G.R. No. 254248. November 06, 2023
VIRGILIO A. TAOK, PETITIONER, VS. SUPREMIDO CONDE AND RAUL CONDE, RESPONDENTS.

FACTS

Petitioner Virgilio Taok and respondents Supremido and Raul Conde entered into an Agreement dated January 29, 2007, for the sale of a parcel of land for PHP 1,000,000.00. Respondents made a partial payment of PHP 165,000.00, with the balance of PHP 835,000.00 payable in monthly installments of PHP 20,000.00 starting February 29, 2007. Petitioner alleged that respondents failed to make any installment payment despite demands, prompting him to file a complaint for rescission of the contract. Respondents countered that the parties had a verbal agreement to start payments in May 2007 to allow Raul to raise funds from abroad. They claimed petitioner later instructed them to defer installments and instead make a lump-sum payment, which they attempted to tender in July and August 2009, but petitioner refused and demanded an additional PHP 400,000.00.
The Regional Trial Court rescinded the Agreement, ruling it was a conditional contract to sell and respondents breached its material terms by non-payment. The Court of Appeals reversed, dismissing the complaint and granting respondents’ counterclaim. It ordered respondents to pay the balance and petitioner to accept it and execute a deed of sale. The CA characterized the contract as an absolute sale, not merely a contract to sell, thus precluding unilateral rescission by the vendor for non-payment.

ISSUE

Whether the Court of Appeals erred in reversing the trial court and ruling that the Agreement was a contract of absolute sale, thereby disallowing its rescission by the vendor for the vendee’s failure to pay the balance of the purchase price.

RULING

The Supreme Court granted the petition, reversed the Court of Appeals, and reinstated the trial court’s decision rescinding the Agreement. The Court meticulously analyzed the contract’s nature, distinguishing between a contract to sell and a contract of sale. In a contract to sell, ownership is retained by the seller until full payment of the price, making payment a positive suspensive condition. Non-fulfillment of this condition prevents the obligation to convey title from arising. The Agreement’s stipulation that the remaining balance “will be paid” on installment basis constituted a suspensive condition, not merely a modality of payment. This was further evidenced by the absence of any provision expressly transferring ownership to respondents upon execution. Thus, the contract was a contract to sell.
Consequently, respondents’ failure to pay the installments for over two years constituted a breach of the suspensive condition. Petitioner, as seller, had the right to rescind the contract under Article 1592 of the Civil Code, which applies to contracts to sell by analogy. The Court found respondents’ defenses of a verbal modification and a valid tender of payment unsubstantiated and belated. The alleged tender occurred only after the complaint was filed and did not constitute timely performance. Therefore, petitioner validly exercised his right to rescind. The Court emphasized that in a contract to sell, the vendor may extrajudicially rescind upon the vendee’s failure to pay, subject to a demand for payment.