Pe v. Intermediate Appellate Court
REITERATIONFacts
1. The Antecedents: The petitioners, spouses Francisco and Anita Pe, were the registered owners of several parcels of land and two buildings, all mortgaged to various banking institutions. They entered into a contract to sell these properties with spouses Ong Su Fu and Luisa Yu, represented by Domingo Sy, for a total consideration of P620,000.00. The contract stipulated that the buyers would pay the outstanding bank obligations on the respective lots, which would be considered payment towards the total consideration, and upon release of the mortgages, the sellers would execute final deeds of sale. Subsequently, Domingo Sy transferred his rights to Jose Juan Tong for Lots Nos. 40 and 41, and to Dionisio Sy for Lot No. 47. Jose Juan Tong paid the mortgage on Lots Nos. 40 and 41, and Domingo Sy paid the mortgage on Lots Nos. 42 and 45. However, a dispute arose regarding the payment for Lot No. 47 and the total consideration, leading to the foreclosure of the mortgage on Lot No. 47 and other properties. 2. Procedural History: The petitioners initiated a complaint for specific performance, rescission of contract, and reconveyance of property with damages before the Court of First Instance of Iloilo. The trial court dismissed the complaint, finding the contract's stipulations clear and that a partial novation had occurred. The petitioners appealed this decision to the Intermediate Appellate Court (IAC), which affirmed the trial court's ruling. The IAC subsequently denied the petitioners' motion for reconsideration. This petition for review on certiorari seeks to overturn the IAC's decision. 3. The Petition: The petitioners are seeking review on certiorari of the IAC's decision. They contend that the total consideration for the contract to sell should be P1,544,161.05, comprising the P620,000.00 stated consideration plus the total bank obligations of P924,161.05. They argue that the lower courts erred in considering novation as a defense, as it was not raised in the pleadings or at the pre-trial conference, and that the courts improperly addressed issues not agreed upon during pre-trial. The petitioners also assert that the preponderance of evidence favors them and that the complaint should not have been dismissed. They raise four assignments of error, primarily focusing on the interpretation of the contract's consideration and the procedural errors of the lower courts.
Issue(s)
Whether the respondent court erred in giving the defendants the benefit of novation as a defense not pleaded in their answer; and whether the respondent court erred in dealing with issues not raised in the pleadings or agreed upon during the pre-trial conference. Whether the preponderance of evidence is in favor of the plaintiffs. Whether the lower court erred in dismissing the complaint. Whether the entire consideration of the Contract to Sell is P620,000.00 or P1,544,161.05.
Ruling
The petition is denied, and the decision of the respondent Intermediate Appellate Court is affirmed. The total consideration of the Contract to Sell is P620,000.00, with the payment of bank obligations being the manner of application of this consideration, not an additional amount.
Ratio Decidendi
On the issue of novation and issues not raised in pleadings: The Court finds the petitioners' first and second assignments of error meritorious. It reiterates the rule that defenses and objections not pleaded in a motion to dismiss or in the answer are deemed waived, with exceptions for failure to state a cause of action and lack of jurisdiction. The Court also emphasizes that courts cannot decide issues not presented in the pleadings or incidental to the controversy, as parties are bound by the issues joined. Therefore, the lower court erred in discussing novation, which was not properly pleaded, and in dealing with issues not raised in the pleadings or material to the controversy. On the findings of fact: Notwithstanding the procedural error regarding novation, the Court holds that the findings of fact of the lower court, affirmed by the appellate court, should be given full credit. The Supreme Court is not a trier of facts and generally leaves factual matters to the lower courts. The findings of fact of the Court of Appeals are considered final and conclusive if supported by substantial evidence and not contrary to those of the trial court. In this case, the factual findings were based on substantial evidence and were consistent between the lower courts. No specific ratio provided in the text for the dismissal of the complaint, but the court's findings of fact being given full credit implies the dismissal was correct based on the evidence presented. On the interpretation of the Contract to Sell and the consideration: The Court finds the petitioners' contention regarding the total consideration to be devoid of merit. Applying Article 1370 of the New Civil Code, if the terms of a contract are clear and leave no doubt upon the intention of the parties, the literal meaning of the stipulations shall control. The contract clearly stated a total consideration of P620,000.00. The stipulation regarding the payment of bank obligations was not for an additional consideration but merely provided the manner in which the P620,000.00 consideration was to be applied. The payment of bank obligations was a condition for the execution of the final deed of sale, and the subsequent acts of the parties conformed to this interpretation. The Court also noted that the PCIB obligation for Lot No. 47 had significantly increased due to subsequent loans obtained by the petitioners, which were secured by additional collateral. Contracts are respected as the law between the parties, provided they are not contrary to law, morals, good customs, public policy, or public order.
Main Doctrine
The literal meaning of the stipulations in a contract shall control if the terms are clear and leave no doubt upon the intention of the contracting parties. Payment of bank obligations on mortgaged properties, as stipulated in a contract to sell, is part of the consideration and not an additional payment unless clearly stated otherwise.