Al and Cel, as seller and buyer respectively, executed a Deed of Conditional Sale over a parcel of land owned by Al. Years later, Cel and her spouse filed a complaint for specific performance with damages against Al over said parcel of land.
The spouses claimed that even before the execution of the Deed of Conditional Sale, they already made an advance payment and that after the execution of the Deed and pursuant to the terms therein, they made installment payments amounting to Pl51,000.
Subsequently, however, they discovered that the subject land was already titled and sold by Al to another person. Naturally, they stopped continuing the payment agreed upon.
Later on, they learned that the previous title of the subject land in the name of another person was cancelled to the effect that it reverts to its former status as a clean title. They then relayed their intention to pay their balance in the conditional sale by sending a letter to Al informing her of their willingness to pay the balance. Despite receipt of the letter, Al failed to get the said balance.
Al countered that the spouses only paid a portion of the consideration and that she had a hard time collecting from them. She explained that she could have tolerated the delayed payments were it not for the discovery of the cheatings committed by Cel.
Instead of paying, Cel asked her to affix her signature on the figure P5,000 and on the figure P151,000 that she listed in her notebook. Cel claimed that the figures were the payments she made to her before leaving for a vacation.
Al refused to sign the same. She further asserted that the discovery of the erroneous titling of the subject lot in the name of a certain Teh, the spouses used the same as an alibi not to further pay the balance of the purchase price despite the assurance that the subject land was not sold to Teh and that steps were taken to correct the mistake. Despite demand, the spouses refused to pay the balance.
As a counterclaim, Al maintained that the Deed is a contract to sell where the ownership or title is retained by the seller and is passed only upon the full payment of the purchase price.
The full payment is considered a positive suspensive condition and failure of which is not a serious breach, but merely an event preventing the obligation of the vendor to convey the title from acquiring binding force. Hence, she may not be compelled to execute a deed of absolute sale in favor of the spouses as the conditions of the Deed were not satisfied.
The couple answered back by arguing that before the Deed can be cancelled by Al, the following requirements under Section 3 of RA 6552 (Maceda Law) thereof should have been complied with: (1) receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by notarial act and (2) full payment of the cash surrender value to the buyer, as said law expressly grants the buyer, who must have paid at least two (2) years of installments said rights.
Q: Is the Deed in question a contract of sale and or a contract to sell?
A: The Deed is a contract to sell and not a contract of sale. An agreement which stipulates that the seller shall execute a deed of sale only upon or after full payment of the purchase price is a contract to sell, not a contract of sale.
Such stipulation shows that the vendor reserved title to the subject property until full payment of the purchase price. Resultantly, given that the ownership over the subject land was retained by Al until full payment by the spouses of the purchase price.
Q: Will Section 3 of the Maceda law applicable in this case?
A: No. Section 3 of the said law provides that “In all transactions or contracts involving the sale or financing of real estate on installment payments, including residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants xxx xxx xxx, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total number of installment payments made.”
When Section 3 speaks of paying “at least two years of installments,” it refers to the equivalent of the totality of payments diligently or consistently made throughout a period of two years.
Accordingly, where installments are to be paid on a monthly basis, paying “at least two years of installments” pertains to the aggregate value of 24 monthly installments.
The basis for computation of the term refers to the installments that correspond to the number of months of payments, and not to the number of months that the contract is in effect as well as any grace period that has been given.
Both the law and the contract thus prevent any buyer who has not been diligent in paying his monthly installments was unduly claiming the rights provided in Section 3 of R.A. 6552.
The phrase “at least two years of installments” refers to value and time. It does not only refer to the period when the buyer has been making payments, with total disregard for the value that the buyer has actually conveyed.
It refers to the proportionate value of the installments made, as well as payments having been made for at least two years. In this case, the spouses failed to faithfully comply with the requirement of paying their monthly installment for two years. Hence, they cannot invoke invoke Section 3.
Q: Is the receipt of Al of the sum of P107,650 constitutes partial performance of the Deed, indicating that as between the parties, the Deed was subsisting and has never been rescinded?
A: No. The payment by the buyer of purchase price is a positive suspensive condition and the non-fulfillment of which is an event that prevents the seller from conveying title to the buyer. Said non-payment of the purchase price renders the contract to sell ineffective and without force and effect. Therefore, a cause of action for specific performance does not arise. (Source: Francisco vs Battung, G.R. No. 212740, November 13, 2019)
The author is Dean of Lyceum of the Philippines University; Chairman of Philippine Association of Law Schools; founder of Mawis Law Office
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