Buot v. Court of Appeals

G.R. No. 119679, 18 May 2001, 357 SCRA 846

FACTS:

Plaintiffs-spouses alleged that defendant Encarnacion Diaz Vda. de Reston, sold to them the eastern portion of her property as evidenced by a Memorandum of Agreement.

The Memorandum of Agreement stated that the purchase price of P19,042.00 shall be paid as follows: (a) the amount of one thousand pesos (P1,000.00) in the concept of earnest money, upon the execution of the said instrument; and (b) the balance thereof, in the amount of eighteen thousand forty-two pesos (P18,042.00), within six (6) months from the date the vendees are notified by the vendor of the fact that the Certificate of Title to the eastern portion of the vendor’s lot is ready for transfer in the names of the vendees. It was also agreed that title to, ownership, possession and enjoyment of the portion sold shall remain with the vendor until the full consideration of the sale shall have been received by her and acknowledged in a document duly executed for said purpose.

The Buot spouses paid Encarnacion Diaz Vda. de Reston the earnest money of P1,000.00. Encarnacion asked Alfredo Buot for additional sums of money totalling P2,774.00, duly receipted as part payment of the subject lot. As the land was not titled, Alfredo Buot protected his interest by informing the Provincial Assessor of Cebu in a letter that he had acquired “certain rights” on said parcel of land and requested that his said rights be annotated on the face of said tax declaration. He also wrote a similar letter to the Municipal Assessor of Minglanilla, Cebu.

ISSUE:

Whether the Memorandum of Agreement was not an option to purchase but a valid and partially executed contract of sale

RULING:

An examination of said Memorandum of Agreement shows that it is neither a contract of sale nor an option to purchase, but it is a contract to sell. An option is a contract granting a privilege to buy or sell at a determined price within an agreed time, the specific length or duration of which is not present in the Memorandum of Agreement. In a contract to sell, the title over the subject property is transferred to the vendee only upon the full payment of the stipulated consideration. Unlike in a contract of sale, the title in a contract to sell does not pass to the vendee upon the execution of the agreement or the Delivery of the thing sold.

From the provisions in the Memorandum of Agreement, it appears that the agreement was in the nature of a contract to sell as the vendor, Encarnacion Diaz Vda. de Reston, clearly reserved to herself ownership and possession of the property until full payment of the purchase price by the vendees, such payment being a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation from acquiring obligatory force.

*Case digest by Teonilo M. Bagalanon Jr., JD – 4, Andres Bonifacio College, SY 2019 – 2020

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