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G.R.No.188064

RepublicofthePhilippines

SupremeCourt
Manila

SECONDDIVISION

MILAA.REYES,
Petitioner,

versus

VICTORIAT.TUPARAN,
Respondent.

G.R.No.188064

Present:

CARPIO,J.,Chairperson,
NACHURA,
PERALTA,
ABAD,and
MENDOZA,JJ.

Promulgated:
June1,2011

XX

DECISION

MENDOZA,J.:

[1]
SubjectofthispetitionforreviewistheFebruary13,2009Decision oftheCourtofAppeals
[2]
(CA) which affirmed with modification the February 22, 2006 Decision of the Regional Trial
Court,Branch172,ValenzuelaCity(RTC),inCivilCaseNo.3945V92,anactionforRescissionof
ContractwithDamages.

OnSeptember10,1992,MilaA.Reyes(petitioner)filedacomplaintforRescissionofContract
withDamagesagainstVictoriaT.Tuparan (respondent)beforetheRTC.InherComplaint,petitioner
alleged, among others, that she was the registered owner of a 1,274 square meter residential and
commerciallotlocatedinKaruhatan,ValenzuelaCity,andcoveredbyTCTNo.V4130thatonthat
property, she put up a threestorey commercial building known as RBJ Building and a residential
apartment building that since 1990, she had been operating a drugstore and cosmetics store on the
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groundfloorofRBJBuildingwhereshealsohadbeenresidingwhiletheotherareasofthebuildings
includingthesidewalkswerebeingleasedandoccupiedbytenantsandstreetvendors.

InDecember1989,respondentleasedfrompetitioneraspaceonthegroundflooroftheRBJ
Buildingforherpawnshopbusinessforamonthlyrentalof4,000.00.Aclosefriendshipdeveloped
between the two which led to the respondent investing thousands of pesos in petitioners
financing/lendingbusinessfromFebruary7,1990toMay27,1990,withinterestattherateof6%a
month.

OnJune20,1988,petitionermortgagedthesubjectrealpropertiestotheFarmersSavingsBank
and Loan Bank, Inc. (FSL Bank) to secure a loan of 2,000,000.00 payable in installments. On
November 15, 1990, petitioners outstanding account on the mortgage reached 2,278,078.13.
Petitionerthendecidedtosellherrealpropertiesforatleast6,500,000.00soshecouldliquidateher
bank loan and finance 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
interestandtoassumethebankloan.Toinducethepetitionertoacceptheroffer,respondentoffered
thefollowingconditions/concessions:

1.Thattheconditionalsalewillbecancellediftheplaintiff(petitioner)canfinda
buyer of said properties for the amount of 6,500,000.00 within the next three (3)
months provided all amounts received by the plaintiff from the defendant (respondent)
including payments actually made by defendant to Farmers Savings and Loan Bank
wouldberefundedtothedefendantwithadditionalinterestofsix(6%)monthly

2.Thattheplaintiffwouldcontinueusingthespaceoccupiedbyheranddrugstore
andcosmeticsstorewithoutanyrentalsforthedurationoftheinstallmentpayments

3.Thattherewillbealeaseforfifteen(15)yearsinfavoroftheplaintiffoverthe
spacefordrugstoreandcosmeticsstoreatamonthlyrentalofonly8,000.00afterfull
paymentofthestipulatedinstallmentpaymentsaremadebythedefendant

4.Thatthedefendantwillundertaketherenewalandpaymentofthefireinsurance
policiesonthetwo(2)subjectbuildingsfollowingtheexpirationofthethenexistingfire
insurance policy of the plaintiff up to the time that plaintiff is fully paid of the total
[3]
purchasepriceof4,200,000.00.

After petitioners verbal acceptance of all the conditions/concessions, both parties worked
together to obtain FSL Banks approval for respondent to assume her (petitioners) outstanding bank
account.Theassumptionwouldbepartofrespondentspurchasepriceforpetitionersmortgagedreal
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properties.FSLBankapprovedtheirproposalontheconditionthatpetitionerwouldsignorremainas
comakerforthemortgageobligationassumedbyrespondent.

On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of
Conditional Sale of Real Properties with Assumption of Mortgage. Due to their close personal
friendshipandbusinessrelationship,bothpartieschosenottoreduceintowritingtheothertermsof
their agreement mentioned in paragraph 11 of the complaint. Besides, FSL Bank did not want to
incorporate in the Deed of Conditional Sale of Real Properties withAssumption of Mortgage any
othersideagreementbetweenpetitionerandrespondent.

Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage,
respondentwasboundtopaythepetitioneralumpsumof1.2millionpesoswithoutinterestaspart
ofthepurchasepriceinthree(3)fixedinstallmentsasfollows:

a)200,000.00dueJanuary31,1991
b)200,000.00dueJune30,1991
c)800,000.00dueDecember31,1991

Respondent,however,defaultedinthepaymentofherobligationsontheirduedates.Insteadof
payingtheamountsdueinlumpsumontheirrespectivematuritydates,respondentpaidpetitionerin
smallamountsfromtimetotime.Tocompensateforherdelayedpayments,respondentagreedtopay
petitioneraninterestof6%amonth.Asof August31,1992,respondenthadonlypaid395,000.00,
leavingabalanceof805,000.00asprincipalontheunpaidinstallmentsand466,893.25asunpaid
accumulatedinterest.

Petitionerfurtheraverredthatdespitehersuccessinfindingaprospectivebuyerforthesubject
realpropertieswithinthe3monthperiodagreedupon,respondentrenegedonherpromisetoallow
thecancellationoftheirdeedofconditionalsale.Instead,respondentbecameinterestedinowningthe
subject real properties and even wanted to convert the entire property into a modern commercial
complex.Nonetheless,sheconsentedbecauserespondentrepeatedlyprofessedfriendshipandassured
herthatalltheirverbalsideagreementwouldbehonoredasshownbythefactthatsinceDecember
1990,she(respondent)hadnotcollectedanyrentalsfromthepetitionerforthespaceoccupiedbyher
drugstoreandcosmeticsstore.

OnMarch19,1992,theresidentialbuildingwasguttedbyfirewhichcausedthepetitionerto
lose rental income in the amount of 8,000.00 a month sinceApril 1992. Respondent neglected to
renewthefireinsurancepolicyonthesubjectbuildings.
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SinceDecember1990,respondenthadtakenpossessionofthesubjectrealpropertiesandhad
beencontinuouslycollectingandreceivingmonthlyrentalincomefromthetenantsofthebuildings
andvendorsofthesidewalkfrontingtheRBJbuildingwithoutsharingitwithpetitioner.

On September 2, 1992, respondent offered the amount of 751,000.00 only payable on


September7,1992,asfullpaymentofthepurchasepriceofthesubjectrealpropertiesanddemanded
thesimultaneousexecutionofthecorrespondingdeedofabsolutesale.

RespondentsAnswer

Respondent countered, among others, that the tripartite agreement erroneously designated by
the petitioner as a Deed of Conditional Sale of Real Property with Assumption of Mortgage was
actually a pure and absolute contract of sale with a term period. It could not be considered a
conditional sale because the acquisition of contractual rights and the performance of the obligation
therein did not depend upon a future and uncertain event. Moreover, the capital gains and
documentarystampsandothermiscellaneousexpensesandrealestatetaxesupto1990weresupposed
tobepaidbypetitionerbutshefailedtodoso.

Respondent further averred that she successfully rescued the properties from a definite
foreclosurebypayingtheassumedmortgageintheamountof2,278,078.13plusinterestandother
financecharges.Becauseofherpayment,shewasabletoobtainadeedofcancellationofmortgage
and secure a release of mortgage on the subject real properties including petitioners ancestral
residentialpropertyinSta.Maria,Bulacan.

Petitioners claim for the balance of the purchase price of the subject real properties was
baselessandunwarrantedbecausethefullamountofthepurchasepricehadalreadybeenpaid,asshe
didpaymorethan4,200,000.00,theagreedpurchasepriceofthesubjectrealproperties,andshehad
even introduced improvements thereon worth more than 4,800,000.00. As the parties could no
longerberestoredtotheiroriginalpositions,rescissioncouldnotberesortedto.

Respondent added that as a result of their business relationship, petitioner was able to obtain
fromheraloanintheamountof400,000.00withinterestandtookseveralpiecesofjewelryworth
120,000.00. Petitioner also failed and refused to pay the monthly rental of 20,000.00 since
November16,1990uptothepresentfortheuseandoccupancyofthegroundfloorofthebuildingon
thesubjectrealproperty,thus,accumulatingarrearagesintheamountof470,000.00asofOctober
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1992.

RulingoftheRTC

OnFebruary22,2006,theRTChandeddownitsdecisionfindingthatrespondentfailedtopayinfull
the4.2milliontotalpurchasepriceofthesubjectrealpropertiesleavingabalanceof805,000.00.It
stated that the checks and receipts presented by respondent 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
consideredtheDeedofConditionalSaleofRealPropertywithAssumptionofMortgageexecutedby
andamongthetwopartiesandFSLBankacontracttosell,andnotacontractofsale.Itwasofthe
opinion that although the petitioner was entitled to a rescission of the contract, it could not be
permittedbecausehernonpaymentinfullofthepurchasepricemaynotbeconsideredassubstantial
and fundamental breach of the contract as to defeat the object of the parties in entering into the
[4]
contract. TheRTCbelievedthattherespondentsofferstatedinhercounselsletterdatedSeptember
2,1992tosettlewhatshethoughtwasherunpaidbalanceof751,000.00showedhersincerityand
willingnesstosettleherobligation.Hence,itwouldbemoreequitabletogiverespondentachanceto
paythebalanceplusinterestwithinagivenperiodoftime.

