Tuico v. Cu-Unjieng
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns a lease agreement for two adjoining lots on Calle Rosario in Manila. The appellee, Lim Tuico, owned an undivided two-eights interest and leased the remaining six-eights interest from Barretto & Co. for twenty years. The lease included a clause granting the lessee preference to purchase the lots at the same price and conditions should the lessor sell, and also stipulated that if the lessee wished to sell his interest, the lessor would have the same preference. The appellee constructed a building on the lots for storage purposes. 2. Procedural History: Barretto & Co. sold its six-eights interest in the lots to the appellant, Cu-Unjieng, on December 21, 1909, without notifying the appellee. The deed of sale mentioned the lease and the appellee's purchase rights. Subsequently, Barretto & Co. executed a deed of donation for P20,000 to Cu-Unjieng, reciting a defective title as consideration, and agreeing to return the balance of the P40,000 purchase price if a clear title was not secured within one year. The appellee, upon learning of the sale, exercised his right to purchase the property from Cu-Unjieng on January 11, 1910, paying P60,000. Discovering that the actual purchase price paid by Cu-Unjieng to Barretto & Co. was P40,000, the appellee initiated this action to recover the P20,000 difference. The court below ruled in favor of the appellee, awarding P20,000 plus interest and costs, from which the appellant appealed. 3. The Petition: The appellant, Cu-Unjieng, appealed the judgment of the lower court. The core issue before the Supreme Court was whether the actual purchase price paid by the appellant to Barretto & Co. for the property was P60,000 or P40,000. The appellant claimed the price was reduced to P40,000 due to a defective title. The appellee contended that the P60,000 paid was inflated to conceal the true transaction and unjustly deprive him of P20,000, given his preferential right to purchase. The Supreme Court affirmed the lower court's finding that the actual sale price was P40,000, and the dealings involving P60,000 were a subterfuge.
Issue(s)
Whether the actual purchase price paid by the defendant-appellant Cu-Unjieng to Barretto & Co. for the property was P60,000 or P40,000. Whether the plaintiff-appellee Lim Tuico was entitled to recover the difference of P20,000.
Ruling
The Supreme Court affirmed the judgment of the court below, holding that the actual purchase price was P40,000 and ordering the defendant-appellant to pay the plaintiff-appellee P20,000 with interest.
Ratio Decidendi
On the actual purchase price: The Court found that the actual purchase price was P40,000, not P60,000. This was supported by several pieces of evidence. Firstly, Barretto & Co. paid a commission to the broker Gonzales based on P40,000, as evidenced by the broker's receipt for P400, representing 1% of P40,000. Secondly, Barretto & Co. sent a cablegram to Madrid stating the property was sold for P40,000. Thirdly, Barretto testified that the agreement was to sell for P40,000, and the P60,000 figure was used to facilitate potential future mortgage transactions. The P20,000 difference was represented by an IOU from Barretto to Cu-Unjieng, which was later returned and destroyed when the deed of donation was executed. On the right to recover the difference: The Court held that Lim Tuico was entitled to recover the P20,000 difference. The lease agreement clearly granted Lim Tuico a right of preference to purchase the property. When Barretto & Co. sold the property to Cu-Unjieng, they were obligated to respect this right. Cu-Unjieng, by purchasing the property with full knowledge of Lim Tuico's right of preference, stepped into the shoes of Barretto & Co. and was bound by the same obligations. The subsequent transaction, where Lim Tuico purchased the property from Cu-Unjieng for P60,000, was based on the false representation of the original purchase price. Since Lim Tuico exercised his right of preference based on the inflated price, and the true price was P40,000, he was unjustly deprived of P20,000. The Court found that the dealings involving P60,000 were intended to cover up the true nature of the transaction from Lim Tuico, thereby violating his preferential right.
Main Doctrine
A seller who sells property subject to a lessee's right of preference, and subsequently attempts to circumvent this right through a simulated sale or donation, is liable for damages to the lessee for the difference between the actual sale price and the price paid by the lessee when exercising their right of preference.