G.R. No.

119107

March 18, 2005

JOSE V. LAGON, petitioner, vs. HONORABLE COURT OF APPEALS and MENANDRO V. LAPUZ, respondents.

FACTS: On June 23, 1982, petitioner Jose Lagon purchased two parcels of land located at Tacurong, Sultan Kudarat from the estate of Bai Tonina Sepi. A few months after the sale, private respondent Menandro Lapuz filed a complaint for torts and damages against petitioner before the Regional Trial Court (RTC) of Sultan Kudarat. Private respondent claimed that he entered into a contract of lease with the late Bai Tonina Sepi over three parcels of land in Sultan Kudarat, Maguindanao beginning 1964. It was agreed upon that private respondent will put up commercial buildings which would, in turn, be leased to new tenants. The rentals to be paid by those tenants would answer for the rent private respondent was obligated to pay Bai Tonina Sepi for the lease of the land. In 1974, the lease contract ended but was allegedly renewed. When Bai Tonina Sepi died, private respondent started remitting his rent to the court-appointed administrator of her estate. But when the administrator advised him to stop collecting rentals from the tenants of the buildings he constructed, he discovered that petitioner, representing himself as the new owner of the property, had been collecting rentals from the tenants. He thus filed a complaint against the latter, accusing petitioner of inducing the heirs of Bai Tonina Sepi to sell the property to him, thereby violating his leasehold rights over it. Petitioner denied the allegation, thus contending that the heirs were in dire need of money to pay off the obligations of the deceased. He also denied interfering with private respondent's leasehold rights as there was no lease contract covering the property when he purchased it; that his personal investigation and inquiry revealed no claims or encumbrances on the subject lots. On July 29, 1986, the RTC decided in favor of the private respondent. Petitioner appealed the judgment to the Court of Appeals. The appellate court affirmed the ruling of the trial court with modification. ISSUE: Whether or not the purchase by petitioner of the subject property, during the supposed existence of private respondent's lease contract with the late Bai Tonina Sepi, constituted tortuous interference for which petitioner should be held liable for damages. HELD: The Supreme Court affirmed the petition and sets aside the decision of the appellate court. Before the appellate court, petitioner disclaimed knowledge of any lease contract between the late Bai Tonina Sepi and private respondent. On the other hand, private respondent insisted that it was impossible for petitioner not to know about the contract since the latter was aware that he was collecting rentals from the tenants of the building. While the appellate court disbelieved the contentions of both parties, it nevertheless held that, for petitioner to become liable for damages, he must have known of the lease contract and must have also acted with malice or bad faith when he bought the subject parcels of land.

Article 1314 of the Civil Code provides that any third person who induces another to violate his contract shall be liable for damages to the other contracting party. The Court, in the case of So Ping Bun v. Court of Appeals, laid down the elements of tortuous interference with contractual relations: (a) existence of a valid contract; (b) knowledge on the part of the third person of the existence of the contract and (c) interference of the third person without legal justification or excuse. Private respondent presented in court a notarized copy of the purported lease renewal to show the existence of a valid contract. While the contract appeared as duly notarized, the notarization thereof, however, only proved its due execution and delivery but not the veracity of its contents. Nonetheless, after undergoing the rigid scrutiny of petitioner's counsel and after the trial court declared it to be valid and subsisting, the notarized copy of the lease contract presented in court appeared to be incontestable proof that private respondent and the late Bai Tonina Sepi actually renewed their lease contract. The second element, on the other hand, in this case, petitioner claims that he had no knowledge of the lease contract. His sellers (the heirs of Bai Tonina Sepi) likewise allegedly did not inform him of any existing lease contract. Even the registry of property had no record of the same. To sustain a case for tortuous interference, the defendant must have acted with malice or must have been driven by purely impious reasons to injure the plaintiff. In other words, his act of interference cannot be justified. Furthermore, the records do not support the allegation of private respondent that petitioner induced the heirs of Bai Tonina Sepi to sell the property to him. The records show that the decision of the heirs of the late Bai Tonina Sepi to sell the property was completely of their own volition and that petitioner did absolutely nothing to influence their judgment. Private respondent himself did not proffer any evidence to support his claim. Petitioner's purchase of the subject property was merely an advancement of his financial or economic interests, absent any proof that he was enthused by improper motives. In sum, inasmuch as not all three elements to hold petitioner liable for tortuous interference are present, petitioner cannot be made to answer for private respondent's losses. This case is one of damnun absque injuria or damage without injury.

