Songcuan v. Intermediate Appellate Court
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns the repurchase of two parcels of land and a building located in San Fernando, La Union. Victoriano Alviar, the original owner, sold these properties to Saturnino Songcuan on September 29, 1966. On October 10, 1966, Songcuan executed a deed granting the Alviars the right to repurchase the properties within 10 years for the original price, plus the cost of any improvements. An additional condition stipulated that if the Alviars repurchased the properties, they would be obligated to lease a portion of the premises back to Songcuan for 25 years at a monthly rental of P390.00. A fire in March 1969 destroyed the original building, and Songcuan constructed a new one at his own expense. The Alviars filed a complaint in 1974 to exercise their right to repurchase, but Songcuan demanded reimbursement for the new building and registration costs, which the Alviars contested, arguing the transaction was an equitable mortgage. 2. Procedural History: The Court of First Instance of La Union, in Civil Case No. 2621, ruled that the transaction was a deed of sale with a right to repurchase, suspending the redemption period during the litigation and allowing repurchase within 30 days from finality of the decision or within the remaining period of one year, ten months, and eighteen days. It also ordered the Alviars to pay P30,000.00 for the new building and P1,000.00 for registration costs. Songcuan appealed this decision, specifically regarding the refusal to rule on his lease right. The Court of Appeals affirmed the trial court's decision. Songcuan then filed Civil Case No. 3213, seeking rescission of the repurchase right due to the Alviars' alleged failure to execute the lease agreement and to repurchase within the stipulated period. The trial court in Civil Case No. 3213 ruled that the Alviars had exercised their right to redemption within the extended period, declared the Deed of Reconveyance valid, and granted Songcuan a 25-year lease over the entire property. Both parties appealed. The Court of Appeals modified the decision, limiting Songcuan's lease to one-third of the building and granting the Alviars possession of the remainder, while deleting the award of attorney's fees. 3. The Petition: Saturnino Songcuan filed a petition for certiorari (G.R. No. 75096) seeking review of the Court of Appeals' decision, primarily arguing that the Alviars had forfeited their right to repurchase or that the right could be rescinded. He contended that the Alviars failed to repurchase within the 30-day period mandated by Article 1606 of the Civil Code and that their failure to execute the lease agreement constituted a breach of reciprocal obligation under Article 1191, justifying rescission. Songcuan also questioned the limitation of his lease to one-third of the building. A separate petition (G.R. No. 80851) sought to enjoin the implementation of a writ of possession in favor of the Alviars. The Supreme Court affirmed the Court of Appeals' decision, ruling that the Alviars' right to repurchase was not forfeited, as the lower court's decision had provided alternative repurchase periods and a final judgment could not be unilaterally amended. The Court also held that the lease obligation was not a reciprocal one justifying rescission, but rather a separate obligation arising only after repurchase, and Songcuan's remedy for non-compliance would be specific performance. The Court further ruled that Songcuan was entitled to lease only one-third of the building, as admitted during pre-trial, and dismissed G.R. No. 80851 as moot.
Issue(s)
Whether the Alviars forfeited their right to repurchase the subject premises. Whether the Alviars' right to repurchase may be rescinded under Article 1191 of the Civil Code due to their alleged failure to execute a lease contract. Whether Songcuan is entitled to lease the entire premises or only one-third thereof. Whether the award of attorney's fees was justified.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals in G.R. No. 75096, holding that the Alviars did not forfeit their right to repurchase. The Court dismissed G.R. No. 80851 as moot and academic. The Alviars are entitled to repurchase the property, and Songcuan is entitled to lease only one-third of the ground floor of the building for 25 years from July 17, 1981, at a monthly rental of P390.00. The award of attorney's fees was deleted.
Ratio Decidendi
On whether the Alviars forfeited their right to repurchase: The Court ruled that the Alviars did not forfeit their right to repurchase. The final judgment in Civil Case No. 2621 had suspended the redemption period during the pendency of the case and provided two alternative periods for repurchase: 30 days from finality of the judgment or within the remaining period of one year, ten months, and eighteen days from finality. To limit the period to only 30 days would violate the rule that a final judgment is the law between the parties and cannot be amended. The Alviars' exercise of their right within the stipulated periods was valid. On whether the right to repurchase may be rescinded under Article 1191: The Court held that Article 1191 of the Civil Code, which allows rescission of reciprocal obligations, is not applicable. While there were obligations between the parties, they were separate and distinct, not reciprocal in the sense that the non-fulfillment of one is a resolutory condition of the other. The obligation to lease arose only after the Alviars repurchased and became owners and possessors of the property. Therefore, the Alviars' failure to execute the lease contract did not give Songcuan the right to rescind the repurchase, but rather the remedy of specific performance, which was granted by the lower courts. On the area Songcuan is entitled to lease: The Court ruled that Songcuan is entitled to lease only one-third of the ground floor of the building, which was the area he was actually occupying at the time of the contract's execution. The trial court's finding that Songcuan occupied the entire premises was based on insufficient evidence and an incorrect interpretation of his admission during pre-trial. The P.S. clause specifically referred to the premises "actually occupied" by Songcuan, not what he might constructively possess as owner. The Alviars were granted possession of the remaining two-thirds of the premises. On the award of attorney's fees: The Court agreed with the Court of Appeals in deleting the award of P50,000.00 in attorney's fees. There was no justification for such an award, as attorney's fees in the concept of damages are awarded only when a party acts in gross and evident bad faith. The Alviars' refusal to grant a 25-year lease of the entire premises was not in bad faith, as the stipulation clearly referred to the portion Songcuan was actually occupying, which was only one-third of the ground floor.
Main Doctrine
The obligation to lease premises arises only after the repurchase of the property and obtaining possession thereof; failure to execute a lease contract does not give rise to rescission but to an action for specific performance. A final judgment suspending the redemption period during the pendency of a case cannot be later amended to limit the repurchase period to 30 days.