Desiderio Dalisay Investments, Inc. vs. Social Security System

A dacion en pago is perfected upon the absolute and unqualified acceptance of the offer meeting the minds of the parties on the object and price, and is consummated by the delivery of possession which transfers ownership to the creditor; where the debtor voluntarily turned over possession of the property to the creditor as settlement of debt, arranged for the release of mortgage encumbrances, and never reserved ownership, the subsequent refusal to transfer titles decades later constitutes bad faith and does not defeat the creditor's title.

Sometime in 1976, respondent Social Security System (SSS) filed collection cases before the Social Security Commission (SSC) against the Dalisay Group of Companies (DGC), including petitioner Desiderio Dalisay Investments, Inc. (DDII), for unremitted SSS premium contributions totaling P4,421,321.62 as of May 28, 1982. In 1977, Desiderio Dalisay, then President of DDII, offered properties in Agdao, Davao City to SSS to offset these liabilities. After negotiations and an appraisal by Joson, Capili and Associates, the parties agreed on a value of P2,000,000. On May 27, 1982, during a meeting of the SSS Committee on Buildings, Supplies and Equipment, DDII's representative offered the properties at P2,000,000, which SSS accepted. The SSC formalized this acceptance through Resolution No. 849 on June 9, 1982. DDII subsequently turned over possession of the properties to SSS in August 1982. However, DDII failed to deliver the certificates of title despite the release of the mortgage with Philippine National Bank in 1994. In 2002, DDII filed an action for quieting of title, claiming no perfected dacion occurred and demanding back rentals for SSS's occupation.

• The subject properties consist of a parcel of land covered by Transfer Certificate of Title (TCT) Nos. T-18203, T-18204, T-255986, and T-255985, with an aggregate area of 2,450 square meters, including the building erected thereon, situated in Agdao, Davao City.
• On March 11, 1977, Desiderio Dalisay, then President of DDII, sent a letter to SSS offering the subject properties at P3,500,000 to partially settle DGC's liabilities.
• On December 15, 1981, Dalisay sent another letter recommending that the appraisal be done by Asian Appraisal Co., Inc., which did not respond; subsequently, Joson, Capili and Associates was engaged and approved.
• On May 21, 1982, Joson, Capili and Associates appraised the total value of the lots at P1,954,777.78, rounded to P1,955,000.
• On July 24, 1982, DDII's Special Board of Directors issued a Resolution authorizing the sale of properties covered by TCT Nos. T-18204 and T-8227 (together with improvements) to SSS to settle obligations, and authorized Desiderio Dalisay or Veronica Dalisay-Tirol to sign pertinent documents.
• On May 27, 1982, during a meeting of the SSS Committee on Buildings, Supplies and Equipment, Atty. Honesto Cabarroguis, representing DGC, offered the properties at P2,000,000, assured that they would be turned over free from liens and encumbrances, and stated that his clients were ready to vacate the premises anytime.
• On May 28, 1982, DDII's total liabilities with SSS amounted to P4,421,321.62, covering unpaid premium contributions, penalties, and loan amortizations.
• On June 9, 1982, the SSC issued Resolution No. 849 - s. 82, accepting DDII's proposed dacion en pago pegged at P2,000,000, subject to conditions regarding application of proceeds to premiums, penalties, and educational/salary loans, and non-withdrawal of criminal cases.
• On June 17, 1982, SSS sent a letter to DDII communicating the acceptance of the offer at P2,000,000 subject to the terms specified in Resolution No. 849.
• On July 8, 1982, Dalisay-Tirol, then Acting President and General Manager of DDII, sent a letter to SSS informing them that the company would vacate the Desidal Building by August 15, 1982, to effect proper turnover.
• On July 31, 1982, the surviving heirs of the late Regina L. Dalisay executed an Affidavit of Consent for the Sale of Real Property, agreeing to the sale to SSS for partial settlement of obligations.
• Desiderio Dalisay passed away on September 18, 1989.
• On December 29, 1995, the Philippine National Bank (PNB) executed a Deed of Confirmatory Sale in favor of DDII for properties that it reacquired, including the subject properties.
• On March 20, 1998, Eddie A. Jara, Assistant Vice-President of SSS - Davao I Branch, executed an Affidavit of Adverse Claim over the properties due to DDII's failure to turn over the certificates of title.
• On April 2, 1998, Jara sent a letter to Dalisay-Tirol demanding the certificates of title, stating that the mortgage with PNB had been settled on January 20, 1994, but the titles were not delivered.
• On May 5, 1998, Dalisay-Tirol replied that the corporation could not act on the matter due to pending estate issues and the need to verify the SSS claim amount.
• On November 18, 1999, DDII, through Managing Director Edith L. Dalisay-Valenzuela, wrote to the SSS President requesting condonation of penalties, payment of original liabilities, return of the property, and withdrawal of claims against the estate.
• On January 18, 2000, DDII sent a letter proposing offset of SSS obligations with back rentals totaling P34,217,988.19 for use of the property from July 1982 onwards, and demanded return of the property.
• On October 8, 2002, DDII filed the complaint for Quieting of Title, Recovery of Possession and Damages against SSS with the RTC, asserting ownership and claiming that no perfected dacion existed because there was no meeting of the minds.

