Case Digest: Ascano-Cupino vs. Pacific Rehouse Corporation, G.R. No. 205113. August 26, 2015.

 

CASE TITLE: Ascano-Cupino vs. Pacific Rehouse Corporation
GR No/ Date: G.R. No. 205113. August 26, 2015.
PETITIONER: Honorlita Ascano-Cupino Flaviana Ascano-Colocado Represented by: Rafael Vicente P. Umali	RESPONDENT: Pacific Rehouse Corporation Represented by: Ines & Villacarlos Law Offices
ACTION WITH THE SUPREME COURT: Petition for Review on Certiorari
PONENTE: Carpio, J.
FACTS: On October 1, 1994, Honorita Ascano-Cupino, Flaviana Ascano-Colocado, and their sister Noeminia Ascano (the Ascanos) entered into a Deed of Conditional Sale with Pacific Rehouse Corporation (Pacific) for the sale of a 59,753 sqm land in General Trias, Cavite for P5,975,300. Pacific paid a down payment of P1,792,590, leaving a balance of P4,182,710 to be paid once the following conditions were met: Completion of all necessary documents for the transfer of the land's certificate of title. Vendors (the Ascanos) must guarantee the removal of tenants, squatters, and other occupants from the land. Vendors are responsible for paying disturbance compensation to the tenants. Vendors must submit the Affidavit of Non-Tenancy and land transfer documents to Pacific. In November 1994, the Ascanos requested an additional P600,000, and in 1995, they asked for another P1,000,000, both deductible from the purchase price, which Pacific paid. In February 1995, the Ascanos provided a certification stating the property was untenanted but failed to submit the other required documents, leading them to propose rescinding the contract. Pacific attempted to make additional payments, depositing P1,005,180 in the petitioners' names, but the Ascanos pursued negotiations with other buyers. In September 1995, Pacific annotated an adverse claim on the property and continued demanding the Ascanos fulfill their obligations, which the latter ignored. In February 1999, Pacific demanded either fulfillment of the contract or the return of payments with interest. The Ascanos continued to ignore the demand. In September 1999, Pacific filed a complaint for cancellation of the contract before the RTC of Trece Martires City.  However, before pre-trial, Pacific discovered that petitioners had withdrawn the PI,005,180 it had deposited with Capitol Bank of General Trias. Pacific filed an Amended Complaint changing its cause of action from cancellation to specific performance. The Ascanos alleged that Pacific defaulted in payment and claimed the real purchase price was P11,950,600, not P5,975,300 as indicated in the Deed of Conditional Sale. They also claimed an Addendum was executed in October 2004, transferring the obligation to pay disturbance compensation to tenants to Pacific, which was disputed by Pacific as unauthorized. Pacific denied both the alleged higher purchase price and the validity of the Addendum. RTC: Canceled the Deed of Conditional Sale and its Addendum between Pacific and the Ascanos. Ordered the Ascanos to return P2,602,000 to Pacific. Pacific was ordered to pay: P150,000 in damages. P100,000 in attorney's fees. Litigation expenses. Pacific paid a total of P2,897,590 to the Ascanos. The Ascanos refused to withdraw the balance of P1,000,000 deposited by Pacific. The Ascanos claimed that Pacific failed to pay the tenants' disturbance compensation. Pacific denied authorizing Melecio Fortuno to handle tenant payments. The court ruled in favor of rescinding the contract due to both parties' unwillingness to proceed, with both sides obligated to return what they received. CA: Reversed the RTC's decision and granted Pacific’s appeal. Ordered: Pacific to pay the Ascanos P1,577,530 upon execution of a Deed of Absolute Sale. The Ascanos to evict tenants and informal settlers at their expense. The CA ruled rescission was not warranted, as the Ascanos failed to meet their obligations under the contract. Pacific was entitled to choose specific performance over contract cancellation. Pacific had already paid a total of P4,497,770, leaving a balance of P1,577,530.
