Narvaez vs. Alciso

Article 448 of the Civil Code is inapplicable in cases of sale with right of repurchase where the owner of the land is the builder of the improvements; the redemption is governed by Article 1616, requiring the vendor to return the price and the necessary and useful expenses.

Larry Ogas owned a parcel of land in La Trinidad, Benguet, which he sold to his daughter, Rose Alciso. Alciso later sold the property to Jaime Sansano via a Deed of Sale with Right to Repurchase, which she eventually exercised. She then sold the property via absolute sale to Celso Bate, who subsequently sold it to Spouses Dominador and Lilia Narvaez. At Alciso's demand, the 1981 Deed of Sale between Bate and the Spouses Narvaez included a stipulation carrying over Alciso's intent to buy back the property at a price and under conditions the buyers might impose. The Spouses Narvaez constructed a commercial building on the property in 1982. Alciso later expressed her desire to repurchase the property, but the parties failed to agree on the price, prompting Alciso to file a complaint seeking annulment of the deeds on the ground that the original transaction was intended as a real estate mortgage, not a sale.

• Original Ownership and Transfers: Larry Ogas owned a 1,329-square meter parcel of land covered by TCT No. T-1068, subject to a 30-year lease with Esso Standard Eastern, Inc. Ogas sold the property to his daughter, Alciso. Alciso sold the property to Sansano for ₱10,000 via a Deed of Sale with Right to Repurchase. Alciso repurchased the property from Sansano.
• Subsequent Sales: Alciso sold the property to Bate for ₱50,000 via a Deed of Absolute Sale, expressly transferring the lessor's rights to Bate. Bate sold the property to the Spouses Narvaez for ₱80,000.
• The Stipulation Pour Autrui: Alciso demanded that the 1981 Deed of Sale between Bate and the Spouses Narvaez include a stipulation carrying over her intent to buy back the property. The Deed stated: "The SELLER (Bate) carries over the manifested intent of the original SELLER of the property (Alciso) to buy back the same at a price under such conditions as the present BUYERS (Spouses Narvaez) may impose." The Spouses Narvaez furnished Alciso with a copy of the Deed.
• Construction and Demand: In 1982, the Spouses Narvaez built a commercial building on the property worth ₱300,000. Alciso informed the Spouses Narvaez that she wanted to repurchase the property. The Spouses Narvaez demanded ₱300,000, while Alciso offered ₱150,000. No agreement was reached.
• Action for Annulment: Alciso filed a complaint seeking the annulment of the deeds of sale and reconveyance of the property. She alleged that her original intention was to execute a real estate mortgage, but Sansano inveigled her into signing a deed of sale with right to repurchase.

• Acceptance of Stipulation Pour Autrui: Petitioners argued that Alciso never demanded fulfillment or communicated her acceptance of the stipulation pour autrui to the obligors before its revocation. Any acceptance was at best inferred, rendering the stipulation unenforceable.

• Validity and Acceptance of Stipulation: Respondent countered that she communicated her acceptance by demanding the inclusion of the repurchase clause in the 1981 Deed and by subsequently informing the Spouses Narvaez of her intent to repurchase the property.
• Nature of the Contract: Respondent maintained the contract was a sale with right of repurchase, entitling her to redeem the property.

• Stipulation Pour Autrui: Whether Alciso communicated her acceptance of the stipulation pour autrui to the obligors before its revocation.
• Applicability of Article 448: Whether Article 448 of the Civil Code applies to determine the rights of the parties when the builder constructed the improvement on land they owned.
• Exercise of Right of Repurchase: Whether Alciso validly exercised her right of repurchase despite not tendering payment.

