Leano vs CA

Facts
Private respondent Hermogenes Fernando, as
vendor, and petitioner Carmelita Leao, as
vendee, executed a contract to sell involving a
piece of land, Lot No. 876-B, with an area of 431
square meters, located at Sto. Cristo, Baliuag,
Bulacan. In the contract, Carmelita Leao bound
herself to pay Hermogenes Fernando the sum of
one hundred seven thousand seven hundred and
fifty pesos (P107,750.00) as the total purchase
price of the lot. After the execution of the
contract, Carmelita Leao made several
payments in lump sum. Thereafter, she
constructed a house on the lot valued at
P800,000.00. 2.
The trial court, however, rendered a decision in
an ejectment case earlier filed by respondent
Fernando ordering petitioner Leao to vacate the
premises and to pay P250.00 per month by way
of compensation for the use and occupation of
the property from May 27, 1991 until she vacated
the premises. Petitioner Leao filed with the
Regional Trial Court of Malolos, Bulacan, a
complaint for specific performance with
preliminary injunction. 3.
The trial court rendered a decision ordering
petitioner to pay to the defendant the sum of
P103,090.70 corresponding to her outstanding
obligations under the contract to sell consisting of
the principal of said obligation together with the
interest and surcharges due thereon as of
February 28, 1994, plus interest thereon at the
rate of 18%
per annum
. Respondent Fernando filed a motion for
reconsideration. The trial court increased the
amount of P103,090.70 to P183,687.00.
According to the trial court, the transaction
between the parties was an absolute sale,
making petitioner Leao the owner of the lot
upon actual and constructive delivery thereof.
Respondent Fernando, the seller, was divested of
ownership and cannot recover the same unless
the contract is rescinded pursuant to Article 1592
of the Civil Code which requires a judicial or
notarial demand. Since there had been no
rescission, petitioner Leao, as the owner in
possession of the property, cannot be evicted. 4.
In time, petitioner Leao appealed the decision to
the Court of Appeals. The Court of Appeals
promulgated a decision affirming that of the
Regional Trial Court
in toto
. Petitioner Leao filed a motion for
reconsideration. The Court of Appeals denied the
motion. 5.
Hence, the present petition.
Issue
1. Whether or not the transaction was an
absolute and not a conditional sale?
2. Whether or not there was proper
cancellation of the contract to sell?
3. Whether or not there was delay on the
petitioners part in the payment of the
monthly amortization?
Ruling
1. NO, the transaction was not an absolute sale;
rather, it was a conditional sale. The very

intention of the parties was to reserve the

ownership of the land in the seller (Fernando)
until the buyer has paid the total purchase price.
First, the contract to sell makes the sale, cession
and conveyance subject to conditions set forth
on the contract. Second, what was transferred
was possession and not ownership. Finally, the
land is covered by the Torrens title, the act of
registration of the deed of sale was the operative
act that could transfer ownership over the lot. No
deed could be registered in the case at bar since
as stipulated in the contract, such deed shall be
executed upon completion of payment by Leao.
In a contract to sell real property on installments,
full payment of the purchase price is a positive
suspensive condition and the failure of the
payment is not a breach but rather shall be an
event that will prevent the obligation of the seller
to convey the title from acquiring any obligatory
force. The transfer of ownership and title would
occur after full payment of the price. In the case
at bar, Leao did not pay the installments after
April 1, 1989, which prevented the obligation of
Fernando to convey the property. It brought into
effect the cancellation provision of the contract.
Article 1592 of the Civil Code is inapplicable in
the case at bar. But the provisions of RA 6552
(The Realty Installment Buyer Protection Act)
governs the case at bar which recognizes the
right of the seller to cancel the contract upon
non-payment of an installment by the buyer.
2. NO, there was no proper cancellation of the
contract to sell. Leao did not pay the
installments after April 1, 1989, which prevented
the obligation of Fernando to convey the property.
It brought into effect the cancellation provision of
the contract. Nevertheless, what is controlling is
not Article 1592 of the Civil Code but the
provisions of RA 6552 (The Realty Installment
Buyer Protection Act) which recognizes not only
the right of the seller to cancel the contract upon
non-payment off an installment by the buyer but
also rights of the buyer in case of cancellation.
Although the ejectment case operated as the
notice of cancellation required under the
provisions of RA 6552, petitioner was not given
the cash surrender value of the payments that
she made; hence, there was no actual
cancellation of the contract. Consequently,
petitioner Leao may still reinstate the contract
by updating the account during the grace period
and before actual cancellation.
3. YES, there was delay on the petitioners part to
pay the monthly amortizations. Article 1169
of the Civil Code provides that in reciprocal
obligations, neither party incurs in delay if the
other does not comply or is not ready to comply
in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfills
his obligation, delay by the other begins. In the
case at bar, respondent Fernando performed his
part of the obligation by allowing petitioner Leao
to continue in possession and use of the property.
Clearly, when petitioner Leao did not pay the
monthly amortizations in accordance with the
terms of the contract, she was in delay and liable
for damages. The Court, however, upheld the trial
court in holding that the default committed by
petitioner Leao in respect of the obligation could
be compensated by the interest and surcharges
imposed upon her under the contract in question.

