G.R. No. L-22761 - Malig vs. Bush

Case Summary (G.R. No. L-22761)

Factual Background

Ignacia Reynes was the registered owner of a lot in Mabolo, Cebu City, covered by Transfer Certificate of Title No. 74196 and containing 448 square meters (the Mabolo Lot). In 1981 she sold a 185-square-meter portion to the Abucay Spouses who occupied that portion. On March 1, 1984 Reynes, who was illiterate and signed by thumb-mark, executed a Deed of Sale purporting to convey the Mabolo Lot to Rido Montecillo for FORTY SEVEN THOUSAND (P47,000.00) PESOS, the deed reciting that the sum was “to me in hand paid” and acknowledging receipt. Montecillo promised to pay the purchase price within one month.

Transactions and Subsequent Acts

According to Reynes, Montecillo failed to pay the purchase price within the agreed one-month period and refused to return the deed upon demand; Reynes then executed a unilateral revocation of the sale and on May 23, 1984 executed a Deed of Sale conveying the entire Mabolo Lot to the Abucay Spouses for P50,000.00, confirming their earlier occupation. On June 18, 1984 Reynes and the Abucay Spouses learned that the Register of Deeds had issued Transfer Certificate of Title No. 90805 in the name of Montecillo.

Allegations Concerning Consideration and Mortgage

Montecillo maintained that he was a buyer in good faith and had paid the P47,000.00 consideration, but admitted a remaining balance of P10,000.00 to Reynes. He asserted that his payment consisted of an amount he paid to Cebu Ice and Cold Storage Corporation to secure the release of a chattel mortgage executed by Bienvenido Jayag over a house that stood on a portion of the Mabolo Lot. Reynes countered that she was not a party to Jayag’s obligation, that the mortgage was a chattel mortgage on a house and not an encumbrance on the land, and that Montecillo’s payment to Cebu Ice Storage did not redound to her benefit.

Trial Court Proceedings and Findings

The Regional Trial Court tried the case as Records of Civil Case No. CEB-2335. The trial court found on the evidence that Montecillo never paid Reynes the P47,000.00 and that Reynes never received that sum. The court further found that Reynes was not privy to Jayag’s debt to Cebu Ice and Cold Storage Corporation and that Montecillo’s payment to that creditor did not constitute a payment of the purchase price to Reynes. Applying the rule that a deed of sale which states that the price was paid when in fact it was never paid is devoid of consideration, the trial court declared Montecillo’s Deed of Sale null and void ab initio, ordered cancellation of TCT No. 90805, directed issuance of title to the Abucay Spouses, and awarded moral damages of P20,000.00 and attorneys’ fees of P2,000.00.

Court of Appeals Ruling

The Court of Appeals, Fourth Division, affirmed the trial court in toto in its Decision dated July 16, 1998 and denied Montecillo’s Motion for Reconsideration by Resolution dated February 11, 1999. The appellate court held that Montecillo’s Deed of Sale was void for lack of consideration and rejected Montecillo’s factual and legal arguments as not raising new grounds warranting reversal.

Issues Presented on Petition for Review

In the Rule 45 petition Montecillo principally contested the factual and legal findings below by posing two questions: whether there was an agreement between Reynes and Montecillo that the P47,000.00 purchase price be paid to Cebu Ice and Cold Storage Corporation to secure release of the title, and if there was no such agreement whether the Deed of Sale was void ab initio or merely rescissible.

Petitioner's Contentions

Montecillo contended that he had paid the purchase price by discharging Jayag’s indebtedness to Cebu Ice Storage and that the parties had contracted with the understanding that such payment would satisfy the vendor’s right to the price. He further argued that, at most, there was a delay in payment that justified rescission or a court-ordered fixing of a period for payment under Article 1191 of the Civil Code rather than a declaration of nullity ab initio.

Respondents' Contentions

Reynes and the Abucay Spouses maintained that Montecillo never paid the purchase price to Reynes and that Reynes never agreed that payment could be made to Cebu Ice Storage to satisfy Jayag’s obligation. They asserted that the chattel mortgage was Jayag’s obligation and not an encumbrance on Reynes’s title, and that the alleged payment to the mortgagee did not redound to Reynes’s benefit or extinguish any obligation to her.

Scope of Review and Factual Deference

The Supreme Court observed that in a Rule 45 petition the Court may entertain only questions of law and is not a trier of facts. It noted that the trial court’s factual findings, having been affirmed by the Court of Appeals, are binding and will not be disturbed unless clearly unsupported by the record or based on a patent misapprehension of facts.