Finally,theRTCstatedthattherewasnofactualorlegalbasistoawarddamagesandattorneysfees
becausetherewasnoproofthateitherpartyactedfraudulentlyorinbadfaith.

Thus,thedispositiveportionoftheRTCDecisionreads:

WHEREFORE,judgmentisherebyrenderedasfollows:

1. Allowing the defendant to pay the plaintiff within thirty (30) days from the finality
hereof the amount of 805,000.00, representing the unpaid purchase price of the subject
property,withinterestthereonat2%amonthfromJanuary1,1992untilfullypaid.Failureof
thedefendanttopaysaidamountwithinthesaidperiodshallcausetheautomaticrescissionof
thecontract(DeedofConditionalSaleofRealPropertywithAssumptionofMortgage)andthe
plaintiff and the defendant shall be restored to their former positions relative to the subject
propertywitheachreturningtotheotherwhateverbenefitseachderivedfromthetransaction

2.Directingthedefendanttoallowtheplaintifftocontinueusingthespaceoccupiedby
her for drugstore and cosmetic store without any rental pending payment of the aforesaid
balanceofthepurchaseprice.

3. Ordering the defendant, upon her full payment of the purchase price together with
interest, to execute a contract of lease for fifteen (15) years in favor of the plaintiff over the
spaceforthedrugstoreandcosmeticstoreatafixedmonthlyrentalof8,000.00and

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4. Directing the plaintiff, upon full payment to her by the defendant of the purchase
pricetogetherwithinterest,toexecutethenecessarydeedofsale,aswellastopaytheCapital
GainsTax,documentarystampsandothermiscellaneousexpensesnecessaryforsecuringthe
BIR Clearance, and to pay the real estate taxes due on the subject property up to 1990, all
necessarytotransferownershipofthesubjectpropertytothedefendant.

Nopronouncementastodamages,attorneysfeesandcosts.

[5]
SOORDERED.

RulingoftheCA

OnFebruary13,2009,theCArendereditsdecisionaffirmingwithmodificationtheRTCDecision.
TheCAagreedwiththeRTCthatthecontractenteredintobythepartiesisacontracttosellbutruled
thattheremedyofrescissioncouldnotapplybecausetherespondentsfailuretopaythepetitionerthe
balance of the purchase price in the total amount of 805,000.00 was not a breach of contract, but
merely an event that prevented the seller (petitioner) from conveying title to the purchaser
(respondent).Itreasonedthatoutofthetotalpurchasepriceofthesubjectpropertyintheamountof
4,200,000.00, respondents remaining unpaid balance was only 805,000.00. Since respondent had
alreadypaidasubstantialamountofthepurchaseprice,itwasbutrightandjusttoallowhertopay
theunpaidbalanceofthepurchasepriceplusinterest.Thus,thedecretalportionoftheCADecision
reads:

WHEREFORE,premisesconsidered,theDecisiondated22 February 2006 and Order


dated 22 December 2006 of the Regional Trial Court of Valenzuela City, Branch 172 in Civil
Case No. 3945V92 are AFFIRMED with MODIFICATION in that defendantappellant
Victoria T. Tuparan is hereby ORDERED to pay plaintiffappellee/appellant Mila A. Reyes,
within 30 days from finality of this Decision, the amount of 805,000.00 representing the
unpaidbalanceofthepurchasepriceofthesubjectproperty,plusinterestthereonattherate
of6%perannumfrom11September1992uptofinalityofthisDecisionand,thereafter,atthe
rate of 12% per annum until full payment. The ruling of the trial court on the automatic
rescissionoftheDeedofConditionalSalewithAssumptionofMortgageisherebyDELETED.
Subjecttotheforegoing,thedispositiveportionofthetrialcourtsdecisionisAFFIRMEDinall
otherrespects.

[6]
SOORDERED.

After the denial of petitioners motion for reconsideration and respondents motion for partial
reconsideration, petitioner filed the subject petition for review praying for the reversal and setting
asideoftheCADecisionanchoredonthefollowing
ASSIGNMENTOFERRORS
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A.THECOURTOFAPPEALSSERIOUSLYERREDANDABUSEDITSDISCRETION
IN DISALLOWING THE OUTRIGHT RESCISSION OF THE SUBJECT DEED OF
CONDITIONALSALEOFREALPROPERTIESWITHASSUMPTIONOFMORTGAGEON
THEGROUNDTHATRESPONDENTTUPARANSFAILURETOPAYPETITIONERREYES
THE BALANCE OF THE PURCHASE PRICE OF 805,000.00 IS NOT A BREACH OF
CONTRACT DESPITE ITS OWN FINDINGS THAT PETITIONER STILL RETAINS
OWNERSHIP AND TITLE OVER THE SUBJECT REAL PROPERTIES DUE TO
RESPONDENTS REFUSAL TO PAY THE BALANCE OF THE TOTAL PURCHASE PRICE
OF 805,000.00 WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE OF
4,200,000.00OR66%OFTHESTIPULATEDLASTINSTALLMENTOF1,200,000.00PLUS
THE INTEREST THEREON. IN EFFECT, THE COURT OF APPEALS AFFIRMED AND
ADOPTED THE TRIAL COURTS CONCLUSION THAT THE RESPONDENTS NON
PAYMENT OF THE 805,000.00 IS ONLY A SLIGHT OR CASUAL BREACH OF
CONTRACT.

