In the case of Lily S. Villamil v. Spouses Juanito Erguiza, the Supreme Court addressed a dispute over a contract to sell, focusing on the principle of constructive fulfillment. The Court ruled that when a seller prevents a condition necessary for the completion of the sale, that condition is considered fulfilled. This means the buyer is entitled to the property, even if the condition wasn’t technically met, protecting the buyer’s rights and promoting fairness in real estate transactions. The decision emphasizes the responsibility of sellers to act in good faith and not obstruct the fulfillment of contractual obligations.

Can a Seller Benefit from Preventing a Sale Condition?

The case revolves around a parcel of land in Dagupan City, originally co-owned by Lily Villamil and her siblings. In 1972, they entered into an agreement with Spouses Juanito and Mila Erguiza to sell the land. The agreement stipulated that a portion of the purchase price would be paid upfront, and the remainder would be due upon the court’s approval of the sale, as some of the co-owners were minors. However, Villamil and her siblings never actually filed a petition to secure this court approval. Instead, Villamil consolidated ownership of the land in her name. Years later, Villamil sought to recover possession of the property, claiming that the Erguizas had failed to pay the remaining balance and that the agreement had effectively converted into a lease.

The central legal question was whether the failure to obtain court approval excused the Erguizas from paying the balance, or whether Villamil’s actions in preventing the condition from being met should be considered as constructive fulfillment, obligating her to proceed with the sale. This hinges on the legal principle of **constructive fulfillment of a condition**, as outlined in Article 1186 of the Civil Code, which states: “The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.”

To fully understand the court’s ruling, it’s vital to examine the nature of the original agreement. The court determined that the agreement was a **contract to sell**, not a contract of sale. In a contract to sell, ownership is retained by the seller until the full purchase price is paid, whereas, in a contract of sale, ownership transfers upon delivery of the property. The agreement in this case contained elements indicative of a contract to sell, primarily the express reservation of ownership by Villamil and her siblings and the dependence of the final sale on court approval.

Building on this principle, the court analyzed whether the condition of obtaining court approval had been met or constructively fulfilled. Villamil argued that the Erguizas’ failure to pay the balance justified her claim for recovery of possession. However, the court found that Villamil had prevented the fulfillment of the condition by failing to file the necessary petition for court approval and by consolidating ownership in her name. Therefore, the principle of constructive fulfillment applied.

The court emphasized that the **intent to prevent fulfillment** and the **actual prevention** are the two requisites for the application of Article 1186. Villamil’s actions clearly demonstrated both. Her failure to seek court approval and her consolidation of ownership directly prevented the condition from being met. Because of this, the court ruled that Villamil could not benefit from the non-fulfillment of a condition that she herself had prevented.

“Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.”

The court also addressed Villamil’s argument that the agreement had converted into a lease due to the non-fulfillment of the condition. The agreement stated that if the court disapproved the sale, the initial payment would be considered rent for twenty years. However, the court rejected this argument, noting that no petition had ever been filed, and thus, there was no disapproval to trigger the conversion to a lease. The Erguizas, therefore, remained prospective buyers, awaiting Villamil’s fulfillment of her obligation to execute a deed of sale.

This case highlights the importance of good faith in contractual obligations. Sellers cannot prevent the fulfillment of conditions and then benefit from their non-fulfillment. The principle of constructive fulfillment ensures fairness and prevents parties from unjustly enriching themselves by obstructing the agreed-upon terms. The spouses Erguiza had the right to possess the property since they were only awaiting for the fulfillment of Villamil to execute a deed of sale.

The ruling underscores that Villamil had a positive duty to inform the Erguizas that she could no longer fulfill the condition of court approval and that she must give them the choice to waive the condition or continue with the agreement. Her failure to do so further solidified the court’s finding that she had acted in a manner that prevented the sale from being completed. Thus, the court ultimately ruled in favor of the Erguizas, affirming their right to possess the property.

FAQs

What was the key issue in this case?	The key issue was whether the seller could claim non-fulfillment of a condition in a contract to sell when she herself prevented the fulfillment of that condition.
What is a contract to sell?	A contract to sell is an agreement where the seller reserves ownership of the property until the buyer has fully paid the purchase price.
What is constructive fulfillment of a condition?	Constructive fulfillment means that a condition is deemed to have been met if the party obligated to fulfill it intentionally prevents it from happening.
What did the Supreme Court decide?	The Supreme Court ruled that the seller, Lily Villamil, could not claim non-fulfillment of the condition because she had prevented it from being fulfilled, entitling the buyers to the property.
What is the relevance of Article 1186 of the Civil Code?	Article 1186 states that a condition is deemed fulfilled when the obligor voluntarily prevents its fulfillment, which was the legal basis for the Court’s decision.
Did the agreement turn into a lease?	No, the agreement did not turn into a lease because the condition that would have triggered the conversion (court disapproval of the sale) never occurred.
What was the seller’s main failure in this case?	The seller failed to seek court approval for the sale and also failed to inform the buyers that the condition could no longer be met due to her actions.
What right did the buyers have to the property?	The buyers had the right to possess the property while awaiting the seller’s fulfillment of her obligation to execute a deed of sale.

This case serves as a reminder of the importance of acting in good faith and fulfilling contractual obligations. Parties cannot prevent conditions from being met and then use that non-fulfillment to their advantage. The Supreme Court’s decision protects buyers’ rights and ensures fairness in real estate transactions.

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: LILY S. VILLAMIL v. SPOUSES JUANITO ERGUIZA, G.R. No. 195999, June 20, 2018