Leabres vs. Court of Appeals

A receipt that merely acknowledges a partial payment, without any agreement on the total purchase price or installments, is neither a valid contract of sale nor a promise to sell; and a sale by a special administrator in his personal capacity without probate approval cannot bind the estate. A plaintiff who fails to appear despite notice cannot claim denial of due process where the dismissal under Section 3, Rule 17 was within the trial court’s discretion.

The case concerns a lot in the Legarda-Tambunting Subdivision, estate property of Clara Tambunting de Legarda administered in Special Proceedings No. 10808 before the Probate Court of Manila. Vicente J. Legarda was the surviving husband and administrator, while Manotok Realty, Inc. is the purchaser of the subdivision through a sale conducted by the estate’s administrator. The legal backdrop is the Torrens system under Act No. 496, which protects purchasers who rely on registered titles, and the probate court’s authority over sales of estate property.

Clara Tambunting de Legarda died testate on April 22, 1950, leaving the Legarda-Tambunting Subdivision on Rizal Avenue Extension, City of Manila, with an area of 80,238.90 sq. m., covered by Transfer Certificates of Title Nos. 62042; 45142; 45149; 49578; 40957; and 59585. Shortly after her death, Catalino Leabres bought a portion identified as No. VIII, Lot No. 1, from Vicente J. Legarda, the surviving husband, who acted as special administrator. Leabres made a partial payment of P1,000.00, and the deed or receipt of the sale appeared to be dated May 2, 1950 (Annex “A”). The receipt merely acknowledged the P1,000.00; it contained no agreement on the total purchase price of the land or on the monthly installments to be paid.

On August 28, 1950, Vicente L. Legarda was appointed regular administrator together with Pacifica Price and Augusto Tambunting, and on November 21, 1951, the Probate Court of Manila in Special Proceedings No. 10808 authorized the sale of the property. Vicente was later relieved as regular administrator, and the Philippine Trust Co. took over as administrator. It advertised the sale of the subdivision, including the lot Leabres claims, in the Manila Times and Daily Mirror on August 26 and 27, September 2 and 3, and September 15 and 17, 1956. No adverse claim or interest over the subdivision or any portion of it was presented by any person in Special Proceedings No. 10808.

In the sale that followed, Manotok Realty, Inc. emerged as the successful bidder at P840,000.00. By order of the Probate Court, Philippine Trust Co. executed a Deed of Absolute Sale of the subdivision dated January 7, 1959 in favor of Manotok Realty, Inc. The deed was judicially approved on March 20, 1959 and recorded immediately in the proper Register of Deeds, which issued the corresponding certificates of title to Manotok Realty, Inc.

On February 8, 1966, Leabres filed a complaint seeking quieting of title over the lot, continuing possession, and damages. At the scheduled hearing, he failed to appear although duly notified, and the trial court issued an order dated September 14, 1967 dismissing the complaint. The dismissal order was later amended so that it referred only to the complaint, and Manotok’s counterclaim was reinstated. Because Manotok had already presented evidence on the counterclaim in three other cases pending in the same court, the counterclaim was considered submitted for resolution. Leabres filed a motion for reconsideration dated January 22, 1968, which Manotok opposed on January 25, 1968; the trial court denied it on January 12, 1970 for lack of merits.

Leabres claimed that he had introduced improvements and erected a house of strong materials on the lot, and that Manotok acquired its interest in bad faith because it had prior knowledge and notice of his physical possession or acquisition, causing him damages. The records showed that Leabres had not registered his supposed interest with the Register of Deeds and had not presented his claim in the testate proceedings over the estate despite the published notices. The SC also noted that the hearing on June 11, 1967 was not ex parte because Leabres was represented by counsel on that date.

