Vidad, Sr. vs. Tayamen

A Memorandum of Agreement in which the seller merely "commits to sell" and retains ownership until full payment of the price, with the deed of absolute sale and transfer of title to be executed only upon later agreement of the parties, is a contract to sell and not a contract of sale; the buyer thereunder acquires no full ownership rights and may be ordered to vacate the premises. Additionally, an appellate court may pass upon and resolve matters not assigned as errors on appeal when their consideration is necessary to arrive at a complete and just resolution of the case, to serve the interests of justice, or to avoid dispensing piecemeal justice.

Respondent-spouses Elpidio and Laureana Tayamen purchased from the spouses Henry and Roselita Batara a parcel of land with a three-door apartment covered by Transfer Certificate of Title No. 78717 of the Registry of Deeds of Manila, the property being then encumbered by a mortgage lien in favor of Veterans Bank. Petitioners Florante Vidad, Sr., Arlene Vidad-Absalon, and Florante Vidad, Jr. were occupying one of the apartment units covered by that purchase and asserted a separate, earlier contractual claim to the same unit arising from a Memorandum of Agreement with the Batara spouses. The dispute thus placed in conflict two sets of claimants deriving title and possession from the same vendors, with the petitioners' claim resting on an instrument whose legal character — contract of sale or contract to sell — determined whether they had acquired ownership before the respondents' purchase.

On August 27, 1982, the spouses Elpidio and Laureana Tayamen purchased from the spouses Henry and Roselita Batara a parcel of land with a three-door apartment covered by Transfer Certificate of Title No. 78717 of the Registry of Deeds of Manila. The deed of sale was executed on August 27, 1982 and notarized on August 31, 1982. At the time of the purchase, the property carried a mortgage lien in favor of Veterans Bank, and the Vidads were renting one of the apartment units covered by the transaction. The Tayamens claimed that when the deed of sale was executed, they had no knowledge of any infirmity or adverse claim over the land other than that mortgage lien.

After the Tayamens had fully paid the Bataras' loan with Veterans Bank, they were confronted by a certain Dr. Rebecca Cabanos, who claimed that she had bought the property in an auction sale and was its new owner. To protect their rights, the Tayamens filed an Affidavit of Adverse Claim with the Registry of Deeds on August 27, 1986, and later, on May 23, 1988, filed Civil Case No. 88-44705 to annul the sheriff's sale in favor of Dr. Cabanos.

While that case was pending, the Vidads filed a complaint docketed as Civil Case No. 89-49741 before the Regional Trial Court of Manila, Branch 20, and caused the annotation of a Notice of Lis Pendens on the original of the title. According to the Vidads, three years before the Tayamens made their purchase, the Batara spouses and the Vidads had already entered into a contract of sale over the apartment unit the Vidads were occupying. They alleged that a Memorandum of Agreement was executed between the parties and that they made a downpayment of ₱25,000, and that the Bataras later agreed to sell the entire three-door apartment for ₱160,000, which the Vidads paid in full. The Memorandum of Agreement itself recited that, for and in consideration of ₱25,000 paid by Mrs. Corazon Vidad, the seller "commit[ted] to sell" one door apartment including the lot therein, that the amount was part payment, that the balance of the entire amount shall be paid and a Deed of Absolute Sale executed upon later agreement of both parties, and that upon agreement on full payment the area of the lot shall be measured and the Transfer Certificate of Title signed by the seller. Civil Case No. 89-49741 was dismissed on July 21, 1994 for failure to prosecute. In the meantime, Civil Case No. 88-44705 was amicably settled through a compromise agreement approved by the trial court on April 30, 1997, after Dr. Cabanos waived and quitclaimed all her rights, interest, and participation over the property and allowed the transfer of title and ownership to the Tayamens.

The Tayamens forthwith demanded that the Vidads vacate the apartment they were occupying, but the Vidads refused. On May 23, 1997, the Tayamens filed a complaint for recovery of possession and damages against the Vidads, arguing that the latter had no right to the premises and that any cause of action they might have should be pursued against the Batara spouses. They prayed that the Vidads and all other persons living in the apartment vacate the premises and pay ₱161,000 with legal interest as past rentals, ₱5,000 monthly rental from the filing of the complaint until the place is vacated, ₱10,000 as attorney's fees, and the costs of suit.

