GR 34574; (September, 1931) (Digest)
G.R. No. 34574 ; September 19, 1931
CIRILO ABELLA, plaintiff-appellant, vs. MARIANO GONZAGA, defendant-appellant.
FACTS
The parties entered into a “Special Contract of Lease” on April 15, 1921, where defendant Mariano Gonzaga, as landowner, leased a parcel of land to plaintiff Cirilo Abella for five years. The contract stipulated an annual rent and a substantial initial payment. Critically, its fourth clause provided that upon full payment of rent over the lease term, the owner would transfer full ownership of the property to the tenant free of charge. The plaintiff made all payments, though the final payment was delayed by over a year, with the defendant accepting it along with agreed-upon interest. At the time of the contract’s execution, the defendant did not yet hold title to the land but subsequently acquired it on December 16, 1922. The land was also mortgaged by the defendant to the Mandaluyong Estate. The plaintiff filed for specific performance to compel the transfer of ownership, which the trial court granted. Both parties appealed.
ISSUE
Whether the plaintiff is entitled to specific performance of the contract, compelling the defendant to execute a deed of transfer for the land, despite the defendant’s lack of title at the time of the contract and the existence of a mortgage on the property.
RULING
Yes. The Supreme Court affirmed the trial court’s judgment, ordering the defendant to execute the deed of transfer. The Court held that the contract, though denominated a lease, was in substance a contract of sale on installments. The defendant, having held himself out as the owner and subsequently acquiring title, was estopped from denying his capacity to bind the property. The doctrine from Llacer vs. Muñoz de Bustillo applies: if a person conveys land and later acquires title, the subsequent ownership validates the prior conveyance. Since the plaintiff fulfilled his obligations (with delayed payments cured by acceptance and interest), he was entitled to specific performance. However, the defendant must first redeem the mortgage on the land to free it from encumbrance before executing the conveyance.
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