Uy Tong v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioners, Spouses Uy Tong and Kho Po Giok, were owners of Apartment No. 307 and its leasehold rights. They purchased seven motor vehicles from respondent Bayanihan Automotive Corporation (BAYANIHAN) for P47,700.00, payable in installments. The agreement stipulated that should the Spouses fail to pay their obligation, BAYANIHAN would automatically become the owner of the apartment, with the obligation to pay the Spouses P3,535.00, and the Spouses would execute a deed of absolute sale and assignment of leasehold rights. Procedural History: The Spouses defaulted on their payments. BAYANIHAN filed a specific performance case (Civil Case No. 80420). The trial court ordered the Spouses to pay the balance or, in case of failure, to execute a deed of assignment over the apartment, upon payment by BAYANIHAN of P3,535.00. An order for execution pending appeal was issued, and the Spouses executed a deed of assignment on May 27, 1972, acknowledging receipt of P3,000.00 more or less. Despite this, the Spouses remained in possession and were allowed to stay as lessees until November 30, 1972. When they failed to vacate, BAYANIHAN filed an ejectment case, which was dismissed. Subsequently, BAYANIHAN filed an action for recovery of possession (Civil Case No. 121532). The trial court ruled in favor of BAYANIHAN, ordering the Spouses to vacate and deliver possession, and Ligaya Investments, Inc. to recognize BAYANIHAN's rights. The Court of Appeals affirmed this decision in toto, and a motion for reconsideration was denied. The Petition: The Spouses filed a petition for review, assailing the validity of the deed of assignment, arguing it was a pactum commissorium, unenforceable due to non-compliance with the condition of payment, and that their refusal to vacate was justified.
Issue(s)
Whether the deed of assignment is null and void for being in the nature of a pactum commissorium. Whether the genuineness and due execution of the deed of assignment were deemed admitted. Whether the deed of assignment is unenforceable due to non-compliance with the condition of payment. Whether the refusal of the petitioners to vacate and surrender the premises is justified.
Ruling
The petition is denied for lack of merit, and the decision of the Court of Appeals is affirmed in toto.
Ratio Decidendi
On the issue of pactum commissorium: The Court held that the stipulation in the agreement was not a pactum commissorium. Firstly, there was no contract of mortgage. Secondly, there was no automatic appropriation of property by BAYANIHAN. The execution of the deed of assignment was a consequence of a court judgment ordering specific performance, which required judicial intervention. The Court cited Northern Motors, Inc. v. Herrera, stating that judicial intervention is anathema to the concept of pacto commissorio. Even if the original agreement had badges of pactum commissorium, the deed of assignment executed pursuant to a valid court judgment was not tainted by such invalidity. The deed of assignment itself clearly stated that it was executed pursuant to the court's order in Civil Case No. 80420. On the genuineness and due execution of the deed of assignment: The Court affirmed the appellate court's ruling that the Spouses were deemed to have admitted the genuineness and due execution of the deed of assignment. This was because the Spouses failed to deny the same under oath in their answer to the complaint in Civil Case No. 121532, as required by Section 8, Rule 8 of the Revised Rules of Court. Furthermore, the Spouses themselves admitted in their sur-rejoinder that the contract was duly executed and genuine, contradicting their current claim. On the enforceability of the deed of assignment due to non-compliance with the condition of payment: The Court found that the Spouses' contention of non-compliance with the P3,535.00 payment was belied by the evidence. The Spouses acknowledged receipt of P3,000.00, more or less, in a receipt dated August 21, 1971, which was stated to be applied for previous rentals as indicated in the judgment. The trial court noted that the Spouses executed the deed of assignment without demanding the remaining P535.00, which would have been illogical if the full amount was not paid. Moreover, a joint manifestation by both parties, assisted by counsel, stated that BAYANIHAN had fully complied with its obligation to pay the sum of P3,535.00. The correlative obligations in the judgment meant that BAYANIHAN could not compel the Spouses to execute the deed if it had not paid the sum. On the justification for refusal to vacate: The Court reiterated that the first two grounds (pactum commissorium and non-compliance with payment) had already been passed upon and found to be without merit. Regarding the third ground, which alluded to the Spouses being allowed to stay until November 30, 1972, the Court stated that the deed of assignment had already vested BAYANIHAN with the rights and interests over the apartment and leasehold rights. Therefore, BAYANIHAN was entitled to possession, and this right could not be superseded by bare allegations unsupported by the record.
Main Doctrine
A stipulation for automatic appropriation of property by a creditor in case of the debtor's default, which constitutes pactum commissorium, is null and void. However, a deed of assignment executed pursuant to a court judgment ordering such transfer in case of non-payment is valid and not a pactum commissorium.