Case Summary (G.R. No. 56550)
Factual Background
On March 13, 1980, petitioners filed with the CFI a complaint for injunction and damages, docketed as Civil Case No. TG-572, seeking to restrain private respondents from selling their pro-indiviso shares to a third party. Petitioners asserted that, under Article 1620 of the Civil Code, as co-owners they possessed a preferential right to purchase private respondents’ shares for a reasonable price.
On March 17, 1980, the trial judge denied an ex parte application for a writ of preliminary injunction. The denial was grounded on the view that petitioners’ registered notice of lis pendens sufficiently protected their rights pending the case. Summons was received by private respondents on April 24, 1980. Private respondents then filed an answer with counterclaim, praying for partition of the subject properties.
On April 29, 1980, Elena Fronda Zaballero filed a motion for intervention, adopting the answer with counterclaim of her co-respondents. At pre-trial, the parties stipulated that they were pro-indiviso co-owners of the properties described in the complaint. They further stipulated that portions of the lands were subject of pending expropriation proceedings by the National Housing Authority (NHA) in Civil Case Nos. TG-392, TG-396, and TG-417, and that the valuation based on evidence in those expropriation cases was P95,132.00 per hectare.
The stipulation also reflected a purchase offer. On April 16, 1980, petitioners received written notice that VOLCANO SECURITIES TRADERS AND AGRI-BUSINESS CORPORATION had offered to buy the co-owners’ shares subject to specified terms: a selling price net at P12.50 per square meter, or P9,000,000.00 for an area of 72 hectares; a downpayment of 30% (minimum P2,700,000.00); payment of the balance within three years in three equal annual installments with interest at the legal rate prevailing at the time of payment; and coverage of the balance by a bank guarantee not governed by Article 1250 of the Civil Code. The letters also asked petitioners to either exercise their pre-emptive right, agree to a physical partition, or sell their own shares jointly with the other co-owners to the third-party offeror.
Petitioners’ theory at pre-trial was that the properties were incapable of physical partition; that the offered price was grossly excessive; that they were willing to exercise any right at a reasonable value not exceeding P95,132.00 per hectare; and that the statutory period for exercising their pre-emptive right had been suspended upon the filing of the complaint. Private respondents’ position was that the reasonable price was P12.50 per square meter; that petitioners’ right of legal pre-emption lapsed under Article 1623 due to failure to timely exercise; that, even if the price were excessive, it would still be in petitioners’ interest to sell to the third-party buyer due to the supposed sincerity and capacity of the offeror; and that the properties, approximately 95 hectares, could be partitioned without difficulty, referencing a subdivision plan.
Pre-Trial Proceedings and Trial Court Orders
The trial judge issued a pre-trial order dated July 9, 1980, giving petitioners ten days from receipt of a subdivision plan prepared by a geodetic engineer to express approval or disapproval, or to submit an alternative plan. On July 16, 1980, private respondents’ counsel sent petitioners a subdivision plan. Petitioners filed a comment on August 4, 1980, maintaining that the issue of reasonable value was a contentious factual matter requiring full trial, and reiterating their pre-emptive right subject to determination of reasonable price. Petitioners did not send a definite approval or disapproval of subsequent subdivision plans.
To settle the controversy, private respondents filed on December 16, 1980 a motion requesting that petitioners be required to choose between the two options under Article 498: either the co-owners’ allotment scheme at P12.50 per square meter, or the sale of the property to a third party, described in the proceedings as VOLCANO LAKEVIEW RESORTS, INC. (with the pre-trial reference to the third party initially made as VOLCANO SECURITIES TRADERS AND AGRI-BUSINESS CORPORATION).
On February 4, 1981, the trial judge issued an order directing the parties to answer questions designed to determine the applicability of Article 498. Private respondents submitted a Constancia expressing willingness to allot their shares to Socorro Marquez Vda. de Zaballero at P12.50 per square meter and stating that they knew no other party able and willing to buy the properties under more favorable conditions than the third-party offer. Petitioners did not submit answers to these queries. Instead, they filed a motion for clarification as to the identity of the third-party buyer. The trial judge denied the motion on February 26, 1981 on the ground of irrelevance.
Petitioners then filed on February 27, 1981 a pleading captioned Compliance and Motion, insisting that the true identity of the alleged third-party buyer was relevant, asserting that there was no bona fide financially able third-party purchaser at P12.50 per square meter, and again insisting on their pre-emptive right to purchase private respondents’ shares at a reasonable price. Petitioners prayed for further proceedings to determine the reasonable value of the properties. On March 16, 1981, the trial judge denied the motion and ruled that petitioners did not possess a pre-emptive right to purchase private respondents’ shares. The trial judge consequently ordered a public sale of the subject properties pursuant to Article 498. A notice of sale was issued for public bidding on April 13, 1981.