• Atty. Cabarroguis lacked authority to reduce the offer from P3,500,000 to P2,000,000; the original offer of P3,500,000 was never categorically accepted.
• SSS's acceptance contained conditions regarding the application of the P2,000,000 to premiums, penalties, and loans, and the non-withdrawal of criminal cases, constituting a qualified acceptance that amounted to a counter-offer.
• No document or instrument proves that DDII accepted SSS's counter-offer; the turnover of possession was merely to show goodwill in negotiations, not acceptance of the counter-offer.
• The fact that the Transfer Certificates of Title remained in DDII's name is a strong indicium that the parties remained in the preparatory stage of contract-making and no transfer of ownership occurred.
• The action is not barred by laches because the cause of action did not arise when possession was transferred, as there was no threat to title at that time; DDII believed no offsetting took place and that SSS was merely in physical possession by tolerance.

• There was a perfected dacion en pago evidenced by DGC's outstanding obligation, the categorical offer to pay via dacion, and SSS's absolute acceptance through SSC Resolution No. 849.
• The agreement was consummated by DDII's delivery of the property to SSS in 1982, transferring ownership.
• The conditions in the June 17, 1982 letter were not of a nature to affect the efficacy of the contract; they merely provided the manner of application of the consideration and implications regarding criminal cases, as originally proposed by DDII's counsel.
• Even assuming the dacion was defective, DDII's claim is barred by laches due to its failure to assert rights over the property for 20 years since consummation.

• Procedural Issues:
  • N/A
• Substantive Issues:
  • Whether there was a perfected dacion en pago between DDII and SSS.
  • Whether the turnover of possession of the subject properties constituted delivery that consummated the contract and transferred ownership.
  • Whether DDII retained legal title sufficient to maintain an action for quieting of title against SSS.
  • Whether the claim is barred by the principle of laches.

• Procedural:
  • N/A
• Substantive:
  • There was a perfected dacion en pago. The offer was validly reduced to P2,000,000 through Atty. Cabarroguis, whose authority was tacitly ratified by DDII's subsequent conduct (arranging turnover, requesting release from PNB mortgage, and silence for decades). SSS's acceptance through Resolution No. 849 was absolute and unqualified, meeting the offer on the same terms. The alleged "conditions" merely specified the manner of application of the proceeds as proposed by DDII's own counsel during the May 27, 1982 meeting, not new contractual terms that would constitute a counter-offer.
  • The turnover of possession in August 1982 constituted delivery (tradition) that consummated the sale and transferred ownership to SSS. The circumstances—voluntary vacating of premises, arrangement for release from PNB mortgage, and absence of any reservation of ownership—demonstrated intent to transfer title, not merely to show goodwill. Delivery signifies the transmission of ownership from vendor to vendee.
  • The action for quieting of title does not prosper because SSS acquired a legitimate legal interest through the perfected and consummated dacion en pago. Under Article 476 of the Civil Code, an action to quiet title requires the plaintiff to have legal or equitable title; DDII had divested itself of title through the sale.
  • While the CA ruled on laches, the Supreme Court found it unnecessary given the finding on the validity of the dacion. However, the Court noted that DDII's 20-year delay and subsequent demand for back rentals evidenced bad faith and unjust enrichment.

