G.R. No.

139173             February 28, 2007 On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter to respondent stating that petitioner
Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction.
Petitioners also informed respondent that he can recover the earnest money of ₱100,000.00 anytime.
SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners
vs. Again, on April 6, 1990, petitioners wrote respondent stating that they delivered to his counsel Philippine National
GODOFREDO CAGUIAT, Respondent. Bank Manager’s Check No. 790537 dated April 6, 1990 in the amount of ₱100,000.00 payable to him.

DECISION In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch
63, Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-
SANDOVAL-GUTIERREZ, J.: 1067.

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, On June 27, 1994, after hearing, the trial court rendered its Decision finding there was a perfected contract of sale
assailing the Decision of the Court of Appeals dated January 29, 1999 and its Resolution dated July 14, 1999 in between the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court
CA-G.R. CV No. 48824. held:

Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Piñas, Metro xxx
Manila covered by Transfer Certificate of Title No. T-9905.
In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply with his
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it at obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiff’s position deserves more weight
₱1,500.00 per square meter. Respondent then gave petitioners ₱100,000.00 as partial payment. In turn, and credibility. First, the ₱100,000.00 that plaintiff paid whether as downpayment or earnest money showed that
petitioners gave respondent the corresponding receipt stating that respondent promised to pay the balance of the there was already a perfected contract. Art. 1482 of the Civil Code of the Philippines, reads as follows, to wit:
purchase price on or before March 23, 1990, thus:
‘Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as
Las Piñas, Metro Manila proof of the perfection of the contract.’

March 19, 1990 Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending defendants
the letter dated March 25, 1990. (Exh. ‘D’) and reiterated the same intent to pursue the sale in a letter dated April
6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh. ‘C’). Defendants’ mere
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIÑAS, allegation that it was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants’ letters (Exhs. ‘2’
METRO MANILA and ‘5’) appear to be mere afterthought.

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial court’s judgment.
PESOS (₱100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS, M.M.
COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS.
Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its
Resolution dated July 14, 1999.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE
MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS
DATE. Hence, the present recourse.

SIGNED THIS 19th DAY OF MARCH, 1990 AT LAS PIÑAS, M.M. The basic issue to be resolved is whether the document entitled "Receipt for Partial Payment" signed by both
parties earlier mentioned is a contract to sell or a contract of sale.
(SGD) AMPARO HERRERA                 (SGD) ONNIE SERRANO"
Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 1458 in relation to
Article 1475 of the Civil Code. The delivery to them of ₱100,000.00 as down payment cannot be considered as
On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of proof of the perfection of a contract of sale under Article 1482 of the same Code since there was no clear
his readiness to pay the balance of the contract price and requesting them to prepare the final deed of sale. agreement between the parties as to the amount of consideration.
Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed except until the full payment, of the purchase price is made. In the first case, non-payment of the price is a negative
for cogent reasons.14 Indeed, they should not be changed on appeal in the absence of a clear showing that the resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their
trial court overlooked, disregarded, or misinterpreted some facts of weight and significance, which if effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land
considered would have altered the result of the case. In the present case, we find that both the trial court and the sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title
Court of Appeals interpreted some significant facts resulting in an erroneous resolution of the issue involved. remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time
specified in the contract.
In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by
respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that "Whenever earnest In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full
money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the payment of the price.
contract."
In this case, the "Receipt for Partial Payment" shows that the true agreement between the parties is a contract to
We are not convinced. sell.

In San Miguel Properties Philippines, Inc. v. Spouses Huang, we held that the stages of a contract of sale are: First, ownership over the property was retained by petitioners and was not to pass to respondent until
(1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the full payment of the purchase price. Thus, petitioners need not push through with the sale should
contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In
essential elements of the sale, which is the meeting of the minds of the parties as to the object of the contract and effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay
upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under within the fixed period.
the contract of sale, culminating in the extinguishment thereof.
Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal
With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered into deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership,
by the parties. but only a transfer after full payment of the purchase price.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication
meaning unless a technical meaning was intended. Thus, when petitioners declared in the said "Receipt for Partial that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of
Payment" that they – the property.

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is given in a contract of sale,
PESOS (₱100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIÑAS, M.M. it shall be considered as part of the price and proof of the perfection of the contract." However, this article speaks
COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The
earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE price. Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of
MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS sale, does not apply.
DATE.
As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place.
there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.
is subject only to the full payment of the purchase price.
WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of Appeals
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to is REVERSED and respondent’s complaint is DISMISSED.
transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition
does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive SO ORDERED.
condition is commonly full payment of the purchase price.
G.R. No. 161318               November 25, 2009
The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951,
in Sing Yee v. Santos, we held that:
JULIE NABUS,* MICHELLE NABUS* and BETTY TOLERO, Petitioners,
x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the vs.
thing sold and a contract to sell x x x where by agreement the ownership is reserved in the seller and is not to pass JOAQUIN PACSON and JULIA PACSON, Respondents.
 DECISION THAT, it is mutually understood that in as much as there is a claim by other persons of the entire property of
which the portion subject of this Instrument is only a part, and that this claim is now the subject of a civil case now
pending before Branch III of the Court of First Instance of Baguio and Benguet, should the VENDOR herein be
PERALTA, J.:
defeated in the said civil action to the end that he is divested of title over the area subject of this Instrument, then
he hereby warrants that he shall return any and all monies paid by the VENDEE herein whether paid to the PNB,
This is a petition for review on certiorari of the Decision of the Court of Appeals in CA-G.R. CV No. 44941 dated La Trinidad, Benguet Branch, or directly received by herein VENDOR, all such monies to be returned upon
November 28, 2003. The Court of Appeals affirmed with modification the Decision of the Regional Trial Court of demand by the VENDEE;
La Trinidad, Benguet, Branch 10, ordering petitioner Betty Tolero to execute a deed of absolute sale in favor of
respondents, spouses Joaquin and Julia Pacson, over the lots covered by Transfer Certificate of Title (TCT) Nos.
THAT, [a] portion of the parcel of land subject of this instrument is presently in the possession of Mr. Marcos
T-18650 and T-18651 upon payment to her by respondents of the sum of ₱57,544.[8]4 representing the balance
Tacloy, and the VENDOR agrees to cooperate and assist in any manner possible in the ouster of said Mr. Marcos
due for the full payment of the property subject of this case; and ordering petitioner Betty Tolero to surrender to
Tacloy from said possession and occupation to the end that the VENDEE herein shall make use of said portion as
respondents her owner’s duplicate copy of TCT Nos. T-18650 and T-18651.
soon as is practicable;

The facts, as stated by the trial court, are as follows:

THAT, finally, the PARTIES hereby agree that this Instrument shall be binding upon their respective heirs,
successors or assigns.
The spouses Bate and Julie Nabus were the owners of parcels of land with a total area of 1,665 square meters,
situated in Pico, La Trinidad, Benguet, duly registered in their names under TCT No. T-9697 of the Register of
Pursuant to the Deed of Conditional Sale, respondents paid PNB the amount of ₱12,038.86 on February 22,
Deeds of the Province of Benguet. The property was mortgaged by the Spouses Nabus to the Philippine National
1977 and ₱20,744.30 on July 17, 1978 for the full payment of the loan.
Bank (PNB), La Trinidad Branch, to secure a loan in the amount of ₱30,000.00.

At the time of the transaction, Mr. Marcos Tacloy had a basket-making shop on the property, while the spouses
On February 19, 1977, the Spouses Nabus executed a Deed of Conditional Sale covering 1,000 square meters of
Delfin and Nelita Flores had a store. Tacloy and the Spouses Flores vacated the property after respondents paid
the 1,665 square meters of land in favor of respondents Spouses Pacson for a consideration of ₱170,000.00, which
them ₱4,000.00 each.
was duly notarized on February 21, 1977. The consideration was to be paid, thus:

Thereafter, respondents took possession of the subject property. They constructed an 80 by 32-feet building and a
THAT, the consideration of the amount of ₱170,000.00 will be paid by the VENDEE herein in my favor in the
steel-matting fence around the property to house their truck body-building shop which they called the "Emiliano
following manner:
Trucking Body Builder and Auto Repair Shop."

a. That the sum of ₱13,000.00, more or less, on or before February 21, 1977 and which amount will be paid
On December 24, 1977, before the payment of the balance of the mortgage amount with PNB, Bate Nabus died.
directly to the PNB, La Trinidad Branch, and which will form part of the purchase price;
On August 17, 1978, his surviving spouse, Julie Nabus, and their minor daughter, Michelle Nabus, executed a
Deed of Extra Judicial Settlement over the registered land covered by TCT No. 9697. On the basis of the said
b. That after paying the above amount to the PNB, La Trinidad, Benguet branch, a balance of about document, TCT No. T- 17718 was issued on February 17, 1984 in the names of Julie Nabus and Michelle Nabus.
₱17,500.00 remains as my mortgage balance and this amount will be paid by the VENDEE herein at the rate
of not less than ₱3,000.00 a month beginning March 1977, until the said mortgage balance is fully liquidated,
Meanwhile, respondents continued paying their balance, not in installments of ₱2,000.00 as agreed upon, but in
and that all payments made by the VENDEE to the PNB, La Trinidad, Benguet branch, shall form part of the
various, often small amounts ranging from as low as ₱10.00 to as high as ₱15,566.00, spanning a period of almost
consideration of this sale;
seven years, from March 9, 1977 to January 17, 1984.

c. That, as soon as the mortgage obligation with the PNB as cited above is fully paid, then the VENDEE herein
There was a total of 364 receipts of payment, which receipts were mostly signed by Julie Nabus, who also signed
hereby obligates himself, his heirs and assigns, to pay the amount of not less than ₱2,000.00 a month in favor
as Julie Quan when she remarried. The others who signed were Bate Nabus; PNB, La Trinidad Branch; Maxima
of the VENDOR, his heirs and assigns, until the full amount of ₱170,000.00 is fully covered (including the
Nabus; Sylvia Reyes; Michelle Nabus and the second husband of Julie Nabus, Gereon Quan. Maxima Nabus is the
payments cited in Pars. a and b above);
mother of Bate Nabus, while Sylvia Reyes is a niece.

THAT, as soon as the full consideration of this sale has been paid by the VENDEE, the corresponding transfer
The receipts showed that the total sum paid by respondents to the Spouses Nabus was ₱112,455.16, leaving a
documents shall be executed by the VENDOR to the VENDEE for the portion sold;
balance of ₱57,544.84. The sum of ₱30,000.00 which was the value of the pick-up truck allegedly sold and
delivered in 1978 to the Spouses Nabus, was not considered as payment because the registration papers remained
THAT, the portion sold is as shown in the simple sketch hereto attached as Annex "A" and made part hereof; in the name of its owner, Dominga D. Pacson, who is the sister of Joaquin Pacson. The vehicle was also returned
to respondents.
THAT, a segregation survey for the portion sold in favor of the VENDEE and the portion remaining in favor of
the VENDOR shall be executed as soon as possible, all at the expense of the VENDEE herein;
During the last week of January 1984, Julie Nabus, accompanied by her second husband, approached Joaquin During the hearing on the merits, Julie Nabus testified that she sold the property to Betty Tolero because she was
Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but told her to return after four days as in need of money. She stated that she was free to sell the property because the Deed of Conditional Sale executed
his daughter, Catalina Pacson, would have to go over the numerous receipts to determine the balance to be paid. in favor of the Spouses Pacson was converted into a contract of lease. She claimed that at the time when the Deed
When Julie Nabus returned after four days, Joaquin sent her and his daughter, Catalina, to Atty. Elizabeth Rillera of Conditional Sale was being explained to them by the notary public, Joaquin Pacson allegedly did not like the
for the execution of the deed of absolute sale. Since Julie was a widow with a minor daughter, Atty. Rillera portion of the contract stating that there was a pending case in court involving the subject property. Consequently,
required Julie Nabus to return in four days with the necessary documents, such as the deed of extrajudicial Joaquin Pacson did not continue to sign the document; hence, the second page of the document was
settlement, the transfer certificate of title in the names of Julie Nabus and minor Michelle Nabus, and the unsigned. Thereafter, it was allegedly their understanding that the Pacsons would occupy the property as lessees
guardianship papers of Michelle. However, Julie Nabus did not return. and whatever amount paid by them would be considered rentals.

Getting suspicious, Catalina Pacson went to the Register of Deeds of the Province of Benguet and asked for a copy Betty Tolero put up the defense that she was a purchaser in good faith and for value. She testified that it was Julie
of the title of the land. She found that it was still in the name of Julie and Michelle Nabus. Nabus who went to her house and offered to sell the property consisting of two lots with a combined area of 1,000
square meters. She consulted Atty. Aurelio de Peralta before she agreed to buy the property. She and Julie Nabus
After a week, Catalina Pacson heard a rumor that the lot was already sold to petitioner Betty Tolero. Catalina brought to Atty. De Peralta the pertinent papers such as TCT No. T-17718 in the names of Julie and Michelle
Pacson and Atty. Rillera went to the Register of Deeds of the Province of Benguet, and found that Julie Nabus and Nabus, the guardianship papers of Michelle Nabus and the blueprint copy of the survey plan showing the two lots.
her minor daughter, Michelle Nabus, represented by the former’s mother as appointed guardian by a court order After examining the documents and finding that the title was clean, Atty. De Peralta gave her the go-signal to buy
dated October 29, 1982, had executed a Deed of Absolute Sale in favor of Betty Tolero on March 5, 1984, the property.
covering the whole lot comprising 1,665 square meters. The property was described in the deed of sale as
comprising four lots: (1) Lot A-2-A, with an area of 832 square meters; (2) Lot A-2-B, 168 square meters; (3) Lot Tolero testified that upon payment of the agreed price of ₱200,000.00, the Deed of Absolute Sale was executed
A-2-C, 200 square meters; and (4) Lot A-2-D, 465 square meters. Lots A-2-A and A-2-B, with a combined area of and registered, resulting in the cancellation of the title of Julie and Michelle Nabus and the issuance in her name of
1,000 square meters, correspond to the lot previously sold to Joaquin and Julia Pacson in the Deed of Conditional TCT Nos. T-18650 and T-18651 corresponding to the two lots. Thereafter, she asked her common-law husband,
Sale. Ben Ignacio, to padlock the gate to the property and hang the "No Trespassing" sign.

