In a contract to sell, failure to fully pay the stipulated price is a question of fact that generally cannot be reviewed by the Supreme Court under Rule 45 of the Rules of Court. The Supreme Court held that the petitioner failed to prove full payment, thus upholding the rescission of the Contract to Sell. This decision emphasizes the importance of providing solid evidence of payment in contractual agreements and highlights the consequences of failing to meet one’s obligations. Such failure can lead to the contract’s rescission and forfeiture of payments already made.

Disputed Payments: When a Contract to Sell Turns Sour

This case revolves around a Contract to Sell executed in January 1994 between Jallaludin Abdulrahman Gulam (petitioner) and Spouses Catalino and Ricarda Santos (respondents). The respondents agreed to sell a 72-square meter parcel of land with a two-story townhouse in Sampaloc, Manila, to the petitioner for P1,700,000.00. The payment terms were structured with initial payments due during construction and a final payment upon completion, after which a deed of sale would be executed. A dispute arose when the petitioner claimed to have fully paid the contract price, including taxes, totaling P2,050,000.00, while the respondents asserted that the petitioner had only paid P1,000,000.00 plus a P50,000.00 reservation fee. This discrepancy led to a legal battle, with the petitioner seeking specific performance and the respondents counter-claiming for rescission of the contract.

The Regional Trial Court (RTC) ruled in favor of the respondents, dismissing the petitioner’s complaint and ordering the rescission of the Contract to Sell. The RTC found that the petitioner had failed to prove full payment of the agreed price. This decision was based on the RTC’s assessment of the evidence presented, including receipts, checks, and testimonies. The RTC particularly noted the questionable authenticity of a receipt for P500,000.00, which the petitioner claimed was part of the payment. The Court of Appeals (CA) affirmed the RTC’s decision, modifying only the amount of damages awarded. The CA also highlighted the petitioner’s failure to comply with his obligations under the contract, further solidifying the decision to rescind the agreement.

The petitioner then elevated the case to the Supreme Court, raising several errors allegedly committed by the lower courts. However, the Supreme Court found that the issues raised by the petitioner were primarily questions of fact, which are not within the purview of a Rule 45 petition. According to the Supreme Court in Air Philippines Corporation v. International Business Aviation Services Philippines, Inc., “only questions of law may be raised therein.” The principal issue was whether the petitioner had fully paid the stipulated price, a factual matter that had already been thoroughly examined by the RTC and the CA.

The Supreme Court emphasized that it is not its role to re-evaluate the evidence presented before the lower courts, especially when the factual findings of both courts are consistent. The Court reiterated the exceptions to this rule, such as when the factual findings of the Court of Appeals and the trial court are contradictory, or when the findings are based on speculation or a misapprehension of facts. However, none of these exceptions were found to be applicable in this case. The court stated that:

Moreover, the Court finds no plausible reason to analyze and weigh all over again the evidence already considered by the RTC and the CA, especially since these findings are not tainted with any capriciousness or palpable error. The rule is that where the factual findings of both courts are in accord, the same are binding on this Court.

The RTC had carefully scrutinized the evidence, including testimonial and documentary evidence, to determine the veracity of the petitioner’s claim of overpayment. The RTC found that the petitioner failed to provide credible evidence to support his claim. The alleged receipt for P500,000.00, purportedly signed by respondent Ricarda Santos, was deemed unreliable. The RTC noted that Santos denied providing a specimen signature for comparison and that the PNP Crime Laboratory concluded that the documents were written by two different persons. Furthermore, the RTC considered the two letters sent by petitioner’s wife to Santos admitting a balance of P446,036.00. These findings led the RTC to conclude that the petitioner had not fully paid the purchase price.

The CA upheld the RTC’s findings, stating that the receipt dated March 9, 1994, was a forgery. The CA also agreed that the respondents were entitled to rescind the Contract to Sell due to the petitioner’s failure to fulfill his contractual obligations. The court found that the petitioner had only paid P1,100,000.00, leaving a significant unpaid balance. Thus, the CA held that:

Correspondingly, appellees are entitled to avail of the provisions of Article 1191 of the Civil Code, which authorizes an injured party in a reciprocal obligation to rescind an obligation to be decreed by the court, in case one of the obligors should not comply with what is incumbent upon him. Surely, the introduction of forged documents can be considered a significant breach in the reciprocal obligation as would warrant the resolution of the contract.

