Case Summary (G.R. No. 102096)
Factual Background
Petitioner was a businesswoman who agreed to secure loans from various financial institutions using several parcels of land owned by respondents as collateral. The parties agreed that petitioner would pay loan amortizations and that amounts actually received by respondents from loan releases would be treated as payments for the parcels at an agreed rate of P170.00 per square meter. Respondents executed a Deed of Sale over Lot No. 800-A-1-B which on its face stated a consideration of P25,120.00, and executed various Special Powers of Attorney that enabled petitioner to obtain loans from Rural Bank of Compostela, Isla Bank, DBP, and J. Finance. The net proceeds received by petitioner totalled P492,002.04 against aggregate loan obligations of P544,851.75, and petitioner remitted P198,000.00 to respondents. Petitioner expended portions of the proceeds for loan amortizations, taxes, alleged payments to bank fixers, and construction of a house on Lot No. 800-A-1-B. When petitioner demanded conveyance of adjacent Lot No. 800-A-1-A to serve as a lawn, respondents declined and asked for an accounting of the loans and collaterals.
Trial Court Proceedings
On May 5, 1985 petitioner filed a complaint for specific performance with damages. After trial the Regional Trial Court of Cebu City rendered judgment in favor of petitioner. The trial court ordered respondents to return the owner’s duplicate of TCT No. T-8648, to convey several lots including Lot Nos. 800-A-1-A, 800-A-4, 800-A-3 and 800-A-2 at P170.00 per square meter or pay their price if transferred to third parties, to reimburse taxes of P2,343.63, and to pay moral damages of P100,000.00, exemplary damages of P50,000.00, attorneys’ fees of P25,000.00 and litigation expenses of P10,000.00. The third-party complaint against Antonio Montalban was dismissed.
Court of Appeals Ruling
Respondents appealed. The Court of Appeals annulled and set aside the trial court decision and rendered a different judgment. The appellate court sustained the validity of the sale of Lot 800-A-1-B in favor of petitioner, ordered respondents to return the owner’s duplicate of TCT T-8648, directed respondents to execute a Deed of Absolute Sale over Lot 800-A-1-A at P300.00 per square meter within thirty days, ordered petitioner to discharge and free Lots 800-A-2, 800-A-3 and 800-A-4 from mortgages within thirty days or to pay their value at P300.00 per square meter, and made no pronouncement as to costs. The Court of Appeals denied petitioner’s Motion for Reconsideration.
Issues Presented
The central issue was the real agreement of the parties: whether petitioner contracted to buy six parcels for a total of P699,890.00 at P170.00 per square meter to be paid only upon full payment from loan proceeds, as respondents contended, or whether the agreement was that petitioner would secure loans using respondents’ lands as collateral and that respondents would convey lots corresponding to the amounts actually received by them at P170.00 per square meter, as petitioner alleged. Subsidiary issues included which of the conflicting documents (the notarized Deed of Sale versus the unnotarized Deed of Agreement and Supplemental Agreement) reflected the true consideration for Lot 800-A-1-B, whether alleged payments of P100,000.00 to bank fixers or P194,002.04 for house construction should be credited against respondents’ account, and whether respondents committed fraud.
Parties’ Contentions
Petitioner argued that the Court of Appeals improperly made a new contract between the parties and disregarded the evidence establishing the parties’ true agreement. She invoked the exceptional circumstances enumerated in Floro v. Llenado permitting review of factual findings under Rule 45, and insisted that the parties agreed to the P170.00 per square meter scheme and that she had remitted P198,000.00 which obliged respondents to convey specific lots including Lot 800-A-1-A. Respondents contended that petitioner undertook to buy all six parcels for P699,890.00 at P170.00 per square meter and that she remitted only P198,000.00 out of the aggregate loan, leaving unpaid balances; they relied on the Deed of Agreement which reflected a balance of P33,380.00 on Lot 800-A-1-B and alleged additional advances of P76,200.00 for the house construction.
