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G.R.No.137909

TodayisWednesday,March02,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
FIRSTDIVISION
G.R.No.137909December11,2003
FIDELADELCASTILLOVda.DEMISTICA,petitioner,
vs.
SpousesBERNARDINONAGUIATandMARIAPAULINAGERONANAGUIAT,respondents.
DECISION
PANGANIBAN,J.:
The failure to pay in full the purchase price stipulated in a deed of sale does not ipso facto grant the seller the
right to rescind the agreement. Unless otherwise stipulated by the parties, rescission is allowed only when the
breachofthecontractissubstantialandfundamentaltothefulfillmentoftheobligation.
TheCase
BeforeusisaPetitionforReview1underRule45oftheRulesofCourt,seekingtonullifytheOctober31,1997
Decision2 and the February 23, 1999 Resolution3 of the Court of Appeals (CA) in CAGR CV No. 51067. The
assailedDecisiondisposedasfollows:
"WHEREFORE,modifiedasindicatedabove,thedecisionoftheRegionalTrialCourtisherebyAFFIRMED."4
TheassailedResolutiondeniedpetitionersMotionforReconsideration.
TheFacts
ThefactsofthecasearesummarizedbytheCAasfollows:
"EulalioMistica,predecessorininterestofherein[petitioner],istheownerofaparceloflandlocatedatMalhacan,
Meycauayan,Bulacan.Aportionthereofwasleasedto[RespondentBernardinoNaguiat]sometimein1970.
"On 5 April 1979, Eulalio Mistica entered into a contract to sell with [Respondent Bernardino Naguiat] over a
portion of the aforementioned lot containing an area of 200 square meters. This agreement was reduced to
writinginadocumententitledKasulatansaPagbibilihanwhichreadsasfollows:
NAGSASALAYSAY:
NaangNAGBIBILIaynagmamayaringtunayatnaghahawakngisanglagaynalupananasaNayon
ng Malhacan, Bayan ng Meycauayan, Lalawigan ng Bulacan, na ang kabuuan sukat at mga
kahangganitogayangsumusunod:
xxxxxxxxx
NaalangalangsahalagangDALAWANGPUNGLIBONGPISO(P20,000.00)KualtangPilipino,ang
NAGBIBILIaynakipagkasundongkanyangipagbibiliangisangbahagiosukatnaDALAWANGDAAN
(200)METROSPARISUKAT,salupangnabanggitsaitaas,naangmgakahangganitoaygayang
sumusunod:
xxxxxxxxx
NamagbibigayngpaunangbayadangBUMIBILISANAGBIBILInahalagangDALAWANGLIBONG
PISO(P2,000.00)KualtangPilipino,sasandalinglagdaanangkasulatangito.
Na ang natitirang halagang LABING WALONG LIBONG PISO (P18,000.00) Kualtang Pilipino, ay
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babayaran ng BUM[I]BILI sa loob ng Sampung (10) taon, na magsisimula sa araw din ng lagdaan
angkasulatangito.
SakalinghindimakakabayadangBumibilisaloobngpanahonpinagkasunduan,an[g]BUMIBILIay
magbabayad ng pakinabang o interes ng 12% isang taon, sa taon nilakaran hanggang sa itoy
mabayarantuluyanngBumibili:
SakatunayannglahataynilagdaanngMagkabilangPanigangkasulatangito,ngayonika5ngAbril,
1979,saBayanngMeycauayan.LalawiganngBulacan,Pilipinas.
(signed)
BERNARDINONAGUIAT
Bumibili

(signed)
EULALIOMISTICA
Nagbibili'