The trial court found that the Vidads had failed to establish a right superior to that of the Tayamens and dismissed the complaint for want of merit, although on reconsideration it ordered the Vidads to pay ₱200,000 as one-third of the ₱600,000 paid to Cabanos, with six percent (6%) interest per annum from April 22, 1997. The Court of Appeals found that the instrument relied upon by the Vidads was a contract to sell rather than a contract of sale, that the deed of absolute sale between the Tayamens and the Bataras was valid, and that the Tayamens' title and ownership could be consolidated by reason of that deed following Dr. Cabanos' waiver and quitclaim.

• Jurisdiction and Finality: Petitioners maintained that the Court of Appeals exceeded its jurisdiction when it reversed or modified the Decision of Branch 34 of the Manila Regional Trial Court dated April 26, 1999, which had allegedly become long final and executory because the respondents, as the losing parties, did not appeal from it.
• Affirmative Relief on Appeal: Petitioners contended that whenever an appeal is taken in a civil case, an appellee who has not himself appealed cannot obtain from the appellate court any affirmative relief other than the ones granted in the decision of the court below.
• Ownership as an Unassigned Error: Petitioners argued that the Court of Appeals erred in deciding the issue of ownership of the premises, which was not one of the assigned errors in the petitioners' appeal brief and not an issue of the appeal; the appellate court could only consider errors raised, which were limited to the order of the trial court requiring the payment of ₱200,000.
• Ownership of the Property: Petitioners asserted that they held a Deed of Absolute Sale over the property and that the Court of Appeals erred in reversing the trial court's declaration that the property belonged to them.

• Authority to Grant Relief: Respondents countered that the affirmative relief sought could be obtained from the Court of Appeals since the latter had the solemn duty to dispense justice and uphold the law.
• Ownership as a Raised Issue: Respondents countered that the petitioners themselves had raised the issue of ownership in their appeal.
• Absence of Title in Petitioners: Respondents contended that the petitioners do not have title to the property.

• Affirmative Relief on Appeal: Whether the Court of Appeals may grant an affirmative relief other than that obtained from the lower court, and whether it exceeded its jurisdiction in reversing or modifying the trial court's decision which the petitioners claim had already become final and executory for failure of the respondents to appeal.
• Ownership as an Unassigned Error: Whether the Court of Appeals erred in deciding the issue of ownership of the premises in question when it was allegedly not among the assigned errors in the petitioners' appeal brief and not an issue of the appeal.
• Nature of the MOA and Ownership: Whether the Court of Appeals erred in reversing the decision of the trial court declaring that the property in question belonged to the petitioners.

• Affirmative Relief on Appeal: Yes. The Court of Appeals is imbued with sufficient authority and discretion to review matters not otherwise assigned as errors on appeal when their consideration is necessary to arrive at a complete and just resolution of the case, to serve the interests of justice, or to avoid dispensing piecemeal justice, pursuant to Section 8, Rule 51 of the Revised Rules of Court.
• Ownership as an Unassigned Error: No. The petitioners themselves had assigned ownership as one of the errors of the lower court, and the appellate court had first to determine who actually owned the property in order to resolve whether the petitioners were liable to the respondents for ₱200,000.
• Nature of the MOA and Ownership: No. The Memorandum of Agreement is a contract to sell, not a contract of sale, so the petitioners do not have full ownership rights to the subject property; the Deed of Absolute Sale between the respondents and Batara was valid, and title and ownership in the respondents' name could be consolidated by reason of that deed.

• Affirmative Relief on Appeal: Section 8, Rule 51 of the Revised Rules of Court provides that no error which does not affect jurisdiction over the subject matter, the validity of the judgment appealed from, or the proceedings therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors. Notwithstanding that rule, the Court has explained in several cases that the Court of Appeals is imbued with sufficient authority and discretion to review matters not otherwise assigned as errors on appeal if it finds that their consideration is necessary in arriving at a complete and just resolution of the case, or to serve the interests of justice, or to avoid dispensing piecemeal justice. In Sesbreño vs. Central Board of Assessment Appeals, the Court held that an appellate court has an inherent authority to review unassigned errors (1) which are closely related to an error properly raised; (2) upon which the determination of the error properly assigned is dependent; or (3) where the Court finds that consideration of them is necessary in arriving at a just decision of the case. Measured against these considerations and precedents, the appellate court did not err in passing upon an unassigned error.

