art 448 carrascoso jr vs ca _ 123672 _ december 14, 2005 _ j

6/21/2015 CarrascosoJrvsCA:123672:December14,2005:J.CarpioMorales:ThirdDivision:Decision

http://sc.judiciary.gov.ph/jurisprudence/2005/dec2005/123672.htm 1/23

THIRDDIVISION

FERNANDOCARRASCOSO,JR.,

Petitioner,versusTHEHONORABLE COURTOF APPEALS, LAURO LEVISTE, as Director andMinorityStockholderandOnBehalfofOtherStockholdersofElDoradoPlantation,Inc. and EL DORADO PLANTATION, INC., represented by one of its minoritystockholders,LauroP.Leviste,

Respondents.xxPHILIPPINELONGDISTANCETELEPHONECOMPANY,

Petitioner,versus

LAUROLEVISTE,asDirectorandMinorityStockholderandOnBehalfofOtherStockholders of El Dorado Plantation, Inc., EL DORADO PLANTATION, INC.,represented by Minority Stockholder, Lauro P. Leviste, and FERNANDOCARRASCOSO,JR.

Respondents.G.R.No.123672Present:PANGANIBAN,J.,Chairman,SANDOVALGUTIERREZ,CORONA,CARPIOMORALES,andGARCIA,JJ.



G.R.No.164489Promulgated:December14,2005

xx

DECISION

CARPIOMORALES,J.:

ElDoradoPlantation, Inc. (ElDorado)was the registeredownerofaparcelof land(theproperty)withanareaofapproximately1,825hectarescoveredbyTransferCertificate

ofTitle(TCT)No.T93[1]

situatedinSablayan,OccidentalMindoro.On February 15, 1972, at a special meeting of El Dorados Board of Directors, a

Resolution[2]

was passed authorizing Feliciano Leviste, then President of El Dorado, tonegotiatethesaleofthepropertyandsignalldocumentsandcontractsbearingthereon.



On March 23, 1972, by a Deed of Sale of Real Property,[3]

El Dorado, throughFelicianoLeviste,soldthepropertytoFernandoO.Carrascoso,Jr.(Carrascoso).

ThepertinentprovisionsoftheDeedofSaleread:

NOW,THEREFORE,forandinconsiderationofthesumofONEMILLIONEIGHTHUNDREDTHOUSAND(1,800,000.00)PESOS,PhilippineCurrency, theVendorherebysells,cedes,andtransfer(sic)untothehereinVENDEE,hisheirs,successorsandassigns,theabovedescribedpropertysubjecttothefollowingtermsandconsitions(sic):

1.Of thesaidsumofP1,800,000.00whichconstitutes thefullconsiderationof this

sale,P290,000.00shallbepaid,asitisherebypaid,tothePhilippines(sic)NationalBank,therebyeffectingthereleaseandcancellationfo(sic)thepresentmortgageover theabovedescribedproperty.

2.ThatthesumofP210,000.00shallbepaid,asitisherebypaidbytheVENDEEto

theVENDOR,receiptofwhichamountisherebyacknowledgedbytheVENDOR.3.The remainingbalanceofP1,300,000.00plus interest thereonat the rateof10%

perannumshallbepaidbytheVENDEEtotheVENDORwithinaperiodofthree(3)years,asfollows:

(a)One(1)yearfromthedateof thesigningof thisagreement, theVENDEEshall

pay to the VENDOR the sum of FIVE HUNDRED NINETEEN THOUSAND EIGHTHUNDREDTHIRTYTHREE&33/100(P519,833.33)PESOS.

(b)Two(2)yearsfromthedateofsigningofthisagreement,theVENDEEshallpay

to the VENDOR the sum of FIVE HUNDRED NINETTEN (sic) THOUSAND EIGHTHUNDREDANDTHIRTYTHREE&33/100(P519,833.33)PESOS.

(c)Three(3)yearsfromthedateofsigningofthisagreement,theVENDEEshallpay

totheVENDORthesumofFIVEHundredNINETEENTHOUSANDEIGHTHUNDREDANDTHIRTYTHREE&33/100(P519,833.33)PESOS.

4.Thetitleoftheproperty,subjectofthisagreement,shallpassandbetransferredto

theVENDEEwhoshallhavefullauthoritytoregisterthesameandobtainthecorrespondingtransfercertificateoftitleinhisname.

xxx

6. THE VENDOR certifies and warrants that the property abovedescribed is notbeing cultivated by any tenant and is therefore not covered by the provisions of theLandReformCode.If,therefore,theVENDEEbecomesliableunderthesaidlaw,theVENDOR

shall reimburse the VENDEE for all expenses and damages he may incur thereon.[4]

(Underscoringsupplied)

FromtheabovequotedprovisionsoftheDeedofSale,Carrascosowastopaythefull



amountofthepurchasepriceonMarch23,1975.Onevendate,theBoardofDirectorsofElDoradopassedaResolutionreading:

RESOLVEDthatbyreasonofthesaleofthatparceloflandcoveredbyTCTNo.T93toDr.FERNANDOO.CARRASCOSO,JR.,thecorporationinterposesnoobjectionto thepropertybeingmortgage (sic) byDr.FERNANDOO.CARRASCOSO, JR. toanybankofhischoiceaslongasthebalanceontheDeedofSaleshallberecognizedbyDr.FERNANDOO.CARRASCOSO,JR.

RESOLVED,FURTHER,thatthecorporationauthorizestheprefered(sic)claimon

thepropertytobesubordinatedtoanymortgagethatmaybeconstitutedbyDr.FERNANDOO.CARRASCOSO,JR.

RESOLVED, FINALLY, that in case of any mortgage on the property, the

corporation waives the preference of any vendors lien on the property.[5]

(Emphasis andunderscoringsupplied)

FelicianoLevistealsoexecutedthefollowingaffidavitonthesameday:

1.ThatbyreasonofthesaleofthatparceloflandcoveredbyTransferCertificateofTitle T93 as evidenced by the Deed of Sale attached hereto as Annex A and made anintegralparthereof,theElDoradoPlantation,Inc.hasnoobjectiontotheaforementionedproperty being mortgaged by Dr. Fernando O. Carrascoso, Jr. to any bank of hischoice,aslongasthepaymentofthebalanceduetheElDoradoPlantation,Inc.underthe Deed of Sale, Annex A hereof, shall be recognized by the vendee therein, Dr.FernandoO.Carrascoso,Jr.thoughsubordinatedtothepreferredclaimofthemortgageebank.

