G.R. No. 137823; December 15, 2000
Reynaldo Mortel, petitioner, vs. Kassco, Inc. and Oscar Santos, respondents.

FACTS

Kassco, Inc., owner of the Kassco Building mortgaged to PNB, entered into an Agreement with Reynaldo Mortel in 1985 to sell the building’s second floor upon its conversion into a condominium. The contract stipulated that Kassco would secure an individual condominium certificate of title (CCT) within one year and then execute a deed of absolute sale. Pending this, Mortel would lease the property. The one-year period lapsed without Kassco obtaining the CCT due to PNB’s inaction on the mortgage release. The parties executed a second, substantially identical agreement with adjusted prices, which also expired without the title being delivered. Mortel remained in possession as a lessee.
Kassco later demanded that Mortel vacate and pay increased rent, leading Kassco to file an unlawful detainer case. Mortel responded by filing the present case for specific performance or rescission with damages, demanding Kassco deliver the CCT and execute a sale. During the case’s pendency, the building was foreclosed by PNB due to Kassco’s loan default.

ISSUE

The primary issue is whether Kassco, Inc. breached its contract with Mortel, thereby entitling him to specific performance or rescission with damages.

RULING

The Supreme Court denied the petition, affirming the lower courts’ dismissal of Mortel’s complaint. The Court ruled that no actionable breach of contract occurred. The agreement was clear that Kassco’s obligation to execute a deed of absolute sale was contingent upon a suspensive condition: the prior issuance of an individual CCT. This condition was not fulfilled through no fault of Kassco, as it was dependent on PNB’s action to partially cancel the mortgage, which PNB never did. The subsequent foreclosure extinguished any possibility of performance.
The Court emphasized that contracts are binding in their literal sense, and the terms showed the sale was conditional. Mortel, as a buyer, was expected to exercise ordinary diligence, which included checking the title. He admitted learning of the mortgage in 1986 but proceeded with a second agreement without protest, indicating awareness of the risk. No misrepresentation was found; Kassco only stated its conversion application was approved, not that it had a license to sell. The law does not relieve a party from an unwise contract entered into with full awareness. Since the condition precedent failed without Kassco’s fault, Mortel’s rights never accrued, and his action for specific performance or rescission had no basis.