Facts:

The case at hand involves the Congregation of the Religious of the Virgin Mary (RVM) as the petitioner and Emilio Q. Orola, Josephine Fatima Laserna Orola, Myrna Angeline Laserna Orola, Manuel Laserna Orola, Marjorie Melba Laserna Orola, and Antonio Laserna Orola as the respondents. The dispute revolves around a property transaction initiated in April 1999, between RVM, represented locally by Sr. Fe Enhenco, and the Orola family regarding a parcel of land known as Lot 159-B-2 located adjacent to St. Mary’s Academy of Capiz. A contract to sell was drafted on June 2, 1999, stipulating a total price of PHP 5,555,000, with an initial down payment of PHP 555,500 paid on June 7, 1999.

Despite the signing of the contract and the receipt of the down payment, RVM subsequently failed to meet with the respondents to finalize the sale and fulfill the remaining payment. RVM contended that the contract was invalid, as it was not signed by their head, VRM Balleque. The respondents filed a com

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Facts:

Negotiation and Formation of Contract

• In April 1999, the Religious of the Virgin Mary (RVM), through its local unit and specifically via Sr. Fe Enhenco, initiated discussions with respondents regarding the sale of a property.
• The property in question, identified as Lot 159-B-2, was still registered in the name of the respondents’ predecessor-in-interest, Manuel Laserna.
• In May 1999, respondent Josephine Orola met with the Mother Superior General of the RVM, Very Reverend Mother Ma. Clarita Balleque, to further discuss the prospective sale.

Execution of the Contract and Initial Payment

• A Contract to Sell was executed on June 2, 1999, listing RVM and the respondents as the contracting parties, and setting the total purchase price at P5,555,000.00.
• The contract stipulated that 10% of the total consideration was payable at the time of execution.
• On June 7, 1999, respondents Josephine Orola and Antonio Orola acknowledged receipt of RCBC Check No. 0005188, amounting to P555,500.00 as the downpayment; the acknowledgment included the “conforme” signature of Sr. Fe Enhenco.

Title Transfer and Subsequent Developments

• Shortly after the downpayment, respondents executed an extrajudicial settlement of the estate of Trinidad Andrada Laserna on June 21, 1999, thereby adjudicating Lot 159-B-2 in pro indiviso shares.
• The property was transferred into the names of the respondents under Transfer Certificate of Title No. T-39194 on August 13, 1999.
• Armed with an undated Deed of Absolute Sale, respondents scheduled a meeting with VRM Balleque at the RVM Headquarters in Quezon City to finalize the sale by obtaining the remaining balance of P4,999,500.00; however, the meeting did not take place.

Dispute Over Payment and Subsequent Litigation

• In ensuing correspondence, RVM denied the respondents’ demand for payment on two grounds:
• The Contract to Sell was only signed by Sr. Enhenco as witness and not by VRM Balleque, the head of the corporation sole.
• RVM contended that it would only be in a position to pay the balance after two years.
• Respondents filed an action for Specific Performance or Rescission with Damages in the Regional Trial Court (RTC).
• After trial, the RTC found that a perfected contract of sale existed between the parties and ruled in favor of rescission, ordering:
• The rescission of the contract and forfeiture of the P555,500.00 downpayment.
• Award of exemplary damages and attorney’s fees to the respondents.
• Both parties filed appeals; the respondents’ appeal was dismissed by the Court of Appeals (CA) for failure to file an Appeal Brief, while RVM continued its appeal.

Court of Appeals Decision and Points of Contention

• The CA set aside the RTC decision, affirming that a perfected contract of sale existed, but modified the relief granted by allowing respondents’ action for specific performance.
• The CA ordered RVM to pay the remaining balance of P4,999,500.00 with 6% per annum interest computed from June 7, 2000 until full payment.
• The CA noted ambiguity in the records over whether the balance was due in two years—as claimed by RVM—or immediately upon transfer of title, thus applying Articles 1383 and 1384 of the Civil Code, with an eye toward ensuring the greatest reciprocity of interest pursuant to Article 1378.
• RVM challenged the imposition of interest, arguing that the absence of fraud or bad faith by either party should preclude such an imposition and that respondents should instead be liable to pay rentals for their continued possession of the property.

Issue:

• Whether RVM’s failure to pay the remaining balance of the purchase price, despite the transfer of title and signing of a contract evidencing a perfected contract of sale, constitutes a breach sufficient to warrant the imposition of interest.
• Whether the contract of sale, as established by the facts (including the downpayment receipt and evidence of title transfer), is legally perfected and binding upon both parties, regardless of subsequent actions or inactions.
• Whether the CA correctly applied Articles 1383 and 1384 of the Civil Code, given that the dispute arises from a breach of a reciprocal obligation as provided under Article 1191, rather than from economic prejudice or rescission for other enumerated causes under Article 1381.
• Whether the imposition of 6% per annum interest from June 7, 2000, notwithstanding the absence of fraud or bad faith, is consistent with the contractual obligations and measures of damages prescribed by the Civil Code, particularly under Article 2210.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)