Petitioners moved for reconsideration, but without waiting for resolution, they filed a petition for certiorari, alleging that the trial judge acted without jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction in issuing the March 16, 1981 order. On April 8, 1981, the Court issued a temporary restraining order enjoining the sale. The Court later considered the issues joined and the case submitted for decision.
Issues Raised
Petitioners’ certiorari attack was anchored on their claim that they had a legal pre-emptive right to purchase private respondents’ pro-indiviso shares at a reasonable price. Interwoven with this claim were contentions that the trial court should have continued with hearings to determine reasonable value and that the trial judge’s resort to Article 498 was legally infirm. Private respondents defended the trial court’s denial of petitioners’ supposed pre-emptive right and the order for a public sale under Article 498.
Parties’ Contentions in Review
Petitioners argued that their pre-emptive right derived from Article 1620 and that the statutory period for exercising any such right was suspended by the filing of the complaint. They also contended that the reasonable price could only be ascertained after full trial, and they insisted on proceedings to determine the reasonable value of the lands.
Private respondents countered that the offered price was the reasonable price and that petitioners’ right had lapsed under Article 1623 due to failure to timely exercise. They also argued that the properties could be physically partitioned, and they invoked, by their counterclaim and later motions, the statutory framework allowing termination of co-ownership when partition could not proceed in the manner the parties preferred.
Legal Basis and Reasoning
The Court held that petitioners’ claim of a pre-emptive right was without basis. The Court emphasized that, in the jurisdiction, the provisions governing co-ownership did not grant a blanket right of pre-emption in favor of co-owners to purchase pro-indiviso shares at will. In particular, the Court found petitioners’ reliance on Article 1620 misplaced.
The Court explained that Article 1620 contemplates legal redemption by a co-owner only after the shares of all co-owners, or of any of them, are actually sold to a third person. It is by the nature of legal redemption that the co-owner’s right is invoked only after such sale to a stranger has taken place. The Court cited Estrada v. Reyes, 33 Phil. 31 (1915) for this principle. Applying that doctrine, the Court ruled that at the time petitioners filed their complaint for injunction and damages, no sale of private respondents’ pro-indiviso shares to a third party had yet occurred. Hence, Article 1620 did not apply.
The Court likewise rejected petitioners’ contention that private respondents acknowledged petitioners’ pre-emptive right. Although private respondents agreed to sell their pro-indiviso shares to petitioners, the Court observed that the offer was at a fixed price of P12.50 per square meter. The Court held that such a fixed-rate offer could not be read as an agreement, without qualification, to sell at a lower price based on “reasonable value” advocated by petitioners. Petitioners therefore could not insist on a right to purchase at a price lower than the selling price tendered by private respondents. The Court also ruled that petitioners had no legal basis to enjoin private respondents from alienating their ideal shares because the law allowed a co-owner to alienate, assign, or mortgage his ideal share under Article 493.
In elaborating the effect of co-ownership law, the Court reiterated that while the co-owner is free to sell or mortgage the ideal share, the remaining co-owners are protected only through the redemption mechanism within the limited framework provided by Articles 1620 and 1623 after a sale to a third party. The Court pointed to jurisprudence on the limitation of the alienation’s effect to the portion allotted upon termination of co-ownership, citing Mercado v. Liwanag, G.R. No. L-14429, June 30, 1962, 5 SCRA 472, PNB v. The Honorable Court of Appeals, G.R. No. L-34404, June 25, 1980, 98 SCRA 207, and Go Ong v. The Honorable Court of Appeals, G.R. No. 7
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Case Syllabus (G.R. No. 56550)
- Petitioners Marina Z. Reyes, Augusto M. Zaballero, and Socorro Z. Francisco filed with the CFI of Cavite, Tagaytay, Br. IV a complaint for injunction and damages docketed as Civil Case No. TG-572.
- Respondents were the Honorable Alfredo B. Concepcion, Presiding Judge, CFI of Cavite, Tagaytay, Br. IV, and private respondents Socorro Marquez Vda. de Zaballero, Eugenia Z. Luna, Leonardo M. Zaballero, and Elena Fronda Zaballero.
- Petitioners sought to enjoin private respondents from selling to a third party their pro-indiviso shares as co-owners in eight parcels of registered land covered by TCT Nos. A-1316 to A-1322.
- Petitioners invoked Article 1620 of the New Civil Code and claimed a preferential right to purchase the co-owners’ shares for a reasonable price.
- Petitioners challenged through a petition for certiorari the respondent trial judge’s order denying petitioners’ asserted pre-emptive right and ordering a public sale under Article 498 of the New Civil Code.
