G.R. No. 119310 - Esguerra vs. Court of Appeals

Case Summary (G.R. No. 119310)

Petitioner, Respondent, and Occupancy Condition

GSIS, through a signed acceptance/approval form, allocated Lot No. 26, Block No. (48) 2 with the housing unit to Agcaoili and expressly advised him to occupy the house immediately, warning that failure to occupy within three days would result in automatic disapproval and re-award. Agcaoili attempted to comply but left because the unit lacked essential facilities; he left a homeless friend (Villanueva) as a watcher pending completion.

Key Dates and Procedural History

Application dated June 24, 1964; approval letter dated October 5, 1965 (Exh. A); initial payment receipt dated October 10, 1966 (O.R. No. 186558); GSIS later cancelled the award (Exh. D). Agcaoili sued for specific performance and damages (CFI of Manila, Civil Case No. 69417). The trial court rendered judgment for Agcaoili; GSIS appealed to the Supreme Court (decision rendered August 30, 1988).

Applicable Law and Authorities Cited

Governing legal framework employed by the Court: Civil Code provisions (Art. 1475 on sale; Art. 1169 on reciprocal obligations; Art. 19 on good faith). Precedents and authorities cited in the decision include Lim v. de los Santos; Pacific Oxygen & Acetylene Co. v. Central Bank; Cristobal v. Melchor; Air Manila, Inc. v. Court of Industrial Relations; and equitable principles and American authorities on specific performance and currency depreciation (as cited in the record).

Undisputed Factual Findings at Trial

The essential facts were not contested. The GSIS acceptance form contained no disclosure that the house was being sold “as is” or that it was incomplete. Agcaoili paid the first installment and incidental fees but withheld further amortizations until GSIS made the unit habitable. GSIS opted to cancel the award and demand vacation of the premises. GSIS chose not to present evidence at trial; judgment was based on Agcaoili’s evidence.

Legal Issues Presented on Appeal

GSIS advanced three principal arguments: (1) Agcaoili had no right to suspend payments because the unit was sold in the condition then existing and acceptance meant he must pay; (2) the requirement of immediate occupancy was a condition precedent to perfection of the contract, and Agcaoili’s failure to occupy within three days meant no contract came into existence; and (3) allowing another person (Villanueva) to occupy without GSIS consent amounted to repudiation and deprived GSIS of rental value.

Supreme Court’s Finding on Contract Formation and Interpretation

The Court held that a perfected contract of sale existed. The acceptance form prepared by GSIS, coupled with Agcaoili’s application, manifested a meeting of minds as to a determinate house and lot at a defined amortization rate (P31.56/month). The occupancy condition, when objectively construed in context, implied that the dwelling was to be reasonably habitable; it could not reasonably be read to require occupancy of a mere shell. Because GSIS prepared the printed forms and imposed the terms, any ambiguity must be resolved against GSIS.

Seller’s Duty and Breach

The Court reaffirmed the seller’s obligation to deliver the sold thing in a condition suitable for the buyer’s contemplated enjoyment. GSIS failed to deliver a dwelling fit for civilized habitation: ceiling, stairs, lighting, water, bathroom, toilet, kitchen, and drainage were absent. That failure constituted breach of GSIS’s obligation under the contract.

On Suspension of Payments and Alleged Breach of Occupancy Condition

The Court ruled that Agcaoili was justified in suspending further amortization payments because GSIS had not complied with its obligation to tender a habitable house. Under the principle of reciprocal obligations, a party is not in delay when the other party is not ready to comply properly. The Court also rejected GSIS’s contention that Agcaoili’s failure to continue residence or his leaving Villanueva amounted to repudiation: Agcaoili attempted to occupy, was forced to leave for reasons attributable to the seller, and left an occupant willing to safeguard the premises—conduct the Court deemed not to constitute breach.

Equity Jurisdiction and Inappropriateness of Literal Specific Performance

Although the contract was valid and GSIS’s cancellation of the award was void, the Court found literal specific performance as originally decreed (i.e., forcing GSIS to complete the house under the old price terms) to be inequitable. After more than twenty years of inaction, completion at current construction costs would render the original stipulated price grossly disproportionate. The Court applied equitable principles, emphasizing that specific performance must be just and practicable and that equity may adjust obligations to reflect changed circumstances at the time of decree.

Adjustment of Rights and the Remedy Ordered

Balancing the equities, the Court modified the relief. It affirmed the lower court’s invalidation of the cancellation and other monetary awards but deleted the order requiring GSIS to complete the house. Instead, it ordered modification of the contract: the cost of the land (as of contract perfection) would be increased by the value of the house in

Case Syllabus (G.R. No. 119310)

Citation and Court

Reported at 247-A Phil. 74, First Division, G.R. No. L-30056.
Decision rendered August 30, 1988.
Decision penned by Justice Narvasa.
Judgment of the Court a quo rendered by Hon. Manuel P. Barcelona, presiding judge of Branch VIII, Court of First Instance of Manila (Record on Appeal, pp. 22–25; Rollo, p. 13).
Docketed in the trial court as Civil Case No. 69417.

