G.R. No. 111238 – ADELFA PROPERTIES, INC., petitioner, vs. COURT OF APPEALS, ROSARIO JIMENEZ-CASTAÑEDA and SALUD JIMENEZ, respondents.
REGALADO, J.
Rule Synopsis
Where the intention of the parties is to withhold transfer of the ownership of the thing subject of a contract of sale until full payment of the purchase price, the contract is one of contract to sell. Delivery without intention of transferring ownership over said property does not affect the nature of the contract.
Facts
Adelfa Properties, Inc. offered to buy a parcel of lot belonging to Rosario and Salud Jimenez (sellers). They executed a document entitled “Exclusive Option to Purchase” (Option contract). Title over the property was delivered to Adelfa. A civil case then was commenced by the nephews and nieces of the sellers concerning the subject property. Adelfa suspended payments. The former civil case was later dismissed, despite which, Adelfa failed to make further payments but it caused the annotation of said option contract in the title. Nonetheless, the seller executed a Deed of Conditional Sale in favor of one Emylene Chua. Adelfa signified its willingness to pay purchase price so the Deed of Absolute Sale may be executed; sellers ignored. The sellers then sent a notice rescinding the contract. They also demanded for the return of the title in Adelfa’s possession; Adelfa refused.
Thus, the sellers filed a complaint, praying among others, for the cancellation of the option contract and its annotation in the title of the subject property, and the return of said title.
The RTC ruled in favor of the sellers. It held that Adelfa’s failure to make further payments amounts to its refusal to exercise its right to purchase the property under the option contract. The CA affirmed. The SC reversed.
Issue
- Was the “Exclusive Option to Purchase” executed between Adelfa and the respondents an option contract?
- Was there was a valid suspension of payment of the purchase price by said Adelfa, and if so, the legal effects thereof on the contractual relations of the parties?
Ruling and Discussion
- No. The “Exclusive Option to Purchase” executed between Adelfa and the respondents was not an option contract but a Contract to Sell.
The parties never intended to transfer ownership to the petitioner except upon full payment of the purchase price; this is the essential characteristic of a contract to sell. Although the “Option contract” provided for an automatic rescission and partial forfeiture of payments in case of default, it did not mention that Adelfa is obliged to return possession or ownership of the property as a consequence of nonpayment. The legal inference is that the parties never intended to transfer ownership to the petitioner prior to completion of payment of the purchase price. In other words, there is an implied agreement that the title to the subject property shall not transfer to Adelfa until there is full payment of the purchase price. This is a valid stipulation under Art. 1478, which is considered a contract to sell. Furthermore, the same provision does not require that the stipulation be made expressly. Also, the Deed of Absolute Sale is to be executed only upon payment of the balance of the price.
There was also no delivery to Adelfa – actual or otherwise. The “Option contract” was not made in a public instrument, and also it did not take actual, physical possession of the subject property. The delivery of title to Adelfa, as explained by the sellers was without the intention of transferring ownership over the property. - Yes. There was a valid suspension of payment. Nonetheless, the sellers can no longer be compelled to sell and deliver the subject property to Adelfa given that: a) Adelfa failed to make proper consignation of the amount due when the disturbance ceased, and b) the contract to sell had been validly rescinded by the sellers.
Adelfa’s suspension of payments was valid. Under Art. 1590, the buyer may suspend payment of the price should he be disturbed in the possession or ownership of the thing acquired, until the vendor cause the disturbance to cease. In this case, the filing of the civil case constitutes such disturbance under the said law, and the seller’s assurance that the case the merely a harassment does not qualify as “causing the disturbance to cease” within the meaning of said law.
The sellers can no longer be compelled to sell or deliver the property. This because Adelfa failed to consign the balance of the purchase price when the disturbance ceased, i.e. when the civil case was dismissed. In this case, consignment was necessary given the nature of the subject contract as a contract to sell. In other words, it creates an obligation on the part of Adelfa to pay the price. In contrast, such failure to consign will not affect Adelfa’s right to purchase the property is the contract was properly an option contract, which is not the case. In the latter, the mere tender of payment to the seller, without corresponding consignation, is sufficient for the buyer to preserve its option, given that the same merely creates a right and does not impose an obligation upon the buyer.
The contract to sell was validly rescinded by the sellers. In this case, the SC held that the written notice of rescission sent by the sellers to Adelfa was sufficient. The SC held that the resolution of reciprocal contracts may be made extra-judicially unless successfully impugned in court. The Court said that Adelfa’s receipt of the said notice without objection amounts to an admission of the veracity and validity of the seller’s claim.
Dispositive
Judgment affirmed.