ISSUE: Whether the Court of Appeals' erred in its decision to award specific performance instead of rescission. NO
PETITIONER ARGUMENTS:	DEFENDANT:
The CA erred in ordering specific performance instead of rescission, claiming Pacific failed to meet its obligations as vendee. Pacific is bound by the Deed of Conditional Sale and its Addendum, as Fortuno, Pacific’s authorized representative, signed the documents. The real purchase price was P200 per square meter (totaling P11,950,600), but Pacific only acknowledged P5,975,300. Pacific still owes a balance, having only paid P3,605,180 of the agreed price. Pacific failed to pay the tenants' disturbance compensation, leaving them as the injured party entitled to rescind the contract.	The purchase price agreed upon was P5,975,300, as stated in the Deed of Conditional Sale. Pacific fulfilled its payment obligations, including making additional payments requested by petitioners and depositing the balance in a savings account. Petitioners failed to deliver the required documents and clearances, causing delays in completing the sale. Pacific denied that the Addendum was valid, arguing it was a unilateral act without Pacific's consent. Pacific insisted that it is the injured party and emphasized that the CA was correct in overturning the RTC's decision, favoring specific performance.
DECISION/DOCTRINE:   The Court's Ruling The petition is denied. The Court affirms the assailed decision and resolution of the CA. The RTC erred in deciding based on the original complaint. It is clear that the RTC erred in deciding the case based on the original complaint and not on the Amended Complaint, thus: [Pacific] in [its] complaint prays for the rescission or cancellation of contract and to this allegation, the Court has no recourse but to grant this prayer x x x. WHEREFORE, judgment is hereby rendered cancelling (sic) the contract and the addendum to it entered into by [Pacific] and [petitioners] on October 1, 1994 x x x."54 The RTC failed to consider the Amended Complaint filed by Pacific which changed Pacific's cause of action from cancellation/rescission of the Conditional Deed of Sale55 into one for specific performance. In particular, he Amended Complaint modified Pacific's prayer to read: WHEREFORE, in view of the foregoing premises, plaintiff respectfully prays that judgment be rendered in favor of plaintiff and against defendants: a) Directing defendants to sign and deliver to plaintiff a Deed of Absolute Sale covering the subject property and compel said defendants [to] comply with their undertaking with plaintiff as embodied in the Conditional Deed of Sale marked as Annex C. x x x x  Section 8, Rule 10 of the Rules of Court provides: SEC. 8. Effect of amended pleadings. - An amended pleading supersedes the pleading that it amends. However, admissions in superseded pleadings may be received in evidence against the pleader; and claims or defenses alleged therein not incorporated in the amended pleading shall be deemed waived.   With Pacific's filing of the Amended Complaint, the original one must be deemed to have been abandoned and to have become functus officio.  Thus, this Court has ruled: When a pleading is amended, the original pleading is deemed abandoned. The original ceases to perform any further function as a pleading. The case stands for trial on the amended pleading only. Therefore, the Amended Compliant, to which petitioners filed an Amended Answer with Counterclaim, should have been the basis for the RTC's decision. The parties' obligations under the Deed of Conditional Sale Considering that Pacific seeks specific performance, particularly for petitioners to execute a Deed of Absolute Sale and fulfill their obligations under the Deed of Conditional Sale, it is prudent to re-examine the terms of said deed to understand each party's obligations. In particular, the terms and conditions under the Deed of Conditional Sale are: 1. That the VENDEE shall pay unto the VENDORS the sum of PESOS: ONE MILLION SEVEN HUNDRED NINETY TWO THOUSAND FIVE HUNDRED NINETY (P1,792,590.00), as downpayment for the purchase of the aforesaid parcel of land, which the VENDORS acknowledged receipt hereof upon the execution of this Conditional Sale; 2. That full payment of the balance of PESOS: FOUR MILLION ONE HUNDRED EIGHTY TWO THOUSAND SEVEN HUNDRED TEN ONLY (P4,182,710.00), shall be made by the VENDEE unto the VENDORS upon completion by the VENDORS of the pertinent documents that are necessary for the transfer of the [Transfer of] Certificate of Title of the above mentioned parcel of land unto the VENDEE; 3. That the VENDORS shall guarantee the removal of any tenant/s, squatters and other occupants on the said parcel of land.  