Quirong v. Development Bank of the Philippines
REITERATIONFacts
The Antecedents: Emilio Dalope died leaving a 589-square meter untitled lot to his wife, Felisa, and nine children. Felisa sold the entire lot to her daughter Rosa Dalope-Funcion and her husband (the Funcions) to enable them to obtain a loan from respondent Development Bank of the Philippines (DBP). The Funcions mortgaged the lot to DBP. After the Funcions defaulted, DBP foreclosed the mortgage and consolidated ownership in its name. Subsequently, DBP conditionally sold the lot to Sofia Quirong for P78,000.00, with Sofia waiving any warranty against eviction and DBP disclaiming liability for possession or encumbrances. Sofia paid a down payment. Meanwhile, Felisa and her eight children (the Dalopes) filed an action for partition and declaration of nullity of documents against DBP and the Funcions. Despite the pending suit, DBP executed a deed of absolute sale in favor of Sofia Quirong, containing similar waivers. Sofia Quirong died, and her heirs (petitioners) intervened in the Dalopes' case, seeking to be awarded the lot or, alternatively, recovery from DBP. However, they failed to make a formal offer of evidence, and the trial court did not rule on their claims. The RTC decision declared DBP's sale to Sofia Quirong valid only with respect to Felisa's and Rosa's shares, voiding it as to the other eight children's shares. DBP failed to appeal the RTC decision, which became final and executory. DBP resisted a writ of execution, claiming the decision lacked specificity, but its petition for certiorari was denied by the Supreme Court for non-payment of fees. Procedural History: On June 10, 1998, the Quirong heirs filed the present action against DBP for rescission of the contract of sale between Sofia Quirong and DBP, seeking reimbursement of the P78,000.00 paid, plus damages, alleging they were deprived of nearly the whole lot by the RTC decision in the earlier case. DBP's motion to dismiss on grounds of prescription and res judicata was denied. The RTC rendered a decision rescinding the sale and ordering DBP to return the P78,000.00. On appeal, the Court of Appeals (CA) reversed the RTC decision, dismissing the heirs' action on the ground of prescription, holding that the four-year prescriptive period under Article 1389 of the Civil Code had elapsed from the finality of the December 16, 1992 RTC decision. The Petition: The Quirong heirs filed a petition for review on certiorari, questioning the CA's dismissal of their action on the ground of prescription.
Issue(s)
Whether or not the Quirong heirs’ action for rescission of respondent DBP’s sale of the subject property to Sofia Quirong was already barred by prescription. Whether or not the heirs of Quirong were entitled to the rescission of the DBP’s sale of the subject lot to the late Sofia Quirong as a consequence of her heirs having been evicted from it.
Ruling
The Court denied the petition and affirmed the decision of the Court of Appeals, holding that the action for rescission was barred by prescription.
Ratio Decidendi
On the issue of prescription: The Court held that the action for rescission, based on eviction and subsequent economic loss, prescribes within four years under Article 1389 of the Civil Code. The prescriptive period is reckoned from the finality of the judgment that causes the eviction. In this case, the RTC decision in Civil Case D-7159 became final and executory on January 28, 1993, when DBP failed to appeal. This decision deprived the Quirong heirs of 80% of the lot. Therefore, the four-year prescriptive period for their action for rescission expired on January 28, 1997. Since the Quirong heirs filed their action on June 10, 1998, it was filed beyond the prescriptive period. The Court clarified that the incident before the Supreme Court in G.R. 116575, involving DBP's motion to quash the writ of execution, did not affect the finality of the RTC decision in Civil Case D-7159, which had already become final and executory on January 28, 1993. The Court distinguished between rescission under Article 1389 (based on injury to economic interests) and resolution under Article 1191 (based on breach of faith), noting that while the latter may be considered an action upon a written contract prescribing in 10 years under Article 1144, the present action was clearly for rescission due to eviction, a situation governed by Article 1389 and Article 1556 of the Civil Code. The Court emphasized that the cause of action stemmed from the loss of the property by final judgment, which is a form of eviction, entitling the vendee to demand rescission of the contract within the prescribed period. On the entitlement to rescission: Given the ruling on prescription, the Court found it unnecessary to delve into the merits of whether the Quirong heirs were entitled to rescission. The primary issue was the timeliness of their action, which was found to be barred by prescription. The Court noted parenthetically that the Quirong heirs' failure to appeal the RTC's omission to rule on their claims in the earlier case, despite their intervention and cross-claim, also contributed to their predicament, suggesting they had themselves to blame for the loss of whatever rights they might have had.
Main Doctrine
An action for rescission of a contract of sale due to eviction, based on a subsequent economic loss suffered by the buyer, prescribes within four years from the time the action accrues, as provided under Article 1389 of the Civil Code. The accrual date is when the buyer is deprived of the property by a final judgment.