B.THECOURTOFAPPEALSSERIOUSLYERREDANDABUSEDITSDISCRETION
INDISREGARDINGASGROUNDFORTHERESCISSIONOFTHESUBJECTCONTRACT
THE OTHER FRAUDULENT AND MALICIOUS ACTS COMMITTED BY THE
RESPONDENTAGAINST THE PETITIONER WHICH BY THEMSELVES SUFFICIENTLY
JUSTIFYADENIALOFAGRACEPERIODOFTHIRTY(30)DAYSTOTHERESPONDENT
WITHIN WHICH TO PAY TO THE PETITIONER THE 805,000.00 PLUS INTEREST
THEREON.

C.EVENASSUMINGARGUENDOTHATPETITIONERISNOTENTITLEDTOTHE
RESCISSION OF THE SUBJECT CONTRACT, THE COURT OF APPEALS STILL
SERIOUSLYERREDANDABUSEDITSDISCRETIONINREDUCINGTHEINTERESTON
THE805,000.00TOONLY6%PERANNUMSTARTINGFROMTHEDATEOFFILINGOF
THE COMPLAINT ON SEPTEMBER 11, 1992 DESPITETHE PERSONAL COMMITMENT
OF THE RESPONDENT AND AGREEMENT BETWEEN THE PARTIES THAT
RESPONDENT WILL PAY INTEREST ON THE 805,000.00 AT THE RATE OF 6%
MONTHLYSTARTINGTHEDATEOFDELINQUENCYONDECEMBER31,1991.

D.THECOURTOFAPPEALSSERIOUSLYERREDANDABUSEDITSDISCRETION
INTHEAPPRECIATIONAND/ORMISAPPRECIATIONOFFACTSRESULTINGINTOTHE
DENIAL OF THE CLAIM OF PETITIONER REYES FOR ACTUAL DAMAGES WHICH
CORRESPONDTOTHE MILLIONS OF PESOS OF RENTALS/FRUITS OFTHE SUBJECT
REAL PROPERTIES WHICH RESPONDENT TUPARAN COLLECTED CONTINUOUSLY
SINCE DECEMBER 1990, EVEN WITH THE UNPAID BALANCE OF 805,000.00 AND
DESPITE THE FACT THAT RESPONDENT DID NOT CONTROVERT SUCH CLAIM OF
THE PETITIONERAS CONTAINED IN HERAMENDED COMPLAINT DATEDAPRIL 22,
2006.

E.THECOURTOFAPPEALSSERIOUSLYERREDANDABUSEDITSDISCRETION
INTHEAPPRECIATIONOFFACTSRESULTINGINTOTHEDENIALOFTHECLAIMOF
PETITIONER REYES FOR THE 29,609.00 BACK RENTALS THAT WERE COLLECTED
BYRESPONDENTTUPARANFROMTHEOLDTENANTSOFTHEPETITIONER.

F.THECOURTOFAPPEALSSERIOUSLYERREDANDABUSEDITSDISCRETION
IN DENYING THE PETITIONERS EARLIER URGENT MOTION FOR ISSUANCE OF A
PRELIMINARY MANDATORY AND PROHIBITORY INJUNCTION DATED JULY 7, 2008
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AND THE SUPPLEMENT THERETO DATED AUGUST 4, 2008 THEREBY CONDONING


THE UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE FLORO ALEJO TO RESOLVE
WITHINELEVEN(11)YEARSTHEPETITIONERSTHREE(3)SEPARATEMOTIONSFOR
PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING ORDER, ACCOUNTING
AND DEPOSIT OF RENTAL INCOME DATED MARCH 17, 1995, AUGUST 19, 1996 AND
JANUARY 7, 2006THEREBY PERMITTINGTHE RESPONDENTTO UNJUSTLY ENRICH
HERSELF BY CONTINUOUSLY COLLECTING ALL THE RENTALS/FRUITS OF THE
SUBJECTREALPROPERTIESWITHOUTANYACCOUNTINGANDCOURTDEPOSITOF
THE COLLECTED RENTALS/FRUITS AND THE PETITIONERS URGENT MOTION TO
DIRECT DEFENDANT VICTORIA TUPARAN TO PAY THE ACCUMULATED UNPAID
REAL ESTATETAXESAND SEFTAXES ONTHE SUBJECT REAL PROPERTIES DATED
JANUARY 13, 2007 THEREBY EXPOSING THE SUBJECT REAL PROPERTIES TO
IMMINENTAUCTIONSALEBYTHECITYTREASUREROFVALENZUELACITY.