"Pursuant to said agreement, [Respondent Bernardino Naguiat] gave a downpayment of P2,000.00. He made
another partial payment of P1,000.00 on 7 February 1980. He failed to make any payments thereafter. Eulalio
MisticadiedsometimeinOctober1986.
"On4December1991,[petitioner]filedacomplaintforrescissionalleginginteralia:thatthefailureandrefusalof
[respondents]topaythebalanceofthepurchasepriceconstitutesaviolationofthecontractwhichentitlesherto
rescindthesamethat[respondents]havebeeninpossessionofthesubjectportionandtheyshouldbeordered
to vacate and surrender possession of the same to [petitioner] that the reasonable amount of rental for the
subject land is P200.00 a month that on account of the unjustified actuations of [respondents], [petitioner] has
beenconstrainedtolitigatewheresheincurredexpensesforattorneysfeesandlitigationexpensesinthesumof
P20,000.00.
"In their answer and amended answer, [respondents] contended that the contract cannot be rescinded on the
groundthatitclearlystipulatesthatincaseoffailuretopaythebalanceasstipulated,ayearlyinterestof12%is
tobepaid.[RespondentBernardinoNaguiat]likewiseallegedthatsometimeinOctober1986,duringthewakeof
thelateEulalioMistica,heofferedtopaytheremainingbalanceto[petitioner]butthelatterrefusedandhence,
there is no breach or violation committed by them and no damages could yet be incurred by the late Eulalio
Mistica, his heirs or assigns pursuant to the said document that he is presently the owner in fee simple of the
subjectlothavingacquiredthesamebyvirtueofaFreePatentTitledulyawardedtohimbytheBureauofLands
and that his title and ownership had already become indefeasible and incontrovertible. As counterclaim,
[respondents] pray for moral damages in the amount of P50,000.00 exemplary damages in the amount of
P30,000.00attorneysfeesintheamountofP10,000.00andotherlitigationexpenses.
"On8July1992,[respondents]alsofiledamotiontodismisswhichwasdeniedbythecourton29July1992.The
motionforreconsiderationwaslikewisedeniedperitsOrderof17March1993.
"After the presentation of evidence, the court on 27 January 1995 rendered the now assailed judgment, the
dispositiveportionofwhichreads:
WHEREFORE,premisesconsidered,judgmentisherebyrendered:
1. Dismissing the complaint and ordering the [petitioner] to pay the [respondents] attorneys fee in the
amountofP10,000.00andcostsofthesuit
2.Orderingthe[respondents]:
a.Topay[petitioner]andtheheirsofEulalioMisticathebalanceofthepurchasepriceintheamount
ofP17,000.00,withinterestthereonattherateof12%perannumcomputedfromApril5,1989until
fullpaymentismade,subjecttotheapplicationoftheconsignedamounttosuchpayment
b.Toreturnto[petitioner]andtheheirsofEulalioMisticatheextraareaof58squaremetersfrom
the land covered by OCT No. 4917 (M), the corresponding price therefor based on the prevailing
marketpricethereof."5(Citationsomitted)
CAsDecision
Disallowing rescission, the CA held that respondents did not breach the Contract of Sale. It explained that the
conclusionofthetenyearperiodwasnotaresolutoryterm,becausetheContracthadstipulatedthatpayment
with interest of 12 percent could still be made if respondents failed to pay within the period. According to the
appellatecourt,petitionerdidnotdisprovetheallegationofrespondentsthattheyhadtenderedpaymentofthe
balanceofthepurchasepriceduringherhusbandsfuneral,whichwaswellwithinthetenyearperiod.
Moreover,rescissionwouldbeunjusttorespondents,becausetheyhadalreadytransferredthelandtitletotheir
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names.Theproperrecourse,theCAheld,wastoorderthemtopaythebalanceofthepurchaseprice,with12
percentinterest.
As to the matter of the extra 58 square meters, the CA held that its reconveyance was no longer feasible,
becauseithadbeenincludedinthetitleissuedtothem.Theappellatecourtruledthattheonlyremedyavailable
wastoorderthemtopaypetitionerthefairmarketvalueoftheusurpedportion.
Hence,thisPetition.6
Issues
InherMemorandum,7petitionerraisesthefollowingissues:
"1. Whether or not the Honorable Court of Appeals erred in the application of Art. 1191 of the New Civil
Code,asitruledthatthereisnobreachofobligationinspiteofthelapseofthestipulatedperiodandthe
failureoftheprivaterespondentstopay.
"2. Whether or not the Honorable Court of Appeals [e]rred in ruling that rescission of the contract is no
longerfeasibleconsideringthatacertificateoftitlehadbeenissuedinfavoroftheprivaterespondents.
"3. Whether or not the Honorable Court of Appeals erred in ruling that since the 58 sq. m. portion in
questioniscoveredbyacertificateoftitleinthenamesofprivaterespondentsreconveyanceisnolonger
feasibleandproper."8
TheCourtsRuling
ThePetitioniswithoutmerit.
FirstIssue:
RescissioninArticle1191
Petitioner claims that she is entitled to rescind the Contract under Article 1191 of the Civil Code, because
respondentscommittedasubstantialbreachwhentheydidnotpaythebalanceofthepurchasepricewithinthe
tenyearperiod.Shefurtheraversthattheprovisoonthepaymentofinterestdidnotextendtheperiodtopay.To
interpretitinthatwaywouldmaketheobligationpurelypotestativeand,thus,voidunderArticle1182oftheCivil
Code.
We disagree. The transaction between Eulalio Mistica and respondents, as evidenced by the Kasulatan, was
clearlyaContractofSale.Adeedofsaleisconsideredabsoluteinnaturewhenthereisneitherastipulationinthe
deed that title to the property sold is reserved to the seller until the full payment of the price nor a stipulation
giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed
period.9
Inacontractofsale,theremedyofanunpaidselleriseitherspecificperformanceorrescission.10UnderArticle
1191oftheCivilCode,therighttorescindanobligationispredicatedontheviolationofthereciprocitybetween
parties, brought about by a breach of faith by one of them.11 Rescission, however, is allowed only where the
breachissubstantialandfundamentaltothefulfillmentoftheobligation.12
Inthepresentcase,thefailureofrespondentstopaythebalanceofthepurchasepricewithintenyearsfromthe
execution of the Deed did not amount to a substantial breach. In the Kasulatan, it was stipulated that payment
could be made even after ten years from the execution of the Contract, provided the vendee paid 12 percent
interest.Thestipulationsofthecontractconstitutethelawbetweenthepartiesthus,courtshavenoalternative
buttoenforcethemasagreeduponandwritten.13
Moreover,itisundisputedthatduringthetenyearperiod,petitionerandherdeceasedhusbandnevermadeany
demand for the balance of the purchase price. Petitioner even refused the payment tendered by respondents
during her husbands funeral, thus showing that she was not exactly blameless for the lapse of the tenyear
period.Hadsheacceptedthetender,paymentwouldhavebeenmadewellwithintheagreedperiod.
IfpetitionerwouldliketoimpressuponthisCourtthatthepartiesintendedotherwise,shehastoshowcompetent
proof to support her contention. Instead, she argues that the period cannot be extended beyond ten years,
because to do so would convert the buyers obligation to a purely potestative obligation that would annul the
contractunderArticle1182oftheCivilCode.
This contention is likewise untenable. The Code prohibits purely potestative, suspensive, conditional obligations
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thatdependonthewhimsofthedebtor,becausesuchobligationsareusuallynotmeanttobefulfilled.14Indeed,
to allow the fulfillment of conditions to depend exclusively on the debtors will would be to sanction illusory
obligations.15TheKasulatandoesnotallowsuchthing.First,nowhereisitstatedintheDeedthatpaymentofthe
purchasepriceisdependentuponwhetherrespondentswanttopayitornot.Second,thefactthattheyalready
madepartialpaymentthereofonlyshowsthatthepartiesintendedtobeboundbytheKasulatan.
Boththetrialandtheappellatecourtsarrivedatthisfinding. WellsettledistherulethatfindingsoffactbytheCA
aregenerallybindinguponthisCourtandwillnotbedisturbedonappeal,especiallywhentheyarethesameas
thoseofthetrialcourt.16Petitionerhasnotgivenussufficientreasonstodepartfromthisrule.
1 w p h i1

