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Platinum Plan Phil. Inc. v. Romeo Cuenco - GR 147405 April 25, 2005
Platinum Plan Phil. Inc. v. Romeo Cuenco - GR 147405 April 25, 2005
AZCUNA, J.:
This was made into a formal offer in writing, the salient conditions of
which are: (1) Plaintiff-appellant will issue a check for P100,000.00 as
earnest money; (2) Plaintiff will also issue a post-dated check for
P1,900,000.00 encashable on 30 September. 1993 on the condition that
he will stop paying rental(s) for the said unit after 30 September 1993;
and (3) That in case the defendants-appellants still had an outstanding
loan (with the said unit as collateral/security) with the bank of less than
P2,000,000.00, as of 31 December 1993, plaintiff-appellant shall assume
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the said loan and pay the defendants-appellants the difference from the
remaining P2,000,000.00.
In the main, plaintiff-appellant argued before the lower court that there
was a perfected sale between them, as based on the facts he alleged
Based on such perfected sale, plaintiff-appellant maintains that he may
validly demand of the defendants-appellants to execute the necessary
deed of sale and other documents transferring ownership and title over
the property in his favor.
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The trial court found that under the circumstances, the essential element of
consent to the contract was lacking as indicated by the failure of the parties
to agree on a definite date when full payment of the purchase price should
be made by respondent. As a result, the court ruled against the existence of
a perfected contract of sale between the parties and ordered petitioners to
return the Two Million Pesos (P2,000,000) they received from respondent
as downpayment for the condominium unit and to likewise pay respondent
interest, moral damages and attorney's fees. For his part, respondent was
directed to pay petitioners rentals in arrears for the use of the unit in the
amount of Eighteen Thousand Pesos (P18,000) per month commencing in
July 1993. Unsatisfied, both parties appealed the decision to the CA.
The CA, on the other hand, differed from the conclusion of the trial court
and ruled that there was, in this instance, a perfected contract of sale
despite the fact that the parties never agreed on the date of payment of the
remaining balance of the purchase price. Accordingly, the CA reversed and
set aside the judgment of the RTC in its Decision dated February 21, 2001,
the dispositive portion of which reads:
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SO ORDERED.[7]
I.
II.
III.
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IV.
The primary issue in this case centers upon a determination of the true
nature of the agreement of the parties concerning the condominium unit. In
brief, petitioners claim that the parties merely entered into a contract to sell
while respondent insists that it was already a perfected contract of sale. It is
therefore critical to ascertain whether the parties intended to enter into a
contract of sale or a contract to sell as these two contracts produce very
different effects under the law.
To begin with, a contract of sale is defined under Article 1458 of the Civil
Code as follows:
In a contract of sale, the vendor cannot recover ownership of the thing sold
until and unless the contract itself is resolved and set aside.[8] On this
score, it is significant to note that the resolution or rescission of a contract
of sale is further circumscribed by Article 1592 of the Civil Code which
provides:
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a notarial act. After the demand, the court may not grant him a new
term. (Emphasis supplied.)
The demand mentioned above refers to that made, upon the vendee to
agree to the resolution of the contract. A party who fails to invoke judicially
or by notarial act the resolution of the contract of sale would be prevented
from blocking the consummation of the same in light of the precept that
mere failure to fulfill that contract does not operate ipso facto as its
rescission.[9]
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ruled that the failure of the parties to agree with respect to the manner of
payment did not negate the existence of a perfected contract of sale
between them, explaining as follows:
Apparently, the lower court relied upon the time element regarding the
payment of the balance of the purchase price. We consider, however,
that first, the object and the total amount of the purchase price has been
agreed upon. It was error on the part of the lower court to consider any
form or manner of payment since under the present circumstances, and
based upon the Levy Hermanos' definition of what a sale on installment
is, the agreement between the parties to this case would constitute a
simple "straight sale." Such manner of payment as discussed by the
lower court, to Our mind, would find pertinent application in the realm of
installment sales. Thus, being a case of straight sale, the manner of
payment- which must be construed here as being made in cash- has no
bearing in the present case. The mode of payment is cash and there is
no subsequent installment to speak of. Being such, the performance of
the contract will not necessarily affect the validity of the perfected
contract of sale.[12]
However, the reliance of the CA upon Levy Hermanos, Inc. vs. Gervacio[13]
is misplaced because the factual circumstances as well as the issues raised
therein are not on all fours with those in the present case. Levy Hermanos
involved a collection suit to recover the balance of the purchase price in a
sale of personal property after the vendee already paid partly in cash and
partly on term by way of a promissory note that was secured with a
mortgage over the property. Since the vendee failed to pay the note upon
its maturity, the vendor was constrained to foreclose on the mortgage. The
proceeds from the foreclosure sale, however, were insufficient to discharge
the note, prompting the vendor to seek judicial recourse.