G.R. No. 148376. March 31, 2005 LEONARDO ACABAL and RAMON NICOLAS, petitioners, vs. VILLANER ACABAL, EDUARDO ACABAL, SOLOMON ACABAL, GRACE ACABAL, MELBA ACABAL, EVELYN ACABAL, ARMIN ACABAL, RAMIL ACABAL, and BYRON ACABAL, respondents.

FACTS: Villaners parents, Alejandro Acabal and Felicidad Balasabas, owned a parcel of land situated in Barrio Tanglad, Manjuyod, Negros Oriental, containing an area of 18.15 hectares more or less, described in Tax Declaration No. 15856. By a Deed of Absolute Sale dated July 6, 1971, his parents transferred for P2,000.00 ownership of the said land to him, who was then married to Justiniana Lipajan. Sometime after the foregoing transfer, Villaner became a widower. Subsequently, he executed on April 19, 1990 a deed conveying the same property in favor of Leonardo. Villaner was later to claim that while the April 19, 1990 document he executed now appears to be a Deed of Absolute Sale purportedly witnessed by a Bais City trial court clerk Carmelo Cadalin and his wife Lacorte, what he signed was a document captioned Lease Contract wherein he leased for 3 years the property to Leonardo at P1,000.00 per hectare and which was witnessed by two women employees of one Judge Villegas of Bais City. Villaner thus filed on October 11, 1993 a complaint before the Dumaguete RTC against Leonardo and Ramon Nicolas to whom Leonardo in turn conveyed the property, for annulment of the deeds of sale. The complaint was later amended to implead Villaners eight children as party plaintiffs, they being heirs of his deceased wife. The trial court found for the therein defendants-herein petitioners Leonardo and Ramon Nicolas and accordingly dismissed the complaint. Villaner brought the case on appeal to the Court of Appeals which reversed the trial court, it holding that the Deed of Absolute Sale executed by Villaner in favor of Leonardo was simulated and fictitious. Hence, Leonardo and Ramon Nicolas present petition for review on certiorari. ISSUE: Whether or not the contract entered into is a contract of lease or contract of sale? HELD: Specifically, allegations of a defect in or lack of valid consent to a contract by reason of fraud or undue influence are never presumed but must be established not by mere preponderance of evidence but by clear and convincing evidence. In the case at bar, it was incumbent on the plaintiff-herein respondent Villaner to prove that he was deceived into executing the Deed of Absolute Sale. Except for his bare allegation that the transaction was one of lease, he failed to adduce evidence in support thereof.

Attempting to seek corroboration of his account, Villaner presented Atty. Vicente Real who notarized the document. While on direct examination, Atty. Real virtually corroborated Villaners claim that he did not bring the document to him for notarization, on cross-examination, Atty. Real conceded that it was impossible to remember every person who would ask him to notarize documents. On Villaners claim that two women employees of Judge Villegas signed as witnesses to the deed but that the signatures appearing thereon are not those of said witnesses, the same must be discredited in light of his unexplained failure to present such alleged women employee-witnesses. In lieu thereof, the Supreme Court granted the petition. Thus, reversed and set aside the decision of the appellate court and rendered declaring the sale in favor of petitioner Leonardo Acabal and the subsequent sale in favor of petitioner Ramon Nicolas valid but only insofar as five-ninths (5/9) of the subject property is concerned.

