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:
Respondent.
February 28, 2007
x------------------------------------------------------------------------------------------------------x
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision[1] of the Court of Appeals dated January
29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824.
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a
lot located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905.
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the
lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave
petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the
corresponding receipt stating that respondent promised to pay the balance of the
purchase price on or before March 23, 1990, thus:
Las Pias, Metro Manila
March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO.
23 COVERED BY TCT NO. T-9905, LAS PIAS,
METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE
AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00)
AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS,
M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439
SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE
PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT
WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON
THIS DATE.
SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]
In view of the cancellation of the contract by petitioners, respondent filed with the
Regional Trial Court, Branch 63, Makati City a complaint against them for specific
performance and damages, docketed as Civil Case No. 90-1067.[6]
On June 27, 1994, after hearing, the trial court rendered its Decision[7] finding there was
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
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
position deserves more weight and credibility. First, the P100,000.00
that plaintiff paid whether as downpayment or earnest money showed
that there was already a perfected contract. Art. 1482 of the Civil Code
of the Philippines, reads as follows, to wit:
Art. 1482. Whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and
as proof of the perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to
push through with the sale by sending defendants the letter
dated March 25, 1990. (Exh. D) and reiterated the same intent to
pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the
balance of the purchase price ready for payment (Exh. C). Defendants
mere allegation that it was plaintiff who did not appear on March
23, 1990 is unavailing. Defendants letters (Exhs. 2 and 5) appear to
be mere afterthought.
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999,
affirmed the trial courts judgment.
Forthwith, petitioners filed their motion for reconsideration but it was denied by
the appellate court in its Resolution[8] dated July 14, 1999.
Hence, the present recourse.
The basic issue to be resolved is whether the document entitled Receipt for
Partial Payment signed by both parties earlier mentioned is a contract to sell or a
contract of sale.

Petitioners contend that the Receipt is not a perfected contract of sale as
provided for in Article 1458[9] in relation to Article 1475[10] of the Civil Code.The delivery
to them of P100,000.00 as down payment cannot be considered as proof of the
perfection of a contract of sale under Article 1482[11] of the same Code since there was
no clear agreement between the parties as to the amount of consideration.
Generally, the findings of fact of the lower courts are entitled to great weight and
should not be disturbed except for cogent reasons.14 Indeed, they should not be changed
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
considered would have altered the result of the case.[12] In the present case, we find
that both the trial court and the Court of Appeals interpreted some significant facts
resulting in an erroneous resolution of the issue involved.
In holding that there is a perfected contract of sale, both courts mainly relied
on the earnest money given by respondent to petitioners. They invoked Article 1482 of
the Civil Code which provides that "Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as proof of the perfection of the
contract."
We are not convinced.
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
prospective contracting parties indicate interest in the contract to the time the contract is
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
the contract and upon the price; and (3) consummation, which begins when the parties
perform their respective undertakings under the contract of sale, culminating in the
extinguishment thereof.
With the above postulates as guidelines, we now proceed to determine the real
nature of the contract entered into by the parties.
It is a canon in the interpretation of contracts that the words used therein should
be given their natural and ordinary meaning unless a technical meaning was
intended.[14] Thus, when petitioners declared in the said Receipt for Partial Payment that
they
RECEIVED FROM MR. GODOFREDO CAGUIAT THE
AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00)
AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS,
M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439
SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE
PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT
WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON
THIS DATE.
there can be no other interpretation than that they agreed to a conditional contract of
sale, consummation of which is subject only to the full payment of the purchase price.
2
A contract to sell is akin to a conditional sale where the efficacy or obligatory
force of the vendor's obligation to transfer title is subordinated to the happening of a
future and uncertain event, so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never existed. The suspensive
condition is commonly full payment of the purchase price.[15]
The differences between a contract to sell and a contract of sale are well-settled
in jurisprudence. As early as 1951, in Sing Yee v. Santos,[16] we held that:
x x x [a] distinction must be made between a contract of sale in which
title passes to the buyer upon delivery of the thing sold and a contract
to sell x x x where by agreement the ownership is reserved in the seller
and is not to pass until the full payment, of the purchase price is
made. In the first case, non-payment of the price is a
negative resolutorycondition; in the second case, full payment is a
positive suspensive condition. Being contraries, their effect in law
cannot be identical. In the first case, the vendor has lost and cannot
recover the ownership of the land sold until and unless the contract of
sale 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
condition precedent of making payment at the time specified in the
contract.
In other words, in a contract to sell, ownership is retained by the seller and is
not to pass to the buyer until full payment of the price.[17]
In this case, the Receipt for Partial Payment shows that the true agreement
between the parties is a contract to sell.
First, ownership over the property was retained by petitioners and was not to
pass to respondent until full payment of the purchase price. Thus, petitioners need not
push through with the sale should respondent fail to remit the balance of the purchase
price before the deadline on March 23, 1990. In effect, petitioners have the right to
rescind unilaterally the contract the moment respondent fails to pay within the fixed
period.[18]
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
did not intend immediate transfer of ownership, but only a transfer after full payment of
the purchase price.[19]
Third, petitioners retained possession of the certificate of title of the lot. This is
an additional indication that the agreement did not transfer to respondent, either by
actual or constructive delivery, ownership of the property. [20]
It is true that Article 1482 of the Civil Code provides that Whenever earnest
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
sell. The earnest money forms part of the consideration only if the sale is consummated
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.:
This is a petition for review on certiorari [1] of the Decision[2] of the Court of
Appeals in CA-G.R. CV No. 44941 dated November 28, 2003. The Court of Appeals
affirmed with modification the Decision of the Regional Trial Court of La Trinidad,
Benguet, Branch 10, ordering petitioner Betty Tolero to execute a deed of absolute sale
in favor of respondents, spouses Joaquin and Julia Pacson, over the lots covered by
Transfer Certificate of Title (TCT) Nos. T-18650 and T-18651 upon payment to her by
respondents of the sum of P57,544.[8]4 representing the balance due for the full
payment of the property subject of this case; and orderingpetitioner Betty Tolero to
surrender to respondents her owners duplicate copy of TCT Nos. T-18650 and T-18651.
The facts, as stated by the trial court,[3] are as follows:
THAT, as soon as the full consideration of this sale has been
paid by the VENDEE, the corresponding transfer documents shall be
executed by the VENDOR to the VENDEE for the portion sold;
THAT, the portion sold is as shown in the simple sketch
hereto attached as Annex "A" and made part hereof;
THAT, a segregation survey for the portion sold in favor of the
VENDEE and the portion remaining in favor of the VENDOR shall be
executed as soon as possible, all at the expense of the VENDEE
herein;
THAT, it is mutually understood that in as much as there is a
claim by other persons of the entire property of which the portion
subject of this Instrument is only a part, and that this claim is now the
subject of a civil case now pending before Branch III of the Court of
First Instance of Baguio and Benguet, should the VENDOR herein be

defeated in the said civil action to the end that he is divested of title
over the area subject of this Instrument, then he hereby warrants that
he shall return any and all monies paid by the VENDEE herein whether
paid to the PNB, La Trinidad, Benguet Branch, or directly received by
herein VENDOR, all such monies to be returned upon demand by the
VENDEE;
THAT, [a] portion of the parcel of land subject of this
instrument is presently in the possession of Mr. Marcos Tacloy, and
the VENDOR agrees to cooperate and assist in any manner possible
in the ouster of said Mr. Marcos Tacloy from said possession and
occupation to the end that the VENDEE herein shall make use of said
portion as soon as is practicable;
THAT, finally, the PARTIES hereby agree that this Instrument
shall be binding upon their respective heirs, successors or assigns. [5]
Pursuant to the Deed of Conditional Sale, respondents paid PNB the amount
of P12,038.86 on February 22, 1977[6] and P20,744.30 on July 17, 1978[7] for the full
payment of the loan.
At the time of the transaction, Mr. Marcos Tacloy had a basket-making shop on
the property, while the spouses Delfin and Nelita Flores had a store. Tacloy and the
Spouses Flores vacated the property after respondents paid them P4,000.00 each.
Thereafter, respondents took possession of the subject property. They
constructed an 80 by 32-feet building and a steel-matting fence around the property to
house their truck body-building shop which they called the Emiliano Trucking Body
Builder and Auto Repair Shop.
On December 24, 1977, before the payment of the balance of the mortgage
amount with PNB, Bate Nabus died. On August 17, 1978, his surviving spouse, Julie
Nabus, and their minor daughter, Michelle Nabus, executed a Deed of Extra Judicial
Settlement over the registered land covered by TCT No. 9697. On the basis of the said
document, TCT No. T- 17718[8] was issued on February 17, 1984 in the names of Julie
Nabus and Michelle Nabus.
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
as P10.00[9] to as high as P15,566.00,[10] spanning a period of almost seven years,
from March 9, 1977[11] to January 17, 1984.[12]
There was a total of 364 receipts of payment,[13] which receipts were mostly
signed by Julie Nabus, who also signed as Julie Quan when she remarried. The others
who signed were Bate Nabus; PNB, La Trinidad Branch; Maxima Nabus; Sylvia Reyes;
Michelle Nabus and the second husband of Julie Nabus, Gereon Quan. Maxima Nabus
is the mother of Bate Nabus, while Sylvia Reyes is a niece.
The receipts showed that the total sum paid by respondents to the Spouses
Nabus was P112,455.16,[14] leaving a balance of P57,544.84. The sum of P30,000.00
which was the value of the pick-up truck allegedly sold and delivered in 1978 to the
Spouses Nabus, was not considered as payment because the registration papers
remained in the name of its owner, Dominga D. Pacson, who is the sister of Joaquin
Pacson. The vehicle was also returned to respondents.
4
During the last week of January 1984, Julie Nabus, accompanied by her second
husband, approached Joaquin Pacson to ask for the full payment of the lot.Joaquin
Pacson agreed to pay, but told her to return after four days as his daughter, Catalina
Pacson, would have to go over the numerous receipts to determine the balance to be
paid. When Julie Nabus returned after four days, Joaquin sent her and his daughter,
Catalina, to Atty. Elizabeth Rillera for the execution of the deed of absolute sale. Since
Julie was a widow with a minor daughter, Atty. Rillera required Julie Nabus to return in
four days with the necessary documents, such as the deed of extrajudicial settlement,
the transfer certificate of title in the names of Julie Nabus and minor Michelle Nabus, and
the guardianship papers of Michelle. However, Julie Nabus did not return.
Getting suspicious, Catalina Pacson went to the Register of Deeds of
the Province of Benguet and asked for a copy of the title of the land. She found that it
was still in the name of Julie and Michelle Nabus.
After a week, Catalina Pacson heard a rumor that the lot was already sold to
petitioner Betty Tolero. Catalina Pacson and Atty. Rillera went to the Register of Deeds
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
October 29, 1982, had executed a Deed of Absolute Sale in favor of Betty Tolero on
March 5, 1984, covering the whole lot comprising 1,665 square meters.[15] The property
was described in the deed of sale as comprising four lots: (1) Lot A-2-A, with an area
of 832 square meters; (2) Lot A-2-B, 168 square meters; (3) Lot A-2-C, 200 square
meters; and (4) Lot A-2-D, 465 square meters. Lots A-2-A and A-2-B, with a combined
area of 1,000 square meters, correspond to the lot previously sold to Joaquin and Julia
Pacson in the Deed of Conditional Sale.
Catalina Pacson and Atty. Rillera also found that the Certificate of Title over the
property in the name of Julie and Michelle Nabus was cancelled on March 16, 1984, and
four titles to the fours lots were issued in the name of Betty Tolero, namely: TCT No. T-
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-
C; and T-18653[19] for Lot A-2-D.
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]
On March 26, 1984, Catalina Pacson filed an affidavit-complaint regarding the
padlocking incident of their repair shop with the police station at La Trinidad, Benguet.
On March 28, 2008, respondents Joaquin and Julia Pacson filed with the
Regional Trial Court of La Trinidad, Benguet (trial court) a Complaint [21] for Annulment
of Deeds, with damages and prayer for the issuance of a writ of preliminary
injunction.[22] They sought the annulment of (1) the Extra-judicial Settlement of Estate,
insofar as their right to the 1,000-square-meter lot subject of the Deed of Conditional
Sale[23] was affected; (2) TCT No. T-17718 issued in the names of Julie and Michelle
Nabus; and (3) the Deed of Absolute Sale[24] in favor of Betty Tolero and the transfer
certificates of title issued pursuant thereto. They also prayed for the award of actual,
moral and exemplary damages, as well as attorneys fees.
In their Answer,[25] Julie and Michelle Nabus alleged that respondent Joaquin
Pacson did not proceed with the conditional sale of the subject property when he learned
that there was a pending case over the whole property. Joaquin proposed that he would
rather lease the property with a monthly rental of P2,000.00 and apply the sum

