GR 120820; (August, 2000) (Digest)
G.R. No. 120820 ; August 1, 2000
SPS. FORTUNATO SANTOS and ROSALINDA R. SANTOS, petitioners, vs. COURT OF APPEALS, SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.
FACTS
Petitioners, the spouses Santos, owned a house and lot mortgaged to a bank. In 1984, needing funds, they agreed to sell the property to respondents, the spouses Caseda, for a total price of P485,385.18. This sum comprised a P350,000.00 cash balance and the assumption of the outstanding mortgage of P135,385.18. The Casedas paid P54,100.00 as partial payment, took possession of the property, leased it out, and paid P81,696.84 towards the mortgage. However, they failed to pay the remaining mortgage balance by the agreed maturity date in 1987 due to financial distress.
In January 1989, the Santoses repossessed the property. Subsequently, in February 1989, the Casedas, having secured funds, offered to pay the full balance, but the Santoses refused, demanding a higher price due to increased property values. The Casedas filed an action for specific performance. The Regional Trial Court dismissed the complaint, declaring the agreement rescinded, reasoning that the Casedas failed to pay the full price and were thus not entitled to specific performance or reimbursement after offsetting their payments against reasonable compensation for their use of the property.
ISSUE
Whether the Court of Appeals erred in reversing the trial court and granting the Casedas a period to pay the balance of the purchase price, thereby ordering specific performance of the contract.
RULING
The Supreme Court affirmed the decision of the Court of Appeals. The legal logic is anchored on the nature of the contract and the proper remedy for default in reciprocal obligations. The agreement between the parties was a contract of sale, not a contract to sell. In a contract of sale, ownership transfers to the buyer upon delivery of the thing sold, and the seller has only the right to compel payment of the price. The Casedas’ failure to pay the full price by the stipulated date constituted mere delay, not a breach warranting automatic rescission.
Under Article 1191 of the Civil Code, in reciprocal obligations like a contract of sale, if one party fails to comply, the injured party may seek rescission or fulfillment. However, the court may grant a period for compliance if justifiable. The Casedas’ initial part-performance and their subsequent offer to pay, coupled with the Santoses’ bad faith in refusing the tender to exploit a rise in market value, constituted compelling reasons for the court to fix a period for payment. The law aims to avoid forfeiture and injustice. Therefore, the appellate court correctly granted the Casedas a 90-day period to pay the balance to complete the sale, as this achieves the contract’s intent and prevents the unjust enrichment of the Santoses.