Cariño, Gregarius Joseph M.

Perfection of a Contract of Sale

Sales / 2BB Article 1475
Case Digest Romero vs. CA

Virgilio R. Romero vs. CA and Enriqueta Chua Vda, De Ongsiong

G.R. No. 107207, 23 November 1995
FACTS:

Virgilio Romero is a civil engineer engaged in the business of the production, manufacture,
and exportation material involving perlite ore. In 1988, he and his foreign partners decided to put
up a central warehouse in Metro Manila. The project was made known to freelance real estate
brokers. Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land measuring
1952 sq. meters in Parañaque, covered by TCT no. 361402 in the name of Enriqueta Chua vda. De
Ongsiong. When Romero visited the lot, he found it suitable for a central warehouse except for the
presence of squatters in the area.

Later, Ongsiong proposed that Romero advance P50,000 to be used in taking up an

ejectment case against the squatters and Ongsiong would lower the purchase price to P800 per
square meter. Romero agreed. Thus, on 09 June 1988, a contract denominated “Deed of
Conditional Sale” was executed between the parties. The contract stated, among others, that
vendor Ongsiong agrees to sell to vendee Romero the property for P 1,561,600, with P50,000 paid
upon signing; and that if after 60 days from the date of signing the contract, the vendor fails to
remove the squatters from the property, the downpayment shall be returned.

Ongsiong was able to acquire a judgement from MTC Parañaque ordering the squatters to
vacate but was beyond the 60-day period stipulated in the contract. Thus, Ongsiong sought to
return the downpayment to Romero on the ground that they “could not get rid of the squatters”.
Romero, thru his counsel, refused the tender and instead states that “because of the favorable
decision, it is possible to eject the squatters from the premises and that Romero shall take it upon
himself to remove the squatters, the expenses of which shall be chargeable to the purchase price.”

Later, in a letter, Ongsiong thru counsel, advised Romero’s counsel that the Deed of
Conditional Sale had been rendered null and void by virtue of his client’s failure to evict the
squatters from the premises within the 60-day grace period, and that Ongsiong had “decided to
retain the property”. Romero continued to refuse and refute the Ongsiong’s contentions.

Thus, Ongsiong filed with RTC Makati a complaint for rescission of the deed of “conditional
sale”, plus damages.

The RTC rendered decision holding that Ongsiong had no right to rescind the contract since
it was she who "violated her obligation to eject the squatters from the subject property" and that
petitioner, being the injured party, was the party who could, under Article 1191 of the Civil Code,
rescind the agreement. The court also ruled that the “ejectment” stipulation and the forfeiture of
the downpayment amounted to “penalty clauses”. The trial court dismissed the complaint and
ordered Ongsiong to eject the squatters from the property and execute the absolute deed of
conveyance upon payment of full purchase price. Ongsiong appealed to the CA.
Cariño, Gregarius Joseph M. Perfection of a Contract of Sale
Sales / 2BB Article 1475
Case Digest Romero vs. CA

The CA reversed the RTC ruling, opining that the contract entered into by the parties was
subject to a “resolutory condition” i.e., the ejectment of the squatters, the non-occurrence of which
resulted in the failure of the object of the contract; and that Romero was not ready to fulfill his
end of the contract to pay the purchase price.

ISSUES:

WON there was a perfected contract of sale

RULING:

On the perfection of a contract of sale

a. It would be futile to challenge the agreement here in question as not being a duly perfected
contract. A sale is at once perfected when a person (the seller) obligates himself, for a price
certain, to deliver and to transfer ownership of a specified thing or right to another (the
buyer) over which the latter agrees.

b. A perfected contract of sale may either be absolute or conditional depending on whether

the agreement is devoid of, or subject to, any condition imposed on the passing of title of
the thing to be conveyed or on the obligation of a party thereto. When ownership is retained
until the fulfillment of a positive condition the breach of the condition will simply prevent
the duty to convey title from acquiring an obligatory force. If the condition is imposed on
an obligation of a party which is not complied with, the other party may either refuse to
proceed or waive said condition (Art. 1545, Civil Code). Where, of course, the condition
is imposed upon the perfection of the contract itself, the failure of such condition would
prevent the juridical relation itself from coming into existence.

In determining the real character of the contract, the title given to it by the parties is not as
much significant as its substance.

c. The term "condition" in the context of a perfected contract of sale pertains, in reality, to
the compliance by one party of an undertaking the fulfillment of which would beckon, in
turn, the demandability of the reciprocal prestation of the other party. The reciprocal
obligations referred to would normally be, in the case of vendee, the payment of the agreed
purchase price and, in the case of the vendor, the fulfillment of certain express warranties
(which, in the case at bench is the timely eviction of the squatters on the property).

d. From the moment the contract is perfected, the parties are bound not only to the fulfillment
of what has been expressly stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law. Under the agreement,
private respondent is obligated to evict the squatters on the property. The ejectment of the
squatters is a condition the operative act of which sets into motion the period of compliance
by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private
respondent's failure "to remove the squatters from the property" within the stipulated period
Cariño, Gregarius Joseph M. Perfection of a Contract of Sale
Sales / 2BB Article 1475
Case Digest Romero vs. CA

gives petitioner the right to either refuse to proceed with the agreement or waive that
condition in consonance with Article 1545 of the Civil Code. This option clearly belongs
to petitioner and not to private respondent.

On the action for rescission

a. In any case, private respondent's action for rescission is not warranted. She is not the
injured party. The right of resolution of a party to an obligation under Article 1191 of
the Civil Code is predicated on a breach of faith by the other party that violates the
reciprocity between them. It is private respondent who has failed in her obligation
under the contract. Petitioner did not breach the agreement. He has agreed, in fact, to
shoulder the expenses of the execution of the judgment in the ejectment case and to
make arrangements with the sheriff to effect such execution. In his letter of 23 June
1989, counsel for petitioner has tendered payment and demanded forthwith the
execution of the deed of absolute sale. Parenthetically, this offer to pay, having been
made prior to the demand for rescission, assuming for the sake of argument that such a
demand is proper under Article 1592 of the Civil Code, would likewise suffice to defeat
private respondent's prerogative to rescind thereunder.

WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED AND SET
ASIDE, and another is entered ordering petitioner to pay private respondent the balance of the
purchase price and the latter to execute the deed of absolute sale in favor of petitioner. No costs.