Carrascoso v. Leviste
REITERATIONFacts
The Antecedents: El Dorado Plantation, Inc. (El Dorado) sold a parcel of land to Fernando Carrascoso, Jr. (Carrascoso) via a Deed of Sale dated March 23, 1972. The sale was for P1,800,000.00, with a balance of P1,300,000.00 plus 10% annual interest payable within three years. El Dorado, through a Board Resolution and an Affidavit by its President, authorized Carrascoso to mortgage the property, waiving its vendor's lien in favor of any mortgagee, provided the balance of the purchase price was recognized. Carrascoso mortgaged the property to Home Savings Bank (HSB) for P1,000,000.00 on March 24, 1972. The Deed of Sale was registered on April 5, 1972, and a new title was issued to Carrascoso, with the mortgage annotated. Carrascoso failed to pay the balance of the purchase price by March 23, 1975. On July 11, 1975, Carrascoso entered into an Agreement to Buy and Sell with Philippine Long Distance Telephone Company (PLDT) for 1,000 hectares of the property for P3,000,000.00. This agreement was not registered. On December 27, 1976, Lauro Leviste, a minority stockholder, demanded rescission of the sale due to Carrascoso's default. El Dorado, by letter dated February 21, 1977, informed Carrascoso of its intent to rescind the sale. On March 15, 1977, El Dorado and Lauro Leviste filed a complaint for rescission of the Deed of Sale, cancellation of Carrascoso's title, and damages. A notice of lis pendens was annotated on Carrascoso's title on the same day. On April 6, 1977, Carrascoso executed a Deed of Absolute Sale over the 1,000 hectares to PLDT. On May 30, 1977, PLDT sold the same portion to its subsidiary, PLDT Agricultural Corporation (PLDTAC). These deeds were annotated on Carrascoso's title on February 21, 1978, and a new title was issued to PLDTAC for the 1,000 hectares. Procedural History: The Regional Trial Court (RTC) dismissed the complaint for rescission on the ground of prematurity, ordering plaintiffs to pay damages and attorney's fees to the defendant. The Court of Appeals (CA) reversed the RTC decision, rescinded the Deed of Sale, ordered the cancellation of PLDTAC's title, and directed the return of the property to El Dorado, with various orders for restitution and payment of damages. PLDT and PLDTAC appealed to the CA, and Carrascoso filed a petition for review with the Supreme Court. PLDT also filed a separate petition for review with the Supreme Court after its motion for reconsideration of the CA decision was denied. The Petition: Both Carrascoso and PLDT/PLDTAC filed petitions for review before the Supreme Court, assailing the CA's decision. Carrascoso argued that the rescission was premature, that El Dorado breached its warranty of non-tenancy, and that the CA erred in reversing the trial court's decision. PLDT argued that its acquisition of the property was not subject to the notice of lis pendens and that El Dorado had prior knowledge of its agreement to buy and sell.
Issue(s)
Whether the action for rescission filed by El Dorado was premature. Whether El Dorado breached its warranty that the property was not being cultivated by any tenant. Whether the sale of the 1,000-hectare portion of the property to PLDT and PLDTAC is subject to the notice of lis pendens. Whether the Agreement to Buy and Sell between Carrascoso and PLDT, dated July 11, 1975, constituted a sale that retroacted to its date, thereby preceding the notice of lis pendens.
Ruling
The Supreme Court denied the petitions, affirming the Court of Appeals' decision with modifications regarding the determination of the fair price of the land, improvements, and compensation for occupancy. The Court held that the rescission was not premature, that El Dorado did not breach its warranty, and that PLDT's acquisition was subject to the notice of lis pendens. The Court also clarified the nature of the Agreement to Buy and Sell as a contract to sell, not a perfected sale.
Ratio Decidendi
On the prematurity of the rescission: The Court held that Carrascoso's failure to pay the balance of the purchase price within the stipulated three-year period constituted a breach of reciprocal obligations, entitling El Dorado to rescind the contract. The Court clarified that the Board Resolution and Affidavit allowing Carrascoso to mortgage the property did not suspend the payment period. The Court found no evidence of verbal extensions granted by El Dorado's directors and officers, emphasizing that any extension should have been in writing. The Court noted that the obligation to pay the balance became due on March 23, 1973, March 23, 1974, and March 23, 1975, and Carrascoso's non-performance constituted a breach, giving rise to El Dorado's cause of action for rescission. The Court reiterated that the period for payment was clearly stipulated in the Deed of Sale and that Carrascoso's failure to comply with this obligation was a definitive breach. On the warranty of non-tenancy: The Court found that Carrascoso failed to substantiate his claim that El Dorado breached its warranty of non-tenancy. While Carrascoso alleged that there were occupants on the property, he did not present sufficient proof that these individuals were indeed tenants covered by the Land Reform Code. The Court emphasized that the fact of tenancy must be established by evidence, and mere claims or suspicions are insufficient to hold El Dorado liable for damages. Without proof of tenancy, El Dorado's warranty was not breached, and Carrascoso could not claim reimbursement for expenses incurred in relocating occupants. On the effect of the notice of lis pendens on PLDT's acquisition: The Court affirmed the CA's ruling that PLDT's acquisition of the 1,000-hectare portion was subject to the notice of lis pendens annotated on Carrascoso's title. The Court explained that a notice of lis pendens serves as a warning to the whole world that the property is under litigation and that any subsequent acquisition is subject to the outcome of the case. The Court found that the July 11, 1975 Agreement to Buy and Sell was merely a contract to sell, not a perfected sale, and thus did not transfer ownership to PLDT. Therefore, PLDT's possession was not that of an owner, and its subsequent purchase on April 6, 1977, occurred after the annotation of the notice of lis pendens, making it subject to the pending litigation. The Court rejected PLDT's argument that its prior possession and the agreement to buy and sell constituted a prior registration, as the agreement was not registered and did not transfer title. On the nature of the Agreement to Buy and Sell: The Court distinguished the July 11, 1975 Agreement to Buy and Sell from a perfected contract of sale. It held that the agreement was a contract to sell, a preparatory contract where ownership was not transferred upon delivery. This was evidenced by the provision that PLDT still had to "definitely inform Carrascoso of its decision on whether or not to finalize the deed of absolute sale" and the subsequent execution of a Deed of Absolute Sale. The Court also noted the provision prohibiting Carrascoso from selling the property during the agreement's existence, which is characteristic of a contract to sell. Consequently, PLDT only acquired beneficial title, not ownership, which remained with Carrascoso until the full payment and execution of an absolute deed of sale. The Court emphasized that the registration of the agreement was necessary to affect the land, and its lack of registration meant it was not protected against the notice of lis pendens.
Main Doctrine
The failure of a buyer to pay the balance of the purchase price within the period stipulated in a contract of sale constitutes a breach of reciprocal obligations, entitling the seller to rescind the contract. Accommodations such as allowing the buyer to mortgage the property do not suspend the period for payment unless expressly agreed upon. Furthermore, a notice of lis pendens binds subsequent purchasers, and a contract to sell, which is merely preparatory and does not transfer ownership, does not grant protection against such notice.