SecondIssue:
RescissionUnrelatedtoRegistration
TheCAfurtherruledthatrescissioninthiscasewouldbeunjusttorespondents,becauseacertificateoftitlehad
already been issued in their names. Petitioner nonetheless argues that the Court is still empowered to order
rescission.
Weclarify.Theissuanceofacertificateoftitleinfavorofrespondentsdoesnotdeterminewhetherpetitioneris
entitledtorescission.Itisafundamentalprincipleinlandregistrationthatsuchtitleservesmerelyasanevidence
ofanindefeasibleandincontrovertibletitletothepropertyinfavorofthepersonwhosenameappearstherein.17
Whileareviewofthedecreeofregistrationisnolongerpossibleaftertheexpirationoftheoneyearperiodfrom
entry, an equitable remedy is still available to those wrongfully deprived of their property.18 A certificate of title
cannot be subject to collateral attack and can only be altered, modified or canceled in direct proceedings in
accordance with law.19 Hence, the CA correctly held that the propriety of the issuance of title in the name of
respondentswasanissuethatwasnotdeterminableintheseproceedings.
ThirdIssue:
ReconveyanceofthePortionImportunatelyIncluded
Petitioner argues that it would be reasonable for respondents to pay her the value of the lot, because the CA
erredinrulingthatthereconveyanceoftheextra58squaremeterlot,whichhadbeenincludedinthecertificate
oftitleissuedtothem,wasnolongerfeasible.
Inprinciple,weagreewithpetitioner.Registrationhasneverbeenamodeofacquiringownershipoverimmovable
property, because it does not create or vest title, but merely confirms one already created or vested.20
Registrationdoesnotgiveholdersanybettertitlethanwhattheyactuallyhave.21 Land erroneously included in
thecertificateoftitleofanothermustbereconveyedinfavorofitstrueandactualowner.22
Section 48 of Presidential Decree 1529, however, provides that the certificate of title shall not be subject to
collateral attack, alteration, modification, or cancellation except in a direct proceeding.23 The cancellation or
removal of the extra portion from the title of respondents is not permissible in an action for rescission of the
contract of sale between them and petitioners late husband, because such action is tantamount to allowing a
collateralattackonthetitle.
Itappearsthatanactionforcancellation/annulmentofpatentandtitleandforreversionwasalreadyfiledbythe
Stateinfavorofpetitionerandtheheirsofherhusband.24Hence,thereisnoneedinthiscasetopassuponthe
rightofrespondentstotheregistrationofthesubjectlandundertheirnames.Forthesamereason,thereisno
necessity to order them to pay petitioner the fair market value of the extra 58square meter lot importunately
includedinthetitle.
WHEREFORE, the assailed Decision and Resolution are AFFIRMED with the MODIFICATION that the payment
fortheextra58squaremeterlotincludedinrespondentstitleisDELETED.
SOORDERED.
Davide,Jr.,C.J.,(Chairman),YnaresSantiago,Carpio,andAzcuna,JJ.,concur.

