City of Cebu v. Heirs of Candido Rubi
REITERATIONFacts
The Antecedents: Candido Rubi was the lessee of Lot 1141 of the Banilad Estate. The Province of Cebu donated 210 lots, including Lot 1141, to the City of Cebu. The City Council enacted Ordinance No. 522, authorizing the sale of these lots, with a condition that lessees shall have the right to equal the highest bid. In a public bidding for Lot 1141, the highest bid was P104,556.00 by Mr. Miguel Kho. Candido Rubi expressed his intention to equal the highest bid and was advised to make a deposit. However, a writ of preliminary injunction was issued, halting the sale. Subsequently, Lot 1141 was adjudicated to the City of Cebu. The lot was subdivided, and Lot 1141-D, where Rubi's house stood, was authorized for sale. After a public bidding where Lot 1141-D had no bidder, Candido Rubi paid a bidder's cash bond and then wrote to the City Mayor, exercising his option to equal the highest bid price based on appraised values. The Committee on Award awarded Lot 1141-D to Candido Rubi. The Mayor instructed Rubi to make the necessary payment for the deed of sale. The City Appraisal Committee appraised portions of Lot 1141-D at P10.00 and P8.00 per square meter. The Mayor again advised Rubi to pay within 15 days. Rubi requested an extension due to circumstances beyond his control, which was not acted upon. Correspondence ensued regarding Rubi's failure to fully pay, with the City Attorney opining no legal impediment but requiring Sangguniang Panglunsod authority. Candido Rubi died in 1983. In 1989, his heirs filed a complaint for specific performance, tendering the balance of the purchase price. Procedural History: The Regional Trial Court (RTC) dismissed the complaint, holding that the contract was a mere contract to sell, and failure to pay was a suspensive condition that was not met, thus the seller's obligation never vested. The Court of Appeals reversed the RTC, ruling that there was a perfected contract of sale, and failure to pay within the period did not automatically rescind the contract, as Article 1592 of the Civil Code allows payment even after the period expires, provided no demand for rescission has been made judicially or by notarial act. The CA also noted that substantial performance and circumstances beyond Rubi's control militated against unilateral extinguishment. The Petition: The City of Cebu filed a petition for review on certiorari, assigning errors concerning the existence of a perfected contract of sale, Rubi's alleged unreasonable delay and laches, automatic rescission due to non-payment, and the CA's failure to order payment of legal interest.
Issue(s)
Whether there was a perfected contract of sale between the City of Cebu and Candido Rubi. Whether Candido Rubi was guilty of unreasonable delay and/or laches in complying with the conditions of the award. Whether the contract of sale was automatically rescinded due to the failure to pay the price at the agreed time. Whether the respondents should be ordered to pay legal interest on the purchase price from the date of the award until its consignation.
Ruling
The petition is denied due course, and the Decision of the Court of Appeals is affirmed. The City of Cebu is ordered to execute the necessary deed of conveyance in favor of the Heirs of Candido Rubi.
Ratio Decidendi
On the existence of a perfected contract of sale: The Court affirmed the Court of Appeals' finding that a perfected contract of sale existed. A contract of sale is consensual and perfected upon the meeting of the minds regarding the object and the price. In this case, Candido Rubi's letter exercising his option to equal the highest bid, coupled with the City's subsequent actions like the award by the Committee on Awards and the Mayor's letters instructing payment, demonstrated a clear meeting of the minds. The exchange of correspondence, including the award and the instructions to pay, constituted sufficient evidence to satisfy the Statute of Frauds. The Court found that the parties intended a contract of sale, not a contract to sell, as evidenced by the advertisement for a cash sale and the Mayor's statement that the deed of sale would be executed after payment. The Court reiterated that the elements of a valid contract of sale—consent, determinate subject matter, and certain price—were all present. On unreasonable delay and laches: The Court found that neither party was solely to blame for the delay. While Candido Rubi requested an extension and then failed to follow up for a considerable period, the City of Cebu also failed to act on his request for an extension and did not demand rescission. The City's subsequent notice to vacate was not considered a demand for rescission. The Court noted that Rubi had made a partial payment and had been a long-time lessee and occupant of the property, introducing improvements. Furthermore, the City Attorney's opinion and the Sangguniang Panglunsod's committee findings indicated that the agreement was valid and binding, suggesting internal delays within the City's processes contributed to the prolonged non-resolution of the sale. Therefore, a finding of laches against Rubi was deemed inappropriate given the factual milieu. On automatic rescission: The Court reiterated that under Article 1592 of the Civil Code, in the sale of immovable property, rescission does not occur automatically upon failure to pay the price within the agreed period. The vendor must make a judicial or notarial demand for rescission. The City of Cebu failed to make such a demand. Its "Formal Notice" to vacate was not a demand for rescission of the sale. The City only invoked "automatic rescission" in its Answer to the complaint for specific performance. Consequently, the contract of sale was not automatically rescinded by Rubi's failure to pay within the initial 15-day period. On the payment of legal interest: The Court denied the City's claim for legal interest, citing the principle that issues not raised before the lower courts cannot be raised for the first time on appeal. The issue of legal interest was only raised in the City's Motion for Reconsideration of the Court of Appeals' decision, which was deemed too late. The Court emphasized that basic considerations of due process require that parties be given the opportunity to address issues in the trial court.
Main Doctrine
In the sale of immovable property, even if it is stipulated that rescission shall of right take place upon failure to pay the price at the time agreed upon, the vendee may still pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. The failure to pay the purchase price within the stipulated period does not automatically rescind the contract of sale unless there is a demand for rescission made judicially or by notarial act.