LAW ON SALES | BABASA VS. COURT OF APPEALS, 290 SCRA 532, MAY 21, 1998

BABASA VS. COURT OF APPEALS, 

290 SCRA 532, MAY 21, 1998

 

TOPIC/DOCTRINE

A deed of sale is absolute in nature although denominated a “conditional sale” absent such stipulations reserving title to the vendor until full payment of the purchase price, nor any stipulation giving them the right to unilaterally rescind the contract in case of non-payment;

 

FACTS

A contract of “Conditional Sale of Registered Lands” was executed between the spouses Vivencio and Elena Babasa as vendors and Tabangao Realty, Inc. (TABANGAO) as vendee over three (3) parcels of land. It was agreed that the total purchase price of P2,121,920.00 would be paid in the following manner: P300,000.00 upon signing of the contract, and P1,821,920.00 upon presentation by the BABASAS of transfer certificates of titles in their name, free from all liens and encumbrances, and delivery of registerable documents of sale in favor of TABANGAO within twenty (20) months from the signing of the contract. It was expressly stipulated that TABANGAO would have the absolute and unconditional right to take immediate possession of the lots as well as introduce any improvements thereon.

On 18 May 1981 TABANGAO leased the lots to Shell Gas Philippines, Inc. (SHELL), which immediately started the construction thereon of a Liquefied Petroleum Gas Terminal Project, an approved zone export enterprise of the Export Processing Zone. TABANGAO is the real estate arm of SHELL.

The parties substantially complied with the terms of the contract. TABANGAO paid the first installment of P300,000.00 to the BABASAS while the latter delivered actual possession of the lots to the former. TABANGAO likewise paid the stipulated monthly interest for the 20-month period amounting to P408,580.80. Meanwhile, the BABASAS filed Civil Case No. 519 and Petition No. 373 for the transfer of titles of the lots in their name.

However, two (2) days prior to the expiration of the 20-month period, the BABASAS asked TABANGAO for an indefinite extension within which to deliver clean titles over the lots. They asked that TABANGAO continue paying the monthly interest of P20,648.43 starting January 1983 on the ground that Civil Case No. 519 and Petition No. 373 had not yet been resolved with finality in their favor. TABANGAO refused the request. In retaliation the BABASAS executed a notarized unilateral rescission to which TABANGAO responded by reminding the BABASAS that they were the ones who did not comply with their contractual obligation to deliver clean titles within the stipulated 20-month period, hence, had no right to rescind their contract.

 

ISSUE

Whether the notarized unilateral rescission executed by the Babasas is valid.

 

RULING

No.

To resolve the issue the Court determined if the sale was an absolute or conditional sale. A deed of sale is absolute in nature although denominated a “conditional sale” absent such stipulations reserving title to the vendor until full payment of the purchase price, nor any stipulation giving them the right to unilaterally rescind the contract in case of non-payment; In such cases, ownership of the thing sold passes to the vendee upon the constructive or actual delivery thereof. Court distinguished between a condition imposed on the perfection of a contract and a condition imposed merely on the performance of an obligation. While failure to comply with the first condition results in the failure of a contract, failure to comply with the second merely gives the other party the option to either refuse to proceed with the sale or to waive the condition.

Here, although denominated “Conditional Sale of Registered Lands,” the contract between petitioners and respondent TABANGAO is one of absolute sale. Aside from the terms and stipulations used therein indicating such kind of sale, there is absolutely no proviso reserving title in the BABASAS until full payment of the purchase price, nor any stipulation giving them the right to unilaterally rescind the contract in case of non-payment. In the instant case, ownership over Lots passed to TABANGAO both by constructive and actual delivery. Constructive delivery was accomplished upon the execution of the contract without any reservation of title on the part of the BABASAS while actual delivery was made when TABANGAO took unconditional possession of the lots and leased them to its associate company SHELL.

The Court further held that the BABASAS’ act of unilaterally rescinding their contract with TABANGAO is unwarranted. Even without the abovequoted stipulation in the deed, the failure of petitioners to deliver clean titles within twenty (20) months from the signing of the contract merely gives TABANGAO the option to either refuse to proceed with the sale or to waive the condition in consonance with Art. 1545 of the New Civil Code. Besides, it would be the height of inequity to allow the BABASAS to rescind their contract of sale with TABANGAO by invoking as a ground therefor their own failure to deliver the titles over the lots within the stipulated period.https://www.instagram.com/lawyalstudent/

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