G.R. No. 195072, August 1, 2016
Bonifacio Danan, Petitioner, vs. Spouses Gregorio Serrano and Adelaida Reyes, Respondents.

FACTS

Respondents Spouses Gregorio Serrano and Adelaida Reyes are the registered owners of a parcel of land. In 1940 and 1950, Gregorio’s sisters permitted petitioner Bonifacio Danan and Artemio Vitug to possess 400-square-meter portions each and build homes in exchange for a yearly cavan of palay. On June 27, 1976, Gregorio executed separate “Agreement in Receipt Form” documents selling each 400-square-meter portion to Bonifacio and Artemio for ₱6,000.00, payable in three installments. The agreements stipulated that a Deed of Conditional Sale would be executed and the title delivered upon full payment by June 30, 1978. Bonifacio and Artemio paid the initial ₱2,000.00 but failed to pay the ₱4,000.00 balance when due. They remained in possession.
In 1998, the Spouses Serrano filed an ejectment complaint, alleging Bonifacio and Artemio were mere caretakers. The MTC dismissed it for lack of jurisdiction. Meanwhile, Bonifacio and Artemio filed a complaint for specific performance, alleging they purchased the lots, stopped paying yearly palay, and were willing to pay the balance but were prevented by the spouses’ absence. They claimed Gregorio deceived them into signing documents in May 1992, which were later used in the ejectment case. They prayed for an order compelling the spouses to execute a deed of sale and deliver titles.
The RTC ruled in favor of Bonifacio and Artemio, ordering the spouses to execute a deed of sale and deliver titles upon payment of the balance, and awarded damages. The Court of Appeals reversed, ruling the agreement was a contract to sell, where full payment was a suspensive condition. Failure to pay prevented the obligation to convey title from arising. The CA also found no merit in the claim that payment was prevented by the spouses’ absence, noting consignation was the proper remedy, and granted the spouses’ counterclaim for rentals. Bonifacio filed the instant petition.

ISSUE

Whether the Court of Appeals erred in ruling that Bonifacio Danan had no cause of action to compel the Spouses Serrano to transfer the property due to his failure to fully pay the purchase price under their agreement.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Court of Appeals Decision with MODIFICATION. The agreement was a contract to sell, not a contract of sale. Ownership was retained by the vendor until full payment of the purchase price, which was a suspensive condition. Petitioner’s failure to pay the balance prevented the obligation to convey title from arising. The Court rejected petitioner’s claim that the spouses’ absence prevented payment, as consignation was the available remedy under Article 1256 of the Civil Code. The right to compel a sale under such a contract prescribes in ten years from the time the right of action accrues. Since the full payment was due on June 30, 1978, and the complaint was filed only on November 3, 1998, the action had prescribed. The Court also found no basis for the award of attorney’s fees to the respondents. The award of ₱50,000.00 in attorney’s fees was deleted.