[G.R. No. 133879. March 19, 2002]
EQUATORIAL vs. MAYFAIR
Gentlemen:
Quoted hereunder, for your
information, is a resolution of this Court dated MAR 19
2002.
G.R. No.
133879 (Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc.)
In its Motion
for Reconsideration, dated December 18, 2001, petitioner argues that we denied
the Petition “on a ground different from that relied upon by the lower court x
x x and on a theory not discussed at all by the parties x x x.” This is not
correct. It should be plain that our
Decision dismissed the Petition because of res
judicata. True, our reasoning in
reaching this conclusion was different form that of the Regional Trial Court
(RTC) but it was based on the earlier Decision in the mother case, which barred
the present proceedings. There is
nothing unusual or strange in affirming a lower court’s conclusion anchored on
a different reasoning. Early on, in Addison v. Felix,[1] we have
already said so, in these words:
“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.”
In our
instant Decision, we clearly said that “[u]nder the doctrine of res judicata or bar by prior judgment, a
matter that has been adjudicated by a court of competent jurisdiction must be
deemed to have been finally and conclusively settled if it arises in any
subsequent litigation between the same parties and for the same cause.” We
added: “Although the court a quo
erred when it declared ‘void from inception’ the Deed of Absolute Sale between
Carmelo and petitioner, our foregoing disquisition supports the grant of the
Motion to Dismiss on the ground that our prior judgment in GR No. 106063 has
already resolved the issue of back rentals.” Unquestionably, res judicata or bar by prior judgment
was raised as a ground in respondent’s Motion to Dismiss and taken up in the
court a quo’s ruling. We quote again from our Decision: “In short,
[the RTC] ruled on the ground raised; namely, bar by final judgment. By granting the Motion, it disposed correctly, even if its legal
reason for nullifying the sale was wrong.
The correct reasons are given in this Decision.”
Very
recently, in Republic v. Cocofed,[2] we
emphasized:
“x x x where the issues already
raised also rest on other issues not specifically presented, as long as the
latter bears relevance and close relation to the former and as long as they
arise from matters on record, the Court has the authority to include them in
its discussion of the controversy as well as to pass upon them.”
As
additional ground for reconsideration, petitioner also claims that “there is no
factual foundation” for our ruling.
Again, this is incorrect. We
repeatedly referred to the facts as found by this Court in the mother
case. Indeed, as stressed by respondent
in its Comment, dated 01 February 2002, this Court cannot avoid references to
past proceedings in discussing res
judicata. Necessarily, the facts
earlier found by the Court in its earlier Decisions come into play as a matter of
judicial notice. The parties need not
undergo trial anew over matters that are easily obtainable from the records of
such earlier cases. Hence, we declared:
“In the mother case, this Court
categorically denied the payment of interest, a fruit of ownership. By the same token, rentals, another fruit of
ownership, cannot be granted without mocking this Court’s en banc Decision,
which has long become final.”
Our
disquisition on petitioner’s bad faith is also taken from the mother case. There is no need to present fresh proof on
this point. As pointed out in our
Decision, since this was “the law of the mother case decided in 1996, it may no
longer be changed, because it has long become final and executory.”
At bottom,
petitioner has not presented substantial or compelling arguments to convince us
to modify, alter or reverse our Decision in this case, which was arrived at
after thorough and careful deliberations.
WHEREFORE,
the Motion for Reconsideration is DENIED with FINALITY. In view of this disposition, the Motion to
Set Case for Hearing/Oral Arguments, dated January 30, 2002, is likewise
DENIED.
SO
ORDERED. (Puno and Vitug, JJ,
on official leave; Gutierrez, J, joined by Bellosillo, Kapunan and De
Leon, JJ, filed a Separate Opinion.)
