(The case of Virgilio Taok vs. Supremido Conde and Raul Conde, G.R. No. 254248, November 6, 2023)
Photo from Canva free photo
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
In determining the real nature of a contract, the express terms of the written agreement and the contemporaneous and subsequent acts of the parties are taken into consideration.
Doctrine:
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment or the purchase price.
Otherwise stated, in a contract or sale, the vendor loses ownership over the properly and cannot recover it until and unless the contract is resolved or rescinded; whereas. in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation or the vendor to convey title from becoming effective.
Facts of the Case:
On September 14, 2009, Virgilio Taok (Petitioner) took Supremido Conde (Supremido) and Raul Conde (Raul) to court in Bogo, Cebu. He wanted to cancel a contract, get compensation for damages, and have his legal fees covered. Taok said he owned a 943-square-meter piece of land in Agujo, Daanbantayan, Cebu. He claimed this land was part of a deal with Supremido and Raul, as shown in a contract from January 29, 2007.
According to the Agreement, the first monthly installment was supposed to be paid via bank transfer on February 29, 2007. Despite several requests, the respondents failed to make any payments towards the installment. For two years and seven months, the respondents made no payments, leading the petitioner to file a complaint seeking to cancel the contract, recover attorney’s fees and litigation expenses, and claim exemplary damages.
In their response with counterclaim, the respondents acknowledged the existence of the Agreement but disputed the claim that they refused to pay the remaining balance of the purchase price. They argued that there was a verbal agreement between the parties stating that the first installment would be due in May 2007, not on February 29, 2007. This arrangement was made to allow Raul to gather funds from February to April 2007 while he was working in the United States. Additionally, Raul informed the petitioner via phone that he would be sending PHP 60,000.00 to cover three months’ worth of installments. However, the petitioner advised Raul to postpone the installment payments and instead make a one-time lump sum payment for the full balance.
On July 7, 2009, Raul called the petitioner again to say he was ready to pay the entire remaining balance of PHP 835,000.00, which he planned to send through his sister, Mirza C. San Miguel (Mirza). They provided supposed evidence that Raul sent PHP 837,045.00 to Mirza. However, the petitioner refused to accept the payment and even asked for an additional PHP 400,000.00, which they did not agree to.
In a letter dated August 25, 2009, the respondents offered full payment to the petitioner. They also informed him of their intention to deposit the amount in court if he did not accept it within 30 days. However, the petitioner had already filed the complaint at that time.
The respondents believed that the petitioner acted in bad faith by unilaterally revoking the Agreement because he intended to sell the property at a higher price.
Ruling of the Regional Trial Court
The court determined that the transaction between the parties was a conditional sale, and the respondents’ failure to fulfill the material provisions of the Agreement, particularly the non-payment of monthly installments, justified the rescission.
Ruling of the Court of Appeals
On appeal, the respondents criticized the trial court for deeming the Agreement as a contract to sell and for rescinding it because of the alleged breach by the respondents, who failed to make the monthly installments.
Contrary to the findings of the trial court, the appellate court held that the Agreement was a contract of sale—not a contract to sell.
Issue:
Was the Agreement a contract of sale or a contract to sell?
Ruling of the Court:
The agreement was a contract of sale, not a contract to sell.
In determining the real nature of a contract, the express terms of the written agreement and the contemporaneous and subsequent acts of the parties are taken into consideration.
The distinction between a contract of sale and contract to sell is well-established in the decisions of the Court:
In a sale contract, the buyer gets ownership once the property is delivered, while in a contract to sell, ownership stays with the seller until full payment. In a sale contract, the seller can’t reclaim the property until the contract is canceled, but in a contract to sell, payment completion is needed for the seller to transfer ownership. If payment doesn’t happen in a contract to sell, it’s not a breach but a condition that stops the seller from transferring ownership.
Some legal experts believe that a sale contract becomes a “contract to sell” when there’s an agreement, either spoken or understood, made at the time of the contract’s completion. This agreement states that the seller’s obligation to transfer ownership to the buyer, even if physical possession has occurred, depends on the buyer’s full payment of the purchase price. In simpler terms, if there’s no agreement keeping ownership with the seller until full payment, the contract is considered a sale contract, not a contract to sell.
The full payment of the purchase price is a positive suspensive condition in a contract to sell. Its non-fulfillment does not constitute a breach of contract, rather, it is merely an event preventing the seller from conveying title to the buyer. Consequently, the remedy of rescission is unavailable in a contract to sell since it is impossible to rescind a non-existing obligation as the suspensive condition has yet to materialize. More, where the buyer fails to pay the purchase price, the contract to sell is only rendered ineffective and without force and effect.
Here, nowhere in the subject Agreement states that the parties agreed or intended to condition the transfer of ownership upon full payment of the purchase price by the buyer. Notably, the contract of sale has all the three elements of a contract of sale: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent.
Source:
Virgilio A. Taok Vs. Supremido Conde and Raul Conde (G.R. No. 254248, November 6, 2023)
Related Article/s:
Distinguishing Contract of Sale from Contract to Sell
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
All rights reserved.