GR L 40105; (November, 1985) (Digest)
G.R. No. L-40105 November 11, 1985
NESTOR L. CENTENO, et al., petitioners, vs. COURT OF APPEALS, RUFINA C. VICTORIA and DANIEL O. VICTORIA, respondents.
FACTS
The respondents, spouses Rufina and Daniel Victoria, agreed to sell an unregistered parcel of land to spouses Pedro M. Cruz and Rosanna Villar under a Contract to Sell dated July 10, 1969. The Cruzes disclosed their intent to subdivide the property for resale. They subsequently subdivided the land and, through Pedro M. Cruz, entered into separate Contracts of Sale with the petitioners for various residential lots. In several of these contracts, Cruz falsely represented himself as the attorney-in-fact of the Victorias. On March 11, 1970, the Victorias executed a Deed of Sale with First Mortgage over the entire property in favor of the Cruzes, transferring ownership subject to a mortgage securing the unpaid balance. The Cruzes then obtained an original certificate of title.
When the Cruzes defaulted on the mortgage, the Victorias extrajudicially foreclosed the property and were the highest bidders at the sheriff’s sale. The petitioners’ contracts with Cruz were never registered or annotated on the title. The petitioners filed an action seeking to compel the Victorias to recognize their contracts and to execute the corresponding deeds of sale.
ISSUE
Whether the petitioners, as buyers of subdivided lots from Pedro M. Cruz, can compel the Victorias, the original owners and subsequent mortgagee-vendors, to recognize their contracts of sale and execute the corresponding deeds of conveyance.
RULING
No. The Supreme Court affirmed the Court of Appeals’ decision dismissing the petitioners’ complaint. The legal logic rests on the absence of privity of contract and the principle of relativity of contracts under Article 1311 of the Civil Code. The contracts of sale were executed solely between the petitioners and Pedro M. Cruz. The Stipulation of Facts explicitly stated that Cruz was never appointed as the attorney-in-fact of the Victorias, making his representation false and unauthorized. Consequently, the Victorias were not parties to these contracts and incurred no obligation arising from them.
The Court rejected the argument of estoppel. The mere knowledge by the Victorias of the Cruzes’ intent to subdivide did not constitute consent to the specific sales made by Cruz prior to full payment of the purchase price, nor did it estop them from enforcing their mortgage rights. There was no evidence that the Victorias induced the petitioners to buy the lots or received any portion of the purchase money. The petitioners’ recourse lies against the Cruzes for any breach of their contracts. The foreclosure by the Victorias, as mortgagees, was a valid exercise of a contractual right separate from the unauthorized sales made by Cruz. Since the petitioners’ unregistered contracts created no real rights binding on the titled property, they cannot prevail over the Victorias’ superior registered mortgage lien and subsequent acquisition of the property at the foreclosure sale.