Heirs of Luis Bacus vs CA and Spouses

Duray
Facts
In the contract of lease of agricultural land
executed between Luis Bacus and Faustino Duray,
an option to buy clause was included.
Later, Luis died and the Duray spouses informed
the heirs of Luis their willingness to exercise their
option to buy the property under the option to
buy clause.
Petitioners refused to sell the property, prompting
Duray to file a complaint for specific
performance.
The heirs of Luis, however, asserted that the
Durays had failed to pay the purchase price of
the land before the expiration of the contract.
Hence, with the expiration of the contract, the
option to buy had also expired.
RTC ruled in favor of private respondents.
Petitioners appealed to CA who denied such
appeal.
Hence this petition.
Issue
1. WON petitioners can be compelled to sell
the disputed property by virtue of the nonfulfillment of the obligation under the
option contract of the private respondents.
Ruling
Yes, petitioners can be compelled to sell the
disputed property
Rationalization
1. Obligations under an option to buy are
reciprocal obligations. The performance of one
obligation is conditioned on the simultaneous
fulfillment of the other obligation. In other words,
in an option to buy, the payment of the purchase
price by the creditor is contingent upon the
execution and delivery of deed of sale by the
debtor. In this case, when private respondents
opted to buy the property, their obligation was to
advise petitioners of their decision and their
readiness to pay the price. They were not yet
obliged to make actual payment. Only upon
petitioners' actual execution and delivery of the
deed of sale were they required to pay. The latter
was contingent upon the former.
2. In Nietes vs. Court of Appeals, 46 SCRA 654
(1972), we held that notice of the creditor's
decision to exercise his option to buy need not be
coupled with actual payment of the price, so long
as this is delivered to the owner of the property
upon performance of his part of the agreement.
Consequently, since the obligation was not yet
due, consignation in court of the purchase price
was not yet required. Consignation is the act of
depositing the thing due with the court or judicial
authorities whenever the creditor cannot accept
or refuses to accept payment and it generally
requires a prior tender of payment. In instances,
where no debt is due and owing, consignation is
not proper. Therefore, petitioners' contention that
private respondents failed to comply with their
obligation under the option to buy because they
failed to actually deliver the purchase price or
consign it in court before the contract expired

