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Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-12342 August 3, 1918

A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.

Thos. D. Aitken for appellant.

Modesto Reyes and Eliseo Ymzon for appellees.

FISHER, J.:

By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix, with the consent of her husband, the defendant Balbino
Tioco, four parcels of land, described in the instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of P3,000 on
account of the purchase price, and bound herself to pay the remainder in installments, the first of P2,000 on July 15, 1914, and the second of P5,000
thirty days after the issuance to her of a certificate of title under the Land Registration Act, and further, within ten years from the date of such title P10,
for each coconut tree in bearing and P5 for each such tree not in bearing, that might be growing on said four parcels of land on the date of the
issuance of title to her, with the condition that the total price should not exceed P85,000. It was further stipulated that the purchaser was to deliver to
the vendor 25 per centum of the value of the products that she might obtain from the four parcels "from the moment she takes possession of them until
the Torrens certificate of title be issued in her favor."

It was also covenanted that "within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present
contract of purchase and sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison, the net value of all the products of the four
parcels sold, and I shall obliged to return to her, Marciana Felix, all the sums that she may have paid me, together with interest at the rate of 10 per
cent per annum."

In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to compel Marciana Felix to make payment of the first
installment of P2,000, demandable in accordance with the terms of the contract of sale aforementioned, on July 15, 1914, and of the interest in
arrears, at the stipulated rate of 8 per cent per annum. The defendant, jointly with her husband, answered the complaint and alleged by way of special
defense that the plaintiff had absolutely failed to deliver to the defendant the lands that were the subject matter of the sale, notwithstanding the
demands made upon him for this purpose. She therefore asked that she be absolved from the complaint, and that, after a declaration of the rescission
of the contract of the purchase and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid to him on account, together with
the interest agreed upon, and to pay an indemnity for the losses and damages which the defendant alleged she had suffered through the plaintiff's
non-fulfillment of the contract.

The evidence adduced shows that after the execution of the deed of the sale the plaintiff, at the request of the purchaser, went to Lucena,
accompanied by a representative of the latter, for the purpose of designating and delivering the lands sold. He was able to designate only two of the
four parcels, and more than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the
parts so occupied by him. The plaintiff admitted that the purchaser would have to bring suit to obtain possession of the land (sten. notes, record, p. 5).
In August, 1914, the surveyor Santamaria went to Lucena, at the request of the plaintiff and accompanied by him, in order to survey the land sold to
the defendant; but he surveyed only two parcels, which are those occupied mainly by the brothers Leon and Julio Villafuerte. He did not survey the
other parcels, as they were not designated to him by the plaintiff. In order to make this survey it was necessary to obtain from the Land Court a writ of
injunction against the occupants, and for the purpose of the issuance of this writ the defendant, in June, 1914, filed an application with the Land Court
for the registration in her name of four parcels of land described in the deed of sale executed in her favor by the plaintiff. The proceedings in the matter
of this application were subsequently dismissed, for failure to present the required plans within the period of the time allowed for the purpose.

The trial court rendered judgment in behalf of the defendant, holding the contract of sale to be rescinded and ordering the return to the plaintiff the
P3,000 paid on account of the price, together with interest thereon at the rate of 10 per cent per annum. From this judgment the plaintiff appealed.

In decreeing the rescission of the contract, the trial judge rested his conclusion solely on the indisputable fact that up to that time the lands sold had
not been registered in accordance with the Torrens system, and on the terms of the second paragraph of clause (h) of the contract, whereby it is
stipulated that ". . . within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of
purchase and sale . . . ."

The appellant objects, and rightly, that the cross-complaint is not founded on the hypothesis of the conventional rescission relied upon by the court, but
on the failure to deliver the land sold. He argues that the right to rescind the contract by virtue of the special agreement not only did not exist from the
moment of the execution of the contract up to one year after the registration of the land, but does not accrue until the land is registered. The wording of
the clause, in fact, substantiates the contention. The one year's deliberation granted to the purchaser was to be counted "from the date of the
certificate of title ... ." Therefore the right to elect to rescind the contract was subject to a condition, namely, the issuance of the title. The record show
that up to the present time that condition has not been fulfilled; consequently the defendant cannot be heard to invoke a right which depends on the
existence of that condition. If in the cross-complaint it had been alleged that the fulfillment of the condition was impossible for reasons imputable to the
plaintiff, and if this allegation had been proven, perhaps the condition would have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code);
but this issue was not presented in the defendant's answer.

However, although we are not in agreement with the reasoning found in the decision appealed from, we consider it to be correct in its result. The
record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was not even able to show them to the
purchaser; and as regards the other two, more than two-thirds of their area was in the hostile and adverse possession of a third person.

