Pascual vs. Pangyarihan-Ang

In case of ambiguity, the contemporaneous and subsequent acts of the parties shall be principally considered to ascertain their true intention. Where a contract of sale stated that the balance of the purchase price would be paid “once I have fixed the measurements, plans, papers and title” and the parties’ conduct showed that full payment for a prior lot was made only after the seller secured a title in the buyers’ names, the seller’s obligation is to effect the transfer of titles before the buyers’ obligation to pay the balance arises. A party who has not performed her own obligation is not an injured party entitled to rescission, nor may she demand increased compensation for delay she caused.

In January 1989, Romulo Pascual sold three parcels of unregistered land in Navotas City to Encarnacion Pangyarihan-Ang and her children through a document entitled “Pagpapatunay at Pananagutan.” A downpayment of P50,000 was paid; the balance was to be paid after the seller “fixed the measurements, plans, papers and title” of the lots. One of the three lots was eventually titled in the buyers’ names and fully paid. Dispute arose over the remaining two lots when the seller (substituted by his widow, Teresita Pascual) claimed she had obtained titles in Romulo Pascual’s name and demanded a higher price, while the buyers insisted that the titles be first transferred to their names before they pay the balance.

• The Sale: Sometime in January 1989, Romulo Pascual (petitioner’s late husband) sold three parcels of unregistered land in Tangos, Navotas City, to respondents Encarnacion Pangyarihan-Ang and her children, all surnamed Ang. The agreement was embodied in a private document titled “Pagpapatunay at Pananagutan,” which stated a price of P350.00 per square meter, acknowledged receipt of P50,000 as downpayment through Antonio Ang, and provided that the remaining balance would be paid “once I have fixed the measurements, plans, papers and title” of the lots.

• First Lot: On October 28, 1993, the lot described in paragraph 1(a) of the document was registered in respondents’ names under Original Certificate of Title No. 246. Petitioner testified that respondents made several installment payments and only paid the full purchase price for that lot after the title was secured in their names.

• Dispute on Remaining Lots: As to the two other lots (paragraphs 1(b) and 1(k)), petitioner claimed they had been surveyed and titles issued in the name of Romulo Pascual, but respondents failed to pay the full purchase price. Petitioner filed a complaint for rescission with damages on March 2, 2006, also demanding that the purchase price be increased due to the change in property values and currency depreciation since 1989. Notably, the Transfer Certificates of Title in Romulo Pascual’s name for these two lots were registered only on March 14, 2006 — twelve days after the complaint was filed.

• Respondents’ Position: Respondents admitted the sale but maintained that under their agreement, titles to the lots should first be registered in their names before they were obliged to pay the balance. They contended that petitioner breached the agreement by refusing to transfer the titles unless a higher price was paid.

• Lower Courts’ Findings: The RTC found paragraph 5 ambiguous — it could mean titles in the seller’s name or in the buyers’ names — but resolved the ambiguity based on the parties’ conduct: since respondents fully paid the first lot only after petitioner secured title in their names, the true intention was that petitioner must first transfer the titles of the remaining lots to respondents before the balance becomes due. The CA affirmed, adding that petitioner’s presentation of TCTs in Romulo Pascual’s name registered after filing the complaint did not constitute compliance with her obligation.

• Failure to Ascertain Real Intention: Petitioner argued that the CA gravely erred by not considering the real intention of the parties as shown by their conduct, words, and deeds before, during, and immediately after executing the contract. She maintained that the manner of payment and registration of the first lot demonstrated that full payment should precede transfer of title.

• Petitioner as Injured Party: Petitioner contended that the lower courts erred in finding her at fault; she claimed it was respondents who failed to pay the balance, making her the injured party entitled to rescind the contract under Article 1191 of the Civil Code.

• Lack of Pronouncement on Reciprocal Obligation and Compensation: Petitioner asserted that even if the CA imposed on her the obligation to transfer titles, it should have simultaneously made a pronouncement ordering respondents to pay the balance within a reasonable period and to pay reasonable compensation for their use of the subject properties since 1989.

• Collateral Attack on Title: Respondents argued that the action for rescission constituted a collateral attack on the Torrens title of the first lot, which is prohibited and can only be raised in a direct proceeding expressly instituted for that purpose.

• Premature Complaint and Non-Compliance: Respondents maintained that petitioner instituted the complaint prematurely because she had not complied with the condition precedent under the contract — to cause the survey, documentation, and execution of necessary transfer documents placing the two remaining lots in respondents’ names. The TCTs in Romulo Pascual’s name, presented before the RTC, were secured only after the complaint was filed and could not be deemed compliance.

• Seller’s Breach: Respondents insisted that petitioner breached their agreement by refusing to register the lots under their names and by demanding a price higher than that originally stipulated.

• Contract Interpretation: Whether the Court of Appeals gravely erred in failing to consider the real intention of the parties based on their conduct, words, and deeds prior to, during, and immediately after executing the contract.

• Right to Rescission: Whether petitioner was the injured party entitled to rescind the sale under Article 1191 of the Civil Code.

