G.R. No. 165168 - Spouses Montecalvo vs. Heirs of Primero

Petitioners: SPS. Nonilon (Manoy) Montecalvo and Irene Montecalvo.
Respondents: Heirs (substitutes) of Eugenia T. Primero, represented by their attorney-in-fact, Alfredo T. Primero, Jr.
Subject Property: A portion of a parcel of land—Lot No. 263 located at Sabayle Street, Iligan City—with an area of 860 square meters as evidenced by Original Certificate of Title No. 0-271, originally registered in the name of Eugenia Primero.

In the early 1980s, Eugenia leased Lot No. 263 to petitioner Irene Montecalvo for a monthly rental of P500.00.
On January 13, 1985, Eugenia and Irene entered into an unnotarized Agreement for negotiating the sale of the property for P1,000.00 per square meter.

The Agreement required a deposit of P40,000.00 to function as part of the down payment (50% of the purchase price).
A negotiation period of 30 to 45 days was agreed upon, within which Irene was to pay the balance of P410,000.00 as part of the down payment.
It was provided that if Irene defaulted, the deposit would be returned within 10 days, and the Agreement would be terminated.
In case the negotiation pushed through, the remaining purchase price was to be paid in installments with interest.

Irene failed to complete the full down payment within the stipulated period but continued occupying the property while making additional payments aggregating P293,000.00.
Eugenia neither returned the initial P40,000.00 deposit nor accepted further payments (except in 1992).
A survey of Lot No. 263 was conducted resulting in the segregation of a 293-square meter portion supposedly in favor of Irene.
Dispute arose when Eugenia opposed the claim and asked Irene to vacate the property.

On May 13, 1996, Eugenia and her heirs filed an unlawful detainer action against Irene and her husband (Nonilon) before the Municipal Trial Court (MTC), which was later dismissed for lack of jurisdiction due to the nature of the issue (non-pecuniary estimation).
On June 18, 1996, petitioners instituted a separate action for specific performance with the Regional Trial Court (RTC) of Lanao del Norte, seeking to compel the conveyance of the disputed 293-square meter portion.
The RTC rendered a decision dismissing the complaint and ordering petitioners to pay P2,500.00 as monthly rentals, applying the deposit and payments received as offset.
The Court of Appeals (CA) affirmed the RTC decision, and subsequent motions for reconsideration were denied.

Petitioners claimed that after failure of the initial Agreement, an oral contract of sale for the 293-square meter portion was established, supported by:

Testimony of Irene regarding payments made and the survey conducted by Engr. Antonio Ravacio.
Presentation of 82 receipts allegedly evidencing payments related to the lot purchase.

Testimonies affirming that the Agreement was a contract to sell, not a contract of sale.
Evidence that the receipts were for lot rentals, and that Eugenia did not consent to the segregation or sale of the property.

Whether the Agreement dated January 13, 1985 is a contract of sale or a contract to sell.
Whether the conditions stipulated in the Agreement, such as the payment of the balance of the 50% down payment, were fulfilled.

Whether an alleged oral contract of sale for a segregated 293-square meter portion of the property is binding upon the seller.
Whether the seller can be compelled to execute the deed of sale after partial performance and delivery of possession.

Whether petitioners discharged their burden by establishing the existence and terms of the alleged contract of sale by a preponderance of evidence.

Whether the trial court had jurisdiction to modify the stipulated rental award in light of the changed circumstances post-termination of the lease.