Catalina Pacson and Atty. Rillera also found that the Certificate of Title over the property in the name of Julie and Tolero also testified that as the new owner, she was surprised and shocked to receive the Complaint filed by the
Michelle Nabus was cancelled on March 16, 1984, and four titles to the fours lots were issued in the name of Betty Spouses Pacson. She admitted that she knew very well the Spouses Pacson, because they used to buy vegetables
Tolero, namely: TCT No. T-18650 for Lot A-2-A; TCT No. 18651 for Lot A-2-B; TCT No. T-18652 for Lot A-2- regularly from her. She had been residing along the highway at Kilometer 4, La Trinidad, Benguet since 1971. She
C; and T-18653 for Lot A-2-D. knew the land in question, because it was only 50 meters away across the highway. She also knew that the
Spouses Pacson had a shop on the property for the welding and body-building of vehicles. She was not aware of
On March 22, 1984, the gate to the repair shop of the Pacsons was padlocked. A sign was displayed on the the Deed of Conditional Sale executed in favor of the Pacsons, and she saw the document for the first time when
property stating "No Trespassing." Joaquin Pacson showed it to her after she had already bought the property and the title had been transferred in her
name. At the time she was buying the property, Julie Nabus informed her that the Pacsons were merely renting the
property. She did not bother to verify if that was true, because the Pacsons were no longer in the property for two
On March 26, 1984, Catalina Pacson filed an affidavit-complaint regarding the padlocking incident of their repair years before she bought it.
shop with the police station at La Trinidad, Benguet.
In a Decision dated September 30, 1993, the trial court ruled in favor of respondents. The dispositive portion of
On March 28, 2008, respondents Joaquin and Julia Pacson filed with the Regional Trial Court of La Trinidad, the Decision reads:
Benguet (trial court) a Complaint for Annulment of Deeds, with damages and prayer for the issuance of a writ of
preliminary injunction. They sought the annulment of (1) the Extra-judicial Settlement of Estate, insofar as their
right to the 1,000-square-meter lot subject of the Deed of Conditional Sale was affected; (2) TCT No. T-17718 WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs, ordering defendant
issued in the names of Julie and Michelle Nabus; and (3) the Deed of Absolute Sale in favor of Betty Tolero and Betty Tolero to execute a deed of absolute sale in favor of the Spouses Joaquin and Julia Pacson over the lots
the transfer certificates of title issued pursuant thereto. They also prayed for the award of actual, moral and covered by Transfer Certificates of Title Nos. T-18650 and T-18651 upon payment to her by the plaintiffs of the
exemplary damages, as well as attorney’s fees. sum of ₱57,544.[8]4 representing the balance due for the full payment of the property subject of this case. In
addition to the execution of a deed of absolute sale, defendant Betty Tolero shall surrender to the plaintiffs her
owner’s duplicate copy of Transfer Certificates of Title Nos. T-18650 and T-18651.
In their Answer, Julie and Michelle Nabus alleged that respondent Joaquin Pacson did not proceed with the
conditional sale of the subject property when he learned that there was a pending case over the whole property.
Joaquin proposed that he would rather lease the property with a monthly rental of ₱2,000.00 and apply the sum of Defendants Julie Nabus, Michelle Nabus, and Betty Tolero shall also pay the plaintiffs damages as follows:
₱13,000.00 as rentals, since the amount was already paid to the bank and could no longer be withdrawn. Hence, he ₱50,000.00 for moral damages; ₱20,000.00 for exemplary damages; and ₱10,000.00 for attorney’s fees and
did not affix his signature to the second page of a copy of the Deed of Conditional Sale. Julie Nabus alleged that in expenses for litigation.
March 1994, due to her own economic needs and those of her minor daughter, she sold the property to Betty
Tolero, with authority from the court. Two issues determined by the trial court were: (1) Was the Deed of Conditional Sale between the Spouses Pacson
and the Nabuses converted into a contract of lease? and (2) Was Betty Tolero a buyer in good faith?
The trial court held that the Deed of Conditional Sale was not converted into a contract of lease because the II
original copy of the contract showed that all the pages were signed by all the parties to the contract. By the
presumption of regularity, all other carbon copies must have been duly signed. The failure of Joaquin Pacson to THE COURT A QUO ERRED IN FINDING THAT THERE ARE ONLY TWO ISSUES IN THE CASE ON
sign the second page of one of the carbon copies of the contract was by sheer inadvertence. The omission was of APPEAL AND THEY ARE: WHETHER THE DEED OF CONDITIONAL SALE WAS CONVERTED INTO A
no consequence since the signatures of the parties in all the other copies of the contract were complete. Moreover, CONTRACT OF LEASE; AND THAT [WHETHER] PETITIONER BETTY TOLERO WAS A BUYER IN
all the receipts of payment expressly stated that they were made in payment of the lot. Not a single receipt showed GOOD FAITH.
payment for rental.
III
Further, the trial court held that Betty Tolero was not a purchaser in good faith as she had actual knowledge of the
Conditional Sale of the property to the Pacsons.
THAT THE TRIAL COURT ERRED IN HOLDING THAT [RESPONDENTS’] BALANCE TO THE SPOUSES
NABUS UNDER THE CONDITIONAL SALE IS ONLY ₱57,544.[8]4.
The trial court stated that the Deed of Conditional Sale contained reciprocal obligations between the parties, thus:
IV
THAT, as soon as the full consideration of this sale has been paid by the VENDEE, the corresponding transfer
documents shall be executed by the VENDOR to the VENDEE for the portion sold;
THAT ASSUMING WITHOUT ADMITTING THAT PETITIONER BETTY TOLERO WAS AWARE OF THE
EXISTENCE OF THE DEED OF CONDITIONAL SALE, THE TRIAL COURT, AS WELL AS THE [COURT
xxxx OF APPEALS], ERRED IN ORDERING PETITIONER BETTY TOLERO TO EXECUTE A DEED OF
ABSOLUTE SALE IN FAVOR OF THE [RESPONDENTS] AND TO SURRENDER THE OWNER'S
THAT, finally, the PARTIES hereby agree that this Instrument shall be binding upon their respective heirs, DUPLICATE COPY OF TCT NOS. T-18650 AND T-18651, WHICH WAS NOT PRAYED FOR IN THE
successors or assigns. PRAYER IN THE COMPLAINT.

In other words, the trial court stated, when the vendees (the Spouses Pacson) were already ready to pay their V
balance, it was the corresponding obligation of the vendors (Nabuses) to execute the transfer documents.
THAT THE [COURT OF APPEALS] ERRED IN FINDING BETTY TOLERO [AS] A BUYER [WHO]
The trial court held that "[u]nder Article 1191 of the Civil Code, an injured party in a reciprocal obligation, such as FAILED TO TAKE STEPS IN INQUIRING FROM THE [RESPONDENTS] THE STATUS OF THE
the Deed of Conditional Sale in the case at bar, may choose between the fulfillment [or] the rescission of the PROPERTY IN QUESTION BEFORE HER PURCHASE, CONTRARY TO FACTS ESTABLISHED BY
obligation, with the payment of damages in either case." It stated that in filing the case, the Spouses Pacson opted EVIDENCE.
for fulfillment of the obligation, that is, the execution of the Deed of Absolute Sale in their favor upon payment of
the purchase price. VI

Respondents appealed the decision of the trial court to the Court of Appeals. THE [COURT OF APPEALS] ERRED IN CONSIDERING PETITIONER BETTY TOLERO A BUYER IN
BAD FAITH, IGNORING THE APPLICATION OF THE DOCTRINE IN THE RULING OF THE SUPREME
In the Decision dated November 28, 2003, the Court of Appeals affirmed the trial court’s decision, but deleted the COURT IN THE CASE OF RODOLFO ALFONSO, ET AL. VS. COURT OF APPEALS, G.R. NO. 63745.
award of attorney’s fees. The dispositive portion of the Decision reads:
The main issues to be resolved are:
WHEREFORE, finding no reversible error in the September 30, 1993 Decision of the Regional Trial Court of La
Trinidad, Benguet, Branch 10, in Civil Case No. 84-CV-0079, the instant appeal is hereby DISMISSED for lack of 1) Whether or not the Deed of Conditional Sale was converted into a contract of lease;
merit, and the assailed Decision is hereby AFFIRMED and UPHELD with the modification that the award of
attorney’s fees is deleted.
2) Whether the Deed of Conditional Sale was a contract to sell or a contract of sale.
Petitioners filed this petition raising the following issues:
As regards the first issue, the Deed of Conditional Sale entered into by the Spouses Pacson and the Spouses Nabus
was not converted into a contract of lease. The 364 receipts issued to the Spouses Pacson contained either the
I phrase "as partial payment of lot located in Km. 4" or "cash vale" or "cash vale (partial payment of lot located in
Km. 4)," evidencing sale under the contract and not the lease of the property. Further, as found by the trial court,
THE [COURT OF APPEALS] ERRED IN CONSIDERING THE CONTRACT ENTERED INTO BETWEEN Joaquin Pacson’s non-signing of the second page of a carbon copy of the Deed of Conditional Sale was through
THE SPOUSES BATE NABUS AND JULIE NABUS AND SPOUSES JOAQUIN PACSON AND JULIA sheer inadvertence, since the original contract and the other copies of the contract were all signed by Joaquin
PACSON TO BE A CONTRACT OF SALE. Pacson and the other parties to the contract.
On the second issue, petitioners contend that the contract executed by the respondents and the Spouses Nabus was c) Price certain in money or its equivalent.
a contract to sell, not a contract of sale. They allege that the contract was subject to the suspensive condition of full
payment of the consideration agreed upon before ownership of the subject property could be transferred to the Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential
vendees. Since respondents failed to pay the full amount of the consideration, having an unpaid balance of element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the
₱57,544.84, the obligation of the vendors to execute the Deed of Absolute Sale in favor of respondents did not prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the
arise. Thus, the subsequent Deed of Absolute Sale executed in favor of Betty Tolero, covering the same parcel of property subject of the contract to sell until the happening of an event, which for present purposes we shall take as
land was valid, even if Tolero was aware of the previous deed of conditional sale. the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to
sell the subject property when the entire amount of the purchase price is delivered to him. In other words, the full
Moreover, petitioners contend that respondents violated the stipulated condition in the contract that the monthly payment of the purchase price partakes of a suspensive condition, the non-fulfilment of which prevents the
installment to be paid was ₱2,000.00, as respondents gave meager amounts as low as ₱10.00. obligation to sell from arising and, thus, ownership is retained by the prospective seller without further remedies
by the prospective buyer.
Petitioners also assert that respondents’ allegation that Julie Nabus’ failure to bring the pertinent documents
necessary for the execution of the final deed of absolute sale, which was the reason for their not having paid the xxxx
balance of the purchase price, was untenable, and a lame and shallow excuse for violation of the Deed of
Conditional Sale. Respondents could have made a valid tender of payment of their remaining balance, as it had Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
been due for a long time, and upon refusal to accept payment, they could have consigned their payment to the the prospective seller’s obligation to sell the subject property by entering into a contract of sale with the
court as provided by law. This, respondents failed to do. prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states:

The Court holds that the contract entered into by the Spouses Nabus and respondents was a contract to sell, not a Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
contract of sale.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
A contract of sale is defined in Article 1458 of the Civil Code, thus: promissor if the promise is supported by a consideration distinct from the price.

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly
to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to
sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is,
A contract of sale may be absolute or conditional. full payment of the purchase price.

Ramos v. Heruela differentiates a contract of absolute sale and a contract of conditional sale as follows: A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the
seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition,
Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional. A contract of sale is because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the
absolute when title to the property passes to the vendee upon delivery of the thing sold. A deed of sale is absolute happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the
when there is no stipulation in the contract that title to the property remains with the seller until full payment of the perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the
purchase price. The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of
the contract the moment the vendee fails to pay within a fixed period. In a conditional sale, as in a contract to sell, the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any
ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price. The further act having to be performed by the seller.
full payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition
prevents the obligation to sell from arising. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase
price, ownership will not automatically transfer to the buyer although the property may have been previously
Coronel v. Court of Appeals distinguished a contract to sell from a contract of sale, thus: delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract
of absolute sale.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of
a contract of sale are the following: Further, Chua v. Court of Appeals cited this distinction between a contract of sale and a contract to sell:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract
to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot
b) Determinate subject matter; and recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by
the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive of the purchase price, which decision was affirmed by the Court of Appeals. Ayala Life Insurance, Inc. v. Ray
condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title Burton Development Corporation held:
from becoming effective.
Evidently, before the remedy of specific performance may be availed of, there must be a breach of the contract.
It is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered
into by the parties. In this case, the contract entitled "Deed of Conditional Sale" is actually a contract to sell. The Under a contract to sell, the title of the thing to be sold is retained by the seller until the purchaser makes full
contract stipulated that "as soon as the full consideration of the sale has been paid by the vendee, the payment of the agreed purchase price. Such payment is a positive suspensive condition, the non-fulfillment of
corresponding transfer documents shall be executed by the vendor to the vendee for the portion sold." Where the which is not a breach of contract but merely an event that prevents the seller from conveying title to the purchaser.
vendor promises to execute a deed of absolute sale upon the completion by the vendee of the payment of the price, The non-payment of the purchase price renders the contract to sell ineffective and without force and effect. Thus, a
the contract is only a contract to sell." The aforecited stipulation shows that the vendors reserved title to the cause of action for specific performance does not arise.
subject property until full payment of the purchase price.
Since the contract to sell was without force and effect, Julie Nabus validly conveyed the subject property to
If respondents paid the Spouses Nabus in accordance with the stipulations in the Deed of Conditional Sale, the another buyer, petitioner Betty Tolero, through a contract of absolute sale, and on the strength thereof, new
consideration would have been fully paid in June 1983. Thus, during the last week of January 1984, Julie Nabus transfer certificates of title over the subject property were duly issued to Tolero.
approached Joaquin Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but told her to
return after four days as his daughter, Catalina Pacson, would have to go over the numerous receipts to determine
the balance to be paid. The Spouses Pacson, however, have the right to the reimbursement of their payments to the Nabuses, and are
entitled to the award of nominal damages. The Civil Code provides:
When Julie Nabus returned after four days, Joaquin Pacson sent Julie Nabus and his daughter, Catalina, to Atty.
Elizabeth Rillera for the execution of the deed of sale. Since Bate Nabus had already died, and was survived by Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or
Julie and their minor daughter, Atty. Rillera required Julie Nabus to return in four days with the necessary invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff
documents such as the deed of extrajudicial settlement, the transfer certificate of title in the names of Julie Nabus for any loss suffered by him.
and minor Michelle Nabus, and the guardianship papers of Michelle. However, Julie Nabus did not return.
Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in
As vendees given possession of the subject property, the ownership of which was still with the vendors, the article 1157, or in every case where any property right has been invaded.
Pacsons should have protected their interest and inquired from Julie Nabus why she did not return and then
followed through with full payment of the purchase price and the execution of the deed of absolute sale. The As stated by the trial court, under the Deed of Conditional Sale, respondents had the right to demand from
Spouses Pacson had the legal remedy of consigning their payment to the court; however, they did not do so. A petitioners Julie and Michelle Nabus that the latter execute in their favor a deed of absolute sale when they were
rumor that the property had been sold to Betty Tolero prompted them to check the veracity of the sale with the ready to pay the remaining balance of the purchase price. The Nabuses had the corresponding duty to respect the
Register of Deeds of the Province of Benguet. They found out that on March 5, 1984, Julie Nabus sold the same respondents’ right, but they violated such right, for they could no longer execute the document since they had sold
property to Betty Tolero through a Deed of Absolute Sale, and new transfer certificates of title to the property the property to Betty Tolero. Hence, nominal damages in the amount of ₱10,000.00 are awarded to respondents.
were issued to Tolero. 1avvphi1

Respondents are not entitled to moral damages because contracts are not referred to in Article 2219 of the Civil
Thus, the Spouses Pacson filed this case for the annulment of the contract of absolute sale executed in favor of Code, which enumerates the cases when moral damages may be recovered. Article 2220 of the Civil Code allows
Betty Tolero and the transfer certificates of title issued in her name. the recovery of moral damages in breaches of contract where the defendant acted fraudulently or in bad faith.
However, this case involves a contract to sell, wherein full payment of the purchase price is a positive suspensive
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a condition, the non-fulfillment of which is not a breach of contract, but merely an event that prevents the seller
contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive from conveying title to the purchaser. Since there is no breach of contract in this case, respondents are not entitled
condition. The full payment of the purchase price is the positive suspensive condition, the failure of which is not a to moral damages.
breach of contract, but simply an event that prevented the obligation of the vendor to convey title from acquiring
binding force. Thus, for its non-fulfilment, there is no contract to speak of, the obligor having failed to perform the In the absence of moral, temperate, liquidated or compensatory damages, exemplary damages cannot be granted
suspensive condition which enforces a juridical relation. With this circumstance, there can be no rescission or for they are allowed only in addition to any of the four kinds of damages mentioned.
fulfilment of an obligation that is still non-existent, the suspensive condition not having occurred as yet. Emphasis
should be made that the breach contemplated in Article 1191 of the New Civil Code is the obligor’s failure to WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 44941,
comply with an obligation already extant, not a failure of a condition to render binding that obligation. dated November 28, 2003, is REVERSED and SET ASIDE. Judgment is hereby rendered upholding the validity
of the sale of the subject property made by petitioners Julie Nabus and Michelle Nabus in favor of petitioner Betty
The trial court, therefore, erred in applying Article 1191 of the Civil Code in this case by ordering fulfillment of Tolero, as well as the validity of Transfer Certificates of Title Nos. T-18650 and T-18651 issued in the name of
the obligation, that is, the execution of the deed of absolute sale in favor of the Spouses Pacson upon full payment Betty Tolero. Petitioners Julie Nabus and Michelle Nabus are ordered to reimburse respondents spouses Joaquin
and Julia Pacson the sum of One Hundred Twelve Thousand Four Hundred Fifty-Five Pesos and Sixteen Centavos
(₱112,455.16), and to pay Joaquin and Julia Pacson nominal damages in the amount of Ten Thousand Pesos installment basis without interest and to assume the bank loan. To induce the petitioner to accept her offer,
(₱10,000.00), with annual interest of twelve percent (12%) until full payment of the amounts due to Joaquin and respondent offered the following conditions/concessions:
Julia Pacson.
1. That the conditional sale will be cancelled if the plaintiff (petitioner) can find a buyer of said properties for
No costs. the amount of ₱6,500,000.00 within the next three (3) months provided all amounts received by the plaintiff
from the defendant (respondent) including payments actually made by defendant to Farmers Savings and Loan
SO ORDERED. Bank would be refunded to the defendant with additional interest of six (6%) monthly;

Republic of the Philippines 2. That the plaintiff would continue using the space occupied by her and drugstore and cosmetics store without
SUPREME COURT any rentals for the duration of the installment payments;
Manila
3. That there will be a lease for fifteen (15) years in favor of the plaintiff over the space for drugstore and
SECOND DIVISION cosmetics store at a monthly rental of only ₱8,000.00 after full payment of the stipulated installment payments
are made by the defendant;
G.R. No. 188064               June 1, 2011
4. That the defendant will undertake the renewal and payment of the fire insurance policies on the two (2)
subject buildings following the expiration of the then existing fire insurance policy of the plaintiff up to the
MILA A. REYES, Petitioner, time that plaintiff is fully paid of the total purchase price of ₱4,200,000.00.
vs.
VICTORIA T. TUPARAN, Respondent.
After petitioner’s verbal acceptance of all the conditions/concessions, both parties worked together to obtain FSL
Bank’s approval for respondent to assume her (petitioner’s) outstanding bank account. The assumption would be
DECISION part of respondent’s purchase price for petitioner’s mortgaged real properties. FSL Bank approved their proposal
on the condition that petitioner would sign or remain as co-maker for the mortgage obligation assumed by
MENDOZA, J.: respondent.

