Case Digest (G.R. No. 230817)
Facts:
Vive Eagle Land, Inc. (Vive) entered, on November 17, 1999, into a Deed of Sale of Rights, Interests, and Participation Over Foreclosed Assets with National Home Mortgage Finance Corporation (NHMFC) over foreclosed property in Angeles City, agreeing to pay a downpayment and subsequent semi-annual installments with interest. Vive paid only the initial downpayment installment and later failed to pay the subsequent installments, prompting NHMFC to notify Vive by letters dated February 10, 2006 and February 27, 2006 of the rescission/cancellation and/or revocation of the deed based on non-payment. After Vive filed a complaint in RTC Makati (Civil Case No. 06-308), the RTC Branch 138 dismissed the complaint for lack of merit, though Branch 133 later reversed, and Branch 139 ultimately reinstated the dismissal; the CA affirmed RTC Branch 139 in CA-G.R. CV No. 105312.
While the case was pending, NHMFC executed a Memorandum of Agreement with Cavacon Corporation, selling the property on an “as is-where is” basis. Vive sought nullification of NHMFC’s rescission, suspension of payment, and attorney’s fees, arguing among others that NHMFC had granted a moratorium and that NHMFC’s cancellation and the subsequent sale were in bad faith; the Supreme Court denied Vive’s Petition for Review on Certiorari.
Issues:
- Whether the deed dated November 17, 1999 was a contract of sale that transferred ownership to Vive upon execution, or a contract to sell.
- Whether Vive was in default in paying the purchase price despite its claim of a moratorium.
- Whether NHMFC’s rescission/cancellation was invalid for lack of substantial breach.
- Whether the subsequent Memorandum of Agreement between NHMFC and Cavacon Corporation was entered in bad faith.
- Whether Vive was entitled to attorney’s fees.
Ruling:
The Court held that the agreement was a contract to sell, not a contract of sale, because NHMFC expressly reserved title and ownership pending Vive’s full payment, with title transfer only upon such payment. Consequently, Vive’s failure to pay the stipulated installments constituted an event of default that gave NHMFC the contractual right to annul/cancel.
The Court further ruled that Vive failed to prove that the claimed moratorium bound NHMFC, as it lacked board approval and Vive did not establish the kind of corporate circumstances that would invoke apparent authority or ratification; it also rejected Vive’s attempt to apply the Maceda Law (R.A. No. 6552) for the first time on Motion for Reconsideration, and held that the Maceda Law did not apply to the parties’ contract to sell. With the cancellation valid, the Court sustained the validity of the NHMFC–Cavacon subsequent sale and affirmed the dismissal of Vive’s claims, including the denial of attorney’s fees, and ultimately denied the petition, affirming the CA.
Ratio:
The Court explained that a contract to sell requires full payment (a positive suspensive condition) before the vendor’s obligation to convey title arises, while a contract of sale transfers ownership upon delivery and uses a different conditional framework. Applying the contract’s stipulations, particularly Section 7 (title and delivery of titles only upon full payment), and the parties’ conduct under the agreement, the Court concluded that NHMFC retained ownership until Vive fully paid, making Vive’s ownership theory untenable.
On default, the Court held Vive was in breach for non-payment on the dates and manner stipulated, and Vive could not shift liability to NHMFC for property-related complications because the contract showed Vive’s awareness and that NHMFC had no obligation to assist litigation. The Court rejected Vive’s moratorium defense for lack of evidence of board authorization, and it declined to apply apparent authority or estoppel against NHMFC because Vive failed to prove the necessary factual premises (including that the officer acted within actual authority or that the corporation was placed in a position requiring ratification). It likewise refused to entertain the Maceda Law argument raised only at reconsideration, and, even if considered, ruled the Maceda Law inapplicable because the policy aims to protect innocent, low-income installment buyers and regulate real estate developers, which the Court found not to describe the parties’ transaction.
Finally, because NHMFC had a contractual right to dispose of the property and treat prior payments as rentals upon Vive’s event of default, the Court found no basis to deem the NHMFC–Cavacon transaction made in bad faith, and it upheld the trial and appellate courts’ disposition, including the denial of attorney’s fees.
Doctrine:
- In a contract to sell, the buyer’s full payment is a positive suspensive condition; title and ownership remain with the seller until full payment.
- Corporate officers cannot validly bind the corporation without board action; unauthorized corporate acts generally do not bind the corporation absent recognized exceptions shown by evidence.
- Apparent authority and estoppel against a corporation require proof of the circumstances supporting them; mere reliance on an unauthorized officer’s act is insufficient.
- The Maceda Law (R.A. No. 6552) is inapplicable to contracts not within its intended protection policy, and issues raised for the first time on Motion for Reconsideration are generally not entertained.
- When a contract expressly provides that upon default the seller may cancel and dispose of the property and treat prior payments as rentals, the cancellation and subsequent disposition consistent with the contract are sustained.