G.R. No. 124874 March 17, 2000
ALBERT R. PADILLA, petitioner, vs. SPOUSES FLORESCO PAREDES and ADELINA PAREDES, and THE HONORABLE COURT OF APPEALS, respondents.

FACTS

Petitioner Albert Padilla and respondent spouses Paredes entered into a Contract to Sell involving an untitled parcel of land. The contract stipulated a purchase price of P312,840.00, with a P50,000.00 downpayment and the balance payable within ten days from the issuance of a court order directing the issuance of a decree of registration, which Padilla undertook to secure. The decree was issued on December 27, 1989, and the property was titled in the name of respondent Adelina Paredes. Padilla made several partial payments, some even before the decree was issued, but failed to pay the full balance within the stipulated ten-day period.
After the period lapsed, respondents demanded full payment within five days, threatening to consider the contract rescinded. Padilla made an additional payment of P100,000.00, which was still insufficient. Respondents then offered to sell only one-half of the property for the total payments made, which Padilla rejected. Instead, Padilla offered to pay the full balance plus interest, but respondents refused. Padilla filed an action for specific performance, arguing that respondents’ acceptance of partial payments constituted an implied modification of the contract and that he had substantially complied.

ISSUE

Whether the Court of Appeals erred in upholding the rescission of the Contract to Sell by the respondents.

RULING

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The legal logic is anchored on the nature of a contract to sell and the principle of mutuality of contracts. In a contract to sell, ownership is retained by the vendor until the vendee fully pays the purchase price. The obligation of the vendor to sell becomes demandable only upon the happening of the positive suspensive condition, which is full payment.
The Court held that Padilla’s failure to pay the full price within the expressly agreed period was a breach of a fundamental term, not a casual breach. The contract contained an explicit stipulation that its terms could not be modified verbally or by an act of tolerance unless done in writing and signed by the parties. Therefore, respondents’ mere acceptance of delayed partial payments, absent a written agreement, did not constitute a novation or waiver of the payment deadline. Their subsequent formal demand and offer for partial conveyance were timely objections that preserved their right to rescind. Rescission was proper under Article 1191 of the Civil Code. The Court ordered respondents to return the payments received, with the value of improvements introduced by Padilla to be offset against any rentals for his use of the property, ensuring equity between the parties.