G.THECOURTOFAPPEALSSERIOUSLYERREDANDABUSEDITSDISCRETION
IN DENYING THE PETITIONERS CLAIM FOR MORAL AND EXEMPLARY DAMAGES
ANDATTORNEYSFEESAGAINSTTHERESPONDENT.

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 Sale with
AssumptionofMortgage.

PositionofthePetitioner

ThepetitionerbasicallyarguesthattheCAshouldhavegrantedtherescissionofthesubjectDeedof
ConditionalSaleofRealPropertieswithAssumptionofMortgageforthefollowingreasons:

1. The subject deed of conditional sale is a reciprocal obligation whose


outstandingcharacteristicisreciprocityarisingfromidentityofcausebyvirtueofwhich
oneobligationiscorrelativeoftheother.

2. The petitioner was rescinding not enforcing the subject Deed of Conditional
SalepursuanttoArticle1191oftheCivilCodebecauseoftherespondentsfailure/refusal
to pay the 805,000.00 balance of the total purchase price of the petitioners properties
withinthestipulatedperiodendingDecember31,1991.

3.Therewasnoslightorcasualbreachonthepartoftherespondentbecauseshe
(respondent) deliberately failed to comply with her contractual obligations with the
petitionerbyviolatingthetermsormannerofpaymentofthe1,200,000.00balanceand
unjustlyenrichedherselfattheexpenseofthepetitionerbycollectingallrentalpayments
forherpersonalbenefitandenjoyment.

Furthermore,thepetitionerclaimsthattherespondentisliabletopayinterestattherateof6%
permonthonherunpaidinstallmentof805,000.00fromthedateofthedelinquency,December31,
1991,becausesheobligatedherselftodoso.
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Finally,thepetitionerassertsthatherclaimfordamagesorlostincomeaswellasfortheback
rentals in the amount of 29,609.00 has been fully substantiated and, therefore, should have been
grantedbytheCA.Herclaimformoralandexemplarydamagesandattorneysfeeshasbeenlikewise
substantiated.

PositionoftheRespondent

The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage
enteredintobetweenthepartiesisacontracttosellandnotacontractofsalebecausethetitleofthe
subject properties still remains with the petitioner as she failed to pay the installment payments in
accordancewiththeiragreement.

RespondentechoestheRTCpositionthatherinabilitytopaythefullbalanceonthepurchaseprice
maynotbeconsideredasasubstantialandfundamentalbreachofthesubjectcontractanditwouldbe
moreequitableifshewouldbeallowedtopaythebalanceincludinginterestwithinacertainperiodof
time.Sheclaimsthatasearlyas1992,shehasshownhersinceritybyofferingtopayacertainamount
whichwas,however,rejectedbythepetitioner.

Finally, respondent states that the subject deed of conditional sale explicitly provides that the
installment payments shall not bear any interest. Moreover, petitioner failed to prove that she was
entitledtobackrentals.
TheCourtsRuling

Thepetitionlacksmerit.

TheCourtagreeswiththerulingofthecourtsbelowthatthesubjectDeedofConditionalSale
withAssumptionofMortgageenteredintobyandamongthetwopartiesandFSLBankonNovember
26,1990isacontracttosellandnotacontractofsale.Thesubjectcontractwascorrectlyclassifiedas
acontracttosellbasedonthefollowingpertinentstipulations:

8.ThatthetitleandownershipofthesubjectrealpropertiesshallremainwiththeFirst
Party until the full payment of the Second Party of the balance of the purchase price and
liquidationofthemortgageobligationof2,000,000.00.Pendingpaymentofthebalanceof
thepurchasepriceandliquidationofthemortgageobligationthatwasassumedbytheSecond
Party,theSecondPartyshallnotsell,transferandconveyandotherwiseencumberthesubject
realpropertieswithoutthewrittenconsentoftheFirstandThirdParty.

9.ThatuponfullpaymentbytheSecondPartyofthefullbalanceofthepurchaseprice
and the assumed mortgage obligation herein mentioned the Third Party shall issue the
corresponding Deed of Cancellation of Mortgage and the First Party shall execute the
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[7]
correspondingDeedofAbsoluteSaleinfavoroftheSecondParty.

Basedontheaboveprovisions,thetitleandownershipofthesubjectpropertiesremainswith
the petitioner until the respondent fully pays the balance of the purchase price and the assumed
mortgageobligation.Thereafter,FSLBankshallthenissuethecorrespondingdeedofcancellationof
mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of the
respondent.

