DDI v. SSS (G.R. No. 231053. April 04, 2018)


FACTS: Involved is a parcel of land covered by Transfer Certificate of Title (TCT) Nos. T-18203, T-18204, T-255986, and T-255985, with an aggregate area of 2,450 sq.m., including the building erected thereon, situated in Agdao, Davao City.

Sometime in the year 1976, respondent Social Security System (SSS) filed a case before the Social Security Commission (SSC) against the Dalisay Group of Companies (DGC) for the collection of unremitted SSS premium contributions of the latter's employees.

On March 11, 1977, Desiderio Dalisay, then President of petitioner Desiderio Dalisay Investments, Inc. (DDII), sent a Letter to SSS offering the subject land and building to offset DGC's liabilities subject of the aforementioned cases at P3,500,000.

On July 24, 1982, DDII issued a Resolution stating that the properties covered by TCT Nos. T-18204 and T-8227 together with all improvements thereon be sold to SSS in order to settle the unremitted premiums and penalty obligations of DDII, Davao Stevedore Terminal Co., and Desidal Fruits, Inc. In the same Board Resolution, Desiderio Dalisay, or in his absence, Veronica Dalisay-Tirol (Dalisay-Tirol), was authorized to sign in behalf of the corporation any and all papers pertinent to effect full and absolute transfer of said properties to the SSS.

On May 21, 1982, the real estate appraisers Joson, Capili and Associates, whose services Dalisay engaged for the purpose of appraising the value of the properties being offered to SSS, sent a letter to him informing him that the total value of the lots is One Million Nine Hundred Fifty Four Thousand Seven Hundred Seventy-Seven & 78/100 (P1,954,777.78), rounded to P1,955,000. This Appraisal Report was then indorsed to the SSC.

On May 27, 1982, during a meeting (1982 Meeting) of the SSS' Committee on Buildings, Supplies and Equipment (Committee) attended by Atty. Cabarroguis, the latter, representing DGC, explained that the DGC is in financial distress and is in no way capable of settling its obligation in cash. When asked what the DGC's offer is, he stated that he has "the authority to offer [the properties] in the amount of 2 million pesos." He also assured them that that they will turn the properties over to SSS free of liens and encumbrances. The offer for dacion was accepted at the appraised value of P2,000,000. As regards the implementation of the dacion, Atty. Cabarroguis stated that "[t)]he Legal Department of the SSS can prepare the Deed of Sale or whatever documents that have to be prepared. My clients are ready to vacate the premises and you can have it occupied anytime." During the same Meeting, Atty. Cabarroguis likewise relayed to SSS that they are requesting that the P2,000,000 amount be applied first to the unpaid premiums and the excess be used to settle part of the penalties due.

On May 28, 1982, DDII's total liabilities with SSS covering unpaid premium contributions, inclusive of penalties and salary/calamity loan amortizations, amounted to P4,421,321.62.[16]

On June 9, 1982, the SSC issued Resolution No. 849 - s. 82. In said Resolution, it accepted DDII's proposed dacion en pago pegged at the appraised value of P2,000,000.
The SSC then informed DDII of its acceptance of the proposed dacion in payment, including its specified terms and conditions, via a Letter dated June 17, 1982.

On July 8, 1982, Dalisay-Tirol, then Acting President and General Manager of Dalisay Investment, informed SSS that the company is preparing the subject property, especially the building, for its turnover on August 15, 1982.

Later, or on July 31, 1982, An Affidavit of Consent for the Sale of Real Property was executed by the surviving heirs of the late Regina L. Dalisay, stating that in order to settle the companies' obligations to SSS, they expressly agree to the sale thereof to the SSS for its partial settlement.

On September 18, 1989, Desiderio Dalisay passed away.

As of November 30, 1995, the company's total obligations allegedly amounted to P15,689,684.93.

Later, or on December 29, 1995, the Philippine National Bank (PNB) executed a Deed of Confirmatory Sale in favor of DDII for properties that it reacquired, including the property subject of the present dispute.

On March 20, 1998, Eddie A. Jara (Jara), Assistant Vice-President of the SSS - Davao I Branch, executed an Affidavit of Adverse Claim over the properties subject of the instant case because of the companies' failure to turn over the certificates of title to SSS.

Then, on April 2, 1998, Jara sent a letter to Dalisay-Tirol, formally demanding the certificates of title over the properties subject of the dacion.[26] In said letter, Jara stated that "[t]he mortgage with PNB has already been settled by Desiderio Dalisay Investments, Inc. last January 20, 1994, but the titles were not delivered to the SSS in violation of the express terms in the dacion in payment that the Dalisay group should deliver the titles after the release of the mortgage with the PNB."[27]

In her reply dated May 5, 1998 to the April 2, 1998 Letter, Dalisay-Tirol, who was then the President of DDII, stated that the corporation could not at that time give due course to and act on the matter because of several issues that need to be resolved first, including two cases involving the subject properties, to wit: (1) the properties are being claimed by the estate of Desiderio F. Dalisay, Sr. and included in the inventory already filed by the executrix, where the corporation's stockholders are contesting said inclusion; and (2) the SSS' pending petition covering the properties where the accuracy and propriety of the amount of PI5,605,079.25 contained therein has yet to be substantiated and verified.[28] She likewise pointed out that the "Board Resolution covers only two (2) parcels of land which were proposed and submitted for the purpose of a negotiated sale to settle unremitted premiums and penalties."

