G.R. No. 119777 - Heirs of Escanlar vs. Court of Appeals

Case Summary (G.R. No. 119777)

Key Dates and Documents

September 15, 1978: Deed of Sale of Rights, Interests and Participation by Cari‑an heirs in favor of Escanlar and Holgado for P275,000 (P50,000 paid at signing; P225,000 balance due May 1979). Clause: contract “shall become effective only upon the approval by the Honorable Court of First Instance of Negros Occidental, Branch VI‑Himamaylan.”
September 15, 1978: Concurrent Deed of Agreement confirming sale and fixing terms (penalty clause forfeiting P50,000 if balance unpaid by May 31, 1979).
November 10, 1981: Petitioners moved for probate-court approval of the 1978 sale; opposition filed January 5, 1982 by Cari‑an heirs.
September 21, 1982: Cari‑an heirs (and some Nombre heirs) sold eight parcels, including Lots 1616 and 1617, to spouses Paquito and Ney Chua; probate court later approved that sale (December 3, 1984) “without prejudice” to unresolved rights.
October 30, 1987: Probate court declared the estate closed and declined to resolve incidents affecting disposition.
December 18, 1991: Trial court declared the September 15, 1978 deed null and void for lack of probate-court approval and nonpayment; upheld sale to Chuas.
February 17, 1995: Court of Appeals affirmed trial court.
Supreme Court decision (reviewing the CA decision) applied the 1987 Constitution as governing law.

Procedural Posture and Relief Sought

Petitioners appealed the trial court judgment (confirmed by the Court of Appeals) that canceled the 1978 sale and upheld the 1982 sale to the Chuas. The proceedings included third‑ and fourth‑party complaints (Jaymes and Chuas), claims for cancellation of deeds, claims for damages and rentals, and motions relating to probate approval. The Supreme Court consolidated petitions and reviewed the legal validity and consequences of the 1978 conveyance and subsequent transactions.

Legal Distinction Considered: Contract of Sale Versus Contract to Sell

The Court reviewed established distinctions: in a contract to sell (conditional sale), ownership remains with the vendor until full payment or fulfillment of a suspensive condition; in an absolute sale ownership passes on delivery (actual or constructive). The Court cited jurisprudence and authorities recognizing a promisor’s extrajudicial rights under a contract to sell (right to terminate, retain installments where expressly provided) and contrasted that with the legal consequences where no reservation of title or unilateral rescission clause exists.

Characterization of the September 15, 1978 Deed

The Supreme Court held the 1978 instrument to be a contract of sale (absolute sale) rather than a contract to sell. The Court’s reasons: (1) the sellers did not expressly reserve ownership until full payment; (2) the deed contained no stipulation authorizing the sellers to unilaterally rescind on nonpayment within the fixed period. Thus, ownership passed upon delivery by operation of law (traditio brevi manu) to the vendees who were already in possession as lessees.

Transfer of Ownership and Mode of Delivery

Applying Article 1477 of the Civil Code and the doctrine of traditio brevi manu, the Court found constructive delivery occurred when petitioners, formerly lessees, continued in possession after the sale and thereby acquired ownership by symbolical delivery. The Court emphasized that ownership in civil-law systems requires delivery (not mere agreement) and that traditio brevi manu is a recognized fiction where the vendee remains in possession but in the character of owner.

Effect of the Probate‑Approval Clause: Validity Versus Efficacy

The Court distinguished the validity of the contract from its effectivity. Under Article 1318, a contract is valid when it has consent, a certain object, and cause. The 1978 deed satisfied these essentials and was therefore valid. The clause making the contract “effective only upon” probate-court approval affected only the contract’s efficacy vis‑à‑vis the parties’ expressed condition, not its intrinsic validity. The Court also explained that heirs may validly alienate their ideal hereditary shares during indivision without judicial approval; judicial approval is necessary for dispositions of specific estate properties by the estate but does not automatically invalidate a sale of ideal shares.

Parties’ Conduct and Estoppel; Practical Impossibility of Approval

The Court relied on the parties’ contemporaneous and subsequent acts (Article 1371) to ascertain intention: the sellers accepted numerous late installment payments and left petitioners in possession, demonstrating intent to give effect to the transaction regardless of court approval. Moreover, the Cari‑an heirs themselves opposed petitioners’ motion for probate approval and filed the cancellation suit, thereby making judicial approval “virtually impossible” and creating the obstacle to the condition’s fulfillment. The Court concluded respondents cannot invoke the failure of a condition they obstructed; such conduct amounts to waiver and estoppel.