Subject of this petition for review is the February 13, 2009 Decision of the Court of Appeals (CA) which affirmed On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real
with modification the February 22, 2006 Decision of the Regional Trial Court, Branch 172, Valenzuela City Properties with Assumption of Mortgage. Due to their close personal friendship and business relationship, both
(RTC), in Civil Case No. 3945-V-92, an action for Rescission of Contract with Damages. parties chose not to reduce into writing the other terms of their agreement mentioned in paragraph 11 of the
complaint. Besides, FSL Bank did not want to incorporate in the Deed of Conditional Sale of Real Properties with
On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages Assumption of Mortgage any other side agreement between petitioner and respondent.
against Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner alleged, among others, that
she was the registered owner of a 1,274 square meter residential and commercial lot located in Karuhatan, Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage, respondent was bound to
Valenzuela City, and covered by TCT No. V-4130; that on that property, she put up a three-storey commercial pay the petitioner a lump sum of ₱1.2 million pesos without interest as part of the purchase price in three (3) fixed
building known as RBJ Building and a residential apartment building; that since 1990, she had been operating a installments as follows:
drugstore and cosmetics store on the ground floor of RBJ Building where she also had been residing while the
other areas of the buildings including the sidewalks were being leased and occupied by tenants and street vendors. a) ₱200,000.00 – due January 31, 1991

In December 1989, respondent leased from petitioner a space on the ground floor of the RBJ Building for her b) ₱200,000.00 – due June 30, 1991
pawnshop business for a monthly rental of ₱4,000.00. A close friendship developed between the two which led to
the respondent investing thousands of pesos in petitioner’s financing/lending business from February 7, 1990 to
May 27, 1990, with interest at the rate of 6% a month. c) ₱800,000.00 – due December 31, 1991

On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of paying the
Inc. (FSL Bank) to secure a loan of ₱2,000,000.00 payable in installments. On November 15, 1990, petitioner’s amounts due in lump sum on their respective maturity dates, respondent paid petitioner in small amounts from
outstanding account on the mortgage reached ₱2,278,078.13. Petitioner then decided to sell her real properties for time to time. To compensate for her delayed payments, respondent agreed to pay petitioner an interest of 6% a
at least ₱6,500,000.00 so she could liquidate her bank loan and finance her businesses. As a gesture of friendship, month. As of August 31, 1992, respondent had only paid ₱395,000.00, leaving a balance of ₱805,000.00 as
respondent verbally offered to conditionally buy petitioner’s real properties for ₱4,200,000.00 payable on principal on the unpaid installments and ₱466,893.25 as unpaid accumulated interest.
Petitioner further averred that despite her success in finding a prospective buyer for the subject real properties On February 22, 2006, the RTC handed down its decision finding that respondent failed to pay in full the ₱4.2
within the 3-month period agreed upon, respondent reneged on her promise to allow the cancellation of their deed million total purchase price of the subject real properties leaving a balance of ₱805,000.00. It stated that the
of conditional sale. Instead, respondent became interested in owning the subject real properties and even wanted to checks and receipts presented by respondent refer to her payments of the mortgage obligation with FSL Bank and
convert the entire property into a modern commercial complex. Nonetheless, she consented because respondent not the payment of the balance of ₱1,200,000.00. The RTC also considered the Deed of Conditional Sale of Real
repeatedly professed friendship and assured her that all their verbal side agreement would be honored as shown by Property with Assumption of Mortgage executed by and among the two parties and FSL Bank a contract to sell,
the fact that since December 1990, she (respondent) had not collected any rentals from the petitioner for the space and not a contract of sale. It was of the opinion that although the petitioner was entitled to a rescission of the
occupied by her drugstore and cosmetics store. contract, it could not be permitted because her non-payment in full of the purchase price "may not be considered
as substantial and fundamental breach of the contract as to defeat the object of the parties in entering into the
On March 19, 1992, the residential building was gutted by fire which caused the petitioner to lose rental income in contract." The RTC believed that the respondent’s offer stated in her counsel’s letter dated September 2, 1992 to
the amount of ₱8,000.00 a month since April 1992. Respondent neglected to renew the fire insurance policy on the settle what she thought was her unpaid balance of ₱751,000.00 showed her sincerity and willingness to settle her
subject buildings. obligation. Hence, it would be more equitable to give respondent a chance to pay the balance plus interest within a
given period of time.
Since December 1990, respondent had taken possession of the subject real properties and had been continuously
collecting and receiving monthly rental income from the tenants of the buildings and vendors of the sidewalk Finally, the RTC stated that there was no factual or legal basis to award damages and attorney’s fees because there
fronting the RBJ building without sharing it with petitioner. was no proof that either party acted fraudulently or in bad faith.

On September 2, 1992, respondent offered the amount of ₱751,000.00 only payable on September 7, 1992, as full Thus, the dispositive portion of the RTC Decision reads:
payment of the purchase price of the subject real properties and demanded the simultaneous execution of the
corresponding deed of absolute sale. WHEREFORE, judgment is hereby rendered as follows:

Respondent’s Answer 1. Allowing the defendant to pay the plaintiff within thirty (30) days from the finality hereof the amount of
₱805,000.00, representing the unpaid purchase price of the subject property, with interest thereon at 2% a month
Respondent countered, among others, that the tripartite agreement erroneously designated by the petitioner as a from January 1, 1992 until fully paid. Failure of the defendant to pay said amount within the said period shall
Deed of Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and absolute contract cause the automatic rescission of the contract (Deed of Conditional Sale of Real Property with Assumption of
of sale with a term period. It could not be considered a conditional sale because the acquisition of contractual Mortgage) and the plaintiff and the defendant shall be restored to their former positions relative to the subject
rights and the performance of the obligation therein did not depend upon a future and uncertain event. Moreover, property with each returning to the other whatever benefits each derived from the transaction;
the capital gains and documentary stamps and other miscellaneous expenses and real estate taxes up to 1990 were
supposed to be paid by petitioner but she failed to do so. 2. Directing the defendant to allow the plaintiff to continue using the space occupied by her for drugstore and
cosmetic store without any rental pending payment of the aforesaid balance of the purchase price.
Respondent further averred that she successfully rescued the properties from a definite foreclosure by paying the
assumed mortgage in the amount of ₱2,278,078.13 plus interest and other finance charges. Because of her 3. Ordering the defendant, upon her full payment of the purchase price together with interest, to execute a
payment, she was able to obtain a deed of cancellation of mortgage and secure a release of mortgage on the subject contract of lease for fifteen (15) years in favor of the plaintiff over the space for the drugstore and cosmetic store
real properties including petitioner’s ancestral residential property in Sta. Maria, Bulacan. at a fixed monthly rental of ₱8,000.00; and

Petitioner’s claim for the balance of the purchase price of the subject real properties was baseless and unwarranted 4. Directing the plaintiff, upon full payment to her by the defendant of the purchase price together with interest,
because the full amount of the purchase price had already been paid, as she did pay more than ₱4,200,000.00, the to execute the necessary deed of sale, as well as to pay the Capital Gains Tax, documentary stamps and other
agreed purchase price of the subject real properties, and she had even introduced improvements thereon worth miscellaneous expenses necessary for securing the BIR Clearance, and to pay the real estate taxes due on the
more than ₱4,800,000.00. As the parties could no longer be restored to their original positions, rescission could subject property up to 1990, all necessary to transfer ownership of the subject property to the defendant.
not be resorted to.
No pronouncement as to damages, attorney’s fees and costs.
Respondent added that as a result of their business relationship, petitioner was able to obtain from her a loan in the
amount of ₱400,000.00 with interest and took several pieces of jewelry worth ₱120,000.00. Petitioner also failed SO ORDERED.
and refused to pay the monthly rental of ₱20,000.00 since November 16, 1990 up to the present for the use and
occupancy of the ground floor of the building on the subject real property, thus, accumulating arrearages in the
amount of ₱470,000.00 as of October 1992. Ruling of the CA

Ruling of the RTC On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision. The CA
agreed with the RTC that the contract entered into by the parties is a contract to sell but ruled that the remedy of
rescission could not apply because the respondent’s failure to pay the petitioner the balance of the purchase price
in the total amount of ₱805,000.00 was not a breach of contract, but merely an event that prevented the seller THE PERSONAL COMMITMENT OF THE RESPONDENT AND AGREEMENT BETWEEN THE PARTIES
(petitioner) from conveying title to the purchaser (respondent). It reasoned that out of the total purchase price of THAT RESPONDENT WILL PAY INTEREST ON THE ₱805,000.00 AT THE RATE OF 6% MONTHLY
the subject property in the amount of ₱4,200,000.00, respondent’s remaining unpaid balance was only STARTING THE DATE OF DELINQUENCY ON DECEMBER 31, 1991.
₱805,000.00. Since respondent had already paid a substantial amount of the purchase price, it was but right and
just to allow her to pay the unpaid balance of the purchase price plus interest. Thus, the decretal portion of the CA D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE
Decision reads: APPRECIATION AND/OR MISAPPRECIATION OF FACTS RESULTING INTO THE DENIAL OF THE
CLAIM OF PETITIONER REYES FOR ACTUAL DAMAGES WHICH CORRESPOND TO THE MILLIONS
WHEREFORE, premises considered, the Decision dated 22 February 2006 and Order dated 22 December 2006 of OF PESOS OF RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WHICH RESPONDENT
the Regional Trial Court of Valenzuela City, Branch 172 in Civil Case No. 3945-V-92 are AFFIRMED with TUPARAN COLLECTED CONTINUOUSLY SINCE DECEMBER 1990, EVEN WITH THE UNPAID
MODIFICATION in that defendant-appellant Victoria T. Tuparan is hereby ORDERED to pay plaintiff- BALANCE OF ₱805,000.00 AND DESPITE THE FACT THAT RESPONDENT DID NOT CONTROVERT
appellee/appellant Mila A. Reyes, within 30 days from finality of this Decision, the amount of ₱805,000.00 SUCH CLAIM OF THE PETITIONER AS CONTAINED IN HER AMENDED COMPLAINT DATED APRIL
representing the unpaid balance of the purchase price of the subject property, plus interest thereon at the rate of 6% 22, 2006.
per annum from 11 September 1992 up to finality of this Decision and, thereafter, at the rate of 12% per annum
until full payment. The ruling of the trial court on the automatic rescission of the Deed of Conditional Sale with E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE
Assumption of Mortgage is hereby DELETED. Subject to the foregoing, the dispositive portion of the trial court’s APPRECIATION OF FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES
decision is AFFIRMED in all other respects. FOR THE ₱29,609.00 BACK RENTALS THAT WERE COLLECTED BY RESPONDENT TUPARAN FROM
THE OLD TENANTS OF THE PETITIONER.
SO ORDERED.
F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE
After the denial of petitioner’s motion for reconsideration and respondent’s motion for partial reconsideration, PETITIONER’S EARLIER "URGENT MOTION FOR ISSUANCE OF A PRELIMINARY MANDATORY
petitioner filed the subject petition for review praying for the reversal and setting aside of the CA Decision AND PROHIBITORY INJUNCTION" DATED JULY 7, 2008 AND THE "SUPPLEMENT" THERETO DATED
anchored on the following AUGUST 4, 2008 THEREBY CONDONING THE UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE
FLORO ALEJO TO RESOLVE WITHIN ELEVEN (11) YEARS THE PETITIONER’S THREE (3) SEPARATE
ASSIGNMENT OF ERRORS "MOTIONS FOR PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING ORDER, ACCOUNTING
AND DEPOSIT OF RENTAL INCOME" DATED MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7,
2006 THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY ENRICH HERSELF BY
A. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DISALLOWING CONTINUOUSLY COLLECTING ALL THE RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES
THE OUTRIGHT RESCISSION OF THE SUBJECT DEED OF CONDITIONAL SALE OF REAL WITHOUT ANY ACCOUNTING AND COURT DEPOSIT OF THE COLLECTED RENTALS/FRUITS AND
PROPERTIES WITH ASSUMPTION OF MORTGAGE ON THE GROUND THAT RESPONDENT THE PETITIONERS "URGENT MOTION TO DIRECT DEFENDANT VICTORIA TUPARAN TO PAY THE
TUPARAN’S FAILURE TO PAY PETITIONER REYES THE BALANCE OF THE PURCHASE PRICE OF ACCUMULATED UNPAID REAL ESTATE TAXES AND SEF TAXES ON THE SUBJECT REAL
₱805,000.00 IS NOT A BREACH OF CONTRACT DESPITE ITS OWN FINDINGS THAT PETITIONER PROPERTIES" DATED JANUARY 13, 2007 THEREBY EXPOSING THE SUBJECT REAL PROPERTIES TO
STILL RETAINS OWNERSHIP AND TITLE OVER THE SUBJECT REAL PROPERTIES DUE TO IMMINENT AUCTION SALE BY THE CITY TREASURER OF VALENZUELA CITY.
RESPONDENT’S REFUSAL TO PAY THE BALANCE OF THE TOTAL PURCHASE PRICE OF ₱805,000.00
WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE OF ₱4,200,000.00 OR 66% OF THE
STIPULATED LAST INSTALLMENT OF ₱1,200,000.00 PLUS THE INTEREST THEREON. IN EFFECT, G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE
THE COURT OF APPEALS AFFIRMED AND ADOPTED THE TRIAL COURT’S CONCLUSION THAT PETITIONER’S CLAIM FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES
THE RESPONDENT’S NON-PAYMENT OF THE ₱805,000.00 IS ONLY A SLIGHT OR CASUAL BREACH AGAINST THE RESPONDENT.
OF CONTRACT.
In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in ruling that there was no
B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN legal basis for the rescission of the Deed of Conditional Sale with Assumption of Mortgage.
DISREGARDING AS GROUND FOR THE RESCISSION OF THE SUBJECT CONTRACT THE
OTHER FRAUDULENT AND MALICIOUS ACTS COMMITTED BY THE RESPONDENT AGAINST Position of the Petitioner
THE PETITIONER WHICH BY THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE
PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT WITHIN WHICH TO PAY TO THE The petitioner basically argues that the CA should have granted the rescission of the subject Deed of Conditional
PETITIONER THE ₱805,000.00 PLUS INTEREST THEREON. Sale of Real Properties with Assumption of Mortgage for the following reasons:

C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT ENTITLED TO THE RESCISSION OF 1. The subject deed of conditional sale is a reciprocal obligation whose outstanding characteristic is reciprocity
THE SUBJECT CONTRACT, THE COURT OF APPEALS STILL SERIOUSLY ERRED AND ABUSED ITS arising from identity of cause by virtue of which one obligation is correlative of the other.
DISCRETION IN REDUCING THE INTEREST ON THE ₱805,000.00 TO ONLY "6% PER ANNUM
STARTING FROM THE DATE OF FILING OF THE COMPLAINT ON SEPTEMBER 11, 1992" DESPITE
 2. The petitioner was rescinding – not enforcing – the subject Deed of Conditional Sale pursuant to Article 1191 9. That upon full payment by the Second Party of the full balance of the purchase price and the assumed mortgage
of the Civil Code because of the respondent’s failure/refusal to pay the ₱805,000.00 balance of the total obligation herein mentioned the Third Party shall issue the corresponding Deed of Cancellation of Mortgage and
purchase price of the petitioner’s properties within the stipulated period ending December 31, 1991. the First Party shall execute the corresponding Deed of Absolute Sale in favor of the Second Party.

3. There was no slight or casual breach on the part of the respondent because she (respondent) deliberately failed Based on the above provisions, the title and ownership of the subject properties remains with the petitioner until
to comply with her contractual obligations with the petitioner by violating the terms or manner of payment of the the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Thereafter, FSL
₱1,200,000.00 balance and unjustly enriched herself at the expense of the petitioner by collecting all rental Bank shall then issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the
payments for her personal benefit and enjoyment. corresponding deed of absolute sale in favor of the respondent.

Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate of 6% per month on her Accordingly, the petitioner’s obligation to sell the subject properties becomes demandable only upon the
unpaid installment of ₱805,000.00 from the date of the delinquency, December 31, 1991, because she obligated happening of the positive suspensive condition, which is the respondent’s full payment of the purchase price.
herself to do so. Without respondent’s full payment, there can be no breach of contract to speak of because petitioner has no
obligation yet to turn over the title. Respondent’s failure to pay in full the purchase price is not the breach of
Finally, the petitioner asserts that her claim for damages or lost income as well as for the back rentals in the contract contemplated under Article 1191 of the New Civil Code but rather just an event that prevents the
amount of ₱29,609.00 has been fully substantiated and, therefore, should have been granted by the CA. Her claim petitioner from being bound to convey title to the respondent. The 2009 case of Nabus v. Joaquin & Julia
for moral and exemplary damages and attorney’s fees has been likewise substantiated. Pacson is enlightening:

Position of the Respondent The Court holds that the contract entered into by the Spouses Nabus and respondents was a contract to sell, not a
contract of sale.
The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage entered into
between the parties is a contract to sell and not a contract of sale because the title of the subject properties still A contract of sale is defined in Article 1458 of the Civil Code, thus:
remains with the petitioner as she failed to pay the installment payments in accordance with their agreement.
Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and
Respondent echoes the RTC position that her inability to pay the full balance on the purchase price may not be to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
considered as a substantial and fundamental breach of the subject contract and it would be more equitable if she
would be allowed to pay the balance including interest within a certain period of time. She claims that as early as xxx
1992, she has shown her sincerity by offering to pay a certain amount which was, however, rejected by the
petitioner. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of
a contract of sale are the following:
Finally, respondent states that the subject deed of conditional sale explicitly provides that the installment payments
shall not bear any interest. Moreover, petitioner failed to prove that she was entitled to back rentals. a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
The Court’s Ruling c) Price certain in money or its equivalent.