Parties

Plaintiff-Appellee: Marcelo Agcaoili.
Defendant-Appellant: Government Service Insurance System (GSIS).
A homeless friend named Villanueva was placed by Agcaoili in the premises as a temporary occupant/watchman.

Procedural Posture

Agcaoili applied to purchase a house and lot from GSIS; acceptance communicated by GSIS.
GSIS conditioned approval on immediate occupancy by awardee within three days.
Agcaoili attempted occupancy but left the next day because the house was uninhabitable; he paid initial amortization and incidental fees but refused further payments until the house was made habitable.
GSIS canceled the award and demanded vacation of the premises; Agcaoili sued for specific performance with damages in the Court of First Instance of Manila.
At trial, GSIS dispensed with presenting its own proofs; judgment was rendered for Agcaoili.
GSIS appealed to the Supreme Court.

Uncontested and Essential Facts

Agcaoili’s offer to buy was submitted on a printed form provided by GSIS (Exh. E).
Approval of Agcaoili’s application was communicated in a letter dated October 5, 1965 (Exh. A) allocating Lot No. 26, Block No. (48) 2 and advising immediate occupation; the letter warned that failure to occupy within three (3) days would result in automatic disapproval and re-award to another applicant.
The initial application itself bore a date of June 24, 1964 ([1]).
On attempting to occupy, Agcaoili found the house to be merely a shell and utterly uninhabitable: absence of ceiling, stairs, double ceiling, lighting facilities, water connection, bathroom, toilet, kitchen, drainage, rendering civilized occupation impossible.
Agcaoili left a homeless friend, Villanueva, to stay in the structure as a watchman pending completion.
GSIS requested payment of monthly amortizations; Agcaoili paid the first monthly installment and incidental fees (O.R. No. 186558, Oct. 10, 1966 [3]), and thereafter refused further payments until the house was completed.
GSIS cancelled the award and required Agcaoili to vacate (Exh. D [4]).
Other awardees lodged a written protest through “Samahang Lakas ng Mahihirap,” attaching a resolution dated July 23, 1967 and a three-page list of uncompleted houses and specific items not completed (Exh. F) ([6]).

Contract Documents and Terms

Offer: Agcaoili’s “Application to Purchase a House and/or Lot,” a printed form prepared by GSIS (Exh. E) ([12]).
Acceptance: A mimeographed form of acceptance prepared and sent by GSIS (Exh. A), allocating a specific lot and housing unit.
The acceptance/notice and the payment commencement notice referred to “the house and lot awarded” and contained no indication that the house was incomplete or being sold “as is.”
Explicit condition in acceptance: awardee was “advised to occupy the said house immediately” and must occupy within three (3) days from receipt of notice or else the application would be automatically disapproved.
Agreed price and payment term: a definite price payable in amortizations at P31.56 per month (as stated by the Court).

Trial Court Judgment (Court a quo)

Judgment rendered in favor of plaintiff Agcaoili, based on evidence adduced by Agcaoili alone (GSIS presented no proofs).
Dispositions ordered by the trial court, as quoted in the decision:
- Declared the cancellation of the award in favor of plaintiff illegal and void.
- Ordered GSIS to respect and enforce the award to plaintiff relative to Lot No. 26, Block No. (48) 2 of the GSIS low cost housing project at Nangka, Marikina, Rizal.
- Ordered GSIS to complete the house so as to make it habitable and authorized GSIS to collect monthly amortization only after said house shall have been completed under the terms and conditions mentioned in Exhibit A.
- Ordered GSIS to pay P100.00 as damages and P300.00 for attorney’s fees, and costs.

Issues Raised on Appeal by GSIS

GSIS urged reversal on the following primary grounds:
- (1) Agcaoili had no right to suspend payment of amortizations on account of incompleteness because the unit was sold “in the condition and state of completion then existing” and he is deemed to have accepted it as found; and, if the contract were indefinite in this regard, such indefiniteness precludes specific performance (Appellant’s brief, pp. 11–14) ([9]).
- (2) Perfection of the contract was conditioned upon Agcaoili’s immediate occupancy of the house; his failure to comply with the condition meant no contract came into existence between them (Appellant’s brief, pp. 7–8) ([10]).
- (3) Agcaoili’s placing of his homeless friend Villanueva in possession “without the prior or subsequent knowledge or consent of the defendant (GSIS)” constituted repudiation of the award and deprived GSIS of reasonable rental value of the property (Appellant’s brief, pp. 8–10) ([11]).

Supreme Court’s Findings of Fact and Law

Contract Perfection and Meeting of Minds:
- The acceptance letter by GSIS allocated a determinate lot and housing