Garcia v. Socco
REITERATIONFacts
The Antecedents: Spouses Miguel Socco and Pura Socco sold a three-story house and lot to spouses Pacifico Garcia and Salvadora Garcia. The purchase price consisted of P38,016.57 in cash and the assumption by the vendees of the vendors' mortgage debt of P20,074.13 to the Development Bank of the Philippines (DBP). The vendees retained P2,000.00 of the cash payment to cover registration fees, real estate taxes, documentary stamps, and notarial fees. The property was mortgaged twice by the Soccos, first to DBP and then to General Financing Corporation. The DBP initiated extrajudicial foreclosure proceedings on August 5, 1959, and General Financing Corporation on October 14, 1959. The Garcias were aware of the mortgages but not that the DBP mortgage was under foreclosure. They paid P18,766.80 to the second mortgagee and updated the DBP mortgage by paying P6,912.21 and P99.32 on October 16, 1959, reducing the outstanding obligation to P20,074.13, which they assumed. The total consideration breakdown was P52,852.46, with a balance of P12,147.54 admittedly paid to the Soccos. The DBP's real estate department approved the assumption of mortgage on May 5, 1960. However, the DBP's legal department, unaware of these developments, proceeded with the foreclosure, and the property was sold at public auction on November 17, 1959, with DBP as the highest bidder. Subsequently, DBP executed a deed of conditional sale in favor of the Garcias. Procedural History: The Soccos filed an action for rescission of the contract of sale against the Garcias for the latter's alleged failure to perform their obligations. The trial court dismissed the complaint. The Court of Appeals reversed the trial court's decision, decreeing rescission of the contract, ordering the Garcias to return the property and its civil fruits, and ordering the Soccos to return the cash payment with legal interest. The appellate court also awarded moral damages and attorney's fees to the Soccos. The Petition: The Garcias filed a petition for review, attributing five errors to the Court of Appeals, primarily arguing a flagrant misapprehension of facts regarding the retention of P2,000.00 and the assumption of the mortgage debt.
Issue(s)
Whether the Court of Appeals committed a misapprehension of facts in concluding that the vendees (petitioners) retained P2,000.00 of the purchase price and failed to assume the mortgage debt. Whether the rescission of the contract of sale was proper under the circumstances. Whether the award of moral damages and attorney's fees to the respondents was justified.
Ruling
The Supreme Court reversed and set aside the decision of the Court of Appeals and reinstated the judgment of the Court of First Instance of Manila. The contract of sale was not rescinded, and the Soccos were ordered to pay costs.
Ratio Decidendi
On the alleged retention of P2,000.00: The Court found that the Court of Appeals committed a misapprehension of facts. The evidence showed that the P2,000.00 was paid by check to Leviste & Co., the respondents' agent who handled the transaction. The deed of sale itself acknowledged receipt of the full cash consideration, and the parties stipulated that the balance due to the Soccos was P12,147.54, which implicitly included the P2,000.00 paid to the agent. The respondents did not deny or refute the petitioners' evidence on this matter. Therefore, the conclusion that the vendees retained this amount was without basis and contrary to indubitable evidence, justifying a review of the appellate court's findings. On the alleged failure to assume the mortgage debt: The Court found no basis for the appellate court's conclusion that the petitioners failed to assume the mortgage. The deed of sale explicitly stated that the petitioners assumed the obligation to pay the balance of P20,074.13 to the DBP. This assumption was further evidenced by the petitioners' actions in updating the respondents' mortgage obligation by paying P6,912.21 and P99.32 to the DBP, which payments were accepted by the mortgagee. The subsequent foreclosure by the DBP, which occurred due to a lack of coordination between DBP's departments and the respondents' failure to inform the petitioners of the foreclosure proceedings, prejudiced the petitioners, not the respondents. The respondents had already transferred the property and received their due, and the foreclosure was not a consequence of the petitioners' failure to assume the mortgage. On the rescission of the contract and award of damages: Since the petitioners did not fail to perform their obligations under the contract, there was no ground to rescind the sale. The respondents' claim for moral damages and attorney's fees was also dismissed. The Court noted that the foreclosure proceedings began before the property was offered to the petitioners, and the respondents failed to inform them of this crucial fact. The confusion that arose was not attributable to the petitioners, who acted in good faith and had an interest in preventing such a situation. Therefore, the rescission decreed by the Court of Appeals was improper, and the award of damages and attorney's fees was unjustified.
Main Doctrine
The Supreme Court may review findings of fact of the Court of Appeals when such findings are based on speculation, a mistaken inference, grave abuse of discretion, or a misapprehension of facts, especially when such findings contradict those of the trial court and are not supported by specific evidence.