- The Court dismissed the petition for lack of merit and lifted its temporary restraining order.
Nature and Claims in the Complaint
- Petitioners alleged that they and private respondents were co-owners of the subject registered lands and that the other co-owners intended to sell their pro-indiviso shares.
- Petitioners argued that, as co-owners, they possessed a right that allowed them to purchase the shares of their co-owners when the latter decided to sell to a third party.
- Petitioners specifically alleged that the offered price was grossly excessive and they were willing to pay a reasonable value based on prior valuation evidence.
- Petitioners likewise argued that the statutory period for exercising their pre-emptive right was suspended upon the filing of the complaint.
Ownership and Properties Involved
- The parties admitted in the pre-trial proceedings that plaintiffs, defendants, and intervenor were pro-indiviso co-owners of the properties described in the complaint.
- The subject lands consisted of parcels with an aggregate area of about 96 hectares.
- The pre-trial stipulation identified portions of the properties that were subject of expropriation proceedings before the Court in Civil Case Nos. TG-392, TG-396 and TG-417.
- The parties agreed on a valuation basis from the expropriation cases, pegging the current valuation of land and improvements at P95,132.00 per hectare.
Tendered Offer and Pre-emptive Demand
- On 16 April 1980, petitioners received written notices from private respondents that VOLCANO SECURITIES TRADERS AND AGRI-BUSINESS CORPORATION offered to buy the defendants’ pro-indiviso shares subject to stated terms.
- The stipulated selling price was net at TWELVE & 50/100 (P12.50) PESOS per square meter, with a total price of NINE MILLION (P9,000,000.00) PESOS for a total area of SEVENTY TWO (72) HECTARES ONLY.
- The offer required a downpayment of thirty (30%) percent of the selling price or a minimum downpayment of P2,700,000.00.
- The remaining balance was payable within three (3) years in three (3) equal annual payments, with interest at the legal rate prevailing at the time of payment.
- The offer specified that the balance would be covered by a bank guarantee of payments and would not be governed by Article 1250 of the Civil Code.
- Private respondents offered petitioners options, including exercising the pre-emptive right to purchase, agreeing to a physical partition, or selling their own shares jointly with the other co-owners to the buyer on the same terms.
- The offer further stated that the buyer was ready, willing, and able to purchase the shares of all the co-owners, including petitioners, for the net price and under the quoted terms.
Procedural History in the Trial Court
- Petitioners filed the complaint on March 13, 1980.
- On March 17, 1980, the trial judge denied petitioners’ ex parte application for a writ of preliminary injunction, reasoning that a filed notice of lis pendens was adequate protection.
- On April 24, 1980, private respondents received summons and filed an answer with counterclaim praying for partition of the properties.
- Elena Fronda Zaballero filed a motion for intervention dated April 29, 1980, adopting the answer with counterclaim.
- During pre-trial, the parties stipulated material facts, including the expropriation portions and valuation, and the receipt of the written offer with its terms.
- The trial court issued a pre-trial order dated July 9, 1980 granting petitioners ten days from receipt of a proposed subdivision plan to express approval or disapproval, or to submit an alternative subdivision plan.
Subdivision Plans and Petitioners’ Response
- On July 16, 1980, private respondents’ counsel sent petitioners’ counsel a subdivision plan prepared by a geodetic engineer.
- On August 4, 1980, petitioners filed their comment, asserting that the reasonable price remained a contentious fact issue requiring full trial.
- Petitioners maintained that they would exercise their pre-emptive right only after determination of the reasonable price.
- Private respondents then sent another subdivision plan, yet petitioners did not give a definite approval or disapproval.
- Private respondents filed a motion dated December 16, 1980 seeking an order requiring petitioners to specify which option under Article 498 they would choose, either allotment at the offered rate or sale to a third party and distribution of proceeds.
Orders Relating to Article 498
- On February 4, 1981, the trial judge issued an order directing the parties to respond to questions for determining the applicability of Article 498 of the New Civil Code.
- The trial judge required submission of answers in relation to whether an allotment scheme to one co-owner at P12.50 per square meter was acceptable or whether a third party willing to buy at more favorable terms existed.
- Private respondents filed a constancia stating willingness to allot their shares to Socorro Marquez Vda. de Zaballero at P12.50 per square meter, and stating they did not know of any other party willing and able to buy under more favorable conditions than the offer attributed to VOLCANO LAKEVIEW RESORTS, INC.
- Petitioners filed a motion for clarification regarding the true identity of the third-party buyer, contending it should be clarified whether it was VOLCANO SECURITIES TRADERS AND AGRI-BUSINESS CORPORATION or VOLCANO LAKEVIEW RESORTS, INC.
- On February 26, 1981, the trial judge rejected petitioners’ motion for clarification as i