Case Summary (G.R. No. 131784)
Petitioner
Felix L. Gonzales, proprietor of Felgon Farms, who entered into a one-year lease with an option to purchase the specified portion for ₱1,000,000, payable over two years with 12% annual interest and annual rentals of ₱2,500 per hectare.
Respondents
Heirs of Thomas and Paula Cruz (Ricardo A. Cruz, Carmelita M. Cruz, Salome A. Cruz, Irenea C. Victoria, Leticia C. Salvador, and Elena C. Talens) who agreed to secure a separate TCT over the leased portion within four years and then execute a new contract mirroring the original terms.
Key Dates
• Contract execution: December 1, 1983 (one‐year lease; purchase option thereafter)
• Expiration of lease: November 30, 1984
• Initial rescission demand: early 1986
• Extra-judicial partition proceedings: initiated July 1989
• Trial court decision: November 16, 1990 (in favor of Gonzales)
• Court of Appeals decision: August 13, 1997 (in favor of Cruz heirs)
• Supreme Court decision: September 16, 1999
Applicable Law
• Article 1373, Civil Code (contract interpretation)
• Article 1181, Civil Code (conditional obligations)
• Principles of nemo dat quod non habet (one cannot transfer better title than one has)
• Rules on conditions precedent and rescission under the Civil Code
Factual Background
Under the lease/purchase contract, Gonzales paid annual rentals (₱15,000) and a ₱50,000 down payment toward the ₱1,000,000 purchase price. He did not exercise the purchase option at the end of the lease year and ceased rent payments thereafter. The lessors never obtained a separate TCT in their names, as required by clause nine, because the property remained undivided among predecessors.
Procedural History
Gonzales remained in possession despite the lessors’ rescission demand. The heirs filed for recovery of possession, damages, and attorney’s fees. The trial court dismissed the complaint, awarded Gonzales moral damages (₱20,000) and attorney’s fees (₱10,000). The Court of Appeals reversed, ordering Gonzales to vacate and pay rentals, attorney’s fees, and costs. Gonzales petitioned for certiorari.
Issue
Whether clause nine of the contract, obligating lessors to secure a separate TCT within four years, constituted a condition precedent to Gonzales’s obligation to purchase and thus barred enforcement of the sale obligation or rescission by the lessors.
Ruling
The Supreme Court granted the petition, reversed the Court of Appeals, and reinstated the trial court’s dismissal of the complaint. Awards of moral damages and attorney’s fees were deleted for lack of basis.
Analysis of Clause Nine
Clause nine required the lessors to obtain a distinct TCT over the leased portion “within a reasonable period of time which shall not in any case exceed four years,” after which a new contract replicating the lease/purchase terms would be executed. Given that the land remained registered to predecessors and no partition existed, clause nine was meant to secure legal title in the lessors’ names before any sale closing.
Conditions Precedent
The obligation to purchase under the first paragraph depended on the prior fulfillment of clause nine
...continue readingCase Syllabus (G.R. No. 131784)
Procedural History
- Petition for Review on Certiorari filed before the Supreme Court from the August 13, 1997 Decision of the Court of Appeals in CA-GR CV No. 303754.
- Trial Court (RTC, Branch 75, San Mateo, Rizal) rendered judgment in favor of defendant-lessee/purchaser Felix Gonzales: dismissal of complaint, award of P20,000 moral damages, P10,000 attorney’s fees, and costs.
- Court of Appeals reversed the RTC, ordering Gonzales to surrender possession, pay P15,000 per annum rentals from December 1, 1984 until recovery, P15,000 attorney’s fees, and costs.
- Petitioner Gonzales elevated the case to the Supreme Court by petition for certiorari.
Facts
- On December 1, 1983, Paula A. Cruz and her co-heirs executed a Contract of Lease/Purchase with Felix L. Gonzales covering a half-portion of a 12-hectare parcel (plus 2-hectare accretion), TCT No. 12111.
- Key contract terms:
- 1-year lease commencing upon signing; thereafter purchaser shall buy for P1,000,000 with 12% interest, 50% down upon sale deed then 25% every six months.
- Annual rental of P2,500 per hectare (P15,000) upon signing.
- Paragraph 9: lessors to obtain separate and distinct TCT over the leased portion within a reasonable time not exceeding four years, then execute a new contract on same terms.
- Gonzales paid P15,000 rental and took possession; did not exercise purchase option at lease end (Nov. 30, 1984), made no further payments.
- Heirs of Thomas and Paula Cruz sent demand letters (1986–1987) rescinding contract and demanding vacation; Gonzales refused.
- Paula A. Cruz died March 19, 1987; property underwent extra-judicial partition; title remained in predecessors’ names.
- Hei