Congregation of the Religious of the Virgin Mary v. Court of Appeals
MODIFICATIONFacts
The Antecedents: On December 26, 1964, Gervacio Serapio, grandfather of respondents-spouses Jerome and Teresa Protasio, sold two lots (Lot No. 5-A and Lot No. 5-C) to petitioner, The Congregation of the Religious of the Virgin Mary. Lot No. 5-B, situated between the two, was not purchased by petitioner. Gervacio Serapio died in 1978. In October 1989, respondents-spouses purchased Lot No. 5-B from Serapio's heirs, and TCT No. 148595 was issued in their name. A survey in November 1989 revealed that petitioner had fenced and occupied 664 square meters of Lot No. 5-B, constructing a building for boys' quarters and a portion of its gymnasium thereon without the respondents-spouses' knowledge and consent. Procedural History: Despite repeated demands from respondents-spouses to restore possession, demolish improvements, and pay damages/back rentals, petitioner refused. Consequently, on September 23, 1991, respondents-spouses filed a complaint for recovery of possession of real property, damages, back rentals, and attorney's fees (Civil Case No. 20,960-91) with the Regional Trial Court (RTC) of Davao City. Petitioner admitted occupation but averred that Lot No. 5-B was intended as a road lot for its perpetual use, thus beyond the commerce of man, and that respondents, as successors-in-interest, were obligated to respect this. The RTC rendered judgment in favor of respondents-spouses, ordering petitioner to vacate, demolish improvements, and pay P100,000.00 moral damages, P15,000.00 back rentals with legal interest, P100,000.00 attorney's fees, and litigation expenses. Upon appeal, the Court of Appeals (CA) affirmed the RTC judgment in toto. The Petition: Petitioner filed a petition for review on certiorari with the Supreme Court, assailing the CA decision. Petitioner contended that the CA grievously erred in not finding that Gervacio Serapio had ceded perpetual use of Lot 5-B, that respondents' claim was barred by laches, and that the awards for actual damages (back rentals), moral damages, and attorney's fees were made without proof or prayer. Petitioner also argued that respondents were purchasers in bad faith.
Issue(s)
Whether Gervacio Serapio had ceded to the petitioner the perpetual use of Lot 5-B. Whether respondents' claim was barred by laches. Whether the award of actual damages in the form of back rentals was supported by proof. Whether the award of moral damages was proper in the absence of a prayer and proof. Whether the award of attorney's fees was justified.
Ruling
The Supreme Court MODIFIED the decision of the respondent Court of Appeals dated September 12, 1996, in CA-G.R. CV No. 43311, by DELETING the awards of back rentals, moral damages, and attorney's fees. In all other respects, the assailed decision was AFFIRMED. No pronouncement as to costs.
Ratio Decidendi
On Issue 1: The Supreme Court found no error in the Court of Appeals' conclusion that there was no concrete evidence supporting petitioner's claim of perpetual use of Lot 5-B as a road lot. The sketch attached to the "Agreement Of Purchase And Sale" merely showed the location of the lots sold (5-A and 5-C) and did not contain any express or implied agreement regarding the perpetual use of Lot 5-B. Applying Section 9, Rule 130 of the Revised Rules of Court (Parol Evidence Rule), the Court held that where the terms of an agreement are reduced to writing, it is considered to contain all terms, and no other evidence of such terms can be admitted between the parties and their successors-in-interest. Even if such a grant were true, a right of way does not legally entitle the petitioner to occupy and introduce permanent improvements on a lot registered in another's name. Thus, the petitioner was correctly deemed a builder in bad faith, having introduced improvements knowing the land did not belong to it and without right. On Issue 2: The Supreme Court affirmed the Court of Appeals' finding that respondents' claim was not barred by laches. Laches is defined as the failure or neglect, for an unreasonable and unexplained length of time, to assert a right. The improvements were finished in 1988, and respondents purchased the lot in October 1989. In November 1989, they had the lot surveyed and immediately informed the petitioner of the encroachment. They sent demand letters in October 1990 and January 1991, and filed the complaint in September 1991. The lapse of a mere three years from the completion of improvements to the filing of the complaint, coupled with the respondents' diligent actions in surveying the land and sending demand letters, clearly demonstrated that they did not sleep on their rights. Therefore, the elements of laches were not present. On Issue 3: The Supreme Court ruled that the award of actual damages in the form of back rentals of P15,000.00 a month lacked factual basis and legal justification. Article 2199 of the Civil Code states that a party is entitled to adequate compensation for pecuniary loss actually suffered and duly proven. Such damages must not only be capable of proof but must actually be proven with a reasonable degree of certainty, as reiterated in Del Mundo vs. Court of Appeals. The Court found no factual basis in the complaint or Jerome Protasio's testimony to support how this specific amount was arrived at. Damages cannot be presumed, and courts must point out specific facts to measure compensatory damages. On Issue 4: The Supreme Court held that the award of moral damages of P100,000.00 was improper because it was not specifically prayed for in the complaint. As established in Darang vs. Belizar, moral damages must be disallowed when not specifically prayed for. Furthermore, it is elementary that for moral damages to be awarded, there must be pleading and proof of moral suffering, mental anguish, fright, and the like, both of which were absent in this particular case. The Court emphasized that such damages cannot be awarded without a clear basis in the pleadings and evidence. On Issue 5: The Supreme Court found that the award of attorney's fees of P100,000.00 should be eliminated due to lack of factual basis and legal justification. The only evidence presented was Jerome Protasio's testimony about an agreement to pay "25% of the obligation receivable," which is insufficient. Citing Refractories Corporation of the Philippines vs. Intermediate Appellate Court, the Court reiterated that attorney's fees are the exception, not the general rule, and are not awarded every time a party wins a suit. The discretion to award attorney's fees under Article 2208 of the Civil Code demands factual, legal, and equitable justification, which must be stated by the court, otherwise, the award becomes a conclusion without a premise, based on speculation and conjecture.
Main Doctrine
This case primarily elaborates on the application of the Parol Evidence Rule in property disputes, affirming that a written agreement is presumed to contain all terms and extrinsic evidence cannot be admitted to vary it unless specifically provided. It also reinforces the legal principles concerning builders in bad faith, emphasizing that one who builds on land knowing it is not theirs, and without right, acts in bad faith. Crucially, the decision provides a comprehensive reiteration of the strict evidentiary requirements for the award of actual damages, moral damages, and attorney's fees, underscoring that these must be specifically pleaded, proven with certainty, and justified by the court, rather than being presumed or awarded without clear factual basis.