Marcelino Galang vs Court of Appeals

July 23, 2011
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Civil Law – Law on Sale – Conditional Sale – Specific Performance

In July 1976, the Buenaventura siblings sold two parcels of land to Marcelino and Guadalupe Galang. The terms of the sale are as follows:

1. Galang shall pay 25% downpayment;

2. The next 25% shall be paid within the next three months or upon removal of the encargado (tiller-farmer) of the land. After payment, the Buenaventuras shall deliver the title to Galang;

3. The remaining 50% shall be payable within one year from the execution of the contract of sale subject to 12% interest per annum in case of delay.

Galang made the downpayment. However, upon Galang’s offer of the second payment within the agreed period, the Buenaventuras refused to accept the payment as they insisted that the contract did not really contain the true intention of the parties.

Now under Article 1191 of the Civil Code, in situations like this, the adverse party (the Galangs) has the option to either compel the other party to fulfill the contract of sale (specific performance) or ask for its rescission. Galang sued the Buenaventuras in court and filed for specific performance against them.

The trial court however ruled that specific performance is not an option because it appears that the encargador is an agricultural tenant protected by PD 1038 (Strengthening the Security of Tenure of Tenant-Tillers in Non-Rice/Corn Producing Private Agricultural Lands). Said encargador cannot be simply excluded from the land. Hence, the condition of excluding the encargador is a legally impossible condition imposed on the contract of sale and cannot be complied with the by Buenaventuras without violating the law. The Court of Appeals affirmed the ruling of the trial court.

ISSUE: Whether or not the trial court and the Court of Appeals are correct.

HELD: No. The interpretation of the lower courts of the contract is wrong. An action for specific performance should be allowed. The contract between the parties here is a contract to sell, which is still a form of a conditional sale.  What we have here is a contract to sell for it is the transfer of ownership, not the perfection of the contract that was subjected to a condition. Note that after the parties agreed to the terms of the contract, it is only when the second term is fulfilled, i.e. payment of the second 25%, will the title vest in Galang.

The second term/condition in the contract merely provides the period as to when the Galang should pay the second 25%, i.e., pay it within the next three months from the execution of the contract or pay it when the encargador was removed from the land. The removal of the encargador is not a condition. Further, it is even of no moment whether or not the encargador is one which was contemplated under PD 1038. The conclusions of the Court of Appeals that the encargador is that kind of a tenant protected by PD 1038 were not fully substantiated.

Given the amount of time that had elapsed since the filing of this case, the Galangs should immediately pay the remaining 75% to the Buenaventura and the latter shall deliver the title to the Galangs. The interest stipulated in the contract is no longer enforced because of the fact that while the case was pending, the Buenaventuras were still in possession of the land.

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