Accordingly,thepetitionersobligationtosellthesubjectpropertiesbecomesdemandableonly
uponthehappeningofthepositivesuspensivecondition,whichistherespondentsfullpaymentofthe
purchase price. Without respondents full payment, there can be no breach of contract to speak of
becausepetitionerhasnoobligationyettoturnoverthetitle.Respondentsfailuretopayinfullthe
purchasepriceisnotthebreachofcontractcontemplatedunderArticle1191oftheNewCivilCode
butratherjustaneventthatpreventsthepetitionerfrombeingboundtoconveytitletotherespondent.
[8]
The2009caseofNabusv.Joaquin&JuliaPacson isenlightening:

TheCourtholdsthatthecontractenteredintobytheSpousesNabusandrespondents
wasacontracttosell,notacontractofsale.

AcontractofsaleisdefinedinArticle1458oftheCivilCode,thus:

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to
transfertheownershipofandtodeliveradeterminatething,andtheothertopaytherefora
pricecertaininmoneyoritsequivalent.

xxx

Sale,byitsverynature,isaconsensualcontractbecauseitisperfectedbymereconsent.
Theessentialelementsofacontractofsalearethefollowing:

a) Consent or meeting of the minds, that is, consent to transfer ownership in


exchangefortheprice
b)Determinatesubjectmatterand
c)Pricecertaininmoneyoritsequivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective seller
explicitlyreservesthetransferoftitletotheprospectivebuyer,meaning,theprospectiveseller
doesnotasyetagreeorconsenttotransferownershipofthepropertysubjectofthecontractto
sell until the happening of an event, which for present purposes we shall take as the full
paymentofthepurchaseprice.Whattheselleragreesorobligeshimselftodoistofulfillhis
promisetosellthesubjectpropertywhentheentireamountofthepurchasepriceisdelivered
to him. In other words, the full payment of the purchase price partakes of a suspensive
condition,thenonfulfillmentofwhichpreventstheobligationtosellfromarisingand,thus,
ownership is retained by the prospective seller without further remedies by the prospective
buyer.
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xxxxxxxxx
Stated positively, upon the fulfillment of the suspensive condition which is the full
paymentofthepurchaseprice,theprospectivesellersobligationtosellthesubjectpropertyby
enteringintoacontractofsalewiththeprospectivebuyerbecomesdemandableasprovidedin
Article1479oftheCivilCodewhichstates:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocallydemandable.

Anacceptedunilateralpromisetobuyortoselladeterminatethingforapricecertainis
binding upon the promissor if the promise is supported by a consideration distinct from the
price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller,whileexpresslyreservingtheownershipofthesubjectpropertydespitedeliverythereof
totheprospectivebuyer,bindshimselftosellthesaidpropertyexclusivelytotheprospective
buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price.

Acontracttosellasdefinedhereinabove,maynotevenbeconsideredasaconditional
contract of sale where the seller may likewise reserve title to the property subject of the sale
until the fulfillment of a suspensive condition, because in a conditional contract of sale, the
first element of consent is present, although it is conditioned upon the happening of a
contingenteventwhichmayormaynotoccur.Ifthesuspensiveconditionisnotfulfilled,the
perfectionofthecontractofsaleiscompletelyabated.However,ifthesuspensiveconditionis
fulfilled,thecontractofsaleistherebyperfected,suchthatiftherehadalreadybeenprevious
delivery of the property subject of the sale to the buyer, ownership thereto automatically
transferstothebuyerbyoperationoflawwithoutanyfurtheracthavingtobeperformedby
theseller.

In acontract to sell,upon the fulfillment of the suspensive condition which is the full
paymentofthepurchaseprice,ownershipwillnotautomaticallytransfertothebuyeralthough
the property may have been previously delivered to him. The prospective seller still has to
conveytitletotheprospectivebuyerbyenteringintoacontractofabsolutesale.

Further,Chuav.CourtofAppeals,citedthisdistinctionbetweenacontractofsaleanda
contracttosell:

In a contract of sale, the title to the property passes to the vendee upon the
delivery of the thing sold in a contract to sell, ownership is, by agreement, reserved in
the vendor and is not to pass to the vendee until full payment of the purchase price.
Otherwisestated,inacontractofsale,thevendorlosesownershipoverthepropertyand
cannot recover it until and unless the contract is resolved or rescinded whereas, in a
contract to sell, title is retained by the vendor until full payment of the price. In the
lattercontract,paymentofthepriceisapositivesuspensivecondition,failureofwhich
is not a breach but an event that prevents the obligation of the vendor to convey title
frombecomingeffective.

