G.R. No. 225033 . August 15, 2018.
SPOUSES ANTONIO BELTRAN AND FELISA BELTRAN, PETITIONERS, VS. SPOUSES APOLONIO CANGAYDA, JR. AND LORETA E. CANGAYDA, RESPONDENTS.

FACTS

In August 1989, respondents verbally agreed to sell a residential lot to petitioners for P35,000.00. Petitioners made partial payments totaling P29,690.00, took possession, and built their family home on the property. Due to petitioners’ failure to pay the remaining balance of P5,310.00, the parties executed an Amicable Settlement before the Barangay on August 24, 1992. The settlement stipulated that petitioners would pay the balance within one week, after which respondents would execute a deed of sale. Petitioners failed to pay within the agreed period. Nearly 17 years later, in January 2009, respondents demanded that petitioners vacate the property. Upon petitioners’ refusal, respondents filed a complaint for recovery of possession.
Petitioners admitted their failure to pay on time but claimed they attempted to tender payment two days after the deadline, which respondents refused, demanding an additional P50,000.00 instead. The Regional Trial Court (RTC) ruled in favor of respondents, ordering petitioners to vacate but also directing respondents to return the partial payments received. The Court of Appeals (CA) affirmed the RTC decision.

ISSUE

Whether the verbal agreement between the parties is a contract of sale or a contract to sell, and consequently, whether respondents are entitled to recover possession of the property.

RULING

The Supreme Court denied the petition and affirmed the CA decision. The Court ruled that the agreement was a contract to sell, not a contract of sale. The legal distinction is pivotal. In a contract to sell, ownership is retained by the seller and is not passed to the buyer until full payment of the purchase price. Here, the terms of the Amicable Settlement were clear: respondents’ obligation to execute a deed of sale was contingent upon petitioners’ full payment of the balance. Since petitioners failed to complete the payment, the suspensive condition was not fulfilled, and ownership never transferred to them.
The Court rejected petitioners’ argument that their possession and construction of improvements transferred ownership, as these acts do not alter the fundamental nature of a conditional contract. Furthermore, the Court did not entertain petitioners’ new argument regarding the applicability of the Maceda Law (RA 6552), as it was raised for the first time only at the CA level, violating due process. The Court also found that respondents’ action for recovery of possession, while filed years after the breach, was not barred by prescription. An action based upon a written contract (the Amicable Settlement) prescribes in ten years from the right of action accrues. Respondents’ right to sue accrued upon petitioners’ failure to pay under the settlement, and the subsequent demand and filing of the complaint in 2009 were within the prescriptive period. Thus, petitioners, having failed to comply with the condition precedent of full payment, had no right to retain possession, and respondents were lawfully entitled to recover the property.