SECOND DIVISION
[G.R. No. 124874. March 17, 2000]
ALBERT R.
PADILLA, petitioner, vs. SPOUSES FLORESCO PAREDES and ADELINA PAREDES,
and THE HONORABLE COURT OF APPEALS, respondents. Supremeä
D E C I S I O N
QUISUMBING, J.:
For resolution is a petition for review on certiorari,
seeking reversal of the decision of the Court of Appeals in CA G.R. CV No.
33089, which set aside the decision of the Regional Trial Court in Civil Case
No. 4357 and confirmed the rescission of the contract between petitioner and
private respondents.
From the records, we glean the following
antecedent facts:
On October 20, 1988, petitioner Albert R.
Padilla and private respondents Floresco and Adelina Paredes entered into a
contract to sell[1] 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.
On December 27, 1989, the court ordered the
issuance of a decree of land registration for the subject property. The
property was titled in the name of private respondent Adelina Paredes. Private
respondents then demanded payment of the balance of the purchase price, per the
second paragraph of the contract to sell,[2] which reads as follows: Jä lexj
"VENDEE
agrees to pay the balance of the purchase price of subject property in the
amount of TWO HUNDRED SIXTY TWO THOUSAND EIGHT HUNDRED FORTY (P262,840.00)
PESOS, within ten (10) days counted from issuance of the Order of the Court for
the issuance of a decree pursuant to an application for registration and
confirmation of title of said subject property, of which the VENDEE is under
obligation to secure the title of subject property at his own expense."
Petitioner made several payments to private
respondents, some even before the court issued an order for the issuance of a
decree of registration.[3] Still, petitioner failed to pay the full purchase
price even after the expiration of the period set. In a letter dated February
14, 1990,[4] 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.
On February 28, 1990, petitioner made a
payment of P100,000.00 to private respondents,[5] still insufficient to cover the full purchase price.
Shortly thereafter, in a letter dated April 17, 1990,[6] private respondents offered to sell to petitioner
one-half of the property for all the payments the latter had made, instead of
rescinding the contract. If petitioner did not agree with the proposal, private
respondents said they would take steps to enforce the automatic rescission of
the contract.
Petitioner did not accept private
respondents' proposal. Instead, in a letter dated May 2, 1990,[7] he offered to pay the balance in full for the entire
property, plus interest and attorney's fees. Private respondents refused the offer.
On May 14, 1990, 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.[8]LexjÓ uris
For their part, private respondents claimed
before the lower court that petitioner maliciously delayed payment of the
balance of the purchase price, despite repeated demand and despite his
knowledge of private respondents' need therefor.[9] 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.[10] Private respondents claimed that this violation led
to the rescission of the contract, of which petitioner was formally informed.[11]
After trial, 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.[12] 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.[13]
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."[14]JuriÓ smis
The 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 Court of Appeals
noted that 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.[15] Moreover, the Court of Appeals ruled that 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.[16]
The Court of Appeals ruled that private
respondents 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 its right of way. Whatever damages private
respondents had suffered should be deemed duly compensated by the benefits they
derived from the payments made by petitioner.[17]
Hence, this petition, wherein petitioner
assigns the following errors allegedly committed by the Court of Appeals:
1. ...IN HOLDING
THAT: "THE APPELLANTS ARE ENTITLED TO RESCISSION UNDER ARTICLE 1191 OF THE
CIVIL CODE." Jjjä uris
2. …IN CONFIRMING
THE UNILATERAL RESCISSION OF THE CONTRACT TO SELL BY THE PRIVATE RESPONDENTS.
3. …WHEN IT
INTERPRETED AND APPLIED LIBERALLY IN FAVOR OF THE PRIVATE RESPONDENTS AND
STRICTLY AGAINST THE HEREIN PETITIONERS, THE PROVISIONS OF ARTICLE 1191 AND
OTHER PROVISIONS OF THE CIVIL CODE.[18]
Petitioner contends that private respondents
are not entitled to rescission, because rescission cannot be availed of when
the breach of contract is only slight or casual, and not so substantial and
fundamental as to defeat the object of the parties in making the contract.
