Lacanilao v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioners Gloria A.S. Lacanilao and Plutarco Cadurnigara were lessees of portions of a residential lot owned by respondent Eusebio C. Encarnacion. Encarnacion offered to sell the lot to petitioners for P120,000.00, with a verbal agreement to finalize the sale by June 15, 1988. Petitioners requested a one-month extension to pay. Meanwhile, the Register of Deeds office in Quezon City was damaged by fire, affecting original land titles. Petitioners failed to pay the purchase price on June 15, 1988. Encarnacion subsequently offered to sell the property to private respondents Ramon and Teresita Acebo, who agreed to purchase it for P145,000.00, paid a down payment, and later paid the balance, leading to the execution of a Deed of Absolute Sale in their favor. The Acebos sent petitioners a notice to vacate. Procedural History: Petitioners filed a complaint with the barangay for violation of tenant's right to purchase under P.D. 1517. After failing to reach a settlement, they filed a complaint before the Regional Trial Court (RTC) to annul the deed of sale to the Acebos and compel Encarnacion to execute a deed of sale in their favor. The RTC dismissed the complaint and awarded damages and attorney's fees to the private respondents. The Court of Appeals (CA) affirmed the dismissal but deleted the awards for damages and attorney's fees. The Petition: Petitioners seek review of the CA decision, alleging that the Acebos were not in good faith and that the CA erred in holding that Encarnacion did not agree to the sale due to petitioners' failure to pay.
Issue(s)
Whether the Court of Appeals erred in holding that the Acebos were not in good faith when they purchased the property. Whether the Court of Appeals erred in holding that Encarnacion did not agree to the sale because the petitioners failed to pay the purchase price.
Ruling
The petition is denied, and the decision of the Court of Appeals is affirmed in toto.
Ratio Decidendi
On the issue of good faith of the Acebos: The Court found that the primary issue was the enforceability of the alleged verbal contract between Encarnacion and the petitioners. The Court upheld the findings of the lower courts that Encarnacion had verbally agreed to sell the lot to petitioners for P120,000.00, with payment due on June 15, 1988. Petitioners failed to pay on the stipulated date. The Court noted that while the contract was unenforceable under Article 1403(2)(e) of the Civil Code (Statute of Frauds), the private respondents did not invoke this defense in their pleadings and even cross-examined petitioners on the existence of the verbal contract, thereby waiving the defense. However, even assuming the waiver, the petitioners failed to present evidence proving their readiness to fulfill the suspensive condition of full payment. Therefore, the Acebos' purchase, which occurred after the petitioners' failure to pay, was not tainted by bad faith concerning the petitioners' alleged right. On the issue of Encarnacion's agreement to the sale due to non-payment: The Court affirmed the findings of the Court of Appeals that Encarnacion had verbally agreed to sell the lot to petitioners for P120,000.00, with the payment due on June 15, 1988. The petitioners failed to pay on this date. The Court reiterated the principle that in contracts to sell, where ownership is retained by the seller until full payment, the payment of the price is a positive suspensive condition. The failure of this condition prevents the obligation of the vendor to convey title, as per Article 1184 of the Civil Code. Article 1545 of the Civil Code also allows a party to refuse to proceed with the contract if a condition is not performed. Encarnacion, having agreed to sell upon full payment, was justified in proceeding with the sale to the Acebos after the petitioners' failure to meet the condition.
Main Doctrine
A verbal contract to sell, even if proven, is unenforceable under the Statute of Frauds unless the defense is waived. Furthermore, failure to pay the purchase price on the agreed date constitutes a failure of a suspensive condition, preventing the vendor's obligation to convey title.