Mate v. Court of Appeals
REITERATIONFacts
The Antecedents: Josefina R. Rey (Josie), a cousin of petitioner Fernando T. Mate's wife, solicited petitioner's help to avoid prosecution by respondent Inocencio Tan for violation of B.P. 22 due to rubber checks amounting to P4,435,067.00 issued by Josie and her family. Josie proposed that petitioner cede his three lots in Tacloban City to respondent Tan to placate him. Petitioner initially refused, stating he owed respondent nothing and his lots were not for sale. Josie then suggested executing a simulated document transferring the lots to respondent Tan, with Josie providing the funds for redemption. Petitioner agreed to execute a Deed of Sale with Right to Repurchase (pacto de retro) for P1,400,000.00 with 5% monthly interest, redeemable within six months (on or before April 4, 1987). It was agreed that Josie would provide the redemption funds, the titles would be delivered to respondent Tan, but the sale would not be registered. To assure petitioner, Josie issued two postdated checks: one for P1,400,000.00 (selling price) and another for P420,000.00 (6 months' interest). Petitioner executed the deed, delivered the titles and the checks to respondent Tan, who did not register the transaction. Procedural History: Petitioner deposited the checks, but both were dishonored for being drawn against a closed account. Realizing he was swindled, petitioner filed criminal cases for violation of B.P. 22 against Josie, which were archived as she went into hiding. He then filed a civil case for Annulment of Contract with Damages against Josie and respondent Tan. Josie was declared in default. The trial court asked respondent Tan to file an action for consolidation of ownership, which he did. The cases were consolidated, decided jointly in favor of respondent Tan, and appealed to the Court of Appeals. The CA affirmed with modification, and a motion for reconsideration was denied. Hence, this petition for review. The Petition: Petitioner assails the validity of the Deed of Sale with Right to Repurchase, contending it is null and void for lack of consideration because no money changed hands and the redemption checks were dishonored.
Issue(s)
Whether the Deed of Sale with Right to Repurchase is null and void for lack of consideration. Whether the respondent court erred in affirming the decision of the trial court.
Ruling
The petition is denied due course for lack of merit. The Decision of the Court of Appeals dated August 29, 1994 is affirmed.
Ratio Decidendi
On the issue of the validity of the Deed of Sale with Right to Repurchase for lack of consideration: The Supreme Court held that the Deed of Sale with Right to Repurchase was valid and binding. The Court found that consideration existed, not only in petitioner's act of accommodating Josefina Rey to avoid criminal prosecution but also in his receipt of P420,000.00 from her, ostensibly as interest but effectively as his fee for executing the document. Furthermore, petitioner received a postdated check for P1,400,000.00 from Josie Rey, representing the repurchase price, which served as his assurance. The Court emphasized that the issuance of these checks, even if dishonored later, constituted consideration because they represented a genuine undertaking by Josie Rey to pay on behalf of the petitioner. The filing of criminal cases against Josie Rey for violation of B.P. 22 was considered a tacit admission by the petitioner that a consideration for the pacto de retro sale existed. The Court rejected the petitioner's claim that the sale was conditioned on the encashment of the checks, noting that it would be illogical for respondent Tan to agree to such a condition given his impending criminal charges against Josie Rey. The Court pointed out that petitioner, being a lawyer, prepared the contract and was aware of the risks involved, and should have repurchased the lots with his own money instead of filing an annulment case. The equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done should bear the loss was applied, holding petitioner responsible as he gave occasion for the damage by executing the deed. The Court concluded that a contract, with all essential elements present, is valid and binding, and petitioner had no one to blame but himself for his misfortune. On the issue of whether the respondent court erred in affirming the decision of the trial court: The Supreme Court found no error in the respondent court's affirmation of the trial court's decision. The Court reiterated its findings regarding the validity of the Deed of Sale with Right to Repurchase and the presence of consideration. The Court highlighted that respondent Tan merely signed the contract and did not employ any deceptive scheme. Petitioner's own actions, including his legal background and the preparation of the contract, demonstrated his awareness of the transaction's nature and risks. The Court noted that respondent Tan waived his right to collect from Josefina Rey, and in turn, Josie gave petitioner a postdated check to ensure he would not lose his lots. However, petitioner, despite knowing Josie Rey's history of issuing worthless checks, agreed to the arrangement, possibly for a huge profit. The Court concluded that a contract is binding if its essential elements are present, and in this case, they were. Therefore, the affirmation of the trial court's decision by the Court of Appeals was deemed correct.
Main Doctrine
A contract of sale with right to repurchase, even if simulated or intended as security, is valid and binding if it possesses the essential elements of a contract, particularly consideration. The issuance of postdated checks, even if dishonored, can constitute valid consideration if they represent a genuine undertaking to pay or secure the obligation. A party who prepares and signs such a contract, especially a lawyer, is bound by its terms and bears the risk of his own misfortune arising from his imprudent actions or reliance on worthless instruments.