The petition lacks merit. Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential
element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the
The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with Assumption of prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the
Mortgage entered into by and among the two parties and FSL Bank on November 26, 1990 is a contract to sell and property subject of the contract to sell until the happening of an event, which for present purposes we shall take as
not a contract of sale. The subject contract was correctly classified as a contract to sell based on the following the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to
pertinent stipulations: sell the subject property when the entire amount of the purchase price is delivered to him. In other words, the full
payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the
obligation to sell from arising and, thus, ownership is retained by the prospective seller without further remedies
8. That the title and ownership of the subject real properties shall remain with the First Party until the full payment by the prospective buyer.
of the Second Party of the balance of the purchase price and liquidation of the mortgage obligation of
₱2,000,000.00. Pending payment of the balance of the purchase price and liquidation of the mortgage obligation
that was assumed by the Second Party, the Second Party shall not sell, transfer and convey and otherwise x x x           x x x          x x x
encumber the subject real properties without the written consent of the First and Third Party.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a
the prospective seller’s obligation to sell the subject property by entering into a contract of sale with the contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive
prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: condition. The full payment of the purchase price is the positive suspensive condition, the failure of which is not a
breach of contract, but simply an event that prevented the obligation of the vendor to convey title from
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. acquiring binding force. Thus, for its non-fulfilment, there is no contract to speak of, the obligor having failed to
perform the suspensive condition which enforces a juridical relation. With this circumstance, there can be no
rescission or fulfillment of an obligation that is still non-existent, the suspensive condition not having occurred as
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the yet. Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is the obligor’s
promissor if the promise is supported by a consideration distinct from the price. failure to comply with an obligation already extant, not a failure of a condition to render binding that
obligation. [Emphases and underscoring supplied]
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v. Espidol, where it was
sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, written:
full payment of the purchase price.
Regarding the right to cancel the contract for non-payment of an installment, there is need to initially determine if
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the what the parties had was a contract of sale or a contract to sell. In a contract of sale, the title to the property passes
seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, to the buyer upon the delivery of the thing sold. In a contract to sell, on the other hand, the ownership is, by
because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the agreement, retained by the seller and is not to pass to the vendee until full payment of the purchase price. In the
happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the contract of sale, the buyer’s non-payment of the price is a negative resolutory condition; in the contract to sell, the
perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the buyer’s full payment of the price is a positive suspensive condition to the coming into effect of the agreement. In
contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the first case, the seller has lost and cannot recover the ownership of the property unless he takes action to set aside
the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any the contract of sale. In the second case, the title simply remains in the seller if the buyer does not comply with the
further act having to be performed by the seller. condition precedent of making payment at the time specified in the contract. Here, it is quite evident that the
contract involved was one of a contract to sell since the Atienzas, as sellers, were to retain title of ownership to the
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase land until respondent Espidol, the buyer, has paid the agreed price. Indeed, there seems no question that the parties
price, ownership will not automatically transfer to the buyer although the property may have been previously understood this to be the case.
delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract
of absolute sale. Admittedly, Espidol was unable to pay the second installment of ₱1,750,000.00 that fell due in December 2002.
That payment, said both the RTC and the CA, was a positive suspensive condition failure of which
Further, Chua v. Court of Appeals, cited this distinction between a contract of sale and a contract to sell: was not regarded a breach in the sense that there can be no rescission of an obligation (to turn over title) that
did not yet exist since the suspensive condition had not taken place. x x x. [Emphases and underscoring
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract supplied]
to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of Conditional
recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by Sale was not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject property
the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive in the amount of ₱4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only ₱805,000.00, a
condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title substantial amount of the purchase price has already been paid. It is only right and just to allow Tuparan to pay the
from becoming effective. said unpaid balance of the purchase price to Reyes."

It is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that,
into by the parties. In this case, the contract entitled "Deed of Conditional Sale" is actually a contract to sell. The considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation.
contract stipulated that "as soon as the full consideration of the sale has been paid by the vendee, the
corresponding transfer documents shall be executed by the vendor to the vendee for the portion sold." Where the Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and
vendor promises to execute a deed of absolute sale upon the completion by the vendee of the payment of the price, fundamental to the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined
the contract is only a contract to sell." The aforecited stipulation shows that the vendors reserved title to the by the attendant circumstances. In the case at bench, the subject contract stipulated the following important
subject property until full payment of the purchase price. provisions:

xxx 2. That the purchase price of ₱4,200,000.00 shall be paid as follows:

 a) ₱278,078.13 received in cash by the First Party but directly paid to the Third Party as partial payment of the CA was, however, correct in imposing interest at the rate of 6% per annum starting from the filing of the
mortgage obligation of the First Party in order to reduce the amount to ₱2,000,000.00 only as of November 15, complaint on September 11, 1992. 1avvphi1

1990;
Finally, the Court upholds the ruling of the courts below regarding the non-imposition of damages and attorney’s
b) ₱721,921.87 received in cash by the First Party as additional payment of the Second Party; fees. Aside from petitioner’s self-serving statements, there is not enough evidence on record to prove that
respondent acted fraudulently and maliciously against the petitioner. In the case of Heirs of Atienza v. Espidol, it
c) ₱1,200,000.00 to be paid in installments as follows: was stated:

1. ₱200,000.00 payable on or before January 31, 1991; Respondents are not entitled to moral damages because contracts are not referred to in Article 2219 of the Civil
Code, which enumerates the cases when moral damages may be recovered. Article 2220 of the Civil Code allows
the recovery of moral damages in breaches of contract where the defendant acted fraudulently or in bad faith.
2. ₱200,000.00 payable on or before June 30, 1991; However, this case involves a contract to sell, wherein full payment of the purchase price is a positive suspensive
condition, the non-fulfillment of which is not a breach of contract, but merely an event that prevents the seller
3. ₱800,000.00 payable on or before December 31, 1991; from conveying title to the purchaser. Since there is no breach of contract in this case, respondents are not entitled
to moral damages.
Note: All the installments shall not bear any interest.
In the absence of moral, temperate, liquidated or compensatory damages, exemplary damages cannot be granted
d) ₱2,000,000.00 outstanding balance of the mortgage obligation as of November 15, 1990 which is hereby for they are allowed only in addition to any of the four kinds of damages mentioned.
assumed by the Second Party.
WHEREFORE, the petition is DENIED.
xxx
SO ORDERED.
3. That the Third Party hereby acknowledges receipts from the Second Party ₱278,078.13 as partial payment of
the loan obligation of First Party in order to reduce the account to only ₱2,000,000.00 as of November 15, 1990 to G.R. No. 118203 July 5, 1996
be assumed by the Second Party effective November 15, 1990.
EMILIO A. SALAZAR and TERESITA DIZON, petitioners,
From the records, it cannot be denied that respondent paid to FSL Bank petitioner’s mortgage obligation in the
amount of ₱2,278,078.13, which formed part of the purchase price of the subject property. Likewise, it is not vs.
disputed that respondent paid directly to petitioner the amount of ₱721,921.87 representing the additional payment COURT OF APPEALS and JONETTE BORRES, respondents.
for the purchase of the subject property. Clearly, out of the total price of ₱4,200,000.00, respondent was able to
pay the total amount of ₱3,000,000.00, leaving a balance of ₱1,200,000.00 payable in three (3) installments. DAVIDE, JR., J.:

Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of Petitioners seek to set aside the decision  of 29 November 1994 of the Court of Appeals in CA-G.R. CV No. 40197, which reversed the
₱200,000.00 each. She, however, failed to pay the third and last installment of ₱800,000.00 due on December 31, decision  of 3 September 1992 of Branch 66 of the Regional Trial Court (RTC) of Makati, Metro Manila, in Civil Case No. 89-4468.
1991. Nevertheless, on August 31, 1992, respondent, through counsel, offered to pay the amount of ₱751,000.00,
which was rejected by petitioner for the reason that the actual balance was ₱805,000.00 excluding the interest The primary issues presented for our resolution are whether (a) the so-called Deed of Absolute Sale executed by
charges. petitioner Emilio A. Salazar in favor of private respondent Jonette Borres is a perfected contract of sale or a mere
contract to sell, and (b) the action for specific performance which the latter filed will lie to compel the former to
Considering that out of the total purchase price of ₱4,200,000.00, respondent has already paid the substantial deliver the Deed of Absolute Sale, the Transfer Certificates of Title, and other documents relative to the property
amount of ₱3,400,000.00, more or less, leaving an unpaid balance of only ₱805,000.00, it is right and just to allow in question.
her to settle, within a reasonable period of time, the balance of the unpaid purchase price. The Court agrees with
the courts below that the respondent showed her sincerity and willingness to comply with her obligation when she The factual antecedents of this case, as summarized by the trial court, are as follows:
offered to pay the petitioner the amount of ₱751,000.00.
That defendant Dr. Salazar is the owner of the two (2) parcels of land with improvements thereon located at
On the issue of interest, petitioner failed to substantiate her claim that respondent made a personal commitment to 2914 Finlandia Street, Makati, Metro Manila and covered by Transfer Certificate of Title Nos. 31038 and
pay a 6% monthly interest on the ₱805,000.00 from the date of delinquency, December 31, 1991. As can be 31039 of the Registry of Deeds of Makati; that Dr. Salazar offered to sell his properties to Jonette Borres for
gleaned from the contract, there was a stipulation stating that: "All the installments shall not bear interest." The One Million pesos (P1,000,000.00) (TSN pp. 7 and 8, November 5, 1991). The initial proposal took place at
the Dimsum Restaurant, Makati, whereby it was proposed that the payment of the consideration was to be
 made within six (6) months but was objected to by Dr. Salazar and he reduced it to a three (3) months period performance cannot prosper. It then dismissed the complaint and ordered Borres to pay the petitioners P5,000.00
(TSN Direct Examination on Jonette Borres p. 22, November 12, 1991); that sometime on [May] 28, 1989, each as attorney's fees and litigation expenses.
Jonette Borres together with a certain Emilio T. Salazar went to see Dr. Salazar at the latter's residence in
Bataan bearing a copy of a Deed of Absolute Sale (Exhibit ("C") and Deed of Warranty (Exhibit "D") but Dr. In ruling that the Deed of Absolute Sale was a contract to sell, the trial court considered pertinent the
Salazar refused to sign because Jonette Borres did not have the money ready then. In said occasion Dr. Salazar circumstances attending its execution. First, that the Deed of Absolute Sale was "reluctantly signed" by Dr.
further reduced the period within which plaintiff may purchase the lots, to one (1) month or up to June 30, Salazar, who was then about to leave for the United States of America, in order that if Borres would comply with
1989 (TSN Direct Examination on Jonette Borres November 5, [1991], pp. 10 and 11). the terms and conditions of their agreement, he need not come to the Philippines just to sign it; hence, it does not
bind Dr. Salazar until the suspensive condition, i.e., the downpayment of P500,000.00 to be effected on or before
Jonette Borres then met again Dr. Salazar on June 2, 1989 at the Ninoy International Airport who was about to 15 June 1989 and the balance to be paid on or before 30 June 1989, is complied with. Second, Borres was not, in
leave for the United States of America where he is a resident. Jonette Borres had with her the Deed of fact, financially prepared to buy the parcels of land on or before 15 June 1989 considering that
Absolute Sale and asked Dr. Salazar to sign said document. Dr. Salazar reluctantly agreed to sign the
document provided that Jonette Borres pays one half (1/2) of the consideration or P500,000.00 in "cash" by [s]he was just looking for possible buyers or business partners. First, she requested that the pertinent
June 15, 1989 and the balance was payable on June 30, 1989 (TSN Direct Examination on Emilio A. Salazar, documents like the Deed of Sale (Exhibit "C") and the corresponding Transfer Certificates of Titles Nos.
May 21, [1991], p. 9; TSN Cross Examination on Jonette Borres, November 12, [1991], pp. 29 and 30). It was 31038 and 31039 of the Register of Deeds of Rizal (Exhibits "A" and "B") be entrusted to her even before
during this occasion that Dr. Salazar again emphasized to Jonette Borres that he needed the money because he making the downpayment of P500,000.00 purposely to raise the amount needed. When Dr. Salazar refused her
was then buying a property in the United States (TSN pp. 15-20, November 5, 1991; pp. 22 and 23, May 21, request, Jonette Borres approached a certain businessman P.D. Dionisio for loan and was turned down when
1991; and pp. 56-57, May 21, 1991). Jonette Borres cannot [sic] produce the Deed of Absolute Sale and the Titles of the parcels of land in question
(TSN November 5, 1991, pp. 20-25). Then she approached a certain Benjamin Balao a realtor developer.
Plaintiff agreed to the above conditions (TSN Cross Examination on Jonette Borres November 12, 1989, p. 32) Although Balao had issued to her his check in the amount of P1,500,000.00 (Exhibit "F") he instructed his
and Dr. Salazar constituted co-defendant Teresa Dizon as custodian at the Deed of Absolute Sale (Exhibit "C") bank not to honor his check without his presence (TSN November 14, 1991, pp. 81 to 84). Jonette Borres
together with the Titles of the Land in question with the instruction to Teresa Dizon not to surrender said admitted that she was not in a position to encash the check (Exhibit "F") although it was payable to "cash"
documents to Jonette Borres until upon payment of the full price in "cash" (TSN Direct Examination on (TSN November 21, 1991, pp. 41 and 44).
Emilio A. Salazar, May 21, [1991], p. 11).
Salazar's victory was short-lived. On Borre's appeal from the decision of the trial court, the Court of Appeals, in its
On June 14, 1989 Jonette Borres informed defendant Dizon that she will be able to pay the full amount of challenged decision of 29 November 1994, ruled that the Deed of Absolute Sale, whose existence and due
P1,000,000.00 on June 15, 1989 (TSN Direct Examination Jonette Borres, November 5, [1991], p. 25) and on execution was undisputed, is perfected contract of sale, with a definite object and a specific consideration which
the next day, she then went to the house of Teresa Dizon to see and get the documents entrusted to her by Dr. the parties had agreed upon. As proof that it is a contract of sale and not a contract to sell, the Court of Appeals
Salazar. The documents not being in Dizon's possession, they agreed to meet at Metro Bank West Avenue stressed the absence of a proviso that the title to the property is reserved in the vendor until full payment of the
Branch to get the documents and then to proceed to Makati to meet the plaintiff's business partner a certain purchase price or that the vendor may unilaterally rescind the contract the moment the vendee fails to pay within
Balao who allegedly gave plaintiff a Far East Bank and Trust Company check for the amount of the fixed period.   Salazar's reluctance to sign it is of no moment, since there is no allegation of fraud, forgery, or
6

