Heris of Escanlar Vs. Court of Appeals Francis Xavier Sinon G.R. No.

119777

Article 1191 Obligations and Contrats No. 88

Facts Spouses Nombre and Cari-an died without a child. Nombres heirs include his nephews and grandnephews. Two parcels of land formed part of the estate of Nombre and Cari-an. The Private Respondents, heirs of Cari-an executed a Deed of Sale in favor of petitioners Escanlar and Holgado. Petitioners paid P50,000.00 as a form of down payment, but was unable to pay the remaining balance (paid only 12 installments). Being former lessees, petitioners continued in possession of the said lots, and continued to pay rent. Private Respondent later sold the said lots to the Chua spouses. Private Respondent then filed an action for cancellation of sale against petitioners, for failure to pay the balance. Petitioners however, sold their rights and interests over the said lots to Jayme, and turned over possession. The Regional Trial Court of Himamaylan which took cognizance of Special Proceeding ruled that the Sale to petitioners was nullified since all the properties of the estate had been transferred and titled to in the name of the Chua spouses. On appeal, the Court of Appeals affirmed, questioned deed of sale (one with petitioners) is a contract to sell because it shall become effective only upon approval by the probate court and upon full payment of the purchase price. Issue Whether or not the sale was a contract to sell and therefore, private respondents may rescind the the contract the moment the buyer fails to pay. Held The sale of rights, interests and participation as to 1/2 portion pro indiviso of the two subject lots is a contract of sale for the following reasons: First, private respondents as sellers did not reserve unto themselves the ownership of the property until full payment of the unpaid balance of P225,000.00. Second, there is no stipulation giving the sellers the right to unilaterally rescind the contract the moment the buyer fails to pay within the fixed period. Prior to the sale, petitioners were in possession of the subject property as lessees. Upon sale to them of the rights, interests and participation as to the 1/2 portion pro indiviso, they remained in possession, not in concept of lessees anymore but as owners now through symbolic delivery known as traditio brevi manu. Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the vendee upon actual or constructive delivery thereof. In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder. The remedy of an unpaid seller in a contract of sale is to seek either specific performance or rescission. In contracts to sell, ownership is retained by the seller and is not to pass until the full payment of the price. Such payment is a positive suspensive condition, the failure of which is not a breach of contract but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. To illustrate, although a deed of conditional sale is denominated as such, absent a proviso that title to the property sold is reserved in the vendor until full payment of the purchase price nor a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period, by its nature, it shall be declared a deed of absolute sale. The petitions are hereby GRANTED. The decision of the Court of Appeals under review is hereby REVERSED AND SET ASIDE.