Vive Eagle Land, Inc. vs. National Home Mortgage Finance Corporation, et al.

A contract to sell is distinguished from a contract of sale by the vendor's express reservation of ownership over the subject property until full payment of the purchase price. In a contract to sell, the vendee's full payment of the price is a positive suspensive condition, and the vendor's failure to pay does not constitute a breach but merely prevents the obligation to convey title from arising. The Court also held that a corporation cannot be bound by the unauthorized acts of its officers, including a grant of moratorium, without board approval, and that the Maceda Law does not apply to transactions involving buyers who are not innocent, low-income purchasers of residential real estate.

Vive Eagle Land, Inc. is a corporation engaged in the realty business, represented by its President, Virgilio O. Cervantes. The National Home Mortgage Finance Corporation (NHMFC) is a government corporation created by virtue of Presidential Decree No. 1267, mandated to operate a secondary market for home mortgages. Cavacon Corporation is a domestic corporation engaged in the business of construction. On November 17, 1999, Vive entered into a Deed of Sale of Rights, Interests, and Participation Over Foreclosed Assets with NHMFC, whereby Vive agreed to purchase NHMFC's rights, interests, and participation in a foreclosed property of Alyansa ng mga Maka-Maralitang Asosasyon at Kapatirang Organisasyon, Inc. (AMAKO) located at Barangay Sta. Catalina, Angeles City, with an area of 73.5565 hectares covered by TCT Nos. 86340 and 86341, for a total purchase price of P40,000,000.00. The property was sold on an "as is-where is" basis pursuant to Board Resolution No. 2391, dated June 23, 1994, and Vive had full knowledge of the nature and extent of NHMFC's rights, including pending litigation involving claims of alleged tenants to the property.

Vive Eagle Land, Inc. (Vive), a corporation engaged in the realty business, filed a complaint on April 18, 2006 against the National Home Mortgage Finance Corporation (NHMFC), its President Joseph Peter S. Sison, and Cavacon Corporation. Vive alleged that on November 17, 1999, it entered into a Deed of Sale of Rights, Interests, and Participation Over Foreclosed Assets with NHMFC, whereby it agreed to purchase NHMFC's rights, interests, and participation in a foreclosed property of Alyansa ng mga Maka-Maralitang Asosasyon at Kapatirang Organisasyon, Inc. (AMAKO) located at Barangay Sta. Catalina, Angeles City, with an area of 73.5565 hectares covered by TCT Nos. 86340 and 86341, for a total purchase price of P40,000,000.00. The price was payable as follows: (1) P8,000,000.00 as 20% downpayment payable in two equal installments, the first due on or before December 4, 1999, and the second from the execution of the Deed of Conditional Sale but no later than January 4, 2000; and (2) the balance of P32,000,000.00 payable in 10 equal installments of P3,200,000.00 each, plus 14% interest per annum, with the first installment due on July 4, 2000 and every 6 months thereafter until fully paid. Vive paid the first installment of the downpayment in the amount of P4,000,000.00 but did not pay the subsequent installments.

Vive claimed it failed to pay because it was prevented from exercising its right to avail of a developmental loan under Section 8 of the Deed of Sale due to issues on the subject property, particularly: (1) the issuance of numerous certificates of land awards over the same; and (2) the classification of the same as agricultural, subjecting it to the coverage of the Comprehensive Agrarian Reform Program (CARP). While awaiting resolution of these issues, Vive requested NHMFC for a moratorium or suspension of the period of payment, waiver of interest, and a 10% reduction of the purchase price. On June 17, 2004, NHMFC's then President, Atty. Angelico T. Salud, initially agreed on the moratorium but advised Vive to submit its request for waiver and interest reduction to NHMFC's Board of Directors. Notwithstanding the agreement, NHMFC, through Sison, notified Vive through a letter dated February 10, 2006 of the rescission/cancellation and/or revocation of the Deed of Sale due to alleged non-payment of the balance of the purchase price, reiterating its decision in another letter dated February 27, 2006.

Vive amended its complaint arguing that without its knowledge and consent, NHMFC and Cavacon, in bad faith, entered into a Memorandum of Agreement on August 7, 2008 by virtue of which NHMFC sold the subject property on an "as is-where is" basis to Cavacon for P35,000,000.00 despite the pendency of the case and Cavacon's knowledge of the prior sale. NHMFC countered that by virtue of Section 5 of the Deed of Sale, it had the right to rescind the Deed of Sale due to Vive's continuous failure to pay the purchase price and to thereafter freely dispose of the subject property as if the Deed of Sale had never been made. The RTC Branch 138 dismissed Vive's complaint, finding the rescission valid. On Vive's motion, the Presiding Judge inhibited himself and ordered re-raffling. The case was raffled to RTC Branch 133, which granted Vive's motion for reconsideration, declaring null and void NHMFC's rescission, declaring Vive as owner of the property, and ordering NHMFC to pay attorney's fees and litigation expenses. Vive tendered the second installment of the downpayment to NHMFC, which refused to accept. On NHMFC's motion, the Presiding Judge of Branch 133 voluntarily inhibited himself, and the case was raffled to RTC Branch 139, which granted NHMFC's motion for reconsideration and reinstated the RTC Branch 138 Decision.