On November 18, 1999, DDII, through its Managing Director Edith L. Dalisay-Valenzuela (Dalisay-Valenzuela), wrote a letter addressed to SSS President and Chief Executive Officer Carlos A. Arellano, requesting the reevaluation and reconsideration of their problem.

On January 18, 2000, DDII issued a Letter to SSS proposing the "offset of SSS obligations with back rentals on occupied land and building of the obligor." It alleged that SSS is bound to pay back rentals totaling P34,217,988.19 for its use of the subject property from July 1982 up to the present. It likewise demanded for the return of the said property.

Meanwhile, despite repeated written and oral demands made by SSS for DDII to deliver the titles of the subject property, free from all liens and encumbrances, DDII still failed to comply.

On October 8, 2002, DDII filed a complaint for Quieting of Title, Recovery of Possession and Damages against SSS with the Regional Trial Court (RTC), Branch 14, in Davao City, docketed as Civil Case No. 29, 353-02.

In said complaint, DDII asserted that it is the owner of the subject property. It averred that when SSS filed the abovementioned cases, the late Desiderio Dalisay, during his lifetime and as president of the company, offered the property appraised at P3,500,000 to SSS for the offsetting of said amount against DGC's total liability to SSS. SSS accepted such but only in the amount of P2,000,000 and subject to certain conditions. It also insists that while negotiations with SSS were still ongoing, it decided to vacate the subject property in favor of SSS to show goodwill on its part. Unfortunately, the negotiations were not fruitful as they failed to agree on the terms and conditions set forth by SSS. Furthermore, DDII insists that Atty. Cabarroguis' alleged acceptance of the proposals of SSS was not covered by any Board Resolution or Affidavit of Consent by the corporate and individual owners of the properties. Thus, according to DDII, there was no meeting of the minds between the parties. Consequently, there was no dation in payment to speak of, contrary to the claim of SSS. With these, DDII asserted that SSS owes it P43,208,270.99 as back rentals for its use of the property from 1982 onwards. It also prayed for attorney's fees and costs of litigation.

In its Answer, SSS argued that the offer for dacion was categorically accepted by SSS, thereby perfecting such.

ISSUES: The pivotal issue in the instant case is whether or not there was a perfected dacion en pago; and if answered in the affirmative, whether or not SSS validly acquired title or interest over the subject properties. This is so since if there was a perfected dacion and if title or interest over the property was transferred to SSS, then an action for quieting of title filed by DDII would not prosper since SSS has a legitimate interest and claim over the properties subject of the case.HELD: The Supreme Court DENIED the petition. WHEREFORE, the instant petition is DENIED. The complaint for quieting of title, recovery of possession and damages, docketed as Civil Case No. 29,353-02, is DISMISSED for lack of merit.

For an action to quiet title to prosper, two indispensable requisites must concur, namely: (1) the plaintiff or complainant has a legal or an equitable title to or interest in the real property subject of the action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting cloud on his title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy.

If, in this case, dacion en pago was indeed perfected, SSS has a legitimate title and interest over the properties in question. As a result, SSS' claim which allegedly casts a cloud on DDII's title is valid and operative, and consequently, the action for quieting of title filed by DDII will not prosper.

Dacion en pago. Among other modes, an obligation is extinguished by payment or performance. There is payment when there is delivery of money or performance of an obligation. Corollary thereto, Article 1245 of the Civil Code provides for a special mode of payment called dacion in payment (dacion en pago).

In dacion en pago, property is alienated to the creditor in satisfaction of a debt in money. The debtor delivers and transmits to the creditor the former's ownership over a thing as an accepted equivalent of the payment or performance of an outstanding debt. In such cases, Article 1245 provides that the law on sales shall apply, since the undertaking really partakes—in one sense—of the nature of sale; that is, the creditor is really buying the thing or property of the debtor, the payment for which is to be charged against the debtor's obligation.
As a mode of payment, dacion en pago extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement—express or implied, or by their silence—consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished. It requires delivery and transmission of ownership of a thing owned by the debtor to the creditor as an accepted equivalent of the performance of the obligation. There is no dacion in payment when there is no transfer of ownership in the creditor's favor, as when the possession of the thing is merely given to the creditor by way of security.

In the case at hand, in order to determine whether or not there was indeed a perfected, or even consummated, dacion in payment, it is necessary to review and assess the evidence and events that transpired and see whether these correspond to the three stages of a contract of sale. This is so since, as previously mentioned, dacion en pago agreements are governed, among others, by the law on sales.