and before they execute a deed, has no leg to

stand on.
3. Private respondents did not incur in delay
when they did not yet deliver payment nor make
a consignation before the expiration of the
contract. In reciprocal obligations, neither party
incurs in delay if the other does not comply or is
not ready to comply in a proper manner with
what is incumbent upon him. Only from the
moment one of the parties fulfills his obligation,
does delay by the other begin. In this case,
private respondents, communicated to petitioners
their intention to buy the property and they were
at that time undertaking to meet their obligation
before the expiration of the contract. However,
petitioners refused to execute the deed of sale
and it was their demand to private respondents
to first deliver the money before they would
execute the same which prompted private
respondents to institute a case for specific
performance. Later, after the case had been
submitted for decision but before the trial court
rendered its decision, private respondents issued
a cashier's check in petitioners' favor purportedly
to bolster their claim that they were ready to pay
the purchase price. The trial court considered this
in private respondents' favor and we believe that
it rightly did so, because at the time the check
was issued, petitioners had not yet executed a
deed of sale nor expressed readiness to do so.
Accordingly, as there was no compliance yet with
what was incumbent upon petitioners under the
option to buy, private respondents had not
incurred in delay when the cashier's check was
issued even after the contract expired.
Megaworld Globus Asia Inc. V. Tanseco(603
SCRA 263)
Facts:
On July 7, 1995, petitioner Megaworld
Globus Asia, Inc. (Megaworld) andrespondent Mila
S. Tanseco (Tanseco) entered into a Contract to
Buy and Sell a224 square-meter (more or less)
condominium unit at a pre-selling project,
"TheSalcedo Park," located along Senator Gil
Puyat Avenue, Makati City.
The purchase price was P16,802,037.32,
to be paid as follows: (1) 30% lessthe reservation
fee of P100,000, or P4,940,611.19, by postdated
check payable onJuly 14, 1995; (2) P9,241,120.50
through 30 equal monthly installments of
P308,037.35 from August 14, 1995 to January 14,
1998; and (3) the balance of P2,520,305.63 on
October 31, 1998, the stipulated delivery date of
the unit; provided that if the construction is
completed earlier, Tanseco would pay the balance
within seven days from receipt of a notice of
turnover.
Section 4 of the Contract to Buy and Sell
provided that the project must becompleted and
delivered not later than October 31, 1998 with
additional grace period of six (6) months within
which to complete the Project and the unit/s,
barring delays due to fire, earthquakes, the
elements, acts of God, war, civildisturbances,
strikes or other labor disturbances, government
and economiccontrols making it, among others,
impossible or difficult to obtain the necessary
materials, acts of third person, or any other cause
or conditions beyond the controlof the SELLER.
Herein respondent paid all installments
except for the balance of P2,520,305.63 pending
delivery of the unit. Megaworld, however, was

only able todeliver the unit to Tanseco on April

22, 2002 which is way past the due date andthe
grace period. Tanseco then replied through
counsel that in view of Megaworlds failure to
deliver the said unit on time, she was demanding
the return of P14,281,731.70 representing the
total installment payment she had made,
withinterest at 12% per annum from April 30,
1999, the expiration of the six-monthgrace
period. Tanseco pointed out that none of the
excepted causes of delayexisted.
Megaworld averred that the delay was
caused by the 1997 Asian FinancialCrisis, which
was favored by the Housing Arbiter. Tanseco,
then, filed a petitionfor review at the Court of
Appeals which ruled in her favor and reversed all
previous rulings.
ISSUE: Whether or not Tanseco is entitled to
damages.

HELD:Yes. Supreme Court affirmed the decision of

CA that judicial or extrajudicial demand by
Tanseco was not necessary to put the obligor in
default if the contract states the date in which
the obligation must be performed as providedin
Article 1169 of the Civil Code. There being no
force majeure to warrant theapplication of the
alternative date of April 30, 1999 and that the
alleged delay dueto the recession being invalid,
the damages must be rightfully awarded to
Tanseco.The SC, however, modified the
dispositive portion of the decision whichcancelled
the contract. Furthermore, petitioner, Megaworld
Globus Asia, Inc., isdirected to pay respondent,
Mila S. Tanseco, the amount of P14,281,731.70,
to bear 6% interest per annum starting May 6,
2002 and 12% interest per annum fromthe time
the judgment becomes final and executory; and
to pay P200,000 attorneys fees,P100,000
exemplary damages, and costs of suit.