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JUAN P. CABRERA, PETITIONER, VS. HENRY YSAAC, RESPONDENT.

G.R. No. 166790, November 19, 2014


LEONEN, J.:

Facts: Heirs of Luis and Matilde Ysaac co-owned a parcel of land


located in Sabang, Naga City. One of the co-owners is respondent,
Henry Ysaac. Henry Ysaac leased out portions of the property to
several lessees and one of those was Juan Cabrera. When Henry Ysaac
needed money, he offered to sell the land to Juan Cabrera but the
latter answered that the land was too small for his needs because
there was no parking space for his vehicle.

In order to address Cabrera's concerns, Ysaac expanded his offer to


include the two adjoining lands that he was then leasing to the Borbe
family and the Espiritu family. However, Ysaac warned Cabrera that the
sale for those two parcels could only proceed if the two families
agree to it.

The two settled on the price of P250.00 per square meter. Then, Ysaac
demanded for an initial payment of P1,500.00, which Cabrera paid.
Subsequently, Ysaac informed Cabrera that the Borbe family and the
Espiritu family were no longer interested in purchasing the properties
they were leasing since Mamerta Espiritu initially considered
purchasing the property and had made an initial deposit for it.
Cabrera agreed to reimburse his earlier payment. However, Cabrera
still paid an additional amount of P6,100.00. Ysaac issued a receipt
for this amount. P3,100.00 of the said amount paid was reimbursed to
Mamerta Espiritu and, in turn, she gave Cabrera the receipts issued to
her by Ysaac.

When Cabrera tried to pay the balance of the purchase price Ysaac was
in the United States. The only person in Ysaac's residence was his
wife who refused to accept Cabrera's payment.

Later on, Cabrera alleged that Ysaac approached him, requesting to


reduce the area of the land subject of their transaction. Part of the
said land was going to be made into a barangay walkway and another
part was being occupied by a family that was difficult to eject.
Cabrera agreed to the proposal. The land was surveyed again. According
to Cabrera, Ysaac agreed to shoulder the costs of the resurvey, which
Cabrera advanced in the amount of P3,000.00.

The resurvey shows that the area now covered by the transaction.
Cabrera intended to show the sketch plan and pay the amount due for
the payment of the lot. However, on that day, Henry Ysaac was in
Manila. Once more, Henry Ysaac's wife refused to receive the payment
because of lack of authority from her husband.

On 1994, Ysaac's counsel, Atty. Luis Ruben General, wrote a letter


addressed to Atty. Leoncio Clemente, Cabrera's counsel informing the
latter that his client is formally rescinding the contract of sale
because Cabrera failed to pay the balance of the purchase price of the
land between May 1990 and May 1992. The letter also stated that Juan
Cabrera's initial payment of P1,500.00 and the subsequent payment of
P6,100.00 were going to be applied as payment for overdue rent of the
parcel of land Cabrera was leasing from Ysaac. The letter also denied
the allegation of Juan Cabrera that Henry Ysaac agreed to shoulder the
costs of the resurveying of the property.

When Cabrera went to Ysaac's house to settle the matter, the latter
told the former that he could no longer sell the property because the
new administrator of the property was his brother, Franklin Ysaac.

Due to Cabrera's inability to enforce the contract of sale between him


and Ysaac, he decided to file a civil case for specific performance on
September 20, 1995. Cabrera prayed for the execution of a formal deed
of sale and for the transfer of the title of the property in his name.
He tendered the sum of P69,650.00 to the clerk of court as payment of
the remaining balance of the original sale price. Subsequently, a
notice of lis pendens was annotated in the lot title.

Before the Regional Trial Court decided the case, the heirs of Luis
and Matilde Ysaac, under the administration of Franklin Ysaac, sold
their property to the local government of Naga City in order to turned
into a project for the urban poor of the city.

During the trial, Corazon Borbe Combe of the Borbe family testified
that contrary to what Juan Cabrera claimed, her family never agreed to
sell the land they were formerly leasing from Ysaac in favor of Juan
Cabrera. The Borbe family bought the property from Naga City's urban
poor program after the sale between the Ysaacs and the local
government of Naga City.

