Salvador v. Rabaja
REITERATIONFacts
The Antecedents: Spouses Salvador (sellers) engaged the services of Rosario Gonzales (agent) to sell their property to Spouses Rabaja (buyers), who were already leasing the property. Spouses Salvador introduced Gonzales as the administrator and handed her the owner's duplicate certificate of title. Spouses Rabaja made initial payments to Gonzales in the presence of Herminia Salvador. A Contract to Sell was executed, with Spouses Rabaja making substantial payments totaling ₱950,000.00, received by Gonzales under a Special Power of Attorney (SPA) and evidenced by check vouchers and receipts signed by Herminia Salvador. Procedural History: Spouses Salvador later claimed non-receipt of payments from Gonzales, prompting Spouses Rabaja to suspend payments. This led to an ejectment case filed by Spouses Salvador, which was initially decided in their favor by the MeTC but later reversed by the RTC. The CA reinstated the MeTC ruling, which became final and executory. Meanwhile, Spouses Rabaja filed a rescission case against Spouses Salvador and Gonzales, seeking the return of their payments and damages. Spouses Salvador were declared in default by the RTC for failing to attend the pre-trial conference. The RTC ruled in favor of Spouses Rabaja, ordering rescission of the contract and joint and several liability of Spouses Salvador and Gonzales for the returned payments, plus damages. The RTC also ordered Spouses Salvador to return the ₱593,400.00 garnished in the ejectment case. The CA affirmed the rescission but modified the ruling by removing Gonzales' joint and several liability, holding that she acted within her authority. The CA also affirmed the return of the garnished amount, citing a separate case (CA-G.R. SP No. 89260) which Spouses Salvador clarified was incorrect, stating the garnishment was from CA-G.R. SP No. 89259. The Petition: Spouses Salvador filed a petition for review on certiorari, assailing the CA's decision, primarily arguing that they were wrongly declared in default, that the receipts and SPA were falsified, that no valid contract existed, and that the garnished amount from the ejectment case should not be returned. They also questioned the award of damages.
Issue(s)
Whether the Spouses Salvador were gravely abused in discretion by the lower courts in declaring them in default and depriving them of the opportunity to present evidence. Whether the trial court erred in giving credence to the testimony of respondent Gonzales and the improvised receipts, and in finding that payments were remitted to petitioner Herminia Salvador; and whether the contract was valid and Gonzales had the authority to act as an agent. Whether the Court of Appeals erred in affirming the trial court's decision ordering the return of ₱593,400.00 representing rentals in arrears garnished in a separate ejectment case. Whether the Court of Appeals erred in finding that the trial court gravely erred in awarding damages and attorney's fees to respondents Spouses Rabaja and Gonzales. Whether the trial court erred in rescinding the contract to sell when no valid contract was entered into, and in ordering the refund of ₱950,000.00 when the evidence shows it was misappropriated by respondent Gonzales. Whether the contract to sell should be rescinded.
Ruling
The Supreme Court partly granted the petition, modifying the decisions of the lower courts. The Court affirmed the rescission of the Contract to Sell but deleted the awards for moral damages, exemplary damages, and attorney's fees in favor of Spouses Rabaja and Gonzales. Crucially, the Court deleted the order for Spouses Salvador to return the ₱593,400.00 garnished in the ejectment case, holding that the judgment in the ejectment case was final and executory and could not be disturbed. The Court also clarified that while Gonzales acted within her authority as agent, she was not solidarily liable with Spouses Salvador for the returned purchase price, as per the CA's modification.
Ratio Decidendi
On the issue of default and presentation of evidence ex parte: The Court reiterated that failure to attend a pre-trial conference does not result in a declaration of default under the 1997 Rules of Civil Procedure. However, it does allow the plaintiff to present evidence ex parte against the absent defendant, as provided in Rule 18, Sections 4 and 5. The excuse of the counsel forgetting to update his calendar was deemed a flimsy excuse, showing carelessness and indifference to the pre-trial stage. Therefore, the Spouses Salvador's failure to attend the pre-trial conference warranted the presentation of evidence ex parte by Spouses Rabaja, and the RTC's order was upheld. On the validity of the contract and agent's authority: The Court affirmed the lower courts' finding that the contract was a contract of sale, not merely a contract to sell, as no title was reserved until full payment. Regarding Gonzales' authority, the Court invoked Articles 1900, 1902, and 1910 of the New Civil Code. It held that as far as third persons are concerned, an act of an agent is deemed within the scope of authority if it is within the terms of the written power of attorney. Since the SPA authorized Gonzales to administer the property, negotiate the sale, and collect payments, she acted within her authority. The fact that Herminia Salvador personally introduced Gonzales as administrator and that Spouses Salvador authorized her to look for a buyer estopped them from denying her authority. Therefore, payments made to Gonzales were considered payments made to Spouses Salvador, and any internal dispute between them did not affect Spouses Rabaja. On the return of the garnished amount (₱593,400.00): The Court ruled that the CA erred in ordering the return of the ₱593,400.00 garnished from Spouses Rabaja's time deposit account. This garnishment was pursuant to a final and executory decision in an ejectment case (CA-G.R. SP No. 89259), which is entirely separate from the rescission case. The principle of immutability of a final and executory judgment was invoked, stating that such judgments cannot be modified even by the highest court. The Court also noted that the issue of returning the garnished amount was not properly raised in the complaint for rescission, making its inclusion in the RTC decision improper. On the award of damages and attorney's fees: The Court deleted the awards for moral and exemplary damages in favor of Spouses Rabaja. It held that the mere filing of a civil action is not a ground for moral damages, and there was no sufficient showing of fraud or bad faith by Spouses Salvador. For exemplary damages, the claimant must first be entitled to moral or compensatory damages, which was not the case here. The award of attorney's fees to both Spouses Rabaja and Gonzales was also deleted, as the right to litigate should not be penalized, and an agent should expect to be involved in litigation related to their duties. On the rescission of the contract and refund of payment: The Court affirmed the rescission of the Contract to Sell, as it was deemed a contract of sale and Spouses Salvador failed to fulfill their obligation to deliver the property upon payment. Spouses Rabaja were entitled to the return of the purchase price paid, which was ₱950,000.00, jointly and severally from Spouses Salvador. On the rescission of the contract: The Court affirmed the rescission of the Contract to Sell, as it was deemed a contract of sale and Spouses Salvador failed to fulfill their obligation to deliver the property upon payment.
Main Doctrine
A party's failure to attend a pre-trial conference, while not resulting in a declaration of default, allows the opposing party to present evidence ex parte. Furthermore, a principal is bound by the acts of an agent acting within the scope of the authority granted in a Special Power of Attorney, irrespective of internal arrangements between the principal and the agent, as far as third persons are concerned. A final and executory judgment in an ejectment case, particularly concerning garnishment, cannot be disturbed in a separate rescission case.