Magoyag v. Maruhom
REITERATIONFacts
The Antecedents: Respondent was awarded a market stall by the Islamic City of Marawi. On December 1, 1985, respondent orally sold the stall to petitioners for ₱20,000.00. On December 10, 1985, respondent executed a Deed of Assignment confirming the sale and assigned the stall to petitioners for ₱20,000.00. Petitioners then leased the stall back to respondent for a monthly rental of ₱250.00, starting December 1, 1985, renewable annually at petitioners' option. Respondent paid rentals until June 1, 1993, when he stopped paying. Petitioners demanded respondent vacate, but he failed to comply. Procedural History: Petitioners filed a complaint for recovery of possession and damages with the RTC. The RTC ruled in favor of petitioners, ordering respondent to vacate the stall and pay unpaid rentals, damages, and attorney's fees. Respondent appealed to the CA, arguing the complaint violated circulars on non-forum shopping, the stall was city-owned and thus inalienable, and the Deed of Assignment was void. The CA reversed the RTC, declaring the Deed of Assignment void and ordering respondent to pay the loan amount of ₱20,000.00 with interest. Petitioners moved for reconsideration, which was denied. The Petition: Petitioners appealed to the Supreme Court, arguing the CA erred in declaring the transaction a loan with mortgage and invalidating the Deed of Assignment, insisting they were entitled to possession.
Issue(s)
Whether the Court of Appeals erred in declaring the Deed of Assignment as a contract of loan with mortgage. Whether the Deed of Assignment is void ab initio. Whether petitioners are entitled to recovery of possession of the market stall. Whether petitioners are entitled to recover the amount paid under the void contract.
Ruling
The petition is partly granted. The Deed of Assignment dated December 10, 1985, is declared void ab initio. Respondent Hadji Abubacar Maruhom is ordered to return to petitioners Hadja Fatima Gaguil Magoyag and Hadji Hasan Madlawi Magoyag the amount of ₱20,000.00 with interest at 6% per annum from the time of the filing of the complaint until the finality of this Decision and 12% per annum thereafter until full payment.
Ratio Decidendi
On the nature of the transaction: The Court of Appeals erred in declaring the Deed of Assignment as a contract of loan with mortgage. The terms of the Deed of Assignment were clear and unambiguous, explicitly stating a sale, transfer, and conveyance of the market stall for a consideration of ₱20,000.00. The language of the contract, which is the primary source for determining the parties' intent, did not indicate a loan secured by a mortgage. The Court emphasized that contract terms, even if explicit, cannot override the clear language of the document unless there is a compelling reason to deviate. The Court cannot rewrite contracts that parties have voluntarily entered into, even if they appear harsh or inequitable. On the validity of the Deed of Assignment: The Deed of Assignment is void ab initio because the subject market stall is owned by the City Government of Marawi, and the respondent, as a mere grantee, was prohibited from selling or alienating it without the City Government's consent. The condition for alienation was violated, automatically rendering the sale null and void. Both the RTC and the CA correctly recognized the ownership of the City Government of Marawi over the stall. The principle of nemo dat quod non habet (one cannot give what one does not have) squarely applies, as the respondent could not validly sell a property he did not own and was prohibited from alienating. On the recovery of possession: Petitioners are not entitled to the recovery of possession of the subject stall. Since the Deed of Assignment is void ab initio, it produces no civil effect and does not create, modify, or extinguish any juridical relation. Parties to a void agreement are left as they are, especially when they are deemed in pari delicto (in equal fault). The Court cannot grant relief based on a contract that is considered a nullity from the beginning. The ownership of the stall remains with the City Government of Marawi, and the respondent's purported transfer of rights was legally ineffective. On the recovery of payment: Petitioners may recover the amount they paid under the void contract. While parties to a void contract are generally left where they are, an exception exists under Article 1412 of the Civil Code. In this case, the respondent was aware that he could not sell the stall without the City Government's consent, yet he proceeded with the sale. However, the records lack proof that the petitioners had actual knowledge of this restriction on the respondent's ownership. Therefore, the petitioners, not being at fault in the sense of having full knowledge of the prohibition, may demand the return of what they have given. This aligns with jurisprudence holding that in a void sale, the seller must refund the money paid by the buyer, with legal interest.
Main Doctrine
A deed of assignment transferring ownership of a market stall, which is owned by the City Government and cannot be alienated by the grantee without consent, is void ab initio. Parties in pari delicto cannot recover what they have given, but the party not at fault may recover what they have given under the void contract.