G.R. No. 126083, July 12, 2006
Topics: contract of sale; rescission
Summary:
Petitioner entered into a contract with respondent with the condition that the full purchase price will be paid upon delivery of the titles. Titles were not delivered, and petitioner refused to accept tender of payment.
Doctrines:
Considering that their obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the Corporation therefore gave rise to a compensation morae or default for both parties because neither has completed their part in their reciprocal obligation.
Facts:
For the purchase price of P3,700,000.00, the Corporation as buyer, and Cortes as seller, entered into a contract of sale over the lots located at Baclaran, Parañaque, Metro Manila.
On various dates in 1983, the Corporation advanced to Cortes the total sum of P1,213,000.00. Sometime in September 1983, the parties executed a deed of absolute sale containing the following terms:
x x x x
1. Upon execution of this instrument, the Vendee shall pay unto the Vendor the sum of TWO MILLION AND TWO HUNDRED THOUSAND (P2,200,000.00) PESOS, Philippine Currency, less all advances paid by the Vendee to the Vendor in connection with the sale;
2. The balance of ONE MILLION AND FIVE HUNDRED THOUSAND P1,500,000.00 PESOS, Phil. Currency shall be payable within ONE (1) YEAR from the date of execution of this instrument, payment of which shall be secured by an irrevocable standby letter of credit to be issued by any reputable local banking institution acceptable to the Vendor.
x x x x
4. All expense for the registration of this document with the Register of Deeds concerned, including the transfer tax, shall be divided equally between the Vendor and the Vendee. Payment of the capital gains shall be exclusively for the account of the Vendor; 5% commission of Marcosa Sanchez to be deducted upon signing of sale.
Said deed was retained by Cortes for notarization.
On January 14, 1985, the Corporation filed the instant case for specific performance seeking to compel Cortes to deliver the TCTs and the original copy of the Deed of Absolute Sale. According to the Corporation, despite its readiness and ability to pay the purchase price, Cortes refused delivery of the sought documents. It thus prayed for the award of damages, attorney’s fees and litigation expenses arising from Cortes’ refusal to deliver the same documents.
In his Answer with counterclaim, Cortes claimed that the owner’s duplicate of the three TCTs were surrendered to the Corporation, and it is the latter which refused to pay in full the agreed down payment. He added that portion of the subject property is occupied by his lessee, who agreed to vacate the premises upon payment of disturbance fee.
However, due to the Corporation’s failure to pay in full the sum of P2,200,000.00, he in turn failed to fully pay the disturbance fee of the lessee who now refused to pay monthly rentals. He thus prayed that the Corporation be ordered to pay the outstanding balance plus interest and, in the alternative, to cancel the sale and forfeit the P1,213,000.00 partial down payment, with damages in either case.
On June 24, 1993, the trial court rendered a decision rescinding the sale and directed Cortes to return to the Corporation the amount of P1,213,000.00, plus interest. It ruled that pursuant to the contract of the parties, the Corporation should have fully paid the amount of P2,200,000.00 upon the execution of the contract. It stressed that such is the law between the parties because the Corporation failed to present evidence that there was another agreement that modified the terms of payment as stated in the contract. And, having failed to pay in full the amount of P2,200,000.00 despite Cortes’ delivery of the Deed of Absolute Sale and the TCTs, rescission of the contract is proper.
On appeal, the Court of Appeals reversed the decision of the trial court and directed Cortes to execute a Deed of Absolute Sale conveying the properties and to deliver the same to the Corporation together with the TCTs, simultaneous with the Corporation’s payment of the balance of the purchase price of P2,487,000.00. It found that the parties agreed that the Corporation will fully pay the balance of the down payment upon Cortes’ delivery of the three TCTs to the Corporation. The records show that no such delivery was made; hence, the Corporation was not remiss in the performance of its obligation and therefore justified in not paying the balance.
Issue: Whether there is delay in the performance of the parties’ obligation that would justify the rescission of the contract of sale.
Ruling:
NO. The stipulation in the Deed of Absolute Sale was that the Corporation shall pay in full the P2,200,000.00 down payment upon execution of the contract. However, as correctly noted by the Court of Appeals, Cortes agreed that the Corporation’s full payment of the sum of P2,200,000.00 would depend upon his delivery of the TCTs of the three lots.
The Court of Appeals found that Cortes never surrendered said documents to the Corporation. Cortes testified that he delivered the same to Manny Sanchez, the son of the broker, and that Manny told him that her mother, Marcosa Sanchez, delivered the same to the Corporation.
However, Marcosa Sanchez’s unrebutted testimony is that, she did not receive the TCTs. She also denied knowledge of delivery thereof to her son.
What further strengthened the findings of the Court of Appeals that Cortes did not surrender the subject documents was the offer of Cortes’ counsel at the pre-trial to deliver the TCTs and the Deed of Absolute Sale if the Corporation will pay the balance of the down payment. Indeed, if the said documents were already in the hands of the Corporation, there was no need for Cortes’ counsel to make such an offer.
Since Cortes did not perform his obligation to have the Deed notarized and to surrender the same together with the TCTs, the trial court erred in concluding that he performed his part in the contract of sale and that it is the Corporation alone that was remiss in the performance of its obligation.
Actually, both parties were in delay. Considering that their obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the Corporation therefore gave rise to a compensation morae or default for both parties because neither has completed their part in their reciprocal obligation. Cortes is yet to deliver the original copy of the notarized Deed and the TCTs, while the Corporation is yet to pay in full the agreed down payment of P2,200,000.00.
This mutual delay of the parties cancels the effects of default, such that it is as if no one is guilty of delay.
Since Cortes did not perform his part, the provision of the contract requiring the Corporation to pay in full the down payment never acquired obligatory force. Moreover, the Corporation could not be faulted for not automatically heeding to the offer of Cortes. For one, its complaint has a prayer for damages, which it may not want to waive by agreeing to the offer of Cortes’ counsel. For another, the previous representation of Cortes that the TCTs were already delivered to the Corporation when no such delivery was, in fact, made, is enough reason for the Corporation to be more cautious in dealing with him.
The Court of Appeals therefore correctly ordered the parties to perform their respective obligation in the contract of sale, i.e., for Cortes to, among others, deliver the necessary documents to the Corporation and for the latter to pay in full, not only the down payment, but the entire purchase price