Title
Roman vs. Court of Appeals
Case
G.R. No. L-37976
Decision Date
Jul 16, 1985
A 1957 land sale contract dispute where Vendees defaulted, leading to a claim for liquidated damages. Courts ruled Vendees jointly liable, affirming one-third damages with interest.

Case Digest (G.R. No. L-43389)
Expanded Legal Reasoning Model

Facts:

  • Contract Formation and Terms
    • On December 12, 1957, a Contract to Sell was executed covering five (5) parcels of land in Barrio Dolores, Municipality of Taytay, Rizal, with an aggregate area of 116,243 square meters.
    • The parties were:
      • Vendor: Pablo M. Sarangaya.
      • Vendees: Pablo R. Roman, Porfirio Belgica, and Emilio Yangco.
    • Essential contractual provisions included:
      • The vendor’s obligation to secure titles to the land in his name within one year from the contract date. Failure to do so would relieve the vendees from the purchase.
      • Upon issuance of the titles, the vendees were required to pay the total purchase price of P116,243.00 within 60 days.
      • In the event of non-compliance by the vendees, they would be jointly liable for liquidated damages amounting to P50,000.00 (or P16,666.00 for each).
  • Execution of Titles and Notice
    • Sarangaya secured the titles on August 5, 1958, as evidenced by Exhibits “B” and “B-1.”
    • Notice of the secured titles was received by vendee Porfirio Belgica on August 12, 1958, as shown in Exhibit “C-2.”
    • The contract stipulated that service of notice on any one of the three vendees would be deemed as notice to all, thus creating a collective obligation on October 11, 1958 for them to either pay the agreed purchase price or the liquidated damages.
  • Default and Initiation of Legal Action
    • The vendees failed to perform their contractual obligations.
    • On January 12, 1959, Sarangaya filed a suit for the recovery of liquidated damages of P50,000.00, plus costs and an additional P5,000.00 for attorney’s fees.
    • The complaint was predicated on what was termed the “implicit or tacit rescission” of the reciprocal obligations to sell and to buy, referencing established jurisprudence on implicit rescission where a breach of a reciprocal obligation justifies rescission without a prior judicial declaration.
  • Procedural History and Developments
    • Service and Default:
      • Vendee Porfirio Belgica was served with summons and subsequently defaulted.
      • Vendee Emilio Yangco was served through publication, later improperly declared in default for an in personam suit.
      • Vendee Pablo R. Roman answered the complaint but failed to appear at the March 1, 1960 trial.
    • Trial Proceedings and Orders:
      • On March 30, 1960, the trial court issued a decision ordering all three vendees to pay liquidated damages of P50,000.00 plus attorney’s fees.
      • Roman filed a motion on March 29, 1960 explaining his non-appearance and, later on April 11, 1960, a Motion for Reconsideration was filed to ask for an extension to fulfill the payment obligation under Article 1191 of the Civil Code.
    • Settlement Negotiations:
      • Subsequent to the motions, settlement discussions ensued between Sarangaya and Roman.
      • In August 1960, Roman, in chambers, proposed to purchase the entire property in cash at the original price of P1.00 per square meter (totaling P116,243.00).
      • Sarangaya accepted this offer on September 20, 1960 subject to additional conditions: payment of legal costs and attorney’s fees, interest at the legal rate from October 12, 1958, and documentary stamps plus registration fees.
      • Roman did not accept the counter-proposal, citing potential excessive costs on provisions such as the two-year legal interest, undetermined attorney’s fees, and stamp taxes.
    • Subsequent Trial Court Action:
      • On September 15, 1961, the trial court granted Roman’s reconsideration petition, allowing the presentation of additional evidence.
      • After an extended period of more than three years, on January 9, 1965, the trial court issued an Order under Article 1191 of the Civil Code. The Order directed Roman to pay, upon execution and registration of the deed of absolute sale at P1.00 per square meter, additional costs including legal expenses, attorney’s fees of P1,000.00, interest from October 12, 1958, and documentary stamps and registration fees.
      • This Order was effectively an approval of Roman’s earlier offer to settle and was considered misguided as it incorporated abandoned settlement and counter-proposals.
    • Appellate Review:
      • Sarangaya appealed the trial court Order to the Court of Appeals.
      • On October 26, 1973, the Court of Appeals reversed the trial court decision and ordered Roman to pay only P16,666.00 (one-third of the liquidated damages), with interest at the legal rate from the filing of the complaint until fully paid.
  • Final Judicial Conclusion
    • The Supreme Court, reviewing the entire proceedings and the trial court’s reliance on settlement negotiations that were later abandoned, found no valid reason to disturb the judgment of the Court of Appeals.
    • Consequently, the Petition for Review on Certiorari filed by Pablo R. Roman was denied, with costs imposed against the petitioner.

Issues:

  • Validity of the Implicit Rescission
    • Whether the complaint invoking the implicit or tacit rescission was a proper basis for demanding liquidated damages under the terms of the contract.
    • Whether the non-compliance by the vendees, particularly their failure to pay within the 60-day period subsequent to receiving notice of title, justified rescission under Article 1191 of the Civil Code.
  • Appropriateness of Settlement Negotiations as a Basis for Judicial Action
    • Whether it was proper for the trial court to base its Order on the subsequent settlement offer and counteroffer despite the parties abandoning the negotiations.
    • The impact of the parties’ informal settlement attempts on the final determination of obligations under the contract.
  • Fixing a Compliance Period Beyond the Contractual Stipulation
    • Whether extending the period of compliance from the original 60 days to over six years (from October 11, 1958, to January 9, 1965) was justified under the circumstances.
    • Whether the trial court had just cause for fixing such an extended period for compliance under Article 1191.
  • Determination of Liquidated Damages
    • Whether the adjudication of liquidated damages on the basis of abandoned settlement proposals was consistent with the contractual terms and the applicable legal principles.
    • The adequacy of determining the amount due as one-third of the agreed liquidated damages by the Court of Appeals.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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