2. That in case of any mortgage on the property, the vendor hereby waives the

preferenceofanyvendorslienontheproperty,subjectmatterofthedeedofsale.3.ThatthisaffidavitisbeingexecutedtoavoidanyquestionontheauthorityofDr.

FernandoO.Carrascoso,Jr.tomortgagethepropertysubjectoftheDeedofSale,AnnexAhereof,wherethepurchasepriceprovidedthereinhasnotbeenfullypaid.

4.ThatthisaffidavithasbeenexecutedpursuanttoaboardresolutionofElDorado

Plantation,Inc.[6]

(Emphasisandunderscoringsupplied)Onthefollowingday,March24,1972,CarrascosoandhiswifeMarleneexecuteda

RealEstateMortgage[7]

overthepropertyinfavorofHomeSavingsBank(HSB)tosecurealoanintheamountofP1,000,000.00.Ofthisamount,P290,000.00waspaidtoPhilippineNationalBanktoreleasethemortgagepriorlyconstitutedonthepropertyandP210,000.00waspaidtoElDoradopursuant toabovequotedparagraphNos.1and2of thetermsand



conditionsoftheDeedofSale.[8]

TheMarch23,1972DeedofSaleofRealPropertywasregisteredandannotatedon

ElDoradosTCTNo.T93asEntryNo.15240[9]

onApril5,1972.Onevendate,TCTNo.

T93coveringthepropertywascancelledandTCTNo.T6055[10]

wasinitssteadissuedby theRegistryofDeedsofOccidentalMindoro in thenameofCarrascosoonwhich the

realestatemortgageinfavorofHSBwasannotatedasEntryNo.15242.[11]

OnMay18,1972,therealestatemortgageinfavorofHSBwasamendedtoinclude

anadditionalthreeyearloanofP70,000.00asrequestedbythespousesCarrascoso.[12]

TheAmendmentofRealEstateMortgagewasalsoannotatedonTCTNo.T6055asEntryNo.

15486onMay24,1972.[13]

The 3year period forCarrascoso to fully pay for the property onMarch 23, 1975

passedwithouthimhavingcompliedtherewith.In the meantime, on July 11, 1975, Carrascoso and the Philippine Long Distance

Telephone Company (PLDT), through its President Ramon Cojuangco, executed an

Agreement toBuy and Sell[14]

whereby the former agreed to sell 1,000 hectares of thepropertytothelatterataconsiderationofP3,000.00perhectareoratotalofP3,000,000.00.

The July11,1975Agreement toBuyandSellwasnot registeredandannotatedon

CarrascososTCTNo.T6055.Lauro Leviste (Lauro), a stockholder andmember of the Board of Directors of El

Dorado, through his counsel, Atty. Benjamin Aquino, by letter[15]

dated December 27,1976, called the attention of the Board to Carrascosos failure to pay the balance of thepurchasepriceofthepropertyamountingtoP1,300,000.00.AndLauroslawyermanifestedthat:



Because of the default for a long time ofMr. Carrascoso to pay the balance of the

consideration of the sale, Don Lauro Leviste, in his behalf and in behalf of the othershareholderssimilarlysituatedlikehim,wantarescissionofthesalemadebytheElDoradoPlantation, Inc. to Mr. Carrascoso. He desires that the Board of Directors take the

correspondingactionforrescission.[16]

Laurosdesire torescindthesalewasreiteratedin twoother letters[17]

addressedtotheBoarddatedJanuary20,1977andMarch3,1977.

JoseP.Leviste,asPresidentofElDorado,latersentaletterofFebruary21,1977[18]

toCarrascosoinforminghimthatinviewofhisfailuretopaythebalanceofthepurchasepriceoftheproperty,ElDoradowasseekingtherescissionoftheMarch23,1972DeedofSaleofRealProperty.

Thepertinentportionsoftheletterread:

xxx

I regret to informyou that the balance ofP1,300,000.00 and the interest thereonhave longbeen due and payable, although you havemortgaged said propertywith theHome SavingsBank for P1,000,000.00 on March 24, 1972, which was subsequently increased toP1,070,000.00onMay18,1972.YouverywellknowthattheElDoradoPlantation,Inc.,isaclosefamilycorporation,ownedexclusivelybythemembersoftheLevistefamilyandIamoneofthecoownersoftheland.AsnothingappearstohavebeendoneonyourpartafterournumerousrequestsforpaymentofthesaidamountofP1,300,000.00andtheinterestof10%perannumduethereon,pleasebe

advised that we would like to rescind the contract of sale of the land.[19]


Jose Leviste, by letter[20]

dated March 10, 1977, informed Lauros counsel Atty.Aquinoofhis(Joses)February21,1977lettertoCarrascoso,helamentingthatCarrascosohasnotdeemeditfittogive[his]letterthecourtesyofareplyandadvis[ing]thatsomeoftheDirectorsof[ElDorado]couldnotseetheirwayclearincomplyingwiththedemandsofyourclient[Lauro]andhavefailedtoreachaconsensustobringthecorrespondingactionfor



rescissionofthecontractagainst...Carrascoso.[21]

LauroandElDoradofinallyfiledonMarch15,1977acomplaint[22]

forrescissionoftheMarch23,1972DeedofSaleofRealPropertybetweenElDoradoandCarrascosowithdamagesbeforetheCourtofFirstInstance(CFI)ofOccidentalMindoro,docketedasCivilCaseNo.R226.

