G.R. No. L-17681 and L-17682, February 26, 1965.
Case Parties:

G.R. No. L-17681: MINDANAO ACADEMY, INC., MAURICIO O. BAS, ERLINDA D. DIAZ, accompanied by her husband ANTOLIN DIAZ, ESTER AIDA D. BAS, accompanied by her husband MAURICIO O. BAS, ROSALINDA D. BELLEZA, accompanied by her husband APOLINARIO BELLEZA, LUZ MINDA D. DAJAO, accompanied by her husband ELIGIO C. DAJAO, ADELAIDA D. NUESA, accompanied by her husband WILSON NUESA, PEDRO N. ABUTON, SY PAOCO, JOSEFA DIGNUM, and PERFECTO VELASQUEZ, plaintiffs-appellees, vs. ILDEFONSO D. YAP, ROSENDA A. DE NUQUI, and SOTERO A. DIONISIO, JR., defendants, ILDEFONSO D. YAP, defendant-appellant.
G.R. No. L-17682: ROSENDA A. DE NUQUI, SOTERO DIONISIO, JR., ERLINDA DIONISIO-DIAZ and ANTOLIN DIAZ, plaintiffs-appellees, vs. ILDEFONSO D. YAP, defendant-appellant.

FACTS

On May 10, 1954, Rosenda A. de Nuqui and her son Sotero Dionisio, Jr. executed a “Mutual Agreement” selling three parcels of residential land in Oroquieta, Misamis Occidental, and another parcel in Ozamis City, including buildings, laboratory equipment, books, furniture, and fixtures used by the Mindanao Academy and Misamis Academy, to Ildefonso D. Yap for P100,700.00. Adelaida Dionisio-Nuesa was named as a co-vendor but did not participate. The sellers were described as owners pro-indiviso, but in truth, the lands were co-owned by Rosenda’s other children (Erlinda D. Diaz, Ester Aida D. Bas, Rosalinda D. Belleza, and Luz Minda D. Dajao), and the school buildings and facilities were owned by the Mindanao Academy, Inc. Yap took possession, operated the schools, and renamed them Harvardian Colleges. Two actions were filed: Civil Case No. 1774 for annulment of the sale and recovery of rents and damages by the Mindanao Academy, Inc., the non-participating co-owner children, and other stockholders; and Civil Case No. 1907 for rescission by Rosenda Nuqui, Sotero Dionisio, Jr., and Erlinda D. Diaz (joined by her husband) against Yap. The four other children had ceded their shares to Erlinda. The cases were tried jointly. The trial court declared the Mutual Agreement null and void ab initio, ordered Yap to restore properties, pay rents, and awarded damages and attorney’s fees. Yap appealed.

ISSUE

1. Whether the trial court erred in declaring the Mutual Agreement entirely void.
2. Whether the trial court erred in holding Yap liable for rents and attorney’s fees in Civil Case No. 1907 and in ordering restoration of all properties to the plaintiffs therein.
3. Whether the trial court erred in awarding nominal and exemplary damages and attorney’s fees to the plaintiff stockholders in Civil Case No. 1774.
4. Whether Yap is entitled to enforce the warranty clause in the deed.

RULING

1. The trial court did not err in declaring the Mutual Agreement null and void ab initio. The contract purported to sell properties not exclusively owned by the sellers (the lands were co-owned, and the buildings and facilities belonged to the Mindanao Academy, Inc.), and the prestation was indivisible as Yap intended to acquire all properties. The subsequent quitclaim by four co-owners to Erlinda D. Diaz, made after the annulment action was filed, and the finding of bad faith against her (which was erroneous as she had filed an earlier action asserting her rights) did not validate the sale, especially since it included properties of a corporation not party to the transaction.
2. The trial court correctly ordered Yap to restore the lands, buildings, and improvements to the plaintiffs in Civil Case No. 1907 as a consequence of annulment. The award of P300.00 monthly rent from July 31, 1956, was proper because Yap’s possession, initially treated as in good faith due to mutual bad faith with the vendors, became in bad faith upon service of judicial summons, interrupting his right to fruits. However, the award of P1,000.00 attorney’s fees to Erlinda D. Diaz and her husband was erroneous, as she was not a party to the Mutual Agreement and had no cause of action for rescission in that case.
3. The trial court erred in awarding P10,000.00 nominal damages and P3,000.00 exemplary damages to the plaintiff stockholders in Civil Case No. 1774. Their interests were represented by the corporation, and no separate cause of action was alleged other than for moral damages, which the trial court ruled out and was not appealed. The award of P2,000.00 attorney’s fees should be upheld but payable to counsel for the account of the Mindanao Academy, Inc., not the individual stockholders.
4. It is unnecessary to rule on the enforcement of the warranty clause in the deed, as the total annulment of the contract, due to the fault of both parties, precludes enforcement of any of its stipulations.
The judgment was modified by eliminating the attorney’s fees award to Erlinda D. Diaz and her husband in Civil Case No. 1907, eliminating the nominal and exemplary damages in Civil Case No. 1774, and making the attorney’s fees award therein payable to counsel for the Mindanao Academy, Inc. In all other respects, the judgment was affirmed.