P1,500,000.00 (Exhibit "F") with which to buy the property (TSN Direct Examination on Jonette Borres duress. And even assuming that Borres failed to pay the contract price, such failure did not convert the contract
November 5, [1991], pp. 30, 32 and 33). For some reason or another Jonette Borres and defendant Dizon into one without cause or consideration as to vitiate the validity of the contract, it not being essential for the
failed to proceed to Makati. existence of cause that payment or full payment be made at the time of the contract. Neither did such failure ipso
facto resolve the contract in question. The remedy of the vendor, Dr. Emilio A. Salazar, is to demand specific
In the meantime or on June 16, 1992, Dr. Salazar made an overseas call to co-defendant Dizon to inquire if performance or rescission, with damages in either case. On the other hand, the vendee, Jonette Borres, may
Jonette Borres had already paid the down payment of P500,000.00 and Teresa Dizon replied to Dr. Salazar demand specific performance, i.e., compel the vendor to accept the price and deliver the title of the land object of
that Jonette Borres had not paid the down payment. Dr. Salazar then ordered Dizon to stop the sale (TSN the contract.
Direct Examination on Emilio A. Salazar, May 21, [1991], pp. 12 and 13).
The Court of Appeals disagreed with the trial court's finding that Borres was not in a position to pay the
As maybe seen from the evidence presented by the plaintiff and the defendants, the terms and conditions of the downpayment because
agreement for the sale of the two (2) parcels of land owned by Dr. Salazar in favor of the plaintiff Jonette
Borres, are that the purchase price is in the amount of P1,000,000.00, fifty percent (50%) of which or [o]n June 15, 1989, plaintiff-appellant had a Far East Bank check payable to her order, in the amount of
P500,000.00 was to paid on or before June 15, 1989 while the balance thereof was to be paid on or before June P1,500,000.00 — more than the whole agreed purchase price of P1,000,000.00. Defendant-appellee Teresa
30, 1989 (TSN May 21, 1991, p. 27); that the payment was to be made in "cash" (TSN May 21, 1991, p. 55); Dizon agreed (on June 14, 1989) to meet her on June 15, 1989, at Metro Bank West and thereafter to proceed
that the place of payment is at defendant's bank, Metropolitan Bank Quezon City Branch (TSN October 21, to Makati in order to encash the Far East Bank check. Defendant-appellee Teresa Dizon somehow managed to
1991, p. 23). manipulate things by making herself unavailable so that the payment could not be made on June 15, 1989.
(TSN, Nov. 5, 1991, pp. 27-41). On the next day, June 16, 1989, defendant-appellee Teresa Dizon informed
The trial court held that the Deed of Absolute Sale was in reality a contract to sell, and that since Borres failed to plaintiff-appellant that defendant-appellee Dr. Emilio A. Salazar called up in the evening of June 15, 1989
pay Salazar the downpayment of P500,000.00 on the agreed date, 15 June 1989, the complaint for specific asking whether plaintiff-appellant paid on that day and upon being answered in the negative, said vendor said
that he is revoking the contract. (TSN, Nov. 5, 1991, pp. 41-42). Defendant-appellee Teresa Dizon having her
 own interested buyer, evidently acted in bad faith, tried and indeed succeeded to frustrate the efforts of 2. THERE WAS AN EXPRESS AGREEMENT BETWEEN THE PARTIES THAT BORRES SHALL BE
plaintiff-appellant to comply with her reciprocal obligation to pay the agreed purchase price. ENTITLED TO THE PROPERTY OR ANY RECORDS PERTAINING THERETO OR ORIGINAL COPIES
OF THE DEED OF ABSOLUTE SALE ONLY UPON FULL PAYMENT OF THE PURCHASE PRICE.
The fact that the Far East Bank check was payable to the Order of plaintiff-appellant, and it covers the amount
of P1,500,000.00 — which is much more than the agreed purchase price of P1,000,000.00 — reveals that C. . . . in holding that DIZON acted in bad faith and succeeded to frustrate the efforts of BORRES to comply
plaintiff-appellant was financially prepared to comply with her reciprocal obligation. That plaintiff-appellant with her reciprocal obligation to pay the purchase price notwithstanding the fact that:
filed the present suit for specific performance on July 6, 1989, bolsters the fact that she is really willing and
able to pay the agreed purchase price. How and from whom she borrowed/obtained the said amount, is of no 1. AT THE TIME THAT BORRES WAS OBLIGED TO PAY AT LEAST 50% OF THE PURCHASE
consequence. PRICE OR ON JUNE 15, 1989, SHE WAS NOT READY, WILLING AND ABLE TO DO SO. EVEN
ASSUMING FOR THE SAKE OF ARGUMENT THAT THE LATTER HAD THE FINANCIAL
Accordingly, the respondent Court reversed the decision of the trial court and handed down a new judgment CAPABILITY TO MEET HER OBLIGATION, THE FACT REMAINS THAT SHE FAILED TO
ordering Emilio A. Salazar to accept from Jonette Borres the payment representing the purchase price in the PROPERLY TENDER PAYMENT OF HER OBLIGATION AND IN CASE TENDER OF PAYMENT WAS
amount of P1 million and thereafter to comply with his reciprocal obligation to surrender the original copies of the REFUSED, TO CONSIGN THE SAME IN COURT;
deed of absolute sale and torrens title covering the parcels of land subject of the contract. Finding petitioner
Teresita Dizon to have "acted in bad faith in frustrating the efforts" of Borres to comply with her obligation to pay 2. DIZON HAD NO REASON TO FRUSTRATE THE EFFORTS OF BORRES TO COMPLY WITH HER
the purchase price, the appellate court ordered her to pay Borres the amounts of P80,000.00 as moral damages; OBLIGATION TO PAY THE AGREED PURCHASE PRICE SINCE SHE WAS MERELY CONSTITUTED
P50,000.00 as exemplary damages; and P100,000.00 as attorney's fees. AS CUSTODIAN OF THE DEED OF ABSOLUTE SALE AND TITLES OF THE PROPERTY WITH
SPECIFIC INSTRUCTIONS TO RELEASE THE SAME TO BORRES ONLY UPON RECEIPT OF THE
Unable to accept the reversal of the trial court's decision, the petitioners filed the instant petition wherein they PURCHASE PRICE IN FULL AND IN CASH WITHIN THE AGREED PERIOD.
submit that the Court of Appeals committed grave and serious errors:
D. . . . in ordering Dizon to pay Borres the amount of P80,000.00 moral damages; P50,000.00 exemplary
A. . . . in relying on the Deed of Absolute Sale dated May 30, 1989 notwithstanding the fact that: damages and P100,000.00 as attorney's fees by way of damages notwithstanding the fact that the evidence
adduced before the trial court clearly shows that BORRES had no cause of action against the former.
1. BORRES EXECUTED A DEED OF WARRANTY (EXHS. "D" AND "2") STATING THEREIN THAT
UNTIL AND UNLESS THE AMOUNT OF P1,000,000.00 REPRESENTING THE PURCHASE PRICE FOR We shall first the issue of whether the agreement between petitioner Salazar and private respondent Borres is
THAT PARCELS OF LAND COVERED BY TCT NOS. S-31038 AND S-31039 BE PAID BY HER TO a contract of sale or a contract to sell.
SALAZAR, SHE HAS NO RIGHT WHATSOEVER TO THE ORIGINAL COPIES OF THE DEED OF
ABSOLUTE SALE AND THAT SHE HAS NO LEGAL RIGHT WHATSOEVER TO ANY AND ALL In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract
PERTINENT RECORDS OF THE ABOVE-MENTIONED LOTS; to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot
2. UPON HERE BEHEST, BORRES WAS GIVEN A PHOTOCOPY OF THE DEED OF ABSOLUTE SALE recover it until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the
BY DIZON BUT ONLY AFTER THE LATTER ERASED THE SIGNATURE OF SALAZAR AS THE vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive
VENDEE THEREIN. condition, failure of which is not a breach but an event prevents the obligation of the vendor to convey title from
becoming effective.
3. BORRES HAD NOT PAID ANY PORTION OF THE AGREED PURCHASE PRICE AND THUS
RENDERS THE DEED OF ABSOLUTE SALE VOID AB INITIO. If we are to consider only the Deed of Absolute Sale,   we can easily say that the contract between Salazar and
10

Borres is one of sale. However, the Deed of Warranty and the oral testimony on the circumstances surrounding the
B. . . . in concluding that the agreement between SALAZAR and BORRES is a contract of sale and thus, execution of the Deed of Absolute Sale, as well as the other pieces of evidence submitted by Borres, sustain the
perfected upon agreement on the subject matter and consideration, notwithstanding the fact that: finding and conclusion of the trial court that the true agreement between the parties was a contract to sell in that
the true intent of Salazar was to transfer ownership of the property to Borres only after the latter pays the full
consideration.
1. THE AGREEMENT BETWEEN THE PARTIES IS ESSENTIALLY A CONTRACT TO SELL SUBJECT
TO A SUSPENSIVE CONDITION, THE BIRTH OR EFFECTIVITY OF WHICH SHOULD TAKE PLACE
ONLY IF AND WHEN THE EVENT WHICH CONSTITUTES THE CONDITION HAPPENS OR IS From the beginning to the end, such intention of Salazar was unequivocal and manifest. He rejected Borre's offer
FULFILLED. SINCE BORRES FAILED TO COMPLY WITH HER OBLIGATION, THE AGREEMENT to pay the consideration within six months to give her time to secure a loan. When Borres proposed that he lend
TO SELL BECAME STILLBORN; her the certificates of title of the lots so that she could secure a loan from the banks in Manila and be able to pay,
within three months, the consideration out of the proceeds of the loan, Salazar agreed provided that she would
assure him that the title would not pass to her until he is fully paid. Borres forthwith promised to execute a
warranty. She then prepared a Deed of Absolute Sale for Salazar's signature and a Deed of Warranty for her
signature. When finally she presented to him the Deed of Absolute Sale, Salazar did not sign it and insisted that he
be paid the purchase price at the end of June 1989; he further told her that he would not lend her the certificates of A I told Dr. Salazar. Dr. Salazar said that he could not wait for that six (6) months is a very long time.
title until he is so paid. He signed it only after Borres agreed to pay by the end of June 1989 at a bank in Makati.
But he did not give the Deed of Absolute Sale to her; instead, he told her to just meet him at the Ninoy Aquino Q What else did you say?
International Airport on 2 June 1989, when he would leave for the United States of America, so she would know
to whom he would entrust the document and other papers relative to the property. We quote verbatim Borre's own
testimony on direct examination upon these points: A I told Dr. Salazar that "it is possible I can pay within three (3) months' time if your can lend me the title of
your property because banks here in Manila usually release loans in three months' time and I will have less
problem to complete the payment of ONE MILLION PESOS (P1,000,000.00)."
Q Have you met the owner of the lot mentioned a while ago?
Q So, what did Dr. Salazar say?
A Yes, your Honor, I met Dr. Salazar, the owner, sometime last week of April, 1989 at Dimsum Restaurant.
A Dr. Salazar said that "if it is the best for our transaction I can lend you the title provided I can be assured
Q You met at Dimsum, in what particular place was that? that the title will not pass on you until you are fully paid.

A We met at Dimsum Restaurant in Makati after I was called by Emilio T. Salazar to meet at Dimsum because Q What was your answer then?
Dr. Salazar wanted to sell the property and he wanted to talk to you [sic].
A I told Dr. Salazar that I can execute a warranty to the effect that the property could not be transferred to me
COURT: until I have fully paid him.

Talk to you? Q What did Dr. Salazar say?

A To discuss the matter of sale to me at Dimsum Sir A Dr. Salazar said "I will agree to that"

ATTY. BORRES: COURT:

Q And so you really met at Dimsum. Dr. Salazar told you that he is agreeable to the proposal.

A Yes, Ma'am. A Yes, Dr. Salazar said "you prepare a craft, the necessary document and bring it to Bataan.

Q What transpired at Dimsum? ATTY. BORRES:

A Dr. Salazar offered me to buy the properties for a total of ONE MILLION PESOS (P1,000,000.00) Q And what was your answer to Dr. Salazar
excluding all and any other expenses that may be involved in the transfer of the properties in case I am
interested to by [sic], in case Atty. Borres wanted to buy.
A I answered Dr. Salazar that "I will be ever willing to go to Bataan any time you wanted me to go.
Q What then was your reply?
Q And you really did go to Bataan.
A I am interested to buy.
A Yes, I did.
Q Dr. Salazar. . . I asked . . . what did Dr. Salazar say after that?
x x x           x x x          x x x
A I answered Dr. Salazar that I could buy or able to buy the properties within six (6) months because I have to
go home to the province to secure a loan. ATTY BORRES:

Q What did Dr. Salazar say regarding your proposal? Q And what happened while there in Bataan?
 x x x           x x x          x x x mortgage the property as security therefor. But, perhaps anticipating Salazar's departure to the United States of
America where he resides, Borres, who is a lawyer, prepared instead a Deed of Absolute Sale and Deed of
Warranty. Notwithstanding Borre's deliberate characterizations of the documents, we are convinced that they were
Q And what happened while you got all seated in the sala of Dr. Salazar.
prepared in connection with and in the implementation of the agreement regarding the lending of the certificates of
title. They do not weaken the adamantine position of Salazar not to part with his title to the two lots until full
A I showed him a document which he instructed me to prepare and he has read it and agreed to the Deed of payment of the agreed price therefor. Borre's execution of the Deed of Warranty was in fact a recognition of
Absolute Sale and the warranty I made. He gave me back the documents for signing. Salazar's position. Despite its careful wordings and phraseology to make some sort of distinction between Borre's
right to the ownership or title over the lots on the one hand, and her right to possess or keep the Deed of Absolute
Q And you did sign the document? Sale and the other documents relative to the lots, the totality of the Deed of Warranty manifests an indubitable
recognition by Borres of the aforementioned intention of Salazar. She declares therein as follows:
A Yes, I did sign it and passed it on to Dr. Salazar.
1. That until and unless the amount of ONE MILLION (P1,000,000.00) PESOS representing the purchase
price for that parcels of land covered by Transfer Certificate of Title Nos. S-31038 and S-31039 be paid by the
Q After you passed it to Dr. Salazar, what happened? undersigned unto Dr. Emilio A. Salazar, the undersigned has no absolute right whatsoever to the original
copies of the Deed of Absolute Sale executed by said Dr. Emilio A. Salazar date May ____, 1989;
A Dr. Salazar did not sign the document and told me that he is only going to sign it if I am going to pay by the
end of June and that he could not lend me the title and he said he is going to sign it and not to give me a copy 2. That she has no legal right whatsoever to any and all pertinent records of the aforementioned lots;
until the purchase price is fully paid.

3. That upon payment of the aforementioned amount, Dr. Emilio A. Salazar or his representative is obliged to
Q And what was your reaction with the statement? surrender the original of these presents together with all the original documents and titles covering the sale of
the aforementioned lots unto the undersigned.
A I said "what about the loan that we have a greed at Dimsum if you will not lend me the title and the
document that we have signed new?" Dr. Salazar said "I could not lend you the title and I care less how your Then, too, in her Memorandum of Agreement with Monteland Realty Corporation, dated 15 June 1989, Borres
are going to loan the property and raise the money you are going to pay me, what is important to me is you pay explicitly mentioned only her "rights and interests" under the Deed of Absolute Sale signed by Salazar and therein
me the whole amount of One Million Pesos (P1,000,000.00) not late than June 30, 1989." conveyed, transferred, and assigned to the said corporation only such "rights and interest." Also worth noting is the
statement in the second whereas clause of the Memorandum of Agreement that Monteland Realty Corporation
Q And what did you say?
has full knowledge of the sales [sic] and conditions of the SELLER-OWNER of the property . . . that the buyer
A Since I could not do anything and I really wanted to buy the property, I agreed to Dr. Salazar's condition [Borres] has an obligation to pay DR. EMILIO SALAZAR the amount of ONE MILLION PESOS
that I pay the property by the end of June and I will pay only at the bank in Makati. (P1,000,000.00) and that there is already a Deed of Absolute Deed of [sic] Sale in favor of [Borres] of which
both copies of the titles of the properties for sale and all documents including the Deed of Absolute Sale
Q And what did Dr. Salazar say? aforementioned are including the Deed of Absolute Sale aforementioned are under the custody of MS.
TERESA DIZON who will only release the Title and the Deed of Absolute Sale after the obligation of
[Borres] is fully
A Dr. Salazar said "okey I will sign this and have this notarized but I could not lend you and never have a paid.
[copy] of the title as well as the Deed of Sale and you just wait oat NAIA and wait if you could have this
document because I am leaving on June 2 for the US. You meet me there".
The withholding by Salazar through Dizon of the Deed of Absolute Sale, the certificates of title, and all other
documents relative to the lots is an additional indubitable proof that Salazar did not transfer to Borres either by
Q And after that what did Dr. Salazar do? actual or constructive delivery the ownership of the two lots. While generally the execution of a deed of absolute
sale constitutes constructive delivery of ownership, the withholding by the vendor of that deed under explicit
A It was only when that he signed the document after I have agreed to his proposal but he was very much agreement that it be delivered together with the certificates of titles to the vendee only upon the latter's full
stand [sic] to the payments and he was no longer the same when I met him at Dimsum. payment of the consideration amounts to a suspension of the effectivity of the deed of sale as a binding contract.

