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SPS. GOMER v. SPS. SANTIAGO

FACTS:

The case involves a petition for review assailing the decision and order of the Regional Trial Court in Misamis Oriental, which dismissed the plaintiffs' action for recovery of ownership with damages. The spouses Gomer and Leonor Ramos are the owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. 16535. They entered into an agreement with the spouses Santiago and Minda Heruela, covering 306 square meters of the land. The spouses Ramos allege that the agreement is a contract of conditional sale, while the spouses Heruela claim it is a sale on installment basis. The spouses Ramos filed a complaint for recovery of ownership with damages, alleging that the spouses Heruela failed to fully pay the purchase price. The spouses Heruela, on the other hand, assert that they have made several installment payments and expressed their willingness to pay the remaining balance. The trial court ruled that the contract is a sale by installment and ordered the spouses Ramos to execute a deed of sale in favor of the spouses Heruela upon full payment of the balance. The trial court also ordered the spouses Ramos to pay attorneys' fees and litigation expenses. The spouses Ramos filed a motion for reconsideration, which was denied by the trial court. Hence, this petition for review.

ISSUES:

  1. Whether Article 1504 of the Civil Code is applicable to the contract in controversy.

  2. Whether RA 6552 is the applicable law in the present case.

  3. Whether the action for reconveyance is premature due to the absence of a valid rescission of the contract to sell.

  4. Whether the spouses Heruela have lost the statutory grace period to pay the balance of the purchase price.

RULING:

  1. Article 1504 of the Civil Code, which pertains to contracts of sale, is not applicable to the contract in controversy. The contract in question is a contract to sell or promise to sell, where title remains with the vendor until the fulfillment of a positive suspensive condition, such as full payment of the price. Therefore, the absence of a formal deed of conveyance does not invalidate the contract.

  2. RA 6552 applies to the present case. RA 6552 recognizes the right of the seller to cancel the contract upon non-payment of an installment by the buyer, and it provides certain rights to the buyer in case of default in payment of succeeding installments. In this case, the buyers paid less than two years of installments, so Section 4 of RA 6552 applies. However, there was no notice of cancellation or demand for rescission by notarial act given to the buyers.

  3. The action for reconveyance is premature since there was no valid rescission of the contract to sell. The trial court should have fixed the statutory grace period of sixty days for the spouses Heruela to pay.

  4. The spouses Heruela have not lost the statutory grace period to pay the balance of the purchase price.

PRINCIPLES:

  • A contract to sell or promise to sell is different from a contract of sale. In a contract to sell, title remains with the seller until the fulfillment of a positive suspensive condition, such as full payment of the price.

  • RA 6552 applies to contracts of sale on installment payments, including residential properties. It recognizes certain rights of the buyer in case of default in payment of installments.

  • Notice of cancellation or demand for rescission by notarial act is required under RA 6552 for the cancellation of the contract in case of default in payment of installments. A court action for reconveyance is not an alternative to notarial act of rescission.

  • The court may authorize the fixing of a period instead of decreeing rescission.

  • The action for reconveyance is premature in the absence of a valid rescission of the contract to sell.

  • The statutory grace period of sixty days should be given to the buyer to pay the balance of the purchase price.

  • Interest at the rate of 6% per annum may be awarded for the breach of obligation.

  • The reckoning period for computing legal interest should be the filing of the complaint for reconveyance.

  • Attorney's fees and litigation expenses cannot be recovered in the absence of stipulation.