G.R. No. 145982

July 3, 2003

FRANK N. LIU, deceased, substituted by his surviving spouse Diana Liu, and children, namely: Walter, Milton, Frank, Jr., Henry and Jockson, all surnamed Liu, Rebecca Liu Shui and Pearl Liu Rodriguez, petitioners, vs. ALFREDO LOY, JR., TERESITA A. LOY and ESTATE OF JOSE VAO, respondents. FACTS: On 13 January 1950, Teodoro Vao, as attorney-in-fact of Jose Vao, sold seven lots of the Banilad Estate located in Cebu City to Benito Liu and Cirilo Pangalo. Teodoro Vao dealt with Frank Liu, the brother of Benito Liu, in the sale of the lots. The lots sold to Benito Liu were Lot Nos. 5, 6, 13, 14, and 15 of Block 12 for a total price of P4,900. Benito Liu gave a down payment of P1,000, undertaking to pay the balance of P3,900 in monthly installments of P100 beginning at the end of January 1950. The lots sold to Cirilo Pangalo were Lot Nos. 14 and 15 of Block 11 for a total price of P1,967.50. Cirilo Pangalo gave P400 as down payment, undertaking to pay the balance of P1,567.50 in monthly installments of P400 beginning at the end of January 1950. Meanwhile, Jose Vao passed away. Benito Liu subsequently paid installments totaling P2,900, leaving a balance of P1,000. Apparently, Benito Liu stopped further payments because Teodoro Vao admitted his inability to transfer the lot titles to Benito Liu. Later, in a letter dated 16 October 1954, Teodoro Vao informed Frank Liu that the Supreme Court had already declared valid the will of his father Jose Vao. Thus, Teodoro Vao could transfer the titles to the buyers names upon payment of the balance of the purchase price. When Benito Liu failed to reply, Teodoro Vao sent him another letter, reminding him of his outstanding balance. It appears that it was only after nine years that Frank Liu responded through a letter. In the letter, Frank Liu informed Teodoro Vao that he was ready to pay the balance of the purchase price of the seven lots. He requested for the execution of a deed of sale of the lots in his name and the delivery of the titles to him. On 22 April 1966, Benito Liu sold to Frank Liu the five lots (Lot Nos. 5, 6, 13, 14 and 15 of Block 12) which Benito Liu purchased from Teodoro Vao. Frank Liu assumed the balance of P1,000 for the five lots. Cirilo Pangalo likewise sold to Frank Liu the two lots (Lot Nos. 14 and 15 of Block 11) that Pangalo purchased from Teodoro Vao. Frank Liu likewise assumed the balance of P417 for the two lots. Frank Liu reiterated in a letter his request for Teodoro Vao to execute the deed of sale covering the seven lots so he could secure the corresponding certificates of title in his name. He also requested for the construction of the subdivision roads pursuant to the original contract. In the letter, Frank Liu referred to another letter, which he allegedly sent to Teodoro Vao. According to Frank Liu, he enclosed PBC Check No. D-782290 for P1,417, which is the total balance of the accounts of Benito Liu and Cirilo Pangalo on the seven lots. On 19 August 1968, Teodoro Vao sold Lot No. 6 to respondent Teresita Loy for P3,930. The Register of Deeds of Cebu City entered this sale in the Daybook on 24 February 1969. On 16 December 1969, Teodoro Vao sold Lot No. 5 to respondent Alfredo Loy for P3,910. The Register of Deeds of Cebu City entered this sale in the Daybook on 16 January 1970. Teodoro Vao died. His widow, Milagros Vao, succeeded as administratrix of the Estate of Jose Vao. The probate court approved the claim of Frank Liu. Thus, Milagros Vao executed a deed of conveyance covering the seven lots in favor of Frank Liu, in compliance with the probate courts order. The deed of conveyance included Lot Nos. 5 and 6, the same lots Teodoro Vao sold to Alfredo Loy, Jr. and to Teresita Loy.