of P13,000.00 as rentals, since the amount was already paid to the bank and could no
longer be withdrawn. Hence, he did not affix his signature to the second page of a copy
of the Deed of Conditional Sale.[26] Julie Nabus alleged that in March 1994, due to her
own economic needs and those of her minor daughter, she sold the property to Betty
Tolero, with authority from the court.
During the hearing on the merits, Julie Nabus testified that she sold the property
to Betty Tolero because she was in need of money. She stated that she was free to sell
the property because the Deed of Conditional Sale executed in favor of the Spouses
Pacson was converted into a contract of lease. She claimed that at the time when the
Deed of Conditional Sale was being explained to them by the notary public, Joaquin
Pacson allegedly did not like the portion of the contract stating that there was a pending
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
unsigned.[27] Thereafter, it was allegedly their understanding that the Pacsons would
occupy the property as lessees and whatever amount paid by them would be considered
rentals.
Betty Tolero put up the defense that she was a purchaser in good faith and for
value. She testified that it was Julie Nabus who went to her house and offered to sell the
property consisting of two lots with a combined area of 1,000 square meters. She
consulted Atty. Aurelio de Peralta before she agreed to buy the property. She and Julie
Nabus brought to Atty. De Peralta the pertinent papers such as TCT No. T-17718 in the
names of Julie and Michelle Nabus, the guardianship papers of Michelle Nabus and the
blueprint copy of the survey plan showing the two lots. After examining the documents
and finding that the title was clean, Atty. De Peralta gave her the go-signal to buy the
property.
Tolero testified that upon payment of the agreed price of P200,000.00, the Deed
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-
18651[28] corresponding to the two lots. Thereafter, she asked her common-law
husband, Ben Ignacio, to padlock the gate to the property and hang the No Trespassing
sign.
Tolero also testified that as the new owner, she was surprised and shocked to
receive the Complaint filed by the Spouses Pacson. She admitted that she knew very
well the Spouses Pacson, because they used to buy vegetables regularly from her. She
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
highway. She also knew that the Spouses Pacson had a shop on the property for the
welding and body-building of vehicles. She was not aware of the Deed of Conditional
Sale executed in favor of the Pacsons, and she saw the document for the first time when
Joaquin Pacson showed it to her after she had already bought the property and the title
had been transferred in her name. At the time she was buying the property, Julie Nabus
informed her that the Pacsons were merely renting the property. She did not bother to
verify if that was true, because the Pacsons were no longer in the property for two years
before she bought it.
In a Decision dated September 30, 1993, the trial court ruled in favor of
respondents. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiffs, ordering defendant Betty Tolero to
5
execute a deed of absolute sale in favor of the Spouses Joaquin and
Julia Pacson over the lots covered by Transfer Certificates of Title Nos.
T-18650 and T-18651 upon payment to her by the plaintiffs of the sum
of P57,544.[8]4 representing the balance due for the full payment of
the property subject of this case. In addition to the execution of a deed
of absolute sale, defendant Betty Tolero shall surrender to the plaintiffs
her owners duplicate copy of Transfer Certificates of Title Nos. T-
18650 and T-18651.
Defendants Julie Nabus, Michelle Nabus, and Betty Tolero
shall also pay the plaintiffs damages as follows: P50,000.00 for moral
damages; P20,000.00 for exemplary damages; and P10,000.00 for
attorneys fees and expenses for litigation.[29]
Two issues determined by the trial court were: (1) Was the Deed of Conditional
Sale between the Spouses Pacson and the Nabuses converted into a contract of lease?
and (2) Was Betty Tolero a buyer in good faith?
The trial court held that the Deed of Conditional Sale was not converted into a
contract of lease because the original copy of the contract[30] showed that all the pages
were signed by all the parties to the contract. By the presumption of regularity, all other
carbon copies must have been duly signed. The failure of Joaquin Pacson to sign the
second page of one of the carbon copies of the contract was by sheer inadvertence. The
omission was of no consequence since the signatures of the parties in all the other
copies of the contract were complete. Moreover, all the receipts of payment expressly
stated that they were made in payment of the lot. Not a single receipt showed payment
for rental.
Further, the trial court held that Betty Tolero was not a purchaser in good faith
as she had actual knowledge of the Conditional Sale of the property to the Pacsons.
The trial court stated that the Deed of Conditional Sale contained reciprocal
obligations between the parties, thus:
THAT, as soon as the full consideration of this sale has been
paid by the VENDEE, the corresponding transfer documents shall be
executed by the VENDOR to the VENDEE for the portion sold;
xxxx
THAT, finally, the PARTIES hereby agree that this Instrument
shall be binding upon their respective heirs, successors or assigns. [31]
In other words, the trial court stated, when the vendees (the Spouses Pacson)
were already ready to pay their balance, it was the corresponding obligation of the
vendors (Nabuses) to execute the transfer documents.
The trial court held that [u]nder Article 1191 of the Civil Code, an injured party in
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
damages in either case. It stated that in filing the case, the Spouses Pacson opted for
fulfillment of the obligation, that is, the execution of the Deed of Absolute Sale in their
favor upon payment of the purchase price.

Respondents appealed the decision of the trial court to the Court of Appeals.
In the Decision dated November 28, 2003, the Court of Appeals affirmed the
trial courts decision, but deleted the award of attorneys fees. The dispositive portion of
the Decision reads:
WHEREFORE, finding no reversible error in the September
30, 1993 Decision of the Regional Trial Court of La Trinidad, Benguet,
Branch 10, in Civil Case No. 84-CV-0079, the instant appeal is hereby
DISMISSED for lack of merit, and the assailed Decision is hereby
AFFIRMED and UPHELD with the modification that the award of
attorneys fees is deleted.[32]
Petitioners filed this petition raising the following issues:
I
THE [COURT OF APPEALS] ERRED IN CONSIDERING
THE CONTRACT ENTERED INTO BETWEEN THE SPOUSES BATE
NABUS AND JULIE NABUS AND SPOUSES JOAQUIN PACSON
AND JULIA PACSON TO BE A CONTRACT OF SALE.
II
THE COURT A QUO ERRED IN FINDING THAT THERE
ARE ONLY TWO ISSUES IN THE CASE ON APPEAL AND THEY
ARE: WHETHER THE DEED OF
CONDITIONAL SALE WAS CONVERTED INTO A CONTRACT OF
LEASE; AND THAT [WHETHER] PETITIONER BETTY TOLERO WAS
A BUYER IN GOOD FAITH.
III
THAT THE TRIAL COURT ERRED IN HOLDING THAT
[RESPONDENTS] BALANCE TO THE SPOUSES NABUS UNDER
THE CONDITIONAL SALE IS ONLY P57,544.[8]4.
IV
THAT ASSUMING WITHOUT ADMITTING THAT
PETITIONER BETTY TOLERO WAS AWARE OF THE EXISTENCE
OF THE DEED OF CONDITIONALSALE, THE TRIAL COURT, AS
WELL AS THE [COURT OF APPEALS], ERRED IN ORDERING
PETITIONER BETTY TOLERO TO EXECUTE A DEED OF
ABSOLUTE SALE IN FAVOR OF THE [RESPONDENTS] AND TO
SURRENDER THE OWNER'S DUPLICATE COPY OF TCT NOS. T-
18650 AND T-18651, WHICH WAS NOT PRAYED FOR IN THE
PRAYER IN THE COMPLAINT.
V sale, which was the reason for their not having paid the balance of the purchase
THAT THE [COURT OF APPEALS] ERRED IN FINDING
BETTY TOLERO [AS] A BUYER [WHO] FAILED TO TAKE STEPS IN
INQUIRING FROM THE [RESPONDENTS] THE STATUS OF THE
PROPERTY IN QUESTION BEFORE HER PURCHASE, CONTRARY
TO FACTS ESTABLISHED BY EVIDENCE.
VI
6
THE [COURT OF APPEALS] ERRED IN CONSIDERING
PETITIONER BETTY TOLERO A BUYER IN BAD FAITH, IGNORING
THE APPLICATION OF THE DOCTRINE IN THE RULING OF THE
SUPREME COURT IN THE CASE OF RODOLFO ALFONSO, ET
AL. VS. COURT OF APPEALS, G.R. NO. 63745.[33]
The main issues to be resolved are:
1) Whether or not the Deed of Conditional Sale was converted into a
contract of lease;
2) Whether the Deed of Conditional Sale was a contract to sell or a
contract of sale.
As regards the first issue, the Deed of Conditional Sale entered into by
the Spouses Pacson and the Spouses Nabus was not converted into a contract of
lease.The 364 receipts issued to the Spouses Pacson contained either the phrase as
partial payment of lot located in Km. 4 or cash vale or cash vale (partial payment of lot
located in Km. 4), evidencing sale under the contract and not the lease of the
property. Further, as found by the trial court, Joaquin Pacsons non-signing of the second
page of a carbon copy of the Deed of Conditional Sale was through sheer inadvertence,
since the original contract[34] and the other copies of the contract were all signed by
Joaquin Pacson and the other parties to the contract.
On the second issue, petitioners contend that the contract executed by the
respondents and the Spouses Nabus was a contract to sell, not a contract of sale. They
allege that the contract was subject to the suspensive condition of full payment of the
consideration agreed upon before ownership of the subject property could be transferred
to the 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
Deed of Absolute Sale in favor of respondents did not arise. Thus, the subsequent Deed
of Absolute Sale executed in favor of Betty Tolero, covering the same parcel of land was
valid, even if Tolero was aware of the previous deed of conditional sale.
Moreover, petitioners contend that respondents violated the stipulated condition
in the contract that the monthly installment to be paid was P2,000.00, as respondents
gave meager amounts as low as P10.00.
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
price, was untenable, and a lame and shallow excuse for violation of the Deed of
Conditional Sale. Respondents could have made a valid tender of payment of their
remaining balance, as it had been due for a long time, and upon refusal to accept
payment, they could have consigned their payment to the court as provided by law. This,
respondents failed to do.
The Court holds that the contract entered into by the Spouses Nabus and
respondents was a contract to sell, not a contract of sale.

A contract of sale is defined in Article 1458 of the Civil Code, thus:
Art. 1458. By the contract of sale, one of the contracting
parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
Ramos v. Heruela[35] differentiates a contract of absolute sale and a contract of
conditional sale as follows:
Article 1458 of the Civil Code provides that a contract of sale
may be absolute or conditional. A contract of sale is absolute when
title to the property passes to the vendee upon delivery of the thing
sold. A deed of sale is absolute when there is no stipulation in the
contract that title to the property remains with the seller until full
payment of the purchase price. The sale is also absolute if there is no
stipulation giving the vendor the right to cancel unilaterally the contract
the moment the vendee fails to pay within a fixed period. In a
conditional sale, as in a contract to sell, ownership remains with the
vendor and does not pass to the vendee until full payment of the
purchase price. The full payment of the purchase price partakes of a
suspensive condition, and non-fulfillment of the condition prevents the
obligation to sell from arising.[36]
Coronel v. Court of Appeals[37] distinguished a contract to sell from a contract of
sale, thus:
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract of
sale are the following:
a) Consent or meeting of the minds, that is, consent
to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered
as a Contract of Sale because the first essential element is lacking. In
a contract to sell, the prospective seller explicitly reserves the
transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take
as the full payment of the purchase price. What the seller agrees
or obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is
delivered to him. In other words, the full payment of the purchase
price partakes of a suspensive condition, the non-fulfilment of
which prevents the obligation to sell from arising and, thus,
ownership is retained by the prospective seller without further
remedies by the prospective buyer.
xxxx
7
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by entering
into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a
determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to
sell a determinate thing for a price certain is binding
upon the 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, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional contract
of sale, the first element of consent is present, although it is
conditioned upon the happening of a contingent event which may or
may not occur. If the suspensive condition is not fulfilled, the perfection
of the contract of sale is completely abated. However, if the suspensive
condition is fulfilled, the contract of sale is thereby perfected, such that
if there had already been previous delivery of the property subject of
the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be
performed by the seller.
In a contract to sell, upon the fulfillment of the
suspensive condition which is the full payment of the purchase
price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to
him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale.[38]
Further, Chua v. Court of Appeals[39] cited this distinction between a contract of
sale and a contract to sell:
In a contract of sale, the title to the property passes to the
vendee upon the delivery of the thing sold; in a contract to sell,
ownership is, by agreement, reserved in the vendor and is not to pass
to the vendee until full payment of the purchase price. Otherwise
stated, in a contract of sale, the vendor loses ownership over the
property and cannot recover it until and unless the contract is resolved
or rescinded; whereas, in a contract to sell, title is retained by the
vendor until full payment of the price. In the latter contract, payment of
the price is a positive suspensive condition, failure of which is not a
breach but an event that prevents the obligation of the vendor to
convey title from becoming effective.[40]

It is not the title of the contract, but its express terms or stipulations that
determine the kind of contract entered into by the parties. In this case, the
contractentitled Deed of Conditional Sale is actually a contract to sell. The contract
stipulated that as soon as the full consideration of the sale has been paid by the
vendee,the corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold.[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
contract is only a contract to sell.[42] The aforecited stipulation shows that the vendors
reserved title to the subject property until full payment of the purchase price.
If respondents paid the Spouses Nabus in accordance with the stipulations in
the Deed of Conditional Sale, the consideration would have been fully paid in June
1983. Thus, during the last week of January 1984, Julie Nabus approached Joaquin
Pacson to ask for the full payment of the lot. Joaquin Pacson agreed to pay, but told her
to return after four days as his daughter, Catalina Pacson, would have to go over the
numerous receipts to determine the balance to be paid.
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
daughter, Atty. Rillera required Julie Nabus to return in four days with the necessary
documents such as the deed of extrajudicial settlement, the transfer certificate of title in
the names of Julie Nabus and minor Michelle Nabus, and the guardianship papers of
Michelle. However, Julie Nabus did not return.
As vendees given possession of the subject property, the ownership of which
was still with the vendors, the Pacsons should have protected their interest and inquired
from Julie Nabus why she did not return and then followed through with full payment of
the purchase price and the execution of the deed of absolute sale. The Spouses Pacson
had the legal remedy of consigning their payment to the court; however, they did not do
so. A rumor that the property had been sold to Betty Tolero prompted them to check the
veracity of the sale with the Register of Deeds of the Province of Benguet. They found
out that on March 5, 1984, Julie Nabus sold the same property to Betty Tolero through a
Deed of Absolute Sale, and new transfer certificates of title to the property were issued
to Tolero.
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.
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. [43] 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.[44]Thus, for its non-fulfilment,
there is no contract to speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation.[45]With this circumstance, there can be no
rescission or fulfilment of an obligation that is still non-existent, the suspensive condition
not having occurred as yet.[46]Emphasis should be made 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. [47]
8
The trial court, therefore, erred in applying Article 1191 of the Civil Code[48] in
this case by ordering fulfillment of the obligation, that is, the execution of the deed of
absolute sale in favor of the Spouses Pacson upon full payment of the purchase price,
which decision was affirmed by the Court of Appeals. Ayala Life Insurance, Inc. v. Ray
Burton Development Corporation[49] held:
Evidently, before the remedy of specific performance may be
availed of, there must be a breach of the contract.
Under a contract to sell, the title of the thing to be sold is
retained by the seller until the purchaser makes full payment of the
agreed purchase price. Such payment is a positive suspensive
condition, the non-fulfillment of which is not a breach of contract but
merely an event that prevents the seller from conveying title to the
purchaser. The non-payment of the purchase price renders
the contract to sell ineffective and without force and effect. Thus, a
cause of action for specific performance does not arise.[50]
Since the contract to sell was without force and effect, Julie
Nabus validly conveyed the subject property to another buyer, petitioner Betty Tolero,
through a contract of absolute sale, and on the strength thereof, new transfer certificates
of title over the subject property were duly issued to Tolero. [51]
The Spouses Pacson, however, have the right to the reimbursement of their
payments to the Nabuses, and are entitled to the award of nominal damages. The Civil
Code provides:
Art. 2221. Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
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.
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
in their favor a deed of absolute sale when they were ready to pay the remaining balance
of the purchase price. The Nabuses had the corresponding duty to respect the
respondents right, but they violated such right, for they could no longer execute the
document since they had sold the property to Betty Tolero.[52] Hence, nominal damages
in the amount of P10,000.00 are awarded to respondents.
Respondents are not entitled to moral damages because contracts are not
referred to in Article 2219[53] of the Civil Code, which enumerates the cases when moral
damages may be recovered. Article 2220[54] of the Civil Code allows the recovery of
moral damages in breaches of contract where the defendant acted fraudulently or in
bad faith. However, this case involves a contract to sell, wherein full payment of the
purchase price is a positive suspensive condition, the non-fulfillment of which
 9