Petitioner points out that he made partial payments even before they were due -
in fact, even before the land registration court issued an order for the
issuance of a decree of registration for the property - since private
respondents requested it. Private respondents' acceptance of the payments
amounted to a modification of the contract, though unwritten. Petitioner
believed in good faith that private respondents would honor an alleged verbal
agreement that the latter would not strictly enforce the period for the payment
of the remaining balance. lex
Petitioner additionally argues that private
respondents were also guilty of breach of contract since they failed to deliver
the three-meter wide additional lot for a right-of-way, as agreed upon in their
contract.
For their part, private respondents
reiterate that, as ruled by the Court of Appeals, the issue of whether or not
the breach is slight or casual is irrelevant in a contract to sell. They
contend that in such a contract, the non-payment of the purchase price is not a
breach but simply an event that prevents the vendor from complying with his
obligation to transfer title to the property to the vendee. Moreover, they
point out that the degree of breach was never raised as an issue during the
pre-trial conference nor at the trial of this case.
Private respondents also aver that
petitioner cannot avail of an action for specific performance since he is not
an injured party as contemplated in Article 1191 of the Civil Code.
Private respondents admit having requested
cash advances from petitioner due to dire financial need. Such need, they point
out, is the same reason why time is of the essence in the payment of the
balance of the purchase price. They claim that petitioner offered to pay the
balance only after more than three months had lapsed from the date his
obligation to pay became due.
Private respondents argue that their
acceptance of advance payments does not amount to a novation of the contract
since, as provided in the contract itself, modification of the contract would
only be binding if written and signed by the parties, which is not the case
here. Acceptance of advance payments is a mere act of tolerance, which under
the contract would not be considered as a modification of the terms and
conditions thereof. francis
The core issue in this case is whether the
respondent Court of Appeals erred in reversing and setting aside the judgment
of the trial court, by holding that private respondents are entitled to rescind
their "contract to sell" the land to petitioner.
To begin with, petitioner is alleging that
the contract entered into between the parties is a contract of sale, in which
case rescission will not generally be allowed where the breach is only slight
or casual. Petitioner insists that the title "Contract to Sell" does
not reflect the true intention of the parties, which is to enter into a
contract of sale.
We note, however, that petitioner only made
this claim as to the nature of the contract in his reply to the comment of
private respondents to his petition for review. In his complaint in the RTC and
in his petition for review, petitioner refers to the subject contract as a
contract to sell. The nature of the contract was never in issue in the
proceedings in the courts below. Moreover, petitioner does not deny private
respondents' allegation that it was he and his counsel who prepared the
contract. Thus, the ambiguity, if an exists, must be resolved strictly against
him as the one who caused the same.[19]
At any rate, the contract between the
parties in our view is indeed a contract to sell, as clearly inferrable from
the following provisions thereof:
"xxxmarie
That the VENDORS
hereby agree and bind themselves not to allienate (sic) encumber, or in any
manner modify the right of title to said property.
xxx
That the VENDORS
agree to pay real estate taxes of said subject property until the same will
have been transferred to the VENDEE.
That on payment of
the full purchase price of the above-mentioned property the VENDORS will
execute and deliver a deed conveying to the VENDEE the title in fee
simple of said property free from all lien and
encumbrances..."(Underscoring supplied.)[20]
These provisions signify that title to the
property remains in the vendors until the vendee should have fully paid the
purchase price, which is a typical characteristic of a contract to sell.
Now, admittedly, petitioner failed to comply
with his obligation to pay the full purchase price within the stipulated
period. Under the contract, petitioner was to pay the balance of the purchase
price within 10 days from the date of the court order for the issuance of the
decree of registration for the property. Private respondents claim, and
petitioner admits, that there was delay in the fulfillment of petitioner's
obligation. The order of the court was dated December 27, 1989. By April 1990,
or four months thereafter, petitioner still had not fully paid the purchase
price, clearly in violation of the contract. novero
Petitioner’s offer to pay is clearly not the
payment contemplated in the contract. While he might have tendered payment
through a check, this is not considered payment until the check is encashed.[21] Besides, a mere tender of payment is not sufficient.
