EQUATORIAL V. MAYFAIR- Sale of Land

Category: Property, Ownership and Its Modifications

EQUATORIAL V. MAYFAIR- Sale of Land

While execution of a public instrument of sale is recognized by law as equivalent to the delivery of the thing sold, such constructive or symbolic delivery is merely presumptive. It is nullified by the failure of the vendee to take actual possession of the land sold.

FACTS:

Carmelo & Bauermann, Inc. owned a land, together with two 2-storey buildings at Claro M. Recto Avenue, Manila, and covered by TCT No. 18529.

On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc. fpr 20 years. The lease covered a portion of the second floor and mezzanine of a two-storey building with about 1,610 square meters of floor area, which respondent used as Maxim Theater.

Two years later, on March 31, 1969, Mayfair entered into a second Lease with Carmelo for another portion of the latter’s property this time, a part of the second floor of the two-storey building, and two store spaces on the ground floor. In that space, Mayfair put up another movie house known as Miramar Theater. The Contract of Lease was likewise for a period of 20 years.

Both leases contained a clause giving Mayfair a right of first refusal to purchase the subject properties. Sadly, on July 30, 1978 - within the 20-year-lease term -- the subject properties were sold by Carmelo to Equatorial Realty Development, Inc. for eleven million smackers, without their first being offered to Mayfair.

As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before the Regional Trial Court of Manila for the recission of the Deed of Absolute Sale between Carmelo and Equatorial, specific performance, and damages. RTC decided for Carmelo and Equatorial. Tsk tsk.
CA reversed and ruled for Mayfair. The SC denied a petition questioning the CA decision. What happened is that the contract did get rescinded, Equatorial got its money back and asserted that Mayfair have the right to purchase the lots for 11 million bucks.

Decision became final and executory, so Mayfair deposited with the clerk the 11M (less 847grand withholding) payment for the properties (Carmelo somehow disappeared).
Meanwhile, on Sept 18, 1997, barely five months after Mayfair submitted its Motion for Execution, Equatorial demanded from Mayfair backrentals and reasonable compensation for the Mayfair’s continued use of the subject premises after its lease contracts expired. Remember that Mayfair was still occupying the premises during all this hullabaloo.

ISSUE:

Whether or not Equatorial was the owner of the subject property and could thus enjoy the fruits and rentals.

HELD:NO.

Nor right of ownership was transferred from Carmelo to Equatorial since there was failure to deliver the property to the buyer. Compound this with the fact that the sale was even rescinded.

The court went on to assert that rent is a civil fruit that belonged to the owner of the property producing it by right of accession. Hence, the rentals that fell due from the time of the perfection of the sale to petitioner until its rescission by final judgment should belong to the owner of the property during that period.

We remember from SALES that in a contract of sale, “one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent.”

Ownership of the thing sold is a real right, which the buyer acquires only upon delivery of the thing to him “in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.” This right is transferred, not by contract alone, but by tradition or delivery. There is delivery if and when the thing sold “is placed in the control and possession of the vendee.”

While execution of a public instrument of sale is recognized by law as equivalent to the delivery of the thing sold, such constructive or symbolic delivery is merely presumptive. It is nullified by the failure of the vendee to take actual possession of the land sold.

For property to be delivered, we need two things. Delivery of property or title, and transfer of control or custody to the buyer.

Possession was never acquired by the petitioner. It therefore had no rights to rent.