is not a breach of contract, but merely an event that prevents the seller from conveying
title to the purchaser. Since there is no breach of contract in this case, respondents are
not entitled to moral damages.
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 damages mentioned.[55]
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-
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
property made by petitioners Julie Nabus and Michelle Nabus in favor of petitioner Betty
Tolero, as well as the validity of Transfer Certificates of Title Nos. T-18650 and T-18651
issued in the name of Betty Tolero. Petitioners Julie Nabus and Michelle Nabus
are ORDERED to REIMBURSE respondents spouses Joaquin and Julia Pacson the
sum of One Hundred Twelve Thousand Four Hundred Fifty-Five Pesos and
Sixteen Centavos (P112,455.16), and to pay Joaquin and Julia Pacson nominal
damages in the amount of Ten Thousand Pesos (P10,000.00), with annual interest
of twelve percent (12%) until full payment of the amounts due to Joaquin and Julia
Pacson.
No costs.
SO ORDERED.
MILA A. REYES , G.R. No. 188064
Petitioner,
Present:
On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for
Rescission of Contract with Damages against Victoria T. Tuparan (respondent) before
the RTC. In her Complaint, petitioner alleged, among others, that she was the registered
owner of a 1,274 square meter residential and commercial lot located in
Karuhatan, Valenzuela City, and covered by TCT No. V-4130; that on that property, she
put up a three-storey 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 ground floor of RBJ Building where she also had been residing while the
other areas of the buildings including the sidewalks were being leased and occupied by
tenants and street vendors.
In December 1989, respondent leased from petitioner a space on the ground
floor of the RBJ Building for her pawnshop business for a monthly rental of ₱4,000.00. A
close friendship developed between the two which led to the respondent investing
thousands of pesos in petitioners financing/lending business from February 7,
1990 to May 27, 1990, with interest at the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject real properties to the
Farmers Savings Bank 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. Petitioner then decided to sell her real
properties for at least ₱6,500,000.00 so she could liquidate her 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
interest and to assume the bank loan. To induce the petitioner to accept her offer,
respondent offered the following conditions/concessions:

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

Subject of this petition for review is the February 13, 2009 Decision[1] of the
Court of Appeals (CA) which affirmed with modification the February 22, 2006
Decision[2] of the Regional Trial Court, Branch 172, Valenzuela City (RTC), in Civil Case
No. 3945-V-92, an action for Rescission of Contract with Damages.
of the fire insurance policies on the two (2) subject buildings following
the expiration of the then existing fire insurance policy of the plaintiff up
to the time that plaintiff is fully paid of the total purchase price of
₱4,200,000.00.[3]

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. The assumption would be part of respondents
purchase price for petitioners mortgaged real properties. FSL Bank approved their
proposal on the condition that petitioner would sign or remain as co-maker for the
mortgage obligation assumed by respondent.
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 friendship and business relationship, both parties chose not to reduce into
writing the other terms of their agreement mentioned in paragraph 11 of the complaint.
Besides, FSL Bank did not want to incorporate in the Deed of Conditional Sale of Real
Properties with Assumption of Mortgage any other side agreement between petitioner
and respondent.
Under the Deed of Conditional Sale of Real Properties with Assumption of
Mortgage, respondent was bound to pay the petitioner a lump sum of ₱1.2 million pesos
without interest as part of the purchase price in three (3) fixed installments as follows:
a) ₱200,000.00 due January 31, 1991
b) ₱200,000.00 due June 30, 1991
c) ₱800,000.00 due December 31, 1991
Respondent, however, defaulted in the payment of her obligations on their due
dates. Instead of paying the amounts due in lump sum on their respective maturity dates,
respondent paid petitioner in small amounts from time to time. To compensate for her
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
₱805,000.00 as principal on the unpaid installments and ₱466,893.25 as unpaid
accumulated interest.
Petitioner further averred that despite her success in finding a prospective buyer
for the subject real properties within the 3-month period agreed upon, respondent
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
wanted to convert the entire property into a modern commercial complex. Nonetheless,
she consented because respondent repeatedly professed friendship and assured her
that all their verbal side agreement would be honored as shown by the fact that since
December 1990, she (respondent) had not collected any rentals from the petitioner for
the space occupied by her drugstore and cosmetics store.
On March 19, 1992, the residential building was gutted by fire which caused the
petitioner to lose rental income in the amount of ₱8,000.00 a month since April 1992.
Respondent neglected to renew the fire insurance policy on the subject buildings.
Since December 1990, respondent had taken possession of the subject real
properties and had been continuously collecting and receiving monthly rental income
from the tenants of the buildings and vendors of the sidewalk fronting the RBJ building
without sharing it with petitioner.
On September 2, 1992, respondent offered the amount of ₱751,000.00 only
payable on September 7, 1992, as full payment of the purchase price of the subject real
10
properties and demanded the simultaneous execution of the corresponding deed of
absolute sale.
Respondents Answer
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 documentary stamps and
other miscellaneous expenses and real estate taxes up to 1990 were supposed to be
paid by petitioner but she failed to do so.
Respondent further averred that she successfully rescued the properties from a
definite foreclosure by paying the assumed mortgage in the amount of ₱2,278,078.13
plus interest and other finance charges. Because of her payment, she was able to obtain
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.
Petitioners claim for the balance of the purchase price of the subject real
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
price of the subject real properties, and she had even introduced improvements thereon
worth more than ₱4,800,000.00. As the parties could no longer be restored to their
original positions, rescission could not be resorted to.
Respondent added that as a result of their business relationship, petitioner was
able to obtain from her a loan in the amount of ₱400,000.00 with interest and took
several pieces of jewelry worth ₱120,000.00. Petitioner also failed and refused to pay the
monthly rental of ₱20,000.00 since November 16, 1990 up to the present for the use and
occupancy of the ground floor of the building on the subject real property, thus,
accumulating arrearages in the amount of ₱470,000.00 as of October 1992.
Ruling of the RTC
On February 22, 2006, the RTC handed down its decision finding that respondent failed
to pay in full the ₱4.2 million total purchase price of the subject real properties leaving a
balance of ₱805,000.00. 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 considered the Deed of Conditional Sale of
Real Property with Assumption of Mortgage executed by and among the two parties and
FSL Bank a contract to sell, and not a contract of sale. It was of the opinion that although
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
substantial and fundamental breach of the contract as to defeat the object of the parties
in entering into the contract.[4] The RTC believed that the respondents offer stated in her
counsels letter dated September 2, 1992 to settle what she thought was her unpaid
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
interest within a given period of time.

Finally, the RTC stated that there was no factual or legal basis to award damages and
attorneys fees because there was no proof that either party acted fraudulently or in bad
faith.
Thus, the dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Allowing the defendant to pay the plaintiff within thirty (30)
days from the finality hereof the amount of ₱805,000.00, representing
the unpaid purchase price of the subject property, with interest thereon
at 2% a month from January 1, 1992 until fully paid. Failure of the
defendant to pay said amount within the said period shall cause the
automatic rescission of the contract (Deed of Conditional Sale of Real
Property with Assumption of Mortgage) and the plaintiff and the
defendant shall be restored to their former positions relative to the
subject property with each returning to the other whatever benefits
each derived from the transaction;
2. Directing the defendant to allow the plaintiff to continue
using the space occupied by her for drugstore and cosmetic store
without any rental pending payment of the aforesaid balance of the
purchase price.
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 space for the
drugstore and cosmetic store at a fixed monthly rental of ₱8,000.00;
and
4. Directing the plaintiff, upon full payment to her by the
defendant of the purchase price together with interest, to execute the
necessary deed of sale, as well as to pay the Capital Gains Tax,
documentary stamps and other miscellaneous expenses necessary for
securing the BIR Clearance, and to pay the real estate taxes due on
the subject property up to 1990, all necessary to transfer ownership of
the subject property to the defendant.
No pronouncement as to damages, attorneys fees and costs.
SO ORDERED.[5]
Ruling of the CA
On February 13, 2009, the CA rendered its decision affirming with modification the RTC
Decision. The CA agreed with the RTC that the contract entered into by the parties is a
contract to sell but ruled that the remedy of rescission could not apply because the
respondents failure to pay the petitioner the balance of the purchase price in the total
amount of ₱805,000.00 was not a breach of contract, but merely an event that prevented
the seller (petitioner) from conveying title to the purchaser (respondent). It reasoned that
11
out of the total purchase price of the subject property in the amount of ₱4,200,000.00,
respondents remaining unpaid balance was only ₱805,000.00. Since respondent had
already paid a substantial amount of the purchase price, it was but right and just to allow
her to pay the unpaid balance of the purchase price plus interest. Thus, the decretal
portion of the CA Decision reads:
WHEREFORE, premises considered, the Decision dated 22
February 2006 and Order dated 22 December 2006 of the Regional
Trial Court of Valenzuela City, Branch 172 in Civil Case No. 3945-V-92
are AFFIRMED with MODIFICATION in that defendant-appellant
Victoria T. Tuparan is hereby ORDERED to pay plaintiff-
appellee/appellant Mila A. Reyes, within 30 days from finality of this
Decision, the amount of ₱805,000.00 representing the unpaid balance
of the purchase price of the subject property, plus interest thereon at
the rate of 6% per annum from 11 September 1992 up to finality of this
Decision and, thereafter, at the rate of 12% per annum until full
payment. The ruling of the trial court on the automatic rescission of the
Deed of Conditional Sale with Assumption of Mortgage is hereby
DELETED. Subject to the foregoing, the dispositive portion of the trial
courts decision is AFFIRMED in all other respects.
SO ORDERED.[6]
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 aside of the CA Decision anchored on the following
ASSIGNMENT OF ERRORS
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
GROUND THAT RESPONDENT TUPARANS FAILURE TO PAY
PETITIONER REYES 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 ₱4,200,000.00 OR 66% OF THE
STIPULATED LAST INSTALLMENT OF ₱1,200,000.00 PLUS 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. THE COURT OF APPEALS SERIOUSLY ERRED AND
ABUSED ITS DISCRETION IN DISREGARDING AS GROUND FOR
THE RESCISSION OF THE SUBJECT CONTRACT THE OTHER
FRAUDULENT AND MALICIOUS ACTS COMMITTED BY THE
RESPONDENT AGAINST THE PETITIONER WHICH BY

THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE
PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT WITHIN
WHICH TO PAY TO THE PETITIONER THE ₱805,000.00 PLUS
INTEREST THEREON.
C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS
NOT ENTITLED TO THE RESCISSION OF THE SUBJECT
CONTRACT, THE COURT OF APPEALS STILL SERIOUSLY
ERRED AND ABUSED ITS DISCRETION IN REDUCING THE
INTEREST ON THE ₱805,000.00 TO ONLY 6% PER ANNUM
STARTING FROM THE DATE OF FILING OF THE COMPLAINT ON
SEPTEMBER 11, 1992 DESPITE THE 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% MONTHLY STARTING THE
DATE OF DELINQUENCY ON DECEMBER 31, 1991.
D. THE COURT OF APPEALS SERIOUSLY ERRED AND
ABUSED ITS DISCRETION IN THE APPRECIATION AND/OR
MISAPPRECIATION OF FACTS RESULTING INTO THE DENIAL OF
THE CLAIM OF PETITIONER REYES FOR ACTUAL DAMAGES
WHICH CORRESPOND TO THE MILLIONS OF PESOS OF
RENTALS/FRUITS OF THE 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 PETITIONER AS
CONTAINED IN HER AMENDED COMPLAINT DATED APRIL 22,
2006.
E. THE COURT OF APPEALS SERIOUSLY ERRED AND
ABUSED ITS DISCRETION IN THE APPRECIATION OF FACTS
RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER
REYES FOR THE ₱29,609.00 BACK RENTALS THAT WERE
COLLECTED BY RESPONDENT TUPARAN FROM THE OLD
TENANTS OF THE PETITIONER.
F. THE COURT OF APPEALS SERIOUSLY ERRED AND
ABUSED ITS DISCRETION IN DENYING THE PETITIONERS
EARLIER URGENT MOTION FOR ISSUANCE OF A PRELIMINARY
MANDATORY AND PROHIBITORY INJUNCTION DATED JULY 7,
2008 AND THE SUPPLEMENT THERETO DATED AUGUST 4, 2008
THEREBY CONDONING THE UNJUSTIFIABLE FAILURE/REFUSAL
OF JUDGE FLORO ALEJO TO RESOLVE WITHIN ELEVEN (11)
YEARS THE PETITIONERS THREE (3) SEPARATE MOTIONS FOR
PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING
ORDER, ACCOUNTING AND DEPOSIT OF RENTAL INCOME
DATED MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7,
2006 THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY
12
ENRICH HERSELF BY CONTINUOUSLY COLLECTING ALL THE
RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES
WITHOUT ANY ACCOUNTING AND COURT DEPOSIT OF THE
COLLECTED RENTALS/FRUITS AND THE PETITIONERS URGENT
MOTION TO DIRECT DEFENDANT VICTORIA TUPARAN TO PAY
THE ACCUMULATED UNPAID REAL ESTATE TAXES AND SEF
TAXES ON THE SUBJECT REAL PROPERTIES DATED JANUARY
13, 2007 THEREBY EXPOSING THE SUBJECT REAL PROPERTIES
TO IMMINENT AUCTION SALE BY THE CITY TREASURER
OF VALENZUELA CITY.
G. THE COURT OF APPEALS SERIOUSLY ERRED AND
ABUSED ITS DISCRETION IN DENYING THE PETITIONERS CLAIM
FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS
FEES AGAINST THE RESPONDENT.
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 Assumption of Mortgage.
Position of the Petitioner
The petitioner basically argues that the CA should have granted the rescission of the
subject Deed of Conditional Sale of Real Properties with Assumption of Mortgage for the
following reasons:
1. The subject deed of conditional sale is a reciprocal
obligation whose outstanding characteristic is reciprocity arising from
identity of cause by virtue of which one obligation is correlative of the
other.
2. The petitioner was rescinding not enforcing the subject
Deed of Conditional Sale pursuant to Article 1191 of the Civil Code
because of the respondents failure/refusal to pay the ₱805,000.00
balance of the total purchase price of the petitioners properties within
the stipulated period ending December 31, 1991.
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
terms or manner of payment of the ₱1,200,000.00 balance and
unjustly enriched herself at the expense of the petitioner by collecting
all rental payments for her personal benefit and enjoyment.
Furthermore, the petitioner claims that the respondent is liable to pay interest at
the rate of 6% per month on her unpaid installment of ₱805,000.00 from the date of the
delinquency, December 31, 1991, because she obligated herself to do so.
Finally, the petitioner asserts that her claim for damages or lost income as well
as for the back rentals in the amount of ₱29,609.00 has been fully substantiated and,
therefore, should have been granted by the CA. Her claim for moral and exemplary
damages and attorneys fees has been likewise substantiated.