SANDOVAL-GUTIERREZ, J.:
On
November 21, 2001, I stood apart from the rest of my colleagues in denying the
instant Petition for Review on Certiorari filed by Equatorial Realty
Development, Inc. (Equatorial) against Mayfair Theater, Inc. (Mayfair). Looking back exactly five years ago, i.e.,
November 21, 1996, this Court promulgated its Decision in G.R. No. 106063 (the
“mother case”) entitled Equatorial Realty
Development, Inc. vs. Mayfair Theater, Inc.1 Since then, new legitimate issues
and legal consequences arose. We cannot
simply ignore them now and take shield behind the principle of res judicata. For in reality, these are entirely neoteric matters that demand
separate judicial determination.
In my
first Dissent, I articulated the various reasons why I could not join the
majority. Now, I am taking this second
occasion to reiterate them and add a few more arguments, hoping that the
majority will have a change of heart and resolve to re-examine its Decision.
Let us
look at the case in the proper perspective.
The only
point of inquiry raised by the parties before this Court is whether or not a
rescissible contract is void at its inception.2 Ancillary to this is the issue of
Equatorial’s right to collect back rentals from Mayfair. My stand on the matter is clear. A rescissible contract remains valid and
binding upon the parties thereto until the same is rescinded in an appropriate
proceeding. In the “mother case,” G.R.
No. 106063, this Court did not declare the Deed of Absolute Sale between
Carmelo and Equatorial void but merely rescissible. Consequently, the contract was, at its
inception, valid and naturally,
under its provisions, Carmelo validly
transferred ownership of the subject property to Equatorial. This is the settled legal effect of a
rescissible contract. As owner in the interim, Equatorial has the right
to demand from Mayfair the payment of rentals or reasonable compensation
corresponding to the period of its (Equatorial’s) ownership. Thus, there is no reason for the Regional
Trial Court, Branch 8, Manila to dismiss Civil Case No. 97-85141 for sum of
money (rentals) filed by Equatorial against Mayfair.
The
majority conceded that a recissible contract is valid until annulled. Surprisingly, however, it resolved the case
on an entirely alien ground. --- that ownership was not transferred to
Equatorial because of Carmelo’s failure to effect actual delivery of the
subject property. The majority
attempted to buttress its Decision by mooring it on G.R. No. 106063 under the
pretext of res judicata. But to my mind, it did more harm than good.
My dissent
now rests on three grounds. First, G.R. No. 106063, the “mother
case,” does not operate as a bar to Civil Case No. 97-85141 for sum of money filed
by Equatorial against Mayfair, subject of the present petition for review on certiorari. Second, in holding
that there was no transfer of ownership between Carmelo and Equatorial, the
majority acted on an issue where the parties were not heard. And third,
the majority’s finding that there was no transfer of ownership between Carmelo
and Equatorial runs contrary to this Court’s pronouncement in the “mother case”
that the contract between them (Deed of Absolute Sale) is rescissible.
I – G.R. No. 106063
does not operate as a bar to Civil Case No. 97-85141.
I Cannot
subscribe to the position of the majority that this Court’s “prior judgment in G.R. No. 106063 has
already resolved the issue of back rentals.”3 I have gone over G.R. No. 106063
very closely and I find nothing therein which embarks on the issue of back
rentals. It seems to me that the only
basis of the majority in decreeing so is this Court’s denial in the said case
of Equatorial’s claim for payment of interest. Let me quote the following revealing
statement from the ponencia of Mr.
Justice Artemio V. Panganiban:
In the
mother case, this Court categorically denied the payment of interest, fruit of
ownership. By the same token, rentals, another fruit of ownership, cannot be
granted without mocking this Court’s en
banc Decision, which has long become final.”
With due
respect to my colleagues, I cannot fathom how the present denial of
Equatorial’s claim for back rentals from Mayfair could flow from this Court’s
denial in the “mother case” of Equatorial’s claim for payment of interest. It
bears stressing that when this court denied Equatorial’s claim for payment of
interest, it had in its mind interest
not back rentals, otherwise, it could have easily said so. Surely, this Court’s denial of Equatorial’s
claim for interest does not necessarily give rise to the application of res judicata on its claim for payment of
back rentals. It must be born in mind
that estoppel of judgment does not extend to matters not expressly adjudicated and which can be inferred only by
argument or construction from the judgment.