In Levy Hermanos, there was no question as to the intent and nature of the
agreement entered into by the parties. Clearly, it was a contract of sale
which immediately vested unto the vendee the ownership of the personal
property subject of the transaction. The issue posed in that case, rather,
pertained to the applicability of Article 1454-A[14] of the old Civil Code
regarding the right of the vendor to recover the remaining balance of the
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purchase price when such vendor has previously exercised the right to
foreclose the subject property. In resolving the issue, this Court delineated
the difference between an installment sale and a "straight" sale and
declared that the transaction between the parties in that case was a
"straight" sale not falling within the purview of Section 1454-A of the old
Civil Code.
As correctly pointed out by the trial court, the fact that respondent
delivered to petitioners and petitioners accepted part of the downpayment
on the price cannot be considered as proof of the perfection of the contract
as they had not agreed on how and when the balance was to be paid.
Respondent admitted as much during his cross-examination on August 12,
1996, to wit:
Court: Do I understand from you that after all in regard to writing, there
was no consummated agreement in regards to the terms and period of
payment?
Court: That's why my question is, there was no definite time frame
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agreed upon by you and the defendant as to when the last payment of
full payment will be made?
A: Based on my letter...
A: The last payment, your Honor, they asked me to pay October 19...
October 15 and October 31.
xxx
Court: And you did not agree in regard to the dates fixed by defendants?
xxx
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A: Yes, ma'm.
Q: Were you not given another period within which you could pay the
balance instead of December 30, 1993?
A: They gave me a period earlier than December 30 but I did not accept.
Q: Are you saying that in the negotiation, you just went to tell the
defendant corporation that you are not acceeding (sic) to their proposal
of an earlier payment?
Significantly, neither side has been able to produce any written evidence
documenting the actual terms of their agreement, specifically the date of
full payment of the purchase price. The evidence adduced during the trial
showed that the respective offers and counter-offers made by the parties
were not accepted by the other party. The trial court properly found that
there was no meeting of the minds in this case considering the acceptance
of the offer was not absolute and unconditional.[18] This further confirmed
the absence of the contractual element of consent.
In a number of cases,[19] this Court has held that before a valid and binding
contract of sale can exist, the manner of payment of the purchase price
must first be established. The manner of payment affects the essential
validity of the sale notwithstanding that the object and purchase price may
have previously been agreed upon. Although not an express statutory
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requirement, the minds of the parties must meet on the terms or manner of
payment of the price, otherwise, there is no sale.[20] An agreement on the
manner of payment goes into the price such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price[21]
Secondly, the reservation of the title in the name of petitioners indicates the
intention of the parties to enter, at most, into a contract to sell. The CA
already found that "there was an express stipulation regarding the
reservation of title of the property made by the seller until full payment of
the price agreed upon."[22] Indeed, this finding is supported by the records
of this case and admitted by respondent himself.[23] Both parties
understood that the documents conveying title over the unit shall be
executed only upon completing payment of the purchase price. Otherwise,
even prior to the belated tender by respondent of the remaining balance, he
would have demanded that petitioners draw in his favor the necessary deed
of absolute sale. Where the seller promises to execute a deed of absolute
sale upon completion of payment of the purchase price by the buyer, the
agreement is unequivocally a contract to sell.[24]
Be that as it may, the intention of the parties to enter into a contract to sell
did not effectively translate into an enforceable obligation in view of their
failure to agree on the contract's actual terms.[25] As in a contract of sale, it
is important that there be a stipulation on the period within which the
payment would become due and demandable, the absence of which would
justify the conclusion that there was no consent to the contract proposed.
The Court, in this instance, cannot step in to cure the deficiency by fixing
the period of the obligation pursuant to either Article 1191[26] [which,
incidentally, applies only to contracts of sale] or Article 1197[27] of the Civil
Code. In the first place, respondent did not pray for this relief when he filed
his complaint for specific performance seeking to compel petitioners to
receive the balance of the purchase price and to transfer title of the
property in his name. He instead claimed that the parties had previously
fixed the period of the obligation on December 31, 1993.