Application of Article 1592 — Forfeiture of the Right to Rescind

Article 1592 provides that even where a stipulation contemplates automatic rescission on nonpayment, the vendee may still pay after the stipulated period so long as no judicial or notarial demand for rescission has been made. The Court found that the Cari‑an heirs did not make a formal demand for rescission nor execute any notarial act to that effect after the May 1979 deadline; instead they accepted delayed payments. By doing so, they waived their right to rescind under Article 1592 and related jurisprudence.

Sufficiency of Payment — Evidence and Credibility

The Court evaluated the testimonial and documentary evidence. The only principal witness for cancellation (Fredisminda Cari‑an) gave inconsistent and unconvincing testimony. Documentary receipts in evidence showed substantial payments: Generosa Martinez and Carmen Cari‑an each acknowledged P45,625; Rodolfo Cari‑an received P47,500 on June 21, 1979; P34,218 was consigned to court for minor Leonell; other handwritten installment receipts were presented. The Court found no competent proof that the sellers were not fully compensated and rejected claims of fraud and incomplete payment as unsupported and improbable in light of signed receipts and corroborating acts.

Legal Consequence for Subsequent Sale to the Chuas

Because the Supreme Court held the 1978 sale valid as a conveyance of the heirs’ ideal hereditary shares (one‑half of Victoriana Cari‑an’s share in the estate), the 1982 sale by the heirs to the Chuas is valid except insofar as it affected the specific fractional interests already transferred to petitioners. The Court recognized that only the ideal shares of the Cari‑an heirs were sold in 1978 — not particular, delineated portions of the lots — and therefore the Chuas’ titles are enforceable subject to the prior valid conveyance. The probate court’s closure of the estate, and its statement that properties had been disposed of, precluded reopening estate partition proceedings now.

Relief, Remand, and Determinations Ordered

The Supreme Court reversed the Court of Appeals and trial-court rulings that had nullified the 1978 sale. It remanded the case to the Regional Trial Court for: (1) determination, at petitioners’ option, of which specific one‑half portion of Lot Nos. 1616 and 1617 will be owned by each party; (2) issuance of corresponding certificates of title in the names of the respective parties; an

Case Syllabus (G.R. No. 119777)

Procedural posture

Petitions for review consolidated from decisions of the Court of Appeals in CA-G.R. CV No. 39975, appealing a trial court judgment that declared the September 15, 1978 deed of sale of rights, interests and participation null and void.
Trial court rendered judgment on December 18, 1991 granting cancellation of the September 15, 1978 sale and related agreements, and upheld the later sale to spouses Paquito and Ney Chua; the trial court also ordered various monetary awards, rentals, vacation and costs.
Court of Appeals affirmed the trial court’s cancellation on February 17, 1995 and denied petitioners’ motion for reconsideration on April 3, 1995.
Petitions for review to the Supreme Court were filed (G.R. Nos. 119777 and 120690), consolidated by the Court on January 17, 1996; the Supreme Court rendered judgment reversing and setting aside the Court of Appeals decision and remanding the case to the Regional Trial Court, Negros Occidental, Branch 61.

Core factual background

Spouses Guillermo Nombre and Victoriana Cari-an died (Nombre in 1924; Victoriana in 1938) without issue.
Victoriana’s succession: her late brother’s son, Gregorio Cari-an, was declared her heir in estate proceedings for Nombre and his wife (Special Proceeding No. 7-7279); after Gregorio’s death in 1971, his widow Generosa Martinez and children Rodolfo, Carmen, Leonardo and Fredisminda (collectively “private respondents Cari-an”) were adjudged heirs by representation.
Leonardo Cari-an died leaving widow Nelly Chua vda. de Cari-an and minor son Leonell C. Cari-an.
Two parcels forming part of the estate: Lot No. 1616 (29,350 square meters) and Lot No. 1617 (460,948 square meters) of the Kabankalan Cadastre.
Petitioners Pedro Escanlar and Francisco Holgado were lessees of the subject lots prior to the transaction of September 15, 1978.

The September 15, 1978 Deed of Sale and contemporaneous Deed of Agreement

Deed of Sale (Sept. 15, 1978) purports to sell “all the RIGHTS, INTERESTS and PARTICIPATION of the Vendors as to the one-half (1/2) portion pro-indiviso of Lots Nos. 1616 and 1617 (Fishpond), of the Kabankalan Cadastre, pertaining to the one-half (1/2) portion pro-indiviso of the late Victoriana Cari-an” to vendees Pedro Escanlar and Francisco Holgado for P275,000.00.
Deed of Sale contained a stipulation: “this Contract of Sale of rights, interests and participations shall become effective only upon the approval by the Honorable Court of First Instance of Negros Occidental, Branch VI- Himamaylan.” (underscoring supplied in source).
Payment terms: at signing, vendees had P50,000.00 available as down payment; balance of P225,000.00 to be paid on or before May 1979.
Deed of Agreement (executed same day) reaffirmed the September 15, 1978 sale, acknowledged the P50,000.00 payment, specified the balance P225,000.00 to be paid by May 1979, restrained vendees from assigning/selling/leasing/mortgaging pending full payment, and provided that if vendees failed to pay by May 31, 1979 and the contract canceled, the P50,000.00 would be deemed damages to vendors.

