CASE
FACTS
ISSUE
Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with
Damages against Victoria T. Tuparan (respondent) before the RTC.In her
Complaint, petitioner alleged, among others, that she was the registered owner
of a 1,274 square meter residential and commercial lot located in Karuhatan,
Valenzuela
City,
and
covered
by
TCT
No.
V-4130.
HELD: YES.
CIVIL LAW: Contract to sell versus contract of sale.
The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with Assumption of
Mortgage entered into by and among the two parties and FSL Bank on November 26, 1990 is a contract to sell and not
a
contract
of
sale.
Petitioner mortgaged the subject real properties to the Farmers Savings Bank
and Loan Bank, Inc. (FSL Bank) to secure a loan. Petitioner then decided to sell
her real properties so she could liquidate her bank loan and finance her
businesses. As a gesture of friendship, respondent verbally offered to
conditionally buy petitioner's real properties.
G.R.
No.
188064, June
01
2011
MILA
A.
REYES,
Petitioner,
vs.
VICTORIA T.
TUPARAN,
Respondent.
The title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance
of the purchase price and the assumed mortgage obligation. Thereafter, FSL Bank shall then issue the corresponding
deed of cancellation of mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of
the
respondent.
The parties and FSL Bank executed the corresponding Deed of Conditional Sale
of Real Properties with Assumption of Mortgage. Due to their close personal
friendship and business relationship, both parties chose not to reduce into writing
the other terms of their agreement mentioned in paragraph 11 of the complaint.
Respondent, however, defaulted in the payment of her obligations on their due
dates. Instead of paying the amounts due in lump sum on their respective
maturity dates, respondent paid petitioner in small amounts from time to time.
Respondent countered, among others, that the tripartite agreement erroneously
designated by the petitioner as a Deed of Conditional Sale of Real Property with
Assumption of Mortgage was actually a pure and absolute contract of sale with a
term period. It could not be considered a conditional sale because the acquisition
of contractual rights and the performance of the obligation therein did not depend
upon a future and uncertain event.
Respondent further averred that she successfully rescued the properties from a
definite foreclosure by paying the assumed mortgage plus interest and other
finance charges.
The RTC handed down its decision finding that respondent failed to pay in full the
total purchase price of the subject real properties. It stated that the checks and
receipts presented by respondent refer to her payments of the mortgage
obligation with FSL Bank. The RTC also considered the Deed of Conditional Sale
of Real Property with Assumption of Mortgage executed by and among the two
parties and FSL Bank a contract to sell, and not a contract of sale.
The CA rendered its decision affirming with modification the RTC Decision.The
CA agreed with the RTC that the contract entered into by the parties is a contract
to sell but ruled that the remedy of rescission could not apply because the
respondent's failure to pay the petitioner the balance of the purchase was not a
breach of contract, but merely an event that prevented the seller (petitioner) from
conveying title to the purchaser (respondent).
RULING
Whether the
agreement is
a contract to
sell and not
a contract of
sale.
Accordingly, the petitioner's obligation to sell the subject properties becomes demandable only upon the happening of
the positive suspensive condition, which is the respondent's full payment of the purchase price. Without respondent's
full payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the
title. Respondent's failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191
of the New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the
respondent.
Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of Conditional Sale
was not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject property in the
amount of ?4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only ?805,000.00, a substantial
amount of the purchase price has already been paid.It is only right and just to allow Tuparan to pay the said unpaid
balance of the purchase price to Reyes."
Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that,
considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation.
Out of the P1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of
P200,000.00 each. She, however, failed to pay the third and last installment of P800,000.00 due on December 31,
1991. Nevertheless, on August 31, 1992, respondent, through counsel, offered to pay the amount of P751,000.00,
which was rejected by petitioner for the reason that the actual balance was P805,000.00 excluding the interest charges.
Considering that out of the total purchase price of P4,200,000.00, respondent has already paid the substantial amount
of P3,400,000.00, more or less, leaving an unpaid balance of only P805,000.00, it is right and just to allow her to settle,
within a reasonable period of time, the balance of the unpaid purchase price. The Court agrees with the courts below
that the respondent showed her sincerity and willingness to comply with her obligation when she offered to pay the
petitioner the amount of P751,000.00.
PETITION DENIED.
