G.R. No. 126083. July 12, 2006.
ANTONIO R. CORTES (Administrator of the estate of Claro S. Cortes), petitioner, vs. HON. COURT OF APPEALS and VILLA ESPERANZA DEVELOPMENT CORPORATION, respondents.

FACTS

Petitioner Antonio Cortes and respondent Villa Esperanza Development Corporation entered into a contract of sale for three parcels of land for P3,700,000.00. The Corporation made partial advances totaling P1,213,000.00. In September 1983, the parties executed a Deed of Absolute Sale stipulating that upon its execution, the Corporation would pay P2,200,000.00, less the advances, with the balance of P1,500,000.00 payable within one year secured by a letter of credit. Cortes retained the deed for notarization. The Corporation filed a complaint for specific performance, alleging readiness to pay but that Cortes refused to deliver the titles and the original deed. Cortes countered that he had delivered the titles and that the Corporation defaulted on paying the full down payment.
The trial court rescinded the contract, ordering Cortes to return the P1,213,000.00 with interest. It held the Corporation in default for failing to pay the full P2,200,000.00 upon the execution of the deed as stipulated. The Court of Appeals reversed, finding that the parties had a separate agreement that the balance of the down payment was payable only upon Cortes’ delivery of the three Transfer Certificates of Title. Since Cortes never made such delivery, the Corporation was not in default. The appellate court ordered Cortes to execute the deed and deliver the titles simultaneously with the Corporation’s payment of the full balance of the purchase price.

ISSUE

Whether the Court of Appeals erred in not finding the respondent Corporation in default, thereby justifying the rescission of the contract of sale.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic centers on the principle of concurrent conditions and the parties’ true agreement. While the written deed stated payment of the down payment “upon execution,” the factual findings established that the parties had a contemporaneous oral agreement modifying this term. The evidence showed they agreed the balance of the down payment would be paid only upon Cortes’ delivery of the certificates of title. This oral agreement constituted a suspensive condition to the Corporation’s obligation.
Since the obligation to deliver the titles and to pay were by mutual agreement intended to be simultaneous, they are considered concurrent conditions under Article 1194 of the Civil Code. Neither party could demand performance from the other without first fulfilling their own obligation. Cortes never delivered the titles; therefore, the Corporation’s obligation to pay the balance of the down payment never became due. The Corporation was not in default. Consequently, rescission by Cortes was not warranted. The proper remedy was to order both parties to perform their reciprocal obligations simultaneously, as correctly decreed by the Court of Appeals.