Position of the Respondent
The respondent counters that the subject Deed of Conditional Sale with Assumption of
Mortgage entered into between the parties is a contract to sell and not a contract of sale
because the title of the subject properties still remains with the petitioner as she failed to
pay the installment payments in accordance with their agreement.
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
subject contract and it would be more equitable if she would be allowed to pay the
balance including interest within a certain period of time. She claims that as early as
1992, she has shown her sincerity by offering to pay a certain amount which was,
however, rejected by the petitioner.
Finally, respondent states that the subject deed of conditional sale explicitly provides that
the installment payments shall not bear any interest. Moreover, petitioner failed to prove
that she was entitled to back rentals.
The Courts Ruling
The petition lacks merit.
The Court agrees with the ruling of the courts below that the subject Deed of
Conditional Sale with Assumption of Mortgage entered into by and among the two parties
and FSL Bank on November 26, 1990 is a contract to sell and not a contract of sale. The
subject contract was correctly classified as a contract to sell based on the following
pertinent stipulations:
8. That the title and ownership of the subject real properties
shall remain with the First Party until the full payment of the Second
Party of the balance of the purchase price and liquidation of the
mortgage obligation of ₱2,000,000.00. Pending payment of the
balance of the purchase price and liquidation of the mortgage
obligation that was assumed by the Second Party, the Second Party
shall not sell, transfer and convey and otherwise encumber the subject
real properties without the written consent of the First and Third Party.
9. That upon full payment by the Second Party of the full
balance of the purchase price 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
corresponding Deed of Absolute Sale in favor of the Second Party. [7]
Based on the above provisions, the title and ownership of the subject properties
remains with the petitioner until the respondent fully pays the balance of the purchase
price and the assumed mortgage obligation. Thereafter, FSL Bank shall then issue the
corresponding deed of cancellation of mortgage and the petitioner shall execute the
corresponding deed of absolute sale in favor of the respondent.
Accordingly, the petitioners obligation to sell the subject properties becomes
demandable only upon the happening of the positive suspensive condition, which is the
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
13
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
event that prevents the petitioner from being bound to convey title to the respondent. The
2009 case of Nabus v. Joaquin & Julia Pacson[8] is enlightening:
The Court holds that the contract entered into by the Spouses
Nabus and respondents was a contract to sell, not a contract of sale.
A contract of sale is defined in Article 1458 of the Civil Code,
thus:
Art. 1458. By the contract of sale, one of the contracting
parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
xxx
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract of
sale are the following:
a) Consent or meeting of the minds, that is, consent
to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered
as a Contract of Sale because the first essential element is lacking. In
a contract to sell, the prospective seller explicitly reserves the transfer
of title to the prospective buyer, meaning, the prospective seller does
not as yet agree or consent to transfer ownership of the property
subject of the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the purchase
price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words, the full payment of
the purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising and,
thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer.
xxx xxx xxx
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective sellers obligation to sell the subject property by entering
into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the 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, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional contract
of sale, the first element of consent is present, although it is
conditioned upon the happening of a contingent event which may or
may not occur. If the suspensive condition is not fulfilled, the perfection
of the contract of sale is completely abated. However, if the suspensive
condition is fulfilled, the contract of sale is thereby perfected, such that
if there had already been previous delivery of the property subject of
the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be
performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, ownership
will not automatically transfer to the buyer although the property may
have been previously delivered to him. The prospective seller still has
to convey title to the prospective buyer by entering into a contract of
absolute sale.
Further, Chua v. Court of Appeals, cited this distinction
between a contract of sale and a contract to sell:
In a contract of sale, the title to the property
passes to the vendee upon the delivery of the thing
sold; in a contract to sell, ownership is, by
agreement, reserved in the vendor and is not to pass
to the vendee until full payment of the purchase
price. Otherwise stated, in a contract of sale, the
vendor loses ownership over the property and
cannot recover it until and unless the contract is
resolved or rescinded; whereas, in a contract to sell,
title is retained by the vendor until full payment of the
price. In the latter contract, payment of the price is a
positive suspensive condition, failure of which is not
a breach but an event that prevents the obligation of
the vendor to convey title from becoming effective.
It is not the title of the contract, but its express terms or
stipulations that determine the kind of contract entered into by the
parties. In this case, the contract entitled Deed of Conditional Sale is
14
actually a contract to sell. The contract stipulated that as soon as the
full consideration of the sale has been paid by the vendee, the
corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold. Where the vendor promises to execute
a deed of absolute sale upon the completion by the vendee of the
payment of the price, the contract is only a contract to sell. The
aforecited stipulation shows that the vendors reserved title to the
subject property until full payment of the purchase price.
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 non-fulfilment, there is no contract to speak of, the
obligor having failed to perform the suspensive condition which
enforces a juridical relation. With this circumstance, there can be no
rescission or fulfillment of an obligation that is still non-existent, the
suspensive condition not having occurred as yet. Emphasis should be
made 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. [Emphases and underscoring supplied]
Consistently, the Court handed down a similar ruling in the 2010 case of Heirs
of Atienza v. Espidol, [9] where it was written:
Regarding the right to cancel the contract for non-
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
a contract of sale, the title to the property passes to the buyer upon the
delivery of the thing sold. In a contract to sell, on the other hand, the
ownership is, by agreement, retained by the seller and is not to pass to
the vendee until full payment of the purchase price. In the contract of
sale, the buyers non-payment of the price is a negative resolutory
condition; in the contract to sell, the buyers full payment of the price is
a positive suspensive condition to the coming into effect of the
agreement. In the first case, the seller has lost and cannot recover the
ownership of the 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
making payment at the time specified in the contract. Here, it is quite
evident that the contract involved was one of a contract to sell since
the Atienzas, as sellers, were to retain title of ownership to the land
until respondent Espidol, the buyer, has paid the agreed price. Indeed,
there seems no question that the parties understood this to be the
case.

Admittedly, Espidol was unable to pay the second installment
of P1,750,000.00 that fell due in December 2002. That payment, said
both the RTC and the CA, was a positive suspensive condition failure
of which was not regarded a breach in the sense that there can be no
rescission of an obligation (to turn over title) that did not yet exist
since the suspensive condition had not taken place. x x x.
[Emphases and underscoring supplied]
Thus, the Court fully agrees with the CA when it resolved: Considering,
however, that the Deed of Conditional Sale was not cancelled by Vendor Reyes
(petitioner) and that out of the total purchase 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 been paid. It is only
right and just to allow Tuparan to pay the said unpaid balance of the purchase price to
Reyes.[10]
Granting that a rescission can be permitted under Article 1191, the Court still
cannot allow it for the reason that, considering the circumstances, there was only a slight
or casual breach in the fulfillment of the obligation.
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 substantial is largely determined by the attendant
circumstances.[11] In the case at bench, the subject contract stipulated the following
important provisions:
2. That the purchase price of ₱4,200,000.00 shall be paid as
follows:
a) ₱278,078.13 received in cash by the First Party but directly
paid to the Third Party as partial payment of the mortgage obligation of
the First Party in order to reduce the amount to ₱2,000,000.00 only as
of November 15, 1990;
b) ₱721,921.87 received in cash by the First Party as
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
31, 1991;
2. ₱200,000.00 payable on or before June 30,
1991;
3. ₱800,000.00 payable on or before December
31, 1991;
Note: All the installments shall not bear any interest.
d) ₱2,000,000.00 outstanding balance of the
mortgage obligation as of November 15, 1990 which is hereby
assumed by the Second Party.
15
xxx
3. That the Third Party hereby acknowledges receipts from
the Second Party P278,078.13 as partial payment of the loan
obligation of First Party in order to reduce the account to only
₱2,000,000.00 as of November 15, 1990 to be assumed by the
Second Party effective November 15, 1990.[12]
From the records, it cannot be denied that respondent paid to FSL Bank
petitioners mortgage obligation in the amount of ₱2,278,078.13, which formed part of the
purchase price of the subject property. Likewise, it is not disputed that respondent paid
directly to petitioner the amount of ₱721,921.87 representing the additional payment for
the purchase of the subject property. Clearly, out of the total price of ₱4,200,000.00,
respondent was able to pay the total amount of ₱3,000,000.00, leaving a balance of
₱1,200,000.00 payable in three (3) installments.
Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates
the first and second installments of ₱200,000.00 each. She, however, failed to pay the
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
₱751,000.00, which was rejected by petitioner for the reason that the actual balance was
₱805,000.00 excluding the interest charges.
Considering that out of the total purchase price of ₱4,200,000.00, respondent
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
with the courts below that the respondent showed her sincerity and willingness to comply
with her obligation when she offered to pay the petitioner the amount of ₱751,000.00.
On the issue of interest, petitioner failed to substantiate her claim that
respondent made a personal commitment to pay a 6% monthly interest on the
₱805,000.00 from the date of delinquency, December 31, 1991. As can be gleaned from
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
starting from the filing of the complaint on September 11, 1992.
Finally, the Court upholds the ruling of the courts below regarding the non-
imposition of damages and attorneys fees. Aside from petitioners self-serving
statements, there is not enough evidence on record to prove that respondent acted
fraudulently and maliciously against the petitioner. In the case of Heirs of Atienza v.
Espidol,[13] it was stated:
Respondents are not entitled to moral damages because
contracts are not referred to in Article 2219 of the Civil Code, which
enumerates the cases when moral damages may be recovered. Article
2220 of the Civil Code allows the recovery of moral damages in
breaches of contract where the defendant acted fraudulently or in bad
faith. However, this case involves a contract to sell, wherein full

payment of the purchase price is a positive suspensive condition, the
non-fulfillment of which is not a breach of contract, but merely an event
that prevents the seller from conveying title to the purchaser. Since
there is no breach of contract in this case, respondents are not entitled
to moral damages.
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 damages
mentioned.
WHEREFORE, the petition is DENIED.
SO ORDERED.
[G.R. No. 118203. July 5, 1996]
EMILIO A. SALAZAR and TERESITA DIZON, petitioners, vs. COURT OF APPEALS
and JONETTE BORRES, respondents.
DECISION
DAVIDE, JR., J.:
Petitioners seek to set aside the decision[1] of 29 November 1994 of the Court of
Appeals in CA-G.R. CV No. 40197, which reversed the decision[2] of 3 September 1992
of Branch 66 of the Regional Trial Court (RTC) of Makati, Metro Manila, in Civil Case No.
89-4468.
The primary issues presented for our resolution are whether (a) the so-called Deed
of Absolute Sale executed by petitioner Emilio A. Salazar in favor of private respondent
Jonette Borres is a perfected contract of sale or a mere contract to sell, and (b) the action
for specific performance which the latter filed will lie to compel the former to deliver the
Deed of Absolute Sale, the Transfer Certificates of Title, and other documents relative to
the property in question.
The factual antecedents of this case, as summarized by the trial court, are as
follows:
That defendant Dr. Salazar is the owner of the two (2) parcels of land with
improvements thereon located at 2914 Finlandia Street, Makati, Metro Manila and
covered by Transfer Certificate of Title Nos. 31038 and 31039 of the Registry of Deeds of
Makati; that Dr. Salazar offered to sell his properties to Jonette Borres for One Million
Pesos (P1,000,000.00) (TSN pp. 7 and 8, November 5, 1991). The initial proposal took
place at the Dimsum Restaurant, Makati, whereby it was proposed that the payment of
the consideration was to be made within six (6) months but was objected to by Dr.
Salazar and he reduced it to a three (3) months period (TSN, Direct Examination on
Jonette Borres p. 22, November 12, 1991); that sometime on [May] 28, 1989, Jonette
Borres together with a certain Emilio T. Salazar went to see Dr. Salazar at the latter's
residence in Bataan bearing a copy of a Deed of Absolute sale (Exhibit ("C") and Deed of
Warranty (Exhibit "D") but Dr. Salazar refused to sign because Jonette Borres did not
have the money ready then. In said occasion Dr. Salazar further reduced the period
within which plaintiff may purchase the lots, to one (1) month or up to June 30, 1989
(TSN Direct Examination on Jonette Borres November 5, [1991], pp. 10 and 11).
Jonette Borres then met again Dr. Salazar on June 2, 1989 at the Ninoy
International Airport who was about to leave for the United States of America where he is
a resident.Jonette Borres had with her the Deed of Absolute Sale and asked Dr. Salazar
to sign said document. Dr. Salazar reluctantly agreed to sign the document provided that
16
Jonette Borres pays one half (1/2) of the consideration or P500,000.00 in "cash" by June
15, 1989 and the balance was payable on June 30, 1989 (TSN Direct Examination on
Emilio A. Salazar, May 21, [1991], p. 9; TSN Cross Examination on Jonette Borres,
November 12, [1991], pp. 29 and 30). It was during this occasion that Dr. Salazar again
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).
Plaintiff agreed to the above conditions (TSN Cross Examination on Jonette Borres
November 12, 1989, p. 32) and Dr. Salazar constituted co-defendant Teresa Dizon as
custodian at the Deed of Absolute Sale (Exhibit "C") together with the Titles of the Land
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).
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
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
documents not being in Dizon's possession, they agreed to meet at Metro Bank West
Avenue Branch to get the documents and then to proceed to Makati to meet the plaintiff's
business partner a certain Balao who allegedly gave plaintiff a Far East Bank and Trust
Company check for the amount of P1,500,000.00 (Exhibit "F") with which to buy the
property (TSN Direct Examination on Jonette Borres November 5, [1991], pp. 30, 32 and
33). For some reason or another Jonette Borres and defendant Dizon failed to proceed to
Makati.
In the meantime or on June 16, 1992, Dr. Salazar made an overseas call to co-
defendant Dizon to inquire if Jonette Borres had already paid the down payment of
P500,000.00 and Teresa Dizon replied to Dr. Salazar that Jonette Borres had not paid
the down payment. Dr. Salazar then ordered Dizon to stop the sale (TSN Direct
Examination on Emilio A. Salazar, May 21, [1991], pp. 12 and 13).
As maybe seen from the evidence presented by the plaintiff and the defendants,
the terms and conditions of the agreement for the sale of the two (2) parcels of land
owned by Dr. Salazar in favor of the plaintiff Jonette Borres, are that the purchase price
is in the amount of P1,000,000.00, fifty percent (50%) of which or P500,000.00 was to be
paid on or before June 15, 1989 while the balance thereof was to be paid on or before
June 30, 1989 (TSN May 21, 1991, p. 27); that the payment was to be made in "cash"
(TSN May 21, 1991, p. 55); that the place of payment is at defendant's bank,
Metropolitan Bank Quezon City Branch (TSN October 21, 1991, p. 23). [3]
The trial court held that the Deed of Absolute Sale was in reality a contract to sell,
and that since Borres failed to pay Salazar the downpayment of P500,000.00 on the
agreed date, 15 June 1989, the complaint for specific performance cannot prosper. It
then dismissed the complaint and ordered Borres to pay the petitioners P5,000.00 each
as attorney's fees and litigation expenses.[4]
In ruling that the Deed of Absolute Sale was a contract to sell, the trial court
considered pertinent the circumstances attending its execution. First, that the Deed of
Absolute Sale was "reluctantly signed" by Dr. Salazar, who was then about to leave for
the United States of America, in order that if Borres would comply with the terms and
conditions of their agreement, he need not come to the Philippines just to sign it; hence,
it does not bind Dr. Salazar until the suspensive condition, i. e., the downpayment of
P500,000.00 to be effected on or before 15 June 1989 and the balance to be paid on or
before 30 June 1989, is complied with. Second, Borres was not, in fact, financially
prepared to buy the parcels of land on or before 15 June 1989 considering that
[s]he was just looking for possible buyers or business partners. First, she requested that
the pertinent documents like the Deed of Sale (Exhibit "C") and the corresponding

