G.R. No. 182409, March 20, 2017
Felix Plazo Urban Poor Settlers Community Association, Inc., Petitioner vs. Alfredo Lipat, Sr. and Alfredo Lipat, Jr., Respondents

FACTS

On December 13, 1991, respondents, represented by Alfredo Lipat, Jr., executed a Contract to Sell (CTS) in favor of petitioner association, represented by its President, for two parcels of land at ₱200.00 per square meter. The CTS stipulated that petitioner had 90 days to pay the full purchase price, otherwise the contract would automatically expire. This period lapsed without full payment by petitioner. Petitioner claimed the 90-day period was conditioned on the properties being cleared of third-party claims from pending litigations. It alleged that after the period, it provided financial assistance for the respondents’ litigation expenses with an assurance the CTS would be enforced upon settlement, and it paid rental fees for its occupation from 1992 to 1996.
After the litigations were terminated, respondents refused to enforce the CTS, asserting it had expired and there was no agreement to extend its term. Respondents contended the petitioner’s failure to pay within the stipulated period caused the CTS’s expiration, and the financial assistance received was merely a loan unrelated to the contract. Consequently, petitioner filed an action for Specific Performance and Damages with Prayer for Preliminary Injunction before the RTC of Naga City. The RTC ruled in favor of petitioner, ordering respondents to sell the properties upon payment. The CA reversed the RTC, dismissing the complaint for lack of cause of action.

ISSUE

Whether the Court of Appeals erred in dismissing the complaint for specific performance, thereby ruling that the petitioner could not compel the respondents to sell the properties under the expired Contract to Sell.

RULING

The Supreme Court denied the petition and affirmed the CA’s dismissal, with modification for a refund. The Court held that the Contract to Sell had automatically expired due to the petitioner’s failure to pay the full purchase price within the 90-day period as expressly stipulated. A contract to sell is a conditional obligation where ownership is reserved until full payment; non-payment within the agreed period results in the contract’s automatic termination without need for a judicial declaration. The petitioner’s claims of a conditional period and an alleged oral agreement for extension were unsubstantiated and could not prevail over the clear written terms of the contract. The payments for rentals and litigation assistance did not constitute compliance with the essential condition of full payment for the purchase price, nor did they establish a novation or extension of the CTS. Since the contract had expired, the action for specific performance had no basis. However, in the interest of justice, the Court ordered the case remanded to the RTC for the computation and refund of all payments made by the petitioner in connection with the CTS, with legal interest.