Itisnotthetitleofthecontract,butitsexpresstermsorstipulationsthatdeterminethe
kind of contract entered into by the parties. In this case, the contract entitled Deed of
ConditionalSaleis actually a contract to sell.The contract stipulated that as soon as the full
considerationofthesalehasbeenpaidbythevendee,thecorrespondingtransferdocuments
shallbeexecutedbythevendortothevendeefortheportionsold.Wherethevendorpromises
to execute a deed of absolute sale upon the completion by the vendee of the payment of the
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price,thecontractisonlyacontracttosell.Theaforecitedstipulationshowsthatthevendors
reservedtitletothesubjectpropertyuntilfullpaymentofthepurchaseprice.

xxx

Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in
their favor was merely a contract to sell, the obligation of the seller to sell becomes
demandable only upon the happening of the suspensive condition. The full payment of the
purchase price is the positive suspensive condition, the failure of which is not a breach of
contract, but simply an event that prevented the obligation of the vendor to convey title from
acquiring binding force. Thus, for its nonfulfilment, there is no contract to speak of, the
obligorhavingfailedtoperformthesuspensiveconditionwhichenforcesajuridicalrelation.
With this circumstance, there can be no rescission or fulfillment of an obligation that is still
nonexistent,thesuspensiveconditionnothavingoccurredasyet.Emphasisshouldbemade
that the breach contemplated in Article 1191 of the New Civil Code is the obligors failure to
comply with an obligation already extant, not a failure of a condition to render binding that
obligation.[Emphasesandunderscoringsupplied]

Consistently,theCourthandeddownasimilarrulinginthe2010caseofHeirsofAtienzav.
[9]
Espidol, whereitwaswritten:

Regardingtherighttocancelthecontractfornonpaymentofaninstallment,thereisneed
to initially determine if what the parties had was a contract of sale or a contract to sell. In a
contractofsale,thetitletothepropertypassestothebuyeruponthedeliveryofthethingsold.
Inacontracttosell,ontheotherhand,theownershipis,byagreement,retainedbytheseller
andisnottopasstothevendeeuntilfullpaymentofthepurchaseprice.Inthecontractofsale,
thebuyersnonpaymentofthepriceisanegativeresolutoryconditioninthecontracttosell,
thebuyersfullpaymentofthepriceisapositivesuspensiveconditiontothecomingintoeffect
oftheagreement.Inthefirstcase,thesellerhaslostandcannotrecovertheownershipofthe
property unless he takes action to set aside the contract of sale.In the second case, the title
simply remains in the seller if the buyer does not comply with the condition precedent of
makingpaymentatthetimespecifiedinthecontract.Here,itisquiteevidentthatthecontract
involved was one of a contract to sell since the Atienzas, as sellers, were to retain title of
ownershiptothelanduntilrespondentEspidol,thebuyer,haspaidtheagreedprice.Indeed,
thereseemsnoquestionthatthepartiesunderstoodthistobethecase.

Admittedly,EspidolwasunabletopaythesecondinstallmentofP1,750,000.00thatfell
due in December 2002. That payment, said both the RTC and the CA, was a positive
suspensiveconditionfailureofwhichwasnotregardedabreachinthesensethattherecanbe
no rescission of an obligation (to turn over title) that did not yet exist since the suspensive
conditionhadnottakenplace.xxx.[Emphasesandunderscoringsupplied]

Thus,theCourtfullyagreeswiththeCAwhenitresolved:Considering,however,thattheDeed
ofConditionalSalewasnotcancelledbyVendorReyes(petitioner)andthatoutofthetotalpurchase
price of the subject property in the amount of 4,200,000.00, the remaining unpaid balance of
Tuparan (respondent) is only 805,000.00, a substantial amount of the purchase price has already
beenpaid.It is only right and just to allowTuparan to pay the said unpaid balance of the purchase
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[10]
pricetoReyes.

GrantingthatarescissioncanbepermittedunderArticle1191,theCourtstillcannotallowit
for the reason that, considering the circumstances, there was only a slight or casual breach in the
fulfillmentoftheobligation.

Unless the parties stipulated it, rescission is allowed only when the breach of the contract is
substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or
[11]
substantialislargelydeterminedbytheattendantcircumstances.
Inthecaseatbench,thesubject
contractstipulatedthefollowingimportantprovisions:

2.Thatthepurchasepriceof4,200,000.00shallbepaidasfollows:

a) 278,078.13 received in cash by the First Party but directly paid to theThird
PartyaspartialpaymentofthemortgageobligationoftheFirstPartyinordertoreduce
theamountto2,000,000.00onlyasofNovember15,1990

b) 721,921.87 received in cash by the First Party as additional payment of the


SecondParty

c)1,200,000.00tobepaidininstallmentsasfollows:

1.200,000.00payableonorbeforeJanuary31,1991
2.200,000.00payableonorbeforeJune30,1991
3.800,000.00payableonorbeforeDecember31,1991

Note:Alltheinstallmentsshallnotbearanyinterest.

d) 2,000,000.00 outstanding balance of the mortgage obligation as of


November15,1990whichisherebyassumedbytheSecondParty.

xxx
3. That the Third Party hereby acknowledges receipts from the Second Party
P278,078.13aspartialpaymentoftheloanobligationofFirstPartyinordertoreducethe
accounttoonly2,000,000.00asofNovember15,1990tobeassumedbytheSecond
[12]
PartyeffectiveNovember15,1990.

