94 Republic vs. David
94 Republic vs. David
*
G.R. No. 155634. August 16, 2004.
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* THIRD DIVISION.
578
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579
PANGANIBAN, J.:
Under the terms of the subject Contract, “actual
possession” cannot be equated with “actual occupancy.”
Inasmuch as the housing unit was physically occupied by
parties other than those intended to be benefited by the
housing program of the Social Security System, there was a
clear violation of the Contract. Since respondent did not
comply with his obligations, rescission is proper.
The Case
1
Before us is a Petition for Review under Rule 45 of 2the
Rules of Court, assailing the October 9, 2002 Decision of
the Court of Appeals (CA) in CA-G.R. CV No. 61374. The
appellate court disposed as follows:
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580
The Facts
The CA narrated the facts thus:
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581
Affirming the trial court, the CA ruled that while other
persons had been found occupying the subject property, no
proof was adduced by petitioner to prove that they had
taken possession of it on their own behalf and not merely
as respondent’s caretakers. The appellate court added that
because of the squalid condition of the property when it
was delivered, respondent had to make improvements
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582
6
Hence, this Petition.
Issues
In its Memorandum, petitioner raises this sole issue:
“whether the Court of Appeals committed reversible error
in affirming the Decision of the trial court holding that
respondent did not violate7 the terms and conditions of the
Deed of Conditional Sale.”
The Petition is meritorious.
Sole Issue:
Violation of the Terms and Conditions of the Deed of
Conditional Sale
Petitioner avers that respondent violated the terms and
conditions of the Deed of Conditional Sale, when he failed
8
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8
to “actually occupy and possess the 9
property at all times”
and allowed other persons to do so.
It argues that contrary to the rulings of the trial and the
appellate courts, the Deed of Conditional Sale required
“actual physical possession at all times,” not just simple
possession. It contends that the material occupation of the
property by other persons ran counter to the objective of
the Social Security System (SSS) housing program to
restrict the use and enjoyment of the housing units to SSS
employees and their immediate families only.
Petitioner likewise submits that the appellate court
erred in believing the claim of respondent that the house
was uninhabitable
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the action of our will, or by the proper acts and legal formalities
established for acquiring such right.”
6 The Petition was deemed submitted for decision on October 27, 2003,
upon the Court’s receipt of petitioner’s Memorandum, signed by Solicitor
General Alfredo L. Benipayo, Assistant Solicitor General Fernanda
Lampas Peralta and Solicitor Elma M. Rafallo-Lingan. Respondent’s
Memorandum, received on September 29, 2003, was signed by Atty. D. D.
Fregillana, Jr.
7 Petitioner’s Memorandum, p. 10; Rollo, p. 307. Original in upper case.
8 Condition 10(c) of the Conditional Deed of Sale; Rollo, p. 79.
9 This allegedly violated subparagraph (a) of paragraph (10); Ibid.
583
Propriety of Review
At the outset, the Court stresses that a question of law
has arisen from petitioner’s contention that simple
possession under Article 531 of the Civil Code is not the
same as “actual occupancy and possession at all times,” as
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584
(a) The VENDEE is making this purchase for his/her own exclusive
use and benefit and not for the use and benefit of another
undisclosed party/parties;
(b) The purpose of the sale shall be to aid the VENDEE in acquiring
a house and lot for himself/herself and/or his/her immediate
family, and not to provide him/her with a means for speculation
or profit by a future assignment of his/her right herein acquired
or the resale of the PROPERTY subject of this Contract.
Therefore, the VENDEE, within the first FIVE (5) years of the
existence of this contract agrees not to sell, assign, encumber,
mortgage, lease, sub-let or in any manner alter or dispose of the
property subject hereof, or his rights thereto, at any time, in
whole or in part. After the FIVE (5) year period, VENDEE shall
have the right to the full disposal of the property, provided that,
VENDEE has been able to fully pay all of his/her obligations
herein. However, the foregoing notwithstanding, the VENDEE
may x x x at any time with prior consent of the VENDOR transfer
his right to the PROPERTY to any eligible employee of the
VENDOR, subject, however, to the right of first refusal by the
VENDOR who may refund to the VENDEE all of his/her
installment payments and the value of substantial improvements
introduced by him/her if any, as appraised by the VENDOR;
(c) The VENDEE, and his heirs and/or successors, shall actually
occupy and be in possession of the PROPERTY at all times;
(d) The VENDEE shall not obstruct or interfere in any manner
whatsoever with the right of the VENDOR or any of its duly
authorized representatives to inspect, survey, repair, lay water
pipes, gas, electric and telephone lines or other works of similar
purposes;
(e) The VENDEE shall abide by and comply with the Vendor’s
Occupancy Rules and Regulations the terms and conditions of
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13 Carceller v. Court of Appeals, 362 Phil. 332, 340; 302 SCRA 718, 725,
February 10, 1999.