• Dacion en pago — A special mode of payment where property is alienated to the creditor in satisfaction of a debt in money, governed by the law on sales; requires delivery and transmission of ownership to the creditor to extinguish the obligation to the extent of the value of the thing delivered.
• Stages of a Contract of Sale — The three stages are: (1) Negotiation (from indication of interest to perfection), (2) Perfection (meeting of minds on object and price upon absolute acceptance), and (3) Consummation (performance of respective undertakings culminating in extinguishment of the contract).
• Absolute and Unqualified Acceptance — For a contract to be perfected, acceptance must be unequivocal, unqualified, and identical in all respects to the offer; a qualified acceptance constitutes a counter-offer that annuls the original offer (Article 1319, Civil Code).
• Tradition/Delivery as Mode of Acquiring Ownership — Ownership of the thing sold is acquired by the vendee only upon delivery, which signifies the transfer of control and possession from vendor to vendee (Articles 1496-1497, Civil Code); delivery is a composite act where one party parts with title and possession and the other acquires the same.
• Implied Ratification — A principal is bound by an agent's acts exceeding authority when the principal ratifies them expressly or tacitly through acceptance of benefits, silence, or subsequent conduct affirming the act (Article 1910, Civil Code).
• Requisites for Action to Quiet Title — The plaintiff must have legal or equitable title to or interest in the property, and the instrument, record, claim, or proceeding casting a cloud must be shown to be in fact invalid or inoperative despite its prima facie validity (Article 476, Civil Code).

• "Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute."
• "An acceptance is considered absolute and unqualified when it is identical in all respects with that of the offer so as to produce consent or a meeting of the minds."
• "Delivery has been described as a composite act, a thing in which both parties must join and the minds of both parties concur. It is an act by which one party parts with the title to and the possession of the property, and the other acquires the right to and the possession of the same."
• "The delivery under any of the forms provided by Articles 1497 to 1505 of the Civil Code signifies that the transmission of ownership from vendor to vendee has taken place."
• "DDII cannot escape its liability from SSS by giving the latter possession over the property with the representation that it is doing so as partial settlement of its unremitted SSS premiums and penalties due only to take the property back decades thereafter, seek condonation of its obligations, and to make matters worse, claim payment of back rentals from SSS."

• Traders Royal Bank v. Cuison Lumber Co., Inc. — Cited for the principle that acceptance must be absolute and unqualified, identical in all respects to the offer, to produce consent.
• Manila Metal Container Corporation v. Philippine National Bank — Cited for the rule that a qualified acceptance constitutes a counter-offer and a rejection of the original offer.
• Cebu Winland Development Corporation v. Ong Siao Hua — Cited for the principle that delivery of the thing signifies that title has passed from the seller to the buyer.
• Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. — Cited for the definition of delivery as a composite act involving the absolute giving up of control and custody by the vendor and the assumption of the same by the vendee.
• Mananquil v. Moico — Cited for the requisites of an action to quiet title under Article 476 of the Civil Code.
• Tan Shuy v. Maulawin — Cited for the definition and effects of dacion en pago under Article 1245 of the Civil Code.
• Fort Bonifacio Development Corporation v. Yllas Lending Corporation — Cited for the requirement that there must be transfer of ownership to the creditor for a valid dacion en pago.
• Alcantara-Daus v. De Leon — Cited for the principle that ownership is transferred only upon delivery, not by mere stipulation or contract perfection.

• Article 1245 of the Civil Code — Provides that dacion in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law of sales.
• Article 1319 of the Civil Code — Defines consent as manifested by the meeting of offer and acceptance upon the thing and cause; requires acceptance to be absolute, with a qualified acceptance constituting a counter-offer.
• Article 1496 of the Civil Code — Provides that the ownership of the thing sold is acquired by the vendee from the moment it is delivered.
• Article 1497 of the Civil Code — Provides that the thing sold shall be understood as delivered when it is placed in the control and possession of the vendee.
• Article 1910 of the Civil Code — Provides that the principal must comply with obligations contracted by the agent within the scope of authority, and is bound by acts exceeding power only when ratified expressly or tacitly.
• Article 476 of the Civil Code — Governs actions to quiet title and remove clouds therefrom, requiring the plaintiff to have legal or equitable title.