St. Dominic Corporation vs. Intermediate Appellate Court

The 60-day period fixed in the CA decision runs from receipt of the decision, not from entry of judgment, and a consignation made almost ten months after that period is late; an innocent purchaser for value of registered land is protected where no lis pendens was annotated.

St. Dominic Corporation was the registered owner of a subdivision lot in Quezon City, and Constantino B. Acosta and Eva A. Acosta were installment buyers under a Land Purchase Agreement. The lot was registered under the Torrens system, and the dispute later required the SC to consider the effect of a transfer to a subsequent purchaser for value.

On February 27, 1967, Constantino B. Acosta and Eva Acosta signed a Land Purchase Agreement with St. Dominic Corporation for Lot No. 1-A, S-2, Block 8, covered by T.C.T. No. 842,00, Quezon City, for P15,400.00. They paid P4,000.00 upon execution, and the remaining balance of P11,400.00 was to be paid in 120 equal monthly installments of P150.75 a month. The agreement stipulated that if payments remained in arrears for more than 60 days, or if the purchaser violated its conditions, the entire balance would at once be due and demandable; and that if the purchaser failed to comply with any condition or failed to pay any monthly installment, the purchaser was granted a grace period not exceeding 60 days counted from the time the breached condition ought to have been complied with, otherwise the contract would be automatically cancelled and rescinded and of no force and effect.

From March 24, 1967 to April 8, 1969, the Acostas made total monthly payments of P2,458.25, covering a period of 17 months, more or less. They were, however, about seven months in arrears of the corresponding monthly payments due when they sent St. Dominic the amount of P300.00 in two separate money orders on April 8, 1969. St. Dominic rejected these payments in a letter sent to the Acostas by its Corporate Secretary, who expressed regret that the corporation could not accept the payments because their contract had been cancelled on March 24, 1969; the secretary stated that as early as July 29, 1968, she had sent the Acostas a letter informing them that their contract had been cancelled on July 15, 1968, exactly one month after their final notice, and that postal money order Nos. 683713, 603930, and 603939 sent by the Acostas were sent back to them.

As a consequence, the Acostas instituted in the then Court of First Instance of Manila an action against St. Dominic to compel it to accept payment of the lot, docketed as Civil Case No. 62370, Branch VIII. The case reached the CA, which rendered a decision on October 21, 1981. The Acostas received a copy of the CA decision on October 30, 1981. In their November 9, 1981 Manifestation and Motion for Reconsideration, the Acostas alleged that Constantino Acosta went to see St. Dominic’s Corporate Secretary, Atty. Lydia Geraldez, and offered to pay the balance of the purchase price, but she said she could do nothing with the request; upon verification with the Office of the Register of Deeds of Quezon City, he found that the lot had been sold to Angel N. Panajon on August 24, 1981, before the CA decision was promulgated, and that TCT No. 280087 dated August 24, 1981 had been issued in Panajon’s name upon payment of P18,480.00; TCT No. 125104 previously registered in St. Dominic’s name had been cancelled; and Acosta saw a newly erected residential house on the lot.

The Acostas’ motion and St. Dominic’s own motion for reconsideration were denied. On March 11, 1982, St. Dominic filed a second motion for reconsideration and moved for a conference; on May 6, 1982, the appellate court denied the motion but granted the conference, emphasizing that it would not prejudice the finality of the decision. The conference was postponed and reset three times; on August 26, 1982, after negotiations bogged down, the Acostas secured a copy of the entry of judgment. On August 30, 1982, they filed a motion for execution with Branch VII of the CFI of Manila; on September 15, 1982, they filed a first motion for consignation, depositing P27,800.17 with the Clerk of Court. The first motion was not found in the records, so the Clerk of Court directed another motion, which the Acostas filed on October 25, 1982 and furnished to St. Dominic, whose receipt was not acknowledged. On October 25, 1982, the trial court granted the motion for consignation. St. Dominic’s motion for reconsideration was denied, and it went to the appellate court.

• Reckoning of the 60-Day Period: Petitioner argued that the 60-day period fixed by the CA should be reckoned from the Acostas’ receipt of the decision, not from the date of entry of judgment, and that even if reckoned from finality, the consignation was still out of time.
• Consignation and Modification of Judgment: Petitioner argued that the consignation was late under the CA decision; that the October 25, 1982 order modified the CA decision; that the consignation was not made in accordance with law; that the motion for consignation violated elementary rules of procedure and deprived petitioner of its day in court; and that the implications of consignation were far-reaching.
• Impossibility of Transfer: Petitioner argued that it was legally impossible, without its fault, to transfer title to the Acostas because the lot had already been transferred to a third party.