• Ownership as an Unassigned Error: The petitioners themselves had assigned ownership as one of the errors of the lower court when it rendered the assailed decision, specifically in their fifth assignment of error alleging that the trial court erred in not declaring the Deed of Sale executed between Henry Batara and the spouses Elpidio and Laureana Tayamen dated August 31, 1982 null and void. Moreover, to determine whether the petitioners were really liable to the respondents for ₱200,000, the appellate court had first to determine who actually owned the property. The ownership question was therefore not improperly injected into the appeal but was integral both to an error properly raised and to the resolution of the monetary liability adjudged by the trial court.

• Nature of the MOA and Ownership: The Memorandum of Agreement provides that, for and in consideration of ₱25,000 paid by Mrs. Corazon Vidad, the seller "commit[ted] to sell" one door apartment including the lot therein; that the amount was part payment of the one door apartment and lot; that the balance of the entire amount shall be paid and a Deed of Absolute Sale executed upon later agreement of both parties; and that in case both parties have agreed on full payment, the area of the lot shall be measured and the Transfer Certificate of Title signed by the seller. Distinguishing a contract of sale from a contract to sell: (a) in a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder, whereas in a contract to sell, full payment of the purchase price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective; (b) in the first, title over the property generally passes to the buyer upon delivery, while in the second, ownership is retained by the seller regardless of delivery and is not to pass until full payment of the price; and (c) in the first, after delivery has been made, the seller has lost ownership and cannot recover it unless the contract is resolved or rescinded, while in the second, since the seller retains ownership despite delivery, he is enforcing and not rescinding the contract if he seeks to oust the buyer for failure to pay. The Memorandum of Agreement contains an implicit agreement that the seller retained ownership regardless of whether or not there was delivery, since ownership was not to pass until full payment of the price, the balance of the entire amount to be paid and a Deed of Absolute Sale to be executed as per later agreement of the parties. Payment in full of the price was thus a positive suspensive condition, another peculiar characteristic of a contract to sell, and the term "commit to sell" in the first paragraph of the instrument confirmed its nature. Because the Memorandum of Agreement is a contract to sell, the petitioners do not have full ownership rights to the subject property. The Deed of Absolute Sale between the respondents and Batara was likewise valid, having been made in accordance with law, since Dr. Cabanos had waived and quitclaimed any and all rights, interest, or participation she may have had over the subject property arising from the execution sale and thereby allowed the consolidation of title and ownership unto the respondents by reason of that execution sale. Thus, title and ownership in the name of the respondents could already be consolidated by reason of the Deed of Absolute Sale dated August 27, 1982 that the latter had entered into with the spouses Henry and Roselita Batara.

• Contract of Sale vs. Contract to Sell — The Court laid down three distinctions: (a) in a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder, whereas in a contract to sell, full payment of the purchase price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective; (b) in a contract of sale, title over the property generally passes to the buyer upon delivery, while in a contract to sell, ownership is retained by the seller regardless of delivery and is not to pass until full payment of the price; and (c) in a contract of sale, after delivery has been made, the seller has lost ownership and cannot recover it unless the contract is resolved or rescinded, while in a contract to sell, since the seller retains ownership despite delivery, he is enforcing and not rescinding the contract if he seeks to oust the buyer for failure to pay. Applying these distinctions, the Memorandum of Agreement was held to be a contract to sell because ownership was not to pass until full payment of the price and the deed of absolute sale was to be executed only upon the parties' later agreement.

• Full Payment as a Positive Suspensive Condition in a Contract to Sell — In a contract to sell, the payment of the full purchase price is a positive suspensive condition; its non-occurrence is not a breach of contract but an event that prevents the obligation of the vendor to convey title from becoming effective. Because the Memorandum of Agreement reserved the execution of the Deed of Absolute Sale and the signing of the Transfer Certificate of Title until full payment, the petitioners acquired no ownership rights over the subject property and could not defeat the respondents' title.

• The "Commit to Sell" Formulation as an Indicium of a Contract to Sell — The use of the phrase "commit to sell" in the first paragraph of the Memorandum of Agreement was treated as a textual marker that the parties had entered into a contract to sell rather than a contract of sale, reinforcing the conclusion drawn from the stipulation that title would pass only upon full payment.

• Appellate Authority to Review Unassigned Errors — Although Section 8, Rule 51 of the Revised Rules of Court limits appellate review to errors stated in the assignment of errors or closely related to or dependent on an assigned error, an appellate court has the inherent authority to review unassigned errors (1) which are closely related to an error properly raised; (2) upon which the determination of the error properly assigned is dependent; or (3) where the court finds that consideration of them is necessary in arriving at a just decision of the case. The Court applied this doctrine to sustain the Court of Appeals' resolution of the ownership issue, which was both raised by the petitioners themselves and necessary to determine their liability for the ₱200,000 adjudged by the trial court.