Footnotes
1Rollo,pp.2233.
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2 Id., pp. 4956. Fourth Division. Penned by Justice Antonio M. Martinez (Division chairman), with the

concurrenceofJusticesCoronaIbaySomeraandOswaldoD.Agcaoili(members).
3Id.,p.65pennedbyJusticeCoronaIbaySomeraandconcurredinbyJusticesOswaldoD.Agcaoiliand

MarianoM.Umali.
4CADecision,p.7rollo,p.55.
5Id.,pp.14&4952.
6 The case was deemed submitted for decision on December 13, 2001, upon this Courts receipt of

respondentsMemorandumsignedbyAtty.ErnestoS.Salunat.ItwasnotedintheCourtsResolutiondated
February 6, 2002. Petitioners Memorandum, signed by Atty. Manuel P. Punzalan, was received by this
CourtonOctober26,2000.
7Rollo,pp.92105.
8PetitionersMemorandum,p.5rollo,p.96.
9PeoplesIndustrialandCommercialCorp.v.CourtofAppeals,346Phil.189,203,October24,1997Sps.

Babasav.CourtofAppeals,352Phil.1142,May21,1998.
10Jacintov.Kaparaz,209SCRA246,257,May22,1992HeirsofEscanlarv.CourtofAppeals,346Phil.

158,172,October23,1997.
11Uyv.CourtofAppeals,372Phil.743,September9,1999.
12 Power Commercial and Industrial Corp. v. Court of Appeals, 274 SCRA 597, 608, June 20, 1997

DevelopmentBankofthePhilippinesv.CourtofAppeals,344SCRA492,509,October30,2000.
13Valaraov.CourtofAppeals,363Phil.495,506,March3,1999.
14Vitug,CompendiumofCivilLaw&Jurisprudence(1993rev.ed.),p.488Perezv.CourtofAppeals,380

Phil.592,600,January28,2000.
15Tolentino,CommentariesandJurisprudenceontheCivilCode,Vol.IV(1991ed.),p.152.
16Lubosv.Galupo,373SCRA618,January16,2002ManufacturersBuilding,Inc.v.CA,354SCRA521,

March16,2001XentrexAutomotive,Inc.v.CA,353Phil.258,June18,1998.
17Vda.deRetuertov.Barz,372SCRA712,719,December19,2001HeirsofBrusasv.CourtofAppeals,

372Phil.47,August26,1999Liaov.CourtofAppeals,380Phil.400,January27,2000.
18VillanuevaMijaresv.CourtofAppeals,386Phil.555,April12,2000HeirsofRamonDuranoSr.v.Uy,

344SCRA238,263,October24,2000.
19Sevillev.NationalDevelopmentCompany,351SCRA112,125,February2,2001Zaragozav.Courtof

Appeals,341SCRA309,317,September29,2000Tanv.PhilippineBankingCorporation,355SCRA292,
299,March26,2001Vda.deRetuertov.Barz,supra,p.722MallilinJr.v.Castillo,389Phil.153,June16,
2000.
20DevelopmentBankofthePhilippinesv.CourtofAppeals,387Phil.283,April28,2000Republicv.Court

ofAppeals, 335 SCRA 693, 700, July 14, 2000 Republic of the Phils. v. Court of Appeals, 361 Phil. 319,
January21,1999Garciav.CourtofAppeals,371Phil.107,August10,1999.
21HeirsofIngjugTirov.Sps.Casals,415Phil.665,August20,2001.
22DevelopmentBankofthePhilippinesv.CourtofAppeals,supra,p.285Republicv.CA,supra,p.384

DeOcampov.Arlos,343SCRA716,727,October19,2000.
23MallilinJr.v.Castillo,supra.
24DocketedasCivilCaseNo.182M95andfiledwiththeRTCofMalolos,Bulacan(Branch12)rollo,pp.

106112.
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