• Reckoning of the 60-Day Period: Whether the 60-day period within which the Acostas were ordered to pay the balance of the purchase price should be reckoned from their receipt of the CA decision or from the date of entry of judgment.
• Timeliness of Consignation: Whether the Acostas made a timely consignation of the balance of the purchase price.
• Effect of Sale to a Third Party: Whether St. Dominic may still be compelled to transfer title to the Acostas after the lot had been sold to Angel M. Panajon.
• Damages: Whether the Acostas are entitled to damages after the contract is declared rescinded and the lot can no longer be transferred to them.

• Reckoning of the 60-Day Period: No. The CA decision expressly fixed the 60-day period “from receipt hereof,” and the Acostas received it on October 30, 1981; even if counted from finality, finality was March 5, 1982, not August 26, 1982.
• Timeliness of Consignation: No. The Acostas had until December 29, 1981 to pay; actual consignation on October 25, 1982 was almost ten months late, and the conferences did not affect the finality of the decision.
• Effect of Sale to a Third Party: No. Angel M. Panajon was an innocent purchaser for value of registered land, and the absence of a notice of lis pendens protected his title; it was legally impossible to transfer the lot to the Acostas.
• Damages: Yes, but mitigated. St. Dominic must return all amounts received with legal interest from April 1968 and pay P6,000.00 in moral and exemplary damages, because the Acostas’ own default and refusal of alternatives contributed to the situation.

• Reckoning of the 60-Day Period: The CA decision was clear: payment within 60 days “from receipt hereof.” The Acostas received a copy on October 30, 1981, so they had until December 29, 1981. Upon St. Dominic’s refusal, the proper procedure was to consign within the 60-day period or within a reasonable time thereafter. Efforts to reach an agreement after promulgation did not affect finality; the May 6, 1982 order itself emphasized that the conference would not prejudice finality. Even under the IAC’s theory that the period ran from finality, finality should be counted from March 5, 1982, the date the decision became final as indicated in the entry of judgment, not from August 26, 1982, the date the entry was made. The SC distinguished finality from entry and cited Pfleider vs. Victoriano: finality is counted from expiration of the period to appeal, and delay in entry does not affect finality.
• Timeliness of Consignation: The Acostas were given until December 29, 1981 to pay the remaining balance. Actual consignment was made on October 25, 1982, almost ten months late. The first motion for consignation on September 15, 1982 was also beyond the period; the records later showed that motion was not found, and the second motion was filed October 25, 1982. Because the consignation was late, the assigned errors on the manner of consignation and the alleged modification of the CA decision were resolved on the threshold ground of timeliness. The SC held there was merit in St. Dominic’s contentions.
• Effect of Sale to a Third Party: The SC held it was too late and legally impossible to enforce the original contract by allowing consignation and ordering transfer. The lot was in the hands of an innocent third person who had secured title. Under Section 39 of the Land Registration Act, every subsequent purchaser of registered land who takes a certificate of title for value in good faith holds it free of all encumbrances except those noted. A purchaser may rely on the correctness of the certificate and need only examine the latest certificate. Panajon paid P18,480.00 for the subdivision lot, and the records showed nothing that would have put him on notice of the dispute. The Acostas did not annotate a notice of lis pendens during the litigation. A notice of lis pendens warns the world that the property is in litigation and that one who acquires an interest does so at his own risk. Because no notice was filed, Panajon could not be prejudiced; fraud is not presumed, and he is presumed to have acquired title in good faith and for valuable consideration. The SC cited Heirs of Mariano V. Tajonera vs. Court of Appeals, Tiongco vs. de la Merced, Constantino vs. Espiritu, De Roda vs. Lalk and Michael & Co., and Dia vs. Finance & Mining Investment Corp. The same protection did not apply to St. Dominic, which was reckless in selling a lot under litigation, but that affected damages, not Panajon’s title.
• Damages: The SC declared the contract rescinded and ordered St. Dominic to return all amounts received from the Acostas with legal interest from April 1968 and to pay P6,000.00 in moral and exemplary damages. The Acostas were also responsible for the situation: they defaulted, ignored notices, failed to take advantage of grace periods, and refused St. Dominic’s offers to return the entire amount with interest or to provide another lot without additional payment. The SC noted St. Dominic may have been unpardonably reckless in selling a subdivision lot under litigation, but it tried to remedy the situation and offered reasonable alternatives. Because both sides contributed, damages were mitigated. Law and equity required protecting the innocent third party with title and possession.

