Sarmiento v. Salud
REITERATIONFacts
The Antecedents: Spouses Francisco D. Sarmiento and Marcelina S. Sarmiento purchased a residential lot with a condition annotated on the title: it could not be resold within 25 years, except to the People's Homesite and Housing Corporation (PHHC) at the original price plus interest and costs. The spouses later obtained a P1,500 loan from Jorge Salud, executing a real estate mortgage over the same lot, which was registered. They executed a second mortgage for the same amount and property. The spouses failed to redeem the property. Procedural History: Pursuant to an extrajudicial foreclosure proceeding, the provincial sheriff sold the property at public auction to Jorge Salud, the highest bidder. The spouses Sarmiento filed a case seeking to annul the foreclosure proceedings and sale, arguing that the lot could not be sold within 25 years from its purchase. The defendants contended that the condition prohibited voluntary sale but not mortgage and subsequent foreclosure, which is an involuntary sale. The Petition: The Court of First Instance declared the foreclosure sale null and void. The defendants appealed.
Issue(s)
Whether the condition prohibiting resale within 25 years applies to a mortgage and subsequent foreclosure sale. Whether the spouses Sarmiento can assail the validity of the foreclosure sale.
Ruling
The Supreme Court reversed the decision of the Court of First Instance, ordering the dismissal of the case, but without prejudice to the rights of the People's Homesite and Housing Corporation (PHHC).
Ratio Decidendi
On the applicability of the condition to mortgage and foreclosure: The condition that the lot could not be resold within 25 years, except to PHHC, was manifestly a condition in favor of PHHC and not the Sarmiento spouses. It operated as a restriction on the spouses' right to dispose of the property (jus disponendi). Therefore, only PHHC was entitled to invoke this condition. The validity of the mortgage and the subsequent foreclosure sale depended exclusively on PHHC. Since PHHC did not appear to have treated the mortgage and foreclosure sale as an infringement of its right, the validity of the sale could not be an issue between the Sarmiento spouses and Jorge Salud. On whether the spouses Sarmiento can assail the validity of the foreclosure sale: Even if the transaction were considered wrongful, the mortgagors (Sarmiento spouses) and the mortgagee-purchaser (Jorge Salud) were in pari delicto. Both were aware of the condition in favor of PHHC, yet they entered into an agreement that tended to violate it. As both parties were equally guilty, neither was entitled to complain against the other. The spouses Sarmiento, having entered into the transaction with open eyes and benefited from the loan, were held in estoppel to assail and annul their own deliberate acts. Consequently, the spouses Sarmiento had no cause of action against Jorge Salud or the sheriff, and the lower court erred in not dismissing the suit.
Main Doctrine
A condition in a land sale contract prohibiting resale within 25 years, except to the original vendor, is a restriction in favor of the vendor and can only be invoked by them, not by the vendees. Both parties aware of the condition and entering into a mortgage transaction that might violate it are in pari delicto, estopping the vendees from assailing the validity of the foreclosure sale.