SECOND DIVISION

ADELFA S. RIVERA, CYNTHIA S. RIVERA, AND

JOSE S. RIVERA,
Petitioners,
G.R. No. 144934
January 15, 2004

-versus-

FIDELA DEL ROSARIO (DECEASED AND

SUBSTITUTED BY HER CO-RESPONDENTS) AND HER
CHILDREN, OSCAR, ROSITA, VIOLETA, ENRIQUE JR.,
CARLOS, JUANITO AND ELOISA, ALL SURNAMED DEL
ROSARIO,

Respondents.

DECISION
QUISUMBING, J.: chanroblesvirtuallawlibrar y

Before us is a petition for review on certiorari of the Court of Appeals’

decision [1] dated November 29, 1999, in CA-G.R. CV No. 60552, which
affirmed the judgment [2] of the Regional Trial Court (RTC) of Malolos,
Bulacan, Branch 17, in Civil Case No. 151-M-93. The RTC granted
respondents’ complaint for nullity of contract of sale and annulment of the
transfer certificates of title issued in favor of petitioners. chan robles virtual law library
The facts, as found by the Court of Appeals, are as follows:
Respondents Fidela (now deceased), Oscar, Rosita, Violeta, Enrique Jr.,
Carlos, Juanito and Eloisa, all surnamed Del Rosario, were the registered
owners of Lot No. 1083-C, a parcel of land situated at Lolomboy, Bulacan.
This lot spanned an area of 15,029 square meters and was covered by TCT
No. T-50.668 (M) registered in the Registry of Deeds of Bulacan. c ralaw

On May 16, 1983, Oscar, Rosita, Violeta, Enrique Jr., Juanito, and Eloisa,
executed a Special Power of Attorney [3] in favor of their mother and co-
respondent, Fidela, authorizing her to sell, lease, mortgage, transfer and
convey their rights over Lot No. 1083-C. [4] Subsequently, Fidela borrowed
P250,000 from Mariano Rivera in the early part of 1987. To secure the loan,
she and Mariano Rivera agreed to execute a deed of real estate mortgage
and an agreement to sell the land. Consequently, on March 9, 1987, Mariano
went to his lawyer, Atty. Efren Barangan, to have three documents drafted:
the Deed of Real Estate Mortgage, [5] a Kasunduan (Agreement to
Sell), [6] and a Deed of Absolute Sale. [7] chan robles virtual law library
The Kasunduan provided that the children of Mariano Rivera, herein
petitioners Adelfa, Cynthia and Jose, would purchase Lot No. 1083-C for a
consideration of P2,141,622.50. This purchase price was to be paid in three
installments: P250,000 upon the signing of the Kasunduan, P750,000 on
August 31, 1987, and P1,141,622.50 on December 31, 1987. [8] It also
provided that the Deed of Absolute Sale would be executed only after the
second installment is paid and a postdated check for the last installment is
deposited with Fidela. [9] As previously stated, however, Mariano had
already caused the drafting of the Deed of Absolute Sale. But unlike the
Kasunduan, the said deed stipulated a purchase price of only P601,160, and
covered a certain Lot No. 1083-A in addition to Lot No. 1083-C. [10] This
deed, as well as the Kasunduan and the Deed of Real Estate
Mortgage, [11] was signed by Mariano’s children, petitioners Adelfa, Cynthia
and Jose, as buyers and mortgagees, on March 9, 1987. [12]
The following day, Mariano Rivera returned to the office of Atty. Barangan,
bringing with him the signed documents. He also brought with him Fidela
and her son Oscar del Rosario, so that the latter two may sign the mortgage
and the Kasunduan there. chan robles virtual law library
Although Fidela intended to sign only the Kasunduan and the Real Estate
Mortgage, she inadvertently affixed her signature on all the three documents
in the office of Atty. Barangan on the said day, March 10, 1987. Mariano
then gave Fidela the amount of P250,000. On October 30, 1987, he also
gave Fidela a check for P200,000. In the ensuing months, also, Mariano
gave Oscar del Rosario several amounts totaling P67,800 upon the latter’s
demand for the payment of the balance despite Oscar’s lack of authority to
receive payments under the Kasunduan. [13] While Mariano was making
payments to Oscar, Fidela entrusted the owner’s copy of TCT No. T-50.668
(M) to Mariano to guarantee compliance with the Kasunduan. c ralaw

