Title
Spouses Salvador vs. Spouses Rabaja
Case
G.R. No. 199990
Decision Date
Feb 4, 2015
Land dispute: Spouses Rabaja paid Spouses Salvador via agent Gonzales for property sale. Payments disputed, ejectment and rescission cases filed. Court rescinded sale, returned P950,000, but upheld garnishment, deleted damages.
contract to sell
parcel of land
valid contract
A

Case Summary (G.R. No. 199990)

Factual Background

From 1994 to 2002 the Rabajas leased an apartment on the subject property. In July 1998 the Salvadors sought a buyer and Herminia introduced Rosario Gonzales as property administrator and presented Gonzales with the owner’s duplicate title. On July 3, 1998 the Rabajas made an initial payment of P48,000 to Gonzales. On July 24, 1998 the parties executed a Special Power of Attorney (SPA) in favor of Gonzales and a Contract to Sell (stated price P5,000,000). The Rabajas subsequently paid a total of P950,000, receipts for which were improvised and signed by Gonzales (and some improvised receipts signed by Herminia). By June 1999 the Salvadors asserted they received no payments from Gonzales, the Rabajas suspended further payments, and the Salvadors issued a notice to vacate and later sued for ejectment; the Rabajas then filed for rescission seeking return of P950,000 and damages.

Parallel Ejectment Litigation and Garnishment

An ejectment action (MeTC Civil Case No. 17344) resulted in an August 14, 2002 judgment favoring the Salvadors and a writ of execution that led to garnishment of P593,400 from the Rabajas’ time deposit. The RTC‑Branch 212 reversed the MeTC on March 1, 2005, but the CA reinstated the MeTC decision on March 31, 2006 in CA‑G.R. SP No. 89259; that CA ruling became final and executory on May 12, 2006. A separate CA case (CA‑G.R. SP No. 89260) involved a different property and was later referenced in the litigation with some confusion.

Rescission Case Trial Proceedings and RTC Ruling

The rescission case (Civil Case No. MC‑03‑2175) was tried after the Salvadors failed to attend the pre‑trial conference of February 4, 2005; the RTC issued a pre‑trial order allowing the Rabajas to present evidence ex parte and declaring the Salvadors in default for purposes of the pre‑trial. After trial the RTC‑Branch 214 (March 29, 2007) rescinded the contract, found the signatures authentic, held the contract to be a contract of sale (not merely a contract to sell), and ordered the Salvadors and Gonzales jointly and severally to refund P950,000 to the Rabajas. The RTC also ordered return of the garnished P593,400, awarded moral and exemplary damages (P20,000 each) to the Rabajas, and attorney’s fees (P100,000) in favor of Gonzales on her cross‑claim.

Court of Appeals Disposition and Modifications

The CA affirmed that the agreement was effectively a contract of sale and that Gonzales held an SPA and had been introduced by the Salvadors; the Rabajas therefore transacted in good faith with an agent who presented a power of attorney. However, the CA modified the RTC’s relief by holding that Gonzales was not solidarily liable with the Salvadors because it was not shown she exceeded her authority or expressly bound herself to personal liability. The CA further addressed (incorrectly, in the Supreme Court’s view) the issue of return of the garnished amount by referencing another CA ejectment case involving a different property.

Issues Raised on Certiorari

The Salvadors assigned errors arguing (1) grave abuse in declaring them in default and denying cross‑examination/presentation of evidence; (2) improper crediting of Gonzales’s testimony and of alleged forged/improvised receipts and SPA; (3) improper rescission and refund order given the Salvadors’ claim that Gonzales misappropriated payments; (4) error in ordering return of the P593,400 garnished under the ejectment case tried in another court; (5) lack of factual/legal basis for damages; and (6) improper award of attorney’s fees to Gonzales despite alleged forgery/falsification.

Standard of Review and Scope of Supreme Court Review

The Court reiterated that Rule 45 jurisdiction is generally limited to questions of law; the Court will not ordinarily disturb factual findings of the trial courts unless there is a compelling reason. The petition presented predominantly questions of fact (e.g., veracity of receipts, SPA, and who received payments), and the petitioners themselves invited factual re‑examination; the Supreme Court found no compelling reason to overturn the lower courts’ factual findings.

Pre‑trial Non‑appearance and Consequences

Under the 1997 Rules, failure to appear at pre‑trial does not equate to an order of default (which is declarable only for failure to file an answer), but it permits an adverse procedural consequence: the plaintiff may present evidence ex parte and the court may render judgment on that evidence (Rules 18 §§4–5). The Salvadors’ excuse (their counsel forgot to update his calendar) was found insufficient; their non‑attendance legitimately permitted ex parte presentation by the Rabajas and Gonzales and justified the RTC’s procedural order and reliance on the evidence adduced at trial.

Agency, SPA and Effect on Third Persons

The Court applied New Civil Code provisions (Arts. 1900, 1902, 1910) and held that as to third persons an agent’s acts within the written terms of a power of attorney are deemed within the scope of authority. The Rabajas required and accepted presentation of the SPA before transacting; Gonzales’s authority to administer, negotiate sale, collect payments and documents was contained in the SPA. Because Gonzales acted within the scope of her written authority and was presented to the Rabajas by Herminia Salvador as administrator, the Salvadors are bound by payments made to Gonzales as if made to the principals. Any internal grievance between the Salvadors and Gonzales is a separate matter and does not affect the Rabajas’ rights; Gonzales cannot be held solidarily liable with the principals absent proof she exceeded authority or expressly assumed personal liability.

Contract Characterization and Right to Rescind

The courts below and the Supreme Court found that the instrument, though labelled a “contract to sell,” functioned as a contract of sale because the vendors did not reserve title until full payment. As a reciprocal contract of sale, rescission by the vendees (Rabajas) was legally available, entitling them to restitution of the amounts they paid (P950,000) from the principals, subject to lawful defenses and offsets.

Garnished Amount (P593,400) and Finality of Executory Judgment

The Supreme Court modified the relief ordering return of the P593,400. It concluded the garnishment arose from a s

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