In other words, there is no estoppel where anything is left to
conjecture as to what necessarily involved and decided.4 To
sustain res judicata on the basis of
the hazy connection is to rule by inference and to read from the “mother case”
a judicial determination which is not there.
This is proscribed by the basic rules on interpretation and construction
of a judgment. In construing a judgment, the adjudication should not extend beyond
that which the language used fairly warrants, since the purpose and function of
construction is to give effect to that which is already latent in the judgment,
and the court may not by construction add new provisions to a judgment which
were omitted or withheld in the first instance.5
Thus, if the language used in a judgment is plain and unambiguous there
is no room for construction or interpretation, and the effect thereof must be
declared in the light of the literal meaning of the language used.6
It may not
be amiss to point out that this Court then knew that Equatorial received rents from Mayfair during the years that the
controversy was litigated.7 Significantly, it did not require
Equatorial to return to Mayfair the amount of rentals it had paid. To be sure, such abstention is inconsistent
with the theory of the majority that this Court, in the “mother case,” intended
to deprive Equatorial of its right to collect rentals from Mayfair.
To my
mind, the best way to measure the applicability of res judicata is not by way of general statements but by specific
reference to its essential requirements.
There are
two concepts of res judicata, one is
“bar by prior judgment” and the other is “conclusiveness of judgment.” The
majority finds the first concept applicable.
I do not agree. There is “bar by
prior judgment” when, between the first case where the judgment was rendered,
and the second case where such judgment is invoked, there is identity of
parties, subject matter and cause of action.8
As may
be gleaned from the records, the requisite identity of cause of action is
absent. G.R. No. 106063 or the “mother
case” originated from a “Complaint for Annulment of Deed of Absolute Sale,
Specific Performance, and Damages,” filed by Mayfair against Equatorial and
Carmelo. Its object was to nullify the
contract of sale between Equatorial and Carmelo and to enforce Mayfair’s right
of first refusal. On the other hand,
the present case is for a sum of money filed by Equatorial against Mayfair, the
object of which is to recover from Mayfair the rentals corresponding to the
period when the owner of the disputed property was Equatorial. This latter case has for its premise this
Court’s declaration in G.R. No. 106063, the “mother case,” that the Deed of
Absolute Sale between Carmelo and Equatorial is merely rescissible. Surely, G.R. 106063 could not be a bar to
Civil Case No. 97-85141.
Not even
the less restricted concept of conclusiveness of judgment can provide solace to
the position of the majority. As I have
previously intimated, the issue of back rentals was never determined or passed
upon in G.R. No. 106063.9 Under the doctrine of
conclusiveness of judgment, which is also known as “preclusion of issues” or
collateral estoppel,” issues actually and directly resolved in a former suit
cannot be again raised in any future case between the same parties involving a
different cause of action. Conversely
stated, res judicata cannot properly be invoked as to an issue which
affirmatively appears not to have been determined by the judgment in the former
action.10 A judgment is not res judicata as to matter that was not
actually litigated, decided, or necessarily involved in the action.11
II – In
holding that there was no transfer of ownership between Carmelo and Equatorial,
the majority acted on an issue where the parties were not heard.
There is
no principle better established that what
is not juridically presented cannot be juridically decided.12 In the light of this principle, I find merit in
Equatorial’s argument that the majority exceeded its authority when it rule
that there was no transfer of ownership between Carmelo and Equatorial because
of lack of “actual delivery.”
It is
indeed surprising that while the majority acquiesced in to Equatorial’s
position that a rescissible contract is valid until annulled, it nonetheless
denied the Petition on an issue not debated upon by the parties.
