Escueta v. Lim
REITERATIONFacts
The Antecedents: Respondent Rufina Lim filed an action to quiet title against Ignacio E. Rubio and the heirs of Luz Baloloy, alleging she bought their hereditary shares in 10 lots. She averred that vendors executed a contract of sale on April 10, 1990, received down payments, and agreed to secure certificates of title before the balance would be paid. Ignacio Rubio and the heirs of Luz Baloloy allegedly refused to deliver the certificates of title. It was also alleged that Ignacio Rubio, despite knowing the lots were sold to respondent, executed a simulated deed of sale in favor of petitioner Corazon Escueta, creating a cloud on respondent's title. Procedural History: The heirs of Luz Baloloy (Baloloys) were declared in default for failure to appear at pre-trial. The trial court rendered a partial decision against them, ordering them to execute a Deed of Absolute Sale or, in their failure, for the Clerk of Court to execute it, with a specified consideration and awarding damages and attorney's fees. The Baloloys' petition for relief from judgment was denied. Trial on the merits proceeded between respondent and Ignacio Rubio and Corazon Escueta. The trial court dismissed the complaint against Rubio and Escueta but ordered Rubio to return the down payment with interest. On appeal, the Court of Appeals (CA) dismissed the Baloloys' appeal, reversed the trial court's decision dismissing the complaint against Rubio and Escueta, upheld the validity of the contract of sale in favor of respondent, directed Rubio to execute a Deed of Absolute Sale upon payment of the balance, declared the sale between Rubio and Escueta null and void, and ordered Rubio and Escueta to pay moral damages and attorney's fees. The CA also dismissed Rubio and Escueta's appeal on their counterclaim. The Petition: Petitioners (Escueta and Rubio) sought to annul the CA Decision and Resolution, raising issues regarding the denial of the Baloloys' petition for relief, the validity of the contract of sale between respondent and Virginia Laygo-Lim (who represented Rubio), whether the contract was a contract to sell or a contract of sale, respondent's alleged failure to comply with obligations, Escueta's good faith, the validity of the sale between Rubio and Escueta, and the dismissal of their counterclaims.
Issue(s)
Whether the Court of Appeals erred in denying the petition for relief from judgment filed by the Baloloys. Whether Ignacio E. Rubio is bound by the contract of sale between Virginia Laygo-Lim and Rufina Lim, and whether the contract entered into between Rufina Lim and Virginia Laygo-Lim is a contract to sell or a contract of sale. Whether Rufina Lim failed to faithfully comply with her obligations under the contract to sell, thereby warranting its cancellation. Whether Corazon L. Escueta acted in utmost good faith in entering into the contract of sale with Ignacio E. Rubio, and whether the contract of sale executed between Ignacio E. Rubio and Corazon L. Escueta is valid. Whether the Court of Appeals erred in reinstating the complaint and awarding moral damages and attorney's fees in favor of respondent Rufina Lim, and whether the Court of Appeals erred in dismissing petitioners' counterclaims.
Ruling
The petition is denied. The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 48282, dated October 26, 1998 and January 11, 1999, respectively, are affirmed.
Ratio Decidendi
On the Baloloys' Petition for Relief: The Court affirmed the CA's dismissal of the Baloloys' appeal from the denial of their petition for relief. The Court found that the Baloloys' former counsel received a copy of the partial decision on April 5, 1994, making the 60-day period for filing the petition for relief reckoned from that date. The petition was filed on July 4, 1994, which was 90 days later, thus beyond the reglementary period. Furthermore, the Baloloys themselves received the partial decision on September 13, 1993, also exceeding the 60-day period. The Court found no fraud, accident, mistake, or excusable negligence to justify the late filing. The Baloloys' claim of lack of notice of pre-trial was also dismissed, as notices were sent to them and their counsel, and the duty to inform the client rests with the counsel. The issue of lack of special power of attorney was deemed waived as it was not raised in their motion to lift the order of default. On the Validity of the Contract of Sale and Ignacio Rubio's Liability; On the Contract Being a Contract to Sell vs. Contract of Sale: The Court upheld the validity of the contract of sale between respondent Lim and Virginia Lim, who acted as sub-agent for Patricia Llamas, the attorney-in-fact of Ignacio Rubio. Article 1892 of the Civil Code allows an agent to appoint a substitute unless prohibited, making Patricia Llamas responsible for the acts of her sub-agent, Virginia Lim. Even if Virginia Lim exceeded her authority, the contract was merely unenforceable under Article 1317 of the Civil Code, unless ratified. Ignacio Rubio's acceptance and encashment of the check, despite his denial of the sale, constituted ratification of the contract. His claim that it was a loan was unsubstantiated. The Court found that all elements of a valid contract of sale were present: consent, determinate subject matter, and a certain price. Earnest money was given, which is considered part of the price and proof of perfection. Ownership transferred to the vendee upon constructive delivery, evidenced by the execution of the contract and respondent's possession and use of the properties. The Court clarified that the contract was a contract of sale, not a contract to sell. There was no stipulation reserving ownership to the vendors until full payment. The transfer of ownership occurred upon delivery. The argument that respondent failed to pay the balance was countered by the fact that the vendors themselves failed to deliver the certificates of title, making it impossible for respondent to pay the balance. The Court noted that even if a period was agreed upon for payment, the vendee may still pay even after the expiration of the period, as long as no demand for rescission has been made judicially or by notarial act. On Rufina Lim's Compliance with Obligations: The argument that respondent failed to pay the balance was countered by the fact that the vendors themselves failed to deliver the certificates of title, making it impossible for respondent to pay the balance. The Court noted that even if a period was agreed upon for payment, the vendee may still pay even after the expiration of the period, as long as no demand for rescission has been made judicially or by notarial act. On Corazon Escueta's Good Faith and the Validity of the Sale to Her: The Court ruled that the sale between Ignacio Rubio and Corazon Escueta was null and void. Ignacio Rubio could no longer sell the properties after having sold them to respondent Lim. Applying Article 1544 of the Civil Code, a second buyer cannot defeat the first buyer's title, even with a Torrens title, if the second buyer had actual or constructive knowledge of the defect in the seller's title. The certificates of title showed the properties were registered in common, not in individual names, which should have alerted Escueta. The argument that a purchaser need not inquire beyond the Torrens title was rejected in this context. On Damages and Attorney's Fees; On the Dismissal of Petitioners' Counterclaims: The CA's award of moral damages and attorney's fees against Rubio and Escueta was affirmed, consistent with the ruling that the sale to Escueta was void and that Rubio was liable for breach of contract. No specific ratio was provided regarding the dismissal of the petitioners' counterclaims, so this is implicitly covered by the overall judgment.
Main Doctrine
A contract of sale is perfected upon the meeting of the minds of the parties on the determinate subject matter and the price. Ownership transfers upon constructive or actual delivery. A second buyer, even with a Torrens title, cannot defeat the first buyer's title if the second buyer had actual or constructive knowledge of the defect in the seller's title.