GR 145330; (October, 2005) (Digest)
G.R. No. 145330 . October 14, 2005.
SPOUSES GOMER and LEONOR RAMOS, Petitioners, vs. SPOUSES SANTIAGO and MINDA HERUELA, SPOUSES CHERRY and RAYMOND PALLORI, Respondents.
FACTS
Petitioners Spouses Ramos owned a parcel of land. On February 18, 1980, they entered into a handwritten agreement with respondent Spouses Heruela covering 306 square meters of that land for a price of ₱15,300. The Spouses Ramos characterized the agreement as a conditional sale, while the Spouses Heruela claimed it was a sale on installment. The Spouses Heruela made a down payment and several installment payments, with the last payment made on December 18, 1981. They failed to fully pay the balance. In 1998, the Spouses Ramos filed a complaint for recovery of ownership, alleging that the Heruelas’ failure to pay the balance justified the contract’s cancellation. The Heruelas countered that they had offered to pay the outstanding balance in 1982, but the Ramos spouses refused.
ISSUE
The primary issue is whether the agreement is a contract of sale or a contract to sell, and consequently, whether the provisions of Republic Act No. 6552 (The Maceda Law) govern its cancellation.
RULING
The Supreme Court ruled that the agreement is a contract to sell, not a contract of sale. The Court distinguished the two: in a contract of sale, title passes to the buyer upon delivery of the property, while in a contract to sell, ownership is retained by the seller until the buyer makes full payment of the purchase price, which operates as a suspensive condition. The handwritten agreement in this case did not contain terms indicating an absolute transfer of title. It merely stipulated the price, down payment, and monthly installments until fully paid. This structure clearly established that full payment was a condition precedent for the obligation to convey title to arise. Therefore, ownership remained with the Spouses Ramos.
Since the contract is a contract to sell involving the sale of a residential lot on installment, RA 6552 applies. The law prescribes specific requirements for cancellation, including the grant of a grace period and a notarial notice of cancellation or demand for rescission. The Spouses Ramos failed to comply with these mandatory procedures. Their mere filing of the complaint for recovery of ownership did not constitute the proper notice of cancellation required by law. Consequently, they had no right to unilaterally cancel the contract. The trial court correctly ordered them to execute a deed of sale upon payment of the balance. However, the Supreme Court deleted the award of attorney’s fees and litigation expenses to the Heruelas, finding no factual or legal basis to support it under Article 2208 of the Civil Code.