The probate court, upon an ex-parte motion filed by Teresita Loy, issued an Order approving the sale by Teodoro Vao of Lot No. 6 in her favor likewise, approving the sale of Lot No. 5 by Teodoro Vao in his favor. The Register of Deeds of Cebu City issued a new title in the name of Alfredo Loy, Jr. and Perfeccion V. Loy likewise, in the name of Teresita A. Loy on Lot Nos. 5 and 6 respectively. On 3 June 1976, Milagros Vao filed a motion for reconsideration of the Orders of the probate court. She contended that she already complied with the probate courts Order to execute a deed of sale covering the seven lots, including Lot Nos. 5 and 6, in favor of Frank Liu. She also stated that no one notified her of the motion of the Loys, and if the Loys or the court notified her, she would have objected to the sale of the same lots to the Loys. Frank Liu then filed a complaint for reconveyance or annulment of title of Lot Nos. 5 and 6. The probate court denied the motion for reconsideration of Milagros Vao on the ground that the conflicting claims regarding the ownership of Lot Nos. 5 and 6 were already under litigation. The Regional Trial Court rendered judgment against Frank Liu. Frank Liu appealed to the Court of Appeals, which affirmed in toto the decision of the trial court. Frank Liu filed a motion for reconsideration but the Court of Appeals denied the same. Hence, the instant petition. ISSUES: 1. 2. Whether or not there is unilateral extrajudicial rescission of the contract to sell between Teodoro Vao and Frank Liu? Whether or not the subsequent sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5 and 6, respectively, were valid?

HELD: On the first issue, there was no valid cancellation of the contract to sell because there was no written notice of the cancellation to Benito Liu or Frank Liu. There was even no implied cancellation of the contract to sell. The letter does not mention anything about rescinding or cancelling the contract to sell. Although the law allows the extra-judicial cancellation of a contract to sell upon failure of one party to comply with his obligation, notice of such cancellation must still be given to the party who is at fault. The notice of cancellation to the other party is one of the requirements for a valid cancellation of a contract to sell, aside from the existence of a lawful cause. The fact that Teodoro Vao advised Frank Liu to file his claim with the probate court is certainly not the conduct of one who supposedly unilaterally rescinded the contract with Frank Liu. In this case, there was prior delay or default by the seller. As admitted by Teodoro Vao, he could not deliver the titles because of a case questioning the authenticity of the will of his father. On the second issue, a prior contract to sell made by the decedent prevails over the subsequent contract of sale made by the administrator without probate court approval. The administrator cannot unilaterally cancel a contract to sell made by the decedent in his lifetime. Any cancellation must observe all legal requisites, like written notice of cancellation based on lawful cause.

It is immaterial if the prior contract is a mere contract to sell and does not immediately convey ownership. Frank Lius contract to sell became valid and effective upon its execution. The seller, Jose Vao, was then alive and thus there was no need for court approval for the immediate effectivity of the contract to sell. In contrast, the execution of the contracts of sale of the Loys took place after the death of the registered owner of the lots. The law requires court approval for the effectivity of the Loys contracts of sale against third parties. The probate court did not validly give this approval since it failed to notify all interested parties of the Loys motion for court approval of the sale. Besides, the probate court had lost jurisdiction over the lots after it approved the earlier sale to Frank Liu. Clearly, Frank Lius contract to sell prevails over the Loys contracts of sale. Since the Loys have no contract of sale validly approved by the probate court, while Frank Liu has a contract of sale approved by the probate court, Lot Nos. 5 and 6 belong to Frank Liu. The Estate of Jose Vao should reimburse the Loys their payments on Lot Nos. 5 and 6.