The RTC of Naga City ruled that the contract of sale between Cabrera
and Ysaac was duly rescinded when the former failed to pay the balance
of the purchase price in the period agreed upon. The RTC found that
there was an agreement between Cabrera and Ysaac as to the sale of
land and the corresponding unit price. However, aside from the
receipts turned over by Mamerta Espiritu of the Espiritu family to
Cabrera, there was no "evidence that the other adjoining lot occupants
agreed to sell their respective landholdings" to Cabrera. The RTC also
doubted that Cabrera was willing and able to pay Ysaac.

On appeal, the CA agreed with the RTC that there was a perfected
contract of sale between the two. According to the CA, even if the
subject of the sale is part of Ysaac's undivided property, a co-owner
may sell a definite portion of the property. The CA also ruled that
the contract of sale between Cabrera and Ysaac was not validly
rescinded. For the rescission to be valid under Article 1592 of the
Civil Code, it should have been done through a judicial or notarial
act and not merely through a letter.
However, due to the sale of the entire property of the Ysaac family in
favor of the local government of Naga City, the Court of Appeals ruled
that the verbal contract between Juan Cabrera and Henry Ysaac cannot
be subject to the remedy of specific performance. The local government
of Naga City was an innocent purchaser for value, and following the
rules on double sales, it had a preferential right since the sale, it
entered into was in a public instrument, while the one with Juan
Cabrera was only made orally. The only recourse the CA gave Cabrera
was to order Ysaac to return the initial payment of the purchase price
of P10,600.00 (P1,500.00 and P6,100.00 as evidenced by the receipts
issued by Henry Ysaac to Juan Cabrera, and P3,000.00 for the surveying
expenses) as payment of actual damages.

Issue: Whether there was a valid contract of sale between Cabrera and
Ysaac.

Held: No. There was no valid contract of sale between petitioner and
respondent. As defined by the Civil Code, "[a] contract is a meeting
of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service." For there
to be a valid contract, there must be consent of the contracting
parties, an object certain which is the subject matter of the
contract, and cause of the obligation which is established.

Sale is a special contract. The seller obligates himself to deliver a


determinate thing and to transfer its ownership to the buyer. In turn,
the buyer pays for a price certain in money or its equivalent. A
"contract of sale is perfected at the moment there is a -meeting of
minds upon the thing which is the object of the contract and upon the
price.” The seller and buyer must agree as to the certain thing that
will be subject of the sale as well as the price in which the thing
will be sold. The thing to be sold is the object of the contract,
while the price is the cause or consideration.

The object of a valid sales contract must be owned by the seller. If


the seller is not the owner, the seller must be authorized by the
owner to sell the object. Specific rules attach when the seller co-
owns the object of the contract. Sale of a portion of the property is
considered an alteration of the thing owned in common. Under the Civil
Code, such disposition requires the unanimous consent of the other co-
owners. However, the rules also allow a co-owner to alienate his or
her part in the co-ownership. These two rules are reconciled through
jurisprudence.

If the alienation precedes the partition, the co-owner cannot sell a


definite portion of the land without consent from his or her co-
owners. He or she could only sell the undivided interest of the co-
owned property. It is crucial that the co-owners agree to which
portion of the land goes to whom.
Hence, prior to partition, a sale of a definite portion of common
property requires the consent of all co-owners because it operates to
partition the land with respect to the co-owner selling his or her
share. The co-owner or seller is already marking which portion should
redound to his or her autonomous ownership upon future partition.

The object of the sales contract between petitioner and respondent was
a definite portion of a co-owned parcel of land. At the time of the
alleged sale between petitioner and respondent, the entire property
was still held in common. This is evidenced by the original
certificate of title, which was under the names of Matilde Ysaac,
Priscilla Ysaac, Walter Ysaac, respondent Henry Ysaac, Elizabeth
Ysaac, Norma Ysaac, Luis Ysaac, Jr., George Ysaac, Franklin Ysaac,
Marison Ysaac, Helen Ysaac, Erlinda Ysaac, and Maridel Ysaac.

At best, the agreement between petitioner and respondent is a contract


to sell, not a contract of sale. A contract to sell is a promise to
sell an object, subject to suspensive conditions. Without the
fulfillment of these suspensive conditions, the sale does not operate
to determine the obligation of the seller to deliver the object.

A co-owner could enter into a contract to sell a definite portion of


the property. However, such contract is still subject to the
suspensive condition of the partition of the property, and that the
other co-owners agree that the part subject of the contract to sell
vests in favor of the co-owner's buyer. Hence, the co-owners' consent
is an important factor for the sale to ripen.

