G.R. No. 75096 and G.R. No. 80851, October 23, 1990
Saturnino Songcuan, petitioner, vs. Hon. Intermediate Appellate Court, Mariano Alviar, Belen Alviar and Luz Alviar Pinlac, respondents. ( G.R. No. 75096 ) / Saturnino Songcuan, petitioner, vs. Hon. Genaro C. Gines, et al., respondents. (G.R. No. 80851)

FACTS

Victoriano Alviar owned two parcels of land in San Fernando, La Union, on which stood a building owned by his son Mariano and daughter-in-law Belen. On September 29, 1966, the Alviars sold these properties to Saturnino Songcuan. Subsequently, on October 10, 1966, Songcuan executed a “Deed of Repurchase” granting the Alviars the right to repurchase the properties within ten years. An undated “P.S. (Additional Condition)” appended to the deed stipulated that if the Alviars repurchased the properties, they would be obliged to execute a 25-year lease contract with Songcuan for “the premises actually occupied by me… at the time of the execution of this instrument,” at a monthly rental of P390. At that time, Songcuan admitted he was physically occupying only one-third of the ground floor of the building.
In 1974, the Alviars filed a complaint for redemption. The trial court and later the Court of Appeals upheld the transaction as a valid sale with pacto de retro, ordering the Alviars to pay the repurchase price plus the cost of a new building Songcuan constructed after a fire. The appellate court deemed a specific ruling on the lease condition unnecessary as the contract itself was the law between the parties. This decision became final. Upon tendering payment, the Alviars sought a writ of possession, but Songcuan refused, insisting they first execute a lease contract for the entire premises.

ISSUE

The principal issue is the proper interpretation and enforcement of the lease condition in the “P.S.” clause of the October 10, 1966 deed, specifically: (1) Is the lease condition valid and binding? (2) What is the exact area subject to the lease?

RULING

The Supreme Court affirmed the decision of the Intermediate Appellate Court. The lease condition is valid and binding. The Court rejected Songcuan’s argument that its non-registration or non-annotation on the title rendered it unenforceable. The purpose of annotation is merely to give notice to third parties; it does not affect the validity of the instrument between the contracting parties. The condition was a integral part of their agreement, signed by all parties, and thus constituted the law between them.
Regarding the leased area, the Court ruled that Songcuan is entitled to lease only the portion he was actually occupying at the time of the deed’s execution, not the entire property. The clause explicitly refers to “the premises actually occupied by me (Saturnino Songcuan) at the time of the execution of this instrument.” It was admitted during pre-trial that Songcuan was then occupying only one-third of the ground floor. His subsequent ownership of the entire property did not expand the scope of the contractual lease right, which was fixed at the time of the agreement. Consequently, the Alviars are entitled to a writ of possession for the remaining two-thirds of the ground floor and the rest of the property. The lease period of 25 years commenced from the date the Alviars effectively exercised their right to repurchase. The Court also upheld the deletion of an award for attorney’s fees to Songcuan, finding no evidence of the Alviars’ gross bad faith. Given