1

On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu,
SPOUSES ONNIE SERRANO AND G.R. No. 139173 wrote petitioners informing them of his readiness to pay the balance of the contract price
AMPARO HERRERA, and requesting them to prepare the final deed of sale. [3]
Petitioners,
Present: On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter[4] to
respondent stating that petitioner Amparo Herrera is leaving for abroad on or before April
PUNO, C.J., Chairperson, 15, 1990 and that they are canceling the transaction. Petitioners also informed
SANDOVAL-GUTIERREZ, respondent that he can recover the earnest money of P100,000.00 anytime.
CORONA,
*AZCUNA, and
- versus - Again, on April 6, 1990,[5] petitioners wrote respondent stating that they
GARCIA, JJ. delivered to his counsel Philippine National Bank Managers Check No. 790537
dated April 6, 1990 in the amount of P100,000.00 payable to him.

GODOFREDO CAGUIAT, Promulgated: In view of the cancellation of the contract by petitioners, respondent filed with the
Respondent. Regional Trial Court, Branch 63, Makati City a complaint against them for specific
February 28, 2007 performance and damages, docketed as Civil Case No. 90-1067.[6]
x------------------------------------------------------------------------------------------------------x
On June 27, 1994, after hearing, the trial court rendered its Decision[7] finding there was
D E C I S I O N a perfected contract of sale between the parties and ordering petitioners to execute a
final deed of sale in favor of respondent. The trial court held:
xxx
SANDOVAL-GUTIERREZ, J.: In the evaluation of the evidence presented by the parties as
to the issue as to who was ready to comply with his obligation on the
verbal agreement to sell on March 23, 1990, shows that plaintiffs
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil position deserves more weight and credibility. First, the P100,000.00
Procedure, as amended, assailing the Decision[1] of the Court of Appeals dated January that plaintiff paid whether as downpayment or earnest money showed
29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824. that there was already a perfected contract. Art. 1482 of the Civil Code
of the Philippines, reads as follows, to wit:
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a Art. 1482. Whenever earnest money is given in a
lot located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905. contract of sale, it shall be considered as part of the price and
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the as proof of the perfection of the contract.
lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave Second, plaintiff was the first to react to show his eagerness to
petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the push through with the sale by sending defendants the letter
corresponding receipt stating that respondent promised to pay the balance of the dated March 25, 1990. (Exh. D) and reiterated the same intent to
purchase price on or before March 23, 1990, thus: pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the
Las Pias, Metro Manila balance of the purchase price ready for payment (Exh. C). Defendants
March 19, 1990 mere allegation that it was plaintiff who did not appear on March
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23, 1990 is unavailing. Defendants letters (Exhs. 2 and 5) appear to
23 COVERED BY TCT NO. T-9905, LAS PIAS, be mere afterthought.
METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE
AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999,
AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, affirmed the trial courts judgment.
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
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE the appellate court in its Resolution[8] dated July 14, 1999.
PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT
WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON Hence, the present recourse.
THIS DATE.
SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M. The basic issue to be resolved is whether the document entitled Receipt for
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2] Partial Payment signed by both parties earlier mentioned is a contract to sell or a
contract of sale.
 2

Petitioners contend that the Receipt is not a perfected contract of sale as A contract to sell is akin to a conditional sale where the efficacy or obligatory
provided for in Article 1458[9] in relation to Article 1475[10] of the Civil Code.The delivery force of the vendor's obligation to transfer title is subordinated to the happening of a
to them of P100,000.00 as down payment cannot be considered as proof of the future and uncertain event, so that if the suspensive condition does not take place, the
perfection of a contract of sale under Article 1482[11] of the same Code since there was parties would stand as if the conditional obligation had never existed. The suspensive
no clear agreement between the parties as to the amount of consideration. condition is commonly full payment of the purchase price.[15]

Generally, the findings of fact of the lower courts are entitled to great weight and The differences between a contract to sell and a contract of sale are well-settled
should not be disturbed except for cogent reasons.14 Indeed, they should not be changed in jurisprudence. As early as 1951, in Sing Yee v. Santos,[16] we held that:
on appeal in the absence of a clear showing that the trial court overlooked,
disregarded, or misinterpreted some facts of weight and significance, which if x x x [a] distinction must be made between a contract of sale in which
considered would have altered the result of the case.[12] In the present case, we find title passes to the buyer upon delivery of the thing sold and a contract
that both the trial court and the Court of Appeals interpreted some significant facts to sell x x x where by agreement the ownership is reserved in the seller
resulting in an erroneous resolution of the issue involved. and is not to pass until the full payment, of the purchase price is
made. In the first case, non-payment of the price is a
In holding that there is a perfected contract of sale, both courts mainly relied negative resolutorycondition; in the second case, full payment is a
on the earnest money given by respondent to petitioners. They invoked Article 1482 of positive suspensive condition. Being contraries, their effect in law
the Civil Code which provides that "Whenever earnest money is given in a contract of cannot be identical. In the first case, the vendor has lost and cannot
sale, it shall be considered as part of the price and as proof of the perfection of the recover the ownership of the land sold until and unless the contract of
contract." sale is itself resolved and set aside. In the second case, however, the
title remains in the vendor if the vendee does not comply with the
We are not convinced. condition precedent of making payment at the time specified in the
contract.
In San Miguel Properties Philippines, Inc. v. Spouses Huang, [13] we held that
the stages of a contract of sale are: (1) negotiation, covering the period from the time the In other words, in a contract to sell, ownership is retained by the seller and is
prospective contracting parties indicate interest in the contract to the time the contract is not to pass to the buyer until full payment of the price.[17]
perfected; (2) perfection, which takes place upon the concurrence of the essential
elements of the sale, which is the meeting of the minds of the parties as to the object of In this case, the Receipt for Partial Payment shows that the true agreement
the contract and upon the price; and (3) consummation, which begins when the parties between the parties is a contract to sell.
perform their respective undertakings under the contract of sale, culminating in the
extinguishment thereof. First, ownership over the property was retained by petitioners and was not to
With the above postulates as guidelines, we now proceed to determine the real pass to respondent until full payment of the purchase price. Thus, petitioners need not
nature of the contract entered into by the parties. push through with the sale should respondent fail to remit the balance of the purchase
It is a canon in the interpretation of contracts that the words used therein should price before the deadline on March 23, 1990. In effect, petitioners have the right to
be given their natural and ordinary meaning unless a technical meaning was rescind unilaterally the contract the moment respondent fails to pay within the fixed
intended.[14] Thus, when petitioners declared in the said Receipt for Partial Payment that period.[18]
they
Second, the agreement between the parties was not embodied in a deed of
sale. The absence of a formal deed of conveyance is a strong indication that the parties
RECEIVED FROM MR. GODOFREDO CAGUIAT THE did not intend immediate transfer of ownership, but only a transfer after full payment of
AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) the purchase price.[19]
AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS,
M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 Third, petitioners retained possession of the certificate of title of the lot. This is
SQUARE METERS. an additional indication that the agreement did not transfer to respondent, either by
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE actual or constructive delivery, ownership of the property. [20]
PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT
WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON It is true that Article 1482 of the Civil Code provides that Whenever earnest
THIS DATE. money is given in a contract of sale, it shall be considered as part of the price and proof
of the perfection of the contract. However, this article speaks of earnest money given in
a contract of sale. In this case, the earnest money was given in a contract to
there can be no other interpretation than that they agreed to a conditional contract of sell. The earnest money forms part of the consideration only if the sale is consummated
sale, consummation of which is subject only to the full payment of the purchase price. upon full payment of the purchase price.[21]Now, since the earnest money was given in a
contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
 3

As previously discussed, the suspensive condition (payment of the balance by The spouses Bate and Julie Nabus were the owners of parcels of land with a
respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer total area of 1,665 square meters, situated in Pico, La Trinidad, Benguet, duly registered
ownership of the property to him. in their names under TCT No. T-9697 of the Register of Deeds of
the Province of Benguet. The property was mortgaged by the Spouses Nabus to the
WHEREFORE, we GRANT the instant Petition for Review. The challenged Philippine National Bank (PNB), La Trinidad Branch, to secure a loan in the amount
Decision of the Court of Appeals is REVERSED and respondents complaint of P30,000.00.
is DISMISSED.
On February 19, 1977, the Spouses Nabus executed a Deed of Conditional
Sale[4] covering 1,000 square meters of the 1,665 square meters of land in favor of
respondents Spouses Pacson for a consideration of P170,000.00, which was duly
SO ORDERED. notarized on February 21, 1977. The consideration was to be paid, thus:
JULIE NABUS,* MICHELLE NABUS* and BETTY G.R. No. 161318
TOLERO, THAT, the consideration of the amount of P170,000.00 will be
Petitioners, Present: paid by the VENDEE herein in my favor in the following manner:
CORONA, J., Chairperson,
CHICO-NAZARIO, a. That the sum of P13,000.00, more or less, on or
- versus - VELASCO, JR., before February 21, 1977 and which amount will be paid
NACHURA, and directly to the PNB, La Trinidad Branch, and which will
PERALTA, JJ. form part of the purchase price;

JOAQUIN PACSON and JULIA PACSON, Promulgated: b. That after paying the above amount to the PNB, La
Respondents. November 25, 2009 Trinidad, Benguet branch, a balance of about P17,500.00
remains as my mortgage balance and this amount will be
paid by the VENDEE herein at the rate of not less
than P3,000.00 a month beginning March 1977, until the
said mortgage balance is fully liquidated, and that all
payments made by the VENDEE to the PNB, La Trinidad,
Benguet branch, shall form part of the consideration of
this sale;

c. That, as soon as the mortgage obligation with the PNB as

cited above is fully paid, then the VENDEE herein hereby
x-----------------------------------------------------------------------------------------x obligates himself, his heirs and assigns, to pay the
amount of not less than P2,000.00 a month in favor of the
VENDOR, his heirs and assigns, until the full amount
DECISION of P170,000.00 is fully covered (including the payments
cited in Pars. a and b above);

PERALTA, J.: THAT, as soon as the full consideration of this sale has been
paid by the VENDEE, the corresponding transfer documents shall be
This is a petition for review on certiorari [1] of the Decision[2] of the Court of executed by the VENDOR to the VENDEE for the portion sold;
Appeals in CA-G.R. CV No. 44941 dated November 28, 2003. The Court of Appeals THAT, the portion sold is as shown in the simple sketch
affirmed with modification the Decision of the Regional Trial Court of La Trinidad, hereto attached as Annex "A" and made part hereof;
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 THAT, a segregation survey for the portion sold in favor of the
Transfer Certificate of Title (TCT) Nos. T-18650 and T-18651 upon payment to her by VENDEE and the portion remaining in favor of the VENDOR shall be
respondents of the sum of P57,544.[8]4 representing the balance due for the full executed as soon as possible, all at the expense of the VENDEE
payment of the property subject of this case; and orderingpetitioner Betty Tolero to herein;
surrender to respondents her owners duplicate copy of TCT Nos. T-18650 and T-18651. 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
The facts, as stated by the trial court,[3] are as follows: 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
 4

defeated in the said civil action to the end that he is divested of title During the last week of January 1984, Julie Nabus, accompanied by her second
over the area subject of this Instrument, then he hereby warrants that husband, approached Joaquin Pacson to ask for the full payment of the lot.Joaquin
he shall return any and all monies paid by the VENDEE herein whether Pacson agreed to pay, but told her to return after four days as his daughter, Catalina
paid to the PNB, La Trinidad, Benguet Branch, or directly received by Pacson, would have to go over the numerous receipts to determine the balance to be
herein VENDOR, all such monies to be returned upon demand by the paid. When Julie Nabus returned after four days, Joaquin sent her and his daughter,
VENDEE; Catalina, to Atty. Elizabeth Rillera for the execution of the deed of absolute sale. Since
THAT, [a] portion of the parcel of land subject of this Julie was a widow with a minor daughter, Atty. Rillera required Julie Nabus to return in
instrument is presently in the possession of Mr. Marcos Tacloy, and four days with the necessary documents, such as the deed of extrajudicial settlement,
the VENDOR agrees to cooperate and assist in any manner possible the transfer certificate of title in the names of Julie Nabus and minor Michelle Nabus, and
in the ouster of said Mr. Marcos Tacloy from said possession and the guardianship papers of Michelle. However, Julie Nabus did not return.
occupation to the end that the VENDEE herein shall make use of said
portion as soon as is practicable; Getting suspicious, Catalina Pacson went to the Register of Deeds of
THAT, finally, the PARTIES hereby agree that this Instrument the Province of Benguet and asked for a copy of the title of the land. She found that it
shall be binding upon their respective heirs, successors or assigns. [5] was still in the name of Julie and Michelle Nabus.

Pursuant to the Deed of Conditional Sale, respondents paid PNB the amount After a week, Catalina Pacson heard a rumor that the lot was already sold to
of P12,038.86 on February 22, 1977[6] and P20,744.30 on July 17, 1978[7] for the full petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went to the Register of Deeds
payment of the loan. of the Province of Benguet, and found that Julie Nabus and her minor daughter, Michelle
Nabus, represented by the formers mother as appointed guardian by a court order dated
At the time of the transaction, Mr. Marcos Tacloy had a basket-making shop on October 29, 1982, had executed a Deed of Absolute Sale in favor of Betty Tolero on
the property, while the spouses Delfin and Nelita Flores had a store. Tacloy and the March 5, 1984, covering the whole lot comprising 1,665 square meters.[15] The property
Spouses Flores vacated the property after respondents paid them P4,000.00 each. 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 A-2-C, 200 square
Thereafter, respondents took possession of the subject property. They meters; and (4) Lot A-2-D, 465 square meters. Lots A-2-A and A-2-B, with a combined
constructed an 80 by 32-feet building and a steel-matting fence around the property to area of 1,000 square meters, correspond to the lot previously sold to Joaquin and Julia
house their truck body-building shop which they called the Emiliano Trucking Body Pacson in the Deed of Conditional Sale.
Builder and Auto Repair Shop.
Catalina Pacson and Atty. Rillera also found that the Certificate of Title over the
On December 24, 1977, before the payment of the balance of the mortgage property in the name of Julie and Michelle Nabus was cancelled on March 16, 1984, and
amount with PNB, Bate Nabus died. On August 17, 1978, his surviving spouse, Julie four titles to the fours lots were issued in the name of Betty Tolero, namely: TCT No. T-
Nabus, and their minor daughter, Michelle Nabus, executed a Deed of Extra Judicial 18650[16] for Lot A-2-A; TCT No. 18651[17] for Lot A-2-B; TCT No. T-18652[18] for Lot A-2-
Settlement over the registered land covered by TCT No. 9697. On the basis of the said C; and T-18653[19] for Lot A-2-D.
document, TCT No. T- 17718[8] was issued on February 17, 1984 in the names of Julie
Nabus and Michelle Nabus. On March 22, 1984, the gate to the repair shop of the Pacsons was
padlocked. A sign was displayed on the property stating No Trespassing. [20]
Meanwhile, respondents continued paying their balance, not in installments
of P2,000.00 as agreed upon, but in various, often small amounts ranging from as low On March 26, 1984, Catalina Pacson filed an affidavit-complaint regarding the
as P10.00[9] to as high as P15,566.00,[10] spanning a period of almost seven years, padlocking incident of their repair shop with the police station at La Trinidad, Benguet.
from March 9, 1977[11] to January 17, 1984.[12]
On March 28, 2008, respondents Joaquin and Julia Pacson filed with the
There was a total of 364 receipts of payment,[13] which receipts were mostly Regional Trial Court of La Trinidad, Benguet (trial court) a Complaint [21] for Annulment
signed by Julie Nabus, who also signed as Julie Quan when she remarried. The others of Deeds, with damages and prayer for the issuance of a writ of preliminary
who signed were Bate Nabus; PNB, La Trinidad Branch; Maxima Nabus; Sylvia Reyes; injunction.[22] They sought the annulment of (1) the Extra-judicial Settlement of Estate,
Michelle Nabus and the second husband of Julie Nabus, Gereon Quan. Maxima Nabus insofar as their right to the 1,000-square-meter lot subject of the Deed of Conditional
is the mother of Bate Nabus, while Sylvia Reyes is a niece. Sale[23] was affected; (2) TCT No. T-17718 issued in the names of Julie and Michelle
The receipts showed that the total sum paid by respondents to the Spouses Nabus; and (3) the Deed of Absolute Sale[24] in favor of Betty Tolero and the transfer
Nabus was P112,455.16,[14] leaving a balance of P57,544.84. The sum of P30,000.00 certificates of title issued pursuant thereto. They also prayed for the award of actual,
which was the value of the pick-up truck allegedly sold and delivered in 1978 to the moral and exemplary damages, as well as attorneys fees.
Spouses Nabus, was not considered as payment because the registration papers
remained in the name of its owner, Dominga D. Pacson, who is the sister of Joaquin In their Answer,[25] Julie and Michelle Nabus alleged that respondent Joaquin
Pacson. The vehicle was also returned to respondents. 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 P2,000.00 and apply the sum
 5