Transfer Certificates of Titles Nos. 31038 and 31039 of the Register of Deeds of Rizal
(Exhibits "A" and "B") be entrusted to her even before making the downpayment of
P500,000.00 purposely to raise the amount needed. When Dr. Salazar refused her
request, Jonette Borres approached a certain businessman P.D. Dionisio for loan and
was turned down when Jonette Borres cannot [sic] produce the Deed of Absolute Sale
and the Titles of the parcels of land in question (TSN November 5, 1991, pp. 20-
25). Then she approached a certain Benjamin Balao a realtor developer. Although Balao
had issued to her his check in the amount of P1,500,000.00 (Exhibit "F") he instructed his
bank not to honor his check without his presence (TSN November 14, 1991, pp. 81 to
84). Jonette Borres admitted that she was not in a position to encash the check (Exhibit
"F") although it was payable to 'cash' (TSN November 21, 1991, pp. 41 and 44).[5]
Salazar's victory was short-lived. On Borres's appeal from the decision of the trial
court, the Court of Appeals, in its challenged decision of 29 November 1994, ruled that
the Deed of Absolute Sale, whose existence and due execution was undisputed, is a
perfected contract of sale, with a definite object and a specific consideration which the
parties had agreed upon. As proof that it is a contract of sale and not a contract to sell,
the Court of Appeals stressed the absence of a proviso that the title to the property is
reserved in the vendor until full payment of the purchase price or that the vendor may
unilaterally rescind the contract the moment the vendee fails to pay within the fixed
period.[6] Salazar's reluctance to sign it is of no moment, since there is no allegation of
fraud, forgery, or duress. And even assuming that Borres failed to pay the contract price,
such failure did not convert the contract into one without cause or consideration as to
vitiate the validity of the contract, it not being essential for the existence of cause that
payment or full payment be made at the time of the contract. Neither did such failure ipso
facto resolve the contract in question. The remedy of the vendor, Dr. Emilio A. Salazar, is
to demand specific performance or rescission, with damages in either case. On the other
hand, the vendee, Jonette Borres, may demand specific performance, i.e., compel the
vendor to accept the price and deliver the title of the land object of the contract.
The Court of Appeals disagreed with the trial court's finding that Borres was not in a
position to pay the downpayment because:
[o]n June 15, 1989, plaintiff-appellant had a Far East Bank check payable to her order, in
the amount of P1,500,000.00 more than the whole agreed purchase price of
P1,000,000.00. Defendant-appellee Teresa Dizon agreed (on June 14, 1989) to meet her
on June 15, 1989, at Metro Bank West and thereafter to proceed to Makati in order to
encash the Far East Bank check. Defendant-appellee Teresa Dizon somehow managed
to manipulate things by making herself unavailable so that the payment could not be
made on June 15, 1989 (TSN, Nov. 5, 1991, pp. 27-41). On the next day, June 16, 1989,
defendant-appellee Teresa Dizon informed plaintiff-appellant that defendant-appellee Dr.
Emilio A. Salazar called up in the evening of June 15, 1989 asking whether plaintiff-
appellant paid on that day and upon being answered in the negative, said vendor said
that he is revoking the contract (TSN, Nov. 5, 1991, pp. 41-42). Defendant-appellee
Teresa Dizon having her own interested buyer, evidently acted in bad faith, tried and
indeed succeeded to frustrate the efforts of plaintiff-appellant to comply with her
reciprocal obligation to pay the agreed purchase price.
The fact that the Far East Bank check was payable to the Order of plaintiff-
appellant, and it covers the amount of P1,500,000.00 which is much more than the
agreed purchase price of P1,000,000.00 reveals that plaintiff-appellant was financially
prepared to comply with her reciprocal obligation. That plaintiff-appellant filed the present
suit for specific performance on July 6, 1989, bolsters the fact that she is really willing
and able to pay the agreed purchase price. How and from whom she borrowed/obtained
the said amount, is of no consequence.[7]
Accordingly, the respondent Court reversed the decision of the trial court and
handed down a new judgment ordering Emilio A. Salazar to accept from Jonette Borres
17
the payment representing the purchase price in the amount of P1 Million and thereafter
to comply with his reciprocal obligation to surrender the original copies of the deed of
absolute sale and Torrens title covering the parcels of land subject of the
contract. Finding petitioner Teresita Dizon to have "acted in bad faith in frustrating the
efforts" of Borres to comply with her obligation to pay the purchase price, the appellate
court ordered her to pay Borres the amounts of P80,000.00 as moral damages;
P50,000.00 as exemplary damages; and P100,000.00 as attorney's fees.
Unable to accept the reversal of the trial court's decision, the petitioners filed the
instant petition wherein they submit that the Court of Appeals committed grave and
serious errors:
A. x x x in relying on the Deed of Absolute Sale dated May 30, 1989
notwithstanding the fact that:
1. BORRES EXECUTED A DEED OF WARRANTY (EXHS. "D" AND "2")
STATING THEREIN THAT UNTIL AND UNLESS THE AMOUNT OF
P1,000,000.00 REPRESENTING THE PURCHASE PRICE FOR THAT
PARCELS OF LAND COVERED BY TCT NOS. S-31038 AND S-31039
BE PAID BY HER TO SALAZAR, SHE HAS NO RIGHT WHATSOEVER
TO THE ORIGINAL COPIES OF THE DEED OF ABSOLUTE SALE AND
THAT SHE HAS NO LEGAL RIGHT WHATSOEVER TO ANY AND ALL
PERTINENT RECORDS OF THE ABOVE-MENTIONED LOTS;
2. UPON HER BEHEST, BORRES WAS GIVEN A PHOTOCOPY OF THE
DEED OF ABSOLUTE SALE BY DIZON BUT ONLY AFTER THE
LATTER ERASED THE SIGNATURE OF SALAZAR AS THE VENDEE
THEREIN;
3. BORRES HAD NOT PAID ANY PORTION OF THE AGREED PURCHASE
PRICE AND THUS RENDERS THE DEED OF ABSOLUTE SALE
VOID AB INITIO.
B. x x x in concluding that the agreement between SALAZAR and BORRES is a
contract of sale and thus, perfected upon agreement on the subject matter and
consideration, notwithstanding the fact that:
1. THE AGREEMENT BETWEEN THE PARTIES IS ESSENTIALLY A
CONTRACT TO SELL SUBJECT TO SUSPENSIVE CONDITION, THE
BIRTH OR EFFECTIVITY OF WHICH SHOULD TAKE PLACE ONLY IF
AND WHEN THE EVENT WHICH CONSTITUTES THE CONDITION
HAPPENS OR IS FULFILLED. SINCE BORRES FAILED TO COMPLY
WITH HER OBLIGATION, THE AGREEMENT TO SELL BECAME
STILLBORN;
2. THERE WAS AN EXPRESS AGREEMENT BETWEEN THE PARTIES
THAT BORRES SHALL BE ENTITLED TO THE PROPERTY OR ANY
RECORDS PERTAINING THERETO OR ORIGINAL COPIES OF THE
DEED OF ABSOLUTE SALE ONLY UPON FULL PAYMENT OF THE
PURCHASE PRICE.
C. x x x in holding that DIZON acted in bad faith and succeeded to frustrate the
efforts of BORRES to comply with her reciprocal obligation to pay the purchase price
notwithstanding the fact that:
1. AT THE TIME THAT BORRES WAS OBLIGED TO PAY AT LEAST 50%
OF THE PURCHASE PRICE OR ON JUNE 15, 1989, SHE WAS NOT
READY, WILLING AND ABLE TO DO SO. EVEN ASSUMING FOR THE
SAKE OF ARGUMENT THAT THE LATTER HAD THE FINANCIAL
CAPABILITY TO MEET HER OBLIGATION, THE FACT REMAINS THAT
SHE FAILED TO PROPERLY TENDER PAYMENT OF HER
OBLIGATION AND IN CASE TENDER OF PAYMENT WAS REFUSED,
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.

Q And you did sign the document?
A Yes, I did sign it and passed it on to Dr. Salazar.
Q After you passed it to Dr. Salazar, what happened?
A Dr. Salazar did not sign the document and told me that he is only going to
sign it if I am going to pay by the end of June and that he could not lend
me the title and he said he is going to sign it and not to give me a copy
until the purchase price is fully paid.
Q And what was your reaction with the statement?
A I said "what about the loan that we have agreed at Dimsum if you will not
lend me the title and the document that we have signed now?" Dr.
Salazar said "I could not lend you the title and I care less how you are
going to loan the property and raise the money you are going to pay me,
what is important to me is you pay me the whole amount of One Million
Pesos (P1,000,000.00) not later than June 30, 1989."
Q And what did you say?
A Since I could not do anything and I really wanted to buy the property, I
agreed to Dr. Salazar's condition that I pay the property by the end of
June and I will pay only at the bank in Makati.
Q And what did Dr. Salazar say?
A Dr. Salazar said "okey I will sign this and have this notarized but I could not
lend you and never have a [copy] of the title as well as the Deed of Sale
and you just wait at NAIA and wait if you could have this document
because I am leaving on June 2 for the US. You meet me there."
Q And after that what did Dr. Salazar do?
A It was only then that he signed the document after I have agreed to his
proposal but he was very much stand [sic] to the payments and he was
no longer the same when I met at Dimsum.[13]
Clearly then, the original intention in the execution of the Deed of Absolute Sale
was to implement the proposal of Borres that Salazar "lend" her the transfer certificates
of title so that she could secure a loan from a bank in Manila whose proceeds would be
applied to the payment of the purchase price of the property, and the original purpose of
the Deed of Warranty was to assure Salazar that, as demanded by him, title to the lots
will not pass to her until she pays the full consideration. The lending of the certificates of
title for the above purpose could have been easily accomplished through a special power
of attorney under which Salazar will authorize her to obtain a loan and to mortgage the
property as security therefor. But, perhaps anticipating Salazar's departure to the United
States of America where he resides, Borres, who is a lawyer, prepared instead a Deed of
Absolute Sale and Deed of Warranty. Notwithstanding Borres deliberate
characterizations of the documents, we are convinced that they were prepared in
connection with and in the implementation of the agreement regarding the lending of the
certificates of title. They do not weaken the adamantine position of Salazar not to part
with his title to the two lots until full payment of the agreed price therefor. Borres
execution of the Deed of Warranty was in fact a recognition of Salazar's position. Despite
its careful wordings and phraseology to make some sort of distinction between Borres'
right to the ownership or title over the lots on the one hand, and her right to possess or
keep the Deed of Absolute Sale and the other documents relative to the lots, the totality
of the Deed of Warranty manifests an indubitable recognition by Borres of the
aforementioned intention of Salazar.She declares therein as follows:
1. That until and unless the amount of ONE MILLION (P1,000,000.00) PESOS
representing the purchase price for that parcels of land covered by
Transfer Certificate of Title Nos. S-31038 and S-31039 be paid by the
undersigned unto Dr. Emilio A. Salazar, the undersigned has no absolute
19
right whatsoever to the original copies of the Deed of Absolute Sale
executed by said Dr. Emilio A. Salazar dated May ___, 1989;
2. That she has no legal right whatsoever to any and all pertinent records of
the aforementioned lots;
3. That upon payment of the aforementioned amount Dr. Emilio A. Salazar or
his representative is obliged to surrender the original of these presents
together with all the original documents and titles covering the sale of the
aforementioned lots unto the undersigned.[14]
Then, too, in her Memorandum of Agreement with Monteland Realty
Corporation,[15] dated 15 June 1989, Borres explicitly mentioned only her "rights and
interests" under the Deed of Absolute Sale signed by Salazar and therein conveyed,
transferred, and assigned to the said corporation only such "rights and interests." Also
worth noting is the statement in the second whereas clause of the Memorandum of
Agreement that Monteland Realty Corporation
has full knowledge of the sales [sic] and conditions of the SELLER-OWNER of the
property . . . that the buyer [Borres] has an obligation to pay DR. EMILIO SALAZAR the
amount of ONE MILLION PESOS (P1,000,000.00) and that there is already a Deed of
Absolute Deed of [sic] Sale in favor of [Borres] of which both copies of the titles of the
properties for sale and all documents including the Deed of Absolute Sale
aforementioned are under the custody of MS. TERESA DIZON who will only release the
Title and the Deed of Absolute Sale after the obligation of [Borres] is fully paid. [16]
The withholding by Salazar through Dizon of the Deed of Absolute Sale, the
certificates of title, and all other documents relative to the two lots is an additional
indubitable proof that Salazar did not transfer to Borres either by actual or constructive
delivery the ownership of the two lots. While generally the execution of a deed of
absolute sale constitutes constructive delivery of ownership, the withholding by the
vendor of that deed under explicit agreement that it be delivered together with the
certificates of titles to the vendee only upon the latter's full payment of the consideration
amounts to a suspension of the effectivity of the deed of sale as a binding contract.
Undoubtedly, Salazar and Borres mutually agreed that despite the Deed of
Absolute Sale title to the two lots in question was not to pass to the latter until full
payment of the consideration of P1 million. The form of the instrument cannot prevail
over the true intent of the parties as established by the evidence.
Accordingly, since Borres was unable to pay the consideration, which was a
suspensive condition, Salazar cannot be compelled to deliver to her the deed of sale,
certificates of title, and other documents concerning the two lots. In other words, no right
in her favor and no corresponding obligation on the part of Salazar were created.Article
1181 of the Civil Code provides:
In conditional obligations, the acquisition of rights, as well as the extinguishment or
loss of those already acquired shall depend upon the happening of the event which
constitutes the condition.
Even granting for the sake of argument that, as ruled by the Court of Appeals, the
agreement of Salazar and Borres as evidenced by the Deed of Absolute Sale was a
perfected contract of sale, Borres' action for specific performance must likewise fail. We
are in full accord with the trial court and, perforce, disagree with the Court of Appeals,
that Borres was not ready to pay P500,000.00 on or before 15 June 1989. That Borres
had a check of P1.5 million, or of more than the full consideration of the two lots, is of no
moment. The check,[17] dated 15 June 1989, is a crossed check payable to "Atty. Jonette
Borres," or herein private respondent. The crossing is of simple type two parallel lines at
the upper left hand corner without the words "and company" between the
lines. Accordingly, it cannot be paid to anyone except Borres, or it can be deposited with
a bank where she keeps an account.[18]