Supreme Court's Ruling on Mode of Payment

The Court found no evidence that Reynes agreed, orally or in writing, that the P47,000.00 purchase price be paid to Cebu Ice and Cold Storage Corporation. The Deed of Sale itself did not specify payment to a third party. Citing Article 1240, Civil Code, the Court stated that payment must be made to the person in whose favor the obligation was constituted or a person authorized to receive it. The Court held that Montecillo’s payment to Cebu Ice Storage did not extinguish his obligation to Reynes because Reynes derived no benefit from that payment and was not a party to Jayag’s obligation.

Supreme Court's Ruling on Existence of a Valid Contract

The Court applied Article 1318 and Article 1352, Civil Code, to reiterate that consent, object, and cause are essential requisites of a valid contract and that contracts without cause produce no effect. The Court accepted the lower courts’ findings that the deed’s recital that the price was paid was false and that in fact there was an indisputable absence of consideration. Relying on precedent beginning with Ocejo Perez & Co. v. Flores and followed in Mapalo v. Mapalo and Vda. De Catindig v. Heirs of Catalina Roque, the Court reaffirmed the rule that a deed of sale which recites payment when none was made is void and produces no legal effect.

Supreme Court's Ruling on Lack of Consent and Manner of Payment

The Court further held that agreement on the manner of payment is integral to consent in a sale. Citing San Miguel Properties P

Case Syllabus (G.R. No. L-22761)

Parties and Procedural Posture

Rido Montecillo was the petitioner who acquired a Transfer Certificate of Title in his name and appealed the lower courts' rulings to this Court under Rule 45, Rules of Court.
Ignacia Reynes and Spouses Redemptor and Elisa Abucay were the respondents and original plaintiffs who sought declaration of nullity of the deed of sale and quieting of title.
The Regional Trial Court of Cebu City, Branch 18, rendered a Decision on March 24, 1993 declaring the deed of sale in favor of Montecillo null and void ab initio and ordering cancellation of TCT No. 90805.
The Court of Appeals affirmed the trial court in its July 16, 1998 Decision and denied Montecillo's Motion for Reconsideration in its February 11, 1999 Order.
The Supreme Court resolved the present petition by way of review on certiorari and denied the petition, affirming the Court of Appeals decision with costs against Montecillo.

Key Factual Allegations

Ignacia Reynes alleged ownership of a 448-square-meter lot in Mabolo, Cebu City, evidenced by Transfer Certificate of Title No. 74196, and partial sale of 185 square meters to the Abucay Spouses in 1981.
Reynes allegedly executed a Deed of Sale on March 1, 1984 in favor of Montecillo, signing with a thumb-mark because she was illiterate, with an agreement that P47,000.00 would be paid within one month.
The Deed of Sale recited that P47,000.00 was "to me in hand paid" and acknowledged receipt, although Reynes later maintained she never received such payment.
Montecillo claimed to have paid the stated purchase price through payments to Cebu Ice and Cold Storage Corporation to secure release of a chattel mortgage on a house mortgaged by Bienvenido Jayag, and he admitted a remaining balance of P10,000.00 allegedly owed to Reynes.
Reynes revoked the March 1, 1984 sale after nonreceipt of the purchase price and on May 23, 1984 executed a Deed of Sale of the entire lot to the Abucay Spouses for P50,000.
The parties discovered that TCT No. 90805 had been issued in the name of Montecillo, prompting the present litigation alleging lack of consideration and absence of meeting of the minds.

Procedural History

The trial court found absence of consideration and lack of consent and declared the March 1, 1984 Deed of Sale null and void ab initio, ordered cancellation of TCT No. 90805, issued a new title in favor of the Abucay Spouses, and awarded moral damages of P20,000.00 and attorneys' fees of P2,000.00.
The Court of Appeals affirmed the trial court's Decision in toto in its July 16, 1998 Decision and denied reconsideration in its February 11, 1999 Order.
Montecillo filed a petition for review on certiorari under Rule 45, raising questions of law which the Supreme Court treated as a Rule 45 appeal subject to limitations on factual review.
The Supreme Court denied the petition and affirmed the Court of Appeals Decision with costs against Montecillo.

Issues Presented

Whether there was an agreement between Reynes and Montecillo that the stated consideration of P47,000.00 be paid to Cebu Ice and Cold Storage Corporation to secure release of the Transfer Certificate of Title.
If there was no such agreem