R No 124874 March 17, 2000 Second Division

QUISUMBING, J.:

Facts: Albert R. Padilla and Floresco and Adelina Paredes entered into a contract to sell involving a parcel of land in San Juan, La Union. At that time, the land was untitled although private respondents were paying taxes thereon. Under the contract, petitioner undertook to secure title to the property in private respondents' names. Of the P312,840.00 purchase price, petitioner was to pay a downpayment of P50,000.00 upon signing of the contract, and the balance was to be paid within ten days from the issuance of a court order directing issuance of a decree of registration for the property. But petitioner made several payments to private respondents, some even before the court issued an order for the issuance of a decree of registration.

After the court ordered the issuance of a decree of land registration for the subject property, respondents then demanded payment of the balance of the purchase price. But the petitioner was not able to pay the balance in full. In a letter, private respondents, through counsel, demanded payment of the remaining balance, with interest and attorney's fees, within five days from receipt of the letter. Otherwise, private respondents stated they would consider the contract rescinded. Petitioner did not accept private respondents' proposal. Instead, he offered to pay the balance in full for the entire property, plus interest and attorney's fees. Private respondents refused the offer.

Petitioner instituted an action for specific performance against private respondents, alleging that he had already substantially complied with his obligation under the contract to sell. He claimed that the several partial payments he had earlier made, upon private respondents' request, had impliedly modified the contract. He also averred that he had already spent P190,000.00 in obtaining title to the property, subdividing it, and improving its right- of-way.

Private respondents on the other hand claimed

before the lower court that petitioner maliciously delayed payment of the balance of the purchase price, despite repeated demand. According to private respondents, their acceptance of partial payments did not at all modify the terms of their agreement, such that the failure of petitioner to fully pay at the time stipulated was a violation of the contract. Also, they aver that this violation led to the rescission of the contract, of which petitioner was formally informed.

The lower court ruled in favor of petitioner, saying that even if petitioner indeed breached the contract to sell, it was only a casual and slight breach that did not warrant rescission of the contract. The trial court pointed out that private respondents themselves breached the contract when they requested and accepted installment payments from petitioner, even before the land registration court ordered issuance of a decree of registration for the property. According to the trial court, this constituted modification of the contract, though not reduced into writing as required by the contract itself. The payments, however, were evidenced by receipts duly signed by private respondents. Acceptance of delayed payments estopped private respondents from exercising their right of rescission, if any existed.

The Court of Appeals, however, reversed the ruling of the trial court and confirmed private respondents' rescission of the contract to sell. According to the Court of Appeals, the issue of whether or not the breach of contract committed is slight or casual is irrelevant in the case of a contract to sell, where title remains in the vendor if the vendee fails to "comply with the condition precedent of making payment at the time specified in the contract." Moreover Court of Appeals rejected petitioner's claim that there had been a novation of the contract when he tendered partial payments for the property even before payment was due. The contract itself provides that no terms and conditions therein shall be modified unless such modification is in writing and duly signed by the parties. The modification alleged by petitioner is not in writing, much less signed by the parties. Moreover, private respondents made a timely objection to petitioner's partial payments when they offered to sell to petitioner only one-half of the property for such partial payments. Private respondents therefore are entitled to rescission under Article 1191 of the Civil Code, but with the obligation to return to petitioner the payments

the latter had made, including expenses incurred in securing title to the property and in subdividing and improving it right of way, hence this petition.

Issues:

Whether the appellants are entitled to rescission under Article 1191 of the Civil Code.

Held: Pertinent provisions of the contract signify that title to the property remains in the vendors until the vendee should have fully paid the purchase price, the contract entered into by the parties thus is a contract to sell. Since petitioner failed to comply with his obligation to pay the full purchase price within the stipulated period, the contract therefore may be rescinded but the reason for this is not that private respondents have the power to rescind such contract, but because their obligation thereunder did not arise.

Art. 1191 cannot be applied. It speaks of obligations already existing, which may be rescinded in case one of the obligors fails to comply with what is incumbent upon him. However, in the present case, there is still no obligation to convey title of the land on the part of private respondents. There can be no rescission of an obligation that is non-existent, considering that the suspensive condition has not yet happened.

Alfonso Iringan vs. Court of Appeals G.R. No. 129107

September 26, 2001 Quisumbing

Facts:

Private respondent Palao sold to petitioner Iringan an undivided portion of land to be paid in installments.

Due to petitioner’s failure to pay the full amount on the second installment, private respondent considered the contract rescinded. The petitioner on the other hand, on its reply, did not oppose the revocation of the contract but only asked for the reimbursement of the initial payment made.

Private respondent said that they are not amenable regarding to the reimbursements claimed. Simply put, no agreement between the parties was made.

Palao filed a complaint for Judicial Confirmation of Rescission of Contract and Damages against Iringan and his wife.

On his answer, he argued that the contract is already consummated; hence, the remedy should be for the collection of the balance of the purchase price and not rescission.

RTC affirmed the rescission and ordered for the payment for damages to Palao.

This was brought to the Court of Appeals but the latter also affirmed the decision. Hence, this petition.