Subsequent transactions, possession and related acts

Petitioners remained in possession of Lots 1616 and 1617 after the sale; because they were lessees prior, their continued possession after sale was characterized as traditio brevi manu (symbolic delivery making possession now in concept of owner).
Petitioners continued to pay rent under their lease contract even after the sale.
Petitioners filed a motion to intervene in the probate proceedings of Nombre and Cari-an on September 10, 1981, and a motion for approval of the Sept. 15, 1978 sale on November 10, 1981; private respondents Cari-an opposed the motion on January 5, 1982.
On September 21, 1982, private respondents Cari-an, along with some heirs of Guillermo Nombre, sold their shares in eight parcels, including Lots 1616 and 1617, to spouses Ney Sarrosa Chua and Paquito Chua for P1,850,000.00; a motion to approve that sale was filed one week later in probate court.
Petitioners (Escanlar and Holgado) were sued by the Cari-ans for cancellation of the Sept. 15, 1978 sale on November 3, 1982 (Civil Case No. 218).
On April 20, 1983, petitioners sold their rights and interests in Lots 1616 and 1617 to Edwin Jayme for P735,000.00 and turned over possession to the Jaymes; the Jaymes were brought into litigation as fourth-party defendants.
Certificates of title over the eight lots were subsequently issued in the names of spouses Ney Sarrosa Chua and Paquito Chua.
Probate court approved the Sept. 21, 1982 sale (to the Chuas) on December 3, 1984 “without prejudice to whatever rights, claims and interests over any of those properties of the estate which cannot be properly and legally ventilated and resolved by the court in the same intestate proceedings.”

Payments received, receipts and contested payment evidence

Petitioners initially paid P50,000.00 at signing; balance to be P225,000.00.
The Cari-ans allegedly each had individual shares of P55,000.00.
Private respondents accepted numerous installments after May 1979; evidence included handwritten receipts for installments (e.g., P112.50 one cavan of rice; P451.50 three cavans of rice and one pig) and exhibits labeled Exhibits 9-A through 9-FFF in the record.
Specific receipts produced in evidence indicate: Generosa Martinez received P45,625.00; Carmen Cari-an received P45,625.00; Rodolfo Cari-an received P47,500.00 (receipt dated June 21, 1979); Nelly Chua vda. de Cari-an received P11,334.00; P34,218.00 was consigned in court for minor Leonell C. Cari-an (deposited per Order dated Sept. 7, 1982).
Fredisminda Cari-an testified she signed a receipt for full payment in December 1979 but claimed she did not receive the final P5,000.00; she compiled a list summing installments to P132,551.00 from a calendar sheet but conceded the list might be incomplete and that receipts were given to petitioners.
Trial court found petitioners had paid amounts after the due date but concluded the Cari-ans were not fully paid and thus nullified the Sept. 15, 1978 sale; Supreme Court scrutinized and discussed the credibility and weight of the receipts and testimony.

Probate court handling of the estate and its effect

Special Proceeding No. 7-7279 (Intestate Estate of Guillermo Nombre and Victoriana Cari-an) adjudicated heirs; Order dated September 28, 1972 confirmed heirs by representation.
Probate court approved lease contracts for estate properties (August 2 and August 9, 1979 approvals referenced).
Probate court rendered decision on October 30, 1987 concluding that all properties of the estate had been disposed of and that the intestate estate was closed; the probate court stated it had no jurisdiction to resolve validity or invalidity of sales of rights in other ordinary actions and that issues were moot as properties were already transferred and titled to spouses Ney S. Chua and Paquito Chua.
The probate court’s December 3, 1984 approval of the Sept. 21, 1982 sale expressly reserved that the approval was “without prejudice to whatever rights, claims and interests over any of those properties of the estate which cannot be properly and legally ventilated and resolved by the court in the same intestate proceedings.”

Issues presented to the Supreme Court

Whether the September 15, 1978 Deed of Sale of Rights, Interests and Participation is an absolute sale (conveyance of ownership) or a contract to sell (conditional, with ownership reserved until full payment and/or court approval).
Wheth