Also in this case, the Court held that a non-existent contract cannot
be a source of obligations, and it cannot be enforced by the courts.
ORION SAVINGS BANK, PETITIONER, VS. SHIGEKANE SUZUKI, RESPONDENT.
G.R. No. 205487, November 12, 2014
BRION, J.:

Facts: In the first week of August 2003, respondent Shigekane Suzuki


(Suzuki), a Japanese national, met with Ms. Helen Soneja (Soneja) to
inquire about a condominium unit and a parking slot at Cityland
Pioneer, Mandaluyong City, allegedly owned by Yung Sam Kang (Kang), a
Korean national and a Special Resident Retiree’s Visa (SRRV) holder.

At the meeting, Soneja informed Suzuki that Unit No. 536 [covered by
Condominium Certificate of Title (CCT) No. 18186] and Parking Slot No.
42 [covered by CCT No. 9118] were for sale for P3,000,000.00. Soneja
likewise assured Suzuki that the titles to the unit and the parking
slot were clean. After a brief negotiation, the parties agreed to
reduce the price to P2,800,000.00.

On August 5, 2003, Suzuki issued Kang a BPI check worth P100,000.00 as


reservation fee. On August 21, 2003, Suzuki issued Kang another BPI
check worth P2,700,000.00 representing the remaining balance of the
purchase price. Suzuki and Kang then executed a Deed of Absolute Sale
dated August 26, 2003 covering Unit No. 536 and Parking Slot No. 42.
Soon after, Suzuki took possession of the condominium unit and parking
lot, and commenced the renovation of the interior of the condominium
unit.

Kang thereafter made several representations with Suzuki to deliver


the titles to the properties, which were then allegedly in possession
of Alexander Perez, Orion’s Loans Officer, for safekeeping. Despite
several verbal demands, Kang failed to deliver the documents. Suzuki
later on learned that Kang had left the country, prompting Suzuki to
verify the status of the properties with the Mandaluyong City Registry
of Deeds.

Before long, Suzuki learned that CCT No. 9118 representing the title
to the Parking Slot No. 42 contained no annotations although it
remained under the name of Cityland Pioneer. This notwithstanding,
Cityland Pioneer, through Assistant Vice President Rosario D. Perez,
certified that Kang had fully paid the purchase price of Unit. No. 536
and Parking Slot No. 42.

CCT No. 18186 representing the title to the condominium unit had no
existing encumbrance, except for an annotation that any conveyance or
encumbrance of CCT No. 18186 shall be subject to approval by the
Philippine Retirement Authority (PRA). Although CCT No. 18186
contained Entry No. 66432/C-10186 dated February 2, 1999 representing
a mortgage in favor of Orion for a P1,000,000.00 loan, that annotation
was subsequently cancelled on June 16, 2000 by Entry No. 73232/T. No.
10186. Despite the cancellation of the mortgage to Orion, the titles
to the properties remained in possession of Perez.
To protect his interests, Suzuki then executed an Affidavit of Adverse
Claim with the Registry of Deeds of Mandaluyong City and then demanded
the delivery of the titles. Orion, (through Perez), however, refused
to surrender the titles, and cited the need to consult Orion’s legal
counsel as its reason.

On October 14, 2003, Suzuki received a letter from Orion’s counsel


dated October 9, 2003, stating that Kang obtained another loan in the
amount of P1,800,000.00. When Kang failed to pay, he executed a
Dacion en Pago dated February 2, 2003, in favor of Orion covering Unit
No. 536. Orion, however, did not register the Dacion en Pago, until
October 15, 2003.

On October 28, 2003, Suzuki executed an Affidavit of Adverse Claim


over Parking Slot No. 42 (covered by CCT No. 9118) and this was
annotated as Entry No. 4712/C-No. 9118 in the parking lot’s title.

On January 27, 2004, Suzuki filed a complaint for specific performance


and damages against Kang and Orion. The RTC of Mandaluyong ruled in
favor of Suzuki and ordered Orion to deliver the CCT Nos. 18186 and
9118 to Suzuki.

The court found that Suzuki was an innocent purchaser for value whose
rights over the properties prevailed over Orion’s. The RTC further
noted that Suzuki exerted efforts to verify the status of the
properties but he did not find any existing encumbrance in the
titles. Although Orion claims to have purchased the property by way
of a Dacion en Pago, Suzuki only learned about it two (2) months after
he bought the properties because Orion never bothered to register or
annotate the Dacion en Pago in CCT Nos. 18186 and 9116.