When Mariano unreasonably refused to return the TCT, [14] one of the
respondents, Carlos del Rosario, caused the annotation on TCT No. T-50.668
(M) of an Affidavit of Loss of the owner’s duplicate copy of the title on
September 7, 1992. This annotation was offset, however, when Mariano
registered the Deed of Absolute Sale on October 13, 1992, and afterwards
caused the annotation of an Affidavit of Recovery of Title on October 14,
1992. Thus, TCT No. T-50.668 (M) was cancelled, and in its place was issued
TCT No. 158443 (M) in the name of petitioners Adelfa, Cynthia and Jose
Rivera. [15]
Meanwhile, the Riveras, representing themselves to be the new owners of
Lot No. 1083-C, were also negotiating with the tenant, Feliciano Nieto, to rid
the land of the latter’s tenurial right. When Nieto refused to relinquish his
tenurial right over 9,000 sq. m. of the land, the Riveras offered to give
4,500 sq. m. in exchange for the surrender. Nieto could not resist and he
accepted. Subdivision Plan No. Psd-031404-052505 was then made on
August 12, 1992. Later, it was inscribed on TCT No. 158443 (M), and Lot No.
1083-C was divided into Lots 1083 C-1 and 1083 C-2. [16] chan robles virtual law
library
To document their agreement with Feliciano Nieto, the Riveras executed a
Kasulatan sa Pagtatakwil ng Karapatan sa Pagmamay-ari ng Bahagi ng Isang
Lagay na Lupa (Written Abdication of Rights over a Portion of a Parcel of
Land) [17] on November 16, 1992. Four days later, they registered the
document with the Registry of Deeds. Two titles were then issued: TCT No.
T-161784 (M) in the name of Nieto, for 4,500 sq. m. of land, and TCT No. T-
161785 (M) in the name of petitioners Adelfa, Cynthia and Jose Rivera, over
the remaining 10,529 sq. m. of land. [18]
On February 18, 1993, respondents filed a complaint [19] in the Regional
Trial Court of Malolos, asking that the Kasunduan be rescinded for failure of
the Riveras to comply with its conditions, with damages. They also sought
the annulment of the Deed of Absolute Sale on the ground of fraud, the
cancellation of TCT No. T-161784 (M) and TCT No. T-161785 (M), and the
reconveyance to them of the entire property with TCT No. T-50.668 (M)
restored. [20]
Respondents claimed that Fidela never intended to enter into a deed of sale
at the time of its execution and that she signed the said deed on the
mistaken belief that she was merely signing copies of the Kasunduan.
According to respondents, the position where Fidela’s name was typed and
where she was supposed to sign her name in the Kasunduan was roughly in
the same location where it was typed in the Deed of Absolute Sale. They
argued that given Fidela’s advanced age (she was then around 72 at the
time) [21] and the fact that the documents were stacked one on top of the
other at the time of signing, Fidela could have easily and mistakenly
presumed that she was merely signing additional copies of the
Kasunduan. [22] They also alleged that petitioners acquired possession of the
TCT through fraud and machination. chan robles virtual law library
In their defense, petitioners denied the allegations and averred that the
Deed of Absolute Sale was validly entered into by both parties. According to
petitioners, Fidela del Rosario mortgaged Lot No. 1083-C to their
predecessor in interest, Mariano Rivera, on March 9, 1987. But on the
following day Fidela decided to sell the lot to petitioners for P2,161,622.50.
When Mariano agreed (on the condition that Lot No. 1083-C will be delivered
free from all liens and encumbrances), the Kasunduan was consequently
drawn up and signed. After that, however, Fidela informed Mariano of the
existence of Feliciano Nieto’s tenancy right over the lot to the extent of
9,000 sq. m. When Mariano continued to want the land, albeit on a much
lower price of only P601,160, as he had still to deal with Feliciano Nieto, the
parties drafted the Deed of Absolute Sale on March 10, 1987, to supersede
the Kasunduan. c ralaw