14 Id., p. 339.
585
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586
No Actual Occupancy
First, actual possession is not the same as actual
occupancy. Hence, it was an error on the part of the lower
courts to hold that the requirement of possession alone was
a sufficient compliance with the conditions under
subparagraphs (a) and 21
(c).
Under the law, “[p]ossession is acquired by the
material occupation of a thing or the exercise of a right, or
by the fact that it is sub-
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“Art. 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy.”
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20 Solanda Enterprises, Inc. v. Court of Appeals, 365 Phil. 194, 206; 305
SCRA 645, 655, April 14, 1999; Philippine Constitution Association, Inc. v.
Mathay, 124 Phil. 890, 924; 18 SCRA 300, 330, October 4, 1966, per the
Concurring Opinion of Castro, J.
21 Article 531 of the Civil Code.
587
ject to the action of our will, or by the proper acts and legal
formalities established for acquiring such right.” As such,
actual possession consists in the manifestation of acts of
dominion over property of such a 22nature as a party would
naturally exercise over his own —as when respondent
himself is physically in occupation of the property, or even
when another person who 23
recognizes the former’s rights as
owner is in occupancy. In short, possession can be either
“actual” or merely constructive.
On the other hand, actual occupancy connotes
“something real, or actually existing, as opposed to
something merely possible, 24or to something which is
presumptive or constructive.” Unlike possession, it can
only be actual or real, not constructive.
Second, the uncontroverted fact remains that it was not
respondent and/or his immediate family, but Penus and his
wife, who had lived in the property since 1992; and that it
was from Penus that Domingo took over possession in
1996. Thus, while it may be conceded that respondent
“possessed” the property through his caretakers, there is no
escaping the fact that he and/or his immediate family did
not “actually occupy” it; and that he allowed other persons
to benefit from its use. In his letter to SSS Assistant 25
Administrator Amador Monteiro on January 24, 1996,
respondent admitted as much, but tried to justify his
noncompliance by saying that the property was not in a
habitable condition at the time of delivery. This line of
defense was sustained by the trial court on the ground of
respondent’s
26
allegedly “uncontroverted or unrebutted
evidence.”
The RTC’s finding, however, is neither borne out by the
records nor by substantial evidence. Hence, it constitutes
an exception to27 the rule that this Court cannot review
factual findings.
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22 Republic v. Court of Appeals, 390 Phil. 1041, 1050; 335 SCRA 693,
701-702, July 14, 2000; Reyes v. Court of Appeals, 374 Phil. 236, 242-243;
315 SCRA 626, 632-633, September 30, 1999.
23 Ibid.
24 Manacop v. Court of Appeals, 342 Phil. 735, 744; 277 SCRA 57, 65-
66, August 11, 1997, per Panganiban, J.
25 Rollo, p. 91.
26 RTC Decision, p. 6; Rollo, p. 139.
27 Potenciano v. Reynoso, 401 SCRA 391, 398, April 22, 2003; Milestone
Realty and Co., Inc. v. Court of Appeals, 381 SCRA 406, 415, April
588
Indeed, a thorough review of the records reveals that the
averments of respondent were ably controverted by denials
made by petitioner. Negating 28
his claim that the house was
located adjacent to a creek, it lengthily argued against it
in the Memorandum it submitted to the trial court.
Likewise,
29
it must be stressed that under the Rules of
Court, the defense alleged in his Answer is deemed
controverted, whether or not petitioner filed a reply.
Moreover, it is a basic rule of evidence that the party 30
asserting an affirmative allegation must prove it.
However, all that there is to back up the defense of
respondent in this case is his self-serving testimony and
that of his witness, Domingo. As to the latter’s testimony, it
suffices to say that he could not have affirmed the alleged
condition of the unit in 1992, as he took possession of it
only in 1996, four years after it had lain exposed to the
elements with no improvements whatsoever.
For four years, respondent likewise kept his silence
about the purported condition of the unit. He accepted it
without any whimper of protest on October 23, 1992, and
even paid the housing loan in full in December of the same
year. If it was indeed uninhabitable, he should have
refused to accept it or immediately protested its condition.
On the other hand, there is enough documentary
evidence to debunk his 31
claim. The report of petitioner’s
Internal Audit Service significantly established that 509
of the 728 awardees—presumably situated similarly as he
was—had occupied their units
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19, 2002. For other exceptions, see also Lagon v. Hooven Comalco
Industries, Inc., 349 SCRA 363, 371, January 17, 2001.
28 Petitioner’s Memorandum to the trial court, p. 5; Rollo, p. 117.
29 Under §10 of Rule 6 of the Rules of Court, all the new matters
alleged in the answer are deemed controverted even if a party does not file
a reply. The said Section reads:
“SEC. 10. Reply.—A reply is a pleading, the office or function of which is to deny or
allege facts in denial or avoidance of new matters alleged by way of defense in the
answer and thereby join or make issue as to such new matters. If a party does not
file such reply, all the new matters alleged in the answer are deemed controverted.
x x x.”
