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MEYNARDO C. POLICARPIO v. CA

FACTS:

This case involves a "Contract to Sell" entered into by petitioners Meynardo and Lourdes Policarpio and private respondents Evelyn, Romulo, and Clemente Catabas. The agreed purchase price was P270,000, with P10,000 paid upon signing the contract and the balance of P260,000 to be paid from the proceeds of the private respondents' PAG-IBIG loan. Despite the private respondents' failure to pay the balance on time, the petitioners did not return the downpayment and the private respondents continued to make partial payments amounting to P75,000. On April 9, 1984, the parties executed a deed of absolute sale and the petitioners delivered physical possession of the property to the private respondents.

The private respondents later filed a case for specific performance and damages, claiming that the petitioners refused to transfer the title of the property despite the processing and approval of their loan. The petitioners, on the other hand, argued that the contract was automatically canceled due to the private respondents' violation of its terms.

The petitioners-spouses also alleged that the private respondents requested to modify the terms of the contract due to financial difficulties and that the parties executed a simulated Deed of Absolute Sale with an undervalued consideration. The private respondents failed to pay the remaining balance on time but made partial payments and promised full payment within July 1984.

During the trial, the trial court dismissed the complaint and ordered the plaintiffs to vacate the property and pay damages. The Court of Appeals later reversed this decision. However, upon review, the Supreme Court found that the petitioners-spouses were not at fault for the non-release of the private respondents' loan. The Urban Bank letter showed that the petitioners-spouses did not renege on their agreement with Urban Bank.

Additionally, there is a letter from the Urban Development Bank (UDB) addressed to the PCIB bank stating that Miss Evelyn Q. Catabas has an approved Pag-Ibig loan with UDB. The letter outlined the conditions for UDB to release the loan amount to PCIB. The petitioners-spouses argue that this letter indicates their agreement to have the payment of the balance price dependent on the release of the PAG-IBIG loan, while the respondent disputes this claim.

ISSUES:

  1. Whether or not the petitioners-spouses were responsible for the non-release of the PAG-IBIG loan.

  2. Whether or not there was an oral agreement between the parties to increase the purchase price.

  3. Whether the Absolute Deed of Sale was simulated and executed only to facilitate the release of the private respondents' PAG-IBIG loan.

  4. Whether the plaintiffs agreed to push through with the sale provided the price would be raised to P330,000.00.

  5. Whether the defendants should be held accountable for the failure to deliver the title to Urban Bank.

  6. Whether the contract to sell between the parties was effectively cancelled due to the private respondents' failure to pay the balance of the price on time.

  7. Whether the private respondents are entitled to specific performance.

  8. Whether or not the Court of Appeals erred in dismissing the petition for certiorari.

  9. Whether or not the Regional Trial Court had jurisdiction over the proceedings.

RULING:

  1. The Court found that the petitioners-spouses were not responsible for the non-release of the PAG-IBIG loan. The evidence shows that the private respondents themselves did not blame the petitioners-spouses for the non-release, and it was due to time constraints that the loan was not approved and released before the deadline to pay the balance. Furthermore, the letter from Urban Development Bank supports the petitioners-spouses' claim that they signed the letter at the request of the private respondents to facilitate the release of the loan.

  2. The Court gave more credence to the trial court's finding that there was an oral agreement between the parties to increase the purchase price. The evidence showed that the parties had agreed to increase the consideration to P330,000.00, and this was reinforced by the fact that the plaintiffs offered to pay P312,000.00 in their letter, which the defendants rejected. The court also found it highly improbable that the defendants would agree to lower the price after all the difficulties they had encountered. The fact that the Deed of Absolute Sale was simulated also supported the existence of an oral agreement.

  3. The court ruled that the Absolute Deed of Sale was indeed simulated and executed only to facilitate the release of the private respondents' PAG-IBIG loan. The existence of a letter referring to "xx our problem of finalizing our purchase xxx" and offering a higher price for the property gives credence to the petitioners-spouses' contention. The court found that the tone of the letter supports the argument that the sale was only a means to secure the loan.

  4. The court did not expressly rule on whether the plaintiffs agreed to push through with the sale at a higher price. However, it was noted that the plaintiffs had paid only a portion of the consideration stated in the Deed of Absolute Sale, but the defendants executed the document and allowed the plaintiffs to take possession of the premises.

  5. The defendants cannot be held accountable for the failure to deliver the title to Urban Bank because the plaintiffs knew from the beginning of the transaction that the title was mortgaged with PCIB. The defendants could not obtain the title without paying off the mortgage balance, which was the responsibility of PCIB.

  6. The contract to sell was effectively cancelled due to the private respondents' failure to pay the balance of the price on time. The failure to pay was a suspensive condition that rendered the contract without force and effect.

  7. The private respondents are not entitled to specific performance because they failed to fulfill their obligation to pay the full price of the property under the contract.

  8. No, the Court of Appeals did not err in dismissing the petition for certiorari. The petition was filed out of time and the respondent judge did not commit any grave abuse of discretion in issuing the challenged orders.

  9. Yes, the Regional Trial Court had jurisdiction over the proceedings. Under Section 19(1) of Batas Pambansa Blg. 129, as amended, the Regional Trial Court has exclusive original jurisdiction over all civil actions, including actions for annulment or declaration of nullity of marriage, and those relating to marital status and property relations between the spouses.

PRINCIPLES:

  • The Court relies on the trial court's findings of fact, as they are borne by the evidence on record.

  • Oral agreements can be enforceable, even without a written contract.

  • Simulated contracts cannot be a valid basis for an action for specific performance.

  • Simulation of a contract occurs when the parties do not intend to be bound by its terms, but use it as a means to achieve another purpose. Simulation may be absolute or relative.

  • The existence of a letter or document that contradicts the terms of a contract can be used as evidence to prove that the contract is simulated.

  • The possession of the premises by the buyer, even without full payment, can be considered as an act of good faith by the seller and may support the argument that the sale was not intended to be simulated.

  • The obligation in a contract of sale is reciprocal and both parties must fulfill their respective obligations. (Cortez v. Bibaño and Borromeo)

  • Estoppel prevents a party from assuming a posture inconsistent with their previous statements or acts when it is expedient to do so.

  • Moral damages are intended to alleviate the moral suffering of the injured party, but the amount awarded must be proportionate to the suffering inflicted.

  • Exemplary damages can be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

  • The reason for the award of attorney's fees must be stated in the text of the court's decision; otherwise, it shall be disallowed on appeal.

  • The Court of Appeals may dismiss a petition for certiorari that is filed out of time.

  • The Regional Trial Court has exclusive original jurisdiction over actions for annulment or declaration of nullity of marriage, as well as those relating to marital status and property relations between spouses.