Petitioners likewise argued that respondents’ cause of action had been

barred by laches or estoppel since more than four years has lapsed from the
time the parties executed the Deed of Absolute Sale on March 10, 1987, to
the time respondents instituted their complaint on February 18, 1993. cralaw

Petitioners also filed a counterclaim asking for moral and exemplary

damages and the payment of attorney’s fees and costs of suit. c ralaw

After trial, the RTC ruled in favor of respondents:

WHEREFORE, in the light of all the foregoing, judgment is hereby rendered:
1. Declaring the Deed of Absolute Sale dated March 10, 1987 as null and
void;
2. Annulling TCT No. T-158443 (M) and TCT No. T-161785 (M) both in the
names of Adelfa, Cynthia and Jose, all surnamed Rivera;
3. Declaring the plaintiffs to be the legitimate owners of the land covered by
TCT No. T-161785 (M) and ordering defendant Adelfa, Cynthia, and Jose, all
surnamed Rivera, to reconvey the same to the plaintiffs; chan robles virtual law library
4. Ordering the Register of Deeds of Bulacan to cancel TCT No. T-161785
(M) and to issue in its place a new certificate of title in the name of the
plaintiffs as their names appear in TCT No. T-50.668;
5. Declaring TCT No. T-161784 (M) in the name of Feliciano Nieto as valid;
6. Ordering the defendant Riveras to pay the plaintiffs solidarily the following
amounts:
a) P191,246.98 as balance for the 4,500 square-meter portion given to
defendant Feliciano Nieto
b) P200,000.00 as moral damages
c) P50,000.00 as exemplary damages
d) P50,000.00 as attorney’s fees
e) costs of the suit. c ralaw

7. Dismissing the counterclaim of the defendant Riveras;

8. Dismissing the counterclaim and the crossclaim of defendant Feliciano
Nieto.cra law

SO ORDERED. [23]
The trial court ruled that Fidela’s signature in the Deed of Absolute Sale was
genuine, but found that Fidela never intended to sign the said deed. Noting
the peculiar differences between the Kasunduan and the Deed of Absolute
Sale, the trial court concluded that the Riveras were guilty of fraud in
securing the execution of the deed and its registration in the Registry of
Deeds. [24] This notwithstanding, the trial court sustained the validity of TCT
No. T-161784 (M) in the name of Feliciano Nieto since there was no fraud
proven on Nieto’s part. The trial court found him to have relied in good faith
on the representations of ownership of Mariano Rivera. Thus, Nieto’s rights,
according to the trial court, were akin to those of an innocent purchaser for
value. [25]
On the foregoing, the trial court rescinded the Kasunduan but ruled that the
P450,000 paid by petitioners be retained by respondents as payment for the
4,500 sq. m. portion of Lot No. 1083-C that petitioners gave to
Nieto. [26] The trial court likewise ordered petitioners to pay P191,246.98 as
balance for the price of the land given to Nieto, P200,000 as moral damages,
P50,000 as exemplary damages, P50,000 as attorney’s fees, and the costs
of suit. [27]
On appeal to the Court of Appeals, the trial court’s judgment was modified
as follows:
WHEREFORE, the judgment appealed from is hereby AFFIRMED with the
MODIFICATION that the Deed of Absolute Sale dated March 10, 1987 is
declared null and void only insofar as Lot No. 1083-C is concerned, but valid
insofar as it conveyed Lot No. 1083-A, that TCT No. 158443 (M) is valid
insofar as Lot No. 1083-A is concerned and should not be annulled, and
increasing the amount to be paid by the defendants-appellants to the
plaintiffs-appellees for the 4,500 square meters of land given to Feliciano
Nieto to P323,617.50. cralaw

Costs against the defendants-appellants. cra law

SO ORDERED. [28]
Petitioners’ motion for reconsideration was denied. Hence, this petition. chan
robles virtual law library
While this petition was pending, respondent Fidela del Rosario died. She was
substituted by her children, herein respondents. c ralaw

