Case Digest: DARREL CORDERO, et al. v. F.S. MANAGEMENT & DEVELOPMENT CORPORATION

DARREL CORDERO, et al. v. F.S. MANAGEMENT & DEVELOPMENT CORPORATION

506 SCRA 451 (2006)

Non-fulfillment of a suspensive condition in a contract of sale renders the latter ineffective and without force and effect.

Belen Cordero, in her own behalf and as attorney-in-fact of her co-petitioners, entered into a contract to sell with respondent F.S. Management and Development Corporation (FSMDC) over five (5) parcels of land located in Batangas. Pursuant to the terms and conditions of the contract, FSMDC paid earnest money. No further payments were made thereafter. Cordero sent FSMDC a demand letter, revoking the contract to sell and treating the payments already made as payment for damages suffered. FSMDC likewise demanded the payment for actual damages suffered due to loss of income.

Cordero thereafter filed before the Regional Trial Court of Parañaque a complaint for rescission of contract with damages alleging FSMDC failed to comply with its obligations under the contract to sell; and that consequently entitled to rescind the contract to sell as well as demand the payment of damages. FSMDC, on the other hand, alleged that Cordero has no cause of action considering that they were the first to violate the contract to sell. It was Cordero who prevented FSMDC from complying with its obligation to pay in full by refusing to execute the final contract of sale unless additional payment of legal interest is made. Moreover, Cordero‘s refusal to execute the final contract of sale was due to the willingness of another buyer to pay a higher price.

The RTC issued its decision, finding in favor of Cordero et al. and ordered FSMDC to pay damages and attorney‘s fees. The Court of Appeals affirmed the decision of the lower court and denied their motion for reconsideration.

ISSUE:

Whether or not contract to sell may be subject to rescission under Article 1191 of the Civil Code

HELD:

Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect.

Since the obligation of Cordero et al. did not arise because of the failure of FSMDC to fully pay the purchase price, Article 1191 of the Civil Code would have no application.

The non-fulfillment by the FSMDC of his obligation to pay, which is a suspensive condition to the obligation of the Cordero et al. to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.