There is absolutely no evidence that Borres encashed the check and tendered to
Salazar thru Dizon the sum of P500,000.00 on 15 June 1989. On the contrary, the check
itself was cancelled as shown by the word cancelled handwritten across it. Moreover, the
delivery of the check by Monteland Realty Corporation through Balao was not
unconditional. Per the receipt[19] Borres signed on 15 June 1989, encashment of the
check "is subject to the verifications as to the authenticity of documents pertaining to the
subject property." Neither is there evidence that Borres paid the downpayment on 15
June 1989 with money she got from other sources. No payment appears to have been
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
Civil Code for her to be released from her obligation and, consequently, exact fulfillment
by Salazar of his corresponding obligation.
The challenged decision of the Court of Appeals must then be reversed. That of the
trial court must be affirmed, with the modification consisting in the deletion of the award
of attorney's fees in favor of the petitioners which we find to be without basis. The award
of attorney's fees as damages is the exception rather than the rule; it is not to be given to
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
course such party acted in bad faith.[20]
WHEREFORE, the instant petition is hereby GRANTED. The challenged decision
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
Trial Court of Manila in Civil Case No. 89-4468 is AFFIRMED, subject to the modification
that the award for attorney's fees is deleted. No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, Francisco, and Panganiban, JJ., concur.
SPOUSES NESTOR CASTILLO and ROSIE REYES- G.R. No. 170917
CASTILLO,
Petitioners, Present:
YNARES-SANTIAGO,
Acting C.J., Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
SPOUSES RUDY REYES and CONSOLACION REYES, Promulgated:
Respondents.
November 28, 2007
x------------------------------------------------------------------------------------x
RESOLUTION
NACHURA, J.:
20
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the December 6, 2005 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV
No. 79385.
On November 7, 1997, Emmaliza Bohler and respondents negotiated for the sale of the
formers house and lot located at Poblacion, New Washington, Aklan, to the latter for the
consideration of P165,000.00.[2] On the following day, November 8, they signed an
Agreement which pertinently reads as follows:
We, the undersigned, agree to the following terms and
conditions regarding the sale of the house and lot located at Poblacion,
New Washington, Aklan:
1. That the total amount to be paid shall be One Hundred
Sixty-Five Thousand Pesos (P165,000.00) to be paid in full on or
before the 15th of December 1997;
2. That a partial payment (sic) a total amount of One Hundred
Thirty Thousand Pesos (P130,000.00) shall be made today, the 8th of
November 1997;
3. That the remaining balance in the amount (sic) of Thirty-
Five Thousand Pesos (P35,000.00) shall be made as per #1 above;
4. That the buyers, represented by the Spouses Rudy and
Consolacion Reyes (sic) shall be responsible for all the legal and other
related documents and procedures regarding this sale;
5. That the seller, represented by Ms. Emmaliza M. Bohler,
shall vacate the said house and lot on or (sic) the 31st of January,
1998;
6. That the tenants, represented by the Spouses Romeo and
Epifania Vicente, shall vacate the same on or before the 30th of April,
1998; and
7. That all parties concerned shall agree to all the terms and
conditions stipulated herein.[3]
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
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
respondents failed to make good the P110,000.00, Bohler subsequently sold the property
to the petitioners.[4]
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]

The pivotal question to be addressed by the Court in this petition is whether the
transaction between Bohler and the respondents is a perfected contract of sale or a
mere contract to sell.
Sale is a consensual contract and is perfected by mere consent, which is
manifested by a meeting of the minds as to the offer and acceptance thereof on the
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
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
the date of execution of the agreement and the remaining balance on or before
December 15, 1997. At that precise moment when the consent of both parties was given,
the contract of sale was perfected.
The said agreement cannot be considered a contract to sell. In
a contract of sale, the title to the property passes to the vendee upon the delivery of the
thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is
not to pass to the vendee until full payment of the purchase price. Otherwise stated, in
a contract of sale, the vendor loses ownership over the property and cannot recover it
until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title
is retained by the vendor until full payment of the price. In the latter contract, payment of
the price is a positive suspensive condition, failure of which is not a breach but an event
that prevents the obligation of the vendor to convey title from becoming effective. [11] The
November 8, 1997 Agreement herein cannot be characterized as a contract to
DECISION
NACHURA, J.:
This petition for review on certiorari seeks to set aside the Decision[1] of the
Court of Appeals (CA) in CA G.R. CV No. 62557 which affirmed in toto the Decision[2] of
the Regional Trial Court (RTC), Branch 16, Zamboanga City in Civil Case No. 467(4544).
The facts are simple.
Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No.
300 located in Lower Calainan, Zamboanga City and covered by Transfer Certificate of
Title (TCT) No. 3182 (T-576).
Sometime in 1991, petitioner United Muslim and Christian Urban Poor
Association, Inc. (UMCUPAI), an organization of squatters occupying Lot No. 300,
through its President, Carmen T. Diola, initiated negotiations with SFC for the purchase
thereof. UMCUPAI expressed its intention to buy the subject property using the proceeds
of its pending loan application with National Home Mortgage Finance Corporation
(NHMF). Thereafter, the parties executed a Letter of Intent to Sell by [SFC] and Letter of
Intent to Purchase by UMCUPAI, providing, in pertinent part:
WHEREAS, [SFC] is the registered owner of a parcel [of] land
designated as Lot No. 300 situated in Lower Calarian, Zamboanga
City, consisting of 61,736 square meters, and more particularly

described in Transfer Certificate of Title No. 576 of the Registry of
Deeds of Zamboanga City;
WHEREAS, UMCUPAI, an association duly registered with
the SEC (Registration No. 403410) and duly accredited with the
Presidential Commission for the Urban Poor, has approached [SFC]
and negotiated for the ACQUISITION of the above-described property
of [SFC];
WHEREAS, in pursuance to the negotiations between [SFC]
and UMCUPAI, the latter has taken steps with the proper government
authorities particularly the Mayor of Zamboanga City and its City
Housing Board which will act as Originator in the acquisition of said
property which will enable UMCUPAI to avail of its Community
Mortgage Program;
WHEREAS, it appears that UMCUPAI will ultimately apply
with the Home Mortgage and Finance Corporation for a loan to pay the
acquisition price of said land;
WHEREAS, as one of the steps required by the government
authorities to initiate proceedings is to receive a formal manifestation of
Intent to Sell from [SFC];
NOW, THEREFORE, for and in consideration of the foregoing
premises, the parties hereto agree as follows:
1. [SFC] expressly declares its intention to sell Lot No. 300
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
of Zamboanga City to UMCUPAI at the price of P105.00 per square
meter, free from all liens, charges and encumbrances;
2. That UMCUPAI hereby expressly declares its intention to
buy the aforesaid property and shall endeavor to raise the necessary
funds to acquire same at the abovementioned price of P105.00 per
square meter;
3. That the Absolute Deed of Sale shall be executed, signed
and delivered together with the title and all other pertinent documents
upon full payment of the purchase price;
4. That [SFC] shall pay the capital gains tax and
documentary stamps, Registration, transfer tax and other expenses
shall be paid by the UMCUPAI.[3]
However, the intended sale was derailed due to UMCUPAIs inability to secure the loan
from NHMF as not all its members occupying Lot No. 300 were willing to join the
undertaking. Intent on buying the subject property, UMCUPAI, in a series of conferences
with SFC, proposed the subdivision of Lot No. 300 to allow the squatter-occupants to
purchase a smaller portion thereof.
22
Consequently, sometime in December 1994, Lot No. 300 was subdivided into
three (3) parts covered by separate titles:
1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T-117,448;
2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T-
117,449; and
3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-
117,450.
On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58.
In turn, Lot No. 300-B was constituted as road right of way and donated by SFC to the
local government.
UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995,
UMCUPAI negotiated anew with SFC and was given by the latter another three months
to purchase Lot No. 300-C. However, despite the extension, the three-month period
lapsed with the sale not consummated because UMCUPAI still failed to obtain a loan
from NHMF. Thus, on July 20, 1995, SFC sold Lot No. 300-C for P2,547,585.00 to
respondent BRYC-V Development Corporation (BRYC).
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.
T-121,523. UMCUPAI alleged that the sale between the respondents violated its valid
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
the purchase of Lot No. 300-C.
In refutation, BRYC said that UMCUPAIs complaint did not state a cause of
action since UMCUPAI had unequivocally recognized its ownership of Lot No. 300-C
when UMCUPAI likewise sent BRYC a Letter of Intent dated August 18, 1995 imploring
BRYC to re-sell the subject lot.
In a separate Answer, SFC countered that the Letter of Intent dated October 4,
1991 is not, and cannot be considered, a valid and subsisting contract of sale. On the
contrary, SFC averred that the document was drawn and executed merely to
accommodate UMCUPAI and enable it to comply with the loan documentation
requirements of NHMF. In all, SFC maintained that the Letter of Intent dated October 4,
1991 was subject to a condition i.e., payment of the acquisition price, which UMCUPAI
failed to do when it did not obtain the loan from NHMF.
After trial, the RTC dismissed UMCUPAIs complaint. The lower court found that
the Letter of Intent was executed to facilitate the approval of UMCUPAIs loan from NHMF
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
option contract, nor an offer contemplated under Article 1319 of the Civil Code, or a
bilateral contract to sell and buy.
As previously adverted to, the CA, on appeal, affirmed in toto the RTCs ruling.
Hence, this recourse by UMCUPAI positing a sole issue for our resolution:

IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A
BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR
CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF
THE PHILIPPINES?[4]
The petition deserves scant consideration. We completely agree with the lower courts
rulings.
Well-entrenched in jurisprudence is the rule that factual findings of the trial
court, especially when affirmed by the appellate court, are accorded the highest degree
of respect and are considered conclusive between the parties. [5] A review of such
findings by this Court is not warranted except upon a showing of highly meritorious
circumstances, such as: (1) when the findings of a trial court are grounded entirely on
speculation, surmises or conjectures; (2) when a lower courts inference from its factual
findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion in the appreciation of facts; (4) when the findings of the appellate court go
beyond the issues of the case, or fail to notice certain relevant facts which, if properly
considered, would justify a different conclusion; (5) when there is a misappreciation of
facts; (6) when the findings of fact are conclusions without mention of the specific
evidence on which they are based, or are premised on the absence of evidence, or are
contradicted by evidence on record.[6] None of the foregoing exceptions necessitating a
reversal of the assailed decision obtain in this instance.
UMCUPAI is adamant, however, that the CA erred when it applied the second
paragraph of Article 1479 of the Civil Code instead of the first paragraph thereof.
UMCUPAI urges us that the first paragraph of Article 1479 contemplates a bilateral
reciprocal contract which is binding on the parties. Yet, UMCUPAI is careful not to
designate the Letter of Intent as a Contract to Sell. UMCUPAI simply insists that the
Letter of Intent is not a unilateral promise to sell or buy which has to be supported by a
consideration distinct from the price for it to be binding on the promissor. In short,
UMCUPAI claims that the Letter of Intent did not merely grant the parties the option to
respectively sell or buy the subject property. Although not stated plainly, UMCUPAI
claims that the Letter of Intent is equivalent to a conditional contract of sale subject only
to the suspensive condition of payment of the purchase price.
UMCUPAI appears to labor under a cloud of confusion. The first paragraph of
Article 1479 contemplates the bilateral relationship of a contract to sell as distinguished
from a contract of sale which may be absolute or conditional under Article 1458[7] of the
same code. It reads:
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price.
The case of Coronel v. Court of Appeals[8] is illuminating and explains the
distinction between a conditional contract of sale under Article 1458 of the Civil Code and
a bilateral contract to sell under Article 1479 of the same code:
23
A contract to sell may thus be defined as a bilateral contract
whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon,
that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional contract
of sale, the first element of consent is present, although it is
conditioned upon the happening of a contingent event which may or
may not occur. If the suspensive condition is not fulfilled, the perfection
of the contract of sale is completely abated. However, if the suspensive
condition is fulfilled, the contract of sale is thereby perfected, such that
if there had already been previous delivery of the property subject of
the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be
performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, ownership
will not automatically transfer to the buyer although the property may
have been previously delivered to him. The prospective seller still has
to convey title to the prospective buyer by entering into a contract of
absolute sale.
It is essential to distinguish between a contract to sell and a
conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller contracted with,
but to a third person, as in the case at bench. In a contract to sell,
there being no previous sale of the property, a third person buying
such property despite the fulfillment of the suspensive condition such
as the full payment of the purchase price, for instance, cannot be
deemed a buyer in bad faith and the prospective buyer cannot seek
the relief of reconveyance of the property. There is no double sale in
such case. Title to the property will transfer to the buyer after
registration because there is no defect in the owner-sellers title per se,
but the latter, of course, may be sued for damages by the intending
buyer.
In a conditional contract of sale, however, upon the fulfillment
of the suspensive condition, the sale becomes absolute and this will
definitely affect the sellers title thereto.In fact, if there had been
previous delivery of the subject property, the sellers ownership or title
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 property who may have had actual or constructive knowledge of
such defect in the sellers title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good

