G.R. No. 120820 (August 1, 2000)
Topics: Contract of absolute sale; oral contract to sell
Summary:
In 1987, Fortunato and Rosalinda Santos owned a home and lot in Paranaque, Philippines. The Santoses’ property was mortgaged with the Rural Bank of Salina, Inc. as collateral for a loan of P150,000.00. After five years, the Santoses realized that they lacked the funds to repay the loan’s installments.
A contract of sale is what the law defines it to be, taking into consideration its elements, and not what the contracting parties call it. The ownership was reserved by the vendor and did not transfer until the full payment of the purchase price, which makes it possible to cancel the agreement.
Doctrines:
A contract of sale is what the law defines it to be, taking into consideration its elements, and not what the contracting parties call it.
Under Art. 1458 of NCC, it expressly obliges the vendor to transfer the ownership of the thing sold as an essential element of a contract of sale. Thus, the transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale.
Facts:
Fortunato and Rosalinda Santos were married and owned a home and lot in Paranaque. In June 1987, the aforementioned property was mortgaged with the Rural Bank of Salina, Inc. to serve as collateral for a loan of P150,000.00. Rosalinda received a letter from the bank after the loan matured demanding payment of the outstanding interest and other fees. Rosalinda gave Carmen Caseda, a close friend of hers and the present respondent, the chance to purchase the property as the Santoses lacked the necessary funds.
After accepting the offer, they signed a document containing terms and conditions that stated that the Casedas would be responsible for paying the remaining balance of the mortgage loan with the Rural Bank, the real estate taxes, the electric and water bills, the remaining cash price at the time of maturity, as well as the down payment for the relevant property.
The Casedas gained control of the property right away after making the initial payment of 54,100.00 of 300,000.00, after which they leased it out. The Casedas also pay all outstanding amounts in accordance with the terms and conditions stated in the contract. However, Rosalinda’s name was used to make these payments. After five years had passed, the Santoses realized that the Casedas lacked the resources to repay the loan’s final installments. So, the property was repossessed. Additionally, they obtained the rent payments from the renters. However, when the Casedas contacted the Santoses to pay for the outstanding debt after selling their fishpond, their offer was denied because the Santoses demanded a larger price than their predetermined limit.
As a result, Casedas brought a lawsuit against the Santoses, stating that there was a contract of sale, that they had acquired possession of the property after paying a portion of the purchase money, and that ownership of the land had been transferred upon delivery.
Issue:
Whether the transaction between the herein parties is a contract of absolute sale or a mere oral contract to sell.
Ruling:
It is a mere oral contract to sell. A contract of sale is what the law defines it to be, taking into consideration its elements, and not what the contracting parties call it.
Under Art. 1458 of NCC, it expressly obliges the vendor to transfer the ownership of the thing sold as an essential element of a contract of sale. Thus, the transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale.
The records in the present case demonstrate that the Santoses’ name continued to be attached to the property’s ownership. As a mere financier, the Casedas were responsible for paying the Santoses’ debts. This payment is still being made on the Santoses’ behalf. No legal ownership has been transferred between the parties. Therefore, the absence of this crucial component will not constitute a sale contract. The ownership was reserved by the vendor and did not transfer until the full payment of the purchase price, according to the Supreme Court, which makes it possible to cancel the agreement.