of P13,000.00 as rentals, since the amount was already paid to the bank and could no execute a deed of absolute sale in favor of the Spouses Joaquin and
longer be withdrawn. Hence, he did not affix his signature to the second page of a copy Julia Pacson over the lots covered by Transfer Certificates of Title Nos.
of the Deed of Conditional Sale.[26] Julie Nabus alleged that in March 1994, due to her T-18650 and T-18651 upon payment to her by the plaintiffs of the sum
own economic needs and those of her minor daughter, she sold the property to Betty of P57,544.[8]4 representing the balance due for the full payment of
Tolero, with authority from the court. 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
During the hearing on the merits, Julie Nabus testified that she sold the property her owners duplicate copy of Transfer Certificates of Title Nos. T-
to Betty Tolero because she was in need of money. She stated that she was free to sell 18650 and T-18651.
the property because the Deed of Conditional Sale executed in favor of the Spouses Defendants Julie Nabus, Michelle Nabus, and Betty Tolero
Pacson was converted into a contract of lease. She claimed that at the time when the shall also pay the plaintiffs damages as follows: P50,000.00 for moral
Deed of Conditional Sale was being explained to them by the notary public, Joaquin damages; P20,000.00 for exemplary damages; and P10,000.00 for
Pacson allegedly did not like the portion of the contract stating that there was a pending attorneys fees and expenses for litigation.[29]
case in court involving the subject property. Consequently, Joaquin Pacson did not
continue to sign the document; hence, the second page of the document was Two issues determined by the trial court were: (1) Was the Deed of Conditional
unsigned.[27] Thereafter, it was allegedly their understanding that the Pacsons would Sale between the Spouses Pacson and the Nabuses converted into a contract of lease?
occupy the property as lessees and whatever amount paid by them would be considered and (2) Was Betty Tolero a buyer in good faith?
rentals.
The trial court held that the Deed of Conditional Sale was not converted into a
Betty Tolero put up the defense that she was a purchaser in good faith and for contract of lease because the original copy of the contract[30] showed that all the pages
value. She testified that it was Julie Nabus who went to her house and offered to sell the were signed by all the parties to the contract. By the presumption of regularity, all other
property consisting of two lots with a combined area of 1,000 square meters. She carbon copies must have been duly signed. The failure of Joaquin Pacson to sign the
consulted Atty. Aurelio de Peralta before she agreed to buy the property. She and Julie second page of one of the carbon copies of the contract was by sheer inadvertence. The
Nabus brought to Atty. De Peralta the pertinent papers such as TCT No. T-17718 in the omission was of no consequence since the signatures of the parties in all the other
names of Julie and Michelle Nabus, the guardianship papers of Michelle Nabus and the copies of the contract were complete. Moreover, all the receipts of payment expressly
blueprint copy of the survey plan showing the two lots. After examining the documents stated that they were made in payment of the lot. Not a single receipt showed payment
and finding that the title was clean, Atty. De Peralta gave her the go-signal to buy the for rental.
property.
Further, the trial court held that Betty Tolero was not a purchaser in good faith
Tolero testified that upon payment of the agreed price of P200,000.00, the Deed as she had actual knowledge of the Conditional Sale of the property to the Pacsons.
of Absolute Sale was executed and registered, resulting in the cancellation of the title of
Julie and Michelle Nabus and the issuance in her name of TCT Nos. T-18650 and T- The trial court stated that the Deed of Conditional Sale contained reciprocal
18651[28] corresponding to the two lots. Thereafter, she asked her common-law obligations between the parties, thus:
husband, Ben Ignacio, to padlock the gate to the property and hang the No Trespassing
sign.
THAT, as soon as the full consideration of this sale has been
Tolero also testified that as the new owner, she was surprised and shocked to paid by the VENDEE, the corresponding transfer documents shall be
receive the Complaint filed by the Spouses Pacson. She admitted that she knew very executed by the VENDOR to the VENDEE for the portion sold;
well the Spouses Pacson, because they used to buy vegetables regularly from her. She xxxx
had been residing along the highway at Kilometer 4, La Trinidad, Benguet since
1971. She knew the land in question, because it was only 50 meters away across the THAT, finally, the PARTIES hereby agree that this Instrument
highway. She also knew that the Spouses Pacson had a shop on the property for the shall be binding upon their respective heirs, successors or assigns. [31]
welding and body-building of vehicles. She was not aware of the Deed of Conditional
Sale executed in favor of the Pacsons, and she saw the document for the first time when In other words, the trial court stated, when the vendees (the Spouses Pacson)
Joaquin Pacson showed it to her after she had already bought the property and the title were already ready to pay their balance, it was the corresponding obligation of the
had been transferred in her name. At the time she was buying the property, Julie Nabus vendors (Nabuses) to execute the transfer documents.
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 years The trial court held that [u]nder Article 1191 of the Civil Code, an injured party in
before she bought it. a reciprocal obligation, such as the Deed of Conditional Sale in the case at bar, may
choose between the fulfillment [or] the rescission of the obligation, with the payment of
In a Decision dated September 30, 1993, the trial court ruled in favor of damages in either case. It stated that in filing the case, the Spouses Pacson opted for
respondents. The dispositive portion of the Decision reads: fulfillment of the obligation, that is, the execution of the Deed of Absolute Sale in their
WHEREFORE, premises considered, judgment is hereby favor upon payment of the purchase price.
rendered in favor of the plaintiffs, ordering defendant Betty Tolero to
 6

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
In the Decision dated November 28, 2003, the Court of Appeals affirmed the THE APPLICATION OF THE DOCTRINE IN THE RULING OF THE
trial courts decision, but deleted the award of attorneys fees. The dispositive portion of SUPREME COURT IN THE CASE OF RODOLFO ALFONSO, ET
the Decision reads: AL. VS. COURT OF APPEALS, G.R. NO. 63745.[33]

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 The main issues to be resolved are:
DISMISSED for lack of merit, and the assailed Decision is hereby
AFFIRMED and UPHELD with the modification that the award of 1) Whether or not the Deed of Conditional Sale was converted into a
attorneys fees is deleted.[32] contract of lease;
2) Whether the Deed of Conditional Sale was a contract to sell or a
Petitioners filed this petition raising the following issues: contract of sale.
I
THE [COURT OF APPEALS] ERRED IN CONSIDERING
THE CONTRACT ENTERED INTO BETWEEN THE SPOUSES BATE As regards the first issue, the Deed of Conditional Sale entered into by
NABUS AND JULIE NABUS AND SPOUSES JOAQUIN PACSON the Spouses Pacson and the Spouses Nabus was not converted into a contract of
AND JULIA PACSON TO BE A CONTRACT OF SALE. lease.The 364 receipts issued to the Spouses Pacson contained either the phrase as
partial payment of lot located in Km. 4 or cash vale or cash vale (partial payment of lot
II located in Km. 4), evidencing sale under the contract and not the lease of the
THE COURT A QUO ERRED IN FINDING THAT THERE property. Further, as found by the trial court, Joaquin Pacsons non-signing of the second
ARE ONLY TWO ISSUES IN THE CASE ON APPEAL AND THEY page of a carbon copy of the Deed of Conditional Sale was through sheer inadvertence,
ARE: WHETHER THE DEED OF since the original contract[34] and the other copies of the contract were all signed by
CONDITIONAL SALE WAS CONVERTED INTO A CONTRACT OF Joaquin Pacson and the other parties to the contract.
LEASE; AND THAT [WHETHER] PETITIONER BETTY TOLERO WAS
A BUYER IN GOOD FAITH.
On the second issue, petitioners contend that the contract executed by the
III respondents and the Spouses Nabus was a contract to sell, not a contract of sale. They
THAT THE TRIAL COURT ERRED IN HOLDING THAT allege that the contract was subject to the suspensive condition of full payment of the
[RESPONDENTS] BALANCE TO THE SPOUSES NABUS UNDER consideration agreed upon before ownership of the subject property could be transferred
THE CONDITIONAL SALE IS ONLY P57,544.[8]4. to the vendees. Since respondents failed to pay the full amount of the consideration,
having an unpaid balance of P57,544.84, the obligation of the vendors to execute the
IV Deed of Absolute Sale in favor of respondents did not arise. Thus, the subsequent Deed
THAT ASSUMING WITHOUT ADMITTING THAT of Absolute Sale executed in favor of Betty Tolero, covering the same parcel of land was
PETITIONER BETTY TOLERO WAS AWARE OF THE EXISTENCE valid, even if Tolero was aware of the previous deed of conditional sale.
OF THE DEED OF CONDITIONALSALE, THE TRIAL COURT, AS
WELL AS THE [COURT OF APPEALS], ERRED IN ORDERING Moreover, petitioners contend that respondents violated the stipulated condition
PETITIONER BETTY TOLERO TO EXECUTE A DEED OF in the contract that the monthly installment to be paid was P2,000.00, as respondents
ABSOLUTE SALE IN FAVOR OF THE [RESPONDENTS] AND TO gave meager amounts as low as P10.00.
SURRENDER THE OWNER'S DUPLICATE COPY OF TCT NOS. T-
18650 AND T-18651, WHICH WAS NOT PRAYED FOR IN THE
PRAYER IN THE COMPLAINT. 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
V sale, which was the reason for their not having paid the balance of the purchase
THAT THE [COURT OF APPEALS] ERRED IN FINDING price, was untenable, and a lame and shallow excuse for violation of the Deed of
BETTY TOLERO [AS] A BUYER [WHO] FAILED TO TAKE STEPS IN Conditional Sale. Respondents could have made a valid tender of payment of their
INQUIRING FROM THE [RESPONDENTS] THE STATUS OF THE remaining balance, as it had been due for a long time, and upon refusal to accept
PROPERTY IN QUESTION BEFORE HER PURCHASE, CONTRARY payment, they could have consigned their payment to the court as provided by law. This,
TO FACTS ESTABLISHED BY EVIDENCE. respondents failed to do.

VI The Court holds that the contract entered into by the Spouses Nabus and
respondents was a contract to sell, not a contract of sale.
 7

Stated positively, upon the fulfillment of the suspensive

A contract of sale is defined in Article 1458 of the Civil Code, thus: condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by entering
Art. 1458. By the contract of sale, one of the contracting into a contract of sale with the prospective buyer becomes
parties obligates himself to transfer the ownership of and to deliver a demandable as provided in Article 1479 of the Civil Code which states:
determinate thing, and the other to pay therefor a price certain in Art. 1479. A promise to buy and sell a
money or its equivalent. determinate thing for a price certain is reciprocally
A contract of sale may be absolute or conditional. demandable.
Ramos v. Heruela[35] differentiates a contract of absolute sale and a contract of An accepted unilateral promise to buy or to
conditional sale as follows: sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a
Article 1458 of the Civil Code provides that a contract of sale consideration distinct from the price.
may be absolute or conditional. A contract of sale is absolute when A contract to sell may thus be defined as a bilateral contract
title to the property passes to the vendee upon delivery of the thing whereby the prospective seller, while expressly reserving the
sold. A deed of sale is absolute when there is no stipulation in the ownership of the subject property despite delivery thereof to the
contract that title to the property remains with the seller until full prospective buyer, binds himself to sell the said property exclusively to
payment of the purchase price. The sale is also absolute if there is no the prospective buyer upon fulfillment of the condition agreed upon,
stipulation giving the vendor the right to cancel unilaterally the contract that is, full payment of the purchase price.
the moment the vendee fails to pay within a fixed period. In a A contract to sell as defined hereinabove, may not even be
conditional sale, as in a contract to sell, ownership remains with the considered as a conditional contract of sale where the seller may
vendor and does not pass to the vendee until full payment of the likewise reserve title to the property subject of the sale until the
purchase price. The full payment of the purchase price partakes of a fulfillment of a suspensive condition, because in a conditional contract
suspensive condition, and non-fulfillment of the condition prevents the of sale, the first element of consent is present, although it is
obligation to sell from arising.[36] conditioned upon the happening of a contingent event which may or
may not occur. If the suspensive condition is not fulfilled, the perfection
Coronel v. Court of Appeals[37] distinguished a contract to sell from a contract of of the contract of sale is completely abated. However, if the suspensive
sale, thus: condition is fulfilled, the contract of sale is thereby perfected, such that
if there had already been previous delivery of the property subject of
Sale, by its very nature, is a consensual contract because it is the sale to the buyer, ownership thereto automatically transfers to the
perfected by mere consent. The essential elements of a contract of buyer by operation of law without any further act having to be
sale are the following: performed by the seller.
a) Consent or meeting of the minds, that is, consent In a contract to sell, upon the fulfillment of the
to transfer ownership in exchange for the price; suspensive condition which is the full payment of the purchase
b) Determinate subject matter; and price, ownership will not automatically transfer to the buyer
c) Price certain in money or its equivalent. although the property may have been previously delivered to
him. The prospective seller still has to convey title to the
Under this definition, a Contract to Sell may not be considered prospective buyer by entering into a contract of absolute sale.[38]
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 prospective buyer, meaning, the Further, Chua v. Court of Appeals[39] cited this distinction between a contract of
prospective seller does not as yet agree or consent to transfer sale and a contract to sell:
ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take In a contract of sale, the title to the property passes to the
as the full payment of the purchase price. What the seller agrees vendee upon the delivery of the thing sold; in a contract to sell,
or obliges himself to do is to fulfill his promise to sell the subject ownership is, by agreement, reserved in the vendor and is not to pass
property when the entire amount of the purchase price is to the vendee until full payment of the purchase price. Otherwise
delivered to him. In other words, the full payment of the purchase stated, in a contract of sale, the vendor loses ownership over the
price partakes of a suspensive condition, the non-fulfilment of property and cannot recover it until and unless the contract is resolved
which prevents the obligation to sell from arising and, thus, or rescinded; whereas, in a contract to sell, title is retained by the
ownership is retained by the prospective seller without further vendor until full payment of the price. In the latter contract, payment of
remedies by the prospective buyer. 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
xxxx convey title from becoming effective.[40]
 8

It is not the title of the contract, but its express terms or stipulations that The trial court, therefore, erred in applying Article 1191 of the Civil Code[48] in
determine the kind of contract entered into by the parties. In this case, the this case by ordering fulfillment of the obligation, that is, the execution of the deed of
contractentitled Deed of Conditional Sale is actually a contract to sell. The contract absolute sale in favor of the Spouses Pacson upon full payment of the purchase price,
stipulated that as soon as the full consideration of the sale has been paid by the which decision was affirmed by the Court of Appeals. Ayala Life Insurance, Inc. v. Ray
vendee,the corresponding transfer documents shall be executed by the vendor to Burton Development Corporation[49] held:
the vendee for the portion sold.[41] Where the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price, the Evidently, before the remedy of specific performance may be
contract is only a contract to sell.[42] The aforecited stipulation shows that the vendors availed of, there must be a breach of the contract.
reserved title to the subject property until full payment of the purchase price.
Under a contract to sell, the title of the thing to be sold is
If respondents paid the Spouses Nabus in accordance with the stipulations in retained by the seller until the purchaser makes full payment of the
the Deed of Conditional Sale, the consideration would have been fully paid in June agreed purchase price. Such payment is a positive suspensive
1983. Thus, during the last week of January 1984, Julie Nabus approached Joaquin condition, the non-fulfillment of which is not a breach of contract but
Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but told her merely an event that prevents the seller from conveying title to the
to return after four days as his daughter, Catalina Pacson, would have to go over the purchaser. The non-payment of the purchase price renders
numerous receipts to determine the balance to be paid. the contract to sell ineffective and without force and effect. Thus, a
cause of action for specific performance does not arise.[50]
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 Julie and their minor Since the contract to sell was without force and effect, Julie
daughter, Atty. Rillera required Julie Nabus to return in four days with the necessary Nabus validly conveyed the subject property to another buyer, petitioner Betty Tolero,
documents such as the deed of extrajudicial settlement, the transfer certificate of title in through a contract of absolute sale, and on the strength thereof, new transfer certificates
the names of Julie Nabus and minor Michelle Nabus, and the guardianship papers of of title over the subject property were duly issued to Tolero. [51]
Michelle. However, Julie Nabus did not return.
As vendees given possession of the subject property, the ownership of which The Spouses Pacson, however, have the right to the reimbursement of their
was still with the vendors, the Pacsons should have protected their interest and inquired payments to the Nabuses, and are entitled to the award of nominal damages. The Civil
from Julie Nabus why she did not return and then followed through with full payment of Code provides:
the purchase price and the execution of the deed of absolute sale. The Spouses Pacson
had the legal remedy of consigning their payment to the court; however, they did not do Art. 2221. Nominal damages are adjudicated in order that a
so. A rumor that the property had been sold to Betty Tolero prompted them to check the right of the plaintiff, which has been violated or invaded by the
veracity of the sale with the Register of Deeds of the Province of Benguet. They found defendant, may be vindicated or recognized, and not for the purpose of
out that on March 5, 1984, Julie Nabus sold the same property to Betty Tolero through a indemnifying the plaintiff for any loss suffered by him.
Deed of Absolute Sale, and new transfer certificates of title to the property were issued
to Tolero. Art. 2222. The court may award nominal damages in every
obligation arising from any source enumerated in article 1157, or in
every case where any property right has been invaded.
Thus, the Spouses Pacson filed this case for the annulment of the contract
of absolute sale executed in favor of Betty Tolero and the transfer certificates of title
issued in her name. As stated by the trial court, under the Deed of Conditional Sale, respondents
had the right to demand from petitioners Julie and Michelle Nabus that the latter execute
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale in their favor a deed of absolute sale when they were ready to pay the remaining balance
executed in their favor was merely a contract to sell, the obligation of the seller to sell of the purchase price. The Nabuses had the corresponding duty to respect the
becomes demandable only upon the happening of the suspensive condition. [43] The full respondents right, but they violated such right, for they could no longer execute the
payment of the purchase price is the positive suspensive condition, the failure of which document since they had sold the property to Betty Tolero.[52] Hence, nominal damages
is not a breach of contract, but simply an event that prevented the obligation of in the amount of P10,000.00 are awarded to respondents.
the vendor to convey title from acquiring binding force.[44]Thus, for its non-fulfilment,
there is no contract to speak of, the obligor having failed to perform the suspensive Respondents are not entitled to moral damages because contracts are not
condition which enforces a juridical relation.[45]With this circumstance, there can be no referred to in Article 2219[53] of the Civil Code, which enumerates the cases when moral
rescission or fulfilment of an obligation that is still non-existent, the suspensive condition damages may be recovered. Article 2220[54] of the Civil Code allows the recovery of
not having occurred as yet.[46]Emphasis should be made that the breach contemplated in moral damages in breaches of contract where the defendant acted fraudulently or in
Article 1191 of the New Civil Code is the obligors failure to comply with an obligation bad faith. However, this case involves a contract to sell, wherein full payment of the
already extant, not a failure of a condition to render binding that obligation. [47] purchase price is a positive suspensive condition, the non-fulfillment of which
 9

is not a breach of contract, but merely an event that prevents the seller from conveying On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for
title to the purchaser. Since there is no breach of contract in this case, respondents are Rescission of Contract with Damages against Victoria T. Tuparan (respondent) before
not entitled to moral damages. 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
In the absence of moral, temperate, liquidated or compensatory damages, Karuhatan, Valenzuela City, and covered by TCT No. V-4130; that on that property, she
exemplary damages cannot be granted for they are allowed only in addition to any of the put up a three-storey commercial building known as RBJ Building and a residential
four kinds of damages mentioned.[55] apartment building; that since 1990, she had been operating a 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
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA- tenants and street vendors.
G.R. CV No. 44941, dated November 28, 2003, is REVERSED and SET
ASIDE. Judgment is hereby rendered upholding the validity of the sale of the subject In December 1989, respondent leased from petitioner a space on the ground
property made by petitioners Julie Nabus and Michelle Nabus in favor of petitioner Betty floor of the RBJ Building for her pawnshop business for a monthly rental of ₱4,000.00. A
Tolero, as well as the validity of Transfer Certificates of Title Nos. T-18650 and T-18651 close friendship developed between the two which led to the respondent investing
issued in the name of Betty Tolero. Petitioners Julie Nabus and Michelle Nabus thousands of pesos in petitioners financing/lending business from February 7,
are ORDERED to REIMBURSE respondents spouses Joaquin and Julia Pacson the 1990 to May 27, 1990, with interest at the rate of 6% a month.
sum of One Hundred Twelve Thousand Four Hundred Fifty-Five Pesos and
Sixteen Centavos (P112,455.16), and to pay Joaquin and Julia Pacson nominal On June 20, 1988, petitioner mortgaged the subject real properties to the
damages in the amount of Ten Thousand Pesos (P10,000.00), with annual interest Farmers Savings Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of
of twelve percent (12%) until full payment of the amounts due to Joaquin and Julia ₱2,000,000.00 payable in installments. On November 15, 1990, petitioners outstanding
Pacson. account on the mortgage reached ₱2,278,078.13. Petitioner then decided to sell her real
properties for at least ₱6,500,000.00 so she could liquidate her bank loan and finance
No costs. her businesses. As a gesture of friendship, respondent verbally offered to conditionally
buy petitioners real properties for ₱4,200,000.00 payable on installment basis without
SO ORDERED. interest and to assume the bank loan. To induce the petitioner to accept her offer,
MILA A. REYES , G.R. No. 188064 respondent offered the following conditions/concessions:
Petitioner,
Present:

CARPIO, J., Chairperson, 1. That the conditional sale will be cancelled if the plaintiff
NACHURA, (petitioner) can find a buyer of said properties for the amount of
- versus - PERALTA, ₱6,500,000.00 within the next three (3) months provided all amounts
ABAD, and received by the plaintiff from the defendant (respondent) including
MENDOZA, JJ. payments actually made by defendant to Farmers Savings and Loan
Bank would be refunded to the defendant with additional interest of six
(6%) monthly;
Promulgated:
VICTORIA T. TUPARAN, June 1, 2011 2. That the plaintiff would continue using the space occupied
Respondent. by her and drugstore and cosmetics store without any rentals for the
duration of the installment payments;
X -----------------------------------------------------------------------------------------------------X
3. That there will be a lease for fifteen (15) years in favor of
DECISION the plaintiff over the space for drugstore and cosmetics store at a
monthly rental of only ₱8,000.00 after full payment of the stipulated
MENDOZA, J.: installment payments are made by the defendant;

4. That the defendant will undertake the renewal and payment

of the fire insurance policies on the two (2) subject buildings following
Subject of this petition for review is the February 13, 2009 Decision[1] of the the expiration of the then existing fire insurance policy of the plaintiff up
Court of Appeals (CA) which affirmed with modification the February 22, 2006 to the time that plaintiff is fully paid of the total purchase price of
Decision[2] of the Regional Trial Court, Branch 172, Valenzuela City (RTC), in Civil Case ₱4,200,000.00.[3]
No. 3945-V-92, an action for Rescission of Contract with Damages.
 10

After petitioners verbal acceptance of all the conditions/concessions, both properties and demanded the simultaneous execution of the corresponding deed of
parties worked together to obtain FSL Banks approval for respondent to assume her absolute sale.
(petitioners) outstanding bank account. The assumption would be part of respondents
purchase price for petitioners mortgaged real properties. FSL Bank approved their Respondents Answer
proposal on the condition that petitioner would sign or remain as co-maker for the
mortgage obligation assumed by respondent. Respondent countered, among others, that the tripartite agreement erroneously
designated by the petitioner as a Deed of Conditional Sale of Real Property with
On November 26, 1990, the parties and FSL Bank executed the corresponding Assumption of Mortgage was actually a pure and absolute contract of sale with a term
Deed of Conditional Sale of Real Properties with Assumption of Mortgage. Due to their period. It could not be considered a conditional sale because the acquisition of
close personal friendship and business relationship, both parties chose not to reduce into contractual rights and the performance of the obligation therein did not depend upon a
writing the other terms of their agreement mentioned in paragraph 11 of the complaint. future and uncertain event. Moreover, the capital gains and documentary stamps and
Besides, FSL Bank did not want to incorporate in the Deed of Conditional Sale of Real other miscellaneous expenses and real estate taxes up to 1990 were supposed to be
Properties with Assumption of Mortgage any other side agreement between petitioner paid by petitioner but she failed to do so.
and respondent.
Respondent further averred that she successfully rescued the properties from a
Under the Deed of Conditional Sale of Real Properties with Assumption of definite foreclosure by paying the assumed mortgage in the amount of ₱2,278,078.13
Mortgage, respondent was bound to pay the petitioner a lump sum of ₱1.2 million pesos plus interest and other finance charges. Because of her payment, she was able to obtain
without interest as part of the purchase price in three (3) fixed installments as follows: a deed of cancellation of mortgage and secure a release of mortgage on the subject real
properties including petitioners ancestral residential property in Sta. Maria, Bulacan.
a) ₱200,000.00 due January 31, 1991
b) ₱200,000.00 due June 30, 1991 Petitioners claim for the balance of the purchase price of the subject real
c) ₱800,000.00 due December 31, 1991 properties was baseless and unwarranted because the full amount of the purchase price
had already been paid, as she did pay more than ₱4,200,000.00, the agreed purchase
Respondent, however, defaulted in the payment of her obligations on their due price of the subject real properties, and she had even introduced improvements thereon
dates. Instead of paying the amounts due in lump sum on their respective maturity dates, worth more than ₱4,800,000.00. As the parties could no longer be restored to their
respondent paid petitioner in small amounts from time to time. To compensate for her original positions, rescission could not be resorted to.
delayed payments, respondent agreed to pay petitioner an interest of 6% a month. As
of August 31, 1992, respondent had only paid ₱395,000.00, leaving a balance of Respondent added that as a result of their business relationship, petitioner was
₱805,000.00 as principal on the unpaid installments and ₱466,893.25 as unpaid able to obtain from her a loan in the amount of ₱400,000.00 with interest and took
accumulated interest. several pieces of jewelry worth ₱120,000.00. Petitioner also failed and refused to pay the
monthly rental of ₱20,000.00 since November 16, 1990 up to the present for the use and
Petitioner further averred that despite her success in finding a prospective buyer occupancy of the ground floor of the building on the subject real property, thus,
for the subject real properties within the 3-month period agreed upon, respondent accumulating arrearages in the amount of ₱470,000.00 as of October 1992.
reneged on her promise to allow the cancellation of their deed of conditional sale.
Instead, respondent became interested in owning the subject real properties and even Ruling of the RTC
wanted to convert the entire property into a modern commercial complex. Nonetheless,
she consented because respondent repeatedly professed friendship and assured her On February 22, 2006, the RTC handed down its decision finding that respondent failed
that all their verbal side agreement would be honored as shown by the fact that since to pay in full the ₱4.2 million total purchase price of the subject real properties leaving a
December 1990, she (respondent) had not collected any rentals from the petitioner for balance of ₱805,000.00. It stated that the checks and receipts presented by respondent
the space occupied by her drugstore and cosmetics store. refer to her payments of the mortgage obligation with FSL Bank and not the payment of
the balance of ₱1,200,000.00. The RTC also considered the Deed of Conditional Sale of
On March 19, 1992, the residential building was gutted by fire which caused the Real Property with Assumption of Mortgage executed by and among the two parties and
petitioner to lose rental income in the amount of ₱8,000.00 a month since April 1992. FSL Bank a contract to sell, and not a contract of sale. It was of the opinion that although
Respondent neglected to renew the fire insurance policy on the subject buildings. the petitioner was entitled to a rescission of the contract, it could not be permitted
because her non-payment in full of the purchase price may not be considered as
Since December 1990, respondent had taken possession of the subject real substantial and fundamental breach of the contract as to defeat the object of the parties
properties and had been continuously collecting and receiving monthly rental income in entering into the contract.[4] The RTC believed that the respondents offer stated in her
from the tenants of the buildings and vendors of the sidewalk fronting the RBJ building counsels letter dated September 2, 1992 to settle what she thought was her unpaid
without sharing it with petitioner. balance of ₱751,000.00 showed her sincerity and willingness to settle her obligation.
Hence, it would be more equitable to give respondent a chance to pay the balance plus
On September 2, 1992, respondent offered the amount of ₱751,000.00 only interest within a given period of time.
payable on September 7, 1992, as full payment of the purchase price of the subject real
 11

Finally, the RTC stated that there was no factual or legal basis to award damages and out of the total purchase price of the subject property in the amount of ₱4,200,000.00,
attorneys fees because there was no proof that either party acted fraudulently or in bad respondents remaining unpaid balance was only ₱805,000.00. Since respondent had
faith. 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
Thus, the dispositive portion of the RTC Decision reads: portion of the CA Decision reads:

WHEREFORE, judgment is hereby rendered as follows: WHEREFORE, premises considered, the Decision dated 22
February 2006 and Order dated 22 December 2006 of the Regional
1. Allowing the defendant to pay the plaintiff within thirty (30) Trial Court of Valenzuela City, Branch 172 in Civil Case No. 3945-V-92
days from the finality hereof the amount of ₱805,000.00, representing are AFFIRMED with MODIFICATION in that defendant-appellant
the unpaid purchase price of the subject property, with interest thereon Victoria T. Tuparan is hereby ORDERED to pay plaintiff-
at 2% a month from January 1, 1992 until fully paid. Failure of the appellee/appellant Mila A. Reyes, within 30 days from finality of this
defendant to pay said amount within the said period shall cause the Decision, the amount of ₱805,000.00 representing the unpaid balance
automatic rescission of the contract (Deed of Conditional Sale of Real of the purchase price of the subject property, plus interest thereon at
Property with Assumption of Mortgage) and the plaintiff and the the rate of 6% per annum from 11 September 1992 up to finality of this
defendant shall be restored to their former positions relative to the Decision and, thereafter, at the rate of 12% per annum until full
subject property with each returning to the other whatever benefits payment. The ruling of the trial court on the automatic rescission of the
each derived from the transaction; Deed of Conditional Sale with Assumption of Mortgage is hereby
DELETED. Subject to the foregoing, the dispositive portion of the trial
2. Directing the defendant to allow the plaintiff to continue courts decision is AFFIRMED in all other respects.
using the space occupied by her for drugstore and cosmetic store
without any rental pending payment of the aforesaid balance of the SO ORDERED.[6]
purchase price.
After the denial of petitioners motion for reconsideration and respondents
3. Ordering the defendant, upon her full payment of the motion for partial reconsideration, petitioner filed the subject petition for review praying
purchase price together with interest, to execute a contract of lease for for the reversal and setting aside of the CA Decision anchored on the following
fifteen (15) years in favor of the plaintiff over the space for the ASSIGNMENT OF ERRORS
drugstore and cosmetic store at a fixed monthly rental of ₱8,000.00;
and
A. THE COURT OF APPEALS SERIOUSLY ERRED AND
ABUSED ITS DISCRETION IN DISALLOWING THE OUTRIGHT
RESCISSION OF THE SUBJECT DEED OF CONDITIONAL SALE OF
REAL PROPERTIES WITH ASSUMPTION OF MORTGAGE ON THE
4. Directing the plaintiff, upon full payment to her by the GROUND THAT RESPONDENT TUPARANS FAILURE TO PAY
defendant of the purchase price together with interest, to execute the PETITIONER REYES THE BALANCE OF THE PURCHASE PRICE
necessary deed of sale, as well as to pay the Capital Gains Tax, OF ₱805,000.00 IS NOT A BREACH OF CONTRACT DESPITE ITS
documentary stamps and other miscellaneous expenses necessary for OWN FINDINGS THAT PETITIONER STILL RETAINS OWNERSHIP
securing the BIR Clearance, and to pay the real estate taxes due on AND TITLE OVER THE SUBJECT REAL PROPERTIES DUE TO
the subject property up to 1990, all necessary to transfer ownership of RESPONDENTS REFUSAL TO PAY THE BALANCE OF THE TOTAL
the subject property to the defendant. 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
No pronouncement as to damages, attorneys fees and costs. STIPULATED LAST INSTALLMENT OF ₱1,200,000.00 PLUS THE
INTEREST THEREON. IN EFFECT, THE COURT OF APPEALS
SO ORDERED.[5] AFFIRMED AND ADOPTED THE TRIAL COURTS CONCLUSION
THAT THE RESPONDENTS NON-PAYMENT OF THE ₱805,000.00
Ruling of the CA IS ONLY A SLIGHT OR CASUAL BREACH OF CONTRACT.

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 B. THE COURT OF APPEALS SERIOUSLY ERRED AND
contract to sell but ruled that the remedy of rescission could not apply because the ABUSED ITS DISCRETION IN DISREGARDING AS GROUND FOR
respondents failure to pay the petitioner the balance of the purchase price in the total THE RESCISSION OF THE SUBJECT CONTRACT THE OTHER
amount of ₱805,000.00 was not a breach of contract, but merely an event that prevented FRAUDULENT AND MALICIOUS ACTS COMMITTED BY THE
the seller (petitioner) from conveying title to the purchaser (respondent). It reasoned that RESPONDENT AGAINST THE PETITIONER WHICH BY
 12

THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE ENRICH HERSELF BY CONTINUOUSLY COLLECTING ALL THE
PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT WITHIN RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES
WHICH TO PAY TO THE PETITIONER THE ₱805,000.00 PLUS WITHOUT ANY ACCOUNTING AND COURT DEPOSIT OF THE
INTEREST THEREON. COLLECTED RENTALS/FRUITS AND THE PETITIONERS URGENT
MOTION TO DIRECT DEFENDANT VICTORIA TUPARAN TO PAY
THE ACCUMULATED UNPAID REAL ESTATE TAXES AND SEF
C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS TAXES ON THE SUBJECT REAL PROPERTIES DATED JANUARY
NOT ENTITLED TO THE RESCISSION OF THE SUBJECT 13, 2007 THEREBY EXPOSING THE SUBJECT REAL PROPERTIES
CONTRACT, THE COURT OF APPEALS STILL SERIOUSLY TO IMMINENT AUCTION SALE BY THE CITY TREASURER
ERRED AND ABUSED ITS DISCRETION IN REDUCING THE OF VALENZUELA CITY.
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 THE PERSONAL COMMITMENT G. THE COURT OF APPEALS SERIOUSLY ERRED AND
OF THE RESPONDENT AND AGREEMENT BETWEEN THE ABUSED ITS DISCRETION IN DENYING THE PETITIONERS CLAIM
PARTIES THAT RESPONDENT WILL PAY INTEREST ON THE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS
₱805,000.00 AT THE RATE OF 6% MONTHLY STARTING THE FEES AGAINST THE RESPONDENT.
DATE OF DELINQUENCY ON DECEMBER 31, 1991.
In sum, the crucial issue that needs to be resolved is whether or not the CA was
correct in ruling that there was no legal basis for the rescission of the Deed of Conditional
D. THE COURT OF APPEALS SERIOUSLY ERRED AND Sale with Assumption of Mortgage.
ABUSED ITS DISCRETION IN THE APPRECIATION AND/OR
MISAPPRECIATION OF FACTS RESULTING INTO THE DENIAL OF Position of the Petitioner
THE CLAIM OF PETITIONER REYES FOR ACTUAL DAMAGES
WHICH CORRESPOND TO THE MILLIONS OF PESOS OF The petitioner basically argues that the CA should have granted the rescission of the
RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WHICH subject Deed of Conditional Sale of Real Properties with Assumption of Mortgage for the
RESPONDENT TUPARAN COLLECTED CONTINUOUSLY SINCE following reasons:
DECEMBER 1990, EVEN WITH THE UNPAID BALANCE OF
₱805,000.00 AND DESPITE THE FACT THAT RESPONDENT DID 1. The subject deed of conditional sale is a reciprocal
NOT CONTROVERT SUCH CLAIM OF THE PETITIONER AS obligation whose outstanding characteristic is reciprocity arising from
CONTAINED IN HER AMENDED COMPLAINT DATED APRIL 22, identity of cause by virtue of which one obligation is correlative of the
2006. other.

2. The petitioner was rescinding not enforcing the subject

E. THE COURT OF APPEALS SERIOUSLY ERRED AND Deed of Conditional Sale pursuant to Article 1191 of the Civil Code
ABUSED ITS DISCRETION IN THE APPRECIATION OF FACTS because of the respondents failure/refusal to pay the ₱805,000.00
RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER balance of the total purchase price of the petitioners properties within
REYES FOR THE ₱29,609.00 BACK RENTALS THAT WERE the stipulated period ending December 31, 1991.
COLLECTED BY RESPONDENT TUPARAN FROM THE OLD
TENANTS OF THE PETITIONER. 3. There was no slight or casual breach on the part of the
respondent because she (respondent) deliberately failed to comply
with her contractual obligations with the petitioner by violating the
F. THE COURT OF APPEALS SERIOUSLY ERRED AND terms or manner of payment of the ₱1,200,000.00 balance and
ABUSED ITS DISCRETION IN DENYING THE PETITIONERS unjustly enriched herself at the expense of the petitioner by collecting
EARLIER URGENT MOTION FOR ISSUANCE OF A PRELIMINARY all rental payments for her personal benefit and enjoyment.
MANDATORY AND PROHIBITORY INJUNCTION DATED JULY 7,
2008 AND THE SUPPLEMENT THERETO DATED AUGUST 4, 2008 Furthermore, the petitioner claims that the respondent is liable to pay interest at
THEREBY CONDONING THE UNJUSTIFIABLE FAILURE/REFUSAL the rate of 6% per month on her unpaid installment of ₱805,000.00 from the date of the
OF JUDGE FLORO ALEJO TO RESOLVE WITHIN ELEVEN (11) delinquency, December 31, 1991, because she obligated herself to do so.
YEARS THE PETITIONERS THREE (3) SEPARATE MOTIONS FOR Finally, the petitioner asserts that her claim for damages or lost income as well
PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING as for the back rentals in the amount of ₱29,609.00 has been fully substantiated and,
ORDER, ACCOUNTING AND DEPOSIT OF RENTAL INCOME therefore, should have been granted by the CA. Her claim for moral and exemplary
DATED MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7, damages and attorneys fees has been likewise substantiated.
2006 THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY
 13

Position of the Respondent over the title. Respondents failure to pay in full the purchase price is not the breach of
contract contemplated under Article 1191 of the New Civil Code but rather just an
The respondent counters that the subject Deed of Conditional Sale with Assumption of event that prevents the petitioner from being bound to convey title to the respondent. The
Mortgage entered into between the parties is a contract to sell and not a contract of sale 2009 case of Nabus v. Joaquin & Julia Pacson[8] is enlightening:
because the title of the subject properties still remains with the petitioner as she failed to
pay the installment payments in accordance with their agreement. The Court holds that the contract entered into by the Spouses
Nabus and respondents was a contract to sell, not a contract of sale.
Respondent echoes the RTC position that her inability to pay the full balance on the
purchase price may not be considered as a substantial and fundamental breach of the A contract of sale is defined in Article 1458 of the Civil Code,
subject contract and it would be more equitable if she would be allowed to pay the thus:
balance including interest within a certain period of time. She claims that as early as
1992, she has shown her sincerity by offering to pay a certain amount which was, Art. 1458. By the contract of sale, one of the contracting
however, rejected by the petitioner. parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
Finally, respondent states that the subject deed of conditional sale explicitly provides that money or its equivalent.
the installment payments shall not bear any interest. Moreover, petitioner failed to prove
that she was entitled to back rentals. xxx
The Courts Ruling
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract of
The petition lacks merit. sale are the following:

The Court agrees with the ruling of the courts below that the subject Deed of a) Consent or meeting of the minds, that is, consent
Conditional Sale with Assumption of Mortgage entered into by and among the two parties to transfer ownership in exchange for the price;
and FSL Bank on November 26, 1990 is a contract to sell and not a contract of sale. The b) Determinate subject matter; and
subject contract was correctly classified as a contract to sell based on the following c) Price certain in money or its equivalent.
pertinent stipulations:
Under this definition, a Contract to Sell may not be considered
8. That the title and ownership of the subject real properties as a Contract of Sale because the first essential element is lacking. In
shall remain with the First Party until the full payment of the Second a contract to sell, the prospective seller explicitly reserves the transfer
Party of the balance of the purchase price and liquidation of the of title to the prospective buyer, meaning, the prospective seller does
mortgage obligation of ₱2,000,000.00. Pending payment of the not as yet agree or consent to transfer ownership of the property
balance of the purchase price and liquidation of the mortgage subject of the contract to sell until the happening of an event, which for
obligation that was assumed by the Second Party, the Second Party present purposes we shall take as the full payment of the purchase
shall not sell, transfer and convey and otherwise encumber the subject price. What the seller agrees or obliges himself to do is to fulfill his
real properties without the written consent of the First and Third Party. promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words, the full payment of
9. That upon full payment by the Second Party of the full the purchase price partakes of a suspensive condition, the non-
balance of the purchase price and the assumed mortgage obligation fulfillment of which prevents the obligation to sell from arising and,
herein mentioned the Third Party shall issue the corresponding Deed thus, ownership is retained by the prospective seller without further
of Cancellation of Mortgage and the First Party shall execute the remedies by the prospective buyer.
corresponding Deed of Absolute Sale in favor of the Second Party. [7]
xxx xxx xxx
Based on the above provisions, the title and ownership of the subject properties Stated positively, upon the fulfillment of the suspensive
remains with the petitioner until the respondent fully pays the balance of the purchase condition which is the full payment of the purchase price, the
price and the assumed mortgage obligation. Thereafter, FSL Bank shall then issue the prospective sellers obligation to sell the subject property by entering
corresponding deed of cancellation of mortgage and the petitioner shall execute the into a contract of sale with the prospective buyer becomes
corresponding deed of absolute sale in favor of the respondent. demandable as provided in Article 1479 of the Civil Code which states:

Accordingly, the petitioners obligation to sell the subject properties becomes Art. 1479. A promise to buy and sell a determinate thing for a
demandable only upon the happening of the positive suspensive condition, which is the price certain is reciprocally demandable.
respondents full payment of the purchase price. Without respondents full payment, there
can be no breach of contract to speak of because petitioner has no obligation yet to turn
 14

An accepted unilateral promise to buy or to sell a determinate actually a contract to sell. The contract stipulated that as soon as the
thing for a price certain is binding upon the promissor if the promise is full consideration of the sale has been paid by the vendee, the
supported by a consideration distinct from the price. corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold. Where the vendor promises to execute
A contract to sell may thus be defined as a bilateral contract a deed of absolute sale upon the completion by the vendee of the
whereby the prospective seller, while expressly reserving the payment of the price, the contract is only a contract to sell. The
ownership of the subject property despite delivery thereof to the aforecited stipulation shows that the vendors reserved title to the
prospective buyer, binds himself to sell the said property exclusively to subject property until full payment of the purchase price.
the prospective buyer upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price. xxx

A contract to sell as defined hereinabove, may not even be Unfortunately for the Spouses Pacson, since the Deed of
considered as a conditional contract of sale where the seller may Conditional Sale executed in their favor was merely a contract to sell,
likewise reserve title to the property subject of the sale until the the obligation of the seller to sell becomes demandable only upon the
fulfillment of a suspensive condition, because in a conditional contract happening of the suspensive condition. The full payment of the
of sale, the first element of consent is present, although it is purchase price is the positive suspensive condition, the failure of which
conditioned upon the happening of a contingent event which may or is not a breach of contract, but simply an event that prevented the
may not occur. If the suspensive condition is not fulfilled, the perfection obligation of the vendor to convey title from acquiring binding
of the contract of sale is completely abated. However, if the suspensive force. Thus, for its non-fulfilment, there is no contract to speak of, the
condition is fulfilled, the contract of sale is thereby perfected, such that obligor having failed to perform the suspensive condition which
if there had already been previous delivery of the property subject of enforces a juridical relation. With this circumstance, there can be no
the sale to the buyer, ownership thereto automatically transfers to the rescission or fulfillment of an obligation that is still non-existent, the
buyer by operation of law without any further act having to be suspensive condition not having occurred as yet. Emphasis should be
performed by the seller. made that the breach contemplated in Article 1191 of the New Civil
Code is the obligors failure to comply with an obligation already
In a contract to sell, upon the fulfillment of the suspensive extant, not a failure of a condition to render binding that
condition which is the full payment of the purchase price, ownership obligation. [Emphases and underscoring supplied]
will not automatically transfer to the buyer although the property may
have been previously delivered to him. The prospective seller still has
to convey title to the prospective buyer by entering into a contract of Consistently, the Court handed down a similar ruling in the 2010 case of Heirs
absolute sale. of Atienza v. Espidol, [9] where it was written:

Further, Chua v. Court of Appeals, cited this distinction Regarding the right to cancel the contract for non-
between a contract of sale and a contract to sell: payment of an installment, there is need to initially determine if
what the parties had was a contract of sale or a contract to sell. In
In a contract of sale, the title to the property a contract of sale, the title to the property passes to the buyer upon the
passes to the vendee upon the delivery of the thing delivery of the thing sold. In a contract to sell, on the other hand, the
sold; in a contract to sell, ownership is, by ownership is, by agreement, retained by the seller and is not to pass to
agreement, reserved in the vendor and is not to pass the vendee until full payment of the purchase price. In the contract of
to the vendee until full payment of the purchase sale, the buyers non-payment of the price is a negative resolutory
price. Otherwise stated, in a contract of sale, the condition; in the contract to sell, the buyers full payment of the price is
vendor loses ownership over the property and a positive suspensive condition to the coming into effect of the
cannot recover it until and unless the contract is agreement. In the first case, the seller has lost and cannot recover the
resolved or rescinded; whereas, in a contract to sell, ownership of the property unless he takes action to set aside the
title is retained by the vendor until full payment of the contract of sale. In the second case, the title simply remains in the
price. In the latter contract, payment of the price is a seller if the buyer does not comply with the condition precedent of
positive suspensive condition, failure of which is not making payment at the time specified in the contract. Here, it is quite
a breach but an event that prevents the obligation of evident that the contract involved was one of a contract to sell since
the vendor to convey title from becoming effective. the Atienzas, as sellers, were to retain title of ownership to the land
until respondent Espidol, the buyer, has paid the agreed price. Indeed,
It is not the title of the contract, but its express terms or there seems no question that the parties understood this to be the
stipulations that determine the kind of contract entered into by the case.
parties. In this case, the contract entitled Deed of Conditional Sale is
 15

Admittedly, Espidol was unable to pay the second installment

of P1,750,000.00 that fell due in December 2002. That payment, said xxx
both the RTC and the CA, was a positive suspensive condition failure 3. That the Third Party hereby acknowledges receipts from
of which was not regarded a breach in the sense that there can be no the Second Party P278,078.13 as partial payment of the loan
rescission of an obligation (to turn over title) that did not yet exist obligation of First Party in order to reduce the account to only
since the suspensive condition had not taken place. x x x. ₱2,000,000.00 as of November 15, 1990 to be assumed by the
[Emphases and underscoring supplied] Second Party effective November 15, 1990.[12]

Thus, the Court fully agrees with the CA when it resolved: Considering, From the records, it cannot be denied that respondent paid to FSL Bank
however, that the Deed of Conditional Sale was not cancelled by Vendor Reyes petitioners mortgage obligation in the amount of ₱2,278,078.13, which formed part of the
(petitioner) and that out of the total purchase price of the subject property in the amount purchase price of the subject property. Likewise, it is not disputed that respondent paid
of ₱4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only directly to petitioner the amount of ₱721,921.87 representing the additional payment for
₱805,000.00, a substantial amount of the purchase price has already been paid. It is only the purchase of the subject property. Clearly, out of the total price of ₱4,200,000.00,
right and just to allow Tuparan to pay the said unpaid balance of the purchase price to respondent was able to pay the total amount of ₱3,000,000.00, leaving a balance of
Reyes.[10] ₱1,200,000.00 payable in three (3) installments.

Granting that a rescission can be permitted under Article 1191, the Court still Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates
cannot allow it for the reason that, considering the circumstances, there was only a slight the first and second installments of ₱200,000.00 each. She, however, failed to pay the
or casual breach in the fulfillment of the obligation. third and last installment of ₱800,000.00 due on December 31, 1991. Nevertheless,
on August 31, 1992, respondent, through counsel, offered to pay the amount of
Unless the parties stipulated it, rescission is allowed only when the breach of ₱751,000.00, which was rejected by petitioner for the reason that the actual balance was
the contract is substantial and fundamental to the fulfillment of the obligation. Whether ₱805,000.00 excluding the interest charges.
the breach is slight or substantial is largely determined by the attendant
circumstances.[11] In the case at bench, the subject contract stipulated the following Considering that out of the total purchase price of ₱4,200,000.00, respondent
important provisions: has already paid the substantial 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 her to settle, within a
reasonable period of time, the balance of the unpaid purchase price. The Court agrees
2. That the purchase price of ₱4,200,000.00 shall be paid as with the courts below that the respondent showed her sincerity and willingness to comply
follows: with her obligation when she offered to pay the petitioner the amount of ₱751,000.00.

a) ₱278,078.13 received in cash by the First Party but directly On the issue of interest, petitioner failed to substantiate her claim that
paid to the Third Party as partial payment of the mortgage obligation of respondent made a personal commitment to pay a 6% monthly interest on the
the First Party in order to reduce the amount to ₱2,000,000.00 only as ₱805,000.00 from the date of delinquency, December 31, 1991. As can be gleaned from
of November 15, 1990; the contract, there was a stipulation stating that: All the installments shall not bear
interest. The CA was, however, correct in imposing interest at the rate of 6% per annum
b) ₱721,921.87 received in cash by the First Party as starting from the filing of the complaint on September 11, 1992.
additional payment of the Second Party;

c) ₱1,200,000.00 to be paid in installments as

follows:

1. ₱200,000.00 payable on or before January Finally, the Court upholds the ruling of the courts below regarding the non-
31, 1991; imposition of damages and attorneys fees. Aside from petitioners self-serving
2. ₱200,000.00 payable on or before June 30, statements, there is not enough evidence on record to prove that respondent acted
1991; fraudulently and maliciously against the petitioner. In the case of Heirs of Atienza v.
3. ₱800,000.00 payable on or before December Espidol,[13] it was stated:
31, 1991;
Respondents are not entitled to moral damages because
Note: All the installments shall not bear any interest. contracts are not referred to in Article 2219 of the Civil Code, which
enumerates the cases when moral damages may be recovered. Article
d) ₱2,000,000.00 outstanding balance of the 2220 of the Civil Code allows the recovery of moral damages in
mortgage obligation as of November 15, 1990 which is hereby breaches of contract where the defendant acted fraudulently or in bad
assumed by the Second Party. faith. However, this case involves a contract to sell, wherein full
 16

payment of the purchase price is a positive suspensive condition, the Jonette Borres pays one half (1/2) of the consideration or P500,000.00 in "cash" by June
non-fulfillment of which is not a breach of contract, but merely an event 15, 1989 and the balance was payable on June 30, 1989 (TSN Direct Examination on
that prevents the seller from conveying title to the purchaser. Since Emilio A. Salazar, May 21, [1991], p. 9; TSN Cross Examination on Jonette Borres,
there is no breach of contract in this case, respondents are not entitled November 12, [1991], pp. 29 and 30). It was during this occasion that Dr. Salazar again
to moral damages. emphasized to Jonette Borres that he needed the money because he was then buying a
property in the United States (TSN pp. 15-20, November 5, 1991; pp. 22 and 23, May 21,
1991; and pp. 56-57, May 21, 1991).
In the absence of moral, temperate, liquidated or Plaintiff agreed to the above conditions (TSN Cross Examination on Jonette Borres
compensatory damages, exemplary damages cannot be granted for November 12, 1989, p. 32) and Dr. Salazar constituted co-defendant Teresa Dizon as
they are allowed only in addition to any of the four kinds of damages custodian at the Deed of Absolute Sale (Exhibit "C") together with the Titles of the Land
mentioned. in question with the instruction to Teresa Dizon not to surrender said documents to
Jonette Borres until upon payment of the full price in "cash" (TSN Direct Examination on
Emilio A. Salazar, May 21, [1991], p. 11).
WHEREFORE, the petition is DENIED. On June 14, 1989 Jonette Borres informed defendant Dizon that she will be able to
pay the full amount of P1,000,000.00 on June 15, 1989 (TSN Direct Examination Jonette
SO ORDERED. Borres, November 5, [1991], p. 25) and on the next day, she then went to the house of
Teresa Dizon to see and get the documents entrusted to her by Dr. Salazar. The
[G.R. No. 118203. July 5, 1996] documents not being in Dizon's possession, they agreed to meet at Metro Bank West
EMILIO A. SALAZAR and TERESITA DIZON, petitioners, vs. COURT OF APPEALS Avenue Branch to get the documents and then to proceed to Makati to meet the plaintiff's
and JONETTE BORRES, respondents. business partner a certain Balao who allegedly gave plaintiff a Far East Bank and Trust
DECISION Company check for the amount of P1,500,000.00 (Exhibit "F") with which to buy the
DAVIDE, JR., J.: property (TSN Direct Examination on Jonette Borres November 5, [1991], pp. 30, 32 and
Petitioners seek to set aside the decision[1] of 29 November 1994 of the Court of 33). For some reason or another Jonette Borres and defendant Dizon failed to proceed to
Appeals in CA-G.R. CV No. 40197, which reversed the decision[2] of 3 September 1992 Makati.
of Branch 66 of the Regional Trial Court (RTC) of Makati, Metro Manila, in Civil Case No. In the meantime or on June 16, 1992, Dr. Salazar made an overseas call to co-
89-4468. defendant Dizon to inquire if Jonette Borres had already paid the down payment of
The primary issues presented for our resolution are whether (a) the so-called Deed P500,000.00 and Teresa Dizon replied to Dr. Salazar that Jonette Borres had not paid
of Absolute Sale executed by petitioner Emilio A. Salazar in favor of private respondent the down payment. Dr. Salazar then ordered Dizon to stop the sale (TSN Direct
Jonette Borres is a perfected contract of sale or a mere contract to sell, and (b) the action Examination on Emilio A. Salazar, May 21, [1991], pp. 12 and 13).
for specific performance which the latter filed will lie to compel the former to deliver the As maybe seen from the evidence presented by the plaintiff and the defendants,
Deed of Absolute Sale, the Transfer Certificates of Title, and other documents relative to the terms and conditions of the agreement for the sale of the two (2) parcels of land
the property in question. owned by Dr. Salazar in favor of the plaintiff Jonette Borres, are that the purchase price
The factual antecedents of this case, as summarized by the trial court, are as is in the amount of P1,000,000.00, fifty percent (50%) of which or P500,000.00 was to be
follows: paid on or before June 15, 1989 while the balance thereof was to be paid on or before
That defendant Dr. Salazar is the owner of the two (2) parcels of land with June 30, 1989 (TSN May 21, 1991, p. 27); that the payment was to be made in "cash"
improvements thereon located at 2914 Finlandia Street, Makati, Metro Manila and (TSN May 21, 1991, p. 55); that the place of payment is at defendant's bank,
covered by Transfer Certificate of Title Nos. 31038 and 31039 of the Registry of Deeds of Metropolitan Bank Quezon City Branch (TSN October 21, 1991, p. 23). [3]
Makati; that Dr. Salazar offered to sell his properties to Jonette Borres for One Million The trial court held that the Deed of Absolute Sale was in reality a contract to sell,
Pesos (P1,000,000.00) (TSN pp. 7 and 8, November 5, 1991). The initial proposal took and that since Borres failed to pay Salazar the downpayment of P500,000.00 on the
place at the Dimsum Restaurant, Makati, whereby it was proposed that the payment of agreed date, 15 June 1989, the complaint for specific performance cannot prosper. It
the consideration was to be made within six (6) months but was objected to by Dr. then dismissed the complaint and ordered Borres to pay the petitioners P5,000.00 each
Salazar and he reduced it to a three (3) months period (TSN, Direct Examination on as attorney's fees and litigation expenses.[4]
Jonette Borres p. 22, November 12, 1991); that sometime on [May] 28, 1989, Jonette In ruling that the Deed of Absolute Sale was a contract to sell, the trial court
Borres together with a certain Emilio T. Salazar went to see Dr. Salazar at the latter's considered pertinent the circumstances attending its execution. First, that the Deed of
residence in Bataan bearing a copy of a Deed of Absolute sale (Exhibit ("C") and Deed of Absolute Sale was "reluctantly signed" by Dr. Salazar, who was then about to leave for
Warranty (Exhibit "D") but Dr. Salazar refused to sign because Jonette Borres did not the United States of America, in order that if Borres would comply with the terms and
have the money ready then. In said occasion Dr. Salazar further reduced the period conditions of their agreement, he need not come to the Philippines just to sign it; hence,
within which plaintiff may purchase the lots, to one (1) month or up to June 30, 1989 it does not bind Dr. Salazar until the suspensive condition, i. e., the downpayment of
(TSN Direct Examination on Jonette Borres November 5, [1991], pp. 10 and 11). P500,000.00 to be effected on or before 15 June 1989 and the balance to be paid on or
Jonette Borres then met again Dr. Salazar on June 2, 1989 at the Ninoy before 30 June 1989, is complied with. Second, Borres was not, in fact, financially
International Airport who was about to leave for the United States of America where he is prepared to buy the parcels of land on or before 15 June 1989 considering that
a resident.Jonette Borres had with her the Deed of Absolute Sale and asked Dr. Salazar [s]he was just looking for possible buyers or business partners. First, she requested that
to sign said document. Dr. Salazar reluctantly agreed to sign the document provided that the pertinent documents like the Deed of Sale (Exhibit "C") and the corresponding
 17