In this petition, petitioners rely on the following grounds:

I
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS, GRAVE AND
REVERSIBLE ERROR IN AWARDING LOT 1083-A IN FAVOR OF THE
PETITIONERS AND FELICIANO NIETO WHICH IS ADMITTEDLY A PART AND
PORTION OF THE EXISTING NORTH LUZON EXPRESSWAY AND AS SUCH
ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION, OR WITH GRAVE
ABUSE OF JUDICIAL DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION.
II
RESPONDENTS FAILED TO PAY THE CORRECT DOCKET, FILING AND OTHER
LAWFUL FEES WITH THE OFFICE OF THE CLERK OF COURT OF THE COURT A
 QUO (RTC, MALOLOS, BULACAN) AT THE TIME OF THE FILING OF THE
ORIGINAL COMPLAINT IN 1993 PURSUANT TO THE SIOL [29] DOCTRINE.
III
[THE] TRIAL COURT AWARDED RELIEFS NOT SPECIFICALLY PRAYED FOR IN
THE AMENDED COMPLAINT WITHOUT REQUIRING THE PAYMENT OF THE
CORRECT DOCKET, FILING AND OTHER LAWFUL FEES.
IV
THE COURT A QUO HAS NO JURISDICTION OVER THE RESPONDENTS’
CAUSE OF ACTION AND OVER THE RES CONSIDERING THAT FELICIANO
NIETO IS AN AGRICULTURAL TENANT OF THE RICELAND IN QUESTION.
V
RESPONDENTS[’] MAIN CAUSE OF ACTION [IS] FOR RESCISSION OF
CONTRACT WHICH IS SUBSIDIARY IN NATURE[,] AND ANNULMENT OF
SALE[,] BOTH OF WHICH HAVE ALREADY PRESCRIBED UNDER ARTICLES
1389 AND 1391 OF THE CIVIL CODE. [30]
Petitioners’ assignment of errors may be reduced into three issues: (1) Did
the trial court acquire jurisdiction over the case, despite an alleged
deficiency in the amount of filing fees paid by respondents and despite the
fact that an agricultural tenant is involved in the case? (2) Did the Court of
Appeals correctly rule that the Deed of Absolute Sale is valid insofar as Lot
1083-A is concerned? (3) Is the respondents’ cause of action barred by
prescription?
On the first issue, petitioners contend that jurisdiction was not validly
acquired because the filing fees respondents paid was only P1,554.45 when
the relief sought was reconveyance of land that was worth P2,141,622.50
under the Kasunduan. They contend that respondents should have paid filing
fees amounting to P12,183.70. In support of their argument, petitioners
invoke the doctrine in Sun Insurance Office, Ltd., (SIOL) v.
Asuncion [31] and attach a certification [32] from the Clerk of Court of the
RTC of Quezon City. c ralaw

Respondents counter that it is beyond dispute that they paid the correct
amount of docket fees when they filed the complaint. If the assessment was
inadequate, they could not be faulted because the clerk of court made no
notice of demand or reassessment, respondents argue. Respondents also
add that since petitioners failed to contest the alleged underpayment of
docket fees in the lower court, they cannot raise the same on appeal. [33]
We rule in favor of respondents. Jurisdiction was validly acquired over the
complaint. In Sun Insurance Office, Ltd., (SIOL) v. Asuncion, [34] this Court
ruled that the filing of the complaint or appropriate initiatory pleading and
the payment of the prescribed docket fee vest a trial court with jurisdiction
over the subject matter or nature of the action. If the amount of docket fees
paid is insufficient considering the amount of the claim, the clerk of court of
the lower court involved or his duly authorized deputy has the responsibility
of making a deficiency assessment. The party filing the case will be required
to pay the deficiency, but jurisdiction is not automatically lost.
cra law

Here it is beyond dispute that respondents paid the full amount of docket
fees as assessed by the Clerk of Court of the Regional Trial Court of Malolos,
Bulacan, Branch 17, where they filed the complaint. If petitioners believed
that the assessment was incorrect, they should have questioned it before
the trial court. Instead, petitioners belatedly question the alleged
underpayment of docket fees through this petition, attempting to support
their position with the opinion and certification of the Clerk of Court of
another judicial region. Needless to state, such certification has no bearing
on the instant case.c rala w