• Stipulation Pour Autrui: The issue of acceptance is a question of fact, which is not reviewable under a Rule 45 petition. The trial court's finding, as affirmed by the Court of Appeals, that Alciso communicated her acceptance is binding. Acceptance need not be formal or express but may be implied from her actions of demanding the stipulation and requesting to redeem.
• Applicability of Article 448: Article 448 is inapplicable because the Spouses Narvaez built the commercial building on land they owned. Article 448 applies only when a person builds on the land of another in good or bad faith; it does not apply when the owner builds on their own land. Compelling an owner to buy their own land is absurd. Consequently, the redemption is governed by Article 1616 of the Civil Code, which requires the vendor to return the price, expenses of the contract, legitimate payments, and necessary and useful expenses made on the thing sold.
• Exercise of Right of Repurchase: A valid exercise of the right of repurchase requires tender of payment, not merely an intimation of the desire to repurchase. Alciso's mere expression of intent was insufficient. However, under the third paragraph of Article 1606, a vendor who considered the transaction a mortgage is granted 30 days from the finality of the judgment declaring it a sale with right of repurchase to effect redemption.

• Stipulation Pour Autrui — A stipulation in favor of a third person allows them to demand fulfillment provided they communicate acceptance before revocation. The requisites are: (1) there is a stipulation in favor of a third person; (2) the stipulation is a part, not the whole, of the contract; (3) the contracting parties clearly and deliberately conferred a favor to the third person, which is not an incidental benefit; (4) the favor is unconditional and uncompensated; (5) the third person communicated his or her acceptance of the favor before its revocation; and (6) the contracting parties do not represent, or are not authorized by, the third party. All requisites were present because Alciso's right to repurchase was deliberately conferred and she accepted it before revocation.
• Inapplicability of Article 448 to Owner-Builders — Article 448 does not apply when the owner of the land is the builder, sower, or planter who later loses ownership by sale or donation. Where the true owner builds on their own land, the issue of good or bad faith is entirely irrelevant, and compelling them to buy the land they already own is absurd.
• Tender of Payment in Conventional Redemption — To validly exercise the right of repurchase, the vendor must tender payment of the repurchase price. A mere intimation or statement of desire to redeem is insufficient; there must be an offer of immediate performance.

• "Article 448 does not apply to a case where the owner of the land is the builder, sower, or planter who then later loses ownership of the land by sale or donation. x x x Elsewise stated, where the true owner himself is the builder of the works on his own land, the issue of good faith or bad faith is entirely irrelevant."
• "it is not sufficient for the vendor to intimate or to state to the vendee that the former desires to redeem the thing sold, but he must immediately thereupon offer to repay the price..."

• Limitless Potentials, Inc. v. Quilala, G.R. Nos. 157391, 160749 and 160816, 15 July 2005 — Followed to lay down the six requisites of a stipulation pour autrui.
• Pecson v. Court of Appeals, 314 Phil. 313 (1995) — Followed to establish the inapplicability of Article 448 when the owner of the land is the builder.
• Lee v. Court of Appeals, 160-A Phil. 820 (1975) — Followed to require tender of payment for the valid exercise of the right of repurchase.
• Laserna v. Javier, 110 Phil. 172 (1960) — Followed to grant the vendor 30 days from the finality of judgment to exercise the right of repurchase under Article 1606.

• Article 1311, paragraph 2, Civil Code — Governs stipulations pour autrui, allowing a third person to demand fulfillment if acceptance is communicated before revocation.
• Article 448, Civil Code — Governs the rights of landowners and builders in good faith. Held inapplicable because the builders owned the land at the time of construction.
• Article 1601, Civil Code — Defines conventional redemption as the vendor's reservation of the right to repurchase.
• Article 1606, Civil Code — Provides the period for conventional redemption (four years if no express agreement) and grants the vendor 30 days from final judgment to repurchase if the vendor claimed the contract was a mortgage.
• Article 1616, Civil Code — Enumerates the amounts the vendor must return to avail of the right of repurchase: price of the sale, expenses of the contract, legitimate payments, and necessary and useful expenses.

Reynato S. Puno (CJ), Renato C. Corona, Teresita J. Leonardo-de Castro, Lucas P. Bersamin