FELIX L. GONZALES, petitioner, vs. THE HEIRS OF THOMAS and PAULA CRUZ, herein represented by ELENA C. TALENS, respondents. Sppedjo

PANGANIBAN, J.: hustisya

If a stipulation in a contract admits of several meanings, it shall be understood as bearing that import most adequate to render it effectual. An obligation cannot be enforced unless the plaintiff has fulfilled the condition upon which it is premised. Hence, an obligation to purchase cannot be implemented unless and until the sellers have shown their title to the specific portion of the property being sold.

Before us is a Petition for Review on Certiorari assailing the August 13, 1997 Decision1 [Penned by Justice Ramon A. Barcelona; concurred in by Justices Jesus M. Elbinias (chairman) and Artemio G. Tuquero (member)] of the Court of Appeals2 [Eleventh Division.] in CA GR-CV No. 303754, which disposed as follows:

On the other hand, the trial court4 [Regional Trial Court of San Mateo, Rizal, Branch 75.] Decision,5 [Written by Judge Cipriano D. Roma.] which was reversed by the CA, ruled as follows:

We hereby reproduce, unedited, the Court of Appeals’ summary of the facts of this case as follows:

x x x......x x x......x x x

x x x......x x x......x x x’

The Court of Appeals reversed the trial court in this wise:

Attributing reversible errors to the appellate court, petitioner elevated the case to this Court.7 [This case was deemed submitted for decision on January 6, 1999, upon receipt by this Court of respondents’ Memorandum. Petitioner’s Memorandum was filed earlier.] Misjuris

In his Memorandum,8 [See pp. 10-11; rollo, pp. 103-104.] petitioner submits the "following main issues":

For these issues to be resolved, petitioner asks this Court to answer the following questions:

In fine, the resolution of this case depends upon the proper interpretation of paragraph nine of the Contract.

The Petition is meritorious. Jurissc

In its first paragraph, the disputed agreement provides that petitioner shall lease the property for one year, after which he "shall purchase" it. Paragraph nine, on the other hand, requires herein respondents to obtain a separate and distinct Transfer Certificate of Title (TCT) over the property, viz.:

Alleging that petitioner has not purchased the property after the lapse of one year, respondents seek to rescind the Contract and to recover the property. Petitioner, on the other hand, argues that he could not be compelled to purchase the property, because respondents have not complied with paragraph nine, which obligates them to obtain a separate and distinct title in their names. He contends that paragraph nine was a condition precedent to the purchase of the property.

To be sure, this paragraph – and the entire agreement, for that matter -- is not a model of how a contract should be worded. It is an invitation to a litigation, as in fact the parties had to go all to way up to this Court to plead for a resolution of their conflict which is rooted in their failure to express themselves clearly. Small wonder, even the two lower courts gave contradictory understanding of this provision, thereby necessitating the intervention of the highest court of the land.

Both the trial court and the Court of Appeals (CA) interpreted this provision to mean that the respondents had obliged themselves to obtain a TCT in the name of petitioner-lessee. The trial court held that this obligation was a condition precedent to petitioner’s purchase of the property. Since respondents had not performed their obligation, they could not compel petitioner to buy the parcel of land. The CA took the opposite view, holding that the property should be purchased first before respondents may be obliged to obtain a TCT in the name of petitioner-lessee-buyer.

As earlier noted, petitioner disagrees with the interpretation of the two courts and maintains that respondents were obligated to procure a TCT in their names before he could be obliged to purchase the property in question.

Basic is the rule in the interpretation of contracts that if some stipulation therein should admit of several meanings, it shall be understood as bearing that import most adequate to render it effectual.9 [Article 1373, Civil Code.] Considering the antecedents of the ownership of the disputed lot, it appears that petitioner’s interpretation renders clause nine most effectual.