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
reconveyance of the property subject of the sale.
In the instant case, however, the parties executed a Letter of Intent, which is
neither a contract to sell nor a conditional contract of sale. As found by the RTC, and
upheld by the CA, the Letter of Intent was executed to accommodate UMCUPAI and
facilitate its loan application with NHMF. The 4th and 5th paragraphs of the recitals
(whereas clauses) specifically provide:
WHEREAS, it appears that UMCUPAI will ultimately apply
with the Home Mortgage and Finance Corporation for a loan to pay the
acquisition price of said land;
WHEREAS, as one of the steps required by the government
authorities to initiate proceedings is to receive a formal manifestation of
Intent to Sell from [SFC].
Nowhere in the Letter of Intent does it state that SFC relinquishes its title over
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
itself to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and Sell is
just that a manifestation of SFCs intention to sell the property and UMCUPAIs intention
to acquire the same. This is quite obvious from the reference to the execution of an
Absolute Deed of Sale in paragraph three[9] of the Letter of Intent.
As the CA did, we quote with favor the RTCs disquisition:
The Decision in this case hinges on the legal interpretation of the
Agreement entered into by SFC and UMCUPAI denominated as Letter
of Intent to Sell by Landowner and Letter of Intent to Purchase by
United Muslim and Christian Urban Poor Association, Inc.
Blacks Law Dictionary says that a Letter of Intent is
customarily employed to reduce to writing a preliminary understanding
of parties who intend to enter into contract. It is a phrase ordinarily
used to denote a brief memorandum of the preliminary understanding
of parties who intend to enter into a contract. It is a written statement
expressing the intention of the parties to enter into a formal agreement
especially a business arrangement or transaction.
In their Agreement, SFC expressly declared its intention to
sell and UMCUPAI expressly declared its intention to buy subject
property. An intention is a mere idea, goal, or plan. It simply signifies a
course of action that one proposes to follow. It simply indicates what
one proposes to do or accomplish. A mere intention cannot give rise to
an obligation to give, to do or not to do (Article 1156, Civil Code). One
cannot be bound by what he proposes or plans to do or accomplish. A
Letter of Intent is not a contract between the parties thereto because it
does not bind one party, with respect to the other, to give something,
or to render some service (Art. 1305, Civil Code).
24
xxxxxxxxx
The Letter of Intent/Agreement between SFC and UMCUPAI is merely
a written preliminary understanding of the parties wherein they
declared their intention to enter into a contract of sale. It is subject to
the condition that UMCUPAI will apply with the Home Mortgage and
Finance Corporation for a loan to pay the acquisition price of said land.
One of the requirements for such loan is a formal manifestation of
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
certain and definite proposal to make a contract but merely a
declaration of SFCs intention to enter into a contract. UMCUPAIs
declaration of intention to buy is also not certain and definite as it is
subject to the condition that UMCUPAI shall endeavor to raise funds to
acquire subject land. The acceptance of the offer must be absolute; it
must be plain and unconditional. Moreover, the Letter of
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
UMCUPAI could secure a loan to pay for the price of a land.
The Letter of Intent/Agreement is not an option contract because aside
from the fact that it is merely a declaration of intention to sell and to
buy subject to the condition that UMCUPAI shall raise the necessary
funds to pay the price of the land, and does not contain a binding
promise to sell and buy, it is not supported by a distinct consideration
distinct from the price of the land intended to be sold and to be bought
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
within a fixed period nor was SFC bound under said Agreement to Sell
exclusively to UMCUPAI only the said land within the fixed period.
Neither can the Letter of Intent/Agreement be considered a bilateral
reciprocal contract to sell and to buy contemplated under Article 1479
of the Civil Code which is reciprocally demandable. The Letter of
Intent/Agreement does not contain a PROMISE to sell and to buy
subject property. There was no promise or commitment on the part of
SFC to sell subject land to UMCUPAI, but merely a declaration of its
intention to buy the land, subject to the condition that UMCUPAI could
raise the necessary funds to acquire the same at the price of P105.00
per square meter x x x
While UMCUPAI succeeded in raising funds to acquire a portion
of Lot No. 300-A, it failed to raise funds to pay for Lot No. 300-C. From
October 4, 1991 when the Letter of Intent was signed to June, 1995,
UMCUPAI had about three (3) years and eight (8) months within which
to pursue its intention to buy subject land from SFC. Within that period,
UMCUPAI had ample time within which to acquire Lot No. 300-C, as in
fact it had acquired Lot No. 300-A which is much bigger than Lot No.
300-C and occupied by more members of UMCUPAI. The failure of
UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V
cannot be blamed on SFC because all that UMCUPAI had to do was to

raise funds to pay for Lot No. 300-C which it did with respect to Lot No.
300-A. SFC had nothing to do with SFCs unilateral action through Mrs.
Antonina Graciano to postpone the processing of the acquisition of Lot
No. 300-C, which it referred to as Phase II, until after the payment to
SFC of the acquisition price for Lot No. 300-A or Phase I x x x
WHEREFORE, premises considered, the petition is hereby DENIED. The
Decision of the Court of Appeals in CA G.R. CV No. 62557 and the Regional Trial Court
in Civil Case No. 467(4544) are AFFIRMED. Costs against the petitioner.
SO ORDERED.
G.R. No. L-61623 December 26, 1984
PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant,
vs.
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R.
MENDOZA, respondents-appellees.
Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner
PHHC.
Tolentino, Cruz, Reyes, Lava and Manuel for private respondents.
AQUINO, J.:
The question in this case is whether the People's Homesite & Housing Corporation
bound itself to sell to the Mendoza spouses Lot 4 (Road) Pcs- 4564 of the revised
consolidation subdivision plan with an area of 2,6,08.7 (2,503.7) square meters located
at Diliman, Quezon City.
The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein
it stated "that subject to the approval of the Quezon City Council of the above-mentioned
Consolidation Subdivision Plan, Lot 4. containing 4,182.2 square meters be, as it is
hereby awarded to Spouses Rizalino Mendoza and Adelaida Mendoza, at a price of
twenty-one pesos (P21.00) per square meter" and "that this award shall be subject to the
approval of the OEC (PHHC) Valuation Committee and higher authorities".
The city council disapproved the proposed consolidation subdivision plan on August 20,
1961 (Exh. 2). The said spouses were advised by registered mail of the disapproval of
the plan (Exh. 2-PHHC). Another subdivision plan was prepared and submitted to the city
council for approval. The revised plan, which included Lot 4, with a reduced area of
2,608.7, was approved by the city council on February 25, 1964 (Exh. H).
On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards of
lots to persons who failed to pay the deposit or down payment for the lots awarded to
them (Exh. 5). The Mendozas never paid the price of the lot nor made the 20% initial
deposit.
On October 18, 1965 the PHHC board of directors passed Resolution No. 218,
withdrawing the tentative award of Lot 4 to the Mendoza -spouses under Resolution No.
513 and re-awarding said lot jointly and in equal shares to Miguela Sto. Domingo,
Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, subject to
existing PHHC rules and regulations. The prices would be the same as those of the
adjoining lots. The awardees were required to deposit an amount equivalent to 20% of
the total selling price (Exh. F).
The five awardees made the initial deposit. The corresponding deeds of sale were
executed in their favor. The subdivision of Lot 4 into five lots was approved by the city
council and the Bureau of Lands.
25
On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal of
the previous award to them of Lot 4 and for the cancellation of the re-award of said lot to
Sto. Domingo and four others. Before the request could be acted upon, the spouses filed
the instant action for specific performance and damages.
The trial court sustained the withdrawal of the award. The Mendozas appealed. The
Appellate Court reversed that decision and declared void the re-award of Lot 4 and the
deeds of sale and directed the PHHC to sell to the Mendozas Lot 4 with an area of
2,603.7 square meters at P21 a square meter and pay to them P4,000 as attorney's fees
and litigation expenses. The PHHC appealed to this Court.
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
performance.
We hold that there was no perfected sale of Lot 4. It was conditionally or contingently
awarded to the Mendozas subject to the approval by the city council of the proposed
consolidation subdivision plan and the approval of the award by the valuation committee
and higher authorities.
The city council did not approve the subdivision plan. The Mendozas were advised in
1961 of the disapproval. In 1964, when the plan with the area of Lot 4 reduced to 2,608.7
square meters was approved, the Mendozas should have manifested in writing their
acceptance of the award for the purchase of Lot 4 just to show that they were still
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
withdrawing the tentative award.
"The contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. From that moment, the
parties may reciprocally demand performance, subject to the law governing the form of
contracts." (Art. 1475, Civil Code).
"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de
las partes o de la ley, se celebra la venta bajo una condicion suspensiva, y en los cuales
no se perfecciona la venta hasta el cumplimiento de la condicion" (4 Castan Tobenas,
Derecho Civil Español 8th ed. p. 81).
"In conditional obligations, the acquisition of rights, as well as the extinguishment or loss
of those already acquired, shall depend upon the happening of the event which
constitutes the condition. (Art. 1181, Civil Code). "Se llama suspensive la condicion de la
que depende la perfeccion, o sea el principio del contrato". (9 Giorgi, Teoria de las
Obligaciones, p. 57).
Under the facts of this case, we cannot say there was a meeting of minds on the
purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square meter.
The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the
awardee in that case applied for the purchase of the lot, paid the 10% deposit and a
conditional contract to sell was executed in his favor. The PHHC could not re-award that
lot to another person.
WHEREFORE, the decision of the Appellate Court is reversed and set aside and the
judgment of the trial court is affirmed. No costs.
SO ORDERED.
Makasiar (Chairman), Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.
G.R. No. 85733 February 23, 1990
Sps. ENRIQUE and CONSUELO LIM, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, Sps. TERESITA and OSCAR GUEVARRA,
Sps. MARCOS and ANITA ORLINO, Sps. ROMULO and CONSUELO ORLINO and
Sps. FELIX and DOLORES ORLINO, respondents.
Salonga, Andres, Hernandez & Allado for petitioners.

Ocampo, Dizon & Domingo for private respondent Pacific Banking Corporation.
CRUZ, J.:
The subject of this controversy is a parcel of land consisting of 1,101 square meters and
located in Diliman, Quezon City. It was originally owned by Felix, Manuel and Maria
Concepcion Orlino, who mortgaged it to the Progressive Commercial Bank as security for
a P100,000.00 loan on July 1, 1965. The loan not having been paid, the mortgage was
foreclosed and the bank acquired the property as the highest bidder at the auction sale
on March 28, 1969. The mortgagee thereafter transferred all its assets, including the said
land, to the Pacific Banking Corporation (PBC).
On May 22, 1975, the Orlinos, and their respective spouses (hereinafter referred to as
the private respondents), who had remained in possession of the land, made a written
offer to PBC to repurchase the property. In response, the bank, through its Assistant
Vice-President, sent the following letter dated November 9, 1977, to the private
respondents' counsel:
This will confirm our agreement concerning the repurchase by your
clients, Mr. and Mrs. Oscar C. Guevarra of that certain property
situated at 26 Jose Abad Santos, Heroes Hills, Quezon City with an
area of 1,1 01 square meters, more or less, under the following terms
and conditions:
a) The cash consideration shall be P160,000.00
payable in full upon signing of the Deed of Absolute
Sale;
b) The additional consideration shall consist of your
client's conveyance to us of their share of 2,901.15
square meters on the property situated at Camarin,
Caloocan City.
We understand that your clients will be applying for a loan with a bank.
In this connection, we are enclosing a xerox copy of the Transfer
Certificate of Title No. 218661 Quezon City, Tax Declaration No. 3092
and Official Receipt No. E-404723 covering payment of real estate
taxes for 1977. Kindly request your clients to expedite the loan so that
we can consummate the transaction as soon as possible.
Please request your clients to sign their conformity below and return
the duplicate thereof for our files. 1
Oscar C. Guevarra, one of the private respondents, indicated the required conformity.
One year later, on November 2, 1978, PBC advised the private respondents that if the
transaction was not finalized within 30 days, it would consider the offer of other
buyers. 2 The record does not show any further development until June 8, 1979, when
the private respondents requested PBC to allow them to secure a certified true copy of its
Torrens certificate over the land for purposes of its survey and partition among them
preparatory to the actual transfer of title to them. 3 PBC granted the request subject to
the condition that title would remain with it until the execution of the necessary deed of
conveyance. 4
On April 8, 1980, or two years later, PBC reminded the private respondents of its letter of
November 2, 1978, but again no action was taken to deliver to it the stipulated
consideration for the sale. Finally, on May 14, 1980, PBC executed a deed of sale over
the land in favor of the herein petitioners, the spouses Enrique and Consuelo Lim, for the
sum of P300,000.00. 5
On September 30, 1980, the private respondents filed a complaint in the Regional Trial
Court of Quezon City against the petitioners and PBC for the annulment of the deed of
sale on the ground that the subject land had been earlier sold to them. In its judgment for
the plaintiffs, the court held that both PBC and the spouses Lim had acted in bad faith
26
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
the petitioners are now before us, urging reversal.
The petitioners claim they are purchasers in good faith, having relied on the assurances
of PBC as verified from the records in the Registry of Deeds of Quezon City that the land
belonged to PBC and was unencumbered. They therefore should have preferential right
to the disputed land, which they had registered in their name under TCT No. 268623. For
their part, the private respondents insist that as they had a valid and binding earlier deed
of sale in their favor, the land could no longer be sold by PBC to the petitioners, who
were aware of their prior right.
In support of their position that it was not incumbent upon them to go beyond the land
records to check the real status of the land, the petitioners cite Seño v. Mangubat8 where
the Court said:
In order that a purchaser of land with a Torrens title may be considered
as a purchaser in good faith, it is enough that he examines the latest
certificate of title which in this case is that issued in the name of the
immediate transferor. The purchaser is not bound by the original
certificate of title but only by the certificate of title of the person from
whom he has purchased the property.
xxx xxx xxx
Thus, where innocent third persons relying on the correctness of the
certificate of title issued, acquire rights over the property, the court
cannot disregard such rights and order the total cancellation of the
certificate for that would impair public confidence in the certificate of
title; otherwise everyone dealing with property registered under the
torrens system would have to inquire in every instance as to whether
the title had been regularly or irregularly issued by the court. Indeed,
this is contrary to the evident purpose of the law. Every person dealing
with registered land may safely rely on the correctness of the certificate
of title issued therefore and the law will in no way oblige him to go
behind the certificate to determine the condition of the property. Stated
differently, an innocent purchaser for value relying on a torrens title
issued is protected.
And even assuming that there was an earlier valid sale of the property to the private
respondents, the petitioners add, they would still prevail under Article 1544 of the Civil
Code, providing as follows:
If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title, provided
there is good faith.
The private respondents, however, deny that the petitioners had acted in good faith,
pointing to the evidence that Consuelo Lim had, before the execution of the disputed
deed of sale, visited the property and been informed of their existing adverse claim
thereto.9 Besides, the said deed contained the following stipulation:
That the VENDEE is aware of the fact that the aforementioned
property is presently occupied by the former owners and that clearing