LauroandElDoradoalsosoughtthecancellationofTCTNo.T6055inthenameofCarrascosoandtherevivalofTCTNo.T93inthenameofElDorado,freefromanyliensandencumbrances.Furthermore,thetwoprayedfortheissuanceofanorderforCarrascosoto:(1)reconveythepropertytoElDoradouponreturntohimofP500,000.00,(2)secureadischargeof therealestatemortgageconstitutedon thepropertyfromHSB,(3)submitanaccountingofthefruitsofthepropertyfromMarch23,1972uptothereturnofpossessionofthelandtoElDorado,(4)turnoversaidfruitsortheequivalentvaluethereoftoElDorado

and(5)paytheamountofP100,000.00forattorneysfeesandotherdamages.[23]

AlsoonMarch15,1977,LauroandElDoradocausedtobeannotatedonTCTNo.T

6055aNoticeofLisPendens,inscribedasEntryNo.39737.[24]

Inthemeantime,Carrascoso,asvendorandPLDT,asvendeeforgedonApril6,1977

aDeedofAbsoluteSale[25]

overthe1,000hectareportionofthepropertysubjectoftheirJuly11,1975AgreementtoBuyandSell.ThepertinentportionsoftheDeedareasfollows:

WHEREAS, theVENDORandtheVENDEEenteredintoanagreementToBuyand

SellonJuly11,1975,whichismadeaparthereofbyreferenceWHEREAS,theVENDORandtheVENDEEarenowdecidedtoexecutetheDeedof

AbsoluteSalereferredtointheaforementionedagreementtoBuyandSellWHEREFORE, for and in consideration of the foregoing premises and the terms

hereunderstated,theVENDORandtheVENDEEhaveagreedasfollows:1.ForandinconsiderationofthesumofTHREEMILLIONPESOS(P3,000,000.00),

Philippine currency, of which ONE HUNDRED TWENTY THOUSAND PESOS



P120,000.00have (sic)alreadybeen receivedby theVENDOR, theVENDORherebysells,transfersandconveysuntotheVENDEEonethousandhectares(1,000has.)ofhisparceloflandcoveredbyT.C.T.No.T6055of theRegistryofDeedsofMindoro,delineatedasLotNo.3B1inthesubdivisionsurveyplanxxx

2.TheVENDEEshall pay to theVENDORupon the signingof this agreement, the

sum of TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) in thefollowingmanner:

a) The sum of TWO MILLION THREE HUNDRED THOUSAND PESOS

(P2,300,000.00) to Home Savings Bank in full payment of the VENDORs mortgagedobligationtherewith

b)ThesumofTWOHUNDREDTHOUSANDPESOS(P200,000.00)toVENDORThe remaining balance of the purchase price in the sum of THREE HUNDRED

EIGHTYTHOUSANDPESOS(P380,000.00),lesssuchexpenseswhichmaybeadvancedbythe VENDEE but which are for the account of the VENDOR under Paragraph 6 of theAgreementtoBuyandSell,shallbepaidbytheVENDEEtotheVENDORuponissuanceof

titletotheVENDEE.[26]


In turn, PLDT, by Deed of Absolute Sale[27]

dated May 30, 1977, conveyed theaforesaid 1,000 hectare portion of the property to its subsidiary, PLDT AgriculturalCorporation(PLDTAC),foraconsiderationofP3,000,000.00,theamountofP2,620,000.00ofwhichwaspayabletoPLDTuponsigningofsaidDeed,andP380,000.00toCarrascosouponissuanceoftitletoPLDTAC.

Inthemeantime,onOctober19,1977,theElDoradoBoardofDirectors,byaspecial

meeting,[28]

adoptedandapprovedaResolutionratifyingandconferringtheprosecutionofCivilCaseNo.R226oftheCourtofFirstInstanceofOccidentalMindoro,entitledLauroP.

Levistevs.FernandoCarascoso(sic),etc.initiatedbystockholderMr.LauroP.Leviste.[29]

InhisAnswerwithCompulsoryCounterclaim,[30]

Carrascosoallegedthat:(1)hehadnotpaidhisremainingP1,300,000.00obligationundertheMarch23,1972DeedofSaleofReal Property in view of the extensions of time to comply therewith granted him by ElDorado(2)thecomplaintsufferedfromfataldefects,therebeingnoshowingofcompliancewiththeconditionprecedentofexhaustionofintracorporateremediesandtherequirement



thataderivativesuit institutedbyacomplainingstockholderbeverifiedunderoath(3)ElDorado committed a grossmisrepresentationwhen itwarranted that the propertywas notbeingcultivatedbyanytenanttotakeitoutofthecoverageoftheLandReformCodeand(4)hesuffereddamagesduetotheprematurefilingofthecomplaintforwhichLauroandElDoradomustbeheldliable.

OnFebruary21,1978, theApril6,1977andMay30,1977DeedsofAbsoluteSaleandtherespectiveArticlesofIncorporationofPLDTandPLDTACwereannotatedonTCT

No.T6055asEntryNos.24770,[31]

42774,[32]

42769[33]

and24772,[34]

respectively.On

evendate,CarrascososTCTNo.T6055wascancelledandTCTNo.T12480[35]

coveringthe1,000hectareportionofthepropertywasissuedinthenameofPLDTAC.TheMarch15,1977NoticeofLisPendenswascarriedovertoTCTNo.T12480.

On July31,1978,PLDTandPLDTACfiledanUrgentMotion for Intervention[36]

whichwasgrantedbythetrialcourtbyOrder[37]

ofSeptember7,1978.

PLDTandPLDTAC thereupon filed theirAnswer In InterventionwithCompulsory

CounterclaimandCrossclaim[38]

againstCarrascosoonNovember13,1978,allegingthat:(1)whenCarrascosoexecutedtheApril6,1977DeedofAbsoluteSale infavorofPLDT,PLDTwasnotawareofanylitigationinvolvingthe1,000hectareportionofthepropertyorofanyflawinhistitle,(2)PLDTisapurchaseringoodfaithandforvalue(3)whenPLDTexecuted the May 30, 1977 Deed of Absolute Sale in favor of PLDTAC, they had noknowledgeof anypending litigationover theproperty andneitherwere they aware that anoticeoflispendenshadbeenannotatedonCarrascosostitleand(4)LauroandElDoradoknewofthesalebyCarrascosotoPLDTandPLDTsactualpossessionofthe1,000hectareportion of the property since June 30, 1975 and of its exercise of exclusive rights of

ownershipthereonthroughagriculturaldevelopment.[39]

ByDecision[40]

ofJanuary28,1991,Branch45oftheSanJoseOccidentalMindoroRegionalTrialCourt towhich theCFIhasbeen renamed, dismissed the complaint on the



groundofprematurity,disposingasfollows,quotedverbatim:

WHEREFORE, in view of all the foregoing considerations, judgment is herebyrendered:

1. Dismissing the plaintiffs complaint against the defendant on the ground of

prematurity2.OrderingtheplaintiffstopaytothedefendantthesumofP2,980,000.00asactual

and compensatory damages, aswell as the sumof P100,000.00 as and for attorneys feesprovided,however, that theaforesaidamountsmust firstbe setoff from the lattersunpaidbalancetotheformer

3.Dismissingthedefendantsintervenorscounterclaimandcrossclaimand4.Orderingtheplaintiffstopayto(sic)thecostsofsuit.