Consignation is essential to extinguish petitioner's obligation to pay the
purchase price.[22]
We sustain the decision of the Court of
Appeals, to the effect that private respondents may validly cancel the
contract to sell their land to petitioner. However, the reason for this is not
that private respondents have the power to rescind such contract, but
because their obligation thereunder did not arise.
Article 1191 of the Civil Code, on
rescission, is inapplicable in the present case. This is apparent from the text
of the article itself: Jksm
"Art. 1191.
The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.
The injured party
may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after
he has chosen fulfillment, if the latter should become impossible.
The court shall
decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
This is understood
to be without prejudice to the rights of third persons who have acquired the
thing, in accordance with articles 1385 and 1388 and the Mortgage Law."
Article 1191 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 therefor has not yet happened.[23]
In Rillo v. Court of Appeals,[24] we ruled:
"The
respondent court did not err when it did not apply Articles 1191 and 1592 of
the Civil Code on rescission to the case at bar. The contract between the
parties is not an absolute conveyance of real property but a contract to sell.
In a contract to sell real property on installments, the full payment of
the purchase price is a positive suspensive condition, the failure of which is
not considered a breach, casual or serious, but simply an event which prevented
the obligation of the vendor to convey title from acquiring any obligatory
force. The transfer of ownership and title would occur after full payment of
the purchase price."[25]Juri-smis
We reiterated this rule in Odyssey Park, Inc.
v. Court of Appeals, 280 SCRA 253 (1997). Moreover, we held in Odyssey:
"The breach
contemplated in Article 1191 of the Code is the obligor’s failure to comply
with an obligation already extant, not a failure of a condition to render
binding that obligation."[26]
Under the parties’ contract, the property
will be transferred to petitioner only upon the latter's "complete
compliance of his obligation provided in [the] contract." Because of
petitioner’s failure to fully pay the purchase price, the obligation of private
respondents to convey title to the property did not arise.[27] Thus, private respondents are under no obligation,
and may not be compelled, to convey title to petitioner and receive the full
purchase price.
Petitioner's reliance on Article 1592 of the
Civil Code is misplaced. It provides:
"Art. 1592.
In the sale of immovable property, even though it may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission 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 of the contract
has been made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term." Jj-juris
Clearly, what this provision contemplates is
an absolute sale and not a contract to sell as in the present case.
Private respondents’ acceptance of several
partial payments did not modify the parties' contract as to exempt petitioner
from complying with his obligation to pay within the stipulated period. The
contract itself provided:
"No terms and
conditions shall be considered modified, changed, altered, or waived by any
verbal agreement by and between the parties hereto or by an act of tolerance on
the parties unless such modification, change, alteration or waiver appears in
writing duly signed by the parties hereto."[28]
Acceptance of the partial payments is, at
best, an act of tolerance on the part of private respondents that could not
modify the contract, absent any written agreement to that effect signed by the
parties.
The Court of Appeals is correct in ordering
the return to petitioner of the amounts received from him by private respondents,
on the principle that no one may unjustly enrich himself at the expense of
another.
WHEREFORE, the petition is DENIED, for lack of merit. Costs
against petitioner. Lex-juris
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
[1] Rollo, pp.
36-39.
"xxx
"For and in consideration of the agreed
purchase price of P312,840.00 PESOS, Philippine Currency of which the sum of
FIFTY THOUSAND (P50,000.00) PESOS, has been paid by the VENDEE upon execution
of this contract, the VENDORS hereby agree to sell and the VENDEE agrees to buy
that certain parcel of land described as follows:
‘A parcel of land, Lot 19, of Plan
Psu-1-005494, situated at Barangay Taboc, Municipality of San Juan, Province of
La Union, Island of Luzon. Bounded on the S., along line 1-2 by Lot 18; on the
W., along line 2-3 by salvage zone (20.00 M. wide); on the N., along line 3-4
by the property of Justiniano Gaetos; and on the E., along line 4-1 by the
property (abandoned) of the Manila Railroad Co. (30.00 M. wide), all of Plan
Psu-1-005494, x x x containing an area of SEVEN THOUSAND EIGHT HUNDRED TWENTY
ONE (7,821) SQUARE METERS x x x’
covered by Tax Declaration No. 19028 of the
Assessor's Office of La Union, Certified Blue copy of Plan Psu-1-005494 and
Certified True Copy of TD No. ___ are hereto attached as Annexes ‘A’ and ‘B’,
respectively, and made an integral part of this Contract.
