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G.R. No. 123672: Fernando Carrascoso, Jr. v. Court of Appeals and Lauro Leviste
December 14, 2005. 477 scra 666
Contract to Sell vs Contract of Sale

In March 1972, El Dorado Plantation Inc, through board member Lauro Leviste, executed a
Deed of Sale with Carrascoso. The subject of the sale was a 1825 hectare of land. It was
agreed that Carrascoso is to pay P1.8M. P290K would be paid by Carrascoso to PNB to settle
the mortgage placed on the said land. P210k would be paid directly to Leviste. The balance of
P1.3M plus 10% interest would be paid over the next 3 years at P519k every 25th of March.
Leviste also assured that there were no tenants hence the land does not fall under the Land
Reform Code. Leviste allowed Carrascoso to mortgage the land which the latter did.

Carrascoso obtained a total of P1.07M as mortgage and he used the same to pay the down
payment agreed upon in the contract. Carrascoso defaulted from his obligation which was
supposed to be settled on March 25, 1975. Leviste then sent him letters to make good his end
of the contract otherwise he will be litigated.

In 1977, Carrascoso executed a Buy and Sell Contract with PLDT. The subject of the sale was
the same land sold to Carrascoso by Leviste but it was only the 1000 sq m portion thereof. The
land is to be sold at P3M. Part of the terms and conditions agreed upon was that Carrascoso is
to remove all tenants from the land within one year. He is also given a 6 month extension in
case he’ll need one. Thereafter, PLDT will notify Carrascoso if whether or not PLDt will finalize
the sale. PLDT gained possession of the land.

El Dorado filed a civil case against Carrascoso. PLDT intervened averring that it was a buyer in
good faith. The RTC ruled in favor of Carrascoso. CA reversed the RTC ruling.

ISSUE: What is the nature of each contract?

HELD: The contract executed between El Dorado and Carrascoso was a contract of sale. It was
perfected by their meeting of the minds and was consummated by the delivery of the property to
Carrascoso. However, El Dorado has the right to rescind the contract by reason of Carrascoso’s
failure to perform his obligation.

A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership
of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in
money or its equivalent. The non-payment of the price by the buyer is a resolutory condition
which extinguishes the transaction that for a time existed, and discharges the obligations
created thereunder. Such failure to pay the price in the manner prescribed by the contract of
sale entitles the unpaid seller to sue for collection or to rescind the contract.

The contract between Carrascoso and PLDT is a contract to sell. This is evidenced by the terms
and conditions that they have agreed upon that after fulfillment of Carrascoso’s obligation PLDT
has “to notify Carrascoso of its decision whether or not to finalize the sale.”

Carrascoso also averred that there was a breach on El Dorado’s part when it comes to
warranty. Carrascoso claimed that there were tenants on the land and he spent about P2.9M
relocating them. The SC ruled that Carrascoso merely had a bare claim without additional proof
to support it.

Requisites of Express warranty in a Contract of Sale

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(1) the express warranty must be an affirmation of fact or any promise by the seller relating to
the subject matter of the sale;
(2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the
thing; and
(3) the buyer purchases the thing relying on such affirmation or promise thereon.