GSIS vs. Court of Appeals

A marginal notation inserted into a contract of sale without the knowledge or consent of the other party is not binding, and a contractual stipulation that leaves the fixing of the purchase price to the unilateral discretion of one contracting party is void under Article 1473 of the Civil Code.

On December 18, 1963, petitioner GSIS conducted a lottery draw for the allocation of lots and housing units in its Project 8-C Village in Quezon City. Private respondent Esperanza Leuterio won and received a Certificate of Acknowledgment. In 1965, the GSIS and the Leuterio spouses executed a Deed of Conditional Sale covering the subject house and lot for a stated purchase price of ₱19,740.00, payable over fifteen years in 180 equal monthly installments. After the project’s completion, the GSIS Board of Trustees increased the purchase price for houses and lots based on the final cost of construction. A marginal notation—“subject to adjustment pending approval of the Board of Trustees”—appeared on the face of the Leuterios’ Deed, which the spouses claimed was not present when they signed. A group of other vendees protested the increase and secured then President Ferdinand E. Marcos’s approval of their plea to maintain the original prices. The Leuterios continued paying amortizations and eventually demanded a final Deed of Sale; GSIS took no action.

• Initial Transaction: On December 18, 1963, GSIS held a lottery draw for the allocation of lots and housing units in Project 8-C of the GSIS Village. Esperanza Leuterio won and was issued a Certificate of Acknowledgment on December 27, 1963. In 1965, the parties executed a Deed of Conditional Sale covering Lot 22, Block 14, Subd. Section B, with a housing unit, for a purchase price of ₱19,740.00, payable in 180 equal monthly installments of ₱168.53 over fifteen years. Paragraph 11 of the Deed stipulated that upon full payment and faithful compliance with all conditions, GSIS would execute a final Deed of Sale in favor of the vendees or their successors-in-interest. The Deed was notarized three years later, and a copy was furnished to the spouses.

• The Marginal Notation: After land development and housing construction were completed in 1966, petitioner’s Board of Trustees increased the purchase price indicated in the Deeds of Conditional Sale based on the final cost of construction. The Leuterios’ Deed bore the marginal notation “subject to adjustment pending approval of the Board of Trustees.” The spouses alleged that this notation was not on the document when they signed in 1965. The trial court so found, a factual conclusion left undisturbed on appeal. Petitioner itself admitted in its Answer that the omission of the notation was an “honest mistake” and stated in its Petition that the words were “inserted” in the Deed.

• The Ad Hoc Committee and Presidential Action: In the early 1970s, a group of other conditional vendees in Project 8-C filed suits against GSIS questioning the price increase and submitted a “Plea for Justice” to then President Ferdinand E. Marcos. The Office of the President created a three-man ad hoc committee, which found the higher final cost justified a higher price range. The GSIS Board of Trustees then approved increased prices. However, on May 30, 1973, Presidential Executive Assistant Jacobo C. Clave issued a memorandum advising GSIS that President Marcos had approved the “Plea” and wanted its “immediate implementation,” effectively setting aside the committee recommendation. GSIS’s motion for reconsideration was denied on December 18, 1980.

• Spouses’ Payments and Demand: Beginning in September 1967, the Leuterios paid accelerated monthly amortizations of ₱200.00 each and consistently paid real estate taxes. By letter dated June 21, 1977, Esperanza Leuterio informed the GSIS General Manager that all payments had been completed and requested execution of an absolute deed of sale. GSIS took no action on the matter, prompting the spouses to file suit.

• Estoppel: Petitioner argued that the Court of Appeals erred in holding GSIS estopped from enforcing the price adjustment, contending that private respondents were aware of the adjustment and never objected.

• Binding Effect of Ad Hoc Committee Recommendation: Petitioner insisted that the spouses Leuterio should be bound by the recommendation of the ad hoc committee, which found a higher final cost justified a proportional price increase.

• Justification for Price Adjustment: Petitioner maintained that the adjustment in the purchase price was justified by the change in the final cost of construction of the GSIS Village, and that the spouses must bear their share of the true cost.

• Error in Ordering Execution: Petitioner claimed the Court of Appeals erred in affirming the trial court’s order to execute the final Deed of Sale despite the spouses’ non-payment of the adjusted price.

• Factual Issues Not Reviewable: Private respondents contended that the petition raised purely factual issues which cannot be settled by the Supreme Court in a petition for review on certiorari.

