THIRD DIVISION
G.R. No. 230832, November 12, 2018
ROYAL PLAINS VIEW, INC. AND/OR RENATO PADILLO, Petitioners, v. NESTOR C. MEJIA, Respondent.
D E C I S I O N
J. REYES, JR., J.:
Petitioners prayed as follows: (1) to return to them the owner's duplicate copy of TCT No.T-225549 and all its derivative titles; (2) to honor the Deed of Conditional Sale which they entered into with respondent Nestor; (3) should the return of TCT No. T-225549 and its derivative titles could no longer be possible or since they could no longer pay the balance, to split the title between both of them as per their gentlemen's agreement; (4) to order the return of the sum already paid for by petitioners if the transaction between the parties finds its demise; and (5) to grant such other relief as justice and equity will allow.
- [In] ordering/requiring respondent Nestor x x x who was already declared in default to file and thereafter admit his Appellee's Brief; and for the CA to give full faith and credence to Mejia's version;
- By applying the provisions of [R.A. No.] 6552 otherwise known as the Maceda Law in resolving the main issue of the original case which is "the nullification of that instrument denominated as Rescission and Cancellation of Deed of Conditional Sale, etc."[;]
- Not considering the entirety of the original complaint, in which the plaintiffs also prayed for Specific Performance and Damages[; and]
- In not accepting the alternative way to dispose the case based on the principle of equity, in view of petitioner's inability to perform his obligation at present, that is: to pay the balance of P4.4 Million. Too, the CA erred in not sustaining the agreement of the parties to divide the property covered by TCT No. T-225549[.]41
SEC. 3. Default; declaration of. - If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such reception of evidence may be delegated to the clerk of court.It is evident from the foregoing rule that even when a defendant is already declared in default, he is entitled to notice of subsequent proceedings.43
(a) Effect of order of default. - A party in default shall be entitled to notice of subsequent proceedings but not to take part in the trial.
The ruling of the Supreme Court in Lim v. Court of Appeals (182 SCRA 564 [1990]) is most illuminating. In the said case, a contract to sell and a contract of sale were clearly and thoroughly distinguished from each other, with the High Tribunal stressing that in a contract of sale, the title passes to the buyer upon the delivery of the thing sold. In a contract to sell, the ownership is reserved in the seller and is not to pass until the full payment of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. In the first case, the vendor has lost and cannot recover the ownership of the property until and unless the contract of sale is itself resolved and set aside. In the second case, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract.51This Court agrees with the CA that the April 11, 2007 Deed of Conditional Sale executed between the parties is a contract to sell. Pertinent portion of the agreement indicative that it is a contract to sell reads:
That for and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00) Philippine currency, receipt of which is hereby acknowledged from the VENDEE, the VENDOR does hereby SELL, CEDE, TRANSFER and CONVEY unto the said VENDEE, its heirs[,] successors, executors and assigns, the above-mentioned property subject to the terms and conditions herein set forth:As worded, the Deed of Conditional Sale dated April 11, 2007 (which substitutes the earlier Deed of Conditional Sale dated March 23, 2005 except that there was already a down payment made) provides that upon full payment of the agreed consideration, the vendor shall execute the deed of absolute sale in favor of the vendee.53 This stipulation evinces the intention of the parties for the vendor (respondent) to reserve ownership of the land and the same is not to pass until the remaining balance (payable in 40 monthly installments) has been fully paid by the vendee (petitioners). As fortified by this Court in the case of Diego v. Diego:54
ChanRoblesVirtualawlibraryx x x x
e. And upon full payment of the agreed consideration the Vendor shall execute the deed of absolute sale in favor of the Vendee.52
It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates that the seller shall execute a deed of sale only upon or after full payment of the purchase price is a contract to sell, not a contract of sale. In Reyes v. Tuparan, this Court declared in categorical terms that where the vendor promises to execute a deed of absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to sell. The aforecited stipulation shows that the vendors reserved title to the subject property until full payment of the purchase price.However, contrary to the findings of the CA, the protection55 provided under R.A. No. 6552 (Maceda Law) is not applicable. Notwithstanding the parties' stipulation for installment payments, wherein the payment of the price is more than one, the parties' contract to sell does not automatically fall under the coverage of the Maceda Law. R.A. No. 6552 provides exclusions for its application. Thus:
Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments. (Underscoring supplied)It is clear that the buyer's protection under R.A. No. 6552 only applies to contracts of sale of real estate on installment payments, including residential condominium apartments, but excluding industrial lots, commercial buildings and sales to tenants. A purchase by a company involved in the real estate business, just like the petitioners in this case, of a six-hectare lot can hardly be considered as residential. This is the same interpretation conveyed in the case of Spouses Garcia v. Court of Appeals,56 when this Court held that the subject lands, comprising five parcels and aggregating 69,028 square meters, do not comprise residential real estate within the contemplation of the Maceda Law. Moreso in this case where it was shown that petitioner Corporation is already engaged in the selling of the portions of the said lots to individual buyers.