The Court of Appeals affirmed the RTC Branch 139 Order, holding that Vive's failure to pay the purchase price was an event of default giving NHMFC the right to annul/cancel the contract pursuant to Section 5 thereof, and that Section 7 of the Deed of Sale showed the parties intended a contract to sell or conditional sale. The appellate court also rejected Vive's contention that a moratorium was granted, finding nothing in the records to indicate that the NHMFC Board of Directors approved Atty. Salud's undertaking.

• Nature of the Contract: Vive argued that the Deed of Sale was a valid contract of sale which absolutely transferred to Vive all of NHMFC's rights, interests, and participation over the property, and that the absence of a provision requiring NHMFC to execute a Deed of Absolute Sale indicated no intention to retain ownership by NHMFC.
• Suspension of Payments: Vive argued that even assuming the Deed of Sale was a contract to sell, it was never in default because further payments were suspended pending resolution of the issues affecting the property, and that NHMFC's failure to assist with litigation prevented Vive from obtaining a loan, invoking Article 1186 of the Civil Code on constructive fulfillment of conditions.
• Moratorium: Vive argued that it was validly granted a moratorium as evidenced by Atty. Salud's June 17, 2004 letter, which stated "In line with our discussion, we initially agreed for a moratorium on the collection period," and that only the request for discount and waiver of interests required board approval.
• Estoppel and Apparent Authority: Vive argued that NHMFC was estopped from denying the moratorium's validity due to its silence and inaction, and that Atty. Cacal's knowledge as Senior Vice-President, Corporate Legal Counsel, and Board Secretary constituted knowledge of NHMFC, citing Francisco vs. Government Service Insurance System.
• Maceda Law: Vive argued for the first time in its Motion for Reconsideration that the Deed of Sale remained valid and subsisting because NHMFC failed to comply with the mandatory twin requirements of a notarized notice of cancellation and a refund of the cash surrender value under Republic Act No. 6552 (Maceda Law).
• Mutual Restitution: Vive argued that even assuming the rescission was valid, the lower courts should have ordered mutual restitution and that NHMFC should not benefit from Vive's efforts to cleanse the title of the property from adverse claims.

• Nature of the Contract: Respondents NHMFC and Cavacon maintained that the Deed of Sale was a conditional sale or contract to sell, as expressly stipulated in Vive's Offer to Purchase, and that the original duplicate copies of the titles were not delivered to Vive.
• No Valid Moratorium: Respondents insisted that there was no valid moratorium because Atty. Salud did not secure prior board approval, and that the grant could not extend beyond the end of the term on January 4, 2005, or until resolution of the legal issues, as this would make the terms of payment indefinite in contravention of Article 1182 of the Civil Code.
• No Apparent Authority: Respondents rejected Vive's invocation of apparent authority, equitable estoppel, and laches, arguing that the government is not bound by unauthorized acts of its agent, and that Vive failed to adduce evidence showing NHMFC clothed Atty. Salud with apparent power to grant the moratorium.
• Valid Rescission: Respondents asseverated that the Deed of Sale was validly rescinded on the ground of substantial violation of the terms thereof, and that Vive could not unilaterally make its principal obligation to pay conditional on the resolution of the issues affecting the properties.
• Maceda Law Inapplicable: Respondents alleged that the Maceda Law was inapplicable because it covers transactions where the buyer has paid at least 2 years of installments, and here Vive only paid the first installment of P4 million.
• Good Faith in MOA: Respondents argued that the MOA was entered into in good faith, citing the RTC Branch 139 ruling that Cavacon disclosed the MOA in its Answer to Vive's Amended Complaint, and that Vive failed to present evidence showing when respondents became aware of the Court's decision resolving the legal issues.