SOORDERED.[41]


Carrascoso, PLDT and PLDTAC filed their respective appeals to the Court of

Appeals.

ByDecision[42]

ofJanuary31,1996,theappellatecourtreversedthedecisionofthetrialcourt,disposingasfollows,quotedverbatim:

WHEREFORE, not being meritorious, PLDTs/PLDTACs appeal is hereby

DISMISSEDandfindingElDoradosappealtobeimpressedwithmerit,WeREVERSEtheappealedDecisionandrenderthefollowingjudgment:

1.TheDeedofSaleofRealProperty(ExhibitC)isherebyrescindedandTCTNo.T

12480(ExhibitQ)iscancelledwhileTCTNo.T93(ExhibitA),isreactivated.2.FernandoCarrascoso,Jr.iscommandedto:

2.1.returnthepossessionofthe825[hectare]remainingportionofthelandto El Dorado Plantation, Inc. without prejudice to the landholdings oflegitimatetenantsthereon2.2.returnthenetfruitsofthelandtoElDoradoPlantation,Inc.fromMarch23,1972toJuly11,1975,andofthe825hectareremainingportionminusthetenants landholdings, from July 11, 1975 up to its delivery to El DoradoPlantation,Inc.includingwhateverhemayhavereceivedfromthetenantsifanybywayofcompensationundertheOperationLandTransferorunderanyotherpertinentagrarianlaw2.3 Pay El Dorado Plantation, Inc. an attorneys fee of P20,000.00 and



litigationexpensesofP30,000.002.4 Return to Philippine Long Distance Telephone Company/PLDTAgriculturalCorporationP3,000,000.00pluslegalinterestfromApril6,1977untilfullypaid

3.PLDTAgriculturalCorporationisorderedtosurrenderthepossessionofthe1000hectareFarmtoElDoradoPlantation,Inc.

4. El Dorado Plantation, Inc. is directed to return the P500,000.00 to Fernando

Carrascoso,Jr.pluslegalinterestfromMarch23,1972untilfullypaid.Theperformanceofthis obligationwill however await the full compliance by FernandoCarrascoso, Jr. of hisobligationtoaccountforanddeliverthenetfruitsofthelandmentionedabovetoElDoradoPlantation,Inc.

5.Tocomplywithparagraph2.2herein,Carrascosoisdirectedtosubmitin(sic)the

courtaquoafullaccountingofthefruitsofthelandduringtheperiodmentionedaboveforthelattersapproval,afterwhichthenetfruitsshallbedeliveredtoElDorado,Plantation,Inc.

6.ElDoradoPlantation,Inc.shouldinformPhilippineLongDistanceTelephoneCo.and PLDT Agricultural Corporation in writing within ten (10) days after finality of thisdecisionregardingtheexerciseofitsoptionunderArt.448oftheCivilCode.

SOORDERED.[43]


PLDTandPLDTACfiledonFebruary22,1996,aMotionforReconsideration[44]

oftheJanuary31,1996CADecision,whileCarrascosowentupthisCourtbyfilingonMarch

25,1996apetitionforreview,[45]

docketedasG.R.No.123672,assailing theJanuary31,1996CADecisionandseekingthereinstatementoftheJanuary28,1991Decisionofthetrialcourt exceptwith respect to its finding that the acquisition of PLDT and PLDTACof the1,000hectareportionofthepropertywassubjecttothenoticeoflispendens.

Lauro, in themeantime,died,hence,onApril16,1996,aMotionforSubstitutionof

Party[46]

wasfiledprayingthathisheirs,representedbyConradC.Leviste,besubstitutedas

respondents.TheMotionwasgrantedbyResolution[47]

ofJuly10,1996.

PLDTandPLDTACfiledtheirComment[48]

toCarrascosospetitionandprayedthatjudgment be rendered finding them to be purchasers in good faith to thus entitle them topossessionandownershipofthe1,000hectareportionoftheproperty,togetherwithallthe



improvementstheybuiltthereon.Reiteratingthattheywerenotpurchaserspendentelite,theyaverredthatElDoradoandLaurohadactualknowledgeoftheirinterestsinthesaidportionof the property prior to the annotation of the notice of lispendens to thereby render saidnoticeineffective.

ElDorado and theheirs ofLauro, both representedbyConradC.Leviste, also filed

theirComment[49]

toCarrascosospetition,prayingthatitbedismissedforlackofmeritandthatparagraph6ofthedispositiveportionoftheJanuary31,1996CADecisionbemodifiedtoreadasfollows:

6.ElDoradoPlantation,Inc.shouldinformPhilippineLongDistanceTelephoneCo.

and PLDT Agricultural Corporation in writing within ten (10) days after finality of thisdecision regarding the exercise of its option under Arts. 449 and 450 of the Civil Code,without right to indemnity on the part of the latter should the former decide to keep the

improvementsunderArticle449.[50]


CarrascosofiledonNovember13,1996hisReply[51]

totheCommentofElDoradoandtheheirsofLauro.

Inthemeantime,astheFebruary22,1996MotionforReconsiderationfiledbyPLDT

andPLDTACoftheCAdecisionhadremainedunresolved,thisCourt,byResolution[52]

ofJune30,2003,directedtheappellatecourttoresolvethesame.

ByResolution[53]

of July8, 2004, theCAdeniedPLDTandPLDTACsMotion forReconsiderationforlackofmerit.