• Due Process: Petitioner argued that the denial of his motion for reconsideration deprived him of his day in court; he attributed his non-appearance to sudden illness.
• Validity of Sale: Petitioner anchored his claim on the receipt dated May 2, 1950 (Exh. 1) as basis of a valid sale.
• Good Faith and Damages: Petitioner argued that he had introduced improvements and erected a house of strong materials on the lot, that Manotok’s adverse interest was secured in bad faith because it had prior knowledge and notice of his physical possession or acquisition, and that he suffered damages.

• Due Process: Private respondent pointed out that the hearing on June 11, 1967 was not ex parte because petitioner was represented by counsel on that date.

• Due Process: Whether petitioner was denied his day in court and deprived of due process of law.
• Probate Approval: Whether petitioner had to submit his receipt to the probate court in order that his right over the parcel of land could be recognized as valid and binding and conclusive against Manotok Realty, Inc.
• Possession in Good Faith: Whether petitioner could be considered a possessor in good faith and in the concept of owner.

• Due Process: No. The dismissal under Section 3, Rule 17 was within the trial court’s discretion; petitioner failed to appear despite notice and was represented by counsel at the June 11, 1967 hearing.
• Probate Approval: Yes. The receipt merely acknowledged P1,000.00 and lacked the requisites of a sale, and the sale by Vicente Legarda in his personal capacity without probate approval could not bind the estate; petitioner should have submitted the receipt to the probate court.
• Possession in Good Faith: No. Petitioner could not be a possessor in good faith against the registered owner because he had not registered his interest and the Torrens title contained no annotation of his claim.

• Due Process: Section 3, Rule 17 allows dismissal when the plaintiff fails to appear at the time of trial, and the dismissal has the effect of an adjudication on the merits unless otherwise provided. The trial court’s action is discretionary and will not be reversed absent abuse; the burden is on the appellant, with every presumption toward correctness. Leabres did not deny that he failed to appear on September 14, 1967 despite notice, and the order of dismissal was issued on that ground. He took no steps to set aside the order; only on January 22, 1968, after receiving a copy of the December 9, 1967 decision about four months later, did he attach the order and decision. His sudden-illness excuse came too late, and the trial court did not abuse its discretion in refusing a new trial. The June 11, 1967 hearing was not ex parte because Leabres was represented by counsel, and no default declaration was necessary since he had filed an answer to the counterclaim.
• Probate Approval: The May 2, 1950 receipt (Exh. 1) cannot be regarded as a contract of sale or a promise to sell. It merely acknowledged P1,000.00; there was no agreement on the total purchase price or on the monthly installment. A valid contract of sale requires (1) consent or meeting of the minds, (2) a determinate subject matter, and (3) a price certain in money or its equivalent. These requisites are lacking, so the “sale” is not valid or enforceable. Moreover, Clara Tambunting died on April 22, 1950, and her estate was under the custodia legis of the probate court, which appointed Vicente Legarda as special administrator on August 28, 1950. Vicente entered into the sale in his own personal capacity and without court approval, so the sale could not bind the estate. Leabres should have submitted the receipt to the probate court for approval. The CA therefore did not err in holding that he should have done so, assuming the receipt could be sufficient proof.
• Possession in Good Faith: Leabres cannot be deemed a possessor in good faith in view of the registration of the ownership of the land. To consider him in good faith would put a premium on his own gross negligence. An occupant of land, or a purchaser from a person other than the registered owner, cannot claim good faith so as to retain the parcels occupied until reimbursement for improvements because he is charged with notice of the owner’s certificate of title. A purchaser of registered lands for value and in good faith holds the same free from all liens and encumbrances except those noted on the title and burdens imposed by law under Section 39 of Act No. 496. Manotok bought the whole subdivision by order and with approval of the probate court, and the deed of absolute sale was immediately registered. Leabres had not registered his supposed interest with the Register of Deeds and had not presented his claim in the testate proceedings despite the published notices; the Torrens certificate covering the subdivision contained no notation of his interest, and the probate records did not show his claim. Manotok’s good faith was therefore supported, and the CA did not err in holding that it had the better right.

