G.R. No. 123672 – 477 SCRA 666 – Civil Law – Law on Sale – Contract to Sell vs Contract of Sale – Right of Rescission; Failure to Pay Purchase Price
In March 1972, El Dorado Plantation, Inc. (El Dorado), through its board member Lauro Leviste, executed a Deed of Sale with Fernando Carrascoso, Jr. The subject of the sale was a 1,825 hectare of land. It was agreed that Carrascoso was to pay P1.8M.; that P290K would be paid by Carrascoso to PNB to settle the mortgage upon the said land. P210k would be paid directly to Leviste. The balance of P1.3M plus 10% interest would be paid over the next 3 years at P519k every 25th of March. Leviste also assured that there were no tenants hence the land does not fall under the Land Reform Code. Leviste allowed Carrascoso to mortgage the land which the latter did.
Carrascoso obtained a total of P1.07M as mortgage and he used the same to pay the down payment agreed upon in the contract. Carrascoso defaulted from his obligation which was supposed to be settled on March 25, 1975. Leviste then sent him letters to make good his end of the contract otherwise he will be sued.
In 1977, Carrascoso executed a Buy and Sell Contract with PLDT. The subject of the sale was the same land sold to Carrascoso by Leviste but it was only the 1000 sq. m. portion thereof. The land is to be sold at P3M. Part of the terms and conditions agreed upon was that Carrascoso is to remove all tenants from the land within one year. He was also being given a 6-month extension in case he’ll need one. Thereafter, PLDT will notify Carrascoso if whether or not PLDt will finalize the sale. Eventually, PLDT gained possession of the land.
Meanwhile, El Dorado filed a civil case against Carrascoso. PLDT intervened averring that it was a buyer in good faith. The Regional Trial Court (RTC) ruled in favor of Carrascoso. The Court of Appeals (CA) reversed the RTC ruling.
ISSUE: What is the nature of each contract?
HELD: The contract executed between El Dorado and Carrascoso was a contract of sale. It was perfected by their meeting of the minds and was consummated by the delivery of the property to Carrascoso. However, El Dorado has the right to rescind the contract by reason of Carrascoso’s failure to perform his obligation.
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in money or its equivalent. The non-payment of the price by the buyer is a resolutory condition which extinguishes the transaction that for a time existed, and discharges the obligations created thereunder. Such failure to pay the price in the manner prescribed by the contract of sale entitles the unpaid seller to sue for collection or to rescind the contract.
On the other hand, the contract between Carrascoso and PLDT is a contract to sell. This is evidenced by the terms and conditions that they have agreed upon that after fulfillment of Carrascoso’s obligation PLDT has “to notify Carrascoso of its decision whether or not to finalize the sale.”
Requisites of Express warranty in a Contract of Sale
(1) the express warranty must be an affirmation of fact or any promise by the seller relating to the subject matter of the sale;
(2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing; and
(3) the buyer purchases the thing relying on such affirmation or promise thereon.
