G.R. No. 199990 - Spouses Salvador vs. Spouses Rabaja

Petitioners: Spouses Rolando and Herminia Salvador (owners). Respondents: Spouses Rogelio and Elizabeth Rabaja (buyers/lessees) and Rosario Gonzales (agent).
Property: Lot No. 25, Merryland Village, Mandaluyong City, TCT No. 13426 (subject property).

From 1994 to 2002, Spouses Rabaja leased an apartment on the subject property. In July 1998 they learned the Salvadors sought a buyer.
Herminia Salvador introduced Gonzales as property administrator; Gonzales received the title duplicate and later presented a Special Power of Attorney (SPA) dated July 24, 1998.

On July 24, 1998, parties executed a Contract to Sell for ₱5,000,000. Spouses Rabaja paid an initial ₱48,000 on July 3, 1998, and thereafter paid a total of ₱950,000 to Gonzales, evidenced by check vouchers and improvised receipts.
In mid-1999 the Salvadors claimed non-receipt of payments, prompting Rabaja to suspend further payments and receive an eviction notice for unpaid rent.

Salvadors filed ejectment in Metropolitan Trial Court (MeTC) Branch 60. On August 14, 2002 the MeTC ruled for Salvadors and awarded back rentals; ₱593,400 was garnished from Rabaja’s time deposit.
On appeal, RTC-Branch 212 reversed MeTC (March 1, 2005), but the Court of Appeals in CA-G.R. SP No. 89259 (March 31, 2006) reinstated MeTC. That decision became final on May 12, 2006.

Spouses Rabaja filed for rescission on July 7, 2003, seeking return of ₱950,000 and damages. Salvadors answered, denied the SPA and payments, and counterclaimed; Gonzales denied falsification and asserted she remitted payments to Salvadors.
Salvadors failed to appear at the February 4, 2005 pre-trial before RTC-212; the court allowed ex parte evidence. After transfer to RTC-214, on March 29, 2007 RTC-214 rescinded the contract, ordered refund of ₱950,000 and ₱593,000, awarded moral/exemplary damages and attorney’s fees. Gonzales’s partial motion was denied (Sept. 12, 2007).

CA affirmed with modification on March 29, 2009: upheld rescission and ₱950,000 refund, deleted Gonzales’s solidarity liability, but maintained return of ₱593,400. Motion for reconsideration denied (Jan. 5, 2012).
Salvadors filed a Rule 45 petition before the Supreme Court, raising assignments of error on default, evidentiary credibility, contract validity, garnishment, damages awards, and attorney’s fees; supplemented with subsequent RTC decision on SPA revocation.

Whether the pre-trial order declaring petitioners in default and allowing ex parte evidence was proper and whether their failure to appear was justified.
Whether the improvised receipts, SPA and contract to sell are falsified or invalid such that no valid contract existed and no payments were received by Salvadors.
Whether the ₱593,400 garnished in the ejectment case may be ordered returned in the rescission case despite the ejectment judgment being final and executory.
Whether awards of moral and exemplary damages and attorney’s fees to Spouses Rabaja and Gonzales are supported by law and evidence.