PLDT[54]

thereuponfiledonSeptember2,2004apetitionforreview[55]

beforethisCourt,docketedasG.R.No.164489,seekingtoreverseandsetasidetheJanuary31,1996DecisionandtheJuly8,2004Resolutionof theappellatecourt.Itprayedthat judgmentberenderedupholdingitsright,interestandtitletothe1,000hectareportionofthepropertyandthatitanditssuccessorsininterestbedeclaredownersandlegalpossessorsthereof,together



withallimprovementsbuilt,sownandplantedthereon.

ByResolution[56]

ofAugust25,2004,G.R.No.164489wasconsolidatedwithG.R.No.123672.

Inhispetition,CarrascosofaultstheCAasfollows:

I

THE COURT OF APPEALS ACTEDWITH GRAVE ABUSE OF DISCRETION ANDCOMMITTEDAMISTAKEOFLAWINNOTDECLARINGTHATTHEACTIONFORRESCISSIONWASPREMATURELYFILED.

II

THE COURT OF APPEALS ACTEDWITH GRAVE ABUSE OF DISCRETION ANDCOMMITTED A MISTAKE OF LAW IN DISREGARDING THE CRUCIALSIGNIFICANCE OF THE WARRANTY OF NONTENANCY EXPRESSLYSTIPULATEDINTHECONTRACTOFSALE.

III

THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN

REVERSINGTHEDECISIONOFTHETRIALCOURT.[57]

(Underscoringsupplied)PLDT,ontheotherhand,faultstheCAasfollows:

I

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDINGTHATPETITIONERANDPLTAC(sic)TOOKTHEIRRIGHT,INTERESTANDTITLETO THE FARM SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME INDISREGARD OF THE PROTECTION ACCORDED THEM UNDER ARTICLES 1181AND1187OFTHENEWCIVILCODE.

II

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDINGTHATPETITIONERANDPLDTACTOOKTHEIRRIGHT,INTERESTANDTITLETOTHE FARM SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME INDISREGARDOF THE LEGAL PRINCIPLE THATRESPONDENTS ELDORADOETAL.s PRIOR, ACTUAL KNOWLEDGE OF PETITIONER PLDTS AGREEMENT TOBUY AND SELL WITH RESPONDENT CARRASCOSO RESULTING IN THEDELIVERYTO,ANDPOSSESSION,OCCUPATIONANDDEVELOPMENTBY,SAID



PETITIONER OF THE FARM, IS EQUIVALENT TO REGISTRATION OF SUCHRIGHT,INTERESTANDTITLEAND,THEREFORE,APRIORREGISTRATIONNOT

AFFECTEDBYTHELATERNOTICEOFLISPENDENS.[58]

(Underscoringsupplied)CarrascosopositsthatintheElDoradoBoardResolutionandtheAffidavitofFeliciano

Leviste, both datedMarch23, 1972, noobjectionwas interposed to hismortgagingof thepropertytoanybankprovidedthatthebalanceofthepurchasepriceofthepropertyundertheMarch23,1972DeedofSaleofRealPropertyisrecognized,hence,ElDoradocouldcollecttheunpaidbalanceofP1,300,000.00onlyafterthemortgageinfavorofHSBispaidinfullandthefilingofthecomplaintforrescissionwithdamagesonMarch15,1977wasprematureashefullypaidhisobligationtoHSBonlyonApril5,1977asevidencedbytheCancellation

ofMortgage[59]

signedbyHSBPresidentGregorioB.Licaros.CarrascosofurtherpositsthatextensionsoftheperiodtopayElDoradowereverbally

accordedhimbyElDoradosdirectorsandofficers,particularlyJoseandAngelLeviste.Article1191oftheCivilCodeprovides:

Art.1191.Thepowertorescindobligationsisimpliedinreciprocalones,incaseoneoftheobligorsshouldnotcomplywithwhatisincumbentuponhim.

The injured party may choose between the fulfillment and the rescission of the

obligation,with thepaymentofdamages ineithercase.Hemayalsoseekrescission,evenafterhehaschosenfulfillment,ifthelattershouldbecomeimpossible.

Thecourtshalldecree therescissionclaimed,unless therebe justcauseauthorizing

thefixingofaperiod.This is understood to bewithout prejudice to the rights of third personswho have

acquiredthething,inaccordancewithArticles1385and1388andtheMortgageLaw.

Reciprocalobligationsarethosewhicharisefromthesamecause,andinwhicheach

party is a debtor and a creditor of theother, such that theobligationof one is dependent

upontheobligationoftheother.[60]

Theyaretobeperformedsimultaneouslysuchthatthe

performanceofoneisconditioneduponthesimultaneousfulfillmentoftheother.[61]



TherightofrescissionofapartytoanobligationunderArticle1191ispredicatedon

abreachoffaithbytheotherpartywhoviolatesthereciprocitybetweenthem.[62]

Acontractofsaleisareciprocalobligation.Thesellerobligatesitselftotransferthe

ownershipofanddeliveradeterminatething,andthebuyerobligatesitselftopaytherefora

pricecertaininmoneyoritsequivalent.[63]

Thenonpaymentofthepricebythebuyerisaresolutory condition which extinguishes the transaction that for a time existed, and

discharges the obligations created thereunder.[64]

Such failure to pay the price in themannerprescribedbythecontractofsaleentitlestheunpaidsellertosueforcollectionorto

rescindthecontract.[65]

Inthecaseatbar,ElDoradoalreadyperformeditsobligationthroughtheexecutionof

theMarch23,1972DeedofSaleofRealPropertywhicheffectivelytransferredownershipofthepropertytoCarrascoso.Thelatter,ontheotherhand,failedtoperformhiscorrelativeobligationofpaying in full thecontractprice in themannerandwithin theperiodagreedupon.

ThetermsoftheDeedareclearandunequivocal:Carrascosowastopaythebalance

ofthepurchasepriceofthepropertyamountingtoP1,300,000.00plusinterestthereonattherateof10%perannumwithinaperiodofthree(3)yearsfromthesigningofthecontractonMarch23,1972.WhenJoseLevisteinformedhimthatElDoradowasseekingrescissionofthecontractby letterofFebruary21,1977, theperiodgiven tohimwithinwhich to fullysatisfyhisobligationhadlonglapsed.