589
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32 Id., p. 89.
33 This is clearly provided under the second Whereas clause of the Deed
of Conditional Sale, which reads:
“Whereas, Pursuant to Development Permit No. 8-0334 issued by the Housing and
Land Use Regulatory Board (HLURB) dated July 7, 1988, the VENDOR has
developed the foregoing property to serve as a low cost housing project site,
exclusively for qualified SSS employees, x x x.” (Italics supplied)
590
We therefore do not see any reason to discuss
respondent’s added arguments, other than to say that the
objectives of low-cost housing—mandated
37
under the social
justice provisions of the Constitution —are too important
to be sidetracked by lame, untimely and unfounded
excuses. Such excuses do nothing but harm to the salutary
efforts of providing the underprivileged and the homeless
with cheap but decent houses. It is for this reason that we
regard this case as no ordinary skirmish over contractual
relations.
Rescission
In view of the foregoing discussion, we rule that
rescission of the Contract is the proper recourse. Article
1191 of the Civil Code provides:
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As noted in previous cases, the rescission contemplated
under Article 1191 is a principal action for “resolution,”
which is based
38
on a breach by a party of its reciprocal
obligations. The present Contract is one of conditional sale
—oftentimes referred to as a contract
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Corp., 368 SCRA 611, 618, November 14, 2001; Laureano v. Court of
Appeals, 381 Phil 403, 412-413; 324 SCRA 414, February 2, 2000.
37 §9 of Article XIII (Social Justice and Human Rights) of the
Constitution mandates:
“Sec. 9. The State shall, by law, and for the common good, undertake, in
cooperation with the private sector, a continuing program of urban land reform
and housing which will make available at affordable cost decent housing and basic
services to underprivileged and homeless citizens in urban centers and
resettlement areas. x x x.”
38 Ong v. Court of Appeals, 369 Phil. 243, 252; 310 SCRA 1, 9, July 6,
1999; Uy v. Court of Appeals, 314 SCRA 69, 81, September 9, 1999;
Romero v. Court of Appeals, 320 Phil. 269, 283; 250 SCRA 223, 235,
November 23, 1995.
591
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39 This is provided under paragraph 15, which reads: “15. Title to the
property subject of this contract remains with the VENDOR and shall
pass to, and be transferred in the name of the VENDEE only upon the
execution of the final deed of absolute sale mentioned in the next
succeeding paragraph.”
40 Paragraph 16 of the Deed of Conditional Sale; Rollo, p. 79.
41 Gomez v. Court of Appeals, 340 SCRA 720, 727-728, September 21,
2000.
592
However, this Court holds that the forfeiture provision
under paragraph 12 does not apply to the payment made
by respondent. The plain and simple reason is that he did
not pay the purchase price by installment, but instead paid
it in full in December 1992—two months after the delivery
of the unit. Hence, that payment was beyond the ambit of
Republic Act 6552, otherwise known as the Realty
Installment Buyer Act or the Maceda Law.
Doctrinally, mutual restitution must follow rescission.
Under Article 1385 of the Civil Code, “rescission creates the
obligation to return the things which were the object of the
contract, together43 with their fruits, and the price with its
interests x x x.” Moreover, “[t]o rescind is to declare a
contract void at its inception
44
and to put an end to it as
though it never was.” Hence, rescission restores the
parties to their relative positions, as if no contract has been
made. Paragraph 11, cited above, supports the mutual
restitution required in rescission.
Respondent is thus obliged to return the house and lot
sold, as well as rental payments he may have earned, if
any. On the other hand, petitioner is mandated to refund to
him his full payment of P172,978.85 plus legal interest of 6
percent per annum, as well as the value of substantial
improvements introduced by him, as appraised by
petitioner. Indeed,
45
stipulated in the Deed is such appraisal
by the vendor, upon transfer of the property to petitioner
or to any of its eligible employees. This condition is
reasonably and justly applicable and proper in the present
case.
WHEREFORE, this Petition is hereby GRANTED and
the assailed Decision SET ASIDE. The Deed of Conditional
Sale is CANCELLED. Petitioner is ORDERED to pay
respondent P172,978.85, plus the legal interest and the
value of any substantial improvements thereon.
Respondent is ORDERED to vacate immediately
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42 Rollo, p. 79.
43 See also Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,
421 Phil. 709, 733; 370 SCRA 56, 73, November 21, 2001; Velarde v. Court
of Appeals, 413 Phil. 360, 375; 361 SCRA 56, 69, July 11, 2001.
44 Velarde v. Court of Appeals, supra, p. 375, per Panganiban, J.
45 10(b) of Deed of Conditional Sale; Rollo, p. 79.
593
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