Supreme Court’s Analysis and Legal Reasoning
The Court examined the parties’ intention as expressed by their contemporaneous acts, as required by Article 1371 and settled rules of contractual interpretation. It found decisive the fact that respondents had executed and delivered a notarized Deed of Sale for Lot 800-A-1-B showing a consideration of P25,120.00 and that parties had partially performed under the scheme of loan releases. The unnotarized Deed of Agreement and Supplemental Agreement, although dated the same day, were explained by petitioner as instruments created to obtain a postdated check and to bolster respondents’ credit; the Court treated the Deed of Agreement as a simulated agreement within the meaning of Articles 1345–1346 and therefore lacking valid consent. The Court held that the written Deed of Sale embodied the parties’ true bargain with respect to Lot 800-A-1-B. The Court rejected the Court of Appeals’ use of a present fair market value of P300.00 per square meter as contrary to the parties’ contractual rate of P170.00 per square meter and admonished that a court may not make a new contract for the parties. The Court accepted that respondent Paray admitted the P170.00 per square meter price and that petitioner likewise confirmed that term. The Court found insufficient proof to credit petitioner with P100,000.00 allegedly given as grease money and refused to treat P194,002.04 spent on construction as a charge against respondents’ account, invoking the presumption under Article 446 that works on land are presumed made by the owner and noting petitioner’s admitted expenditures and borrowings for construction. Th
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Case Syllabus (G.R. No. 102096)
Parties and Posture
- Petitioner filed a petition for certiorari under Rule 45 to review and set aside the decision and resolution of the Court of Appeals that reversed the Regional Trial Court, Branch 6, Cebu City (Civil Case No. CEB-3835).
- Respondents are the Court of Appeals as respondent and the private parties Spouses Gerardo and Maria Paray as real parties in interest.
- The Court of Appeals promulgated a decision on June 25, 1991 and denied petitioner’s motion for reconsideration by Resolution dated September 27, 1991.
- Petitioner filed the certiorari petition in this Court on October 19, 1991 and the case was set for submission of memoranda by this Court.
Key Facts
- Petitioner agreed to obtain bank loans using several parcels of land owned by Spouses Gerardo and Maria Paray as collateral, in consideration that the respondents would convey lots to her corresponding to amounts they actually received from loan releases at an agreed price of P170.00 per square meter.
- Respondents executed a Deed of Sale over Lot No. 800-A-1-B dated June 6, 1983 for P25,120.00 and executed Special Powers of Attorney over other lots to enable petitioner to obtain loans.
- Petitioner obtained multiple loans with aggregate gross amounts of P544,851.75 and net proceeds actually received of P492,002.04, of which she remitted P198,000.00 to respondents as receipts reflect.
- Petitioner used P194,002.04 of net proceeds to build a house on Lot No. 800-A-1-B, paid P109,916.28 in loan amortizations, and paid realty taxes of P2,342.63 on the collateral properties.
- Petitioner alleged that respondents agreed to convey Lot No. 800-A-1-A (250 sq. m.) as part of the transaction but respondents later refused transfer pending accounting and liquidation of the loans and collaterals.
- Respondents contended that petitioner undertook to buy six parcels totaling 4,117 sq. m. for P699,890.00 at P170.00/sq. m., and that petitioner remitted only P198,000.00 instead of paying the full purchase price.
Issues Presented
- Whether the true agreement of the parties was that petitioner would secure loans and transfer to respondents the loan proceeds or, conversely, that petitioner purchased the lots outright for P699,890.00 payable from loan proceeds.
- Whether the Deed of Sale for Lot 800-A-1-B or the contemporaneous Deed of Agreement with an alleged outstanding balance of P33,380.00 reflected the parties’ true intention.
- Whether petitioner is entitled to the conveyance of Lot No. 800-A-1-A or, alternatively, monetary reimbursement.
- Whether alleged payments of P100,000.00 as "grease money" and P194,002.04 used in construction should be credited against respondents’ account.
- Whether respondents committed actionable fraud and whether third-party defendant Antonio Montalban was solidarily liable.
Contentions of the Parties
- Petitioner contended that the parties agreed that loan proceeds would be shared and that lots covered by loan releases would be conveyed to her at P170.00/sq. m., that she remitted P198,000.00, and that respondents refused to convey Lot 800-A-1-A despite the agreement.
- Respondents contended that petitioner contracted to buy all six lots for P699,890.00 at P170.00/sq. m., that only P198,000.00 was delivered, that Lot 800-A-1-B still had an unpaid balance of P33,380.00, and that advances and loans totaling P76,200.00 were extended to petitioner to finish house construction.
Trial Court Ruling
- The RTC found in favor of petitioner and ordered immediate return of the owner’s duplicate of TCT No. T-8648, ordered respondents to convey Lot Nos. 800-A-1-A, 800-A-4, 800-A-3 and 800-A-2 at P170.00/sq. m. or pay their value if transferred, reimbursed petitioner