Title
Salazar vs. Court of Appeals
Case
G.R. No. 118203
Decision Date
Jul 5, 1996
A contract to sell was deemed unenforceable as buyer failed to pay the agreed amount, preventing transfer of property ownership.

Case Digest (G.R. No. 118203)
Expanded Legal Reasoning Model

Facts:

  • Background and Property Details
    • Dr. Emilio A. Salazar is the owner of two parcels of land in Makati, Metro Manila, covered by Transfer Certificate of Title Nos. 31038 and 31039.
    • On or about April–May 1989, Salazar proposed to sell these properties to Jonette Borres for a total consideration of One Million Pesos (P1,000,000.00).
  • Negotiations and Initial Proposals
    • The initial offer took place at Dimsum Restaurant, Makati, where the payment period was initially set at six (6) months, later reduced by Salazar to three (3) months.
    • During a visit on May 28, 1989, Borres, accompanied by Emilio T. Salazar, presented a copy of a Deed of Absolute Sale and a Deed of Warranty at Salazar’s residence in Bataan.
    • Salazar refused to sign immediately, citing the lack of available funds with Borres, and subsequently further shortened the payment period to one (1) month, with a fixed deadline of June 30, 1989.
  • Execution of Documents and Subsequent Actions
    • On June 2, 1989, at Ninoy Aquino International Airport, Borres met Salazar who, about to leave for the United States, agreed under protest to sign the Deed of Absolute Sale provided that Borres would pay half (P500,000.00) immediately (by June 15, 1989) and the balance on June 30, 1989.
    • Salazar then designated co-defendant Teresa Dizon as the custodian of the Deed of Absolute Sale and the Transfer Certificates, with explicit instructions to release these documents only upon full cash payment of the purchase price.
    • Borres later informed Dizon on June 14, 1989, of her intention to pay the full amount on the following day. However, when she attempted to collect the documents from Dizon on June 15, 1989, complications arose.
    • An arrangement was made at a Metro Bank branch to retrieve the documents and subsequently proceed to Makati for further transactions; this plan did not materialize as scheduled.
    • On June 16, 1989, Salazar, via an overseas call to Dizon, confirmed that the downpayment had not been made, and consequently, he ordered Dizon to “stop the sale.”
  • Content and Nature of the Agreements
    • The contractual documents created include the Deed of Absolute Sale and a supplemental Deed of Warranty, which ostensibly provided that:
      • The documents (and transfer of title) would be released only upon full payment of the agreed One Million Pesos.
      • Borres expressly acknowledged that she had no right to the originals of the documents or the pertinent records until the condition (full cash payment) was fulfilled.
    • In a subsequent Memorandum of Agreement with Monteland Realty Corporation dated June 15, 1989, Borres confined her “rights and interests” under the sale to those expressly subject to the condition that the full purchase price must be paid.
  • Payment Issues and Evidence of Readiness
    • Borres produced a Far East Bank check dated June 15, 1989, reportedly payable to her order in the amount of P1,500,000.00, which exceeded the purchase price.
    • Testimony and documentary evidence later revealed a cancellation of the check and evidence suggesting that no actual payment was tendered on the specified date.
    • Despite claims that Borres was financially prepared (by virtue of possessing the check), evidence showed that she neither encashed the check nor made any subsequent payment.
  • Subsequent Court Proceedings and Trial Court Findings
    • The trial court determined that the Deed of Absolute Sale was in reality a contract to sell, given:
      • Salazar’s “reluctant” signing as he expressly made it clear that the title would not pass until full payment.
      • The suspensive nature of the payment condition, making the transfer of title contingent upon full payment.
    • Based on Borres’ failure to pay the downpayment of P500,000.00 on or before June 15, 1989, the trial court dismissed her action for specific performance and ordered her to pay nominal attorney’s fees and litigation expenses.
  • Appeal to the Court of Appeals
    • The Court of Appeals reversed the trial court’s decision, ruling that:
      • The executed Deed of Absolute Sale was a perfected contract of sale with a definite object and specific consideration.
      • The absence of a reservation of title or a unilateral rescission clause indicated that title should pass upon agreement, regardless of the timing of payment.
    • The appellate court further held that:
      • Salazar’s initial “reluctance” to sign did not invalidate the contract.
      • Borres had demonstrated readiness to perform her obligations, evidenced by the presentation of the check.
      • Teresa Dizon’s actions in her capacity as custodian amounted to bad faith, frustrating Borres’ tender of payment.
    • The Court of Appeals ultimately reversed the trial court, ordering Salazar to accept the full purchase price and compel the delivery of the documents, and imposed damages against Dizon.
  • Issues Raised on Petition for Reversal
    • Petitioners (Salazar and Dizon) argued that:
      • The Deed of Absolute Sale and the accompanying documents evidenced a contract to sell rather than a perfected contract of sale.
      • The suspensive condition of full payment had not been fulfilled, rendering the sale unperfected.
      • Borres failed to tender payment properly and was not in a position to enforce specific performance.
    • They further challenged the imposition of damages against Dizon, including moral, exemplary, and attorney’s fees.

Issues:

  • Classification of the Contract
    • Whether the Deed of Absolute Sale, taken in conjunction with the Deed of Warranty and other evidences, constitutes a perfected contract of sale or a mere contract to sell subject to a suspensive condition.
    • Determining the effect on the transfer of title when the vendor expressly conditions the title transfer on full payment.
  • Specific Performance and Payment Issues
    • Whether Borres’ action for specific performance can be sustained despite the alleged failure to tender the downpayment of P500,000.00 within the agreed timeframe.
    • Whether the existence of a bank check for P1,500,000.00 (allegedly evidencing financial readiness) is sufficient to establish Borres’ ability to pay, notwithstanding its cancellation and the circumstances surrounding its presentation.
  • Conduct of Teresa Dizon
    • Whether Teresa Dizon, as custodian of the documents, acted in bad faith by withholding the Deed of Absolute Sale and related titles, thereby frustrating Borres’ efforts to comply with her obligations.
  • Legal Consequences
    • The appropriate remedy for breach or non-performance in view of the suspensive condition in a contract to sell—specifically, whether the remedy of specific performance should be granted or whether the contract remains unenforceable absent full payment.
    • The propriety of awarding damages (moral, exemplary, and attorney’s fees) against Dizon under these circumstances.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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