The record shows that at the time the contract was executed, the land in question was still registered in the name of Bernardina Calixto and Severo Cruz, respondents’ predecessors-in-interest. There is no showing whether respondents were the only heirs of Severo Cruz or whether the other half of the land in the name of Bernardina Calixto was adjudicated to them by any means. In fact, they admit that extrajudicial proceedings were still ongoing. Hence, when the Contract of Lease/Purchase was executed, there was no assurance that the respondents were indeed the owners of the specific portion of the lot that petitioner wanted to buy, and if so, in what concept and to what extent.

Thus, the clear intent of the ninth paragraph was for respondents to obtain a separate and distinct TCT in their names. This was necessary to enable them to show their ownership of the stipulated portion of the land and their concomitant right to dispose of it. Absent any title in their names, they could not have sold the disputed parcel of land. Jjlex

It is a well-settled principle in law that no one can give what one does not have -- nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.10 [Segura v. Segura, 165 SCRA 368, September 19, 1988.]

Because the property remained registered in the names of their predecessors-in-interest, private respondents could validly sell only their undivided interest in the estate of Severo Cruz, the extent of which was however not shown in the records. There being no partition of the estate thus far, there was no guarantee as to how much and which portion would be adjudicated to respondents.

In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold.11 [Dawson v. Register of Deeds, GR No. 120600, September 22, 1998, per Panganiban, J.; Salazar v. Court of Appeals, 258 SCRA 317, July 5, 1996; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 46 SCRA 381, August 18, 1972; Pingol v. Court of Appeals, 226 SCRA 118, September 6, 1993.] In this case, the respondent could not deliver ownership or title to a specific portion of the yet undivided property. True, they could have intended to sell their hereditary interest, but in the context of the Contract of Lease/Purchase, the parties under paragraph nine wanted the specific portion of the land to be segregated, identified and specifically titled. Hence, by the said Contract, the respondents as sellers were given a maximum of four years within which to acquire a separate TCT in their names, preparatory to the execution of the deed of sale and the payment of the agreed price in the manner described in paragraph nine. Acctmiso

This interpretation is bolstered by the P50,000 petitioner advanced to respondents in order to help them expedite the transfer of the TCT to their names. Ineluctably, the intention of the parties was to have the title transferred first to respondents’ names as a condition for the completion of the purchase.

In holding that clause nine was not a condition precedent to the purchase of the property, the CA relied on a literal interpretation to the effect that the TCT should be obtained in the name of the petitioner-vendee. It reasoned that the title could be transferred to the name of the buyer only after the completion of the purchase. Thus, petitioner should first purchase the property before respondents could be obliged to transfer the TCT to his name.

We disagree. The literal interpretation not only ignores the factual backdrop of the case; it also utilizes a faulty parsing of paragraph nine, which should purportedly read as follows: "The lessors x x x shall undertake to obtain a separate and distinct TCT xxx to the LESSEE within a reasonable period of time which shall not in any case exceed four (4) years x x x." Read in its entirety, however, paragraph nine does not say that the TCT should be obtained in the name of the lessee. In fact, paragraph nine requires respondents to obtain a "TCT over the herein leased portion to the LESSEE," thereby showing that the crucial phrase "to the LESSEE" adverts to "the leased portion" and not to the name which should appear in the new TCT. Misact

Furthermore, the CA interpretation ignores the other part of paragraph nine, stating that after a separate TCT had been obtained, "a new contract shall be executed by the herein parties which shall be the same in all respects with this Contract of Lease/Purchase insofar as the terms and conditions are concerned."

If, as the CA held, petitioner should purchase the property first before the title can be transferred to his name, why should there be a waiting period of four years before the parties can execute the new contract evidencing the sale? Why should the petitioner still be required to pay rentals after it purchases and pays for the property? The Contract could not have envisioned this absurd scenario.

Clearly, the appellate court’s literal interpretation of the first portion of paragraph nine renders the latter portion thereof ineffectual. In other words, that portion can only mean that the respondents should first obtain a TCT in their names, after which petitioner is given time to purchase and pay for the property.

