Theis v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondent Calsons Development Corporation (CDC) owned three parcels of land. In 1985, a survey erroneously indicated that parcel no. 3 (where CDC constructed a two-storey house) was covered by TCT No. 15515, while two idle lots (parcel nos. 1 and 2) were mistakenly surveyed to be on parcel no. 4 (not owned by CDC) and covered by TCT Nos. 15516 and 15684. Believing parcel no. 4 was owned by CDC and covered by TCT Nos. 15516 and 15684, petitioners Spouses Theis purchased parcel no. 4 from CDC on October 26, 1987, for P486,000.00, which was deposited in escrow and released to CDC on December 4, 1987. Petitioners registered the TCTs delivered to them, resulting in new TCTs in their names. Petitioners then left for Germany. Upon their return in early 1990, they discovered that parcel no. 4 was not owned by CDC and that the lots actually sold to them were parcel nos. 2 and 3, with parcel no. 3 already having a house constructed by CDC. Petitioners insisted on having parcel no. 4, but CDC could not sell it as it did not own it. CDC offered parcel nos. 1 and 2 (vacant lots it owned) as a remedy, or double the purchase price paid. Petitioners refused and insisted on parcel no. 3. Procedural History: CDC filed an action for annulment of the deed of sale and reconveyance of properties before the Regional Trial Court (RTC), Branch 18, Tagaytay City. The RTC ruled in favor of CDC, annulling the contract of sale due to mistake in the identification of the parcels of land. Petitioners appealed to the Court of Appeals (CA), which affirmed the RTC decision. Petitioners then filed the present petition for review before the Supreme Court. The Petition: Petitioners seek to reverse the decision of the Court of Appeals, arguing that the contract of sale should not have been annulled.
Issue(s)
Whether the contract of sale is voidable on the ground of mistake in the object of the sale. Whether petitioners are entitled to parcel no. 3, where private respondent's house stands, despite their initial intention to purchase vacant lots.
Ruling
The petition is DISMISSED, and the decision of the Court of Appeals affirming the trial court's annulment of the deed of sale is AFFIRMED. Costs against the petitioner.
Ratio Decidendi
On Whether the contract of sale is voidable on the ground of mistake in the object of the sale: Yes, the contract is voidable due to mistake. Article 1390 of the Civil Code states that contracts where consent is vitiated by mistake are voidable. Article 1331 of the Civil Code further clarifies that for mistake to invalidate consent, it must refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. In this case, private respondent CDC committed an honest mistake in selling parcel no. 4, as it did not own the said parcel. This mistake was a wrong conception about the thing being sold, as it was not within CDC's ownership. The fact that CDC immediately offered two other vacant lots or double the purchase price upon discovery of the mistake demonstrates its good faith and the presence of an honest error. The Supreme Court reiterated that a contract may be annulled where consent was procured by mistake, citing Mariano vs. Court of Appeals. The mistake committed by CDC in selling parcel no. 4, which it did not own, clearly invalidated its consent, making the annulment of the deed of sale proper. On Whether petitioners are entitled to parcel no. 3, where private respondent's house stands, despite their initial intention to purchase vacant lots: No, petitioners are not justified in insisting on parcel no. 3. The evidence clearly shows that petitioners intended to buy vacant lots. Defendant Betty Theis herself testified that they intended to buy the lot on the right side of the house, which was vacant. The trial court also noted that the intended lot, parcel no. 4, was vacant, with only pineapple crops. Furthermore, the construction cost of CDC's two-storey house on parcel no. 3 (P1,500,000.00) far exceeded the purchase price paid by petitioners (P486,000.00). To allow petitioners to take parcel no. 3 would constitute unjust enrichment at the expense of CDC, which is not allowed by law, as held in Security Bank and Trust Company v. Court of Appeals. Petitioners' refusal to accept CDC's offer of two other vacant lots or double the purchase price, and their insistence on parcel no. 3, is unreasonable and contrary to their original intent.
Main Doctrine
A contract may be annulled where the consent of one of the contracting parties was procured by mistake, which mistake must refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract. An honest mistake in the identity of the object of the sale, which was not the true intention of the parties, can vitiate consent and warrant annulment.