Stages of a contract of sale

Briefly, the stages of a contract of sale are: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. Each shall hereinafter be discussed in seriatim.

First Stage: Negotiation Offer validly reduced

To recall, the negotiation stage covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected. This then includes the making of an offer by one party to another and ends when both parties agree on the object and the price.

In the instant case, the late Desiderio Dalisay, on March 11, 1977, offered to SSS that they partially settle their obligations to the latter via dacion. Dalisay offered several properties for P3,500,000 in favor of SSS to partially extinguish petitioner's obligation which amounted to P4,421,321.62.

Then, years later or on May 27, 1982, the SSS' Committee met with the corporation, represented by Atty. Cabarroguis. During said meeting, Atty. Cabarroguis explained that he has "the authority to offer [the properties] in the amount of 2 million pesos." He also gave them an assurance that that they will turn the properties over to SSS free of liens and encumbrances, and that his clients are ready to vacate the premises and you can have it occupied anytime.

In this respect, petitioner argues that Atty. Cabarroguis did not have the requisite authority to make said representations and thereby bind the corporation. DDII thus maintains that the offer to SSS remained at P3,500,000. We beg to disagree.

While petitioner is correct that there is no evidence of Atty. Cabarroguis' authority to represent the company in said meeting, this however is outweighed by the fact that no one questioned Atty. Cabarroguis' representations and authority after the conclusion of the negotiations; and that a few days after the said meeting, the company immediately arranged for the property's turnover through Dalisay-Tirol, Acting President and General Manager, and eventually delivered possession thereof to SSS.

What makes matters worse for petitioner is that it was well aware of what transpired during the meeting and the agreements reached. In fact, the SSC issued Resolution No. 849 - s. 82 where it accepted DDII's proposed dacion en pago at P2,000,000.

We emphasize that it is only now, in this action for quieting of title filed decades after the conclusion of the 1982 Meeting, that DDII questioned Atty. Cabarroguis' authority to represent the corporation. Because of this, the Supreme Court was sufficiently convinced that, contrary to petitioner's claim, Atty. Cabarroguis acted within the scope of the authority given him, which includes offering the properties at P2,000,000. There was tacit ratification of the agency.

Accordingly, the Court rule that DDII's offer was validly reduced from P3,500,000 to P2,000,000.

Second Stage: Perfection Acceptance absolute and unqualified

According to the CA, SSC Resolution No. 849 — s. 82 constitutes an absolute and unequivocal acceptance which perfected the offered dacion. Thus, when possession of the subject property was delivered to SSS, this signified a transfer of ownership thereon, consistent with the supposedly perfected agreement. The Court agreed with the CA that there was perfected dation in payment.

Within the purview of the law on sales, a contract of sale is perfected by mere consent, upon a meeting of the minds on the offer and the acceptance thereof based on subject matter, price and terms of payment. It is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price.

It is clearly shown by the records that the SSS simply agreed to said proposal when it included such in its Resolution. It is not a new condition imposed by the SSS as petitioner argues.

Third Stage: Consummation Transfer of possession to SSS tantamount to "delivery"

Agreeing with SSS, the CA held that the agreement on dacion en pago was consummated by DDII's delivery of the property to SSS. This is correct.

The third stage of a contract of sale is consummation which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.

While a contract of sale is perfected by mere consent, ownership of the thing sold is acquired only upon its delivery to the buyer. Upon the perfection of the sale, the seller assumes the obligation to transfer ownership and to deliver the thing sold, but the real right of ownership is transferred only "by tradition" or delivery thereof to the buyer.

Material to the case at bar is tradition by real or actual delivery contemplated Article 1497 of the same Code.

Here, petitioner DDII insists that its delivery of the property to SSS was only to show its goodwill in the negotiations. The records, however, reveal otherwise. It is well to emphasize that nowhere in their communications or during the discussions at the meeting is it stated that the company will turn over possession of the property to SSS to show its goodwill while the negotiations were pending.

Thus, contrary to petitioner's arguments, We are of the view that the turnover was in fact tantamount to tradition and was not done simply to show goodwill on the part of the company. What was only left to be done was for the corporation to surrender the certificates of title over the properties, free from all liens and encumbrances as promised during the 1982 meeting, so as to facilitate its transfer in SSS' name.

This being the case, We find that SSS has validly and in good faith acquired title to the property subject of the dispute, making the action to quiet title filed by DDII improper.

Additionally, it is well to emphasize that in order that an action for quieting of title may prosper, it is essential that the plaintiff must have legal or equitable title to, or interest in, the property which is the subject-matter of the action. Legal title denotes registered ownership, while equitable title means beneficial ownership. In the absence of such legal or equitable title, or interest, there is no cloud to be prevented or removed.

Here, DDII having divested itself of any claim over the property in favor of SSS by means of sale via dacion en pago, petitioner has lost its title over the property which would give it legal personality to file said action.