• Requisites of a contract of sale — A valid contract of sale requires (1) consent or meeting of the minds, (2) a determinate subject matter, and (3) a price certain in money or its equivalent. A receipt acknowledging only partial payment, without agreement on the total price or installments, lacks these requisites and is neither a sale nor a promise to sell. Applied to Leabres’s May 2, 1950 receipt.
• Sale by administrator without probate approval — A sale by a special administrator in his personal capacity and without court approval cannot bind the estate; the claimant should submit the transaction to the probate court for approval. Applied to Vicente Legarda’s sale to Leabres.
• Torrens title and unregistered adverse interests — Adverse interests not annotated on a Torrens certificate and without previous knowledge by third parties do not bind the latter; a purchaser for value and in good faith may rely on the certificate. Applied to Manotok.
• Possessor in good faith against registered owner — An occupant or purchaser from a person other than the registered owner cannot claim good faith to retain possession until reimbursement for improvements because he is charged with notice of the owner’s certificate of title. Applied to Leabres.
• Dismissal for failure to prosecute — Under Section 3, Rule 17, dismissal for failure to appear is discretionary, has the effect of an adjudication on the merits unless otherwise provided, and will not be reversed absent abuse; the burden is on the appellant. Applied to Leabres.

• “Petitioner’s contention that he was denied his day in court holds no water.” — The SC disposes of the due process issue at the outset.
• “There was merely an acknowledgment of the sum of One Thousand Pesos (P1,000.00). There was no agreement as to the total purchase price of the land nor to the monthly installment to be paid by the petitioner. The requisites of a valid Contract of Sale namely 1) consent or meeting of the minds of the parties; 2) determinate subject matter; 3) price certain in money or its equivalent-are lacking in said receipt and therefore the "sale" is not valid nor enforceable.” — The SC uses the receipt’s own terms to hold that the May 2, 1950 document did not create a valid sale.
• “Don Vicente Legarda entered into said sale in his own personal-capacity and without court approval, consequently, said sale cannot bind the estate of Clara Tambunting.” — The SC explains why the sale by the special administrator could not bind the estate absent probate approval.
• “To consider petitioner in good faith would be to put a premium on his own gross negligence.” — The SC rejects Leabres’s claim of good-faith possession against the registered owner.

• Smith, Bell & Co., et al vs. American Pres. Lines, Ltd., and Manila Terminal Co., No. L-5304, April 30, 1954 — Cited for the rule that dismissal for failure to prosecute is discretionary and will not be reversed absent abuse.
• Adorable vs. Bonifacio, G.R. No. L-0698, April 22, 1959 — Cited for the same rule on dismissal for failure to prosecute.
• Flores vs. Phil. Alien Property Administration, G.R. No. L-12741, April 27, 1960 — Cited for the same rule.
• J.M. Tuason & Co. vs. Lecardo, et al., CA-G.R. No. 25477-R, July 24, 1962 — Cited for the rule that an occupant or purchaser from a non-registered owner cannot claim good faith to retain possession until reimbursement for improvements.
• J.M. Tuason & Co., Inc. vs. Manuel Abundo, CA-G.R. No. 29701-R, November 18, 1968 — Cited for the same rule.

• Section 3, Rule 17, Rules of Court — If the plaintiff fails to appear at trial or prosecute for an unreasonable time or comply with the rules or an order, the action may be dismissed on defendant’s motion or the court’s own motion; the dismissal has the effect of an adjudication on the merits unless otherwise provided. Applied to uphold the dismissal after Leabres failed to appear on September 14, 1967.
• Section 5, Rule 131, paragraphs (m) and (o), Rules of Court — Presumptions of regularity of official performance and that the court passed upon all issues. Cited to support the presumption of correctness of the trial court’s dismissal.
• Section 39, Act No. 496 — A purchaser of registered lands for value and in good faith holds the same free from all liens and encumbrances except those noted on the title and burdens imposed by law. Applied to Manotok’s registered title.