Clearly then, the original intention in the execution of the Deed of Absolute Sale was to implement the proposal of Undoubtedly, Salazar and Borres mutually agreed that despite the Deed of Absolute Sale title to the two lots in
Borres that Salazar "lend" her the transfer certificates of title so that she could secure a loan from a bank in Manila question was not to pass to the latter until full payment of the consideration of P1 million. The form of the
whose proceeds would be applied to the payment of the purchase price of the property, and the original purpose of instrument cannot prevail over the true intent of the parties as established by the evidence.
the Deed of Warranty was to assure Salazar that, as demanded by him, title to the lots will not pass to her until she
pays the full consideration. The lending of the certificates of title for the above purpose could have been Accordingly, since Borres was unable to pay the consideration, which was a suspensive condition, Salazar cannot
accomplished through a special power of attorney under which Salazar will authorize her to obtain a loan and to be compelled to deliver to her the deed of sale, certificates of title, and other documents concerning the two lots. In
other words, no right in her favor and no corresponding obligation on the part of Salazar were created. Article RESOLUTION
1181 of the Civil Code provides:
NACHURA, J.:
In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already
acquired shall depend upon the happening of the event which constitutes the condition. Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the December
6, 2005 Decision of the Court of Appeals (CA) in CA-G.R. CV No. 79385.
Even granting for the sake of argument that, as ruled by the court of Appeals, the agreement of Salazar and Borres
as evidenced by the Deed of Absolute Sale was a perfected contract of sale, Borre's action for specific On November 7, 1997, Emmaliza Bohler and respondents negotiated for the sale of the former’s house and lot
performance must likewise fail. We are in full accord with the trial court and, perforce, disagree with the Court of located at Poblacion, New Washington, Aklan, to the latter for the consideration of ₱165,000.00. On the following
Appeals, that Borres was not ready to pay P500,000.00 on or before 15 June 1989. That Borres had a check of day, November 8, they signed an Agreement which pertinently reads as follows:
P1.5 million, or of more than the full consideration of the two lots, is of no moment. The check,  7 dated 15 June
1

1989, is a crossed check payable to "Atty. Jonette Borres," or herein private respondent. The crossing is of simple
type — two parallel lines at the upper left hand corner without the words "and company" between the lines. We, the undersigned, agree to the following terms and conditions regarding the sale of the house and lot located at
Accordingly, it cannot be paid to anyone except Borres, or it can be deposited with a bank where she keeps an Poblacion, New Washington, Aklan:
account.
1. That the total amount to be paid shall be One Hundred Sixty-Five Thousand Pesos (₱165,000.00) to be paid
There is absolutely no evidence that Borres encashed the check and tendered to Salazar thru Dizon the sum of in full on or before the 15th of December 1997;
P500,000.00 on 15 June 1989. On the contrary, the check itself was cancelled as shown by the
word cancelled handwritten across it. Moreover, the delivery of the check by Monteland Realty Corporation 2. That a partial payment (sic) a total amount of One Hundred Thirty Thousand Pesos (₱130,000.00) shall be
through Balao was not unconditional. Per the receipt Borres signed on 15 June 1989, encashment of the check "it made today, the 8th of November 1997;
subject to the verifications as to the authenticity of documents pertaining to the subject property." Neither is there
evidence that Borres paid the downpayment on 15 June 1989 with money she got from other sources. No payment 3. That the remaining balance in the amount (sic) of Thirty-Five Thousand Pesos (₱35,000.00) shall be made
appears to have been made thereafter or during the pendency of the case before the trial court or the Court of as per #1 above;
Appeals. She should have consigned the payment in court pursuant to Article 1256 of the Civil Code for her to be
released from her obligation and, consequently, exact fulfillment by Salazar of his corresponding obligation.
4. That the buyers, represented by the Spouses Rudy and Consolacion Reyes (sic) shall be responsible for all
the legal and other related documents and procedures regarding this sale;
The challenged decision of the Court of Appeals must then be reversed. That of the trial court must be affirmed,
with the modification consisting in the deletion of the award of attorney's fees in favor of the petitioners which we
find to be without basis. The award of attorney's fees as damages is the exception rather than the rule; it is not to 5. That the seller, represented by Ms. Emmaliza M. Bohler, shall vacate the said house and lot on or (sic) the
be given to the defendant every time the latter prevails. The right to litigate is so precious that a penalty should not 31st of January, 1998;
be charged on those who may exercise it erroneously, unless, of course such party acted in bad faith.
6. That the tenants, represented by the Spouses Romeo and Epifania Vicente, shall vacate the same on or
WHEREFORE, the instant petition is hereby GRANTED. The challenged decision of 29 November 1994 of the before the 30th of April, 1998; and
Court of Appeals in CA-G.R. CV No. 40197 is REVERSED and SET ASIDE, and the decision of 3 September
1992 of Branch 66 of the Regional Trial Court of Manila in Civil Case No. 89-4468 is AFFIRMED, subject to the 7. That all parties concerned shall agree to all the terms and conditions stipulated herein.
modification that the award for attorney's fees is deleted.
Upon the signing of the said contract, respondents handed to Bohler ₱20,000.00 cash and allegedly a ₱110,000.00-
No pronouncement as to costs. check. Bohler nonetheless insisted that the entire partial payment should be in cash as she needed it to redeem the
subject property from the bank on the following Monday. She hence demanded for its payment up to midnight on
SO ORDERED. that day otherwise she would cancel the sale. Because the respondents failed to make good the ₱110,000.00,
Bohler subsequently sold the property to the petitioners.

G.R. No. 170917               November 28, 2007

Having learned of the subsequent sale, the respondents immediately tendered the check, asked the bank for a
certification that it was funded and consulted their lawyer who sent a notice of lis pendens to the Register of Deeds
SPOUSES NESTOR CASTILLO and ROSIE REYES-CASTILLO, Petitioners, and the Provincial Assessor. Civil Case No. 6070 for annulment of sale, specific performance and damages was
vs. subsequently filed by the respondents with the Regional Trial Court (RTC) of Kalibo, Aklan against Bohler and
the petitioners.
SPOUSES RUDY REYES and CONSOLACION REYES, Respondents.
On February 21, 2003, the RTC rendered its Decision declaring the November 8, 1997 Agreement a contract to vs.
sell. Considering that no actual sale happened between Bohler and the respondents, the former could validly sell BRYC-V DEVELOPMENT CORPORATION represented by its President,
the property to the petitioners. Thus, the trial court dismissed the complaint.
BENJAMIN QUIDILLA; and SEA FOODS CORPORATION, represented by its
Aggrieved, respondents appealed the case to the CA. In the challenged December 6, 2005 Decision, the appellate
Executive Vice President, VICENTE T. HERNANDEZ, Respondents.
court reversed the trial court’s ruling, declared the November 8, 1997 Agreement a contract of sale, and annulled
the subsequent sale to the petitioners. The CA ruled, among others, that the wordings of the agreement and the DECISION
conduct of the parties suggest that they intended to enter into a contract of sale. Ownership was not reserved by the
vendor and non-payment of the purchase price was not made a condition for the contract’s effectivity. NACHURA, J.:

Petitioners, thus, filed the instant petition for review on certiorari imputing the following errors to the CA: This petition for review on certiorari seeks to set aside the Decision of the Court of Appeals (CA) in CA G.R. CV
No. 62557 which affirmed in toto the Decision of the Regional Trial Court (RTC), Branch 16, Zamboanga City in
1. The appellate court erred in declaring the contract styled AGREEMENT dated 08 November 1997 as a Civil Case No. 467(4544).
"contract of sale" and not a contract to sell.
The facts are simple.
2. The appellate court erred in declaring the petitioners in bad faith when they bought the subject matter house
and lot on 02 March 1998 from Emmaliza H. Bohler. Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower Calainan,
Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T-576).
The pivotal question to be addressed by the Court in this petition is whether the transaction between Bohler and
the respondents is a perfected contract of sale or a mere contract to sell. Sometime in 1991, petitioner United Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an
organization of squatters occupying Lot No. 300, through its President, Carmen T. Diola, initiated negotiations
Sale is a consensual contract and is perfected by mere consent, which is manifested by a meeting of the minds as with SFC for the purchase thereof. UMCUPAI expressed its intention to buy the subject property using the
to the offer and acceptance thereof on the subject matter, price and terms of payment of the price. In the instant proceeds of its pending loan application with National Home Mortgage Finance Corporation (NHMF). Thereafter,
case, the November 8, 1997 Agreement clearly indicates that Bohler and the Spouses Reyes had a meeting of the the parties executed a Letter of Intent to Sell by [SFC] and Letter of Intent to Purchase by UMCUPAI, providing,
minds on the subject matter of the contract, the house and lot; on the price, ₱165,000.00; and on the terms of in pertinent part:
payment, an initial payment of ₱130,000.00 on the date of execution of the agreement and the remaining balance
on or before December 15, 1997. At that precise moment when the consent of both parties was given, the contract WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as Lot No. 300 situated in Lower
of sale was perfected. Calarian, Zamboanga City, consisting of 61,736 square meters, and more particularly described in Transfer
Certificate of Title No. 576 of the Registry of Deeds of Zamboanga City;
The said agreement cannot be considered a contract to sell. In a contract of sale, the title to the property passes to
the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No. 403410) and duly
vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of accredited with the Presidential Commission for the Urban Poor, has approached [SFC] and negotiated for the
sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or ACQUISITION of the above-described property of [SFC];
rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter
contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective. The November 8, 1997 Agreement WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter has taken steps with the
herein cannot be characterized as a contract to sell because the seller made no express reservation of ownership or proper government authorities particularly the Mayor of Zamboanga City and its City Housing Board which will
title to the subject house and lot. Instead, the Agreement contains all the requisites of a contract of sale. act as "Originator" in the acquisition of said property which will enable UMCUPAI to avail of its Community
Mortgage Program;

WHEREFORE, premises considered, the petition for review on certiorari is DENIED DUE COURSE.
WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation
for a loan to pay the acquisition price of said land;
SO ORDERED.
WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a
G.R. No. 179653               July 31, 2009 formal manifestation of Intent to Sell from [SFC];

UNITED MUSLIM AND CHRISTIAN URBAN POOR ASSOCIATION, INC. NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree as follows:
represented by its President, MANUEL V. BUEN, Petitioner,
 1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736 square meters situated in In a separate Answer, SFC countered that the Letter of Intent dated October 4, 1991 is not, and cannot be
Lower Calarian, Zamboanga City and covered by TCT No. 576 of the Registry of Deeds of Zamboanga City considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the document was drawn and
to UMCUPAI at the price of P105.00 per square meter, free from all liens, charges and encumbrances; executed merely to accommodate UMCUPAI and enable it to comply with the loan documentation requirements
of NHMF. In all, SFC maintained that the Letter of Intent dated October 4, 1991 was subject to a condition i.e.,
2. That UMCUPAI hereby expressly declares its intention to buy the aforesaid property and shall endeavor to payment of the acquisition price, which UMCUPAI failed to do when it did not obtain the loan from NHMF.
raise the necessary funds to acquire same at the abovementioned price of P105.00 per square meter;
After trial, the RTC dismissed UMCUPAI’s complaint. The lower court found that the Letter of Intent was
3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title and all other executed to facilitate the approval of UMCUPAI’s loan from NHMF for its intended purchase of Lot No. 300.
pertinent documents upon full payment of the purchase price; According to the RTC, the Letter of Intent was simply SFC’s declaration of intention to sell, and not a promise to
sell, the subject lot. On the whole, the RTC concluded that the Letter of Intent was neither a promise, nor an option
contract, nor an offer contemplated under Article 1319 of the Civil Code, or a bilateral contract to sell and buy.
4. That [SFC] shall pay the capital gains tax and documentary stamps, Registration, transfer tax and other
expenses shall be paid by the UMCUPAI.
As previously adverted to, the CA, on appeal, affirmed in toto the RTC’s ruling.
However, the intended sale was derailed due to UMCUPAI’s inability to secure the loan from NHMF as not all its
members occupying Lot No. 300 were willing to join the undertaking. Intent on buying the subject property, Hence, this recourse by UMCUPAI positing a sole issue for our resolution:
UMCUPAI, in a series of conferences with SFC, proposed the subdivision of Lot No. 300 to allow the squatter-
occupants to purchase a smaller portion thereof. IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A BILATERAL RECIPROCAL
CONTRACT WITHIN THE MEANING OR CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH,
Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by separate CIVIL CODE OF THE PHILIPPINES?
titles:
The petition deserves scant consideration. We completely agree with the lower courts’ rulings.
1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T-117,448;
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the
2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T-117,449; and appellate court, are accorded the highest degree of respect and are considered conclusive between the parties. A
review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances,
such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises or conjectures; (2)
3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-117,450. when a lower court’s inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when
there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go
On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58. In turn, Lot No. 300-B was beyond the issues of the case, or fail to notice certain relevant facts which, if properly considered, would justify a
constituted as road right of way and donated by SFC to the local government. different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions
without mention of the specific evidence on which they are based, or are premised on the absence of evidence, or
UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew are contradicted by evidence on record. None of the foregoing exceptions necessitating a reversal of the assailed
with SFC and was given by the latter another three months to purchase Lot No. 300-C. However, despite the decision obtain in this instance.
extension, the three-month period lapsed with the sale not consummated because UMCUPAI still failed to obtain a
loan from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V UMCUPAI is adamant, however, that the CA erred when it applied the second paragraph of Article 1479 of the
Development Corporation (BRYC). Civil Code instead of the first paragraph thereof. UMCUPAI urges us that the first paragraph of Article 1479
contemplates a bilateral reciprocal contract which is binding on the parties. Yet, UMCUPAI is careful not to
A year later, UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC seeking to annul the designate the Letter of Intent as a Contract to Sell. UMCUPAI simply insists that the Letter of Intent is not a
sale of Lot No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI alleged that the sale between the unilateral promise to sell or buy which has to be supported by a consideration distinct from the price for it to be
respondents violated its valid and subsisting agreement with SFC embodied in the Letter of Intent. According to binding on the promissor. In short, UMCUPAI claims that the Letter of Intent did not merely grant the parties the
UMCUPAI, the Letter of Intent granted it a prior, better, and preferred right over BRYC in the purchase of Lot option to respectively sell or buy the subject property. Although not stated plainly, UMCUPAI claims that the
No. 300-C. Letter of Intent is equivalent to a conditional contract of sale subject only to the suspensive condition of payment
of the purchase price.

In refutation, BRYC said that UMCUPAI’s complaint did not state a cause of action since UMCUPAI had
unequivocally recognized its ownership of Lot No. 300-C when UMCUPAI likewise sent BRYC a Letter of Intent UMCUPAI appears to labor under a cloud of confusion. The first paragraph of Article 1479 contemplates the
dated August 18, 1995 imploring BRYC to re-sell the subject lot. bilateral relationship of a contract to sell as distinguished from a contract of sale which may be absolute or
conditional under Article 1458 of the same code. It reads:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance Corporation
promissor if the promise is supported by a consideration distinct from the price. for a loan to pay the acquisition price of said land;

The case of Coronel v. Court of Appeals is illuminating and explains the distinction between a conditional contract WHEREAS, as one of the steps required by the government authorities to initiate proceedings is to receive a
of sale under Article 1458 of the Civil Code and a bilateral contract to sell under Article 1479 of the same code: formal manifestation of Intent to Sell from [SFC].

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject property, subject only to
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to the condition of complete payment of the purchase price; nor, at the least, that SFC, although expressly retaining
sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, ownership thereof, binds itself to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and Sell
full payment of the purchase price. is just that – a manifestation of SFC’s intention to sell the property and UMCUPAI’s intention to acquire the same.
This is quite obvious from the reference to the execution of an Absolute Deed of Sale in paragraph three of the
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the Letter of Intent.
seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the As the CA did, we quote with favor the RTC’s disquisition:
happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the The Decision in this case hinges on the legal interpretation of the Agreement entered into by SFC and UMCUPAI
contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of denominated as "Letter of Intent to Sell by Landowner and Letter of Intent to Purchase by United Muslim and
the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any Christian Urban Poor Association, Inc."
further act having to be performed by the seller.
Black’s Law Dictionary says that a Letter of Intent is customarily employed to reduce to writing a preliminary
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase understanding of parties who intend to enter into contract. It is a phrase ordinarily used to denote a brief
price, ownership will not automatically transfer to the buyer although the property may have been previously memorandum of the preliminary understanding of parties who intend to enter into a contract. It is a written
delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract statement expressing the intention of the parties to enter into a formal agreement especially a business arrangement
of absolute sale. or transaction.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where In their Agreement, SFC expressly declared its "intention" to sell and UMCUPAI expressly declared its
the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the "intention" to buy subject property. An intention is a mere idea, goal, or plan. It simply signifies a course of action
case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such that one proposes to follow. It simply indicates what one proposes to do or accomplish. A mere "intention" cannot
property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for give rise to an obligation to give, to do or not to do (Article 1156, Civil Code). One cannot be bound by what he
instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance proposes or plans to do or accomplish. A Letter of Intent is not a contract between the parties thereto because it
of the property. There is no double sale in such case. Title to the property will transfer to the buyer after does not bind one party, with respect to the other, to give something, or to render some service (Art. 1305, Civil
registration because there is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for Code).
damages by the intending buyer.
xxx     xxx     xxx
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes
absolute and this will definitely affect the seller’s title thereto. In fact, if there had been previous delivery of the
subject property, the seller’s ownership or title to the property is automatically transferred to the buyer such that, The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding of the
the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, parties wherein they declared their intention to enter into a contract of sale. It is subject to the condition that
such second buyer of the property who may have had actual or constructive knowledge of such defect in the UMCUPAI will "apply with the Home Mortgage and Finance Corporation for a loan to pay the acquisition price
seller’s title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good of said land." One of the requirements for such loan is "a formal manifestation of Intent to Sell" from SFC. Thus,
faith. Such second buyer cannot defeat the first buyer’s title. In case a title is issued to the second buyer, the first the Letter of Intent to Sell fell short of an "offer" contemplated in Article 1319 of the Civil Code because it is not a
buyer may seek reconveyance of the property subject of the sale. certain and definite proposal to make a contract but merely a declaration of SFC’s intention to enter into a
contract. UMCUPAI’s declaration of intention to buy is also not certain and definite as it is subject to the
condition that UMCUPAI shall endeavor to raise funds to acquire subject land. The acceptance of the offer must
In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to sell nor a be absolute; it must be plain and unconditional. Moreover, the Letter of Intent/Agreement does not contain a
conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of Intent was executed to promise or commitment to enter into a contract of sale as it merely declared the intention of the parties to enter
accommodate UMCUPAI and facilitate its loan application with NHMF. The 4th and 5th paragraphs of the recitals into a contract of sale upon fulfillment of a condition that UMCUPAI could secure a loan to pay for the price of a
(whereas clauses) specifically provide: land.
The Letter of Intent/Agreement is not an "option contract" because aside from the fact that it is merely a AQUINO, J.:
declaration of intention to sell and to buy subject to the condition that UMCUPAI shall raise the necessary funds
to pay the price of the land, and does not contain a binding promise to sell and buy, it is not supported by a distinct The question in this case is whether the People's Homesite & Housing Corporation bound itself to sell to the
consideration distinct from the price of the land intended to be sold and to be bought x x x No option was granted Mendoza spouses Lot 4 (Road) Pcs- 4564 of the revised consolidation subdivision plan with an area of 2,6,08.7
to UMCUPAI under the Letter of Intent/Agreement to buy subject land to the exclusion of all others within a fixed (2,503.7) square meters located at Diliman, Quezon City.
period nor was SFC bound under said Agreement to Sell exclusively to UMCUPAI only the said land within the
fixed [Link]!l