The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no

objectiontoCarrascososmortgagingofthepropertytoanybankdidnothavetheeffectofsuspendingtheperiodtofullypaythepurchaseprice,asexpresslystipulatedin theDeed,pendingfullpaymentofanymortgageobligationofCarrascoso.

AstheCAcorrectlyfound:



Theadverted resolution (Exhibit2)doesnot say that theobligationofCarrascoso to

paythebalancewasextended.NeithercanWeseeinitanythingthatcanlogicallyinfersaidaccommodation.

A partially unpaid seller can agree to the buyersmortgaging the subject of the sale

without changing the time fixed for the payment of the balance of the price. The twoagreementsarenotincompatiblewitheachothersuchthatwhenoneistobeimplemented,theotherhas tobesuspended. In thecaseatbench, therewasno impediment forCarrascoso topaythebalanceofthepriceaftermortgagingtheland.

Also,ElDoradossubordinatingitspreferredclaimorwaivingitssuperiorvendorslien

overthelandinfavorofthemortgageeofsaidpropertyonlymeansthatinasituationwheretheunpaidpriceoftheLandandloansecuredbythemortgageovertheLandbothbecomedueand demandable, the mortgagee shall have precedence in going after the Land for thesatisfactionof the loan.Suchaccommodationsdonotnecessarily imply themodificationoftheperiodfixedinthecontractofsaleforthepaymentbyCarrascosoofthebalance.

The palpable purpose of El Dorado in not raising any objection to Carrascosos

mortgaging the landwas toeliminateany legal impediment to suchacontract.Thatwas sosuccinctly expressed in theAffidavit (Exhibit 2A) of President Feleciano (sic) Leviste. ElDoradosyieldingitssuperiorlienoverthelandinfavorofthemortgageewasplainlyintendedtoovercomethenaturalreluctanceoflendinginstitutionstoacceptalandwhosepricehasnot

yetbeenfullypaidascollateralofaloan.[66]


RespectingCarrascososinsistencethathewasgrantedverbalextensionswithinwhich

topaythebalanceofthepurchasepriceofthepropertybyElDoradosdirectorsandofficersJose and Angel Leviste, this Court finds the same unsubstantiated by the evidence onrecord.

ItbearsrecallingthatJoseLevistewroteCarrascoso,byletterofFebruary21,1977,

callinghisattentiontohisfailuretocomply,despitenumerousrequests,withhisobligationtopaytheamountofP1,300,000.00and10%annualinterestthereon,andadvisinghimthatwe would like to rescind the contract of sale. This letter reiterated the term of paymentagreedupon in theMarch23,1972DeedofSaleofRealPropertyandCarrascosossnoncompliancetherewith.

Carrascoso,harpingonJoseLevistesMarch10,1977lettertoLauroscounselwherein

he(JoseLeviste)statedthatsomeoftheDirectorsofthecorporationcouldnotseetheirwayclear in complyingwith the demands of [Lauro] and have failed to reach a consensus to



bring the corresponding action for rescission of the contract against Dr. FernandoCarrascoso, argues that the extensions priorly given to him no doubt lead to the logical

conclusiononsomeofthedirectorsinabilitytofilesuitagainsthim.[67]

Theargumentisspecious.AstheCAfound,evenifsomeofficersofElDoradowere

initially reluctant to filesuitagainsthim, thesameshouldnotbe interpreted tomean thatthiswasbroughtaboutbyapriorextensionoftheperiodtopaythebalanceofthepurchasepriceofthepropertyassuchreluctancecouldhavebeenduetoamyriadofreasonstotallyunrelatedtotheperiodofpaymentofthebalance.

The bottomline however is, if El Dorado really intended to extend the period of

paymentofthebalancetherewasabsolutelynoreasonwhyitdidnotdoitinwritinginclearand unmistakable terms. That there is no suchwriting negates all the speculations of thecourtaquoandpretensionsofCarrascoso.

xxx

TheunalterablefacthereremainsthatonMarch23,1973,withorwithoutdemand,theobligationofCarrascosotopayP519,933.33becamedue.ThesamewastrueonMarch23,1974andonMarch23,1975forequalamounts.Sincehedidnotperformhisobligationunder the contract of sale, he, therefore, breached it. Having breached the contract, El

Doradoscauseofactionforrescissionofthatcontractarose.[68]


Carrascosogoesontoarguethattheappellatecourterredinignoringtheimportofthe

warrantyofnontenancyexpresslystipulated in theMarch23,1972DeedofSaleofRealProperty.HeallegesthatonMarch8,1972ortwoweekspriortotheexecutionoftheDeedofSale,hediscovered,whileinspectingthepropertyonboardahelicopter,thattherewerepeopleandcattleintheareawhenheconfrontedElDoradoaboutit,hewastoldthatthe

occupants were caretakers of cattle who would soon leave[69]

four months after theexecutionof theDeedofSale,upon inquirywith theBureauofLandsand theBureauofSoils,hewasinformedthattherewerepeopleclaimingtobetenantsincertainportionsof

theproperty[70]

andhe thusbrought thematteragain toElDoradowhich informedhim

thattheoccupantswerenottenantsbutsquatters.[71]



Carrascosonowalleges that as a result ofwhat he concludes tobe a breachof thewarrantyofnontenancycommittedbyElDorado,he incurredexpenses in theamountofP2,890,000.00 for which he should be reimbursed, his unpaid obligation to El Dorado

amountingtoP1,300,000.00tobedeductedtherefrom.[72]

The breach of an express warranty makes the seller liable for damages.[73]

Thefollowing requisites must be established in order that there be an express warranty in acontractofsale:(1)theexpresswarrantymustbeanaffirmationoffactoranypromisebythe seller relating to the subject matter of the sale (2) the natural tendency of suchaffirmation or promise is to induce the buyer to purchase the thing and (3) the buyer

purchasesthethingrelyingonsuchaffirmationorpromisethereon.[74]

UndertheMarch23,1972DeedofSaleofRealProperty,ElDoradowarranted that

thepropertywasnotbeingcultivatedbyanytenantandwas,andtherefore,notcoveredbytheprovisionsoftheLandReformCode.IfCarrascosowouldbecomeliableunderthesaidlaw,hewouldbereimbursedforallexpensesanddamagesincurredthereon.

