NATALIA P. BUSTAMANTE vs. SPOUSES RODITO F. ROSEL and NORMA A. ROSEL G. R. No. 126800. November 29, 1999 Pardo.

J. FACTS: The petitioners herein borrowed a sum of money from the respondents through a loan which stipulated, among others, that: a certain parcel of land of the petitioners will be collateral; and that the lender (respondents) has the option to purchase the collateral lot for P 200,000.00 , inclusive of the amount and interest therein. When the loan was about to mature on March 1, 1989, respondents proposed to buy at the pre-set price of P200,000.00, the seventy (70) square meters parcel of the land. This was refused by the petitioners, together with the request of the petitioners to extend the period of payment. The petitioners offered another land instead, with the consideration that the borrowed amount as down payment. The lender refused to accept payment upon being offered by the petitioners and insisted that the collateral be sold to them. The petitioners deposited the amount to the trial court instead, showing their desire to pay. The trial court Denied the execution of the Deed of Sale and just ordered the payment of the loan with interest. This was REVERSED by the Court of Appeals hence this petition. ISSUE: Whether or not the Deed of Sale can be executed considering the conditions stipulated in the loan. HELD: No, it cannot be executed. The sale of the collateral is an obligation with a suspensive condition. It is dependent upon the happening of an event, without which the obligation to sell does not arise as provided in Article 1181 of the Civil Code. The event that is to be based upon is the non-payment of the petitioners. This did not happen because the petitioner tendered payment at the due date which respondents refused to accept, insisting that petitioner sell to them the collateral of the loan. Upon such refusal, they deposited the amount in the trial court showing their intention to pay. A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor to acquire the property given as security for the loan. This stipulation is embraced in the concept of pactum commissorium, which is prohibited by law. Pactum commissorium occurs if there was a creditor-debtor relationship between the parties; the property was used as security for the loan; and there was automatic appropriation by the borrower.