Transfer Certificates of Titles Nos. 31038 and 31039 of the Register of Deeds of Rizal the payment representing the purchase price in the amount of P1 Million and thereafter
(Exhibits "A" and "B") be entrusted to her even before making the downpayment of to comply with his reciprocal obligation to surrender the original copies of the deed of
P500,000.00 purposely to raise the amount needed. When Dr. Salazar refused her absolute sale and Torrens title covering the parcels of land subject of the
request, Jonette Borres approached a certain businessman P.D. Dionisio for loan and contract. Finding petitioner Teresita Dizon to have "acted in bad faith in frustrating the
was turned down when Jonette Borres cannot [sic] produce the Deed of Absolute Sale efforts" of Borres to comply with her obligation to pay the purchase price, the appellate
and the Titles of the parcels of land in question (TSN November 5, 1991, pp. 20- court ordered her to pay Borres the amounts of P80,000.00 as moral damages;
25). Then she approached a certain Benjamin Balao a realtor developer. Although Balao P50,000.00 as exemplary damages; and P100,000.00 as attorney's fees.
had issued to her his check in the amount of P1,500,000.00 (Exhibit "F") he instructed his Unable to accept the reversal of the trial court's decision, the petitioners filed the
bank not to honor his check without his presence (TSN November 14, 1991, pp. 81 to instant petition wherein they submit that the Court of Appeals committed grave and
84). Jonette Borres admitted that she was not in a position to encash the check (Exhibit serious errors:
"F") although it was payable to 'cash' (TSN November 21, 1991, pp. 41 and 44).[5] A. x x x in relying on the Deed of Absolute Sale dated May 30, 1989
Salazar's victory was short-lived. On Borres's appeal from the decision of the trial notwithstanding the fact that:
court, the Court of Appeals, in its challenged decision of 29 November 1994, ruled that 1. BORRES EXECUTED A DEED OF WARRANTY (EXHS. "D" AND "2")
the Deed of Absolute Sale, whose existence and due execution was undisputed, is a STATING THEREIN THAT UNTIL AND UNLESS THE AMOUNT OF
perfected contract of sale, with a definite object and a specific consideration which the P1,000,000.00 REPRESENTING THE PURCHASE PRICE FOR THAT
parties had agreed upon. As proof that it is a contract of sale and not a contract to sell, PARCELS OF LAND COVERED BY TCT NOS. S-31038 AND S-31039
the Court of Appeals stressed the absence of a proviso that the title to the property is BE PAID BY HER TO SALAZAR, SHE HAS NO RIGHT WHATSOEVER
reserved in the vendor until full payment of the purchase price or that the vendor may TO THE ORIGINAL COPIES OF THE DEED OF ABSOLUTE SALE AND
unilaterally rescind the contract the moment the vendee fails to pay within the fixed THAT SHE HAS NO LEGAL RIGHT WHATSOEVER TO ANY AND ALL
period.[6] Salazar's reluctance to sign it is of no moment, since there is no allegation of PERTINENT RECORDS OF THE ABOVE-MENTIONED LOTS;
fraud, forgery, or duress. And even assuming that Borres failed to pay the contract price, 2. UPON HER BEHEST, BORRES WAS GIVEN A PHOTOCOPY OF THE
such failure did not convert the contract into one without cause or consideration as to DEED OF ABSOLUTE SALE BY DIZON BUT ONLY AFTER THE
vitiate the validity of the contract, it not being essential for the existence of cause that LATTER ERASED THE SIGNATURE OF SALAZAR AS THE VENDEE
payment or full payment be made at the time of the contract. Neither did such failure ipso THEREIN;
facto resolve the contract in question. The remedy of the vendor, Dr. Emilio A. Salazar, is 3. BORRES HAD NOT PAID ANY PORTION OF THE AGREED PURCHASE
to demand specific performance or rescission, with damages in either case. On the other PRICE AND THUS RENDERS THE DEED OF ABSOLUTE SALE
hand, the vendee, Jonette Borres, may demand specific performance, i.e., compel the VOID AB INITIO.
vendor to accept the price and deliver the title of the land object of the contract. B. x x x in concluding that the agreement between SALAZAR and BORRES is a
The Court of Appeals disagreed with the trial court's finding that Borres was not in a contract of sale and thus, perfected upon agreement on the subject matter and
position to pay the downpayment because: consideration, notwithstanding the fact that:
[o]n June 15, 1989, plaintiff-appellant had a Far East Bank check payable to her order, in 1. THE AGREEMENT BETWEEN THE PARTIES IS ESSENTIALLY A
the amount of P1,500,000.00 more than the whole agreed purchase price of CONTRACT TO SELL SUBJECT TO SUSPENSIVE CONDITION, THE
P1,000,000.00. Defendant-appellee Teresa Dizon agreed (on June 14, 1989) to meet her BIRTH OR EFFECTIVITY OF WHICH SHOULD TAKE PLACE ONLY IF
on June 15, 1989, at Metro Bank West and thereafter to proceed to Makati in order to AND WHEN THE EVENT WHICH CONSTITUTES THE CONDITION
encash the Far East Bank check. Defendant-appellee Teresa Dizon somehow managed HAPPENS OR IS FULFILLED. SINCE BORRES FAILED TO COMPLY
to manipulate things by making herself unavailable so that the payment could not be WITH HER OBLIGATION, THE AGREEMENT TO SELL BECAME
made on June 15, 1989 (TSN, Nov. 5, 1991, pp. 27-41). On the next day, June 16, 1989, STILLBORN;
defendant-appellee Teresa Dizon informed plaintiff-appellant that defendant-appellee Dr. 2. THERE WAS AN EXPRESS AGREEMENT BETWEEN THE PARTIES
Emilio A. Salazar called up in the evening of June 15, 1989 asking whether plaintiff- THAT BORRES SHALL BE ENTITLED TO THE PROPERTY OR ANY
appellant paid on that day and upon being answered in the negative, said vendor said RECORDS PERTAINING THERETO OR ORIGINAL COPIES OF THE
that he is revoking the contract (TSN, Nov. 5, 1991, pp. 41-42). Defendant-appellee DEED OF ABSOLUTE SALE ONLY UPON FULL PAYMENT OF THE
Teresa Dizon having her own interested buyer, evidently acted in bad faith, tried and PURCHASE PRICE.
indeed succeeded to frustrate the efforts of plaintiff-appellant to comply with her C. x x x in holding that DIZON acted in bad faith and succeeded to frustrate the
reciprocal obligation to pay the agreed purchase price. efforts of BORRES to comply with her reciprocal obligation to pay the purchase price
The fact that the Far East Bank check was payable to the Order of plaintiff- notwithstanding the fact that:
appellant, and it covers the amount of P1,500,000.00 which is much more than the 1. AT THE TIME THAT BORRES WAS OBLIGED TO PAY AT LEAST 50%
agreed purchase price of P1,000,000.00 reveals that plaintiff-appellant was financially OF THE PURCHASE PRICE OR ON JUNE 15, 1989, SHE WAS NOT
prepared to comply with her reciprocal obligation. That plaintiff-appellant filed the present READY, WILLING AND ABLE TO DO SO. EVEN ASSUMING FOR THE
suit for specific performance on July 6, 1989, bolsters the fact that she is really willing SAKE OF ARGUMENT THAT THE LATTER HAD THE FINANCIAL
and able to pay the agreed purchase price. How and from whom she borrowed/obtained CAPABILITY TO MEET HER OBLIGATION, THE FACT REMAINS THAT
the said amount, is of no consequence.[7] SHE FAILED TO PROPERLY TENDER PAYMENT OF HER
Accordingly, the respondent Court reversed the decision of the trial court and OBLIGATION AND IN CASE TENDER OF PAYMENT WAS REFUSED,
handed down a new judgment ordering Emilio A. Salazar to accept from Jonette Borres TO CONSIGN THE SAME IN COURT;
 18

2. DIZON HAD NO REASON TO FRUSTRATE THE EFFORTS OF BORRES COURT:

TO COMPLY WITH HER OBLIGATION TO PAY THE AGREED Talk to you?
PURCHASE PRICE SINCE SHE WAS MERELY CONSTITUTED AS A To discuss the matter of sale to me at Dimsum Sir.
CUSTODIAN OF THE DEED OF ABSOLUTE SALE AND TITLES OF THE ATTY. BORRES:
PROPERTY WITH SPECIFIC INSTRUCTIONS TO RELEASE THE SAME Q And so you really met at Dimsum.
TO BORRES ONLY UPON RECEIPT OF THE PURCHASE PRICE IN A Yes, Ma'am.
FULL AND IN CASH WITHIN THE AGREED PERIOD. Q What transpired at Dimsum?
D. x x x in ordering Dizon to pay Borres the amount of P80,000.00 moral damages; A Dr. Salazar offered me to buy the properties for a total of ONE MILLION
P50,000.00 exemplary damages and P100,000.00 as attorney's fees by way of damages PESOS (P1,000,000.00) excluding all and any other expenses that may
notwithstanding the fact that the evidence adduced before the trial court clearly shows be involved in the transfer of the properties in case I am interested to by
that BORRES had no cause of action against the former.[8] [sic], in case Atty. Borres wanted to buy.
We shall first face the issue of whether the agreement between petitioner Salazar Q What then was your reply?
and private respondent Borres is a contract of sale or a contract to sell. A I am interested to buy.
In a contract of sale, the title to the property passes to the vendee upon the delivery Q Dr. Salazar. . . I asked . . . what did Dr. Salazar say after that?
of the thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor A I answered Dr. Salazar that I could buy or able to buy the properties within
and is not to pass to the vendee until full payment of the purchase price. Otherwise six (6) months because I have to go home to the province to secure a
stated, in a contract of sale, the vendor loses ownership over the property and cannot loan.
recover it until and unless the contract is resolved or rescinded; whereas in a contract to Q What did Dr. Salazar say regarding your proposal?
sell, title is retained by the vendor until full payment of the price. In the latter contract, A I told Dr. Salazar. Dr. Salazar said that he could not wait for that, six (6)
payment of the price is a positive suspensive condition, failure of which is not a breach months is a very long time.
but a event that prevents the obligation of the vendor to convey title from becoming Q What else did you say?
effective.[9] A I told Dr. Salazar that "it is possible that I can pay within three (3) months'
If we are to consider only the Deed of Absolute Sale, [10] we can easily say that the time if you can lend me the title of your property because banks here in
contract between Salazar and Borres is one of sale. However, the Deed of Manila usually release loans in three months' time and I will have less
Warranty[11]and the oral testimony on the circumstances surrounding the execution of the problem to complete the payment of ONE MILLION PESOS
Deed of Absolute Sale, as well as the other pieces of evidence submitted by Borres, (P1,000,000.00)."
sustain the finding and conclusion of the trial court that the true agreement between the Q So, what did Dr. Salazar say?
parties was a contract to sell in that the true intent of Salazar was to transfer ownership A Dr. Salazar said that "if it is the best for our transaction I can lend you the
of the property to Borres only after the latter pays the full consideration. title provided I can be assured that the title will not pass on you until you
From the beginning to the end, such intention of Salazar was unequivocal and are fully paid.
manifest. He rejected Borres's offer to pay the consideration within six months to give her Q What was your answer then?
time to secure a loan. When Borres proposed that he lend her the certificates of title of A I told Dr. Salazar that I can execute a warranty to the effect that the property
the lots so that she could secure a loan from the banks in Manila and be able to pay, could not be transferred to me until I have fully paid him.
within three months,[12] the consideration out of the proceeds of the loan, Salazar agreed Q What did Dr. Salazar say?
provided that she would assure him that the title would not pass to her until he is fully A Dr. Salazar said "I will agree to that."
paid. Borres forthwith promised to execute a warranty. She then prepared a Deed of COURT:
Absolute Sale for Salazar's signature and a Deed of Warranty for her signature. When Dr. Salazar told you that he is agreeable to the proposal.
finally she presented to him the Deed of Absolute Sale, Salazar did not sign it and A Yes, Dr. Salazar said "you prepare a draft, the necessary document and
insisted that he be paid the purchase price at the end of June 1989; he further told her bring it to Bataan."
that he would not lend her the certificates of title until he is so paid. He signed it only after ATTY. BORRES:
Borres agreed to pay by the end of June 1989 at a bank in Makati. But he did not give Q And what was your answer to Dr. Salazar?
the Deed of Absolute Sale to her; instead, he told her to just meet him at the Ninoy A I answered Dr. Salazar that "I will be ever willing to go to, Bataan any time
Aquino International Airport on 2 June 1989, when he would leave for the United States you wanted me to.
of America, so she would know to whom he would entrust the document and other Q And you really did go to Bataan.
papers relative to the property. We quote verbatim Borres's own testimony on direct A Yes, I did.
examination upon these points: xxx xxx xxx
Q Have you met the owner of the lot mentioned a while ago? ATTY. BORRES:
A Yes, your Honor, I met Dr. Salazar, the owner, sometime last week of April, Q And what happened while there in Bataan?
1989 at Dimsum Restaurant. xxx xxx xxx
Q You met at Dimsum, in what particular place was that? Q And what happened while you got all seated in the sala of Dr. Salazar.
A We met at Dimsum Restaurant in Makati after I was called by Emilio T. A I showed him a document which he instructed me to prepare and he has
Salazar to meet at Dimsum because Dr. Salazar wanted to sell the read and agreed to the Deed of Absolute Sale and the warranty I
property and he wanted to talk to you [sic]. made. He gave me back the documents for signing.
 19

Q And you did sign the document? right whatsoever to the original copies of the Deed of Absolute Sale
A Yes, I did sign it and passed it on to Dr. Salazar. executed by said Dr. Emilio A. Salazar dated May ___, 1989;
Q After you passed it to Dr. Salazar, what happened? 2. That she has no legal right whatsoever to any and all pertinent records of
A Dr. Salazar did not sign the document and told me that he is only going to the aforementioned lots;
sign it if I am going to pay by the end of June and that he could not lend 3. That upon payment of the aforementioned amount Dr. Emilio A. Salazar or
me the title and he said he is going to sign it and not to give me a copy his representative is obliged to surrender the original of these presents
until the purchase price is fully paid. together with all the original documents and titles covering the sale of the
Q And what was your reaction with the statement? aforementioned lots unto the undersigned.[14]
A I said "what about the loan that we have agreed at Dimsum if you will not Then, too, in her Memorandum of Agreement with Monteland Realty
lend me the title and the document that we have signed now?" Dr. Corporation,[15] dated 15 June 1989, Borres explicitly mentioned only her "rights and
Salazar said "I could not lend you the title and I care less how you are interests" under the Deed of Absolute Sale signed by Salazar and therein conveyed,
going to loan the property and raise the money you are going to pay me, transferred, and assigned to the said corporation only such "rights and interests." Also
what is important to me is you pay me the whole amount of One Million worth noting is the statement in the second whereas clause of the Memorandum of
Pesos (P1,000,000.00) not later than June 30, 1989." 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
A Since I could not do anything and I really wanted to buy the property, I property . . . that the buyer [Borres] has an obligation to pay DR. EMILIO SALAZAR the
agreed to Dr. Salazar's condition that I pay the property by the end of amount of ONE MILLION PESOS (P1,000,000.00) and that there is already a Deed of
June and I will pay only at the bank in Makati. Absolute Deed of [sic] Sale in favor of [Borres] of which both copies of the titles of the
Q And what did Dr. Salazar say? properties for sale and all documents including the Deed of Absolute Sale
A Dr. Salazar said "okey I will sign this and have this notarized but I could not aforementioned are under the custody of MS. TERESA DIZON who will only release the
lend you and never have a [copy] of the title as well as the Deed of Sale Title and the Deed of Absolute Sale after the obligation of [Borres] is fully paid. [16]
and you just wait at NAIA and wait if you could have this document The withholding by Salazar through Dizon of the Deed of Absolute Sale, the
because I am leaving on June 2 for the US. You meet me there." certificates of title, and all other documents relative to the two lots is an additional
Q And after that what did Dr. Salazar do? indubitable proof that Salazar did not transfer to Borres either by actual or constructive
A It was only then that he signed the document after I have agreed to his delivery the ownership of the two lots. While generally the execution of a deed of
proposal but he was very much stand [sic] to the payments and he was absolute sale constitutes constructive delivery of ownership, the withholding by the
no longer the same when I met at Dimsum.[13] vendor of that deed under explicit agreement that it be delivered together with the
Clearly then, the original intention in the execution of the Deed of Absolute Sale certificates of titles to the vendee only upon the latter's full payment of the consideration
was to implement the proposal of Borres that Salazar "lend" her the transfer certificates amounts to a suspension of the effectivity of the deed of sale as a binding contract.
of title so that she could secure a loan from a bank in Manila whose proceeds would be Undoubtedly, Salazar and Borres mutually agreed that despite the Deed of
applied to the payment of the purchase price of the property, and the original purpose of Absolute Sale title to the two lots in question was not to pass to the latter until full
the Deed of Warranty was to assure Salazar that, as demanded by him, title to the lots payment of the consideration of P1 million. The form of the instrument cannot prevail
will not pass to her until she pays the full consideration. The lending of the certificates of over the true intent of the parties as established by the evidence.
title for the above purpose could have been easily accomplished through a special power Accordingly, since Borres was unable to pay the consideration, which was a
of attorney under which Salazar will authorize her to obtain a loan and to mortgage the suspensive condition, Salazar cannot be compelled to deliver to her the deed of sale,
property as security therefor. But, perhaps anticipating Salazar's departure to the United certificates of title, and other documents concerning the two lots. In other words, no right
States of America where he resides, Borres, who is a lawyer, prepared instead a Deed of in her favor and no corresponding obligation on the part of Salazar were created.Article
Absolute Sale and Deed of Warranty. Notwithstanding Borres deliberate 1181 of the Civil Code provides:
characterizations of the documents, we are convinced that they were prepared in In conditional obligations, the acquisition of rights, as well as the extinguishment or
connection with and in the implementation of the agreement regarding the lending of the loss of those already acquired shall depend upon the happening of the event which
certificates of title. They do not weaken the adamantine position of Salazar not to part constitutes the condition.
with his title to the two lots until full payment of the agreed price therefor. Borres Even granting for the sake of argument that, as ruled by the Court of Appeals, the
execution of the Deed of Warranty was in fact a recognition of Salazar's position. Despite agreement of Salazar and Borres as evidenced by the Deed of Absolute Sale was a
its careful wordings and phraseology to make some sort of distinction between Borres' perfected contract of sale, Borres' action for specific performance must likewise fail. We
right to the ownership or title over the lots on the one hand, and her right to possess or are in full accord with the trial court and, perforce, disagree with the Court of Appeals,
keep the Deed of Absolute Sale and the other documents relative to the lots, the totality that Borres was not ready to pay P500,000.00 on or before 15 June 1989. That Borres
of the Deed of Warranty manifests an indubitable recognition by Borres of the had a check of P1.5 million, or of more than the full consideration of the two lots, is of no
aforementioned intention of Salazar.She declares therein as follows: moment. The check,[17] dated 15 June 1989, is a crossed check payable to "Atty. Jonette
1. That until and unless the amount of ONE MILLION (P1,000,000.00) PESOS Borres," or herein private respondent. The crossing is of simple type two parallel lines at
representing the purchase price for that parcels of land covered by the upper left hand corner without the words "and company" between the
Transfer Certificate of Title Nos. S-31038 and S-31039 be paid by the lines. Accordingly, it cannot be paid to anyone except Borres, or it can be deposited with
undersigned unto Dr. Emilio A. Salazar, the undersigned has no absolute a bank where she keeps an account.[18]
 20