• Nature of the Contract: Whether the Deed of Sale of Rights, Interests, and Participation Over Foreclosed Assets dated November 17, 1999 was a contract to sell or a contract of sale.
• Default and Moratorium: Whether Vive was in default in its payment obligations, considering the alleged moratorium on the collection of the balance of the purchase price.
• Validity of Rescission: Whether NHMFC validly rescinded the Deed of Sale, or whether there was no substantial breach thereof.
• Validity of the MOA: Whether the Memorandum of Agreement dated August 7, 2008 between NHMFC and Cavacon was valid and not entered into in bad faith.
• Applicability of the Maceda Law: Whether Republic Act No. 6552 (Maceda Law) applies to the contract to sell between the parties.
• Mutual Restitution: Whether the lower courts should have ordered mutual restitution in favor of Vive.

• Nature of the Contract: No. The Deed of Sale was a contract to sell, not a contract of sale, because Section 7 thereof expressly reserved title and ownership in NHMFC's name pending Vive's full payment of the purchase price.
• Default and Moratorium: Yes. Vive was in default, and the alleged moratorium was not binding on NHMFC because it was granted by Atty. Salud without prior board approval, and the doctrine of apparent authority did not apply.
• Validity of Rescission: Yes. NHMFC validly rescinded the Deed of Sale due to Vive's failure to pay the purchase price, which constituted an event of default under Section 5 of the contract.
• Validity of the MOA: Yes. The MOA between NHMFC and Cavacon was valid, as NHMFC was merely acting in accordance with the provisions of the contract to sell, having every right to dispose of the property as if the sale to Vive was never executed.
• Applicability of the Maceda Law: No. The Maceda Law does not apply to the contract to sell because Vive is not the "innocent, low-income buyer" that the law was enacted to protect, and NHMFC is not the "real estate developer" that the law intends to regulate.
• Mutual Restitution: No. Vive expressly waived all rights to demand the return of amounts paid, and there was no proof of NHMFC's bad faith in selling the property to Cavacon.

• Nature of the Contract: The Court sustained the appellate court's finding that the agreement was a contract to sell. A contract to sell is a bilateral contract whereby the prospective seller, while expressly reserving ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the latter upon fulfillment of the conditions agreed upon, i.e., full payment of the purchase price. Section 7 of the Deed of Sale provided that "Upon full payment by the VENDEE of the sales price of the rights, interest and participations in the property and other sums due, the VENDOR shall execute a Certificate of [full payment] and deliver the Duplicate Original Transfer Certificate of Title Nos. 86340 and 86341 to the VENDEE." This clearly showed NHMFC expressly reserved title and ownership pending full payment. The Court rejected Vive's argument based on the "SELLS, TRANSFERS and CONVEYS" language, noting that the phrase "subject to the following terms and conditions" was omitted from Vive's citation, and that contracts must be read in their totality. The Court also noted that the parties' use of the term "rescission" was immaterial, as "a contract is what the law defines it to be and not what the contracting parties call it."
• Default and Moratorium: The Court held that Vive was aware of the nature of the property it was purchasing, as the contract explicitly stated that Vive had "full knowledge of the nature and extent of the VENDOR's rights, interests, and participation over the foreclosed property subject of this contract including pending litigation involving claims of alleged tenants to the property." Vive could not blame NHMFC or the issues affecting the property for its failure to pay. As for the alleged moratorium, the Court held that a juridical entity cannot act or give its consent except through its board of directors as a collective body, pursuant to Section 23 of the Corporation Code. Without a board resolution authorizing Atty. Salud to grant a moratorium, NHMFC was not bound. The doctrine of apparent authority did not apply because Vive failed to prove that NHMFC clothed Atty. Salud with apparent power to grant the moratorium, and the execution of the Deed of Sale was accomplished by NHMFC's then President Augusto A. Legasto, Jr., not Atty. Salud. The Court also rejected the argument that Atty. Cacal's knowledge constituted knowledge of NHMFC, citing University of Mindanao, Inc. vs. Bangko Sentral ng Pilipinas, which held that knowledge should be actually communicated to the corporation through its authorized representatives. The Court distinguished Francisco vs. Government Service Insurance System, noting that unlike GSIS, NHMFC never accepted any form of payment from Vive in furtherance of the alleged amended contract.
• Validity of Rescission: The Court held that Vive's failure to pay the stipulated amounts constituted an event of default under Section 5 of the contract, which gave NHMFC the right to: (1) annul and cancel the contract; (2) dispose of the property as if the contract was never executed; and (3) treat the sums of money paid by Vive as rentals for the latter's use and occupancy thereof. Vive consciously and categorically waived any and all rights to demand the return of the sums of money it paid.
• Validity of the MOA: The Court held that since NHMFC validly cancelled the contract to sell, it was within its rights to sell the property to Cavacon, citing Spouses Garcia vs. Court of Appeals, where the seller was within her rights to sell the subject lands to another buyer as a result of the buyers' failure to pay the balance of the purchase price.
• Applicability of the Maceda Law: The Court held that the Maceda Law argument was raised for the first time in Vive's Motion for Reconsideration before the Supreme Court, which is barred by the rudimentary principle that matters neither alleged in the pleadings nor raised during the proceedings below cannot be ventilated for the first time on appeal. Even if given due course, the Maceda Law does not apply. Citing Active Realty Development Corporation vs. Daroya, the Court noted that the declared policy of the Maceda Law is to protect innocent, low-income buyers of real estate from exploitative and onerous installment schemes of private housing developers. The contract before the Court was between Vive, a corporation engaged in the realty business, and NHMFC, a government corporation, and was not the kind of onerous contract of adhesion under the Maceda Law. Vive was not the "innocent, low-income buyer" the law was enacted to protect, and NHMFC was not the "real estate developer" the law intends to regulate.
• Mutual Restitution: The Court held that there was no proof of NHMFC's bad faith in allegedly waiting for the resolution of the legal issues before selling the property to Cavacon, and that the contract's clear provisions showed Vive waived all rights to demand the return of amounts paid.