G.R. No. 139523

May 26, 2005

SPS. FELIPE AND LETICIA CANNU, petitioners, vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE CORPORATION, respondents. FACTS: Respondents-spouses Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173,800.00 to purchase a house and lot located at Pulang Lupa, Las Pias, covered by Transfer Certificate of Title (TCT) No. T-8505 in the names of respondents-spouses. To secure payment, a real estate mortgage was constituted on the said house and lot in favor of Fortune Savings & Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondents-spouses from Fortune Savings & Loan Association for P173,800.00. Respondent Fernandina Galang authorized her attorney-in-fact, Adelina R. Timbang, to sell the subject house and lot. Petitioner Leticia Cannu agreed to buy the property for P120,000.00 and to assume the balance of the mortgage obligations with the NHMFC and with CERF Realty. Of the P120,000.00, petitioners paid P75,000.00 thus, leaving a balance of P45,000.00. A Deed of Sale with Assumption of Mortgage Obligation was made and entered into by and between spouses Fernandina and Gil Galang (vendors) and spouses Leticia and Felipe Cannu (vendees) over the house and lot in question. Petitioners immediately took possession and occupied the house and lot. Petitioners paid NHMFC a total of P 55,312.47. Petitioners paid the "equity" or second mortgage to CERF Realty. Despite requests from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused to do so. In a letter petitioner Leticia Cannu informed Mr. Fermin T. Arzaga, Vice President, Fund Management Group of the NHMFC that the ownership rights over the land covered by TCT No. T-8505 in the names of respondents-spouses had been ceded and transferred to her and her husband per Deed of Sale with Assumption of Mortgage, and that they were obligated to assume the mortgage and pay the remaining unpaid loan balance. Petitioners formal assumption of mortgage was not approved by the NHMFC. Because the Cannus failed to fully comply with their obligations, respondent Fernandina Galang paid P233,957.64 as full payment of her remaining mortgage loan with NHMFC. Petitioners opposed the release of TCT No. T-8505 in favor of respondents-spouses insisting that the subject property had already been sold to them. Consequently, the NHMFC held in abeyance the release of said TCT. Thereupon, a Complaint for Specific Performance and Damages was filed asking, among other things, that petitioners (plaintiffs therein) be declared the owners of the property involved subject to reimbursements of the amount made by respondents-spouses (defendants therein) in preterminating the mortgage loan with NHMFC.

Respondent NHMFC claimed that petitioners have no cause of action against it because they have not submitted the formal requirements to be considered assignees and successors-in-interest of the property under litigation. Respondents-spouses alleged that because of petitioners-spouses failure to fully pay the consideration and to update the monthly amortizations with the NHMFC, they paid in full the existing obligations with NHMFC as an initial step in the rescission and annulment of the Deed of Sale with Assumption of Mortgage. In their counterclaim, they maintain that the acts of petitioners in not fully complying with their obligations give rise to rescission of the Deed of Sale with Assumption of Mortgage with the corresponding damages. The lower court ruled in favor of defendants thus, ordering the Deed of Sale with Assumption of Mortgage Obligation rescinded and declared nullified. A Motion for Reconsideration was filed, but same was denied. Hence, this Petition for Certiorari. ISSUE: 1. 2. HELD: The Supreme Court affirmed the decision of the appellate court thus ordered Spouses Gil and Fernandina Galang to return the partial payments made by petitioners. On the first issue, settled is the rule that rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage of the amount not paid. In the case at bar, we find petitioners failure to pay the remaining balance of P45,000.00 to be substantial. Taken together with the fact that the last payment made eighteen months before the respondent Fernandina Galang paid the outstanding balance of the mortgage loan with NHMFC, the intention of petitioners to renege on their obligation is utterly clear. Petitioners had all the time to do what was required of them but still they failed to comply. Despite demands for them to pay the balance, no payments were made. Their failure to fulfill their obligation gave the respondentsspouses Galang the right to rescission. On the second issue, the subsidiary character of the action for rescission applies to contracts enumerated in Articles 1381 of the Civil Code. The contract involved in the case is not one of those mentioned therein. The provision that applies in the case at bar is Article 1191. From the foregoing, it is clear that rescission under Article 1191 is a principal action, while rescission under Article 1383 is a subsidiary action. The former is based on breach by the other party that violates the reciprocity between the parties, while the latter is not. In the case at bar, the reciprocity between the parties was violated when petitioners failed to fully pay the balance of P45,000.00 to respondents-spouses and their failure to update their amortizations with the NHMFC. Whether or not there was substantial breach of the obligation that may lead to its rescission? Whether or not the action for rescission is subsidiary?