There is absolutely no evidence that Borres encashed the check and tendered to Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
Salazar thru Dizon the sum of P500,000.00 on 15 June 1989. On the contrary, the check assailing the December 6, 2005 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV
itself was cancelled as shown by the word cancelled handwritten across it. Moreover, the No. 79385.
delivery of the check by Monteland Realty Corporation through Balao was not
unconditional. Per the receipt[19] Borres signed on 15 June 1989, encashment of the On November 7, 1997, Emmaliza Bohler and respondents negotiated for the sale of the
check "is subject to the verifications as to the authenticity of documents pertaining to the formers house and lot located at Poblacion, New Washington, Aklan, to the latter for the
subject property." Neither is there evidence that Borres paid the downpayment on 15 consideration of P165,000.00.[2] On the following day, November 8, they signed an
June 1989 with money she got from other sources. No payment appears to have been Agreement which pertinently reads as follows:
made thereafter or during the pendency of the case before the trial court or the Court of
Appeals. She should have consigned the payment in court pursuant to Article 1256 of the We, the undersigned, agree to the following terms and
Civil Code for her to be released from her obligation and, consequently, exact fulfillment conditions regarding the sale of the house and lot located at Poblacion,
by Salazar of his corresponding obligation. New Washington, Aklan:
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 1. That the total amount to be paid shall be One Hundred
of attorney's fees in favor of the petitioners which we find to be without basis. The award Sixty-Five Thousand Pesos (P165,000.00) to be paid in full on or
of attorney's fees as damages is the exception rather than the rule; it is not to be given to before the 15th of December 1997;
the defendant every time the latter prevails. The right to litigate is so precious that a
penalty should not be charged on those who may exercise it erroneously, unless, of 2. That a partial payment (sic) a total amount of One Hundred
course such party acted in bad faith.[20] Thirty Thousand Pesos (P130,000.00) shall be made today, the 8th of
WHEREFORE, the instant petition is hereby GRANTED. The challenged decision November 1997;
of 29 November 1994 of the 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 3. That the remaining balance in the amount (sic) of Thirty-
Trial Court of Manila in Civil Case No. 89-4468 is AFFIRMED, subject to the modification Five Thousand Pesos (P35,000.00) shall be made as per #1 above;
that the award for attorney's fees is deleted. No pronouncement as to costs.
SO ORDERED. 4. That the buyers, represented by the Spouses Rudy and
Narvasa, C.J., (Chairman), Melo, Francisco, and Panganiban, JJ., concur. Consolacion Reyes (sic) shall be responsible for all the legal and other
related documents and procedures regarding this sale;
SPOUSES NESTOR CASTILLO and ROSIE REYES- G.R. No. 170917
CASTILLO, 5. That the seller, represented by Ms. Emmaliza M. Bohler,
Petitioners, Present: shall vacate the said house and lot on or (sic) the 31st of January,
1998;
YNARES-SANTIAGO,
Acting C.J., Chairperson, 6. That the tenants, represented by the Spouses Romeo and
- versus - AUSTRIA-MARTINEZ, Epifania Vicente, shall vacate the same on or before the 30th of April,
CHICO-NAZARIO, 1998; and
NACHURA, and
REYES, JJ. 7. That all parties concerned shall agree to all the terms and
conditions stipulated herein.[3]
SPOUSES RUDY REYES and CONSOLACION REYES, Promulgated:
Respondents.
November 28, 2007 Upon the signing of the said contract, respondents handed to
Bohler P20,000.00 cash and allegedly a P110,000.00-check. Bohler nonetheless insisted
x------------------------------------------------------------------------------------x 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 that day otherwise she would cancel the sale. Because the
RESOLUTION respondents failed to make good the P110,000.00, Bohler subsequently sold the property
to the petitioners.[4]
NACHURA, J.:
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 and the Provincial
Assessor.[5] Civil Case No. 6070 for annulment of sale, specific performance and
 21

damages was subsequently filed by the respondents with the Regional Trial Court (RTC) sell because the seller made no express reservation of ownership or title to the subject
of Kalibo, Aklan against Bohler and the petitioners. house and lot.[12] Instead, the Agreement contains all the requisites of a contract of sale.

On February 21, 2003, the RTC rendered its Decision[6] declaring the November WHEREFORE, premises considered, the petition for review
8, 1997 Agreement a contract to sell. Considering that no actual sale happened between on certiorari is DENIED DUE COURSE.
Bohler and the respondents, the former could validly sell the property to the petitioners.
Thus, the trial court dismissed the complaint. SO ORDERED.

Aggrieved, respondents appealed the case to the CA. In the

challenged December 6, 2005 Decision,[7] the appellate court reversed the trial courts UNITED MUSLIM AND CHRISTIAN URBAN POOR G.R. No. 179653
ruling, declared the November 8, 1997 Agreement a contract of sale, and annulled the ASSOCIATION, INC. represented by its President, MANUEL V.
subsequent sale to the petitioners. The CA ruled, among others, that the wordings of the BUEN, Present:
agreement and the conduct of the parties suggest that they intended to enter into Petitioner,
a contract of sale. Ownership was not reserved by the vendor and non-payment of the YNARES-SANTIAGO, J.,
purchase price was not made a condition for the contracts effectivity. [8] Chairperson,
- versus - CHICO-NAZARIO,
Petitioners, thus, filed the instant petition for review on certiorari imputing the VELASCO, JR.,
following errors to the CA: NACHURA, and
BRYC-V DEVELOPMENT CORPORATION represented by its PERALTA, JJ.
1. The appellate court erred in declaring the contract styled President, BENJAMIN QUIDILLA; andSEA FOODS
AGREEMENT dated 08 November 1997 as a contract of sale and not CORPORATION, represented by its Executive Vice Promulgated:
a contract to sell. President, VICENTE T. HERNANDEZ,
Respondents. July 31, 2009
2. The appellate court erred in declaring the petitioners in bad
faith when they bought the subject matter house and lot on 02 March x------------------------------------------------------------------------------------x
1998 from Emmaliza H. Bohler.[9]

DECISION
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 NACHURA, J.:
mere contract to sell.
This petition for review on certiorari seeks to set aside the Decision[1] of the
Sale is a consensual contract and is perfected by mere consent, which is Court of Appeals (CA) in CA G.R. CV No. 62557 which affirmed in toto the Decision[2] of
manifested by a meeting of the minds as to the offer and acceptance thereof on the the Regional Trial Court (RTC), Branch 16, Zamboanga City in Civil Case No. 467(4544).
subject matter, price and terms of payment of the price.[10] In the instant case, the
November 8, 1997 Agreement clearly indicates that Bohler and the Spouses Reyes had The facts are simple.
a meeting of the minds on the subject matter of the contract, the house and lot; on the
price, P165,000.00; and on the terms of payment, an initial payment of P130,000.00 on Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No.
the date of execution of the agreement and the remaining balance on or before 300 located in Lower Calainan, Zamboanga City and covered by Transfer Certificate of
December 15, 1997. At that precise moment when the consent of both parties was given, Title (TCT) No. 3182 (T-576).
the contract of sale was perfected.
Sometime in 1991, petitioner United Muslim and Christian Urban Poor
The said agreement cannot be considered a contract to sell. In Association, Inc. (UMCUPAI), an organization of squatters occupying Lot No. 300,
a contract of sale, the title to the property passes to the vendee upon the delivery of the through its President, Carmen T. Diola, initiated negotiations with SFC for the purchase
thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is thereof. UMCUPAI expressed its intention to buy the subject property using the proceeds
not to pass to the vendee until full payment of the purchase price. Otherwise stated, in of its pending loan application with National Home Mortgage Finance Corporation
a contract of sale, the vendor loses ownership over the property and cannot recover it (NHMF). Thereafter, the parties executed a Letter of Intent to Sell by [SFC] and Letter of
until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title Intent to Purchase by UMCUPAI, providing, in pertinent part:
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 WHEREAS, [SFC] is the registered owner of a parcel [of] land
that prevents the obligation of the vendor to convey title from becoming effective. [11] The designated as Lot No. 300 situated in Lower Calarian, Zamboanga
November 8, 1997 Agreement herein cannot be characterized as a contract to City, consisting of 61,736 square meters, and more particularly
 22

described in Transfer Certificate of Title No. 576 of the Registry of Consequently, sometime in December 1994, Lot No. 300 was subdivided into
Deeds of Zamboanga City; three (3) parts covered by separate titles:

WHEREAS, UMCUPAI, an association duly registered with 1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T-117,448;
the SEC (Registration No. 403410) and duly accredited with the
Presidential Commission for the Urban Poor, has approached [SFC] 2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T-
and negotiated for the ACQUISITION of the above-described property 117,449; and
of [SFC];
3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-
WHEREAS, in pursuance to the negotiations between [SFC] 117,450.
and UMCUPAI, the latter has taken steps with the proper government
authorities particularly the Mayor of Zamboanga City and its City On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58.
Housing Board which will act as Originator in the acquisition of said In turn, Lot No. 300-B was constituted as road right of way and donated by SFC to the
property which will enable UMCUPAI to avail of its Community local government.
Mortgage Program;
UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995,
WHEREAS, it appears that UMCUPAI will ultimately apply UMCUPAI negotiated anew with SFC and was given by the latter another three months
with the Home Mortgage and Finance Corporation for a loan to pay the to purchase Lot No. 300-C. However, despite the extension, the three-month period
acquisition price of said land; 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
WHEREAS, as one of the steps required by the government respondent BRYC-V Development Corporation (BRYC).
authorities to initiate proceedings is to receive a formal manifestation of
Intent to Sell from [SFC]; A year later, UMCUPAI filed with the RTC a complaint against respondents SFC
and BRYC seeking to annul the sale of Lot No. 300-C, and the cancellation of TCT No.
NOW, THEREFORE, for and in consideration of the foregoing T-121,523. UMCUPAI alleged that the sale between the respondents violated its valid
premises, the parties hereto agree as follows: and subsisting agreement with SFC embodied in the Letter of Intent. According to
UMCUPAI, the Letter of Intent granted it a prior, better, and preferred right over BRYC in
1. [SFC] expressly declares its intention to sell Lot No. 300 the purchase of Lot No. 300-C.
with an area of 61,736 square meters situated in Lower Calarian,
Zamboanga City and covered by TCT No. 576 of the Registry of Deeds In refutation, BRYC said that UMCUPAIs complaint did not state a cause of
of Zamboanga City to UMCUPAI at the price of P105.00 per square action since UMCUPAI had unequivocally recognized its ownership of Lot No. 300-C
meter, free from all liens, charges and encumbrances; when UMCUPAI likewise sent BRYC a Letter of Intent dated August 18, 1995 imploring
BRYC to re-sell the subject lot.
2. That UMCUPAI hereby expressly declares its intention to
buy the aforesaid property and shall endeavor to raise the necessary In a separate Answer, SFC countered that the Letter of Intent dated October 4,
funds to acquire same at the abovementioned price of P105.00 per 1991 is not, and cannot be considered, a valid and subsisting contract of sale. On the
square meter; contrary, SFC averred that the document was drawn and executed merely to
accommodate UMCUPAI and enable it to comply with the loan documentation
3. That the Absolute Deed of Sale shall be executed, signed requirements of NHMF. In all, SFC maintained that the Letter of Intent dated October 4,
and delivered together with the title and all other pertinent documents 1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI
upon full payment of the purchase price; failed to do when it did not obtain the loan from NHMF.

4. That [SFC] shall pay the capital gains tax and After trial, the RTC dismissed UMCUPAIs complaint. The lower court found that
documentary stamps, Registration, transfer tax and other expenses the Letter of Intent was executed to facilitate the approval of UMCUPAIs loan from NHMF
shall be paid by the UMCUPAI.[3] for its intended purchase of Lot No. 300. According to the RTC, the Letter of Intent was
simply SFCs 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
However, the intended sale was derailed due to UMCUPAIs inability to secure the loan option contract, nor an offer contemplated under Article 1319 of the Civil Code, or a
from NHMF as not all its members occupying Lot No. 300 were willing to join the bilateral contract to sell and buy.
undertaking. Intent on buying the subject property, UMCUPAI, in a series of conferences
with SFC, proposed the subdivision of Lot No. 300 to allow the squatter-occupants to As previously adverted to, the CA, on appeal, affirmed in toto the RTCs ruling.
purchase a smaller portion thereof.
Hence, this recourse by UMCUPAI positing a sole issue for our resolution:
 23

IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A A contract to sell may thus be defined as a bilateral contract
BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR whereby the prospective seller, while expressly reserving the
CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF ownership of the subject property despite delivery thereof to the
THE PHILIPPINES?[4] prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price.
The petition deserves scant consideration. We completely agree with the lower courts
rulings. A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
Well-entrenched in jurisprudence is the rule that factual findings of the trial likewise reserve title to the property subject of the sale until the
court, especially when affirmed by the appellate court, are accorded the highest degree fulfillment of a suspensive condition, because in a conditional contract
of respect and are considered conclusive between the parties. [5] A review of such of sale, the first element of consent is present, although it is
findings by this Court is not warranted except upon a showing of highly meritorious conditioned upon the happening of a contingent event which may or
circumstances, such as: (1) when the findings of a trial court are grounded entirely on may not occur. If the suspensive condition is not fulfilled, the perfection
speculation, surmises or conjectures; (2) when a lower courts inference from its factual of the contract of sale is completely abated. However, if the suspensive
findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of condition is fulfilled, the contract of sale is thereby perfected, such that
discretion in the appreciation of facts; (4) when the findings of the appellate court go if there had already been previous delivery of the property subject of
beyond the issues of the case, or fail to notice certain relevant facts which, if properly the sale to the buyer, ownership thereto automatically transfers to the
considered, would justify a different conclusion; (5) when there is a misappreciation of buyer by operation of law without any further act having to be
facts; (6) when the findings of fact are conclusions without mention of the specific performed by the seller.
evidence on which they are based, or are premised on the absence of evidence, or are
contradicted by evidence on record.[6] None of the foregoing exceptions necessitating a In a contract to sell, upon the fulfillment of the suspensive
reversal of the assailed decision obtain in this instance. condition which is the full payment of the purchase price, ownership
will not automatically transfer to the buyer although the property may
UMCUPAI is adamant, however, that the CA erred when it applied the second have been previously delivered to him. The prospective seller still has
paragraph of Article 1479 of the Civil Code instead of the first paragraph thereof. to convey title to the prospective buyer by entering into a contract of
UMCUPAI urges us that the first paragraph of Article 1479 contemplates a bilateral absolute sale.
reciprocal contract which is binding on the parties. Yet, UMCUPAI is careful not to
designate the Letter of Intent as a Contract to Sell. UMCUPAI simply insists that the It is essential to distinguish between a contract to sell and a
Letter of Intent is not a unilateral promise to sell or buy which has to be supported by a conditional contract of sale specially in cases where the subject
consideration distinct from the price for it to be binding on the promissor. In short, property is sold by the owner not to the party the seller contracted with,
UMCUPAI claims that the Letter of Intent did not merely grant the parties the option to but to a third person, as in the case at bench. In a contract to sell,
respectively sell or buy the subject property. Although not stated plainly, UMCUPAI there being no previous sale of the property, a third person buying
claims that the Letter of Intent is equivalent to a conditional contract of sale subject only such property despite the fulfillment of the suspensive condition such
to the suspensive condition of payment of the purchase price. as the full payment of the purchase price, for instance, cannot be
deemed a buyer in bad faith and the prospective buyer cannot seek
UMCUPAI appears to labor under a cloud of confusion. The first paragraph of the relief of reconveyance of the property. There is no double sale in
Article 1479 contemplates the bilateral relationship of a contract to sell as distinguished such case. Title to the property will transfer to the buyer after
from a contract of sale which may be absolute or conditional under Article 1458[7] of the registration because there is no defect in the owner-sellers title per se,
same code. It reads: but the latter, of course, may be sued for damages by the intending
buyer.
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable. In a conditional contract of sale, however, upon the fulfillment
of the suspensive condition, the sale becomes absolute and this will
An accepted unilateral promise to buy or to sell a determinate thing for definitely affect the sellers title thereto.In fact, if there had been
a price certain is binding upon the promissor if the promise is previous delivery of the subject property, the sellers ownership or title
supported by a consideration distinct from the price. to the property is automatically transferred to the buyer such that, the
seller will no longer have any title to transfer to any third
person. Applying Article 1544 of the Civil Code, such second buyer of
The case of Coronel v. Court of Appeals[8] is illuminating and explains the the property who may have had actual or constructive knowledge of
distinction between a conditional contract of sale under Article 1458 of the Civil Code and such defect in the sellers title, or at least was charged with the
a bilateral contract to sell under Article 1479 of the same code: obligation to discover such defect, cannot be a registrant in good
 24

faith. Such second buyer cannot defeat the first buyers title. In case a
title is issued to the second buyer, the first buyer may seek xxxxxxxxx
reconveyance of the property subject of the sale.
The Letter of Intent/Agreement between SFC and UMCUPAI is merely
a written preliminary understanding of the parties wherein they
In the instant case, however, the parties executed a Letter of Intent, which is declared their intention to enter into a contract of sale. It is subject to
neither a contract to sell nor a conditional contract of sale. As found by the RTC, and the condition that UMCUPAI will apply with the Home Mortgage and
upheld by the CA, the Letter of Intent was executed to accommodate UMCUPAI and Finance Corporation for a loan to pay the acquisition price of said land.
facilitate its loan application with NHMF. The 4th and 5th paragraphs of the recitals One of the requirements for such loan is a formal manifestation of
(whereas clauses) specifically provide: Intent to Sell from SFC. Thus, the Letter of Intent to Sell fell short of an
offer contemplated in Article 1319 of the Civil Code because it is not a
WHEREAS, it appears that UMCUPAI will ultimately apply certain and definite proposal to make a contract but merely a
with the Home Mortgage and Finance Corporation for a loan to pay the declaration of SFCs intention to enter into a contract. UMCUPAIs
acquisition price of said land; 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
WHEREAS, as one of the steps required by the government acquire subject land. The acceptance of the offer must be absolute; it
authorities to initiate proceedings is to receive a formal manifestation of must be plain and unconditional. Moreover, the Letter of
Intent to Sell from [SFC]. Intent/Agreement does not contain a promise or commitment to enter
into a contract of sale as it merely declared the intention of the parties
to enter into a contract of sale upon fulfillment of a condition that
Nowhere in the Letter of Intent does it state that SFC relinquishes its title over UMCUPAI could secure a loan to pay for the price of a land.
the subject property, subject only to the condition of complete payment of the purchase
price; nor, at the least, that SFC, although expressly retaining ownership thereof, binds The Letter of Intent/Agreement is not an option contract because aside
itself to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and Sell is from the fact that it is merely a declaration of intention to sell and to
just that a manifestation of SFCs intention to sell the property and UMCUPAIs intention buy subject to the condition that UMCUPAI shall raise the necessary
to acquire the same. This is quite obvious from the reference to the execution of an funds to pay the price of the land, and does not contain a binding
Absolute Deed of Sale in paragraph three[9] of the Letter of Intent. promise to sell and buy, it is not supported by a distinct consideration
distinct from the price of the land intended to be sold and to be bought
As the CA did, we quote with favor the RTCs disquisition: x x x No option was granted to UMCUPAI under the Letter of
Intent/Agreement to buy subject land to the exclusion of all others
The Decision in this case hinges on the legal interpretation of the within a fixed period nor was SFC bound under said Agreement to Sell
Agreement entered into by SFC and UMCUPAI denominated as Letter exclusively to UMCUPAI only the said land within the fixed period.
of Intent to Sell by Landowner and Letter of Intent to Purchase by
United Muslim and Christian Urban Poor Association, Inc. Neither can the Letter of Intent/Agreement be considered a bilateral
reciprocal contract to sell and to buy contemplated under Article 1479
Blacks Law Dictionary says that a Letter of Intent is of the Civil Code which is reciprocally demandable. The Letter of
customarily employed to reduce to writing a preliminary understanding Intent/Agreement does not contain a PROMISE to sell and to buy
of parties who intend to enter into contract. It is a phrase ordinarily subject property. There was no promise or commitment on the part of
used to denote a brief memorandum of the preliminary understanding SFC to sell subject land to UMCUPAI, but merely a declaration of its
of parties who intend to enter into a contract. It is a written statement intention to buy the land, subject to the condition that UMCUPAI could
expressing the intention of the parties to enter into a formal agreement raise the necessary funds to acquire the same at the price of P105.00
especially a business arrangement or transaction. per square meter x x x

