ROBERTO Z. LAFORTEZA, et. al. v. ALONZO MACHUCA

GG.R. No. 137552 (June 16, 2000)

Topics: contract to sell; rescission; earnest money

Summary:

A contract of sale was executed through a Special Power of Attorney, with earnest money paid. Buyer was unable to pay and requested for an extension. The request was granted but only with the confirmation of one of the two attorneys-in-fact.

Doctrines:

The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain in money or its equivalent.

Facts:

The property involved consists of a house and lot located at No. 7757 Sherwood Street, Marcelo Green Village, Paraaque, Metro Manila. The subject property is registered in the name of the late Francisco Q. Laforteza, although it is conjugal in nature.

On August 2, 1988, defendant Lea Zulueta-Laforteza executed a Special Power of Attorney in favor of defendants Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr., appointing both as her Attorney-in-fact authorizing them jointly to sell the subject property and sign any document for the settlement of the estate of the late Francisco Q. Laforteza 

In the exercise of the above authority, on January 20, 1989, the heirs of the late Francisco Q. Laforteza represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered into a Memorandum of Agreement (Contract to Sell) with the plaintiff2 over the subject property for the sum of SIX HUNDRED THIRTY THOUSAND PESOS (P630,000.00) payable as follows:

(a) P30,000.00 as earnest money, to be forfeited in favor of the defendants if the sale is not effected due to the fault of the plaintiff;

(b) P600,000.00 upon issuance of the new certificate of title in the name of the late Francisco Q. Laforteza and upon execution of an extra-judicial settlement of the decedents estate with sale in favor of the plaintiff 

On January 20, 1989, plaintiff paid the earnest money of THIRTY THOUSAND PESOS (P30,000.00).

On September 18, 19983, defendant heirs, through their counsel wrote a letter to the plaintiff furnishing the latter a copy of the reconstituted title to the subject property, advising him that he had thirty (30) days to produce the balance of SIX HUNDRED PESOS (P600,000.00) under the Memorandum of Agreement which plaintiff received on the same date.

On October 18, 1989, plaintiff sent the defendant heirs a letter requesting for an extension of the THIRTY (30) DAYS deadline up to November 15, 1989 within which to produce the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00).

Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to the plaintiffs letter request. Defendant Roberto Z. Laforteza, assisted by his counsel Atty. Romeo L. Gutierrez, signed his conformity to the plaintiffs letter request

On November 15, 1989, plaintiff informed the defendant heirs, through defendant Roberto Z. Laforteza, that he already had the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00) covered by United Coconut Planters Bank Manager’s Check.

However, the defendants, refused to accept the balance. Defendant Roberto Z. Laforteza had told him that the subject property was no longer for sale.

On November 20, 1998, defendants informed the plaintiff that they were canceling the Memorandum of Agreement (Contract to Sell) in view of the plaintiffs failure to comply with his contractual obligations

Thereafter, plaintiff reiterated his request to tender payment of the balance of SIX HUNDRED THOUSAND PESOS (P600,000.00). Defendants, however, insisted on the rescission of the Memorandum of Agreement. Thereafter, plaintiff filed the instant action for specific performance.

The lower court rendered judgment on July 6, 1994 in favor of the plaintiff, ordering the said defendants.

(a) To accept the balance of P600,000.00 as full payment of the consideration for the purchase of the house and lot located;

(b) To execute a registrable deed of absolute sale over the subject property in favor of the plaintiff;

(c) Jointly and severally to pay the plaintiff the sum of P20,000.00 as attorneys fees plus cost of suit.

On appeal, the judgment was affirmed.

Issue:

1. Whether there was a perfected contract of sale.
2. Whether the Lafortezas may rescind the contract for failure of Machucha to pay the balance within the period allowed.

Ruling:

1. YES. A contract of sale is a consensual contract and is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter and (3) price certain in money or its equivalent.

In the case at bench, there was a perfected agreement between the petitioners and the respondent whereby the petitioners obligated themselves to transfer the ownership of and deliver the house and lot located at 7757 Sherwood St., Marcelo Green Village, Paraaque and the respondent to pay the price amounting to six hundred thousand pesos (P600,000.00). All the elements of a contract of sale were thus present.

However, the balance of the purchase price was to be paid only upon the issuance of the new certificate of title in lieu of the one in the name of the late Francisco Laforteza and upon the execution of an extrajudicial settlement of his estate. Prior to the issuance of the “reconstituted” title, the respondent was already placed in possession of the house and lot as lessee thereof for six months at a monthly rate of three thousand five hundred pesos (P3,500.00). 

It was stipulated that should the issuance of the new title and the execution of the extrajudicial settlement be completed prior to expiration of the six-month period, the respondent would be liable only for the rentals pertaining to the period commencing from the date of the execution of the agreement up to the execution of the extrajudicial settlement. 

It was also expressly stipulated that if after the expiration of the six month period, the lost title was not yet replaced and the extrajudicial partition was not yet executed, the respondent would no longer be required to pay rentals and would continue to occupy and use the premises until the subject condition was complied with by the petitioners.

The six-month period merely delayed the demandability of the contract of sale and did not determine its perfection for after the expiration of the six-month period, there was an absolute obligation on the part of the petitioners and the respondent to comply with the terms of the sale.

The issuance of the new certificate of title in the name of the late Francisco Laforteza and the execution of an extrajudicial settlement of his estate was not a condition which determined the perfection of the contract of sale. Petitioners contention that since the condition was not met, they no longer had an obligation to proceed with the sale of the house and lot is unconvincing. The petitioners fail to distinguish between a condition imposed upon the perfection of the contract and a condition imposed on the performance of an obligation. Failure to comply with the first condition results in the failure of a contract, while the failure to comply with the second condition only gives the other party the option either to refuse to proceed with the sale or to waive the condition.

2. NO. Admittedly, the failure of the respondent to pay the balance of the purchase price was a breach of the contract and was a ground for rescission thereof. The extension of thirty (30) days allegedly granted to the respondent by Roberto Z. Laforteza (assisted by his counsel Attorney Romeo Gutierrez) was correctly found by the Court of Appeals to be ineffective inasmuch as the signature of Gonzalo Z. Laforteza did not appear thereon as required by the Special Powers of Attorney. 

However, the evidence reveals that after the expiration of the six-month period provided for in the contract, the petitioners were not ready to comply with what was incumbent upon them, i.e. the delivery of the reconstituted title of the house and lot. It was only on September 18, 1989 or nearly eight months after the execution of the Memorandum of Agreement when the petitioners informed the respondent that they already had a copy of the reconstituted title and demanded the payment of the balance of the purchase price. 

The respondent could not therefore be considered in delay for in reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what was incumbent upon him.24cräläwvirtualibräry

Even assuming for the sake of argument that the petitioners were ready to comply with their obligation, we find that rescission of the contract will still not prosper. The rescission of a sale of an immovable property is specifically governed by Article 1592 of the New Civil Code, which reads:

“In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.”

It is not disputed that the petitioners did not make a judicial or notarial demand for rescission. The November 20, 1989 letter of the petitioners informing the respondent of the automatic rescission of the agreement did not amount to a demand for rescission, as it was not notarized.26 It was also made five days after the respondents attempt to make the payment of the purchase price. This offer to pay prior to the demand for rescission is sufficient to defeat the petitioners right under article 1592 of the Civil Code.

Besides, the Memorandum Agreement between the parties did not contain a clause expressly authorizing the automatic cancellation of the contract without court intervention in the event that the terms thereof were violated.