Wrong premise
Being a consensual contract, sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon its price or consideration. Failure to pay the consideration does not prevent the existence of a valid contract but only results in the right to demand the fulfillment or cancellation of the obligation under the contract. This is different from lack of consideration which renders the contract inexistent or null and void ab initio. This is illustrated in this case between Mike and RTR.
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Unfortunately, no payment of the stipulated purchase price has been made by Mike. Neither was he able to assume the mortgage because of the subsequent disapproval of the security finance needed for such assumption. Despite demands, Mike was still not able to pay the stipulated price so RTR filed a suit in court seeking the issuance of a writ of replevin to take possession of the buses already delivered and praying for judgment declaring it as the lawful owner/possessor of said buses and ordering Mike to remit the income generated by the buses from the time he got delivery of them and operated them as unpaid rentals for their use.
After trial the trial court upheld the right of RTR to possess the two buses but dismissed the claim for unpaid rentals for the use of the two buses. The Court of Appeals (CA) on appeal sustained the lower court’s finding that ownership over the passenger buses remained with RTR because the Deed of Sale was not perfected. It said that the non-perfection of the Deed of Sale precluded Mike from possessing and enjoying the buses so it also ordered Mike to remit the income derived from the said buses. Was the CA correct?
The CA is correct in its conclusion but wrong in its premises. It erred in stating that the deed of sale was not perfected. It was perfected although there was no consummation. Contracts like sale are perfected by mere consent which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which constitute the contract. Once perfected, they bind the parties and the obligation arising there from have the force of law between them and should be complied with in good faith. In sale reciprocal obligations arise whereby the seller obligates himself to transfer ownership of and deliver a determinate thing to the buyer who, in turn, is obligated to pay a price certain in money or its equivalent. Failure of either party to comply with his obligation entitles the other to rescission as the power to rescind is implied in reciprocal obligations.
In this case, the sale was already perfected but there was failure on the part of Mike to pay the purchase price and to complete the assumption of mortgage. Failure to pay the consideration is different from lack of consideration. It merely results in a right to demand the fulfillment or cancellation of the obligation. Non-payment of the purchase price of the property object of the sale constitutes a very good ground to rescind or cancel the sale for it violates its very essence. While the action of RTR is for recovery of possession or replevin, the allegations of its complaint make out a case for rescission for failure of Mike to pay the full purchase price.
A necessary consequence of rescission is restitution or return of the property delivered and sold with payment of damages. Hence Mike is also liable to pay damages in the form of reasonable rentals for the use of the passenger buses (Macasaet vs. R Transport Corp. G.R. 172446,
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