The Supreme Court also addressed the petitioner’s argument that the CA erred in considering his testimony regarding payments made by his wife as hearsay. The Court acknowledged that while the petitioner’s statements could be considered independently relevant statements, their admissibility did not equate to their weight and sufficiency. According to the Rules of Court, Rule 130, Section 36, a witness can only testify to facts derived from personal knowledge.

The Court pointed out that the RTC and the CA had refused to give credence to the petitioner’s testimony, and the Supreme Court found no reason to question their assessments. Despite the testimony of the petitioner’s wife, Norhaya, the courts found her testimony unconvincing. The courts gave more weight to the testimony of the PNP Crime Laboratory Document Examiner, who concluded that the signature on the contested receipt was not made by respondent Santos. The Supreme Court deferred to the lower courts’ assessment of the witnesses’ credibility, noting that the trial court is in the best position to observe the witnesses’ demeanor and conduct.

In sum, the Supreme Court’s decision underscores the importance of fulfilling contractual obligations and providing credible evidence of payment. The petitioner’s failure to prove full payment led to the rescission of the Contract to Sell and the forfeiture of payments already made. This case serves as a reminder of the legal consequences of breaching a contract and the necessity of maintaining accurate records of all transactions.

FAQs

What was the key issue in this case?	The central issue was whether the petitioner had fully paid the stipulated price under the Contract to Sell, entitling him to the execution of a final deed of sale. This involved determining if the petitioner provided sufficient evidence of payment to fulfill his contractual obligations.
What is a Contract to Sell?	A Contract to Sell is an agreement where the seller promises to sell a property to the buyer upon full payment of the purchase price. Ownership is retained by the seller until the buyer completes all payments, at which point a final deed of sale is executed.
What is rescission of a contract?	Rescission is a legal remedy that cancels a contract, restoring the parties to their original positions before the contract was entered into. It is typically granted when one party fails to fulfill their obligations, such as non-payment in a Contract to Sell.
What type of evidence did the petitioner present to prove payment?	The petitioner presented checks, private receipts, and his own testimony, as well as the testimony of his wife. He claimed these documents and testimonies showed that he had overpaid for the property, entitling him to a final deed of sale.
Why did the courts reject the petitioner’s evidence?	The courts found the petitioner’s evidence unreliable, particularly a receipt for P500,000.00 that was deemed a forgery. The courts also noted inconsistencies in the petitioner’s claims and gave more weight to the respondents’ evidence and the findings of the PNP Crime Laboratory.
What is the hearsay rule, and how did it apply in this case?	The hearsay rule prevents a witness from testifying about statements made outside of court to prove the truth of the matter asserted. The court found that the petitioner’s testimony about payments made by his wife was hearsay because he lacked personal knowledge of those payments.
What is the significance of the Supreme Court’s reliance on the lower courts’ findings?	The Supreme Court generally does not re-evaluate factual findings already established by the lower courts, especially when those findings are consistent. This deference is based on the principle that trial courts are in the best position to assess the credibility of witnesses and evaluate evidence.
What was the final outcome of the case?	The Supreme Court denied the petition and affirmed the decisions of the Court of Appeals and the Regional Trial Court. The Contract to Sell was rescinded, and the payments made by the petitioner were forfeited in favor of the respondents.
What can be learned from this case?	This case highlights the importance of maintaining accurate records of payments and fulfilling contractual obligations. It also underscores the need to present credible evidence in legal disputes and the potential consequences of failing to do so, including rescission and forfeiture.

This case underscores the critical importance of meticulous record-keeping and the presentation of credible evidence in contractual disputes. The failure to substantiate claims of payment can result in severe legal repercussions, including the rescission of contracts and the forfeiture of substantial sums. Businesses and individuals alike must ensure that all transactions are thoroughly documented to safeguard their interests and uphold their contractual obligations.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Gulam v. Santos, G.R. No. 151458, August 31, 2006