May I
reiterate that the real issue before this Court is whether or not a rescissible
contract is void at its inception. The
pleadings do not raise the issue of whether there is “actual delivery” of the
disputed property. As a matter of fact,
the petition involves only pure questions of law bordering on the legal effects
of rescission. Therefore, when the
majority decided the case on a factual issue not raised or argued by both
parties, it acted on a matter where the parties were not heard. It had gone astray into the field of factual
conflict, thus its legal pronouncements do not rests on solid grounds.
Jurisprudence,
both local and foreign, teaches us that it is imperative for a judgment to
conform to, and be supported by, both the pleadings and the proofs, and be in accordance with the theory of the
action on which the pleadings are framed and the case was tried. This rule is of universal application, and
whether the action or suit is at law, in equity, or under the code, the
judgment must be secundum allegata et
probata.13 Simply put, judgments must be responsive to the issues presented in the pleadings
or litigated between the parties, and issues not so raised may not be
determined.14
Corollarily,
a judgment on issues not made by the pleadings is erroneous, and may be set
aside or reversed in a proper proceeding for that purpose. In some cases, courts go further, and hold
that judgment based on issues not made by the pleadings or litigated by the
parties are coram non judice and
void, at least in so far as they go beyond such issues, on the theory that a
court has no jurisdiction to pass on questions not submitted to it for
decision.
III – The
majority’s finding that there was no transfer of ownership between Carmelo and
Equatorial runs contrary to this Court’s pronouncement in G.R. No. 106063.
Until now,
I am deeply bothered in the manner the majority construed G.R. No. 106063, the
“mother case.” Frankly, I find nothing therein which decrees that no right of
ownership was transferred from Carmelo to Equatorial. On the contrary, to my assessment, this Court even declared that Equatorial exercised its right of
ownership over the disputed property.
Thus, in disposing G.R. No. 106063, it explicitly ordered Equatorial to
“execute the deeds and documents
necessary to return ownership to Carmelo & Bauermann of the disputed lots.”15 Why would this Court order Equatorial
to execute the deeds and documents necessary to return ownership to Carmelo if, all along, it believed that
ownership remained with Carmelo?
Another cue worth citing is this Court’s express pronouncement, also in
G.R. No. 106063, that Equatorial received rentals from Mayfair during the
pendency of the case, thus:
“X x x
Equatorial, on the other hand, has received rents and otherwise profited from
the use of the property turned over to it by Carmelo. In fact, during
all the years that this controversy was being litigated, Mayfair paid rentals
regularly to the buyer (Equatorial)
who had an inferior right to purchase the property. Mayfair is under no obligation to pay any interests arising from
this judgment to either Carmelo or Equatorial.”16
Mr. Justice
Teodoro R. Padilla, in his Separate Opinion, made similar observations.17 And even Mr. Justice Artemio V. Panganiban himself
described the sale between Carmelo and Equatorial not only as a “perfected” but
also “consummated.”18
Undoubtedly,
this Court acknowledge in the “mother case” the transfer of ownership from
Carmelo to Equatorial. The language of
the Court is explicit and not susceptible of equivocation. I see no reason why we should view the above
pronouncement on a different light. Restraint should be exercised in construing a final judgment, lest
we commit the sin of substituting the disposition of the writer with that of
ours. We must guard ourselves against
the danger of reading too much between the lines.
