Bernabe v. Titan Construction Corporation
REITERATIONFacts
The Antecedents: Respondent Titan Construction Corporation (Titan) filed a Complaint for specific performance against Antonio F. Bernabe and his siblings, co-owners of a one-half share in two parcels of land. The co-owners sold their share to Titan via an undated Deed of Sale of Real Estate for P17,700,000.00, with specific payment terms and conditions, including the acquisition of a right of way and waiver of the right of first refusal. Titan alleged partial payment and defendants' failure to comply with their undertakings. The defendants claimed that not all co-owners agreed to the terms, and they had not authorized the cancellation of the deed. Subsequently, a compromise agreement was entered into by Titan and the remaining defendants, leading to new Deeds of Conditional Sale. Antonio F. Bernabe opposed a joint motion for judgment based on the compromise, but his children, acting via Special Power of Attorney (SPA), executed the motion on his behalf. Antonio later died, and his heirs (petitioners) were substituted. Titan filed a supplemental complaint alleging Antonio had received a substantial down payment and executed an SPA for his children to execute the Deed of Conditional Sale, but his heirs refused to execute the formal deed. Procedural History: The Regional Trial Court (RTC) ruled in favor of Titan, upholding the validity of both the Deed of Sale of Real Estate and the Deed of Conditional Sale, and ordering the heirs of Antonio to execute a registrable Deed of Sale upon Titan's payment of the remaining balance. The Court of Appeals affirmed the RTC decision. Petitioners appealed to the Supreme Court. The Petition: Petitioners sought review of the Court of Appeals' decision, raising issues on whether Titan could compel the execution of a registrable deed of sale based on substantial down payment when full payment was stipulated as a condition, and whether vendors could seek rescission for the vendee's failure to pay in full.
Issue(s)
Whether Titan, as vendee, may compel the vendors to execute a registrable deed of sale based on substantial down payment when full payment was expressly stipulated as a condition for such execution. Whether the vendors in a deed of conditional sale may seek rescission of the contract due to the vendee's failure to pay the full agreed consideration.
Ruling
The petition is denied. Respondent Titan Construction Corporation is ordered to pay petitioners Heirs of Antonio F. Bernabe the amount of P3,431,058.42 within sixty (60) days from the finality of this decision. Petitioners are ordered to accept the payment and thereupon execute the proper deed of absolute sale. Both parties are ordered to comply with the other stipulations in the Deed of Conditional Sale.
Ratio Decidendi
On the issue of compelling execution of a registrable deed of sale: The Court clarified that the Deed of Conditional Sale is a contract to sell, not a contract of sale. In a contract to sell, ownership is reserved in the vendor until full payment of the purchase price, and such full payment is a positive suspensive condition. The Deed of Conditional Sale explicitly stated that the vendor shall execute the deed of absolute sale only upon full payment of the purchase price. Therefore, Titan could not compel the execution of the deed of absolute sale until full payment was made. However, the Court found that Titan had partially performed its obligations and was ready to perform further, and that the balance had not yet become due and demandable due to the pendency of the appeal. The Court ultimately ordered the execution of the deed of absolute sale upon Titan's payment of the outstanding balance. On the issue of rescission of contract: The Court held that rescission under Article 1191 of the Civil Code is available only to the injured party who has faithfully fulfilled or is ready and willing to fulfill their obligations. Petitioners sought rescission based on Titan's alleged failure to pay the full consideration. However, the Court found that Titan had partially performed its obligations and that the balance of the purchase price had not yet become due and demandable at the time of the filing of the supplemental complaint because not all conditions precedent had been met. Furthermore, Titan's waiver of the right of way condition and its readiness to pay demonstrated its willingness to perform. Therefore, petitioners, not having fulfilled their end of the bargain or being ready to do so, were not the injured party entitled to demand rescission.
Main Doctrine
A Deed of Conditional Sale is a contract to sell, where ownership is reserved in the vendor until full payment of the purchase price, and payment is a suspensive condition. Rescission under Article 1191 of the Civil Code is available only to the injured party who has fulfilled or is ready to fulfill their obligations.