Carrascoso claims to have incurred expenses in relocating persons found on the

propertyfourmonthsaftertheexecutionoftheDeedofSale.Apartfromsuchbareclaim,

therecordsarebereftofanyproofthatthosepersonswereindeedtenants.[75]

Thefactof

tenancy[76]

nothavingbeenpriorlyestablished,[77]

ElDoradomaynotbeheldliableforactualdamages.

Carrascosofurtherarguesthatboththetrialandappellatecourtserredinholdingthat

thesaleofthe1,000hectareportionofthepropertytoPLDT,aswellasitssubsequentsaletoPLDTAC,issubjecttotheMarch15,1977NoticeofLisPendens.

PLDTadditionallyarguesthattheCAincorrectlyignoredtheAgreementtoBuyand

SellwhichitenteredintowithCarrascosoonJuly11,1975,positingthattheefficacyofitspurchasefromCarrascoso,uponhisfulfillmentof theconditionit imposedresultinginitsdecision to formalize their transaction and execute the April 6, 1977 Deed of Sale,



retroactedtoJuly11,1975orbeforetheannotationoftheNoticeofLisPendens.[78]

The pertinent portions of the July 11, 1975 Agreement to Buy and Sell betweenPLDTandCarrascosoread:

2. That theVENDOR hereby agrees to sell to theVENDEE and the latter hereby

agreestopurchasefromtheformer,1,000hectaresoftheabovedescribedparceloflandasshown in the map hereto attached as Annex A and made an integral part hereof and ashereaftertobemoreparticularlydeterminedbythesurveytobeconductedbyCerteza&Co.,at thepurchasepriceofP3,000.00perhectareorforatotalconsiderationofThreeMillionPesos(P3,000,000.00)payableincash.

3.That this contract shall be considered rescinded and cancelled and of no further

forceandeffect,uponfailureoftheVENDORtocleartheaforementioned1,000hectaresoflandof all theoccupants therein located,within aperiodofone (1)year from thedateofexecutionofthisAgreement.However,theVENDEEshallhavetheoptiontoextendthelifeofthisAgreementbyanothersixmonths,duringwhichperiodtheVENDEEshalldefinitelyinformtheVENDORofitsdecisiononwhetherornottofinalizethedeedofabsolutesalefortheaforementioned1,000hectaresofland.

The VENDOR agrees that the amount of P500.00 per family within the

aforementioned1,000hectaresoflandshallbespentbyhimforrelocationpurposes,whichamount however shall be advancedby theVENDEEandwhich shall not exceed the totalamount of P120,000.00, the same to be thereafter deducted by the VENDEE from theaforementionedpurchasepriceofP3,000,000.00.

TheaforementionedadvanceofP120,000.00shallberemittedbytheVENDEEtothe

VENDORuponthesigningofthisAgreement.

xxx

It is likewisefurtheragreedthat theVENDEEshallhavetherighttoenterintoanypartoftheaforementioned1,000hectaresatanytimewithintheperiodofthisAgreementforpurposesofcommencingthedevelopmentofthesame.

xxx

5.Titletotheaforementionedlandshallalsobeclearedofallliensorencumbrances

andif thereareanyunpaid taxes,existingmortgages, liensandencumbrancesonthe land,thepaymentstobemadebytheVENDEEtotheVENDORofthepurchasepriceshallfirstbeappliedtoliquidatesaidmortgages, liensand/orencumbrances,suchthatsaidpaymentsshallbemadedirectlytothecorrespondingcreditors.Thus,thebalanceofthepurchasepricewill be paid to the VENDOR after the title to the land is cleared of all such liens andencumbrances.

xxx

7.TheVENDORagreesthat,duringtheexistenceofthisAgreementandwithoutthepreviouswrittenpermissionfromtheVENDEE,heshallnotsell,cede,assignand/ortransfer



theparceloflandsubjectofthisAgreement.[79]

Anoticeof lispendens isanannouncement to thewholeworld thataparticular real

propertyisinlitigation,andservesasawarningthatonewhoacquiresaninterestoversaidpropertydoessoathisownrisk,orthathegamblesontheresultofthelitigationoversaid

property.[80]

Onceanoticeoflispendenshasbeendulyregistered,anycancellationorissuanceof

titleover the land involvedaswellasanysubsequent transactionaffecting thesamewouldhavetobesubjecttotheoutcomeofthesuit.Inotherwords,apurchaserwhobuysregisteredlandwith fullnoticeof the fact that it is in litigationbetween thevendoranda thirdpartystands in the shoes of his vendor and his title is subject to the incidents and result of the

pendinglitigation.[81]

xxxNoticeoflispendenshasbeenconceivedand,moreoftenthannot,availedof,to

protect the real rights of the registrant while the case involving such rights is pendingresolution or decision.With the notice of lis pendens duly recorded, and while it remainsuncancelled,theregistrantcouldrestsecurethathewouldnotlosethepropertyoranypartofitduringthelitigation.

Thefilingofanoticeoflispendensineffect(1)keepsthesubjectmatteroflitigation

withinthepowerofthecourtuntiltheentryofthefinaljudgmentsoastopreventthedefeatofthe latter by successive alienations and (2) binds a purchaser of the land subject of thelitigationtothejudgmentordecreethatwillbepromulgatedthereonwhethersuchapurchaserisabonafidepurchaserornotbut(3)doesnotcreateanonexistentrightorlien.