The enactment on September 14, 1972 by Congress of Republic Act No. 6552 entitled "An Act to Provide Protection to Buyer[s] of Real Estate on Installment Payments" which inter alia compels the seller of real estate on installments (but excluding industrial lots, commercial buildings among others from the Act's coverage) to grant one month's grace period for every one year of installments made before the contract to sell may be cancelled for non-payment of the installments due forecloses any overturning of this Court's long-established jurisprudence. Republic Act 6552 recognizes in conditional sales of all kinds of real estate (industrial and commercial as well as residential) the non-applicability of Article 1592 (1504) Civil Code to such contracts to sell on installments and the right of the seller to cancel the contract (in accordance with the established doctrine of this Court) upon non-payment "which is simply an event that prevents the obligation of the vendor to convey title from acquiring binding force." (Manuel v. Rodriguez, 109 Phil. 1, 10, per Reyes, J.B.L.). The Act in modifying the terms and application of Art. 1592 Civil Code reaffirms the vendor's right to cancel unqualifiedly in the case of industrial lots and commercial buildings (as in the case at bar) and requires a grace period in other cases, particularly residential lots, with a refund of certain percentages of payments made on account of the cancelled contract.58 (Underscoring supplied)In other words, whether the property is residential, commercial or industrial, Maceda Law does not make any distinction insofar as the availability of the remedy of cancellation by the seller in case of nonpayment of installments is concerned. The only distinction lies on the added protection given by the law to residential buyers, which is not enjoyed by commercial and industrial lot buyers. Indeed, the Maceda Law addressed the predicament of thousands upon thousands of residential property buyers who, in the words of this Court, are hounded to suffer the loss of their life earnings only because of an oversight or difficulty in paying one or two installments.59 This is not the case for industrial or commercial lot buyers, who, the law perceives to have deep pockets. To quote the verbatim pronouncement of this Court:
The Act even in residential properties recognizes and reaffirms the vendor's right to cancel the contract to sell upon breach and [nonpayment] of the stipulated installments but requires a grace period after at least two years of regular installment payments (of one month for every one year of installment payments made, but to be exercise[d] by the buyer only once in every five years of the life of the contract) with a refund of certain percentages of payments made on account of the cancelled contract (starting with fifty percent with gradually increasing percentages after five years of installments). In case of industrial and commercial properties, as in the case at bar, the Act recognizes and reaffirms the Vendor's right unqualifiedly to cancel the sale upon the buyer's default.60It is clear by the said provision that in case of industrial and commercial properties, the seller can unqualifiedly cancel the sale upon the buyer's default.
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.64The breach contemplated in Article 1191 of the Civil Code is the obligor's failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation.65 Article 1592, on the other hand, speaks of nonpayment of the purchase price as a resolutory condition.66 It permits the buyer to 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 notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until full payment of the price.67
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 extrajudicial 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 he should exercise due diligence to minimize its own damages.In the same manner that in unilateral cancellation of contracts to sell, notice to the other party is important. If the other party perceives that the cancellation of the contract is not proper, he/she is free to question and raise his/her objection to the court. It is the court who will settle once and for all if the cancellation is warranted. Thus:
[I]n every case where the extrajudicial resolution is contested only the final award of the court of competent jurisdiction can conclusively settle whether the resolution was proper or not. It is in this sense that judicial action will be necessary, as without it, the extrajudicial resolution will remain contestable and subject to judicial invalidation, unless attack thereon should become barred by acquiescence, estoppel or prescription.76Guided by the foregoing pronouncements, respondent Nestor's action in canceling (through a notarized Rescission of Conditional Sale) the contract to sell is unjustified.
If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six percent per annum.is not warranted. Article 2209 governs transactions involving the payment of indemnity in the concept of damages arising from delay in the discharge of obligations consisting of the payment of a sum of money.81 There was no showing that petitioners incurred in delay. As discussed, records show that respondent Nestor never made a demand for petitioners to pay.
Very truly yours, (SGD) WILFREDO V. LAPITAN Division Clerk of Court |
Endnotes:
1Rollo, pp. 3-19.
2 Penned by Associate Justice Edgardo A. Camello, with Associate Justices Maria Filomena D. Singh and Perpetua T. Atal-Paño, concurring; id. at 21-30.
