G.R. No. 240145 - Capueta y Ataday vs. People

On October 14, 1959, spouses Miguel R. Socco and Pura Verona (vendors) sold a three-story house and lot located on Pennsylvania, Malate, Manila, to spouses Pacifico Garcia and Salvadora Garcia (vendees).
The total purchase price was P65,000.00, payable partly in money and partly by assuming a mortgage debt.
The purchase price breakdown included:

P38,016.57 as cash, which encompassed various payments including a P2,000.00 check held in escrow for registration fee, real estate taxes, documentary stamps, and notarial fee.
An assumption by the vendees of the vendors’ mortgage debt amounting to P20,074.13 to the Development Bank of the Philippines (DBP).

Prior to the sale, the property had been mortgaged twice – first to DBP and then to the General Financing Corporation.
Negotiations for the sale were handled by the brokerage firm Leviste & Co., which advertised the property.
The itemized payments made by the petitioners included:

A check of P2,000.00 issued to Leviste & Co. (reflecting the part deducted for certain fees).

The petitioners did not immediately assume the vendors’ mortgage obligation, which led to the DBP initiating extrajudicial foreclosure proceedings on August 5, 1959.
The foreclosure culminated in a public auction on November 17, 1959, where the DBP acquired the property as its highest bidder.
Despite the foreclosure, approximately one year later on October 27, 1960, the petitioners acquired the property through a conditional sale from the DBP.
The formal approval of the sale by the DBP’s real estate department did not occur until May 5, 1960, though the legal department had already foreclosed the mortgage.

The petitioners (vendees) retained the amount of P2,000.00 (meant for registration and other fees) instead of delivering it to them.
The petitioners failed to fully assume the vendors’ mortgage obligation.

The fact that the P2,000.00 payment was made by check to Leviste & Co.—the respondents’ agent—supports the petitioners’ position.
The deed of sale with assumption of mortgage explicitly indicates that the petitioners assumed “the obligation of paying the Development Bank of the Philippines the balance of P20,074.13 … as if they were the original mortgagors.”
Evidence presented during trial, including stipulations and check details, confirmed that the petitioners had indeed complied with their obligations.

On April 13, 1960, the Soccos instituted an action for rescission of the contract claiming non-performance by the petitioners.
The trial court initially dismissed the complaint and ordered the petitioners to pay an attorney’s fee of P1,000.00.
The Court of Appeals reversed the trial court’s decision, issuing a judgment that:

Decreed the rescission of the sale with assumption of mortgage.
Ordered the return of the property and its civil fruits to the petitioners.
Ordered restitutions amounting to P36,016.57 with legal interest, P15,000.00 as moral damages, and P33,000.00 as counsel fees.
Left for a later determination the extent of civil fruits from the property.

The petitioners raised five errors, with emphasis on the misapprehension of facts by the Court of Appeals’ findings, particularly regarding the retention of P2,000.00 and the assumption of the mortgage.

Whether the trial court’s findings of fact, particularly concerning the payment of P2,000.00 to Leviste & Co. and the assumption of the DBP mortgage debt by the petitioners, were erroneously disregarded or misapprehended by the Court of Appeals.

Was it proper for the appellate court to reverse the trial court’s factual findings when evidence conclusively demonstrated that the petitioners fulfilled their contractual obligations?
Whether the retention of the P2,000.00 by the petitioners, paid directly to the agent, was valid and binding upon both parties.

Whether the petitioners’ fulfillment of their obligation to assume the DBP mortgage debt was adequately evidenced despite the subsequent foreclosure by the DBP.

Was the foreclosure truly attributable to any failure on the part of the petitioners?
What role did the communication gap between the DBP’s legal and real estate departments play in the foreclosure process?

Whether the procedural rule that the appellate court’s findings are conclusive is subject to the exceptions raised by the petitioners related to misapprehension of facts, grave abuse of discretion, and conclusions contrary to the evidence.