• Reciprocal Obligation and Compensation: Whether the CA erred in imposing on petitioner the obligation to transfer titles without simultaneously ordering respondents to pay the balance within a reasonable period and to pay compensation for the use of the properties.

• Contract Interpretation: The issue was essentially factual. Under Rule 45, only questions of law may be raised; the Supreme Court is not a trier of facts and defers to the factual findings of the trial and appellate courts when supported by substantial evidence. No exception applied. Even on the merits, paragraph 5 of the “Pagpapatunay at Pananagutan” was ambiguous — susceptible of interpretation as requiring titles either in the seller’s name or in the buyers’ names. Pursuant to Article 1371 of the Civil Code, the parties’ contemporaneous and subsequent acts are principally considered to judge their intention. The undisputed evidence that respondents paid the full price of the first lot only after petitioner secured its original certificate of title in respondents’ names compelled the conclusion that the parties intended the titles to be first transferred to the buyers before the balance became due.

• Right to Rescission: Petitioner was not entitled to rescind. Rescission under Article 1191 is available only to the injured party. Respondents’ non-payment of the balance was caused by petitioner’s own failure to transfer the titles as required by the contract. Because petitioner had not performed her reciprocal obligation, she could not claim injury or demand rescission.

• Reciprocal Obligation and Compensation: Petitioner’s claim for compensation for the use of the lots was denied. A party cannot benefit from her own wrongdoing; it was petitioner’s non-compliance that caused the delay in payment. Petitioner’s neglect to assert her supposed right for over sixteen years also warranted the presumption of abandonment. Vigilantibus, sed non dormientibus jura subveniunt — the law aids the vigilant, not those who slumber on their rights. The Court, in the exercise of its equity jurisdiction, ordered the reciprocal prestations: petitioner must transfer the titles to respondents, and respondents must pay the remaining balance within thirty days from transfer.

• Interpretation of Ambiguous Contracts (Arts. 1370 & 1371, Civil Code): If the terms of a contract are clear, the literal meaning controls. If ambiguous, the contemporaneous and subsequent acts of the parties shall be principally considered to ascertain their true intention. Applied here, the parties’ conduct regarding the first lot — payment in full only after title was transferred to the buyers — resolved the ambiguity in favor of the buyer’s interpretation.

• Plain Meaning Rule / Four Corners Rule: A court must first determine whether a contract is ambiguous. A provision is ambiguous if it is susceptible of two reasonable alternative interpretations. Where the contract is unambiguous, it is interpreted as a matter of law; if ambiguous, the court resolves the ambiguity in light of intrinsic evidence, including the parties’ acts.

• Rescission under Article 1191: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The right belongs to the injured party. A party who has not performed her own obligation is not the injured party and cannot seek rescission.

• Vigilantibus, sed non dormientibus jura subveniunt: The law aids the vigilant, not those who sleep on their rights. Petitioner’s inaction for over sixteen years in asserting her supposed right constituted laches and barred her claim for compensation.

• “[I]f the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.” This provision is akin to the ‘plain meaning rule’ … It also resembles the ‘four corners’ rule, a principle which allows courts in some cases to search beneath the semantic surface for clues to meaning.” — Articulating the primary standard for contract interpretation.

• “In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.” — The controlling principle under Article 1371, applied to resolve the ambiguity in the contract of sale.

• “Thus, petitioner is not entitled to rescind the contract as she is not the injured party.” — The direct consequence of the seller’s prior breach on the reciprocal obligation.

• “The law aids the vigilant, not those who slumber on their rights. Vigilantibus, sed non dormientibus jura subverniunt.” — The basis for denying relief to a party who slept on her rights for sixteen years.

• Abad v. Goldloop Properties, Inc., 549 Phil. 641 (2007): Extensively quoted for the cardinal rule on interpretation of contracts under Article 1370, the plain meaning rule, and the standard for determining ambiguity. The Court followed this precedent in applying the parties’ contemporaneous and subsequent acts to resolve the ambiguity.

• Gepulle-Garbo v. Spouses Garabato, 750 Phil. 846 (2015); Republic v. Ortigas and Company Limited Partnership, 728 Phil. 277 (2014); Pascual v. Burgos, et al., 776 Phil. 167 (2016); Uyboco v. People, 749 Phil. 987 (2014): These cases were cited collectively to delineate the scope of a petition for review on certiorari under Rule 45, the rule that the Supreme Court is not a trier of facts, the definition of a question of fact, and the recognized exceptions to the rule.

• Articles 1370 and 1371, New Civil Code: Article 1370 provides the primary rule — literal meaning controls if terms are clear; if words appear contrary to evident intention, the latter prevails. Article 1371 instructs that to judge the intention of contracting parties, their contemporaneous and subsequent acts shall be principally considered. Both were applied to resolve the ambiguous phrase “maipaayos ko ang mga sukat, plano, papeles at titulo ng nasabing mga lupa” by looking at how the parties performed with respect to the first lot.

Caguioa, J. Reyes, Jr., Lazaro-Javier, and Lopez, JJ., concurred.

N/A — The decision was unanimous.