The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein it stated "that subject to
the approval of the Quezon City Council of the above-mentioned Consolidation Subdivision Plan, Lot 4.
Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to sell and to buy containing 4,182.2 square meters be, as it is hereby awarded to Spouses Rizalino Mendoza and Adelaida
contemplated under Article 1479 of the Civil Code which is reciprocally demandable. The Letter of Mendoza, at a price of twenty-one pesos (P21.00) per square meter" and "that this award shall be subject to the
Intent/Agreement does not contain a PROMISE to sell and to buy subject property. There was no promise or approval of the OEC (PHHC) Valuation Committee and higher authorities".
commitment on the part of SFC to sell subject land to UMCUPAI, but merely a declaration of its intention to buy
the land, subject to the condition that UMCUPAI could raise the necessary funds to acquire the same at the price
of P105.00 per square meter x x x The city council disapproved the proposed consolidation subdivision plan on August 20, 1961 (Exh. 2). The said
spouses were advised by registered mail of the disapproval of the plan (Exh. 2-PHHC). Another subdivision plan
was prepared and submitted to the city council for approval. The revised plan, which included Lot 4, with a
While UMCUPAI succeeded in raising funds to acquire a portion of Lot No. 300-A, it failed to raise funds to pay reduced area of 2,608.7, was approved by the city council on February 25, 1964 (Exh. H).
for Lot No. 300-C. From October 4, 1991 when the Letter of Intent was signed to June, 1995, UMCUPAI had
about three (3) years and eight (8) months within which to pursue its intention to buy subject land from SFC.
Within that period, UMCUPAI had ample time within which to acquire Lot No. 300-C, as in fact it had acquired On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards of lots to persons who
Lot No. 300-A which is much bigger than Lot No. 300-C and occupied by more members of UMCUPAI. The failed to pay the deposit or down payment for the lots awarded to them (Exh. 5). The Mendozas never paid the
failure of UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V cannot be blamed on SFC because price of the lot nor made the 20% initial deposit.
all that UMCUPAI had to do was to raise funds to pay for Lot No. 300-C which it did with respect to Lot No. 300-
A. SFC had nothing to do with SFC’s unilateral action through Mrs. Antonina Graciano to "postpone" the On October 18, 1965 the PHHC board of directors passed Resolution No. 218, withdrawing the tentative award of
processing of the acquisition of Lot No. 300-C, which it referred to as Phase II, until after the payment to SFC of Lot 4 to the Mendoza -spouses under Resolution No. 513 and re-awarding said lot jointly and in equal shares to
the acquisition price for Lot No. 300-A or Phase I x x x Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, subject to
existing PHHC rules and regulations. The prices would be the same as those of the adjoining lots. The awardees
WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals in CA were required to deposit an amount equivalent to 20% of the total selling price (Exh. F).
G.R. CV No. 62557 and the Regional Trial Court in Civil Case No. 467(4544) are AFFIRMED. Costs against the
petitioner. The five awardees made the initial deposit. The corresponding deeds of sale were executed in their favor. The
subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands.
SO ORDERED.
On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal of the previous award to
them of Lot 4 and for the cancellation of the re-award of said lot to Sto. Domingo and four others. Before the
request could be acted upon, the spouses filed the instant action for specific performance and damages.

The trial court sustained the withdrawal of the award. The Mendozas appealed. The Appellate Court reversed that
decision and declared void the re-award of Lot 4 and the deeds of sale and directed the PHHC to sell to the
G.R. No. L-61623 December 26, 1984 Mendozas Lot 4 with an area of 2,603.7 square meters at P21 a square meter and pay to them P4,000 as attorney's
fees and litigation expenses. The PHHC appealed to this Court.

PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant,

The issue is whether there was a perfected sale of Lot 4, with the reduced area, to the Mendozas which they can
vs. enforce against the PHHC by an action for specific performance.
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R.
MENDOZA, respondents-appellees. We hold that there was no perfected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas
subject to the approval by the city council of the proposed consolidation subdivision plan and the approval of the
Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner PHHC. award by the valuation committee and higher authorities.

Tolentino, Cruz, Reyes, Lava and Manuel for private respondents. The city council did not approve the subdivision plan. The Mendozas were advised in 1961 of the disapproval. In
1964, when the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should
have manifested in writing their acceptance of the award for the purchase of Lot 4 just to show that they were still The subject of this controversy is a parcel of land consisting of 1,101 square meters and located in Diliman,
interested in its purchase although the area was reduced and to obviate ally doubt on the matter. They did not do Quezon City. It was originally owned by Felix, Manuel and Maria Concepcion Orlino, who mortgaged it to the
so. The PHHC board of directors acted within its rights in withdrawing the tentative award. Progressive Commercial Bank as security for a P100,000.00 loan on July 1, 1965. The loan not having been paid,
the mortgage was foreclosed and the bank acquired the property as the highest bidder at the auction sale on March
"The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of 28, 1969. The mortgagee thereafter transferred all its assets, including the said land, to the Pacific Banking
the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to Corporation (PBC).
the law governing the form of contracts." (Art. 1475, Civil Code).
On May 22, 1975, the Orlinos, and their respective spouses (hereinafter referred to as the private respondents),
"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de las partes o de la ley, se who had remained in possession of the land, made a written offer to PBC to repurchase the property. In response,
celebra la venta bajo una condicion suspensiva, y en los cuales no se perfecciona la venta hasta el cumplimiento the bank, through its Assistant Vice-President, sent the following letter dated November 9, 1977, to the private
de la condicion" (4 Castan Tobenas, Derecho Civil Español 8th ed. p. 81). respondents' counsel:

"In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already This will confirm our agreement concerning the repurchase by your clients, Mr. and Mrs. Oscar C. Guevarra
acquired, shall depend upon the happening of the event which constitutes the condition. (Art. 1181, Civil Code). of that certain property situated at 26 Jose Abad Santos, Heroes Hills, Quezon City with an area of 1,1 01
"Se llama suspensive la condicion de la que depende la perfeccion, o sea el principio del contrato". (9 Giorgi, square meters, more or less, under the following terms and conditions:
Teoria de las Obligaciones, p. 57).
a) The cash consideration shall be P160,000.00 payable in full upon signing of the Deed of Absolute Sale;
Under the facts of this case, we cannot say there was a meeting of minds on the purchase of Lot 4 with an area of
2,608.7 square meters at P21 a square meter. b) The additional consideration shall consist of your client's conveyance to us of their share of 2,901.15
square meters on the property situated at Camarin, Caloocan City.
The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the awardee in that case applied
for the purchase of the lot, paid the 10% deposit and a conditional contract to sell was executed in his favor. The We understand that your clients will be applying for a loan with a bank. In this connection, we are
PHHC could not re-award that lot to another person. enclosing a xerox copy of the Transfer Certificate of Title No. 218661 Quezon City, Tax Declaration No.
3092 and Official Receipt No. E-404723 covering payment of real estate taxes for 1977. Kindly request
WHEREFORE, the decision of the Appellate Court is reversed and set aside and the judgment of the trial court is your clients to expedite the loan so that we can consummate the transaction as soon as possible.
affirmed. No costs.
Please request your clients to sign their conformity below and return the duplicate thereof for our files.
SO ORDERED.
Oscar C. Guevarra, one of the private respondents, indicated the required conformity.
Makasiar (Chairman), Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.
One year later, on November 2, 1978, PBC advised the private respondents that if the transaction was not finalized
within 30 days, it would consider the offer of other buyers. The record does not show any further development
G.R. No. 85733 February 23, 1990 until June 8, 1979, when the private respondents requested PBC to allow them to secure a certified true copy of its
Torrens certificate over the land for purposes of its survey and partition among them preparatory to the actual
Sps. ENRIQUE and CONSUELO LIM, petitioners, transfer of title to them. PBC granted the request subject to the condition that title would remain with it until the
vs. execution of the necessary deed of conveyance.
THE HONORABLE COURT OF APPEALS, Sps. TERESITA and OSCAR
GUEVARRA, Sps. MARCOS and ANITA ORLINO, Sps. ROMULO and CONSUELO On April 8, 1980, or two years later, PBC reminded the private respondents of its letter of November 2, 1978, but
again no action was taken to deliver to it the stipulated consideration for the sale. Finally, on May 14, 1980, PBC
ORLINO and Sps. FELIX and DOLORES ORLINO, respondents. executed a deed of sale over the land in favor of the herein petitioners, the spouses Enrique and Consuelo Lim, for
the sum of P300,000.00.
Salonga, Andres, Hernandez & Allado for petitioners.
On September 30, 1980, the private respondents filed a complaint in the Regional Trial Court of Quezon City
Ocampo, Dizon & Domingo for private respondent Pacific Banking Corporation. against the petitioners and PBC for the annulment of the deed of sale on the ground that the subject land had been
earlier sold to them. In its judgment for the plaintiffs, the court held that both PBC and the spouses Lim had acted
CRUZ, J.: in bad faith when they concluded the sale knowing that "there was a cloud in the status of the property in
question." The decision was affirmed in toto by the respondent court,   and the petitioners are now before us,
7

urging reversal.
The petitioners claim they are purchasers in good faith, having relied on the assurances of PBC as verified from The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely upon
the records in the Registry of Deeds of Quezon City that the land belonged to PBC and was unencumbered. They the face of the Torrens Certificate of Title and to dispense with the need of inquiring further, except when the
therefore should have preferential right to the disputed land, which they had registered in their name under TCT party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man
No. 268623. For their part, the private respondents insist that as they had a valid and binding earlier deed of sale in to make such inquiry. (Emphasis supplied.)
their favor, the land could no longer be sold by PBC to the petitioners, who were aware of their prior right.
As the Court sees it, the real issue is not whether the petitioner acted in good faith but whether there was in fact a
In support of their position that it was not incumbent upon them to go beyond the land records to check the real prior sale of the same property to the private respondents. Only if it is established that there was indeed a double
status of the land, the petitioners cite Seño v. Mangubat  where the Court said:
8
sale of the property will it be necessary to ascertain if Article 1544 is applicable.

In order that a purchaser of land with a Torrens title may be considered as a purchaser in good faith, it is Stated differently, the question is: Was the transaction between private respondents and PBC, as embodied in the
enough that he examines the latest certificate of title which in this case is that issued in the name of the letter of November 9, 1977, a contract to sell or a contract of sale?
immediate transferor. The purchaser is not bound by the original certificate of title but only by the certificate
of title of the person from whom he has purchased the property. It is not enough to say that the contract of sale being consensual, it became effective between the bank and the
private respondents as of November 9, 1977. There is no question about that; but such agreement is like putting
xxx xxx xxx the cart before the horse. Precisely, our purpose is to ascertain to what particular undertakings the parties have
given their mutual consent so we can determine the nature of their agreement.
Thus, where innocent third persons relying on the correctness of the certificate of title issued, acquire rights
over the property, the court cannot disregard such rights and order the total cancellation of the certificate for According to Sing Yee v. Santos:
that would impair public confidence in the certificate of title; otherwise everyone dealing with property
registered under the torrens system would have to inquire in every instance as to whether the title had been ... A distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the
regularly or irregularly issued by the court. Indeed, this is contrary to the evident purpose of the law. Every thing sold and a contract to sell (or of exclusive right and privilege to purchase as in this case) where by
person dealing with registered land may safely rely on the correctness of the certificate of title issued therefore agreement the ownership is reserved in the seller and is not to pass until the full payment of the purchase price
and the law will in no way oblige him to go behind the certificate to determine the condition of the property. is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full
Stated differently, an innocent purchaser for value relying on a torrens title issued is protected. payment is a positive suspensive condition. Being contraries, their effect in law cannot be Identical. In the first
case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale
And even assuming that there was an earlier valid sale of the property to the private respondents, the petitioners is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does
add, they would still prevail under Article 1544 of the Civil Code, providing as follows: not comply with the condition precedent of making payment at the time specified in the contract.

If the same thing should have been sold to different vendees, the ownership shall be transferred to the person Applying these distinctions, the Court finds that the agreement between PBC and the private respondents was only
who may have first taken possession thereof in good faith, if it should be movable property. a contract to sell, not a contact of sale. And the reasons are obvious.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first There was no immediate transfer of title to the private respondents as would have happened if there had been a
recorded it in the Registry of Property. sale at the outset. The supposed sale was never registered and TCT No. 218661 in favor of PBC was not replaced
with another certificate of title in favor of the private respondents. In their letter to PBC on June 8, 1979, they
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the acknowledged that title to the property would remain with the bank until their transaction shall have been
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. finalized. In response, PBC reiterated the same condition. No less important, the consideration agreed upon by the
parties was never paid by the private respondents, to convert the agreement into a contract of sale. In fact, PBC
reminded them twice — on November 2, 1978, and on April 8, 1980 — to comply with their obligations. They did
The private respondents, however, deny that the petitioners had acted in good faith, pointing to the evidence that not. Their default was not, as the respondent court described it, "a slight delay" but lasted for all of three years and
Consuelo Lim had, before the execution of the disputed deed of sale, visited the property and been informed of in fact continued up to the rendition of the decision in the trial court. As payment of the consideration was a
their existing adverse claim thereto. Besides, the said deed contained the following stipulation: positive suspensive condition, title to the subject property never passed to the private respondents. Hence, the
property was legally unencumbered and still belonged to PBC on May 14, 1980, when it was sold by the bank to
That the VENDEE is aware of the fact that the aforementioned property is presently occupied by the former the petitioners.
owners and that clearing of the property of its occupants shall be for the exclusive responsibility and account
of the vendee. It is true that the contract to sell imposes reciprocal obligations and so cannot be terminated unilaterally by either
party. Judicial rescission is required under Article 1191 of the Civil Code. However, this rule is not absolute. We
And, indeed, the Court also said in Seno that: have held that in proper cases, a party may take it upon itself to consider the contract rescinded and act
accordingly albeit subject to judicial confirmation, which may or may not be given. It is true that the rescinding
party takes a risk that its action may not be approved by the court. But as we said in University of the Philippines HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, namely:
v. De los Angeles: MELINDA D. PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS,
NATIVIDAD D. PELAYO, YOLANDA D. CACERES and MARY
Of course, it must be understood that the act of a party in treating a contract as cancelled or resolved on
account of infractions by the other contracting party must be made known to the other and is always
DONASCO, respondents.
provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that
rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court. Then, Bernardo S. Chan for petitioners.
should the court, after due hearing, decide that the resolution of the contract was not warranted, the responsible
party will be sentenced to damages; in the contrary case, the resolution will be affirmed, and the consequent Orlando A. Galope for respondents.
indemnity awarded to the party prejudiced.
DAVIDE, JR., J.:
In other words, the party who deems the contract violated may consider it resolved or rescinded, and act
accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of
the corresponding court that will conclusively and finally settle whether the action taken was or was not An action denominated as one for specific performance and damages was brought by the private respondents
correct in law. But the law definitely does not require that the contracting party who believes itself injured against the petitioners before the Regional Trial Court (RTC) of Caloocan City which, after due trial, rendered a
must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, decision in favor of the petitioners. On appeal, the respondent Court reversed the trial court's decision.
the party injured by the other's breach will have to passively sit and watch its damages accumulate during the
pendency of the suit until final judgment of rescission is rendered when the law itself requires that he should It is from this judgment that the petitioners have appealed to this Court by way of a petition for review
exercise due diligence to minimize its own damages. on certiorari.

