The Issue Presented
The core issue for resolution is whether or not there are genuine issues of fact to be tried in this case.
The Court’s Ruling
A genuine issue of fact is that which requires the presentation of evidence, as distinguished from a sham, fictitious, contrived or false issue. When the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue. Summary judgment is proper in such a case.
Here, Piltel contends that summary judgment is out of place because the parties raise factual issues of fraud and breach of contract. Although their contract has a built-in rescission and forfeiture clause, this becomes operative only upon the occurrence of the following conditions: 1) Piltel sends a Statement of Account to Smartnet; 2) Smartnet fails to pay within 10 days from receipt of the statement; 3) Piltel sends a Notice of Delinquency to Smartnet; and 4) Smartnet fails to pay within five days from receipt of the notice.
The rescission and forfeiture clause thus reads:
In case the VENDEE fails to fully pay, within the stipulated period, the balance of the total consideration under Article 2(c) of this Contract to Sell, the VENDOR shall send a notice of delinquency to the VENDEE. Failure on the part of the VENDEE to pay within five (5) days from receipt of said notice, ten (10%) percent of the downpayment or EIGHTEEN MILLION PESOS (
P18,000,000.00) PESOS, Philippine Currency shall automatically be forfeited in favor of the VENDOR and the Contract to Sell shall be without force and effect.
Notably, however, both Piltel and Smartnet admit that they entered into a contract to sell covering the Valgoson Property; that Smartnet agreed to pay Piltel
P560 million for it, with a down payment of P180 million; and that Smartnet failed to pay the balance of the purchase price on or about April 30, 1997.
With these common admissions, it is clear that there are no genuine issues of fact as to the existence and nature of the contract to sell as well as Smartnet’s failure to pay the balance of the purchase price within the agreed period. Thus, the RTC was correct in skipping trial and deciding the case through a summary judgment based on the undisputed facts.
Smartnet’s allegations respecting fraud and breach of contract referred to what appears to be Piltel’s non-binding promise to buy cellular phones and accessories from Smartnet. These are matters independent of the parties’ agreement concerning Piltel’s sale of the Valgoson Property to Smartnet. The contract to sell of such property was not legally linked or made dependent on the aborted cellular phone deal between the parties. Indeed, Smartnet dropped with leave of court its causes of action relating to such deal.
All that matters is that since Smartnet failed to pay the balance of the purchase price, automatic rescission set in and this placed Piltel under an obligation to return the down payment it received, less the portion that it forfeited due to Smartnet’s default. Consequently, it is but proper for Piltel to fully abide by such obligation. Piltel cannot avoid rescission since it in fact partially abided by rescission’s consequences when it returned to Smartnet on December 19, 1997 a
P50 million portion of the down payment it received.
By returning part of the down payment, it is clear that Piltel recognized that the contract to sell the Valgoson Property had reached the point of automatic rescission. Piltel is, therefore, in estoppel to deny rescission based on a claim that it had not yet sent a statement of account or a notice of delinquency to Smartnet regarding the latter’s default. Such statement of account and notice of delinquency had become academic.
Piltel argues that Smartnet cannot, as a defaulting buyer, rescind the contract to sell between them by the simple act of refusing to pay. But, Smartnet’s nonpayment of the full price of the property was not an act of rescission. It was but an event that rendered the contract to sell without force and effect. In a contract to sell, the prospective seller binds himself to part with his property only upon fulfillment of the condition agreed, in this case, the payment in full of the purchase price. If this condition is not fulfilled, the seller is then released from his obligation to sell.
As the Court said in Heirs of Cayetano Pangan and Consuelo Pangan v. Perreras, the payment of the purchase price in a contract to sell is a positive suspensive condition, the failure of which is not a breach but a situation that results in the cancellation of the contract. Strictly speaking, therefore, there can be no rescission or resolution of an obligation that is still non-existent due to the non-happening of the suspensive condition.
Likewise, a cause of action for specific performance does not arise where the contract to sell has been cancelled due to nonpayment of the purchase price. Smartnet obviously cannot demand title to the Valgoson Property because it did not pay the purchase price in full. For its part, Piltel also cannot insist on full payment since Smartnet’s failure to pay resulted in the cancellation of the contract to sell. Indeed, in the case of Ayala Life Assurance, Inc. v. Ray Burton Dev’t. Corp., the Court rejected the seller’s demand for full payment and instead ordered it to refund to the buyer all sums previously paid. The order to refund is correct based on the principle that no one should unjustly enrich himself at the expense of another.
Lastly, the Court sustains the CA’s imposition of 12% interest pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.
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