G.R. No. 135528, 14 July 2004, 434 SCRA 365
Petitioner Spouses Rayos, secured a short-term loan from the Philippine Savings Bank (PSB). To secure the payment of the loan, the petitioners executed, on the same date, a Real Estate Mortgage over their property in Las Piñas.
The petitioners, as vendors, and the respondents Spouses Miranda, as vendees, executed a Deed of Sale with Assumption of Mortgage over the subject property. However, the petitioners, likewise, executed a Contract to Sell the said property in favor of the respondents for P250,000.00. The petitioners obliged themselves to execute a deed of absolute sale over the property in favor of the respondents upon the full payment of the purchase price thereof.
Respondent Rogelio Miranda filed an application with the PSB to secure the approval of his assumption of the petitioners’ obligation on the loan. The PSB disapproved his application. Nevertheless, respondent Rogelio Miranda paid the three quarterly installments.
Petitioners subsequently received a Letter from the PSB, reminding him that his loan with the bank was about to mature, and that it expected him to pay his loan on or before the said date. Fearing that the respondents would not be able to pay the amount due, petitioner Orlando Rayos paid and advised the PSB not to turn over to the respondents the owner’s duplicate of the title over the subject property, even if the latter paid the last quarterly installment on the loan, as they had not assumed the payment of the same.
Respondent subsequently paid PSB the last installment on the petitioners. He informed the bank that the petitioners had executed a deed of sale with assumption of mortgage in their favor, and that he was paying the balance of the loan, conformably to said deed. On the other hand, the bank informed the respondent that it was not bound by said deed and that the petitioners had earlier paid the amount on the loan. The bank refused respondent Rogelio Miranda’s offer to pay the loan.
Respondent Rogelio Miranda filed a complaint alleging that the petitioners and the PSB conspired to prevent him from paying the last quarterly payment of the petitioners’ loan with the bank, despite the existence of the deed of sale with assumption of mortgage executed by him and the petitioners.
The trial court ordered plaintiff Rogelio Miranda to refund to spouses Orlando and Mercedes T. Rayos the total sum of P29,069.45 and Spouses Orlando and Mercedes T. Rayos to deliver to Rogelio Miranda Transfer Certificate of Title and, deliver to Rogelio Miranda the possession of the parcel of land described in the said title. CA affirmed. The petitioners asserts that the Court of Appeals erred in not finding that the respondents first committed a breach of their contract to sell upon their failure to pay the amount due for the last quarterly installment of their loan from the PSB.
Whether or not the parties executed a contract to sell instead of a contract of sale.
YES. Under the two contracts executed, the petitioners bound and obliged themselves to execute a deed of absolute sale over the property and transfer title thereon to the respondents after the payment of the full purchase price of the property, inclusive of the quarterly installments due on the petitioners’ loan with the PSB.
Construing the contracts together, it is evident that the parties executed a contract to sell and not a contract of sale. The petitioners retained ownership without further remedies by the respondents until the payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of which is not really a breach, serious or otherwise, but an event that prevents the obligation of the petitioners to convey title from arising, in accordance with Article 1184 of the Civil Code.
In Lacanilao v. Court of Appeals: It is well established that where the seller promised to execute a deed of absolute sale upon completion of payment of the purchase price by the buyer, the agreement is a contract to sell. In contracts to sell, where ownership is retained by the seller until payment of the price in full, such payment is a positive suspensive condition, failure of which is not really a breach but an event that prevents the obligation of the vendor to convey title in accordance with Article 1184 of the Civil Code.
The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.
*Case digest by Earl M. Acoymo, JD-IV, Andres Bonifacio Law School, SY 2019-2020