Romero vs. Court of Appeals

In a contract of sale where the obligation of one party is subject to a condition, the party who failed to perform the condition cannot unilaterally rescind the contract; the right to either refuse to proceed or waive performance of the condition belongs to the other, non-breaching party.

Petitioner Virgilio R. Romero sought to purchase a parcel of land in Parañaque from private respondent Enriqueta Chua Vda. de Ongsiong to build a warehouse. The property was occupied by squatters. On 09 June 1988, they executed a "Deed of Conditional Sale" for P1,561,600.00. A down payment of P50,000.00 was paid. The contract stipulated that the balance would be due 45 days after the vendor removed all squatters. Crucially, it provided that if the vendor failed to remove the squatters within 60 days from the signing, the down payment would be returned to the vendee. The vendor filed an ejectment case but failed to clear the property within the 60-day period (expiring 09 August 1988). She later attempted to return the down payment and rescind the contract, which the vendee refused.

• Nature of the Agreement: The parties executed a "Deed of Conditional Sale" for a 1,952-sq.m. lot. The vendee paid a P50,000.00 down payment. The balance of P1,511,600.00 was payable "45 days after the removal of all squatters."
• The Condition and Breach: The vendor was obligated to remove the squatters. The contract stated that if she failed to do so within 60 days from signing (by 09 August 1988), the down payment would be returned to the vendee. The vendor filed an ejectment case, but judgment was rendered only on 21 February 1989, well beyond the 60-day period.
• Vendor's Attempted Rescission: On 07 April 1989, the vendor offered to return the P50,000.00, citing her inability to remove the squatters. The vendee, through counsel, refused the tender on 17 April 1989, arguing the contract was perfected and proposing to handle the ejectment himself at his own expense.
• Vendee's Position and Tender: The vendee reiterated his willingness to underwrite the ejectment costs and, on 23 June 1989, made a formal tender of payment and demand for the execution of the absolute deed of sale.
• Vendor's Lawsuit: On 27 June 1989, the vendor filed the complaint for rescission and consignation, which led to the appealed decisions.

• Perfected Contract and Waiver of Condition: Petitioner argued the contract was a perfected sale. The condition (squatter removal) was imposed on the vendor's obligation. Under Article 1545 of the Civil Code, the right to refuse to proceed or waive the condition belonged to him as the other party, not to the vendor who failed to perform.
• Vendor as Injured Party: Petitioner maintained that the vendor was not the injured party and thus had no right to rescind under Article 1191. He was the injured party but had chosen to waive the condition and proceed with the sale.
• Tender of Payment Defeats Rescission: Petitioner contended that his tender of payment and demand for a deed of absolute sale, made prior to the vendor's judicial demand for rescission, defeated any purported right to rescind under Article 1592.

• Resolutory Condition: Respondent argued that the contract was subject to a resolutory condition—the ejectment of squatters. Its non-fulfillment caused the failure of the contract's object, rendering the contract cancelled.
• Substantial Compliance: Respondent claimed she substantially complied with her obligation by filing and obtaining a favorable judgment in the ejectment case, even if it was beyond the 60-day period.
• Vendee's Non-Payment: Respondent contended it was the petitioner who was not ready to pay the purchase price, as the condition for his payment (squatter removal) had not occurred.
• Mandatory Return of Down Payment: Respondent asserted that the contract's clause requiring the mandatory return of the P50,000.00 upon her failure to evict squatters was not a penal clause but a clear stipulation that the contract would be cancelled.

• Nature of the Condition: Whether the obligation to evict squatters was a condition imposed on the perfection of the contract, on the vendor's obligation, or a resolutory condition.
• Right to Rescind: Whether the vendor, who failed to perform the condition within the stipulated period, had the right to unilaterally rescind the contract.
• Effect of Vendee's Tender: Whether the vendee's tender of payment and demand for conveyance prior to the filing of the rescission case affected the vendor's purported right to rescind.

• Nature of the Condition: The obligation to evict squatters was a condition imposed on the vendor's obligation, not on the perfection of the contract. The contract was a perfected contract of sale. The condition's fulfillment was the operative act that would trigger the demandability of the vendee's reciprocal obligation to pay the balance.
• Right to Rescind: The vendor had no right to rescind. Under Article 1545 of the Civil Code, where the obligation of a party is subject to a condition that is not performed, the other party may either refuse to proceed or waive performance of the condition. This option belongs to the non-breaching party—in this case, the vendee. The vendor, being the party who failed, could not invoke rescission. Furthermore, under Article 1191, the power to rescind is given to the injured party, which was the vendee, not the vendor.
• Effect of Vendee's Tender: The vendee's prior tender of payment and demand for execution of the absolute deed of sale effectively waived the condition regarding the squatter eviction period and defeated any argument for rescission based on the vendor's failure.

• Reciprocal Obligations and Conditions in Sales — In a perfected contract of sale, a condition attached to the obligation of one party (e.g., the vendor's duty to deliver a property free of occupants) does not suspend the perfection of the contract but only the demandability of the reciprocal performance. The party who fails to perform the condition cannot rescind; the right to waive the condition or refuse to proceed belongs to the other, non-breaching party (Article 1545, Civil Code).
• Right to Rescind (Resolution) — The right to rescind an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by one party that violates the reciprocity between them. It is granted to the injured or aggrieved party, not to the party who caused the breach.

• "The term 'condition' in the context of a perfected contract of sale pertains, in reality, to the compliance by one party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the reciprocal prestation of the other party." — This clarifies that conditions in a perfected sale relate to the timing of performance, not the contract's existence.
• "Private respondent's failure 'to remove the squatters from the property' within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner and not to private respondent." — This is the core application of Article 1545 to the facts.
• "The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. It is private respondent who has failed in her obligation under the contract. Petitioner did not breach the agreement." — This reinforces that only the injured party may rescind.

• Ang Yu Asuncion, et al. vs. Court of Appeals, 238 SCRA 602 — Cited for the principle that the character of a contract is determined by its substance, not its title, and for the distinction between conditions affecting perfection, obligation, or title passage.
• Intestate Estate of the Late Ricardo P. Presbitero, Sr. v. Court of Appeals, 217 SCRA 372 — Cited in support of the application of Article 1545, where the obligee may waive a condition unperformed by the other party.
• Boysaw v. Interphil. Promotions, Inc., 148 SCRA 635 — Cited for the doctrine that the power to rescind is given to the injured party.

• Article 1545, Civil Code — Applied to grant the vendee the option to either refuse to proceed with the sale or waive the vendor's unperformed condition (squatter eviction), thereby denying the vendor the right to rescind.
• Article 1191, Civil Code — Applied to hold that the right to rescind reciprocal obligations belongs to the injured party, which was the vendee, not the vendor who failed to perform.
• Article 1592, Civil Code — Mentioned in the context that the vendee's tender of payment prior to the demand for rescission would defeat a vendor's right to rescind for non-payment of the price.

• Justice Florentino P. Feliciano
• Justice Flerida Ruth P. Romero
• Justice Jose A. R. Melo
• Justice Artemio V. Panganiban