3 Id. at 32-34.
4 Penned by Acting Presiding Judge Ma. Susana T. Baua; id. at 47-53.
5 Id. at 23.
6 Also referred to as OCT No. (P-1324) P-282 in some parts of the rollo.
7Rollo, p. 22.
8 Id.
9 Id.
10 Id. at 48.
11 Supra note 7.
12 Id. at 5.
13 Id.
14 Id.
15 Id.
16 Supra note 7.
17 Supra note 10.
18 Id.
19 Supra note 5.
20Rollo, p.43.
21 Supra note 10.
22 Id.
23 Supra note 5.
24 Id.
25 Id.
26Rollo, p. 7.
27 Id. at 49.
28 Id. at 44.
29 Supra note 27.
30Rollo, p. 15.
31 Id.
32 Id.
33 Supra note 5.
34 Id.
35Rollo, p. 45.
36 Id. at 46.
37 Id. at 50.
38 Id. at 53.
39 Supra note 2.
40 Supra note 3.
41Rollo, pp. 9-10.
42Rural Bank of Sta. Catalina, Inc. v. Land Bank of the Philippines, 479 Phil. 43, 52 (2004).
43Alcaraz v. Judge Lindo, 471 Phil. 39, 44 (2004).
44Lui Enterprises, Inc. v. Zuellig Pharma Corp., 729 Phil. 440, 468 (2014).
45Momarco Import Co., Inc. v. Villamena, 791 Phil. 457, 464 (2016), citing Coombs v. Santos, 24 Phil. 446, 449-450 (1913).
46 See: Dissenting Opinion of Justice Hilado in the old case Lim Toco v. Go Fay, 81 Phil. 258 (1948), which ruling was already abandoned under the 1997 Rules of Court.
47 220 Phil. 311, 316-317 (1985).
48Indiana Aerospace University v. Commission on Higher Education, 408 Phil. 483, 496 (2001).
49 Id.
50Rural Bank of Sta. Catalina, Inc. v. Land Bank of the Philippines, supra note 42.
51Ayala Life Assurance, Inc. v. Ray Burton Development Corp., 515 Phil. 431, 438 (2006); See also: Heirs of Atienza v. Espidol, 642 Phil. 408, 416 (2010).
52 Supra note 20.
53 See: Deed of Conditional Sale; id.
54 704 Phil. 373, 377 (2013).
55 SECTION 3. x x x [W]here the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:
ChanRoblesVirtualawlibrary(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him, which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.Down payments, deposits or options on the contract shall be included in the computation of the total number of installments made.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.SECTION 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than sixty days from the date the installment became due. If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.56 633 Phil. 294, 302-303 (2010).
SECTION 5. Under Sections 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act.
SECTION 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property.
SECTION 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and void.
SECTION 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected thereby. (Realty Installment Buyer Protection Act, Republic Act No. 6552, [September 14, 1972]).
57 175 Phil. 476 (1978).
58 Id. at 501-502.
59 Id. at 503.
60 Id. at 504.
61 Supra note 28.
62 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.
63 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. (Emphasis supplied)
64Rillo v. Court of Appeals, 340 Phil. 570, 577 (1997).
65Padilla v. Spouses Paredes, 385 Phil. 128, 141 (2000), cited case omitted.
66Diego v. Diego, supra note 54, at 391.
67Chua v. Court of Appeals, 449 Phil. 25, 43-44 (2003).
68Heirs of Pangan v. Spouses Perreras, 613 Phil. 615, 626-627 (2009).
69Spouses Santos v. Court of Appeals, 391 Phil. 739, 751-752 (2000).
70Spouses Garcia v. Court of Appeals, supra note 56, at 300.
71Olivarez Realty Corp. v. Castillo, 738 Phil. 737, 765 (2014).
72Padilla v. Spouses Paredes, supra note 65.
73 Supra note 57.
74University of the Philippines v. De Los Angeles, 146 Phil. 108, 114-115 (1970).
75 Id. at 115.
76 Id.
77Cabanting v. BPI Family Savings Bank, Inc., 781 Phil. 164, 170 (2016).
78 See rollo, p. 29.
79 665 Phil. 425, 445-446 (2011).
80 As per award given in Heirs of Antonio F. Bernabe v. Court of Appeals, 581 Phil. 48, 61-62 (2008).
81Castelo v. Court of Appeals, 314 Phil. 1, 20 (1995).
82 Supra note 79.
83 Id. at 446, citing Nabus v. Spouses Pacson, 620 Phil. 344, 366-367 (2009).
84Padilla v. Spouses Paredes, supra note 65.