Contract to sell and conditional sale distinguished… THIRD DIVISION, G.R. No. 196251, July 09, 2014, OLIVAREZ REALTY CORORATION AND DR. A!LO R. OLIVAREZ, ETITIONERS, VS. !ENJA"IN CASTILLO, RESONDENT
Olivarez Realty Corporation and Benjamin executed a deed of conditional sale over a parcel of lot owned by Bejamin, covered by TCT No. T!""#$, w%ic% is also claimed by t%e &%ilippine Tourism 'ut%ority under TCT No. T!()"*. +nder t%e terms of t%e contract, t%e corporation s%alll buy t%e land for &!",(,)", wit% an a-reed downpayment of &,,. payable in several instalments. T%e balance of t%e purc%ase price s%all be paid by t%e corporation in * e/ual mont%ly installments, commencin- on t%e day t%e title of t%e &%ilippine Tourism Tourism 'ut%ority %ad been cancelled. T%e corporation s%all file t%e case a-ainst &T', &T', wit% t%e full assistance of Benjamin. 'lso, t%e corporation a-reed to pay disturbance compensation up to &!,,. only, only, to t%e tenants t%erein, and Benjamin s%all be responsible for clearin- t%e tenants. T%e parties a-reed t%at corporation s%all immediately immediately occupy t%e lot, and in case t%e contract is cancelled, t%e improvements put up by t%e company s%all inure to Benjamin. T%ereafter, T%ereafter, Benjamin filed an action to rescind t%e contract under 'rticle !!"! !!"! of t%e Civil Code. 'ccordin'ccordin- to %im, t%e company only paid %im t%e amount of &$,,.. out of t%e &,,. instalment price. Contrary to t%e company0s representation, t%e company did not file any action a-ainst t%e &%ilippine Tourism 'ut%ority, nor paid disturbance compensation to t%e tenants. 1espite demand, t%e company refused to pay t%e full purc%ase price of t%e property. 2e also ar-ued t%at t%e contract was a contract of ad%esion, and even so, t%e company committed substantial breac% of t%e obli-ation warrantin- rescission under 'rt. !!"! of t%e Civil Code. T%e company, on t%e ot%er %and, countered t%at Benjamin did not fully assist in t%e case to be filed a-ainst &T'3 %e also did not clear t%e property of tenants, t%us t%e company %ad all t%e le-al ri-%t to wit%%old instalment payment. 4%en %is re/uest for admission to 1r. &ablo Olivarez was objected to by t%e company, company, Benjamin filed a motion for jud-ment on t%e pleadin-s and5or summary jud-ment, attac%in- t%ereto %is affidavit and t%e affidavit of a witness attestin- to t%e material alle-ations of %is complaint. 'ccordin- to %im, t%e company %ad already admitted t%e material alle-ations of %is complaint, t%at is, t%at t%e company %ave not yet commenced an action a-ainst &T', nor paid t%e disturbance compensation. 6%ould jud-ment on t%e pleadin-s be denied, a summary jud-ment is still stil l porper, since t%ere are no -enuine issues tendered by t%e company. T%e company opposed t%e motion, since t%ere were -enuine -enuine issues w%ic% need to be resolved and a full blown trial is necessary to fres% out t%e issues. T%e trial court -ranted Benjamin0s motion and rendered summary jud-ment, rulin- t%at t%e company substantially admitted t%e material alle-ations in Benjamin0s complaint, and t%ere were no -enuine issues tendered by it. 7t rescinded t%e contract of conditional sale between Benjamin and Olivarez Realty Corporation and forfeited t%e &$,.. as dama-es under 'rt. !!"! !!"! of t%e Civil Code. On appeal to t%e Court of 'ppeals, t%e appellate court affirmed t%e findin-s of t%e trial court. T%e company t%us filed a petition for certiorari under Rule ) of t%e Rules of Court to try to reverse t%e jud-ments of t%e lower courts. 'mon- t%e issues it presented for consideration was t%e propriety of t%e summary jud-ment. 'ccordin- to t%e company, company, it cannot be faulted for wit%%oldin- instalment instalment payments. 4%at t%en is t%e nature of t%e contract between between t%e company and Benjamin8
The Supreme Court: 6ince Olivarez Realty Corporation ille-ally wit%%eld payments payments of t%e purc%ase price, Castillo is entitled to cancel %is contract wit% petitioner corporation. corporation. 2owever, 2owever, we properly c%aracterize t%e parties0 contract as a contract to sell, not a contract contract of conditional sale. 7n bot% contracts to sell and contracts of conditional sale, title to t%e property remains wit% t%e seller until t%e buyer fully pays t%e purc%ase price. Bot% contracts are subject to t%e positive suspensive condition of t%e buyer0s full payment of t%e purc%ase price. 7n a contract of conditional sale, t%e buyer automatically ac/uires title to t%e property upon full payment of t%e purc%ase price. T%is transfer of title is 9by operation of law wit%out any furt%er act %avin- to be performed by t%e seller.: seller.: 7n a contract