Payments for the tenants' disturbance compensation shall be shouldered by the VENDORS; 4. That the VENDORS shall furnish the VENDEE the Affidavit of Non-Tenancy and the Land operation transfer document; x x x x In summary, Pacific's obligations are: to pay the down payment of P1,892,590, which it did; and to pay the balance of the purchase price "upon completion by the VENDORS of the pertinent documents that are necessary for the transfer of the Transfer Certificate of Title of the above mentioned parcel of land unto the VENDEE[.]" On the other hand, the Ascanos undertook the following: to furnish Pacific with all "pertinent documents that are necessary for the transfer of the Transfer Certificate of Title" to the subject property to guarantee removal of tenants and shoulder the full amount of the tenants' disturbance compensation; and  to furnish Pacific the certificate of non-tenancy and land operation transfer document. Likewise, as ruled by the CA, the Addendum relied upon by petitioners cannot prevail over the original Deed of Conditional Sale entered into by the parties. As the CA found, the Addendum was not signed by any of Pacific's officers or authorized representatives. Pacific's authorized representative, Dee Hua T. Gatchalian, did not sign the Addendum. Moreover, Fortuno, the person purported to be Pacific's representative, signed as a mere witness. A witness is not a party to the contract and is not automatically converted to a party simply because, under some other extraneous document or circumstance, he has presented himself as the corporation's authorized representative. Likewise, such act of signing as a witness cannot be taken as evidence of that person's authority. Thus, the Addendum did not alter the parties' obligations under the original Deed of Conditional Sale. Pacific is entitled to ask for specific performance. Article 1191 of the Civil Code states: Art. 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 injured party may choose between fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. As previously discussed, the Deed of Conditional Sale clearly spells out the obligations of each party. Based on the allegations of the parties and the findings of the lower courts, Pacific has already partially fulfilled its obligation while petitioners have not. The obligation of petitioners under the Deed of Conditional Sale is to "guarantee removal of tenants" and not merely to pay disturbance compensation. It is an undertaking specifically given to petitioners under the Deed of Conditional Sale, considering that Pacific is not yet the owner of the property and will have no personality to evict the property's present occupants. Petitioners failed to fulfill this obligation, as well as the obligation to deliver the necessary documents to complete the sale. As previously held by the Court, "the injured party is the party who has faithfully fulfilled his obligation or is ready and willing to perform his obligation." From the foregoing, it is clear that Pacific is the injured party, entitled to elect between rescinding of the contract and exacting fulfillment of the obligation. It has opted for the remedy of specific performance, as embodied in its Amended Complaint. Moreover, rescission must not be allowed in favor of petitioners, since they themselves failed to perform their obligations under the Deed of Conditional Sale.  As to the purchase price, both the RTC and the CA held that, given no other evidence to conclude otherwise, the true purchase price agreed upon by the parties is P5,975,300, the amount stipulated in the Deed of Conditional Sale. The Court agrees. The RTC's Pre-trial Order is instructive. Specifically, item "2" of the stipulations reads: STIPULATIONS The parties have agreed on the following: x x x x 2. That on October 1, 1994, plaintiff and defendants] entered into a Deed of Conditional Sale whereby plaintiff obliged itself to purchase the property belonging to defendants for a sum of P5,975,300.00; x x x x Likewise, in the check vouchers issued by Pacific for each of its payments, the consideration under the contract was stated as P100 per square meter. These check vouchers were acknowledged and signed by petitioners. Finally, records show, and petitioners do not dispute, that the following amounts have already been paid by Pacific: (1) down payment of PI,792,590, receipt evidenced by Check Voucher No. 0863;69 (2) additional payment of P600,000, receipt evidenced by Check Voucher No. 0968;70 (3) additional payment of P1,000,000, receipt evidenced by Check Voucher No. 1113; (4) additional payments of P505,18072 and P500,000 deposited at Capitol Bank of General Trias in Cavite. Pacific, therefore, has a balance of P1,577,530 to be paid upon the fulfillment by petitioners of their obligations under the Deed of Conditional Sale. Thereafter, petitioners are to execute the Deed of Absolute Sale in favor of Pacific and deliver all the necessary documents to consummate the sale. WHEREFORE, the petition is DENIED for lack of merit. The Decision dated 17 July 2012 and Resolution dated 8 January 2013 of the Court of Appeals in CA-G.R. CV No. 90568 are AFFIRMED. SO ORDERED.