Petitioners also contend that the trial court does not have jurisdiction over
the case because it involves an agricultural tenant. They insist that by virtue
of Presidential Decree Nos. 316 and 1038, [35] it is the Department of
Agrarian Reform Adjudication Board (DARAB) that has jurisdiction. [36]
Petitioners’ contention lacks merit. The DARAB has exclusive original
jurisdiction over cases involving the rights and obligations of persons
engaged in the management, cultivation and use of all agricultural lands
covered by the Comprehensive Agrarian Reform Law. [37] However, the
cause of action in this case is primarily against the petitioners, as
indispensable parties, for rescission of the Kasunduan and nullification of the
Deed of Sale and the TCTs issued because of them. Feliciano Nieto was
impleaded merely as a necessary party, stemming from whatever rights he
may have acquired by virtue of the agreement between him and the Riveras
and the corresponding TCT issued. Hence, it is the regular judicial courts
that have jurisdiction over the case.
cra law

On the second issue, contrary to the ruling of the Court of Appeals that the
Deed of Absolute Sale is void only insofar as it covers Lot No. 1083-C, we
find that the said deed is void in its entirety. Noteworthy is that during the
oral arguments before the Court of Appeals, both petitioners and
respondents admitted that Lot No. 1083-A had been expropriated by the
government long before the Deed of Absolute Sale was entered
into. [38] What’s more, this case involves only Lot No. 1083-C. It never
involved Lot 1083-A. Thus, the Court of Appeals had no jurisdiction to
adjudicate on Lot 1083-A, as it was never touched upon in the pleadings or
made the subject of evidence at trial. [39]
As to the third issue, petitioners cite Articles 1383, [40] 1389 [41] and
1391 [42] of the New Civil Code. They submit that the complaint for
rescission of the Kasunduan should have been dismissed, for respondents’
failure to prove that there was no other legal means available to obtain
reparation other than to file a case for rescission, as required by Article
1383. Moreover, petitioners contend that even assuming respondents had
satisfied this requirement, prescription had already set in, the complaint
having been filed in 1992 or five years after the execution of the Deed of
Absolute Sale in March 10, 1987. chan robles virtual law library
Respondents counter that Article 1383 of the New Civil Code applies only to
rescissible contracts enumerated under Article 1381 of the same Code, while
the cause of action in this case is for rescission of a reciprocal obligation, to
which Article 1191 [43] of the Code applies. They assert that their cause of
action had not prescribed because the four-year prescriptive period is
counted from the date of discovery of the fraud, which, in this case, was
only in 1992.cralaw

Rescission of reciprocal obligations under Article 1191 of the New Civil Code
should be distinguished from rescission of contracts under Article 1383 of
the same Code. Both presuppose contracts validly entered into as well as
subsisting, and both require mutual restitution when proper, nevertheless
they are not entirely identical. [44]
In countless times there has been confusion between rescission under
Articles 1381 and 1191 of the Civil Code. Through this case we again
emphasize that rescission of reciprocal obligations under Article 1191 is
different from rescissible contracts under Chapter 6 of the law on contracts
under the Civil Code. [45] While Article 1191 uses the term rescission, the
original term used in Article 1124 of the old Civil Code, from which Article
1191 was based, was resolution. [46] Resolution is a principal action that is
based on breach of a party, while rescission under Article 1383 is a
subsidiary action limited to cases of rescission for lesion under Article 1381
of the New Civil Code, [47] which expressly enumerates the following
rescissible contracts: chan robles virtual law library
ART. 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom
they represent suffer lesion by more than one-fourth of the value of the
things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the
lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any
other manner collect the claims due them;
(4) Those which refer to things under litigation if they have been entered
into by the defendant without the knowledge and approval of the litigants or
of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.c ralaw

