Cabrera vs. Ysaac, G.R. No. 166790, November 19, 2014 Leonen, J. [Case Digest]

Cabrera vs. Ysaac,

G.R. No. 166790, November 19, 2014

Leonen, J.

Case Digest

Facts:

            The heirs of Luis and Matilde Ysaac co-owned a 5,517-square-meter parcel of land located in Sabang, Naga City, covered by Original Certificate of Title (OCT) No. 506. One of the co-owners is respondent, Henry Ysaac.

            Henry Ysaac leased out portions of the property to several lessees. Juan Cabrera, one of the lessees, leased a 95-square-meter portion of the land beginning in 1986. On May 6, 1990, Henry Ysaac needed money and offered to sell the 95-square-meter piece of land to Juan Cabrera. He told Henry Ysaac that the land was too small for his needs because there was no parking space for his vehicle.

            In order to address Juan Cabrera’s concerns, Henry Ysaac expanded his offer to include the two adjoining lands that Henry Ysaac was then leasing to the Borbe family and the Espiritu family. Those three parcels of land have a combined area of 439-square-meters. However, Henry Ysaac warned Juan Cabrera that the sale for those two parcels could only proceed if the two families agree to it.

            Juan Cabrera accepted the new offer. Henry Ysaac and Juan Cabrera settled on the price of ₱250.00 per square meter, but Juan Cabrera stated that he could only pay in full after his retirement on June 15, 1992.8 Henry Ysaac agreed but demanded for an initial payment of ₱1,500.00, which Juan Cabrera paid.

            According to Juan Cabrera, Henry Ysaac informed him that the Borbe family and the Espiritu family were no longer interested in purchasing the properties they were leasing. Since Mamerta Espiritu of the Espiritu family initially considered purchasing the property and had made an initial deposit for it, Juan Cabrera agreed to reimbursethis earlier payment. On June 9, 1990, Juan Cabrera paid the amount of ₱6,100.00. Henry Ysaac issued a receipt for this amount. ₱3,100.00 of the amount paid was reimbursed to Mamerta Espiritu and, in turn, she gaveJuan Cabrera the receipts issued to her by Henry Ysaac.

            On June 15, 1992, Juan Cabrera tried to pay the balance of the purchase price to Henry Ysaac. However,at that time, Henry Ysaac was in the United States. The only person in Henry Ysaac’s residence was his wife. The wife refused to accept Juan Cabrera’s payment.

            On September 21, 1994, Henry Ysaac’s counsel, Atty. Luis Ruben General, wrote a letter addressed to Atty. Leoncio Clemente, Juan Cabrera’s counsel.16 Atty. General informed Atty. Clemente that his client is formally rescinding the contract of sale because Juan Cabrera failed to pay the balance of the purchase price of the land between May 1990 and May 1992. The letter also stated that Juan Cabrera’s initial payment of ₱1,500.00 and the subsequent payment of ₱6,100.00 were going to be applied as payment for overdue rent of the parcel of land Juan Cabrera was leasing from Henry Ysaac. The letter also denied the allegation of Juan Cabrera that Henry Ysaac agreed to shoulder the costs of the resurveying of the property. Juan Cabrera, together with his uncle, Delfin Cabrera, went to Henry Ysaac’s house on September 16, 1995 to settle the matter.19 Henry Ysaac told Juan Cabrera that he could no longer sell the property because the new administrator of the property was his brother, Franklin Ysaac.

            Due to Juan Cabrera’s inability to enforce the contract of sale between him and Henry Ysaac, he decided to file a civil case for specific performance on September 20, 1995. Juan Cabrera prayed for the execution of a formal deed of sale and for the transfer of the title of the property in his name. He tendered the sum of ₱69,650.00 to the clerk of court as payment of the remaining balance of the original sale price.

            Regional Trial Court of Naga City ruled that the contract of sale between Juan Cabrera and Henry Ysaac was duly rescinded when the former failed to pay the balance of the purchase price in the period agreed upon. CA ruled that the contract of sale between Juan Cabrera and Henry Ysaac was not validly rescinded. For the rescission to be valid under Article 1592 of the Civil Code, it should have been done through a judicial or notarial act and not merely through a letter. However, due to the sale of the entire property of the Ysaac family in favor of the local government of Naga City, the Court of Appeals ruled that the verbal contract between Juan Cabrera and Henry Ysaac cannot be subject to the remedy of specific performance. The local government of Naga City was an innocent purchaser for value, and following the rules on double sales, it had a preferential right since the sale it entered into was in a public instrument, while the one with Juan Cabrera was only made orally.

 

Issue:

            Whether there was no valid contract of sale between petitioner and respondent.

 

Held:

            No; unless all the co-owners have agreed to partition their property, none of them may sell a definite portion of the land. The co-owner may only sell his or her proportionate interest in the co-ownership. A contract of sale which purports to sell a specific or definite portion of unpartitioned land is null and void ab initio.

            The object of a valid sales contract must be owned by the seller. If the seller is not the owner, the seller must be authorized by the owner to sell the object.

            Specific rules attach when the seller co-owns the object of the contract. Sale of a portion of the property is considered an alteration of the thing owned in common. Under the Civil Code, such disposition requires the unanimous consent of the other co-owners. However, the rules also allow a co-owner to alienate his or her part in the co-ownership.

            These two rules are reconciled through jurisprudence.

If the alienation precedes the partition, the co-owner cannot sell a definite portion of the land without consent from his or her co-owners. He or she could only sell the undivided interest of the co-owned property. As summarized in Lopez v. Ilustre, "if he is the owner of an undivided half of a tract of land, he has a right to sell and convey an undivided half, but he has no right to divide the lot into two parts, and convey the whole of one part by metes and bounds."

Hence, prior to partition, a sale of a definite portion of common property requires the consent of all co-owners because it operates to partition the land with respect to the co-owner selling his or her share. The co-owner or seller is already marking which portion should redound to his or her autonomous ownership upon future partition.

The object of the sales contract between petitioner and respondent was a definite portion of a co-owned parcel of land. At the time of the alleged sale between petitioner and respondent, the entire property was still held in common. This is evidenced by the original certificate of title, which was under the names of Matilde Ysaac, Priscilla Ysaac, Walter Ysaac, respondent Henry Ysaac, Elizabeth Ysaac, Norma Ysaac, Luis Ysaac, Jr., George Ysaac, Franklin Ysaac, Marison Ysaac, Helen Ysaac, Erlinda Ysaac, and Maridel Ysaac.

We rule that petitioner is entitled to the return of the amount of money because he paid it as consideration for ownership of the land. Since the ownership of the land could not be transferred to him, the money he paid for that purpose must be returned to him. Otherwise, respondent will be unjustly enriched.

Respondent’s claim for rent in arrears is a separate cause of action from this case. For petitioner’s earnestmoney payment to be considered payment for his rent liabilities, the rules of compensation under Article 1279 of the Civil Code must be followed.