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed "in the hands and
possession of the vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the execution of a public instruments is equivalent to the
delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that
the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough
to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a
public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy
of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of
another will, then fiction yields to reality the delivery has not been effected.

As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of the French Civil code, "the word "delivery" expresses a
complex idea . . . the abandonment of the thing by the person who makes the delivery and the taking control of it by the person to whom the delivery is
made."

The execution of a public instrument is sufficient for the purposes of the abandonment made by the vendor; but it is not always sufficient to permit of
the apprehension of the thing by the purchaser.

The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this
article "merely declares that when the sale is made through the means of a public instrument, the execution of this latter is equivalent to the delivery of
the thing sold: which does not and cannot mean that this fictitious tradition necessarily implies the real tradition of the thing sold, for it is
incontrovertible that, while its ownership still pertains to the vendor (and with greater reason if it does not), a third person may be in possession of the
same thing; wherefore, though, as a general rule, he who purchases by means of a public instrument should be deemed . . . to be the possessor in
fact, yet this presumption gives way before proof to the contrary."

It is evident, then, in the case at bar, that the mere execution of the instrument was not a fulfillment of the vendors' obligation to deliver the thing sold,
and that from such non-fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price.
(Civ. Code, arts. 1506 and 1124.)

Of course if the sale had been made under the express agreement of imposing upon the purchaser the obligation to take the necessary steps to obtain
the material possession of the thing sold, and it were proven that she knew that the thing was in the possession of a third person claiming to have
property rights therein, such agreement would be perfectly valid. But there is nothing in the instrument which would indicate, even implicitly, that such
was the agreement. It is true, as the appellant argues, that the obligation was incumbent upon the defendant Marciana Felix to apply for and obtain the
registration of the land in the new registry of property; but from this it cannot be concluded that she had to await the final decision of the Court of Land
Registration, in order to be able to enjoy the property sold. On the contrary, it was expressly stipulated in the contract that the purchaser should deliver
to the vendor one-fourth "of the products ... of the aforesaid four parcels from the moment when she takes possession of them until the Torrens
certificate of title be issued in her favor." This obviously shows that it was not forseen that the purchaser might be deprived of her possession during
the course of the registration proceedings, but that the transaction rested on the assumption that she was to have, during said period, the material
possession and enjoyment of the four parcels of land.

Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual agreement, it is not the conventional but the legal interest
that is demandable.

It is therefore held that the contract of purchase and sale entered into by and between the plaintiff and the defendant on June 11, 1914, is rescinded,
and the plaintiff is ordered to make restitution of the sum of P3,000 received by him on account of the price of the sale, together with interest thereon at
the legal rate of 6 per annum from the date of the filing of the complaint until payment, with the costs of both instances against the appellant. So
ordered.

Torres, Johnson, Street, Malcolm and Avancea, JJ., concur.

The Lawphil Project - Arellano Law Foundation

Issue:

Whether or not the respondent Judge correctly ordered the herein petitioner to reimburse
the amount paid to the Special Sheriff by virtue of the execution?

Ruling:

No. The questioned Order of April 6, 1970 must be set aside insofar as it ordered the
petitioner RCBC, jointly and severally with Badoc, to reimburse PVTA.

The petitioner merely obeyed a mandatory directive from the respondent Judge ordering
petitioner to "deliver in check the amount garnished to Sheriff Faustino Rigor and Sheriff
Rigor is in turn ordered to cash the check and deliver the amount to the plaintiff's
representative and/or counsel on record."

PVTA instantly urges that the premature delivery of the garnished amount by RCBC to the
special sheriff even in the absence of a demand to deliver made by the latter, before the
expiration of the five-day period given to reply to the Notice of Garnishment, without any
reply having been given thereto nor any prior authorization from its depositor, PVTA and
even if the court's order of January 27, 1970 did not require the bank to immediately
deliver the garnished amount constitutes such lack of prudence as to make it answerable
jointly and severally with the plaintiff for the wrongful release of the money from the
deposit of the PVTA.

Such allegations must be rejected for lack of merit. In the first place, it should be pointed
out that RCBC did not deliver the amount on the strength solely of a Notice of Garnishment;
rather, the release of the funds was made pursuant to the aforesaid Order of January 27,
1970. In the second place, the bank had already filed a reply to the Notice of Garnishment
stating that it had in its custody funds belonging to the PVTA, which, in fact was the basis of
the plaintiff in filing a motion to secure delivery of the garnished amount to the sheriff.
Lastly, the bank, upon the receipt of the Notice of Garnishment, duly informed PVTA
thereof to enable the latter to take the necessary steps for the protection of its own
interest.