Respondents insist that "the obligation of petitioner to buy the disputed land immediately after the termination of the one year lease period is explicit."12 [Respondents’ Memorandum, p. 11; rollo, p. 123.] However, it is more reasonable to state that the first paragraph was effectively modified by the ninth. To repeat, petitioner can be compelled to perform his obligation under the first paragraph, only after respondents have complied with the ninth. Unless and until respondents have done so, the first paragraph cannot be enforced against petitioner. Sppedsc

In sum, we hold that the ninth provision was intended to ensure that respondents would have a valid title over the specific portion they were selling to petitioner. Only after the title is assured may the obligation to buy the land and to pay the sums stated in the Contract be enforced within the period stipulated. Verily, the petitioner’s obligation to purchase has not yet ripened and cannot be enforced until and unless respondents can prove their title to the property subject of the Contract.

Because the ninth clause required respondents to obtain a separate and distinct TCT in their names and not in the name of petitioner, it logically follows that such undertaking was a condition precedent to the latter’s obligation to purchase and pay for the land. Put differently, petitioner’s obligation to purchase the land is a conditional one and is governed by Article 1181 of the Civil Code.13 [The provision reads:

Condition has been defined as "every future and uncertain event upon which an obligation or provision is made to depend. It is a future and uncertain event upon which the acquisition or resolution of rights is made to depend by those who execute the juridical act."14 [Arturo Tolentino, Civil Code of the Philippines, Vol. IV, p. 144; citing Brugi, p. 108; 1 Rugigiero 289; 1 Colin & Capitant 194.] Without it, the sale of the property under the Contract cannot be perfected, and petitioner cannot be obliged to purchase the property. "When the consent of a party to a contract is given subject to the fulfillment of a suspensive condition, the contract is not perfected unless that condition is first complied with."15 [Ruperto v. Kosea, 26 Phil 227, December 4, 1913, per Torres, J.] Calrspped

The Court has held that "[w]hen the obligation assumed by a party to a contract is expressly subjected to a condition, the obligation cannot be enforced against him unless the condition is complied with."16 [Wise & Co. v. Kelly, 37 Phil 696, February 21, 1918, per Fisher J.; PNB v. Philippine Trust Co., 68 Phil 48, May 12, 1939, per Diaz, J.; Roque v. Lapuz, 96 SCRA 741.] Furthermore, "[t]he obligatory force of a conditional obligation is subordinated to the happening of a future and uncertain event, so that if that event does not take place, the parties would stand as if the conditional obligation had never existed."17 [Rose Packing Company, Inc. v. Court of Appeals, 167 SCRA 309, November 14, 1988, per Paras, J.; Gaite v. Fonacier, 2 SCRA 831.]

In this case, the obligation of the petitioner to buy the land cannot be enforced unless respondents comply with the suspensive condition that they acquire first a separate and distinct TCT in their names. The suspensive condition not having been fulfilled, then the obligation of the petitioner to purchase the land has not arisen.

In the same vein, respondents cannot rescind the contract, because they have not caused the transfer of the TCT to their names, which is a condition precedent to petitioner’s obligation. This Court has held that "there can be no rescission (or more properly, resolution) of an obligation as yet non-existent, because the suspensive condition has not happened."18 [Luzon Brokerage Co., Inc v. Maritime Building Co., Inc., 46 SCRA 381, August 18, 1972, per Reyes, J.B.L., J.]

Since the reversal of the CA Decision is inevitable, the trial court’s judgment should be reinstated. However, we find no sufficient factual or legal justifications for the awards of moral damages and attorney’s fees. Calrsc

WHEREFORE, the petition is GRANTED and the appealed Decision is REVERSED and SET ASIDE. The Decision of the trial court is REINSTATED, but the award of moral damages and attorney’s fees is DELETED for lack of basis. No costs.

Melo, (Chairman), Purisima and Gonzaga-Reyes, JJ., concur.

Vitug, J., no part; did not participate in deliberations (in PHILJA on official business).