to sell, transfer of title to t%e prospective buyer is not automatic. 9T%e prospective seller ;must< convey title to t%e property ;t%rou-%< a deed of conditional sale.: T%e distinction is important to determine t%e applicable laws and remedies in case a party does not fulfill %is or %er obli-ations under t%e contract. 7n contracts of conditional sale, our laws on sales under t%e Civil Code of t%e &%ilippines apply. On t%e ot%er %and, contracts to sell are not -overned by our law on sales but by t%e Civil Code provisions on conditional obli-ations. 6pecifically, 'rticle !!"! of t%e Civil Code on t%e ri-%t to rescind reciprocal obli-ations does not apply to contracts to sell. 's t%is court explained in On- v. Court of 'ppeals, failure to fully pay t%e purc%ase price in contracts to sell is not t%e breac% of contract under 'rticle !!"!. =ailure to fully pay t%e purc%ase price is 9merely an event w%ic% prevents t%e ;seller0s< obli-ation to convey title from ac/uirin- bindin- force.: T%is is because 9t%ere can be no rescission of an obli-ation t%at is still non existent, t%e suspensive condition not %avin- ;%appened<.: 7n t%is case, Castillo reserved %is title to t%e property and undertoo> to execute a deed of absolute sale upon Olivarez Realty Corporation0s full payment of t%e purc%ase price. 6ince Castillo still %as to execute a deed of absolute sale to Olivarez Realty Corporation upon full payment of t%e purc%ase price, t%e transfer of title is not automatic. T%e contract in t%is case is a contract to sell. 's t%is case involves a contract to sell, 'rticle !!"! of t%e Civil Code of t%e &%ilippines does not apply. T%e contract to sell is instead cancelled, and t%e parties s%all stand as if t%e obli-ation to sell never existed. Olivarez Realty Corporation s%all return t%e possession of t%e property to Castillo. 'ny improvement t%at Olivarez Realty Corporation may %ave introduced on t%e property s%all be forfeited in favor of Castillo per para-rap% 7 of t%e deed of conditional sale? 7mmediately upon si-nin- t%is Contract, ;Olivarez Realty Corporation< s%all be entitled to occupy, possess and develop t%e subject property. 7n case t%is Contract is cancelled, any improvement introduced by ;Olivarez Realty Corporation< on t%e property s%all be forfeited in favor of ;Castillo. 's for prospective sellers, t%is court -enerally orders t%e reimbursement of t%e installments paid for t%e property w%en settin- aside contracts to sell. T%is is true especially if t%e property0s possession %as not been delivered to t%e prospective buyer prior to t%e transfer of title. 7n t%is case, %owever, Castillo delivered t%e possession of t%e property to Olivarez Realty Corporation prior to t%e transfer of title. 4e cannot order t%e reimbursement of t%e installments paid. 7n @omez v. Court of 'ppeals, t%e City of Aanila and uisa @omez entered into a contract to sell over a parcel of land. T%e city delivered t%e property0s possession to @omez. 6%e fully paid t%e purc%ase price for t%e property but violated t%e terms of t%e contract to sell by rentin- out t%e property to ot%er persons. T%is court set aside t%e contract to sell for %er violation of t%e terms of t%e contract to sell. 7t ordered t%e installments paid forfeited in favor of t%e City of Aanila 9as reasonable compensation for ;@omez0s< use of t%e ;property<: for ei-%t years. 7n t%is case, Olivarez Realty Corporation failed to fully pay t%e purc%ase price for t%e property. 7t only paid &$,,. out of t%e &!",(,)". a-reed purc%ase price. 4orse, petitioner corporation %as been in possession of Castillo0s property for !) years since Aay , $ and %as not paid for its use of t%e property. 6imilar to t%e rulin- in @omez, we order t%e &$,,. forfeited in favor of Castillo as reasonable compensation for Olivarez Realty Corporation0s use of t%e property.:
