Olivarez Vs Castillo

OLIVAREZ REALTY CORPORATION and Olivarez Realty failed to comply with the
DR. PABLO R. OLIVAREZ, Petitioner, conditions, to wit: a) pay the full purchase

vs. price; b) failed to file any action against PTA;
BENJAMIN CASTILLO, Respondent. c) failed to clear the land of the tenants nor
paying them disturbance compensation. For
FACTS: Castillo was the owner of a parcel of breaching the contract, Castillo prayed for
land covered by TCT 19972. The Philippine rescission of contract under Art. 1191 of Civil
Tourism Authority allegedly claimed Code, plus damages.
ownership of the same parcel of land based
on TCT 18493. In their defense, Olivarez Realty alleged
that Castillo failed to fully assist in filing the
Castillo and Olivarez Realty Corporation, action against PTA; that Castillo failed to
represented by Dr. Pablo Olivarez, entered clear the property of the tenants within 6
into a contract of conditional sale over months from the signing of the deed. Thus,
the property. The details were as follows: they had all the legal right to withhold the
subsequent payments to fully pay the
1. Under the deed of conditional sale, purchase price.
Castillo agreed to sell his property to
Olivarez Realty; with Olivarez Realty RTC and CA ruled that Olivarez Realty
delivering the downpayment and the rest breached the contract and ordered the
to be paid in 30 equal monthly rescission of the sale plus damages.
installments; That the parties would
receive a decision voiding the PTA’s title ISSUE:
to the property.
1. WON rescission of the contract is
2. Under the same deed, Olivarez Realty will proper; WON the contract was a
file the action against PTA with full Contract to Sell or a Contract of
assistance of Castillo; and that should the Conditional Sale
petition be denied, Castillo shall
reimburse all the amounts paid by RULING: NO. SC characterized the contract
Olivarez Realty. as a contract to sell, not a contract of
conditional sale.
3. Under the same contract, Olivarez Realty
undertook to pay the legitimate tenants Contract to sell Contract of conditional
of the land disturbance compensation, Sale
while Castillo undertook to clear the land transfer of title the buyer
of the tenants within 6 months from the to the automatically
signing of the deed; that should Castillo prospective acquires title to the
fail to clear the land within 6 months, buyer is not property upon full
Olivarez Realty may suspend its monthly automatic. “The payment of the
downpayment until the tenants vacate prospective purchase price. This
the property. seller must transfer of title is “by
convey title to operation of law without
4. The parties agreed that Olivarez Realty the property any further act having to
Corporation may immediately occupy the through a deed be performed by the
property upon signing of the deed. of conditional seller.”
Should the contract be cancelled, Olivarez sale.
Realty Corporation agreed to return the not governed our laws on sales under
property’s possession to Castillo and by our law on the Civil Code of the
forfeit all the improvements it may have sales but by the Philippines apply
introduced on the property. Civil Code
provisions on
conditional
obligations.
The distinction is important to determine the

applicable laws and remedies in case a party
does not fulfill his or her obligations under
the contract.
Specifically, Article 1191 of the Civil Code

on the right to rescind reciprocal
obligations does not apply to contracts
to sell.
Failure to fully pay the purchase price in

contracts to sell is not the breach of contract
under Art. 1191.
Failure to fully pay the purchase price is

merely an event which prevents the
seller’s obligation to convey title from
acquiring binding force. This is because
there can be no rescission of an obligation
that is still nonexistent, the suspensive
condition (the condition of having the buyer
pay the full purchase price) having not
happened.
In this case, Castillo reserved his title to the

property and undertook to execute a deed of
absolute sale upon Olivarez Realty
Corporation’s full payment of the purchase
price.
Since Castillo still has to execute a deed of

absolute sale to Olivarez Realty Corporation
upon full payment of the purchase price, the
transfer of title is not automatic.
As this case involves a contract to sell,

Article 1191 of the Civil Code of the
Philippines does not apply. The contract to
sell is instead cancelled, and the parties shall
stand as if the obligation to sell never
existed.
SC cancelled the deed of conditional sale.

Olivarez Realty was ordered to return to
Castillo the possession of property, together
with all improvements that it introduced.
Olivarez Realty was also ordered to pay
moral damages, exemplary damages, and
attorney’s fees to Castillo.

Olivarez Vs Castillo

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OLIVAREZ REALTY CORPORATION and Olivarez Realty failed to comply with the

DR. PABLO R. OLIVAREZ, Petitioner, conditions, to wit: a) pay the full purchase

The distinction is important to determine the

Specifically, Article 1191 of the Civil Code

Failure to fully pay the purchase price in

Failure to fully pay the purchase price is

In this case, Castillo reserved his title to the

Since Castillo still has to execute a deed of

As this case involves a contract to sell,

SC cancelled the deed of conditional sale.

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