Fromtherecords,itcannotbedeniedthatrespondentpaidtoFSLBankpetitionersmortgage
obligation in the amount of 2,278,078.13, which formed part of the purchase price of the subject
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property. Likewise, it is not disputed that respondent paid directly to petitioner the amount of
721,921.87representingtheadditionalpaymentforthepurchaseofthesubjectproperty.Clearly,out
of the total price of 4,200,000.00, respondent was able to pay the total amount of 3,000,000.00,
leavingabalanceof1,200,000.00payableinthree(3)installments.

Out of the 1,200,000.00 remaining balance, respondent paid on several dates the first and
secondinstallmentsof200,000.00each.She,however,failedtopaythethirdandlastinstallmentof
800,000.00 due on December 31, 1991. Nevertheless, on August 31, 1992, respondent, through
counsel,offeredtopaytheamountof751,000.00,whichwasrejectedbypetitionerforthereason
thattheactualbalancewas805,000.00excludingtheinterestcharges.

Consideringthatoutofthetotalpurchasepriceof4,200,000.00,respondenthasalreadypaid
the substantial amount of 3,400,000.00, more or less, leaving an unpaid balance of only
805,000.00,itisrightandjusttoallowhertosettle,withinareasonableperiodoftime,thebalance
oftheunpaidpurchaseprice.TheCourtagreeswiththecourtsbelowthattherespondentshowedher
sincerity and willingness to comply with her obligation when she offered to pay the petitioner the
amountof751,000.00.

On the issue of interest, petitioner failed to substantiate her claim that respondent made a
personalcommitmenttopaya6%monthlyinterestonthe805,000.00fromthedateofdelinquency,
December31,1991.Ascanbegleanedfromthecontract,therewasastipulationstatingthat:Allthe
installmentsshallnotbearinterest.TheCAwas,however,correctinimposinginterestattherateof
6%perannumstartingfromthefilingofthecomplaintonSeptember11,1992.

Finally, the Court upholds the ruling of the courts below regarding the nonimposition of
damages and attorneys fees. Aside from petitioners selfserving statements, there is not enough
evidenceonrecordtoprovethatrespondentactedfraudulentlyandmaliciouslyagainstthepetitioner.
[13]
InthecaseofHeirsofAtienzav.Espidol,
itwasstated:

Respondentsarenotentitledtomoraldamagesbecausecontractsarenotreferredtoin
Article 2219 of the Civil Code, which enumerates the cases when moral damages may be
recovered.Article2220oftheCivilCodeallowstherecoveryofmoraldamagesinbreachesof
contractwherethedefendantactedfraudulentlyorinbadfaith.However,thiscaseinvolvesa
contracttosell,whereinfullpaymentofthepurchasepriceisapositivesuspensivecondition,
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thenonfulfillmentofwhichisnotabreachofcontract,butmerelyaneventthatpreventsthe
sellerfromconveyingtitletothepurchaser.Sincethereisnobreachofcontractinthiscase,
respondentsarenotentitledtomoraldamages.

In the absence of moral, temperate, liquidated or compensatory damages, exemplary


damages cannot be granted for they are allowed only in addition to any of the four kinds of
damagesmentioned.

WHEREFORE,thepetitionisDENIED.

SOORDERED.

JOSECATRALMENDOZA
AssociateJustice

WECONCUR:

ANTONIOT.CARPIO
AssociateJustice
Chairperson

ANTONIOEDUARDOB.NACHURADIOSDADOM.PERALTA
AssociateJusticeAssociateJustice

ROBERTOA.ABAD
AssociateJustice

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ATTESTATION

IattestthattheconclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethe
casewasassignedtothewriteroftheopinionoftheCourtsDivision.

ANTONIOT.CARPIO
AssociateJustice
Chairperson,SecondDivision

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
beforethecasewasassignedtothewriteroftheopinionoftheCourtsDivision.

RENATOC.CORONA
ChiefJustice

[1]
Rollo,pp.72102pennedbyAssociateJusticeCeliaC.LibreaLeagogoandconcurredinbyAssociateJusticeJuanQ.Enriquez,Jr.and
AssociateJusticeNormandieB.Pizarro.
[2]
Id.at147162.
[3]
Paragraph11oftheComplaint,id.at176.
[4]
Id.at160.
[5]
Id.at162.
[6]
Id.at101102.
[7]
MemorandumforRespondent,id.at395.
[8]
G.R.No.161318,November25,2009,605SCRA334,348353.

[9]
G.R.No.180665,August11,2010,628SCRA256,262263.
[10]
CADecision,rollo,p.100.
[11]
GGSportswearMfg.Corp.v.WorldClassProperties,Inc.,G.R.No.182720,March2,2010,614SCRA75,87.
[12]
Rollo,pp.2526.
[13]
Supranote9.

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