Thedoctrineoflispendensisfoundeduponreasonofpublicpolicyandnecessity,the

purposeofwhichistokeepthesubjectmatterofthelitigationwithinthepowerofthecourtuntil the judgment or decree shall have been entered otherwise by successive alienationspending the litigation, its judgment or decree shall be rendered abortive and impossible ofexecution. The doctrine of lis pendens is based on considerations of public policy andconvenience,which forbid a litigant togive rights toothers, pending the litigation, so as toaffect the proceedings of the court then progressing to enforce those rights, the rule beingnecessary to the administration of justice in order that decisions in pending suits may bebindingandmaybegivenfulleffect,bykeepingthesubjectmatterincontroversywithinthepower of the court until final adjudication, that there may be an end to litigation, and topreservethepropertythatthepurposeofthependingsuitmaynotbedefeatedbysuccessive

alienationsandtransfersoftitle.[82]

(Italicsintheoriginal)



InrulingagainstPLDTandPLDTAC,theappellatecourtheld:

PLDTandPLDTACarguethatinrealitytheFarmwasboughtbytheformeronJuly11, 1975whenCarrascoso and it entered into theAgreement toBuy andSell (Exhibit 15).How can an agreement to buy and sell which is a preparatory contract be the same as acontractofsalewhichisaprincipalcontract?IfPLDTscontentioniscorrectthatitboughttheFarmon July11,1975,whydid itbuy the samepropertyagainonApril6,1977?There issimplynowayPLDTandPLDTACcanextricatethemselvesfromtheeffectsofsaidNoticeofLisPendens.ItisadmittedthatPLDTtookpossessionoftheFarmonJuly11,1975aftertheexecutionoftheAgreementtoBuyandSellbutitdidsonotasownerbutasprospectivebuyeroftheproperty.Asprospectivebuyerwhichhadactualon(sic)constructivenoticeofthelispendens,whydiditpursueandgothroughwiththesaleifithadnotbeenwillingtogamble

withtheresultofthiscase?[83]


Further,initsJuly8,2004Resolution,theCAheld:

PLDTcannotshielditselffromthenoticeoflispendensbecauseallthatithadatthetimeof its inscriptionwas anAgreement toBuy andSellwithCARRASCOSO,which ineffectisamerecontracttosellthatdidnotpasstoittheownershipoftheproperty.

xxx

Ownershipwas retained byCARRASCOSOwhich ELDORADOmay verywell recoverthroughitsactionforrescission.

xxx

PLDTs possession at the time the notice of lis pendens was registered not being a legalpossessionbasedonownershipbutamerepossessioninfactandtheAgreementtoBuyandSellunderwhichitsupposedlytookpossessionnotbeingregistered,itisnotprotectedfromanadverse judgment thatmayberendered in thecasesubjectof thenoticeof lis pendens.[84]

(Underscoringsupplied)Inacontractofsale,thetitlepassestothevendeeuponthedeliveryofthethingsold

whereasinacontracttosell,ownershipisnottransferredupondeliveryofthepropertybut

uponfullpaymentofthepurchaseprice.[85]

Intheformer,thevendorhaslostandcannotrecover ownership until and unless the contract is resolved or rescinded whereas in thelatter,titleisretainedbythevendoruntilthefullpaymentoftheprice,suchpaymentbeinga positive suspensive condition and failure of which is not a breach but an event that

preventstheobligationofthevendortoconveytitlefrombecomingeffective.[86]



PLDT argues that the July 11, 1975 Agreement to Buy and Sell is a conditional

contractof sale, thus calling for the applicationofArticles1181[87]

and1187[88]

of the

CivilCodeasheldinCoronelv.CourtofAppeals.[89]

TheCourtisnotpersuaded.For in a conditional contract of sale, if the suspensive condition is fulfilled, the

contractofsaleistherebyperfected,suchthatiftherehadalreadybeenpreviousdeliveryofthepropertysubjectofthesaletothebuyer,ownershiptheretoautomaticallytransferstothe

buyerbyoperationoflawwithoutanyfurtheracthavingtobeperformedbytheseller.[90]

Whereasinacontracttosell,uponfulfillmentofthesuspensivecondition,ownershipwillnot automatically transfer to the buyer although the property may have been previouslydeliveredtohim.Theprospectivesellerstillhastoconveytitletotheprospectivebuyerby

enteringintoacontractofabsolutesale.[91]

Aperusalofthecontract[92]

advertedtoinCoronelrevealsmarkeddifferencesfromtheAgreementtoBuyandSellinthecaseatbar.IntheCoronelcontract,therewasaclearintentonthepartofthethereinpetitionerssellerstotransfertitletothethereinrespondentbuyer.IntheJuly11,1975AgreementtoBuyandSell,PLDTstillhadtodefinitelyinformCarrascoso of its decision onwhether or not to finalize the deed of absolute sale for the1,000hectareportionoftheproperty,suchthatintheApril6,1977DeedofAbsoluteSalesubsequentlyexecuted,thepartiesdeclaredthattheyarenowdecidedtoexecutesuchdeed,indicating that theAgreement toBuy andSellwas, as the appellate court held,merely apreparatory contract in the nature of a contract to sell. In fact, the parties even had tostipulateinthesaidAgreementtoBuyandSellthatCarrascoso,duringtheexistenceoftheAgreement, shallnot sell, cede,assignand/or transfer theparcelof land,whichprovision

thisCourthasheldtobeatypicalcharacteristicofacontracttosell.[93]

Beingacontracttosell,whatwasvestedbytheJuly11,1975AgreementtoBuyand



SelltoPLDTwasmerelythebeneficialtitletothe1,000hectareportionoftheproperty.

The right of Daniel Jovellanos to the property under the contract [to sell] withPhilamlifewasmerelyaninchoateandexpectantrightwhichwouldripenintoavestedrightonlyuponhisacquisitionofownershipwhich,asaforestated,wascontingentuponhis fullpayment of the rentals and compliance with all his contractual obligations thereunder. Avested right is an immediate fixed right of present and future enjoyment. It is to bedistinguished from a right that is expectant or contingent. It is a right which is fixed,unalterable,absolute,completeandunconditionaltotheexerciseofwhichnoobstacleexists,andwhich is perfect in itself andnot dependent upon a contingency.Thus, for a propertyright tobevested, theremustbea transitionfromthepotentialorcontingent to theactual,and the proprietary interest must have attached to a thing it must have become fixed or

establishedandisnolongeropentodoubtorcontroversy.[94]


In thecaseatbar, theJuly11,1975Agreement toBuyandSellwasnotregistered,

whichactofregistrationis

art 448 carrascoso jr vs ca _ 123672 _ december 14, 2005 _ j

Documents

dorado plantation

lauro leviste

authorizing feliciano

panganiba carrascosojrvsca

jr thevendorherebysells

versusthehonor courtof

dorados board of directors

real property