In their Agreement, SFC expressly declared its intention to While UMCUPAI succeeded in raising funds to acquire a portion
sell and UMCUPAI expressly declared its intention to buy subject of Lot No. 300-A, it failed to raise funds to pay for Lot No. 300-C. From
property. An intention is a mere idea, goal, or plan. It simply signifies a October 4, 1991 when the Letter of Intent was signed to June, 1995,
course of action that one proposes to follow. It simply indicates what UMCUPAI had about three (3) years and eight (8) months within which
one proposes to do or accomplish. A mere intention cannot give rise to to pursue its intention to buy subject land from SFC. Within that period,
an obligation to give, to do or not to do (Article 1156, Civil Code). One UMCUPAI had ample time within which to acquire Lot No. 300-C, as in
cannot be bound by what he proposes or plans to do or accomplish. A fact it had acquired Lot No. 300-A which is much bigger than Lot No.
Letter of Intent is not a contract between the parties thereto because it 300-C and occupied by more members of UMCUPAI. The failure of
does not bind one party, with respect to the other, to give something, UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V
or to render some service (Art. 1305, Civil Code). cannot be blamed on SFC because all that UMCUPAI had to do was to
 25

raise funds to pay for Lot No. 300-C which it did with respect to Lot No. On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal of
300-A. SFC had nothing to do with SFCs unilateral action through Mrs. the previous award to them of Lot 4 and for the cancellation of the re-award of said lot to
Antonina Graciano to postpone the processing of the acquisition of Lot Sto. Domingo and four others. Before the request could be acted upon, the spouses filed
No. 300-C, which it referred to as Phase II, until after the payment to the instant action for specific performance and damages.
SFC of the acquisition price for Lot No. 300-A or Phase I x x x 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 Mendozas Lot 4 with an area of
WHEREFORE, premises considered, the petition is hereby DENIED. The 2,603.7 square meters at P21 a square meter and pay to them P4,000 as attorney's fees
Decision of the Court of Appeals in CA G.R. CV No. 62557 and the Regional Trial Court and litigation expenses. The PHHC appealed to this Court.
in Civil Case No. 467(4544) are AFFIRMED. Costs against the petitioner. The issue is whether there was a perfected sale of Lot 4, with the reduced area, to the
Mendozas which they can enforce against the PHHC by an action for specific
SO ORDERED. performance.
We hold that there was no perfected sale of Lot 4. It was conditionally or contingently
G.R. No. L-61623 December 26, 1984 awarded to the Mendozas subject to the approval by the city council of the proposed
PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant, consolidation subdivision plan and the approval of the award by the valuation committee
vs. and higher authorities.
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R. The city council did not approve the subdivision plan. The Mendozas were advised in
MENDOZA, respondents-appellees. 1961 of the disapproval. In 1964, when the plan with the area of Lot 4 reduced to 2,608.7
Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner square meters was approved, the Mendozas should have manifested in writing their
PHHC. acceptance of the award for the purchase of Lot 4 just to show that they were still
Tolentino, Cruz, Reyes, Lava and Manuel for private respondents. interested in its purchase although the area was reduced and to obviate ally doubt on the
matter. They did not do so. The PHHC board of directors acted within its rights in
AQUINO, J.: withdrawing the tentative award.
The question in this case is whether the People's Homesite & Housing Corporation "The contract of sale is perfected at the moment there is a meeting of minds upon the
bound itself to sell to the Mendoza spouses Lot 4 (Road) Pcs- 4564 of the revised thing which is the object of the contract and upon the price. From that moment, the
consolidation subdivision plan with an area of 2,6,08.7 (2,503.7) square meters located parties may reciprocally demand performance, subject to the law governing the form of
at Diliman, Quezon City. contracts." (Art. 1475, Civil Code).
The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein "Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de
it stated "that subject to the approval of the Quezon City Council of the above-mentioned las partes o de la ley, se celebra la venta bajo una condicion suspensiva, y en los cuales
Consolidation Subdivision Plan, Lot 4. containing 4,182.2 square meters be, as it is no se perfecciona la venta hasta el cumplimiento de la condicion" (4 Castan Tobenas,
hereby awarded to Spouses Rizalino Mendoza and Adelaida Mendoza, at a price of Derecho Civil Español 8th ed. p. 81).
twenty-one pesos (P21.00) per square meter" and "that this award shall be subject to the "In conditional obligations, the acquisition of rights, as well as the extinguishment or loss
approval of the OEC (PHHC) Valuation Committee and higher authorities". of those already acquired, shall depend upon the happening of the event which
The city council disapproved the proposed consolidation subdivision plan on August 20, constitutes the condition. (Art. 1181, Civil Code). "Se llama suspensive la condicion de la
1961 (Exh. 2). The said spouses were advised by registered mail of the disapproval of que depende la perfeccion, o sea el principio del contrato". (9 Giorgi, Teoria de las
the plan (Exh. 2-PHHC). Another subdivision plan was prepared and submitted to the city Obligaciones, p. 57).
council for approval. The revised plan, which included Lot 4, with a reduced area of Under the facts of this case, we cannot say there was a meeting of minds on the
2,608.7, was approved by the city council on February 25, 1964 (Exh. H). purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter.
On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards of The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the
lots to persons who failed to pay the deposit or down payment for the lots awarded to awardee in that case applied for the purchase of the lot, paid the 10% deposit and a
them (Exh. 5). The Mendozas never paid the price of the lot nor made the 20% initial conditional contract to sell was executed in his favor. The PHHC could not re-award that
deposit. lot to another person.
On October 18, 1965 the PHHC board of directors passed Resolution No. 218, WHEREFORE, the decision of the Appellate Court is reversed and set aside and the
withdrawing the tentative award of Lot 4 to the Mendoza -spouses under Resolution No. judgment of the trial court is affirmed. No costs.
513 and re-awarding said lot jointly and in equal shares to Miguela Sto. Domingo, SO ORDERED.
Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, subject to Makasiar (Chairman), Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.
existing PHHC rules and regulations. The prices would be the same as those of the G.R. No. 85733 February 23, 1990
adjoining lots. The awardees were required to deposit an amount equivalent to 20% of Sps. ENRIQUE and CONSUELO LIM, petitioners,
the total selling price (Exh. F). vs.
The five awardees made the initial deposit. The corresponding deeds of sale were THE HONORABLE COURT OF APPEALS, Sps. TERESITA and OSCAR GUEVARRA,
executed in their favor. The subdivision of Lot 4 into five lots was approved by the city Sps. MARCOS and ANITA ORLINO, Sps. ROMULO and CONSUELO ORLINO and
council and the Bureau of Lands. Sps. FELIX and DOLORES ORLINO, respondents.
Salonga, Andres, Hernandez & Allado for petitioners.
 26

Ocampo, Dizon & Domingo for private respondent Pacific Banking Corporation. when they concluded the sale knowing that "there was a cloud in the status of the
property in question." 6The decision was affirmed in toto by the respondent court, 7 and
CRUZ, J.: the petitioners are now before us, urging reversal.
The subject of this controversy is a parcel of land consisting of 1,101 square meters and The petitioners claim they are purchasers in good faith, having relied on the assurances
located in Diliman, Quezon City. It was originally owned by Felix, Manuel and Maria of PBC as verified from the records in the Registry of Deeds of Quezon City that the land
Concepcion Orlino, who mortgaged it to the Progressive Commercial Bank as security for belonged to PBC and was unencumbered. They therefore should have preferential right
a P100,000.00 loan on July 1, 1965. The loan not having been paid, the mortgage was to the disputed land, which they had registered in their name under TCT No. 268623. For
foreclosed and the bank acquired the property as the highest bidder at the auction sale their part, the private respondents insist that as they had a valid and binding earlier deed
on March 28, 1969. The mortgagee thereafter transferred all its assets, including the said of sale in their favor, the land could no longer be sold by PBC to the petitioners, who
land, to the Pacific Banking Corporation (PBC). were aware of their prior right.
On May 22, 1975, the Orlinos, and their respective spouses (hereinafter referred to as In support of their position that it was not incumbent upon them to go beyond the land
the private respondents), who had remained in possession of the land, made a written records to check the real status of the land, the petitioners cite Seño v. Mangubat8 where
offer to PBC to repurchase the property. In response, the bank, through its Assistant the Court said:
Vice-President, sent the following letter dated November 9, 1977, to the private In order that a purchaser of land with a Torrens title may be considered
respondents' counsel: as a purchaser in good faith, it is enough that he examines the latest
This will confirm our agreement concerning the repurchase by your certificate of title which in this case is that issued in the name of the
clients, Mr. and Mrs. Oscar C. Guevarra of that certain property immediate transferor. The purchaser is not bound by the original
situated at 26 Jose Abad Santos, Heroes Hills, Quezon City with an certificate of title but only by the certificate of title of the person from
area of 1,1 01 square meters, more or less, under the following terms whom he has purchased the property.
and conditions: xxx xxx xxx
a) The cash consideration shall be P160,000.00 Thus, where innocent third persons relying on the correctness of the
payable in full upon signing of the Deed of Absolute certificate of title issued, acquire rights over the property, the court
Sale; cannot disregard such rights and order the total cancellation of the
b) The additional consideration shall consist of your certificate for that would impair public confidence in the certificate of
client's conveyance to us of their share of 2,901.15 title; otherwise everyone dealing with property registered under the
square meters on the property situated at Camarin, torrens system would have to inquire in every instance as to whether
Caloocan City. the title had been regularly or irregularly issued by the court. Indeed,
We understand that your clients will be applying for a loan with a bank. this is contrary to the evident purpose of the law. Every person dealing
In this connection, we are enclosing a xerox copy of the Transfer with registered land may safely rely on the correctness of the certificate
Certificate of Title No. 218661 Quezon City, Tax Declaration No. 3092 of title issued therefore and the law will in no way oblige him to go
and Official Receipt No. E-404723 covering payment of real estate behind the certificate to determine the condition of the property. Stated
taxes for 1977. Kindly request your clients to expedite the loan so that differently, an innocent purchaser for value relying on a torrens title
we can consummate the transaction as soon as possible. issued is protected.
Please request your clients to sign their conformity below and return And even assuming that there was an earlier valid sale of the property to the private
the duplicate thereof for our files. 1 respondents, the petitioners add, they would still prevail under Article 1544 of the Civil
Oscar C. Guevarra, one of the private respondents, indicated the required conformity. Code, providing as follows:
One year later, on November 2, 1978, PBC advised the private respondents that if the If the same thing should have been sold to different vendees, the
transaction was not finalized within 30 days, it would consider the offer of other ownership shall be transferred to the person who may have first taken
buyers. 2 The record does not show any further development until June 8, 1979, when possession thereof in good faith, if it should be movable property.
the private respondents requested PBC to allow them to secure a certified true copy of its Should it be immovable property, the ownership shall belong to the
Torrens certificate over the land for purposes of its survey and partition among them person acquiring it who in good faith first recorded it in the Registry of
preparatory to the actual transfer of title to them. 3 PBC granted the request subject to Property.
the condition that title would remain with it until the execution of the necessary deed of Should there be no inscription, the ownership shall pertain to the
conveyance. 4 person who in good faith was first in the possession; and, in the
On April 8, 1980, or two years later, PBC reminded the private respondents of its letter of absence thereof, to the person who presents the oldest title, provided
November 2, 1978, but again no action was taken to deliver to it the stipulated there is good faith.
consideration for the sale. Finally, on May 14, 1980, PBC executed a deed of sale over The private respondents, however, deny that the petitioners had acted in good faith,
the land in favor of the herein petitioners, the spouses Enrique and Consuelo Lim, for the pointing to the evidence that Consuelo Lim had, before the execution of the disputed
sum of P300,000.00. 5 deed of sale, visited the property and been informed of their existing adverse claim
On September 30, 1980, the private respondents filed a complaint in the Regional Trial thereto.9 Besides, the said deed contained the following stipulation:
Court of Quezon City against the petitioners and PBC for the annulment of the deed of That the VENDEE is aware of the fact that the aforementioned
sale on the ground that the subject land had been earlier sold to them. In its judgment for property is presently occupied by the former owners and that clearing
the plaintiffs, the court held that both PBC and the spouses Lim had acted in bad faith
 27

of the property of its occupants shall be for the exclusive responsibility It is true that the contract to sell imposes reciprocal obligations and so cannot be
and account of the vendee. terminated unilaterally by either party. Judicial rescission is required under Article 1191 of
And, indeed, the Court also said in Seno that: the Civil Code. However, this rule is not absolute. We have held that in proper cases, a
The well-known rule in this jurisdiction is that a person dealing with a party may take it upon itself to consider the contract rescinded and act accordingly albeit
registered land has a right to rely upon the face of the Torrens subject to judicial confirmation, which may or may not be given. It is true that the
Certificate of Title and to dispense with the need of inquiring rescinding party takes a risk that its action may not be approved by the court. But as we
further, except when the party concerned has actual knowledge of said in University of the Philippines v. De los Angeles: 11
facts and circumstances that would impel a reasonably cautious man Of course, it must be understood that the act of a party in treating a
to make such inquiry. (Emphasis supplied.) contract as cancelled or resolved on account of infractions by the other
As the Court sees it, the real issue is not whether the petitioner acted in good faith but contracting party must be made known to the other and is always
whether there was in fact a prior sale of the same property to the private respondents. provisional, being ever subject to scrutiny and review by the proper
Only if it is established that there was indeed a double sale of the property will it be court. If the other party denies that rescission is justified, it is free to
necessary to ascertain if Article 1544 is applicable. resort to judicial action in its own behalf, and bring the matter to court.
Stated differently, the question is: Was the transaction between private respondents and Then, should the court, after due hearing, decide that the resolution of
PBC, as embodied in the letter of November 9, 1977, a contract to sell or a contract of the contract was not warranted, the responsible party will be sentenced
sale? to damages; in the contrary case, the resolution will be affirmed, and
It is not enough to say that the contract of sale being consensual, it became effective the consequent indemnity awarded to the party prejudiced.
between the bank and the private respondents as of November 9, 1977. There is no In other words, the party who deems the contract violated may
question about that; but such agreement is like putting the cart before the horse. consider it resolved or rescinded, and act accordingly, without previous
Precisely, our purpose is to ascertain to what particular undertakings the parties have court action, but it proceeds at its own risk. For it is only the final
given their mutual consent so we can determine the nature of their agreement. judgment of the corresponding court that will conclusively and finally
According to Sing Yee v. Santos: 10 settle whether the action taken was or was not correct in law. But the
... A distinction must be made between a contract of sale in which title law definitely does not require that the contracting party who believes
passes to the buyer upon delivery of the thing sold and a contract to itself injured must first file suit and wait for a judgment before taking
sell (or of exclusive right and privilege to purchase as in this case) extrajudicial steps to protect its interest. Otherwise, the party injured by
where by agreement the ownership is reserved in the seller and is not the other's breach will have to passively sit and watch its damages
to pass until the full payment of the purchase price is made. In the first accumulate during the pendency of the suit until final judgment of
case, non-payment of the price is a negative resolutory condition; in rescission is rendered when the law itself requires that he should
the second case, full payment is a positive suspensive condition. Being exercise due diligence to minimize its own damages.
contraries, their effect in law cannot be Identical. In the first case, the In the case at bar, the private respondents obligated themselves to deliver to the bank
vendor has lost and cannot recover the ownership of the land sold until the sum of P160,000.00 and their share of 2,901.15 square meters on a property situated
and unless the contract of sale is itself resolved and set aside. In the in Caloocan City. In the letter of PBC dated November 9, 1977, they were requested to
second case, however, the title remains in the vendor if the vendee "expedite the loan (they were negotiating for this purpose) so we can consummate the
does not comply with the condition precedent of making payment at transaction as soon as possible". That was in 1977. In 1978, they were reminded of their
the time specified in the contract. obligation and asked to comply within thirty days. They did not. On April 8, 1980, they
Applying these distinctions, the Court finds that the agreement between PBC and the were reminded of that letter of November 2, 1978, and again asked to comply; but again
private respondents was only a contract to sell, not a contact of sale. And the reasons they did not. Surely, the bank could not be required to wait for them forever, especially so
are obvious. since they remained in possession of the property and there is no record that they were
There was no immediate transfer of title to the private respondents as would have paying rentals. Under the circumstances, PBC had the right to consider the contract to
happened if there had been a sale at the outset. The supposed sale was never sell between them terminated for non-payment of the stipulated consideration. We
registered and TCT No. 218661 in favor of PBC was not replaced with another certificate hereby confirm that rescission.
of title in favor of the private respondents. In their letter to PBC on June 8, 1979, they Having arrived at these conclusions, the Court no longer finds it necessary to determine
acknowledged that title to the property would remain with the bank until their transaction if the petitioners acted in bad faith when they purchased the subject property. The private
shall have been finalized. In response, PBC reiterated the same condition. No less respondents lost all legal interest in the land when their contract to sell was rescinded by
important, the consideration agreed upon by the parties was never paid by the private PBC for their non-compliance with its provisions. As that contract was rito longer effective
respondents, to convert the agreement into a contract of sale. In fact, PBC reminded when the land was sold by PBC to the petitioners, the private respondents had no legal
them twice — on November 2, 1978, and on April 8, 1980 — to comply with their standing to assail that subsequent transaction. The deed of sale between PBC and the
obligations. They did not. Their default was not, as the respondent court described it, "a petitioners must therefore be sustained.
slight delay" but lasted for all of three years and in fact continued up to the rendition of WHEREFORE, the petition is GRANTED and the challenged decision of the Court of
the decision in the trial court. As payment of the consideration was a positive suspensive Appeals is REVERSED. TCT No. 268623 in favor of the petitioners is recognized as valid
condition, title to the subject property never passed to the private respondents. Hence, and the complaint for the annulment of the deed of sale dated May 14, 1980, is hereby
the property was legally unencumbered and still belonged to PBC on May 14, 1980, dismissed. Costs against the private respondents.
when it was sold by the bank to the petitioners. SO ORDERED.
 28

Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur. That in case of partition of the above-described property between
G.R. No. 102909 September 6, 1993 herein VENDOR and VENDEE the same shall be divided into two (2)
SPOUSES VICENTE and LOURDES PINGOL, petitioners, equal parts, the VENDOR gets the corner facing J. De Jesus and
vs. Malolos Avenue and the VENDEE shall get the portion with fifteen 15
HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, namely: meters frontage facing J. De Jesus Street only.1
MELINDA D. PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, NATIVIDAD D. Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion,
PELAYO, YOLANDA D. CACERES and MARY DONASCO, respondents. designated as Lot No. 3223-A, was then segregated from the mother lot, and the parties
Bernardo S. Chan for petitioners. prepared a subdivision plan (Exhibit "C") which was approved by the Land Registration
Orlando A. Galope for respondents. Commission.2
Francisco immediately took possession of the subject lot and constructed a house
DAVIDE, JR., J.: thereon. In January 1970, he started paying the monthly installments but was able to pay
An action denominated as one for specific performance and damages was brought by only up to 1972.
the private respondents against the petitioners before the Regional Trial Court (RTC) of On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid
Caloocan City which, after due trial, rendered a decision in favor of the petitioners. On P8,369.00, plus the P2,000.00 advance payment, leaving a balance of P10,161.00 on
appeal, the respondent Court reversed the trial court's decision. the contract price. 3 Lot No. 3223-A remained in the possession of Donasco's heirs.
It is from this judgment that the petitioners have appealed to this Court by way of a On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific
petition for review on certiorari. Performance and Damages, with Prayer for Writ of Preliminary Injunction" against the
The material facts of this case are simple and undisputed. spouses Vicente and Lourdes Pingol (petitioners herein) before the RTC of Caloocan
Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of City. The action was docketed as Civil Case No. 13572 and raffled off to Branch 125 of
Caloocan, with an area of 549 square meters, located at Bagong Barrio, Caloocan City the said court.
and more particularly described in Transfer Certificate of Title (TCT) No. 7435 of the In their complaint, 4 the plaintiffs (private respondents herein) averred that after the death
Registry of Deeds of Caloocan City. On 17 February 1969, he executed a "DEED OF of their father, they offered to pay the balance of P10,161.00 plus the stipulated legal rate
ABSOLUTE SALE OF ONE-HALF OF (1/2) [OF] AN UNDIVIDED PORTION OF A of interest thereon to Vicente Pingol but the latter rebuffed their offer and has "been
PARCEL OF LAND" in favor of Francisco N. Donasco which was acknowledged before a demanding for a bigger and unreasonable amount, in complete variance to what is
notary public. The parcel of land referred to herein is Lot No. 3223 and the pertinent lawfully due and payable." They stated that they had "exerted earnest efforts to forge or
portions of the document read as follows: reach an amicable and peaceful settlement with the defendants" for the payment of the
That for and in consideration of the sum of TWENTY THOUSAND property in question but to no avail. They further alleged that the defendants were
AND FIVE HUNDRED THIRTY (P20,530.00) PESOS, Philippine committing "acts of forcible entry and encroachment" upon their land and asked that a
Currency, the VENDOR hereby these presents SELL, CONVEY AND writ of preliminary injunction be issued to restrain the defendants from the acts
CONVEY by way of Absolute Sale the one-half (1/2) portion, complained of.
equivalent to Two Hundred Seventy Four and point Fifty (274.50) Plaintiffs then prayed that the defendants be ordered, inter alia:
square meters, to VENDEE, the above-mentioned property, his heirs, a. . . . to accept the amount of P10,161.00, more or less, plus the
assigns and successors-in- interest; stipulated legal rate of interest due thereon, as full and complete
That the VENDOR hereby confesses and acknowledges the receipt of payment of the balance for the agreed price/consideration on the one-
TWO THOUSAND (P2,000.00) PESOS from VENDEE as advanced half (1/2) portion of the parcel of land . . .; [and]
(sic) and partial payment to the above-cited consideration of the Sale b. . . . to execute the final deed of sale on the one-half (1/2) portion of
herein mentioned, leaving therefor a balance of Eighteen Thousand the lot . . . in accordance with the partition reflected in the survey and
and Five Hundred Thirty (P18,530) Pesos to be paid in several equal subdivision plan, . . . .5
installments within a period of six (6) years, beginning January, 1970; In their answer with counterclaim, 6 defendants admitted the execution of the
That after computing the above-mentioned equal installments, the aforementioned deed of sale, the segregation of the portion sold and the preparation and
VENDEE agrees and undertakes to pay unto the VENDOR a monthly approval of the subdivision plan, but set up the following special and affirmative
amount equivalent to Two Hundred Fifty Seven (sic) and Thirty Six defenses: (1) plaintiffs' cause of action had already prescribed; (2) the deed of sale
Centavos (P257.36) within a period of Seventy One (71) months and embodied a conditional contract of sale "as the consideration is to be paid on installment
on the Seven Two [sic] (72) month, the amount of (P257.44) as the last basis within a period of six years beginning January, 1970"; (3) the subdivision plan was
and final installment thereof; prepared on the assumption that Francisco Donasco would be able to comply with his
That the VENDEE agrees that in case of default in the payment of the obligation; (4) when Francisco died, he had not fully paid the total consideration agreed
installment due the same shall earn a legal rate of interest, and to upon; and (5) considering the breach by Francisco of his contractual obligation way back
which the VENDOR likewise agrees; in 1976, the sale was deemed to have been cancelled and the continuous occupancy of
That the VENDEE undertakes to pay unto the VENDOR the herein Francisco after 1976 and by his heirs thereafter was by mere tolerance of Vicente Pingol.
monthly installment within the first five (5) days of each month and the They then asked that the plaintiffs be ordered to vacate the premises and to pay them
same shall be made available and to be paid at the residence of the attorney's fees and a reasonable compensation for the use of the land.
VENDOR, payment to be made either directly to the VENDOR, his wife In their Reply and Answer to Counterclaim, 7 the plaintiffs pointed out that there is no
or his authorized representative or factor; provision in the deed of sale for its cancellation in case of default in the payment of the
 29

monthly installments and invoked Article 1592 of the New Civil Code. They specifically UNDIVIDED PORTION OF A PARCEL OF LAND" IS AN ABSOLUTE
denied the allegations in the counterclaim. DEED OF SALE SUFFICIENT TO CONFER OWNERSHIP ON THE
The issues having been joined, the case was then tried on the merits. VENDEE AND HIS SUCCESSORS-IN-INTEREST, DESPITE THE
On 22 January 1990, the trial court rendered a decision 8 dismissing the complaint and FACT THAT BY ITS TERMS AND CONDITIONS, LIKE THE PRICE
ordering the plaintiffs to pay the defendants P350.00 as reasonable monthly rental for the BEING PAYABLE ON INSTALLMENTS WITHIN A FIXED PERIOD,
use of the premises from the filing of the complaint, P10,000.00 by way of attorney's THE SAME IS A CONDITIONAL DEED OF SALE.
fees, and the costs of the suit. It held that: (1) the deed of absolute sale in question, II
marked and offered in evidence as Exhibit "A," is a contract to sell, not a contract of sale, IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE
since Vicente Pingol had no intention to part with the ownership of the loan unless the full VENDEE FAILED TO COMPLY WITH THE TERMS OF THE
amount of the agreed price had been paid; (2) the contract was deemed to have been CONTRACT (EXHIBIT "A") SPECIFICALLY TO COMPLETE THE
cancelled from the moment the late father of the plaintiffs defaulted in the payment of the PAYMENT OF THE CONSIDERATION ON THE DATE STIPULATED
monthly installments; (3) title and ownership over the lot did not pass to Francisco IN THE CONTRACT WHICH WAS SUPPOSED TO BE IN JANUARY
Donasco and his heirs since the contract to sell was never consummated; and (5) 1976, COMPLETE PAYMENT THEREOF CAN STILL BE ENFORCED
assuming, arguendo, that the plaintiffs have a cause of action for specific performance, IN AN ACTION INSTITUTED BY THE HEIRS OF THE VENDEE
such action had already prescribed since the complaint was filed only on 19 October FILED ON OCTOBER 19, 1988 OR A PERIOD OF MORE THAN
1988 or more than ten years from the time that they could have lawfully demanded TWELVE (12) YEARS FROM THE TIME COMPLETE PAYMENT
performance.9 SHOULD HAVE BEEN MADE;
Plaintiffs elevated the case to the Court of Appeals where the appeal was docketed as III
CA-G.R. CV No. 25967. On 12 November 1991, the said court rendered a IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE
decision 10 reversing the appealed decision and decreeing as follows: WHICH IS AN OFFER TO COMPLETE THE PAYMENT LEFT
WHEREFORE, the decision appealed from is hereby REVERSED and UNPAID BY PRIVATE RESPONDENTS' FATHER WHICH DOES NOT
SET ASIDE and another one is rendered: PRESCRIBE;
(1) Ordering appellee-vendor Vicente Pingol to accept the sum of IV
P10,161.00, plus the legal interest due thereon from the date of IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION
institution of this action on October 19, 1988; HAS NOT PRESCRIBE.14
(2) Upholding the validity of the "DEED OF ABSOLUTE SALE OF The decisive issue in this case is whether Exhibit "A" embodies a contract of sale or a
ONE- HALF (1/2) (of) AN UNDIVIDED PORTION OF A PARCEL OF contract to sell. The distinction between the two is important for in a contract of sale, the
LAND" (Exh. A), and by virtue and on the strength of which declaring title passes to the vendee upon the delivery of the thing sold, whereas in a contract to
the "Heirs of the Deceased Francisco N. Domingo" as the owners of sell, by agreement, ownership is reserved in the vendor and is not to pass until the full
the 274.50 sq. m. land, denominated as Lot 3223-A, (LRC) Psd- payment of the price. In a contract of sale, the vendor has lost and cannot recover
146255 under the technical description (exh. D) and reflected in the ownership until and unless the contract is resolved or rescinded, whereas in a contract to
Plan of Subdivision Survey which was approved By Commissioner of sell, title is retained by the vendor until the full payment of the price, such payment being
Land Registration on August 13, 1971 (exh. C), representing one-half a positive suspensive condition, failure of which is not a breach but an event that
portion [of] lot 3223, situated at the corner of Malolos Avenue and G. prevented the obligation of the vendor to convey title from becoming
de Jesus St., Bagong Barrio, Caloocan City, and covered by TCT No. effective.15
7435 of the Registry of Deeds of Caloocan City (exh. B); and A perusal of Exhibit "A" leads to no other conclusion than that it embodies a contract of
(3) Ordering the defendants-appellees to pay the costs. sale. The plain and clear tenor of the "DEED OF ABSOLUTE SALE OF ONE-HALF (1/2)
SO ORDERED. 11 [OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" is that "the VENDOR hereby
The Court of Appeals ruled that the deed of sale in question reveals the clear intention of . . . SELL, CONVEY AND CONVEY by way Absolute Sale the one-half (1/2) portion . . .
Vicente Pingol to part with the ownership of the one-half portion of the land by way of an to the VENDEE . . . his heirs, assigns and successors-in-interest." That the vendor,
absolute sale; that the failure to fully pay the agreed price was not a ground for the petitioner Vicente Pingol, had that clear intention was further evidenced by his failure to
cancellation of the sale; and that the plaintiffs' action is imprescriptible since it is akin to reserve his title thereto until the full payment of the price.
an action to quiet title to property in one's possession.12 In Dignos vs. Court of Appeals, 16 we held that a deed of sale is absolute in nature
Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter although denominated as a "Deed of Conditional Sale" where there is no stipulation in
referred to as the petitioners, filed this petition for certiorari on 9 January 1992. Plaintiffs, the deed that title to the property sold is reserved in the seller until the full payment of the
hereinafter referred to as the private respondents, filed their comment thereto on 10 price, nor is there a stipulation giving the vendor the right to unilaterally resolve the
September 1992 to which the petitioners filed a reply 11 November 1992. We gave due contract the moment the buyer fails to pay within a fixed period. Exhibit "A" contains
course to the petition and required the parties to submit their respective neither stipulation. What is merely stated therein is that "the VENDEE agrees that in case
memoranda, 13 which they subsequently complied with. of default in the payment of the installments due the same shall earn a legal rate of
Petitioners contend that the Court of Appeals erred: interest, and to which the VENDOR likewise agrees."
I Furthermore, as found by the Court of Appeals, the acts of the parties, contemporaneous
IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED and subsequent to the contract, clearly show that an absolute deed of sale was intended,
AS "ABSOLUTE DEED OF SALE OF ONE-HALF (½) OF AN by the parties and not a contract to sell:
 30

[P]ursuant to the deed, the vendor delivered actual and constructive That a cloud has been cast on the title of the private respondents is indubitable. Despite
possession of the property to the vendee, who occupied and took such the fact that the title had been transferred to them by the execution of the deed of sale
possession, constructed a building thereon, had the property surveyed and the delivery of the object of the contract, the petitioners adamantly refused to accept
and subdivided and a plan of the property was prepared and submitted the tender of payment by the private respondents and steadfastly insisted that their
to the Land Registration Commission which approved it preparatory to obligation to transfer title had been rendered ineffective.
segregating the same and obtaining the corresponding TCT in his A vendee in an oral contract to convey land who had made part payment thereof, entered
name. Since the sale, appellee continuously possessed and occupied upon the land and had made valuable improvements thereon, is entitled to bring suit to
the property as owner up to his death on July 13, 1984 and his heirs, clear his title against the vendor who had refused to transfer the title to him. It is not
after his death, continued the occupancy and possession of the necessary that the vendee has an absolute title, an equitable title being sufficient to
property up to the present. Those contemporaneous and subsequent clothe him with personality to bring an action to quiet title. 21
events are demonstrative acts that the vendor since the sale Prescription thus cannot be invoked against the private respondents for it is aphoristic
recognized the vendee as the absolute owner of the property sold. All that an action to quiet title to property in one's possession is
those attributes of ownership are admitted by defendants in their imprescriptible. 22 The rationale for this rule has been aptly stated thus:
answer, specifically in paragraphs 7 and 9 of their special and The owner of real property who is in possession thereof may wait until
affirmative defenses.17 his possession is invaded or his title is attacked before taking steps to
The contract here being one of absolute sale, the ownership of the subject lot was vindicate his right. A person claiming title to real property, but not in
transferred to the buyer upon the actual and constructive delivery thereof. The possession thereof, must act affirmatively and within the time provided
constructive delivery of the subject lot was made upon the execution of the deed of by the statute. Possession is a continuing right as is the right to defend
sale 18 while the actual delivery was effected when the private respondents took such possession. So it has been determined that an owner of real
possession of and constructed a house on Lot No. 3223-A. property in possession has a continuing right to invoke a court of equity
The delivery of the object of the contract divested the vendor of the ownership over the to remove a cloud that is a continuing menace to his title. Such a
same and he cannot recover the title unless the contract is resolved or rescinded menace is compared to a continuing nuisance or trespass which is
pursuant to Article 1592 of the New Civil Code which provides that: treated as successive nuisances or trespasses, not barred by statute
In the sale of immovable property, even though it may have been until continued without interruption for a length of time sufficient to
stipulated that upon failure to pay the price at the time agreed upon the affect a change of title as a matter of law.23
rescission of the contract shall of right take place, the vendee may pay, Private respondents shall, however, be liable to pay the legal rate of interest on the
even after the expiration of the period, as long as no demand for unpaid balance of the purchase price from the date default or on 6 January 1976, when
rescission of the contract has been made upon him either judicially or the entire balance should have been paid, pursuant to the provision in the deed of sale.
by a notarial act. After the demand, the court may not grant him a new WHEREFORE, except as above modified, the Decision appealed from is hereby
term. AFFIRMED. As modified, the interest on the unpaid balance of P10,161.00, at the legal
Both the trial court and the Court of Appeals did not find that a notarial or judicial rate, shall be computed from 6 January 1976. Upon the payment by the private
rescission of the contract had been made. Although Vicente Pingol asserts that he had respondents to the petitioners of the said amount and the interest thereon, the latter are
declared to Francisco Donasco that he was cancelling the contract, he did not prove that ordered to deliver Transfer Certificate of Title No. 7435 to the Register of Deeds of
his demand for rescission was made either judicially or by a notarial act. Caloocan City who shall cancel the same and issue two new transfer certificates of title in
Petitioners fault the respondent Court for holding that the action of the petitioners is not lieu thereof, one of which shall be in the name of the herein private respondents covering
barred by the statute of limitations. They argue that the private respondents' action, being Lot No. 3223-A and the other in the name of the petitioners covering the remainder of the
based upon a written contract, has prescribed since it was brought only in 1988 or more lot.
than ten years from the time when the latter could have lawfully demanded SO ORDERED.
performance.19 Cruz, Griño-Aquino, Bellosillo and Quiason, JJ., concur.
We disagree.
Although the private respondents' complaint before the trial court was denominated as
one for specific performance, it is in effect an action to quiet title. In this regard, the
following excerpt from Bucton vs. Gabar 20 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.