Thirdly, the Court cannot arbitrarily set a period different from the term
probably contemplated by the parties.[28] In the present case, both parties
submit that the due date of the final payment had been sometime in 1993;
they only differ with respect to the exact month and day. For this reason,
the Court would have no basis for granting to respondent an extension of
time within which to pay his outstanding balance well beyond the
contemplated period.
This is not to say that petitioners can treat the agreement as cancelled
without serving notice to respondent of their decision to do so. The act of a
party in treating a contract as cancelled should be made known to the other
party because this act is subject to scrutiny and review by the courts in
case the alleged defaulter brings the matter for judicial determination.[31]
This point was explained in University of the Philippines v. De Los Angeles,
[32] thus:
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In other words, the party who deems the contract violated may consider
it resolved or rescinded, and act accordingly, without previous court
action, but it proceeds at its own risk. For it is only the final judgment of
the corresponding court that will conclusively and finally settle whether
the action taken was or was not correct in law. But the law definitely
does not require that the contracting party who believes itself injured
must first file suit and wait for a judgment before taking extra-judicial
steps to protect its interest. Otherwise, the party injured by the other's
breach will have to passively sit and watch its damages accumulate
during the pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that [it] should exercise due
diligence to minimize its own damages.
Considering that the agreement of the parties did not ripen into a binding
and enforceable contract meaning it did not acquire any obligatory force
either for the transfer of the ownership of the property or the rendition of
payments as part of the purchase price due to the absence of the essential
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element of consent, the Court is precluded from finding any cause of action
that would warrant the granting of the reliefs prayed for in respondent's
complaint. Accordingly, the initial payment of Two Million Pesos
(P2,000,000) advanced by respondent should be returned by petitioners
lest the latter unjustly enrich themselves at the expense of the former. In
the same vein, considering that respondent has been in continuous
possession of the subject unit beginning July of 1993, the award of back
rentals in favor of petitioners is likewise proper, but the award of moral
damages and attorney's fees should be deleted for lack of sufficient basis.
However, moral damages and attorney's fees awarded are DELETED for lack
of basis.
No costs.
SO ORDERED.
[5] The subject unit measuring one hundred thirty-six (136) square meters is
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TOLENTINO, p. 24 (1999).
[11]
Spouses Gimenez v. CA, G.R. No. 92171, March 13, 1991, 195 SCRA 205;
Augustin v. CA, G.R. No. 84751, June 6, 1990, 186 SCRA 375; Roque v.
Lapuz, G.R. No. L-32811, March 31, 1980, 96 SCRA 741; Luzon Brokerage
Co. v. Maritime Building Co., G.R. No. 25885, January 31,1972, 43 SCRA 93.
[17] Transcript of Stenographic Notes (TSN), August 12, 1996, pp. 12-16.
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[19] Swedish Match, AB v. CA, G.R. No. 128120, October 20, 2004, 441
SCRA 1; Montecillo v. Reynes, 434 Phil. 456 (2002); San Miguel Properties
Philippines, Inc. v. Spouses Huang, supra note 16; Co v. CA, 349 Phil 745
(1998); Uraca v. CA, G.R. No. 115158, September 5, 1997, 278 SCRA 702;
Limketkai Sons Milling, Inc. v. CA, 330 Phil. 171 (1996); Toyota Shaw, Inc. v.
CA, 314 Phil. 201 (1995).
[20]
Montecillo v. Reynes, supra note 19; Navarro v. Sugar Producers
Cooperative Marketing Association, Inc., G.R. No. L-12888, April 29, 1961, 1
SCRA 1181.
[21]
San Miguel Properties Philippines, Inc. v. Spouses Huang quoting Toyota
Shaw, Inc. v. CA, 314 Phil. 201 (1995)], supra note 16.
[24] Rayos v. CA, G.R. No. 135528, July 14, 2004, 434 SCRA 365.
[25] Ebrada v. Ramos, G.R. No. 154413, August 31, 2005, 468 SCRA 597.
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[30] Cheng v. Genato, G.R. No. 129760, December 29,1998, 300 SCRA 722.
[31]
Palay, Inc. v. Clave, GR No. L-56076, September 21, 1983, 124 SCRA
638.
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