On appeal, the CA partially granted Orion’s appeal and sustained the


RTC insofar as it upheld Suzuki’s right over the properties. The CA
further noted that Entry No. 73321/C-10186 pertaining to the
withdrawal of investment of an SRRV only serves as a warning to an
SRRV holder about the implications of a conveyance of a property
investment. Orion sought a reconsideration of the CA decision but the
CA denied the motion.

Issue:Whether or not Orion claims priority in right under the principle


of prius tempore, potior jure (i.e., first in time, stronger in
right),to prove the existence and due execution of the Dacion en Pago
in its favor is correct.

Held: No. There appears to be no due and demandable obligation when


the Dacion en Pago was executed, contrary to the allegations of Orion.
Orion’s witness Perez tried to impress upon the RTC that Kang was in
default in his P1,800,000.00 loan. A reading of the supposed
promissory note, however, shows that there was no default to speak of
when the supposed Dacion en Pago was executed.
Based on the promissory note, Kang’s loan obligation would mature only
on August 27, 2003. Neither can Orion claim that Kang had been in
default in his installment payments because the wordings of the
promissory note provide that “[t]he principal of this loan and its
interest and other charges shall be paid by me/us in accordance
hereunder: SINGLE PAYMENT LOANS.” There was thus no due and demandable
loan obligation when the alleged Dacion en Pago was executed.

Second, Perez, the supposed person who prepared the Dacion en Pago,
appears to only have a vague idea of the transaction he supposedly
prepared.
Third, the Dacion en Pago, mentioned that the P1,800,000.00 loan was
secured by a real estate mortgage. However, no document was ever
presented to prove this real estate mortgage aside from it being
mentioned in the Dacion en Pago itself.
Fourth, the Dacion en Pago was first mentioned only two (2) months
after Suzuki and Samin demanded the delivery of the titles sometime in
August 2003, and after Suzuki caused the annotation of his affidavit
of adverse claim. Records show that it was only on October 9, 2003,
when Orion, through its counsel, Cristobal Balbin Mapile & Associates
first spoke of the Dacion en Pago. Not even Perez mentioned any Dacion
en Pago on October 1, 2003, when he personally received a letter
demanding the delivery of the titles. Instead, Perez refused to accept
the letter and opted to first consult with his lawyer.

Fifth, it is undisputed that notwithstanding the supposed execution of


the Dacion en Pago on February 2, 2003, Kang remained in possession of
the condominium unit. In fact, nothing in the records shows that
Orion even bothered to take possession of the property even six (6)
months after the supposed date of execution of the Dacion en Pago.
Kang was even able to transfer possession of the condominium unit to
Suzuki, who then made immediate improvements thereon. If Orion really
purchased the condominium unit on February 2, 2003 and claimed to be
its true owner, why did it not assert its ownership immediately after
the alleged sale took place? Why did it have to assert its ownership
only after Suzuki demanded the delivery of the titles? These gaps
have remained unanswered and unfilled.

Hence, the Court held that the absence of any attempt on the part of
Orion to assert its right of dominion over the property allegedly sold
to it is a clear badge of fraud. That notwithstanding the execution of
the Dacion en Pago, Kang remained in possession of the disputed
condominium unit – from the time of the execution of the Dacion en
Pago until the property’s subsequent transfer to Suzuki – unmistakably
strengthens the fictitious nature of the Dacion en Pago.

These circumstances, aside from the glaring inconsistencies in the


documents and testimony of Orion’s witness, indubitably prove the
spurious nature of the Dacion en Pago.
Notably, the fact that the Dacion en Pago is a notarized document does
not support the conclusion that the sale it embodies is a true
conveyance.
Public instruments are evidence of the facts that gave rise to their
execution and are to be considered as containing all the terms of the
agreement. While a notarized document enjoys this presumption, “the
fact that a deed is notarized is not a guarantee of the validity of
its contents.”The presumption of regularity of notarized documents is
not absolute and may be rebutted by clear and convincing evidence to
the contrary

In the present case, the presumption cannot apply because the


regularity in the execution of the Dacion en Pago and the loan
documents was challenged in the proceedings below where their prima
facie validity was overthrown by the highly questionable circumstances
surrounding their execution.

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