Facts:

The case involves the Spouses Mario and Elizabeth Torcuator as petitioners against the Spouses Remigio and Gloria Bernabe and Spouses Diosdado and Lourdes Salvador as respondents. The events leading to the case began with the purchase of a parcel of land, specifically Lot 17, Block 5 of Ayala Alabang Village, Muntinlupa, Metro-Manila, which has an area of 569 square meters and is covered by TCT No. S-79773. The Salvadors purchased the lot from Ayala Corporation, subject to specific conditions, including the requirement to construct a residential house within two years, approval of architectural plans by Ayala Corporation, and a prohibition against resale of the lot without a house being built.

On December 18, 1980, the Salvadors sold the property to the Bernabes, who were authorized via a special power of attorney to construct a house and transfer the title. However, the Bernabes did not build any improvements and later contracted to sell the property to the Torcuators in ...

Facts:

Subject Property and Initial Sale:
The case involves Lot 17, Block 5 of Ayala Alabang Village, Muntinlupa, Metro Manila, with an area of 569 square meters, covered by TCT No. S-79773. The lot was initially purchased by spouses Diosdado and Lourdes Salvador (Salvadors) from Ayala Corporation, subject to conditions, including:

1. A cash bond of P17,000.00, refundable if a residence is built within two years; otherwise, forfeited.
2. Architectural plans for improvements must be approved by Ayala Corporation.
3. No resale of the lot unless a residential house is constructed (Ayala Corporation retains the Torrens Title).

Subsequent Transactions:

• On December 18, 1980, the Salvadors sold the lot to spouses Remigio and Gloria Bernabe (Bernabes) and executed a Special Power of Attorney (SPA) authorizing the Bernabes to construct a house and transfer the title.
• In September 1986, the Bernabes, without constructing a house, agreed to sell the lot to spouses Mario and Elizabeth Torcuator (Torcuators). To circumvent Ayala’s restrictions, the parties agreed to cancel the sale between the Salvadors and Bernabes and execute new documents:
  1. A new deed of sale from the Salvadors directly to the Torcuators.
  2. An Irrevocable SPA from the Salvadors to the Torcuators to build a house.
  3. An Irrevocable SPA from the Salvadors to the Bernabes to sell the lot.

Failure to Consummate the Sale:
The Torcuators prepared architectural plans but failed to pay the purchase price or consummate the sale. Subsequently, the Bernabes sold the lot to Leonardo Angeles, prompting the Torcuators to file a complaint for Specific Performance or Rescission with Damages against the Bernabes and Salvadors.

Trial Court and Court of Appeals Rulings:

• The trial court dismissed the complaint, finding no real damage to the Torcuators and noting their failure to pay the purchase price.
• The Court of Appeals affirmed the dismissal, ruling that the sale was tainted with irregularities and bad faith, as it violated Ayala’s restrictions and deprived the government of taxes.

Issue:

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Ruling:

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Ratio:

1. Contract to Sell vs. Contract of Sale:

   • In a contract to sell, ownership remains with the seller until the buyer fulfills the conditions (e.g., full payment). Non-compliance with the conditions prevents the obligation to convey title from arising.
   • In a contract of sale, ownership passes to the buyer upon delivery, and non-payment is a resolutory condition that may lead to rescission.

2. Suspensive Conditions:

   • The Torcuators were required to:
     a. Fully pay the purchase price.
     b. Construct a residential house on the property.
   • Failure to fulfill these conditions meant the sellers were not obligated to transfer ownership.

3. Awareness of Ayala’s Restrictions:

   • The Torcuators knew of Ayala’s prohibition on selling vacant lots and agreed to construct a house in the Salvadors’ name to comply with the condition.

4. Good Customs and Morals:

   • The transaction did not contravene good customs and morals, as it was intended to comply with Ayala’s restrictions.

5. Taxation Issue:

   • Since the contract to sell was aborted, no capital gains tax was due, making the issue irrelevant.