In the case at bar, the private respondents obligated themselves to deliver to the bank the sum of P160,000.00 and The material facts of this case are simple and undisputed.
their share of 2,901.15 square meters on a property situated in Caloocan City. In the letter of PBC dated November
9, 1977, they were requested to "expedite the loan (they were negotiating for this purpose) so we can consummate Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of Caloocan, with an area of 549
the transaction as soon as possible". That was in 1977. In 1978, they were reminded of their obligation and asked square meters, located at Bagong Barrio, Caloocan City and more particularly described in Transfer Certificate of
to comply within thirty days. They did not. On April 8, 1980, they were reminded of that letter of November 2, Title (TCT) No. 7435 of the Registry of Deeds of Caloocan City. On 17 February 1969, he executed a "DEED OF
1978, and again asked to comply; but again they did not. Surely, the bank could not be required to wait for them ABSOLUTE SALE OF ONE-HALF OF (1/2) [OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" in
forever, especially so since they remained in possession of the property and there is no record that they were favor of Francisco N. Donasco which was acknowledged before a notary public. The parcel of land referred to
paying rentals. Under the circumstances, PBC had the right to consider the contract to sell between them herein is Lot No. 3223 and the pertinent portions of the document read as follows:
terminated for non-payment of the stipulated consideration. We hereby confirm that rescission.
That for and in consideration of the sum of TWENTY THOUSAND AND FIVE HUNDRED THIRTY
Having arrived at these conclusions, the Court no longer finds it necessary to determine if the petitioners acted in (P20,530.00) PESOS, Philippine Currency, the VENDOR hereby these presents SELL, CONVEY AND
bad faith when they purchased the subject property. The private respondents lost all legal interest in the land when CONVEY by way of Absolute Sale the one-half (1/2) portion, equivalent to Two Hundred Seventy Four and
their contract to sell was rescinded by PBC for their non-compliance with its provisions. As that contract was rito point Fifty (274.50) square meters, to VENDEE, the above-mentioned property, his heirs, assigns and
longer effective when the land was sold by PBC to the petitioners, the private respondents had no legal standing to successors-in- interest;
assail that subsequent transaction. The deed of sale between PBC and the petitioners must therefore be sustained.
That the VENDOR hereby confesses and acknowledges the receipt of TWO THOUSAND (P2,000.00) PESOS
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of Appeals is REVERSED. from VENDEE as advanced (sic) and partial payment to the above-cited consideration of the Sale herein
TCT No. 268623 in favor of the petitioners is recognized as valid and the complaint for the annulment of the deed mentioned, leaving therefor a balance of Eighteen Thousand and Five Hundred Thirty (P18,530) Pesos to be
of sale dated May 14, 1980, is hereby dismissed. Costs against the private respondents. paid in several equal installments within a period of six (6) years, beginning January, 1970;

SO ORDERED. That after computing the above-mentioned equal installments, the VENDEE agrees and undertakes to pay unto
the VENDOR a monthly amount equivalent to Two Hundred Fifty Seven (sic) and Thirty Six Centavos
Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur. (P257.36) within a period of Seventy One (71) months and on the Seven Two [sic] (72) month, the amount of
(P257.44) as the last and final installment thereof;
G.R. No. 102909 September 6, 1993
That the VENDEE agrees that in case of default in the payment of the installment due the same shall earn a
legal rate of interest, and to which the VENDOR likewise agrees;
SPOUSES VICENTE and LOURDES PINGOL, petitioners,
vs.
 That the VENDEE undertakes to pay unto the VENDOR the herein monthly installment within the first five 1976, the sale was deemed to have been cancelled and the continuous occupancy of Francisco after 1976 and by
(5) days of each month and the same shall be made available and to be paid at the residence of the VENDOR, his heirs thereafter was by mere tolerance of Vicente Pingol. They then asked that the plaintiffs be ordered to
payment to be made either directly to the VENDOR, his wife or his authorized representative or factor; vacate the premises and to pay them attorney's fees and a reasonable compensation for the use of the land.

That in case of partition of the above-described property between herein VENDOR and VENDEE the same In their Reply and Answer to Counterclaim, the plaintiffs pointed out that there is no provision in the deed of sale
shall be divided into two (2) equal parts, the VENDOR gets the corner facing J. De Jesus and Malolos Avenue for its cancellation in case of default in the payment of the monthly installments and invoked Article 1592 of the
and the VENDEE shall get the portion with fifteen 15 meters frontage facing J. De Jesus Street only. New Civil Code. They specifically denied the allegations in the counterclaim.

Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion, designated as Lot No. 3223-A, The issues having been joined, the case was then tried on the merits.
was then segregated from the mother lot, and the parties prepared a subdivision plan (Exhibit "C") which was
approved by the Land Registration Commission. On 22 January 1990, the trial court rendered a decision dismissing the complaint and ordering the plaintiffs to pay
the defendants P350.00 as reasonable monthly rental for the use of the premises from the filing of the complaint,
Francisco immediately took possession of the subject lot and constructed a house thereon. In January 1970, he P10,000.00 by way of attorney's fees, and the costs of the suit. It held that: (1) the deed of absolute sale in
started paying the monthly installments but was able to pay only up to 1972. question, marked and offered in evidence as Exhibit "A," is a contract to sell, not a contract of sale, since Vicente
Pingol had no intention to part with the ownership of the loan unless the full amount of the agreed price had been
On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid P8,369.00, plus the P2,000.00 paid; (2) the contract was deemed to have been cancelled from the moment the late father of the plaintiffs
advance payment, leaving a balance of P10,161.00 on the contract price. Lot No. 3223-A remained in the defaulted in the payment of the monthly installments; (3) title and ownership over the lot did not pass to Francisco
possession of Donasco's heirs. Donasco and his heirs since the contract to sell was never consummated; and (5) assuming, arguendo, that the
plaintiffs have a cause of action for specific performance, such action had already prescribed since the complaint
was filed only on 19 October 1988 or more than ten years from the time that they could have lawfully demanded
On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific Performance and Damages, with performance.
Prayer for Writ of Preliminary Injunction" against the spouses Vicente and Lourdes Pingol (petitioners herein)
before the RTC of Caloocan City. The action was docketed as Civil Case No. 13572 and raffled off to Branch 125
of the said court. Plaintiffs elevated the case to the Court of Appeals where the appeal was docketed as CA-G.R. CV No. 25967. On
12 November 1991, the said court rendered a decision reversing the appealed decision and decreeing as follows:
In their complaint, the plaintiffs (private respondents herein) averred that after the death of their father, they
offered to pay the balance of P10,161.00 plus the stipulated legal rate of interest thereon to Vicente Pingol but the WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and another one is
latter rebuffed their offer and has "been demanding for a bigger and unreasonable amount, in complete variance to rendered:
what is lawfully due and payable." They stated that they had "exerted earnest efforts to forge or reach an amicable
and peaceful settlement with the defendants" for the payment of the property in question but to no avail. They (1) Ordering appellee-vendor Vicente Pingol to accept the sum of P10,161.00, plus the legal interest due
further alleged that the defendants were committing "acts of forcible entry and encroachment" upon their land and thereon from the date of institution of this action on October 19, 1988;
asked that a writ of preliminary injunction be issued to restrain the defendants from the acts complained of.
(2) Upholding the validity of the "DEED OF ABSOLUTE SALE OF ONE- HALF (1/2) (of) AN
Plaintiffs then prayed that the defendants be ordered, inter alia: UNDIVIDED PORTION OF A PARCEL OF LAND" (Exh. A), and by virtue and on the strength of which
declaring the "Heirs of the Deceased Francisco N. Domingo" as the owners of the 274.50 sq. m. land,
a. . . . to accept the amount of P10,161.00, more or less, plus the stipulated legal rate of interest due thereon, as denominated as Lot 3223-A, (LRC) Psd-146255 under the technical description (exh. D) and reflected in the
full and complete payment of the balance for the agreed price/consideration on the one- half (1/2) portion of Plan of Subdivision Survey which was approved By Commissioner of Land Registration on August 13, 1971
the parcel of land . . .; [and] (exh. C), representing one-half portion [of] lot 3223, situated at the corner of Malolos Avenue and G. de Jesus
St., Bagong Barrio, Caloocan City, and covered by TCT No. 7435 of the Registry of Deeds of Caloocan City
(exh. B); and
b. . . . to execute the final deed of sale on the one-half (1/2) portion of the lot . . . in accordance with the
partition reflected in the survey and subdivision plan, . . . .
(3) Ordering the defendants-appellees to pay the costs.
In their answer with counterclaim, defendants admitted the execution of the aforementioned deed of sale, the
segregation of the portion sold and the preparation and approval of the subdivision plan, but set up the following SO ORDERED.
special and affirmative defenses: (1) plaintiffs' cause of action had already prescribed; (2) the deed of sale
embodied a conditional contract of sale "as the consideration is to be paid on installment basis within a period of The Court of Appeals ruled that the deed of sale in question reveals the clear intention of Vicente Pingol to part
six years beginning January, 1970"; (3) the subdivision plan was prepared on the assumption that Francisco with the ownership of the one-half portion of the land by way of an absolute sale; that the failure to fully pay the
Donasco would be able to comply with his obligation; (4) when Francisco died, he had not fully paid the total agreed price was not a ground for the cancellation of the sale; and that the plaintiffs' action is imprescriptible since
consideration agreed upon; and (5) considering the breach by Francisco of his contractual obligation way back in it is akin to an action to quiet title to property in one's possession.
Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter referred to as the petitioners, PARCEL OF LAND" is that "the VENDOR hereby . . . SELL, CONVEY AND CONVEY by way Absolute Sale
filed this petition for certiorari on 9 January 1992. Plaintiffs, hereinafter referred to as the private respondents, the one-half (1/2) portion . . . to the VENDEE . . . his heirs, assigns and successors-in-interest." That the vendor,
filed their comment thereto on 10 September 1992 to which the petitioners filed a reply 11 November 1992. We petitioner Vicente Pingol, had that clear intention was further evidenced by his failure to reserve his title thereto
gave due course to the petition and required the parties to submit their respective memoranda,   which they
13
until the full payment of the price.
subsequently complied with.
In Dignos vs. Court of Appeals, we held that a deed of sale is absolute in nature although denominated as a "Deed
Petitioners contend that the Court of Appeals erred: of Conditional Sale" where there is no stipulation in the deed that title to the property sold is reserved in the seller
until the full payment of the price, nor is there a stipulation giving the vendor the right to unilaterally resolve the
I contract the moment the buyer fails to pay within a fixed period. Exhibit "A" contains neither stipulation. What is
merely stated therein is that "the VENDEE agrees that in case of default in the payment of the installments due the
same shall earn a legal rate of interest, and to which the VENDOR likewise agrees."
IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED AS "ABSOLUTE DEED OF
SALE OF ONE-HALF (½) OF AN UNDIVIDED PORTION OF A PARCEL OF LAND" IS AN
ABSOLUTE DEED OF SALE SUFFICIENT TO CONFER OWNERSHIP ON THE VENDEE AND HIS Furthermore, as found by the Court of Appeals, the acts of the parties, contemporaneous and subsequent to the
SUCCESSORS-IN-INTEREST, DESPITE THE FACT THAT BY ITS TERMS AND CONDITIONS, LIKE contract, clearly show that an absolute deed of sale was intended, by the parties and not a contract to sell:
THE PRICE BEING PAYABLE ON INSTALLMENTS WITHIN A FIXED PERIOD, THE SAME IS A
CONDITIONAL DEED OF SALE. [P]ursuant to the deed, the vendor delivered actual and constructive possession of the property to the vendee,
who occupied and took such possession, constructed a building thereon, had the property surveyed and
II subdivided and a plan of the property was prepared and submitted to the Land Registration Commission
which approved it preparatory to segregating the same and obtaining the corresponding TCT in his name.
Since the sale, appellee continuously possessed and occupied the property as owner up to his death on July 13,
IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE VENDEE FAILED TO COMPLY 1984 and his heirs, after his death, continued the occupancy and possession of the property up to the present.
WITH THE TERMS OF THE CONTRACT (EXHIBIT "A") SPECIFICALLY TO COMPLETE THE Those contemporaneous and subsequent events are demonstrative acts that the vendor since the sale
PAYMENT OF THE CONSIDERATION ON THE DATE STIPULATED IN THE CONTRACT WHICH recognized the vendee as the absolute owner of the property sold. All those attributes of ownership are
WAS SUPPOSED TO BE IN JANUARY 1976, COMPLETE PAYMENT THEREOF CAN STILL BE admitted by defendants in their answer, specifically in paragraphs 7 and 9 of their special and affirmative
ENFORCED IN AN ACTION INSTITUTED BY THE HEIRS OF THE VENDEE FILED ON OCTOBER defenses.
19, 1988 OR A PERIOD OF MORE THAN TWELVE (12) YEARS FROM THE TIME COMPLETE
PAYMENT SHOULD HAVE BEEN MADE;
The contract here being one of absolute sale, the ownership of the subject lot was transferred to the buyer upon the
actual and constructive delivery thereof. The constructive delivery of the subject lot was made upon the execution
III of the deed of sale while the actual delivery was effected when the private respondents took possession of and
constructed a house on Lot No. 3223-A.
IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE WHICH IS AN OFFER TO
COMPLETE THE PAYMENT LEFT UNPAID BY PRIVATE RESPONDENTS' FATHER WHICH DOES The delivery of the object of the contract divested the vendor of the ownership over the same and he cannot
NOT PRESCRIBE; recover the title unless the contract is resolved or rescinded pursuant to Article 1592 of the New Civil Code which
provides that:
IV
In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at
IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION HAS NOT PRESCRIBE. the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the
expiration of the period, as long as no demand for rescission of the contract has been made upon him either
The decisive issue in this case is whether Exhibit "A" embodies a contract of sale or a contract to sell. The judicially or by a notarial act. After the demand, the court may not grant him a new term.
distinction between the two is important for in a contract of sale, the title passes to the vendee upon the delivery of
the thing sold, whereas in a contract to sell, by agreement, ownership is reserved in the vendor and is not to pass Both the trial court and the Court of Appeals did not find that a notarial or judicial rescission of the contract had
until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and been made. Although Vicente Pingol asserts that he had declared to Francisco Donasco that he was cancelling the
unless the contract is resolved or rescinded, whereas in a contract to sell, title is retained by the vendor until the contract, he did not prove that his demand for rescission was made either judicially or by a notarial act.
full payment of the price, such payment being a positive suspensive condition, failure of which is not a breach but
an event that prevented the obligation of the vendor to convey title from becoming Petitioners fault the respondent Court for holding that the action of the petitioners is not barred by the statute of
effective. limitations. They argue that the private respondents' action, being based upon a written contract, has prescribed
since it was brought only in 1988 or more than ten years from the time when the latter could have lawfully
A perusal of Exhibit "A" leads to no other conclusion than that it embodies a contract of sale. The plain and clear demanded performance.
tenor of the "DEED OF ABSOLUTE SALE OF ONE-HALF (1/2) [OF] AN UNDIVIDED PORTION OF A
We disagree. SO ORDERED.

Although the private respondents' complaint before the trial court was denominated as one for specific Cruz, Griño-Aquino, Bellosillo and Quiason, JJ., concur.
performance, it is in effect an action to quiet title. In this regard, the following excerpt from Bucton vs.
Gabar is apropos:

The real and ultimate basis of petitioners' action is their ownership of one- half of the lot coupled with their
possession thereof, which entitles them to a conveyance of the property. In Sapto, et al. v. Fabiana [103 Phil.
683, 686-87 (1958)], this Court, speaking thru Mr. Justice J.B.L. Reyes, explained that under the circumstances
no enforcement of the contract is needed, since the delivery of possession of the land sold had consummated the
sale and transferred title to the purchaser, and that, actually, the action for conveyance is one to quiet title, i.e., to
remove the cloud upon the appellee's ownership by the refusal of the appellants to recognize the sale made by
their predecessors.

That a cloud has been cast on the title of the private respondents is indubitable. Despite the fact that the title had
been transferred to them by the execution of the deed of sale and the delivery of the object of the contract, the
petitioners adamantly refused to accept the tender of payment by the private respondents and steadfastly insisted
that their obligation to transfer title had been rendered ineffective.

A vendee in an oral contract to convey land who had made part payment thereof, entered upon the land and had
made valuable improvements thereon, is entitled to bring suit to clear his title against the vendor who had refused
to transfer the title to him. It is not necessary that the vendee has an absolute title, an equitable title being sufficient
to clothe him with personality to bring an action to quiet title.

Prescription thus cannot be invoked against the private respondents for it is aphoristic that an action to quiet title to
property in one's possession is
imprescriptible. The rationale for this rule has been aptly stated thus:

The owner of real property who is in possession thereof may wait until his possession is invaded or his title is
attacked before taking steps to vindicate his right. A person claiming title to real property, but not in
possession thereof, must act affirmatively and within the time provided by the statute. Possession is a
continuing right as is the right to defend such possession. So it has been determined that an owner of real
property in possession has a continuing right to invoke a court of equity to remove a cloud that is a continuing
menace to his title. Such a menace is compared to a continuing nuisance or trespass which is treated as
successive nuisances or trespasses, not barred by statute until continued without interruption for a length of
time sufficient to affect a change of title as a matter of law.

Private respondents shall, however, be liable to pay the legal rate of interest on the unpaid balance of the purchase
price from the date default or on 6 January 1976, when the entire balance should have been paid, pursuant to the
provision in the deed of sale.

WHEREFORE, except as above modified, the Decision appealed from is hereby AFFIRMED. As modified, the
interest on the unpaid balance of P10,161.00, at the legal rate, shall be computed from 6 January 1976. Upon the
payment by the private respondents to the petitioners of the said amount and the interest thereon, the latter are
ordered to deliver Transfer Certificate of Title No. 7435 to the Register of Deeds of Caloocan City who shall
cancel the same and issue two new transfer certificates of title in lieu thereof, one of which shall be in the name of
the herein private respondents covering Lot No. 3223-A and the other in the name of the petitioners covering the
remainder of the lot.