• Contract to Sell vs. Contract of Sale — In a contract of sale, title to the property passes to the vendee upon delivery of the thing sold, and the vendee's non-payment of the price is a negative resolutory condition. In a contract to sell, ownership is, by agreement, retained by the vendor and is not to pass to the vendee until full payment of the purchase price; the vendee's full payment of the price is a positive suspensive condition. In a contract to sell, the fulfillment of the suspensive condition will not automatically transfer ownership to the buyer although the property may have been previously delivered to him; the prospective seller still has to convey title by entering into a contract of absolute sale. The Court applied this doctrine in finding that Section 7 of the Deed of Sale, which required NHMFC to deliver the titles only upon full payment, made the agreement a contract to sell.
• Corporate Power Exercised Through the Board of Directors — A juridical entity cannot act or give its consent except through its board of directors as a collective body, which is vested with the power and responsibility to decide whether the corporation should enter into a contract that will bind the corporation, subject to the Articles of Incorporation, By-Laws, or relevant provisions of law. Without delegation by the board of directors or trustees, acts of a person — including those of the corporation's directors, trustees, shareholders, or officers — executed on behalf of the corporation are generally not binding on the corporation. The Court applied this doctrine in holding that Atty. Salud's grant of moratorium was not binding on NHMFC without board approval.
• Doctrine of Apparent Authority — Apparent authority is a species of the doctrine of estoppel, resting on the rule that when a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it. The Court held that the doctrine did not apply because Vive failed to prove that NHMFC clothed Atty. Salud with apparent power to grant the moratorium.
• Knowledge of Corporate Officer as Knowledge of Corporation — Knowledge of an officer is considered knowledge of the corporation only when the officer is acting within the authority given to him or her by the corporation. Knowledge should be actually communicated to the corporation through its authorized representatives, and a corporation cannot be expected to act or not act on knowledge that had not been communicated to it through an authorized representative. The Court applied this doctrine in rejecting Vive's argument that Atty. Cacal's alleged knowledge constituted knowledge of NHMFC.
• Maceda Law (Realty Installment Buyer Act) — The declared policy of the Maceda Law is to protect innocent, low-income buyers of real estate who are eager to acquire property upon which to build their homes from the exploitative and onerous installment schemes of private housing developers. The law does not apply to transactions where the buyer is not an innocent, low-income buyer, or where the seller is not a real estate developer. The Court applied this doctrine in holding that the Maceda Law was inapplicable to the contract between Vive, a realty corporation, and NHMFC, a government corporation.

• "A contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the latter upon his fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or compliance with the other obligations stated in the contract to sell." — This passage defines the controlling doctrine distinguishing a contract to sell from a contract of sale and is the ratio decidendi for the Court's finding on the nature of the agreement.
• "It is a fundamental principle in corporate law that a juridical entity cannot act or give its consent except through its board of directors as a collective body, which is vested with the power and responsibility to decide whether the corporation should enter into a contract that will bind the corporation, subject to the Articles of Incorporation, By-Laws, or relevant provisions of law." — This passage states the corporate law principle applied to hold that Atty. Salud's grant of moratorium was not binding on NHMFC without board approval.
• "The Maceda law was enacted to remedy the plight of low and middle-income lot buyers, save them from the exacting default clauses in real estate sales, and assure them of a home they can call their own." — This passage articulates the policy behind the Maceda Law and supports the Court's conclusion that the law is inapplicable to the transaction between Vive and NHMFC.
• "It is an established principle in law that a contract is what the law defines it to be and not what the contracting parties call it." — This passage states the principle that courts are not bound by the parties' characterization of their contract, which the Court applied in disregarding the parties' use of the term "rescission."