That
actual possession of the property was turned over by Carmelo to Equatorial is
clear from the fact that the latter received rents from Mayfair. Receiving
rentals is an exercise of actual possession. When Mayfair paid its monthly rentals to Equatorial, it
recognized the latter’s right of ownership over the property. And
even if Mayfair did not recognize Equatorial’s superior right, the fact remains
that Equatorial was then enjoying the fruits of the disputed property. Pertinently, it does not follow that because
a transaction is prohibited or illegal, title, as between the parties to the transaction, does not pass from the
seller, donor, or transferor to the vendee, donee or transferee.19
Thus, I
cannot abide with the majority’s pronouncement that there was no “actual delivery.”20 The fact that Mayfair was just a lessee whose right,
at that time, was subordinate to that of Equatorial, the owner. To rule otherwise is to affirm that a
lessor, in a contract of sale, cannot transfer ownership of his property,
occupied by the lessee, to the buyer because there can be no delivery of such
property to the latter. This is
contrary to the prevailing law and jurisprudence. Mayfair’s alleged “timely objection to the sale and continued
actual possession of the property” can never be considered as an “impediment”
that may prevent the passing of the property from Carmelo to Equatorial.21 It must
be stressed that in the “mother case,” Mayfair’s main concern was the
recognition of its right of first refusal. Hence, the most that Mayfair could secure
from the institution of its suit was to be allowed to exercise its right to buy
the property upon rescission of the contract of sale. Not until Mayfair actually exercised what it was allowed to do by
this Court in that case, specifically, to buy the disputed property for
P11,300,000.00, would it have any right of ownership.
In
recapitulation, I am firmly convinced that Equatorial has the right to be paid
the monthly rentals corresponding to the period that the contract of sale was
in existence, minus the rents already
paid. The pronouncement of this
Court in Guzman vs. Court of Appeals,22 is
explicit and unequivocal. While
Equatorial may have committed bad faith in entering into the contract with
Carmelo, it had been equitably punished when this Court declared the contract
rescissible in G.R. No. 106063 itself.23 To utilize
the theory of bad faith again is to render a different and erroneous ruling,
i.e., that the contract is void from the beginning, not a rescissible one. It will deprive Equatorial of its right to
collect rents from Mayfair corresponding to the period during which the
contract was valid. Indeed, it will not
only be unjust, it will contravene the Civil Code provisions on rescissible contracts,
specifically Article 1380 which provides that “Contracts validly agreed upon
may be rescinded in the cases established by law.” By joining the majority, I
may disturb the very nature of a rescissible contract, i.e., a
contract valid and binding upon the
parties until rescinded in an appropriate judicial proceeding.
In the
case at bar, the fact remains that Mayfair occupied the property as a
lessee. It derived benefit from such
occupation, thus, it should pay the corresponding rentals due. Nemo
cum alterius detrimento locupletari potest. No one shall enrich himself at the expense of another.24 Consequently, Equatorial’s claim for payment of
rentals should be resolved by the trial court.
WHEREFORE, I vote to
GRANT the Motion for Reconsideration.
Very truly yours,
(Sgd.) MA.
LUISA D. VILLARAMA
[1] 38 Phil. 404, August 3, 1918.
[2] GR Nos. 147062-64, December 14, 2001, citing
Diamante v. CA, 206 SCRA 52, February 7, 1992.
1 264 SCRA 483 (1996), per Hermosisima, J.;
concurred in by Justices Padilla (with Separate Opinion), Regalado, Davide,
Bellosillo, Melo, Puno, Kapunan, Mendoza, Francisco, and Panganiban (with
Separate Concurring Opinion). Justice
Vitug wrote a Dissenting Opinion, joined by Justice Torres, while Justice Romero
filed a Concurring and Dissenting Opinion.
Chief Justice Narvasa took no part.
The Court disposed of the case as follows:
“WHEREFORE, the
petition for review of the decision of the Court of Appeals, dated June 23,
1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute Sale between petitioners Equatorial Realty
Development, Inc. and Carmelo & Bauermann, Inc. is hereby deemed rescinded;
Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty
Development the purchase price. The
latter is directed to execute the deeds and documents necessary to return
ownership to Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to allow
Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00.
SO ORDERED.”
2 It may be recalled that Mayfair sought the dismissal
of Civil Case No. 97-85141, a Complaint for a Sum of Money (constituting
rentals and reasonable compensation) filed by Equatorial against Mayfair, on
the ground of res judicata. Allegedly, this Court’s Decision in G.R. No.
