Salazar v. Borres
REITERATIONFacts
The Antecedents: Petitioner Dr. Emilio A. Salazar offered to sell two parcels of land with improvements to private respondent Jonette Borres for P1,000,000.00. Initially, the payment period was six months, but Salazar reduced it to three months, and later to one month (up to June 30, 1989). On June 2, 1989, Salazar reluctantly agreed to sign a Deed of Absolute Sale and a Deed of Warranty, provided Borres paid P500,000.00 by June 15, 1989, and the balance by June 30, 1989. Salazar entrusted the Deed of Absolute Sale and titles to co-defendant Teresita Dizon, with instructions not to release them until full payment. Borres informed Dizon on June 14, 1989, that she would pay the full amount on June 15, 1989. On June 15, 1989, Borres met Dizon, but they failed to proceed to Makati to finalize the transaction. On June 16, 1989, Salazar, learning that the down payment was not made, instructed Dizon to stop the sale. Procedural History: The Regional Trial Court (RTC) ruled that the Deed of Absolute Sale was a contract to sell and dismissed Borres' complaint for specific performance due to her failure to pay the down payment on the agreed date. The Court of Appeals (CA) reversed the RTC decision, holding that the Deed of Absolute Sale was a perfected contract of sale and that Borres was financially prepared to pay, attributing the failure to meet the deadline to Dizon's bad faith. The Petition: Petitioners Salazar and Dizon seek to set aside the CA decision, arguing that the agreement was a contract to sell, that Borres failed to comply with the suspensive condition, and that Dizon did not act in bad faith.
Issue(s)
Whether the Deed of Absolute Sale executed by petitioner Emilio A. Salazar in favor of private respondent Jonette Borres is a perfected contract of sale or a mere contract to sell. Whether the action for specific performance filed by Borres will lie to compel Salazar to deliver the Deed of Absolute Sale, Transfer Certificates of Title, and other relevant documents.
Ruling
The petition is granted. The Court of Appeals decision is reversed and set aside, and the RTC decision is affirmed, with the modification that the award for attorney's fees is deleted. The agreement between Salazar and Borres is deemed a contract to sell, and Borres' failure to pay the stipulated down payment on the agreed date means the suspensive condition was not met, thus preventing the obligation to convey title from becoming effective. Consequently, Salazar cannot be compelled to deliver the deed of sale and titles.
Ratio Decidendi
On the issue of whether the agreement is a contract of sale or a contract to sell: The Court held that while the Deed of Absolute Sale, taken alone, suggests a contract of sale, the accompanying Deed of Warranty and the circumstances surrounding its execution clearly indicate that the parties intended a contract to sell. The Court emphasized that in a contract to sell, ownership is reserved in the vendor until full payment of the purchase price, and failure to pay is an event that prevents the obligation to convey title from becoming effective, rather than a breach. The evidence showed Salazar's consistent intention not to transfer ownership until full payment, as evidenced by his rejection of longer payment terms, his insistence on a Deed of Warranty, and the withholding of the original documents by Dizon. The Court found that the Deed of Warranty explicitly stated that Borres had no absolute right to the original copies of the Deed of Absolute Sale until the full purchase price was paid, reinforcing the suspensive nature of the condition. On the issue of whether the action for specific performance will lie: The Court ruled that even if the agreement were considered a perfected contract of sale, Borres' action for specific performance would still fail because she was not ready, willing, and able to pay the required down payment on the stipulated date of June 15, 1989. The Court noted that the P1.5 million check Borres possessed was crossed, cancelled, and its encashment was subject to verification of property documents, thus not constituting a valid tender of payment. Furthermore, Borres failed to consign the payment in court, which is a necessary step to be released from her obligation and to exact fulfillment from the vendor. Therefore, Salazar could not be compelled to deliver the property documents as the suspensive condition of payment was not fulfilled.
Main Doctrine
In a contract to sell, ownership is reserved in the vendor until full payment of the purchase price, and failure to pay is an event that prevents the obligation to convey title from becoming effective, not a breach of contract. The form of the instrument (Deed of Absolute Sale) cannot prevail over the true intent of the parties as established by evidence, especially when accompanied by a Deed of Warranty and surrounding circumstances indicating that title would not pass until full payment.