Leal v. Intermediate Appellate Court
REITERATIONFacts
1. The Antecedents: The underlying dispute stems from a "Compraventa" (Sale Agreement) executed on March 21, 1941, involving three parcels of land. The private respondent's predecessors-in-interest sold these lands to the deceased father of some petitioners. The title was transferred, and the buyer took possession. Upon the buyer's death, the lands were inherited by his children, who are among the petitioners. Between 1960 and 1965, these inherited properties were mortgaged or leased by the petitioners to their co-petitioners. Subsequently, Vicente Santiago, a predecessor of the private respondent, attempted to repurchase the properties, but the petitioners refused. 2. Procedural History: Vicente Santiago filed a complaint for specific performance on August 2, 1967, before the Court of First Instance of Quezon City. The trial court dismissed the complaint, finding it premature as there was no sale or alienation equivalent to a sale. The private respondent appealed to the Court of Appeals, which, in a decision dated June 28, 1978, affirmed the trial court's dismissal. The petitioners filed a motion to amend the dispositive portion, while the private respondent filed a motion for reconsideration. Due to the abolition of the Court of Appeals and the establishment of the Intermediate Appellate Court (IAC), the case was reassigned. The IAC, in a resolution dated September 27, 1983, reversed its previous decision, ordering the petitioners to accept the repurchase price and execute a Deed of Repurchase, among other orders. 3. The Petition: The petitioners, aggrieved by the IAC's reversal, filed this petition for review by certiorari. They challenge the IAC's interpretation of paragraph (b) of the "Compraventa," which states that in case of sale, the lots could only be sold to the original seller, Vicente Santiago, or his heirs or successors for the same price of P5,600.00, provided they could afford it. The petitioners argue that this clause does not grant a right of repurchase and, even if it did, such a right would be void as it constitutes a perpetual restriction contrary to public policy, or that the right, if any, had already prescribed under the Civil Code.
Issue(s)
Whether the stipulation in the "Compraventa" granting a prohibition to sell to third parties is valid. Whether the stipulation in the "Compraventa" grants a right of repurchase to the private respondent. Whether the alleged right of repurchase, if granted, has already prescribed.
Ruling
The Supreme Court set aside the Resolution dated September 27, 1983, of the respondent Intermediate Appellate Court and reinstated the Decision promulgated on June 28, 1978. The annotations of the prohibition to sell at the back of TCT Nos. 138837, 138838, 138839, 138840, 138841, and 138842 were ordered cancelled. Costs were against the private respondent.
Ratio Decidendi
On the validity of the prohibition to sell: The Court held that the stipulation in the "Compraventa" stating, "En caso de venta, no podran vender a otros dichos tres lotes de terreno sino al aqui vendedor Vicente Santiago, o los herederos o sucesores de este por el niismo precio de CINCO MIL SEISCIENTOS PESOS (P5,600.00) siempre y cuando estos ultimos pueden hacer la compra," is a prohibition against selling the lots to third persons. However, such a prohibition, being indefinite and perpetual, virtually amounts to a perpetual restriction on the owner's right to freely dispose of his properties. This is contrary to public policy, which frowns upon unwarranted restrictions on the right of ownership. Therefore, the prohibition is null and void, consistent with Article 1255 of the Civil Code of Spain (now Article 1306 of the Civil Code of the Philippines), which declares void stipulations contrary to public order or public policy. The Court agreed with the interpretation that such a prohibition, extending beyond the lifetime of the original parties, is a nullity. On the existence of a right of repurchase: The Court found no express or implied grant of a right to repurchase in the "Compraventa." The phrase "en caso de venta" (in case of sale) was interpreted to mean "should the buyers wish to sell," not "the buyers should sell." The Court emphasized that for conventional redemption to take place, the vendor must reserve the right to repurchase in no uncertain terms, as provided by Article 1507 of the Civil Code of Spain (now Article 1601 of the Civil Code of the Philippines). The interpretation by the IAC that the stipulation granted a right to repurchase was considered strained and not supported by the plain language of the contract. The Court reiterated that the words of the contract envisioned the resale of the lots to their original owners or their successors, not a sale to third parties. On prescription of the alleged right of repurchase: Even assuming, for the sake of argument, that a right of repurchase was granted, the Court found that it had already prescribed. Under Article 1508 of the Civil Code of Spain (now Article 1606 of the Civil Code of the Philippines), the right to redeem, in the absence of an express agreement as to time, shall last for four years from the date of the contract. In this case, the contract was dated March 21, 1941, meaning any right to repurchase should have been exercised by 1945. Furthermore, if the condition "siempre y cuando estos ultimos pueden hacer la compra" (when the latter shall be able to buy it) were to be considered as setting an indefinite time, the second paragraph of Article 1508 would apply, limiting the period to ten years. Since the private respondent attempted to exercise this right in 1966, 25 years after the contract's execution, the right had undoubtedly expired.
Main Doctrine
A perpetual prohibition to sell, indefinite as to time, which virtually amounts to a perpetual restriction on the owner's right to freely dispose of his properties, is contrary to public policy and therefore null and void. Furthermore, a right to repurchase must be expressly stipulated in the contract of sale, and if not exercised within the period prescribed by law or by contract, it prescribes.