Issues:

1. Whether or not the contract of sale is validly rescinded.

2. Whether or not the award of moral and exemplary damages is proper.

Held:

1. Article 1592 requires the rescinding party to serve judicial or notarial notice of his intent to resolve the contract. The

party entitled to rescind should apply to the court for a decree of rescission. The operative act which produces the resolution of contract is decree of court not the mere act of vendor.

The letter written by the private respondent declaring hi intention to rescind did not operate validly,

The filing by Palao of Judicial Confirmation of Rescission of Contract and Damages satisfies the requirement of the law.

2. The petitioner knew respondent’s reason for selling. Petitioner refused to formally execute an instrument showing their mutual agreement to rescind the contract of sale. He also did not substantiate proof that he was ready and willing to pay. Hence, the awarding for damages is proper.

Perla Gil vs. CA

G.R. No. 127206 September 12, 2003 Callejo Sr.

Facts:

Concepcion Gil and sister Nieves Gil are co-owners of a parcel of land. Nieves and husband constructed a two storey building on the said land. Concepcion then filed a complaint against her sister. The Court rendered judgment in favor of Concepcion. Nieves appealed to the Court of Appeals but the latter also affirmed the assailed decision.

The Court issued a writ of execution but Nieves refused to execute the required deed.

The Sheriff was then ordered to execute but instead, he divided the property into 4 lots and gave two to Concepcion. Lot 59 C1, one of the two lots given to Concepcion was then sold by the latter to Agapito and Iluminada Pacetes. This contract was however subject to the condition that a deposit shall be given at the time of the execution of the contract and the remaining amount shall be paid upon the delivery of the certificate of title to the vendee. The property was then sold to one Constancio Maglana and was again sold to the present possessor Emilio Magtulac who is constructing a building on said lot. Subsequently, Concepcion died and now represented by her successors as the petitioners in this instant case.

Petitioners are contending that Concepcion’s sale of the disputed property to Iluminada and Agapito Pacetes is merely a contract to sell because the full price was not paid by the latter to the former. They also argue that the consignation made by Iluminada did not produce legal effect. Therefore, subsequent buyers are not purchasers

in good faith.

Issue:

Whether or not the property was validly sold to Iluminada and Agapito Pacetes. Held:

The Court ruled that the sale between Concepcion and Iluminada is a consummated contract of sale. The contract specifies payment provision wherein a deposit will be made at a time of the execution of the instrument. The vendor within 120 days shall be delivered the certificate of title to the vendee. Then, vendee will pay the remaining amount.

The certificate of title was not delivered. As a consequence of the death of Concepcion, it is the heirs who have the duty to deliver such. Apparently, they were not able to deliver the certificate also. Iluminada’s act of paying the remaining amount only after so many years is still valid because after all she has no duty to pay until tile has been delivered to her.

Severino Baricuatro, Jr., vs.

Court of Appeals, Tenth Division, Mariano B. Nemenio and Felisa V. Nemenio, Constantino M. Galeos and Eugenio V. Amores

February 9, 2000 G.R. No. 105902

Buena, J.:

FACTS:

Baricuatro bought two lots, part of the Victoria Village, on installments basis from Galeos on October 16, 1968.

Two months from the date of the previous sale, Galeos sold the entire subdivision, including the two lots, to Amores. Baricuatro was informed by Galeos about the sale and was advised to pay the balance of the purchase price of the two lots directly to Amores.

Amores took possession of the subdivision and developed the same for residential purposes. He secured the transfer of the title to the same in his name. Afterwards, he sold the two lots of the spouses Mariano and Felisa Nemenio. Prior to the sale, Baricuatro was informed through a letter by Amores about the impending sale of the two lots but the former failed to respond.

Nemenio spouses demanded from Baricuatro to vacate the said lots but the latter refused to do so.

Trial court rendered a decision, declaring Nemenio spouses as the owners of the disputed lot. Court of Appeals affirmed in toto the

judgment of the trial court.

ISSUE:

1. Whether the sale made to Amores by Galeos is valid?

2. Whether the Nemenio spouses are purchasers in good faith?

RULING:

Issue 1

Amores was in good faith when he bought the subdivision, however, when he registered his title he already had knowledge of the previous sale. Such knowledge tainted his registration with bad faith. In addition, the agreement to collect the balance of the purchase price of the disputed lots from Baricuatro which presupposes knowledge of the previous sale by Amores.

Under Art. 1544, the ownership of an immovable property shall belong to the purchaser who in good faith registers it first in the registry of property.

(Uraca vs Ca) “The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior

registration as provided by law.” This means that the good faith of the purchaser should be from the time of the perfection of the sale until up to the time that he be declared the sole and true owner of the property.

Issue 2

Nemenio spouses only visited the lots ten months after the sale which was evidenced

during the trial of the case. And so, they cannot claim to be purchasers in good faith when they registered the title. The registration made by the spouses were done in bad faith, hence, it amounted to no inscription at all.

Decision of CA is REVERSED.

Cecilia Amodia Vda. De Melencion,

Veneranda Amodia, Felipe Amodia, Eutiquio Amodia and Go Kim Chuan

vs.