"VENDEE agrees to pay the balance of the
purchase price of subject property in the amount of TWO HUNDRED SIXTY TWO
THOUSAND EIGHT HUNDRED FORTY (P252,840.00) PESOS, within ten (10) days counted
from issuance of the Order of the Court for the issuance of a decree pursuant
to application for registration and confirmation of title of said subject
property, of which the VENDEE is under obligation to secure the title of
subject property at his own expense.
"That the VENDORS hereby undertake and
agree with the VENDEE that the first-named party shall warrant and defend the
title to said real property in favor of the second-named party, his heirs,
successors and assigns, against all just claims of all persons and entities.
"That the VENDORS will also guarantee
the right of said VENDEE to possess the property subject of this Contract and
will defend him against all judicial or administrative actions for eviction.
"That the VENDORS will execute any
additional document to complete the title of the VENDEE to the above-described
property so that it may be registered in the name of the said VENDEE in
accordance with the provisions of the Land Registration Act.
"That the VENDORS hereby agree and bind
themselves not to alienate, encumber, or in any manner modify the right of
title to said property. Courtä
"That the VENDORS shall grant a three
(3) meter wide right-of-way without any payment thereof across Lot 1, Psu
1-005494, measured from the National Road up to Lot 19, Psu-1-005494, to
provide the subject property access to the National Road; Provided that, the
VENDORS shall further allow the VENDEE to purchase additional Three (3) meter
wide, measured from the National Road up the subject property and alongside the
right-of-way mentioned in order that the access road will have a total width of
six (6) meters at the rate of Forty (P40.00) Pesos per square meter.
"That thirty days before the execution
of this Contract, all adjoining owners have been notified in accordance with
the provision of the Civil Code and furthermore this subject property is
untenanted.
"That the VENDORS agree to pay real
estate taxes of said subject property until the same will have been transferred
to the VENDEE.
"That on payment of the full purchase
price of the above-mentioned property the VENDORS will execute and d liver a
deed conveying to the VENDEE the title in fee simple of said property free from
all lien and encumbrances, and should the VENDEE need any other instrument to
perfect his title to said property upon complete compliance of his obligation
provided in this Contract, the VENDORS will execute and deliver the same.
"No terms and conditions shall be
considered modified, changed, altered, or waived by any verbal agreement by and
between the parties hereto or by an act of tolerance on the parties unless such
modification, change, alteration or waiver appears in writing duly signed by
the parties hereto.
"That all the provisions and contents of this contract have been translated also in IIocano, the dialect known by the VENDORS and the VENDEE; hence, the parties hereto have fully understood all and any of the terms and conditions of this Contract."
[2] Id. at 37.
[3] Folder of Exhibits, pp. 5-18.
[4] Id. at 19.
[5] Id. at 23.
[6] Id. at 20.
[7] Id. at 21-22.
[8] Records, pp. 1-4.
[9] Id. at 20, 23.
[10] Id. at 20.
[11] Id. at 24.
[12] Id. at 198.
[13] Id. at 199.
[14] Rollo, p. 46.
[15] Id. at 46-47.
[16] Id. at 48. See CIVIL CODE, Art. 1235.
[17] Ibid.
[18] Rollo, p. 23.
[19] CIVIL CODE, Art. 1377.
[20] Rollo, pp. 37-38.
[21] CIVIL CODE, Art. 1249.
[22] People’s Industrial and Commercial Corp. v. Court of Appeals, 281 SCRA 206, 223 (1997).
[23] Rillo v. Court of Appeals, 274 SCRA 461, 467 (1997).
[24] Supra.
[25] Supra note 23.
[26] 280 SCRA 253, 260 (1997).
[27] Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 46 SCRA 381, 387 (1972); Agustin v. Court of Appeals, 186 SCRA 375, 381 (1990).
[28] Folder of Exhibits, p. 3.