It is important to stress that there was nothing irregular in the delivery of the funds of
PVTA by check to the sheriff, whose custody is equivalent to the custody of the court, he
being a court officer. It must be noted that in delivering the garnished amount in check to
the sheriff, the RCBC did not thereby make any payment, for the law mandates that delivery
of a check does not produce the effect of payment until it has been cashed.

Moreover, by virtue of the order of garnishment, the same was placed in custodia legis and
therefore, from that time on, RCBC was holding the funds subject to the orders of the court
a quo. That the sheriff, upon delivery of the check to him by RCBC encashed it and turned
over the proceeds thereof to the plaintiff was no longer the concern of RCBC as the
responsibility over the garnished funds passed to the court. Thus, no breach of trust or
dereliction of duty can be attributed to RCBC in delivering its depositor's funds pursuant to
a court order which was merely in the exercise of its power of control over such funds.

The order directing the bank to deliver the amount to the sheriff was distinct and separate
from the order directing the sheriff to encash the said check. The bank had no choice but to
comply with the order demanding delivery of the garnished amount in check. The very
tenor of the order called for immediate compliance therewith. On the other hand, the bank
cannot be held liable for the subsequent encashment of the check as this was upon order of
the court in the exercise of its power of control over the funds placed in custodia legis by
virtue of the garnishment.

The aforequoted ruling in Engineering Construction Inc. vs National Power Corporation

thus bolsters RCBC's stand that its immediate compliance with the lower court's order
should not have been met with the harsh penalty of joint and several liability. Nor can its
liability to reimburse PVTA of the amount delivered in check be premised upon the
subsequent declaration of nullity of the order of delivery.

From the foregoing, it may be concluded that the charge of breach of trust and/or
dereliction of duty as well as lack of prudence in effecting the immediate payment of the
garnished amount is totally unfounded. Upon receipt of the Notice of Garnishment, RCBC
duly informed PVTA thereof to enable the latter to take the necessary steps for its
protection. However, right on the very next day after its receipt of such notice, RCBC was
already served with the Order requiring delivery of the garnished amount. Confronted as it
was with a mandatory directive, disobedience to which exposed it to a contempt order, it
had no choice but to comply.
Are the PVTA funds public funds exempt from garnishment? The Court holds that they are
not. It is clear that PVTA has been endowed with a personality distinct and separate from
the government which owns and controls it. Accordingly, this Court has heretofore
declared that the funds of the PVTA can be garnished since "funds of public corporation
which can sue and be sued were not exempt from garnishment. If such funds cannot be
executed upon or garnished pursuant to a judgment sustaining the liability of the PVTA to
answer for its obligations, then the purpose of the law in creating the PVTA would be
defeated.

The same cannot hold true for RCBC as the funds entrusted to its custody, which belong to
a public corporation, are in the nature of private funds insofar as their susceptibility to
garnishment is concerned. Hence, RCBC cannot be charged with lack of prudence for
immediately complying with the order to deliver the garnished amount. Since the funds in
its custody are precisely meant for the payment of lawfully-incurred obligations, RCBC
cannot rightfully resist a court order to enforce payment of such obligations. That such
court order subsequently turned out to have been erroneously issued should not operate to
the detriment of one who complied with its clear order.

Finally, it is contended that RCBC was bound to inquire into the legality and propriety of
the Writ of Execution and Notice of Garnishment issued against the funds of the PVTA
deposited with said bank. But the bank was in no position to question the legality of the
garnishment since it was not even a party to the case. As correctly pointed out by the
petitioner, it had neither the personality nor the interest to assail or controvert the orders
of respondent Judge. It had no choice but to obey the same inasmuch as it had no standing
at all to impugn the validity of the partial judgment rendered in favor of the plaintiff or of
the processes issued in execution of such judgment.

RCBC cannot therefore be compelled to make restitution solidarily with the plaintiff
BADOC. Plaintiff BADOC alone was responsible for the issuance of the Writ of Execution
and Order of Payment and so, the plaintiff alone should bear the consequences of a
subsequent annulment of such court orders; hence, only the plaintiff can be ordered to
restore the account of the PVTA.

WHEREFORE, the petition is hereby granted and the petitioner is ABSOLVED from any
liability to respondent PVTA for reimbursement of the funds garnished. The questioned
Order of the respondent Judge ordering the petitioner, jointly and severally with BADOC, to
restore the account of PVTA are modified accordingly.