• No Reversible Error: Private respondents argued that the Court of Appeals committed no reversible errors in finding that GSIS was estopped from enforcing the price increase and affirming the order to execute the final Deed of Sale.

• Consent to Marginal Notation: Whether the trial court’s factual finding that the marginal notation “subject to adjustment pending approval of the Board of Trustees” was inserted without the knowledge and consent of the Leuterio spouses is binding and conclusive.

• Unilateral Price Fixing: Whether GSIS can validly increase the purchase price unilaterally based on the final cost of construction, consistent with Article 1473 of the Civil Code.

• Effect of Presidential Action: Whether the spouses Leuterio are bound by the ad hoc committee’s recommendation despite the presidential directive approving the vendees’ plea to maintain original prices.

• Right to Specific Performance: Whether the spouses Leuterio, having fully paid the original stipulated purchase price, are entitled to the execution of the final Deed of Sale.

• Consent to Marginal Notation: The factual finding stood. The Supreme Court is not a trier of facts; findings of fact of the trial court, especially when affirmed by the Court of Appeals, are binding unless marred by manifest error. The finding that the notation was inserted without the spouses’ consent was supported by Raul Leuterio’s explicit testimony and by GSIS’s own judicial admission that the omission of the notation was an “honest mistake” and that the words were subsequently “inserted.” Consequently, the agreed purchase price was ₱19,740.00, not subject to unilateral adjustment.

• Unilateral Price Fixing: The price adjustment was void. Article 1473 of the Civil Code expressly provides that “the fixing of the price can never be left to the discretion of one of the contracting parties.” A stipulation granting one party the prerogative to unilaterally change the purchase price, particularly when inserted without mutual consent, is illegal and unenforceable. GSIS could not compel the spouses to pay a price higher than that mutually agreed upon.

• Effect of Presidential Action: The spouses were not bound by the ad hoc committee’s recommendation. That recommendation was set aside when then President Marcos approved the “Plea for Justice” and ordered its immediate implementation, as communicated through the May 30, 1973 memorandum. The denial of GSIS’s motion for reconsideration confirmed that the recommendation had no legal force.

• Right to Specific Performance: The spouses were entitled to a final Deed of Sale upon proof of full payment of the original price. GSIS’s failure to anticipate the increased construction cost was its own business judgment; the law on contracts does not relieve a party of the obligation to specifically perform merely because the bargain turned out to be financially disadvantageous.

• Binding Nature of Lower Courts’ Factual Findings — Findings of fact of the trial court, especially when affirmed by the Court of Appeals, are conclusive on the Supreme Court and will not be disturbed on appeal absent a showing that they are marred by manifest error, bias, or grave abuse of discretion.

• Judicial Admission — A party is bound by the factual admissions made in its pleadings. GSIS’s characterization of the missing notation as an “honest mistake” and its admission that the words were “inserted” constituted judicial admissions that the notation was not part of the original agreement.

• Article 1473, Civil Code — Fixing of the Price — In a contract of sale, the fixing of the price can never be left to the discretion of one of the contracting parties. A stipulation granting the vendor a unilateral right to adjust the purchase price post-execution is void for being contrary to law.

• Irrelevance of Bad Business Judgment — A contracting party cannot refuse to specifically perform an obligation on the ground that it made a bad business judgment. Losses resulting from a failure to foresee costs must be borne by the party responsible.

• “Trite to state, this Court is not a trier of facts. In a multitude of cases, we have laid down the unbending rule that findings of fact of lower courts are binding on us unless they are marred by manifest errors.”

• “It is illegal for petitioner to claim this prerogative, for Article 1473 of the Civil Code provides that ‘the fixing of the price can never be left to the discretion of one of the contracting parties. . . .’”

• “If petitioner failed to factor this increase in the cost of the construction in the purchase price of the subject house and lot, it has nobody to blame but itself and it alone should suffer the loss. . . . our law on contracts does not excuse a party from specifically performing his obligation on the ground that he made a bad business judgment.”

• N/A — The decision relies on the settled rule on the binding nature of lower courts’ factual findings but does not identify any specific case authority by name.

• Article 1473, Civil Code of the Philippines — Prohibits leaving the fixing of the purchase price to the sole discretion of one contracting party. The provision was applied to invalidate the unilaterally inserted marginal notation and the attempted price adjustment, as the price had been fixed by mutual consent at ₱19,740.00.

Narvasa, C.J., Padilla, Regalado, and Nocon, JJ., concurred.