106063 served as a bar to the aforementioned case. The Regional Trial Court of Manila, Branch 8 granted Mayfair’s
motion. In dismissing Civil Case No.
97-85141, the trial court was apparently of the impression that a rescissible
contract has the same effect as a void contract. In declaring res judicata,
it ruled in passing:
“The Supreme Court in the Equatorial case, G.R. No. 106063 has
categorically stated that the Deed of Absolute Sale dated July 31, 1978 has
been rescinded subjecting the present complaint to res judicata.
In the final analysis, the
entry of judgment issued by the Supreme Court and the administrative process of
i.e. to execute the deeds and documents necessary to return ownership to x x
x,’ on the contrary, awards Mayfair the expectant ownership over subject
property. The Supreme Court has
recognized tenant Mayfair’s opportunity in the sale by Carmelo of subject
property. This is the spirit and
substance of the Supreme Court decision in G.R. No. 106063. Any other interpretation in reopening a
final and executory judgment opens the gates to endless litigation.” (Order
dated March 11, 1998, p. 9)
Unable to accept the trial
court’s erroneous interpretation that a rescissible contract is void at its
inception, Equatorial elevated the case to this Court on a Petition for Review.
3 Resolution, p. 1.
4 50 C.J.S. §717, p. 195.
5 49 C.J.S. § 436 p. 865. The general rules of construction of written instruments have
been held to apply to the construction of judgments.
6 Ibid., p. 863.
7 Equatorial Realty Development, Inc. vs.
Mayfair Theater, Inc., 264 SCRA 4830, 512 (1996).
8 Sta Lucia and
Development, Inc., vs. Cabrigas, G.R. No. 134895, June 19, 2001;
Mendiola vs. Court of Appeals, G.R. No. 122807, July 5, 1996, Mangoma vs.
Court of Appeals, 241 SCRA 21 (1995).
For a claim of res judicata to prosper, the following
requisites must concur: 1) there must be a final judgment or order; 2)
the court rendering it must have jurisdiction over the subject matter and the
parties; 3) it must be a judgment or order on the merits; and 4) there must be, between the two cases
identity of parties, subject matter and causes of action.
9 (G.R. No.
122807. July 5, 1996) Mendiola vs.
Court of Appeals.
10 50 C.J.S. § 657, p.
103.
11 50 C.J.S. § 728, p.
216
12 Cooke vs.
Cooke, 248 P. 83, 104, 67 Utah 371.
13 49 C.J.S. § 48, p.
110.
14 49 C.J.S. § 50.
15 G.R. No. 106063, p.
512.
16 Ibid.
17 Ibid., p. 514.
18 His Concurring
Opinion in G.R. No. 106063, supra.
19 O’Mara vs. Dettinger,
62 N.Y.S. 2d 825, 271 App. Div. 22; Rosario Creameries, Inc. vs. Cohen,
276 N.Y. 274, 11 N.E. 2d 908, 909; Whitfield vs. United States, 92 U.S.
165, 169, 170, 23 L. Ed 705.
20 Equatorial Realty
Development, Inc. vs. Mayfair Theater, Inc., G.R. No. 133879, November
21, 2001, p. 17.
21 Dissenting Opinion,
p. 5.
22 177 SCRA 604
(1989). Upon the purchase of the leased
property and proper notice by the vendee, the lessee must pay the agreed
monthly rentals to the new owner since, by virtue of the sale, the vendee steps
into the shoes of the original lessor to whom the lessee bound himself to
pay. His belief that the subject property should have been sold to him does
not justify the unilateral withholding of rental payments due to the new owner
of the property.
23 “Since Equatorial
is a buyer in bad faith, this finding renders the sale to it of the property in
question rescissible. We agree with
respondent Appellate Court that the records bear out the fact that Equatorial was
aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts. As such,
Equatorial cannot tenably claim to be a purchaser in good faith, and therefore,
rescission lies.”
24 Santos vs.
Court of Appeals, 221 SCRA 42 (1993).