Obviously, the Kasunduan does not fall under any of those situations
mentioned in Article 1381. Consequently, Article 1383 is inapplicable. Hence,
we rule in favor of the respondents. chan robles virtual law library
May the contract entered into between the parties, however, be rescinded
based on Article 1191?
A careful reading of the Kasunduan reveals that it is in the nature of a
contract to sell, as distinguished from a contract of sale. In a contract of
sale, the title to the property passes to the vendee upon the delivery of the
thing sold; while in a contract to sell, ownership is, by agreement, reserved
in the vendor and is not to pass to the vendee until full payment of the
purchase price. [48] In a contract to sell, the payment of the purchase price
is a positive suspensive condition, [49] the failure of which is not a breach,
casual or serious, but a situation that prevents the obligation of the vendor
to convey title from acquiring an obligatory force. [50]
Respondents in this case bound themselves to deliver a deed of absolute
sale and clean title covering Lot No. 1083-C after petitioners have made the
second installment. This promise to sell was subject to the fulfillment of the
suspensive condition that petitioners pay P750,000 on August 31, 1987, and
deposit a postdated check for the third installment of
P1,141,622.50. [51] Petitioners, however, failed to complete payment of the
second installment. The non-fulfillment of the condition rendered the
contract to sell ineffective and without force and effect. It must be stressed
that the breach contemplated in Article 1191 of the New Civil Code is the
obligor’s failure to comply with an obligation already extant, not a failure of
a condition to render binding that obligation. [52] Failure to pay, in this
instance, is not even a breach but an event that prevents the vendor’s
obligation to convey title from acquiring binding force. [53] Hence, the
agreement of the parties in the instant case may be set aside, but not
because of a breach on the part of petitioners for failure to complete
payment of the second installment. Rather, their failure to do so prevented
the obligation of respondents to convey title from acquiring an obligatory
force. [54]
Coming now to the matter of prescription. Contrary to petitioners’ assertion,
we find that prescription has not yet set in. Article 1391 states that the
action for annulment of void contracts shall be brought within four years.
This period shall begin from the time the fraud or mistake is discovered.
Here, the fraud was discovered in 1992 and the complaint filed in 1993.
Thus, the case is well within the prescriptive period. chan robles virtual law library
On the matter of damages, the Court of Appeals awarded respondents
P323,617.50 as actual damages for the loss of the land that was given to
Nieto, P200,000 as moral damages, P50,000 as exemplary damages,
P50,000 as attorney’s fees and the costs of suit. Modifications are in order,
however. cralaw

Moral damages may be recovered in cases where one willfully causes injury
to property, or in cases of breach of contract where the other party acts
fraudulently or in bad faith. [55] Exemplary damages are imposed by way of
example or correction for the public good, [56] when the party to a contract
acts in a wanton, fraudulent, oppressive or malevolent
manner. [57] Attorney’s fees are allowed when exemplary damages are
awarded and when the party to a suit is compelled to incur expenses to
protect his interest. [58]
While it has been sufficiently proven that the respondents are entitled to
damages, the actual amounts awarded by the lower court must be reduced
because damages are not intended for a litigant’s enrichment, at the
expense of the petitioners. [59] The purpose for the award of damages other
than actual damages would be served, in this case, by reducing the amounts
awarded. chan robles virtual law library
Respondents were amply compensated through the award of actual
damages, which should be sustained. The other damages awarded total
P300,000, or almost equivalent to the amount of actual damages. Practically
this will double the amount of actual damages awarded to respondents. To
avoid breaching the doctrine on enrichment, award for damages other than
actual should be reduced. Thus, the amount of moral damages should be set
at only P30,000, and the award of exemplary damages at only P20,000. The
award of attorney’s fees should also be reduced to P20,000, which under the
circumstances of this case appears justified and reasonable.
cra law

WHEREFORE, the assailed decision of the Court of Appeals is MODIFIED. The

Deed of Absolute Sale in question is declared NULL and VOID in its entirety.
Petitioners are ORDERED to pay respondents P323,617.50 as actual
damages, P30,000.00 as moral damages, P20,000.00 as exemplary
damages and P20,000.00 as attorney’s fees. No pronouncement as to costs. c ralaw

SO ORDERED. cralaw

Puno, J., (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ.,

concur. cralaw