Honorable Court of Appeals and Aznar Brothers Realty Company.

June 23, 2001 G.R. No. 148846

Nachura, J.:

FACTS:

A property in the name of Go Kim Chuan was originally owned by the Amodias and was brought under the operation of the Torrens System. However, the title was lost during the Second World War.

In 1964, the Amodias allegedly conveyed the property to Aznar and was registered under Act 344 as there was no title.

In 1989, the Amodias conveying the property in favor of Go Kim Chuan and was reconstituted pursuant to RA No. 26. Thereafter, Go Kim Chuan exercised control and dominion over the subject property in an adverse and continuous manner in the concept of an owner.

RTC’s decision: Go Kim Chuan as the real owner of the property. The signatures of the Amodias were forged, thus, the said deed did not convey anything in favor of Aznar. And Aznar, failed to show that Go Kim Chuan acquired the property in bad faith.

CA’s decision: Aznar registered ahead in favor of Go Kim Chuan, thus, pursuant to Art 1544, the former deed should be given preference over the latter.

ISSUE:

1. Who between Go Kim Chuan and Aznar has the better right over the subject property?

RULING:

Art. 1544 provides:

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

If the land is registered under Torrens Title, and it is sold and the sale is registered no under the Land Registration Act but under Act 3344, such sale is not considered registered.

Aznar registered its title under Act 3344 while Go Kim Chuan registered it under Act No. 496, and so the latter is deemed to be the owner of the property.

Petition for review is GRANTED.

Soliva vs. The Intestate Estate of Marcelo M. Villalba

Date: December 8, 2003 G.R. No.154017 Division: First Division

Ponente: Justice Panganiban

FACTS: Petitioner, Soliva, filed a complaint for recovery of ownership against respondent, Villalba, over a parcel of land situated in Misamis Oriental. She contended that the respondent failed to give full consideration for the house and lot purchased by the latter.

On the other hand, respondent argued that the house and lot were sold to him on installment basis; and that partial payment thereof was given. He also argued that no demands were made on him to vacate the property for a long a period of time. Prescription, therefore, barred petitioner’s claim of ownership.

Trial Court ruled in favor of the respondent on the ground of laches. Court of Appeals affirmed this ruling.

Hence, this petition.

ISSUE: Whether or not the respondent’s nonpayment of the full consideration would invalidate the contract of sale.

RULING: SC affirmed CA’ s and ruled in favor of respondent, stressing that contrary to petitioner’s submission, the nonpayment of the full consideration did not invalidate the contract of sale. Under the settled doctrine, nonpayment is a resolutory condition that extinguishes the transaction existing for a time and discharges the obligations created thereunder. The remedy of the unpaid seller is to sue for collection or rescind the contract.

For the rescission of immovables, Art 1592 provides that even though it may have been stipulated that upon failure to pay the price at the time agreed upon, the recission of the contract shall of right take place, the vendee may pay, even after the expiration of the period as long as no demand for rescission has been made upon him. After the demand, the court may not grant him a new term.

The petitioner, herein, did not exercise her right to demand for rescission or specific performance. Hence, she was already barred from recovering the property due to laches and prescription.

Visayan Sawmill Company, Inc. vs. Court of Appeals

Date: March 3, 1993 G.R. No. 83851 Division: En banc

Ponente: Justice Davide

FACTS: Petitioner-corporation entered into a sale involving scrap iron with private respondent, subject to the condition that the latter should open a letter of credit in favor of the former on or before May 15, 1983. Private respondent then started to dig and gather scrap iron. Subsequently, however, petitioner-corporation sent a letter to the private respondent conveying its intention to discontinue with the sale due to the latter’s failure to comply with the essential preconditions of their con tract.

Private respondent prayed for judgment ordering the petitioner-corporation to comply with the contract by delivering to him the scrap iron subject thereof.

On the other hand, petitioner- corporation insisted that the cancellation of the contract was justified because of private respondent’s non-compliance with essential pre- conditions, among which was the opening of an irrevocable and unconditional letter of credit not later than May 15, 1983.

Trial Court ruled in favor of the private respondent finding that Art 1593 of the Civil Code, which provides for automatic rescission upon failure to deliver or failure to pay movable properties, could not be applied because implied delivery was already made in the case at bar. This implied delivery was manifested by the fact that the petitioner-corporation allowed the private respondent to dig and gather scrap iron from its premises.

Court of Appeals affirmed the ruling.

Hence, the petition.

ISSUE: Whether or not lower court erred in ruling that automatic rescission could not be applied in the instant case.

RULING: SC found merit on the petition stressing that the lower court erred in the appreciation of the nature of the transaction between petitioner-corporation and private respondent. Accordingly, what transpired between the parties was a contract or promise to sell and not a contract of sale. Petitioner- corporation’s obligation to sell is subject to a suspensive condition, which was private respondent’s opening of an irrevocable and unconditional letter of credit. However, this condition was not fulfilled.

In line with the foregoing, the non- fulfillment could not even be considered a breach, but simply an event that prevented the

In document Law on Sales - Digested Cases (Page 69-78)