439 SCRA 273 – Civil Law – Law on Sales – Elements of a Contract of Sale – Determining the Intention of Parties in a Contract [of Sale]
Blas and Hutalla were living in California in 1988 when they agreed to execute a sale between them. Subject of which was Hutalla’s land located in Mandaluyong, Metro Manila. In June 1988, they arrived in the Philippines and they executed an unnotarized contract of sale where it was indicated that the purchase price in consideration of the land and the 3 door apartment standing thereon was P250k; the contract manifested Hutalla’s receipt of the purchase price. The contract also indicated that that only the original contract is binding and all other would be void. They showed the contract to Hutalla’s step-mom and her nephew (who were occupying one of the apartment space) for the purpose of evicting them.
After a month, the two returned to the USA where they executed another Deed of Sale this time it was notarized by Renato Calura, also based in California. This time the purchase price indicated was $40k (P553k). Simultaneously, a Real Estate Purchase Contract and Receipt for Deposit was executed by both parties notarized by Calura as well. It was acknowledged that Blas paid $5k; that she was to pay another $5k on August 31, 1988; that $7k is to be paid on January 31, 1989; that the remaining balance plus interest would be paid monthly starting February 1989 at $527.08.
In 1998, Hutalla sent an eviction letter to the relatives of Blas who were then occupying the apartments by reason of Blas’ failure to pay her obligation. A civil case ensued. Blas invoked the unnotarized Deed of Sale as the true and binding contract between her and Hutalla. Hutalla invoked the 2nd Deed of Sale and the REPCRD they executed in the USA. Blas averred she is fully paid of P250k under the 1st contract. Blas challenged the validity of the REPCRD but she remained silent when it comes to the 2nd Deed of Sale. Blas also invoked Maceda Law which provides:
a buyer who has paid at least two years of installments under a contract of sale of real estate on installment payments, including residential apartments, is granted a grace period of one month for every year of installment payments made.
The case reached the Court of Appeals which ruled in favor of Hutalla. The CA ruled that the 2nd Deed of Sale is binding for Blas never challenged it, and under which, Blas could not claim full payment for the price considered under it was $40k or roughly P553k, twice the amount that Blas claimed she paid. Also, by invoking Maceda Law, Blas admits she never made full payment instead what she did was installment payment for which she missed some payments. This gave Hutalla the right to rescind the contract and recover the property.
ISSUE: What is the real intent of the parties considering that there are multiple contracts? Which is the real contract of sale?
HELD: It is settled that the real nature of a contract may be determined from the express terms of the written agreement and from the contemporaneous and subsequent acts of the parties thereto. In the construction or interpretation of an instrument, the intention of the parties is primordial and is to be pursued. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the contract appears to be contrary to the evident intentions of the parties, the latter shall prevail over the former. The denomination given by the parties in their contract is not conclusive of the nature of the contents.
The agreement of the parties may be embodied in only one contract or in two or more separate writings. In such event, the writings of the parties should be read and interpreted together in such a way as to render their intention effective.
In this case, the first contract is not binding for it was admitted by Blas [in another affidavit] that they only executed the 1st contract so as to show the same to Hutalla’s step-mom for the purpose of evicting them from the property so that Blas’ relatives could stay in their place.
The clause “only the original contract binds them” could not possibly refer to the 2nd Deed of Sale for Blas made payment under the REPCRD. Fact of which was admitted by her invocation of the Maceda Law. The subsequent and contemporaneous acts of the parties manifest that they intended the 2nd Deed of Sale together with the REPCRD as the binding one.
Under the two contracts, the parties entered into a contract of sale over the subject property for the price of $40k, with a down payment of $17k, payable as follows: $5k having been already paid by Blas to the Hutalla ; $5k on or before August 31, 1988; and $7k on or before January 31, 1989. Considering that Blas obtained a loan from Hutalla, the balance of $23k was, likewise, already paid. However, of the $17k down payment, Blas managed to pay only $10k, and failed to pay $7k due on or before January 31, 1989, exclusive of ‘late fees.’
It must be stressed that a sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. From the time the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.
By Blas’ failure to pay, Hutalla has the right to rescind the contract of sale. The CA’s ruling on the Maceda Law issue is sustained.