• Villamil vs. Spouses Erguiza, G.R. No. 195999, June 20, 2018 — Cited as authority for the definition of a contract to sell and its distinction from a conditional contract of sale.
• Danan vs. Spouses Serrano, 792 Phil. 37 (2016) — Cited for the rule distinguishing between a contract of sale and a contract to sell, particularly regarding when title passes to the vendee.
• Francisco vs. Government Service Insurance System, 117 Phil. 586 (1963) — Cited by Vive for the rule that knowledge of facts acquired by an officer or agent of a corporation in relation to matters within the scope of his authority is notice to the corporation. Distinguished by the Court because, unlike GSIS, NHMFC never accepted any form of payment from Vive in furtherance of the alleged amended contract.
• University of Mindanao, Inc. vs. Bangko Sentral ng Pilipinas, 776 Phil. 401 (2016) — Cited for the principles that a corporation cannot be bound by unauthorized actions made on its account, that knowledge should be actually communicated to the corporation through its authorized representatives, and that ratification requires actual communication.
• Active Realty & Development Corp. vs. Daroya, 431 Phil. 753 (2002) — Cited for the declared policy of the Maceda Law and the definition of the class of buyers it seeks to protect.
• Spouses Garcia, et al. vs. Court of Appeals, et al., 633 Phil. 294 (2010) — Cited for the ruling that the Maceda Law does not apply to lands that do not comprise residential real estate within the contemplation of the law, and that the seller was within her rights to sell the property to another buyer upon the buyers' failure to pay.
• Spouses Dela Cruz vs. Court of Appeals, 485 Phil. 168 (2004) — Cited for the ruling that the Maceda Law does not govern a contract to sell that is not between a subdivision owner or developer and a buyer.
• Ayala Land, Inc. vs. ASB Realty Corporation, et al., G.R. No. 210043, September 26, 2018 — Cited for the principle that a juridical entity cannot act or give its consent except through its board of directors.
• Ejercito vs. Hon. Commission on Elections, et al., 748 Phil. 205 (2014) — Cited for the principle that matters neither alleged in the pleadings nor raised during the proceedings below cannot be ventilated for the first time on appeal.
• The Wellex Group, Inc. vs. U-Land Airlines, Co., Ltd., 750 Phil. 530 (2015) — Cited for the cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.

• Section 7, Deed of Sale — Provided that upon full payment by the vendee of the sales price, the vendor shall execute a Certificate of Full Payment and deliver the Duplicate Original Transfer Certificate of Title Nos. 86340 and 86341 to the vendee. The Court applied this provision to find that the agreement was a contract to sell, as NHMFC expressly reserved title pending full payment.
• Section 5, Deed of Sale — Provided that upon the occurrence of an event of default, NHMFC shall have the right to declare the contract annulled/cancelled, dispose of the property as if the Deed of Sale had never been made, and treat the sums of money paid as rentals for the occupancy and use of the property, with the vendee waiving all rights to demand the return thereof. The Court applied this provision to uphold the validity of NHMFC's rescission and the subsequent sale to Cavacon.
• Section 23, Corporation Code — Provides that the corporate powers of all corporations formed under the Code shall be exercised, all business conducted, and all property controlled and held by the board of directors or trustees. The Court applied this provision in holding that Atty. Salud's grant of moratorium was not binding on NHMFC without board approval.
• Article 1186, Civil Code — Provides that a condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Cited by Vive in arguing constructive fulfillment of its obligation, but the Court did not apply it because Vive was aware of the property's condition and could not blame NHMFC for its failure to pay.
• Article 1182, Civil Code — Provides that when the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. Cited by respondents to argue that the alleged moratorium could not extend indefinitely.
• Article 1431, Civil Code — Provides that through estoppel, an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. The Court discussed this provision in the context of the doctrine of apparent authority.
• Article 428, Civil Code — Provides that ownership includes the right to enjoy and dispose of a thing owned without other limitations than those established by law. The Court cited this provision in noting that if NHMFC had absolutely parted with ownership, it should no longer have any business with Vive's decisions relating to the property.
• Republic Act No. 6552 (Maceda Law), Sections 3 and 4 — Provides for the rights of buyers who have paid at least two years of installments and the requirements for cancellation of contracts where less than two years of installments were paid. The Court held that the law was inapplicable to the contract between Vive and NHMFC.

Leonen, A. Reyes, Jr., Hernando, and Inting, JJ., concurred.