• "This, notwithstanding, in several cases we have also explained that the Court of Appeals is imbued with sufficient authority and discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal justice." — This passage states the ratio decidendi on the procedural issue, establishing that the appellate court did not err in passing upon an unassigned error and supplying the standard frequently invoked for appellate review of matters outside the assignment of errors.

• "in a Contract TO Sell, full payment of the purchase price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective" — This is the Court's canonical formulation of the second distinguishing characteristic between a contract of sale and a contract to sell, and it supplied the operative rule for characterizing the Memorandum of Agreement.

• "Note that the MOA contains an implicit agreement that the seller retained ownership regardless of whether or not there was delivery. Ownership was not to pass until full payment of the price, as 'the balance of the entire amount shall be paid and a Deed of Absolute Sale be executed as per agreement later on by the parties.' The payment in full of the price was a positive suspensive condition, another peculiar characteristic of a contract to sell. Noteworthy also is the term 'commit to sell' in the first paragraph of the MOA. Since the MOA is a contract to sell, the petitioners do not have full ownership rights to the subject property." — This passage applies the contract-to-sell doctrine to the instrument at bar and constitutes the core substantive holding of the decision.

• "in the first, after delivery has been made, the seller has lost ownership and cannot recover it unless the contract is resolved or rescinded; in the second, since the seller retains ownership, despite delivery, he is enforcing and not rescinding the contract if he seeks to oust the buyer for failure to pay." — This is the third of the enumerated distinctions between a contract of sale and a contract to sell, explaining why a vendor under a contract to sell may eject a buyer who fails to pay without first rescinding the agreement.

• Sesbreño vs. Central Board of Assessment Appeals, G.R. No. 106588, March 24, 1997, 270 SCRA 360 — Controlling precedent on the procedural issue; cited for the rule that an appellate court has an inherent authority to review unassigned errors in three instances: those closely related to an error properly raised, those upon which the determination of the error properly assigned is dependent, and those whose consideration is necessary in arriving at a just decision of the case. The Court expressly relied on this ruling in holding that the Court of Appeals did not err in passing upon an unassigned error.
• St. Michael's Institute vs. Santos, G.R. No. 145280, December 4, 2001, 371 SCRA 383 — Cited, together with the succeeding case, to support the proposition that the Court of Appeals is imbued with sufficient authority and discretion to review matters not otherwise assigned as errors on appeal when necessary for a complete and just resolution of the case or to avoid dispensing piecemeal justice.
• Heirs of Ramon Durano, Sr. vs. Uy, G.R. No. 136456, October 24, 2000, 344 SCRA 238 — Cited in the same vein as St. Michael's Institute vs. Santos to reinforce the appellate court's authority to review unassigned errors.
• Valdez vs. Court of Appeals, G.R. No. 140715, September 24, 2004, 439 SCRA 55 — Cited for the rule that in a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder.
• Heirs of Pedro Escanlar vs. Court of Appeals, G.R. No. 120690, October 23, 1997, 281 SCRA 176 — Cited in Valdez vs. Court of Appeals as authority for the rule on non-payment of the price as a resolutory condition in a contract of sale.
• Salazar vs. Court of Appeals, G.R. No. 118203, July 5, 1996, 258 SCRA 317 — Cited for the rule that in a contract to sell, full payment of the purchase price is a positive suspensive condition, the failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.

• Section 8, Rule 51, Revised Rules of Court — Provides that no error which does not affect jurisdiction over the subject matter, the validity of the judgment appealed from, or the proceedings therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors. The Court cited this provision as the general rule on appellate review, then held that it did not preclude the Court of Appeals from resolving the ownership issue, since the consideration of that matter was necessary to arrive at a complete and just resolution of the case and to avoid dispensing piecemeal justice.
• Section 13, Article VIII, 1987 Constitution — Cited in the Chief Justice's certification accompanying the decision, attesting that the conclusions of the Court had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

• Justice Antonio T. Carpio
• Justice Conchita Carpio Morales
• Justice Dante O. Tinga
• Justice Presbitero J. Velasco, Jr.

Chief Justice Reynato S. Puno certified that the conclusions in the decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.