• Finality of judgment is distinct from entry of judgment — Finality is counted from expiration of the period to appeal, not from the date the judgment is entered; delay in entry does not affect finality. Applied: the CA decision became final on March 5, 1982, not August 26, 1982.
• Consignation after refusal must be timely — When a creditor refuses payment, the debtor must consign within the period fixed or within a reasonable time; a consignation almost ten months late is ineffective. Applied: the Acostas’ October 25, 1982 consignation was late.
• Innocent purchaser for value under the Torrens system — A purchaser of registered land for value and in good faith may rely on the certificate of title and holds the land free of encumbrances except those noted; fraud is not presumed. Applied: Panajon paid P18,480.00 and had no notice, so his title was protected.
• Lis pendens — An annotation warns the whole world that the property is in litigation and that a purchaser takes at his own risk; failure to annotate means a subsequent purchaser for value is not prejudiced. Applied: the Acostas did not annotate, so Panajon was protected.
• Mitigation of damages — Damages are mitigated where the obligee also contributed to the situation. Applied: the Acostas’ default and refusal of alternatives reduced damages; St. Dominic was ordered to return amounts with interest and pay P6,000.00.
• Rescission with mutual restitution — Upon rescission, the parties must return what they received; but an innocent third party is not bound by Article 1308. Applied: the contract was rescinded, St. Dominic returns amounts, and Panajon’s title is unaffected.

• “First of all, the decision of the then Court of Appeals which was promulgated on October 21, 1981, is quite clear when it ordered the payment of the balance of the purchase price for the disputed lot within 60 days "from receipt hereof ," meaning from the receipt of the decision by the respondents.” — The SC uses the CA decision’s own wording to reject the IAC’s reckoning from entry of judgment.
• “The date of a finality of a decision is entirely distinct from the date of its entry and the delay in the latter does not affect the effectivity of the former as such is counted from the expiration of the period to appeal.” — The SC distinguishes finality from entry and fixes finality at March 5, 1982.
• “A notice of lis pendens in an announcement to the whole world that a particular piece of real property is in litigation and serves as a warning that one who acquires an interest over said property does so on his own risk or that he gambles on the result of the litigation over said property.” — The SC defines lis pendens and explains why its absence protected Panajon.
• “Since the private respondents failed to file such notice, the subsequent purchaser for value cannot be prejudiced by the outcome of the litigation and in the absence of proof of any fraud on his part, such purchaser is presumed to have acquired his title in good faith and for a valuable consideration.” — The SC applies the absence of lis pendens to uphold Panajon’s title.

• Pfleider vs. Victoriano, 98 SCRA 497 — Controlling precedent on finality: the period to appeal runs from notice of judgment or denial of motion for reconsideration, and finality is not delayed by entry.
• Heirs of Mariano V. Tajonera vs. Court of Appeals, 103 SCRA 473-474 — Cited for Section 39 of the Land Registration Act and the protection of a subsequent purchaser of registered land for value in good faith.
• Tiongco vs. de la Merced, L-24426, July 25, 1974 — Cited for the rule that a purchaser in good faith need only examine the latest certificate of title.
• Constantino vs. Espiritu, 45 SCRA 563 — Cited for the definition and effect of a notice of lis pendens.
• De Roda vs. Lalk and Michael & Co., 48 Phil. 107 — Cited for the rule that fraud is not presumed.
• Dia vs. Finance & Mining Investment Corp., 83 Phil. 677 — Cited for the rule that innocent purchasers for value are protected under the Torrens system and that Article 1308 does not apply to an innocent third party.

• Section 39, Land Registration Act, as amended — Every person receiving a certificate of title and every subsequent purchaser of registered land who takes a certificate for value in good faith holds the land free of all encumbrances except those noted; applied to protect Panajon’s title against the Acostas’ claim.
• Article 1308, Civil Code — Mutual restitution under rescission refers to the immediate parties and not to an innocent third party; applied in the SC’s quotation from Dia to shield Panajon while ordering St. Dominic to return amounts to the Acostas.

• Justice Teehankee (Chairman) (Concurring in the result) — Separate opinion; its text is not included.