of the property of its occupants shall be for the exclusive responsibility
and account of the vendee.
And, indeed, the Court also said in Seno that:
The well-known rule in this jurisdiction is that a person dealing with a
registered land has a right to rely upon the face of the Torrens
Certificate of Title and to dispense with the need of inquiring
further, except when the party concerned has actual knowledge of
facts and circumstances that would impel a reasonably cautious man
to make such inquiry. (Emphasis supplied.)
As the Court sees it, the real issue is not whether the petitioner acted in good faith but
whether there was in fact a prior sale of the same property to the private respondents.
Only if it is established that there was indeed a double sale of the property will it be
necessary to ascertain if Article 1544 is applicable.
Stated differently, the question is: Was the transaction between private respondents and
PBC, as embodied in the letter of November 9, 1977, a contract to sell or a contract of
sale?
It is not enough to say that the contract of sale being consensual, it became effective
between the bank and the private respondents as of November 9, 1977. There is no
question about that; but such agreement is like putting the cart before the horse.
Precisely, our purpose is to ascertain to what particular undertakings the parties have
given their mutual consent so we can determine the nature of their agreement.
According to Sing Yee v. Santos: 10
... A distinction must be made between a contract of sale in which title
passes to the buyer upon delivery of the thing sold and a contract to
sell (or of exclusive right and privilege to purchase as in this case)
where by agreement the ownership is reserved in the seller 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 negative resolutory condition; in
the second case, full payment is a positive suspensive condition. Being
contraries, their effect in law cannot be Identical. In the first case, the
vendor has lost and cannot recover the ownership of the land sold until
and unless the contract of sale 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 condition precedent of making payment at
the time specified in the contract.
Applying these distinctions, the Court finds that the agreement between PBC and the
private respondents was only a contract to sell, not a contact of sale. And the reasons
are obvious.
There was no immediate transfer of title to the private respondents as would have
happened if there had been a sale at the outset. The supposed sale was never
registered and TCT No. 218661 in favor of PBC was not replaced with another certificate
of title in favor of the private respondents. In their letter to PBC on June 8, 1979, they
acknowledged that title to the property would remain with the bank until their transaction
shall have been finalized. In response, PBC reiterated the same condition. No less
important, the consideration agreed upon by the parties was never paid by the private
respondents, to convert the agreement into a contract of sale. In fact, PBC reminded
them twice — on November 2, 1978, and on April 8, 1980 — to comply with their
obligations. They did not. Their default was not, as the respondent court described it, "a
slight delay" but lasted for all of three years and in fact continued up to the rendition of
the decision in the trial court. As payment of the consideration was a positive suspensive
condition, title to the subject property never passed to the private respondents. Hence,
the property was legally unencumbered and still belonged to PBC on May 14, 1980,
when it was sold by the bank to the petitioners.
27
It is true that the contract to sell imposes reciprocal obligations and so cannot be
terminated unilaterally by either party. Judicial rescission is required under Article 1191 of
the Civil Code. However, this rule is not absolute. We have held that in proper cases, a
party may take it upon itself to consider the contract rescinded and act accordingly albeit
subject to judicial confirmation, which may or may not be given. It is true that the
rescinding party takes a risk that its action may not be approved by the court. But as we
said in University of the Philippines v. De los Angeles: 11
Of course, it must be understood that the act of a party in treating a
contract as cancelled or resolved on account of infractions by the other
contracting party must be made known to the other and is always
provisional, being ever subject to scrutiny and review by the proper
court. If the other party denies that rescission is justified, it is free to
resort to judicial action in its own behalf, and bring the matter to court.
Then, should the court, after due hearing, decide that the resolution of
the contract was not warranted, the responsible party will be sentenced
to damages; in the contrary case, the resolution will be affirmed, and
the consequent indemnity awarded to the party prejudiced.
In other words, the party who deems the contract violated may
consider it resolved or rescinded, and act accordingly, without previous
court action, but it proceeds at its own risk. For it is only the final
judgment of the corresponding court that will conclusively and finally
settle whether the action taken was or was not correct in law. But the
law definitely does not require that the contracting party who believes
itself injured must first file suit and wait for a judgment before taking
extrajudicial steps to protect its interest. Otherwise, the party injured by
the other's breach will have to passively sit and watch its damages
accumulate during the pendency of the suit until final judgment of
rescission is rendered when the law itself requires that he should
exercise due diligence to minimize its own damages.
In the case at bar, the private respondents obligated themselves to deliver to the bank
the sum of P160,000.00 and their share of 2,901.15 square meters on a property situated
in Caloocan City. In the letter of PBC dated November 9, 1977, they were requested to
"expedite the loan (they were negotiating for this purpose) so we can consummate the
transaction as soon as possible". That was in 1977. In 1978, they were reminded of their
obligation and asked to comply within thirty days. They did not. On April 8, 1980, they
were reminded of that letter of November 2, 1978, and again asked to comply; but again
they did not. Surely, the bank could not be required to wait for them forever, especially so
since they remained in possession of the property and there is no record that they were
paying rentals. Under the circumstances, PBC had the right to consider the contract to
sell between them terminated for non-payment of the stipulated consideration. We
hereby confirm that rescission.
Having arrived at these conclusions, the Court no longer finds it necessary to determine
if the petitioners acted in bad faith when they purchased the subject property. The private
respondents lost all legal interest in the land when their contract to sell was rescinded by
PBC for their non-compliance with its provisions. As that contract was rito longer effective
when the land was sold by PBC to the petitioners, the private respondents had no legal
standing to assail that subsequent transaction. The deed of sale between PBC and the
petitioners must therefore be sustained.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of
Appeals is REVERSED. TCT No. 268623 in favor of the petitioners is recognized as valid
and the complaint for the annulment of the deed of sale dated May 14, 1980, is hereby
dismissed. Costs against the private respondents.
SO ORDERED.

Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
G.R. No. 102909 September 6, 1993
SPOUSES VICENTE and LOURDES PINGOL, petitioners,
vs.
HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, namely:
MELINDA D. PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, NATIVIDAD D.
PELAYO, YOLANDA D. CACERES and MARY DONASCO, respondents.
Bernardo S. Chan for petitioners.
Orlando A. Galope for respondents.
DAVIDE, JR., J.:
An action denominated as one for specific performance and damages was brought by
the private respondents against the petitioners before the Regional Trial Court (RTC) of
Caloocan City which, after due trial, rendered a decision in favor of the petitioners. On
appeal, the respondent Court reversed the trial court's decision.
It is from this judgment that the petitioners have appealed to this Court by way of a
petition for review on certiorari.
The material facts of this case are simple and undisputed.
Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of
Caloocan, with an area of 549 square meters, located at Bagong Barrio, Caloocan City
and more particularly described in Transfer Certificate of Title (TCT) No. 7435 of the
Registry of Deeds of Caloocan City. On 17 February 1969, he executed a "DEED OF
ABSOLUTE SALE OF ONE-HALF OF (1/2) [OF] AN UNDIVIDED PORTION OF A
PARCEL OF LAND" in favor of Francisco N. Donasco which was acknowledged before a
notary public. The parcel of land referred to herein is Lot No. 3223 and the pertinent
portions of the document read as follows:
That for and in consideration of the sum of TWENTY THOUSAND
AND FIVE HUNDRED THIRTY (P20,530.00) PESOS, Philippine
Currency, the VENDOR hereby these presents SELL, CONVEY AND
CONVEY by way of Absolute Sale the one-half (1/2) portion,
equivalent to Two Hundred Seventy Four and point Fifty (274.50)
square meters, to VENDEE, the above-mentioned property, his heirs,
assigns and successors-in- interest;
That the VENDOR hereby confesses and acknowledges the receipt of
TWO THOUSAND (P2,000.00) PESOS from VENDEE as advanced
(sic) and partial payment to the above-cited consideration of the Sale
herein mentioned, leaving therefor a balance of Eighteen Thousand
and Five Hundred Thirty (P18,530) Pesos to be paid in several equal
installments within a period of six (6) years, beginning January, 1970;
That after computing the above-mentioned equal installments, the
VENDEE agrees and undertakes to pay unto the VENDOR a monthly
amount equivalent to Two Hundred Fifty Seven (sic) and Thirty Six
Centavos (P257.36) within a period of Seventy One (71) months and
on the Seven Two [sic] (72) month, the amount of (P257.44) as the last
and final installment thereof;
That the VENDEE agrees that in case of default in the payment of the
installment due the same shall earn a legal rate of interest, and to
which the VENDOR likewise agrees;
That the VENDEE undertakes to pay unto the VENDOR the herein
monthly installment within the first five (5) days of each month and the
same shall be made available and to be paid at the residence of the
VENDOR, payment to be made either directly to the VENDOR, his wife
or his authorized representative or factor;
28
That in case of partition of the above-described property between
herein VENDOR and VENDEE the same shall be divided into two (2)
equal parts, the VENDOR gets the corner facing J. De Jesus and
Malolos Avenue and the VENDEE shall get the portion with fifteen 15
meters frontage facing J. De Jesus Street only.1
Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion,
designated as Lot No. 3223-A, was then segregated from the mother lot, and the parties
prepared a subdivision plan (Exhibit "C") which was approved by the Land Registration
Commission.2
Francisco immediately took possession of the subject lot and constructed a house
thereon. In January 1970, he started paying the monthly installments but was able to pay
only up to 1972.
On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid
P8,369.00, plus the P2,000.00 advance payment, leaving a balance of P10,161.00 on
the contract price. 3 Lot No. 3223-A remained in the possession of Donasco's heirs.
On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific
Performance and Damages, with Prayer for Writ of Preliminary Injunction" against the
spouses Vicente and Lourdes Pingol (petitioners herein) before the RTC of Caloocan
City. The action was docketed as Civil Case No. 13572 and raffled off to Branch 125 of
the said court.
In their complaint, 4 the plaintiffs (private respondents herein) averred that after the death
of their father, they offered to pay the balance of P10,161.00 plus the stipulated legal rate
of interest thereon to Vicente Pingol but the latter rebuffed their offer and has "been
demanding for a bigger and unreasonable amount, in complete variance to what is
lawfully due and payable." They stated that they had "exerted earnest efforts to forge or
reach an amicable and peaceful settlement with the defendants" for the payment of the
property in question but to no avail. They further alleged that the defendants were
committing "acts of forcible entry and encroachment" upon their land and asked that a
writ of preliminary injunction be issued to restrain the defendants from the acts
complained of.
Plaintiffs then prayed that the defendants be ordered, inter alia:
a. . . . to accept the amount of P10,161.00, more or less, plus the
stipulated legal rate of interest due thereon, as full and complete
payment of the balance for the agreed price/consideration on the one-
half (1/2) portion of the parcel of land . . .; [and]
b. . . . to execute the final deed of sale on the one-half (1/2) portion of
the lot . . . in accordance with the partition reflected in the survey and
subdivision plan, . . . .5
In their answer with counterclaim, 6 defendants admitted the execution of the
aforementioned deed of sale, the segregation of the portion sold and the preparation and
approval of the subdivision plan, but set up the following special and affirmative
defenses: (1) plaintiffs' cause of action had already prescribed; (2) the deed of sale
embodied a conditional contract of sale "as the consideration is to be paid on installment
basis within a period of six years beginning January, 1970"; (3) the subdivision plan was
prepared on the assumption that Francisco Donasco would be able to comply with his
obligation; (4) when Francisco died, he had not fully paid the total consideration agreed
upon; and (5) considering the breach by Francisco of his contractual obligation way back
in 1976, the sale was deemed to have been cancelled and the continuous occupancy of
Francisco after 1976 and by his heirs thereafter was by mere tolerance of Vicente Pingol.
They then asked that the plaintiffs be ordered to vacate the premises and to pay them
attorney's fees and a reasonable compensation for the use of the land.
In their Reply and Answer to Counterclaim, 7 the plaintiffs pointed out that there is no
provision in the deed of sale for its cancellation in case of default in the payment of the

monthly installments and invoked Article 1592 of the New Civil Code. They specifically
denied the allegations in the counterclaim.
The issues having been joined, the case was then tried on the merits.
On 22 January 1990, the trial court rendered a decision 8 dismissing the complaint and
ordering the plaintiffs to pay the defendants P350.00 as reasonable monthly rental for the
use of the premises from the filing of the complaint, P10,000.00 by way of attorney's
fees, and the costs of the suit. It held that: (1) the deed of absolute sale in question,
marked and offered in evidence as Exhibit "A," is a contract to sell, not a contract of sale,
since Vicente Pingol had no intention to part with the ownership of the loan unless the full
amount of the agreed price had been paid; (2) the contract was deemed to have been
cancelled from the moment the late father of the plaintiffs defaulted in the payment of the
monthly installments; (3) title and ownership over the lot did not pass to Francisco
Donasco and his heirs since the contract to sell was never consummated; and (5)
assuming, arguendo, that the plaintiffs have a cause of action for specific performance,
such action had already prescribed since the complaint was filed only on 19 October
1988 or more than ten years from the time that they could have lawfully demanded
performance.9
Plaintiffs elevated the case to the Court of Appeals where the appeal was docketed as
CA-G.R. CV No. 25967. On 12 November 1991, the said court rendered a
decision 10 reversing the appealed decision and decreeing as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and
SET ASIDE and another one is rendered:
(1) Ordering appellee-vendor Vicente Pingol to accept the sum of
P10,161.00, plus the legal interest due thereon from the date of
institution of this action on October 19, 1988;
(2) Upholding the validity of the "DEED OF ABSOLUTE SALE OF
ONE- HALF (1/2) (of) AN UNDIVIDED PORTION OF A PARCEL OF
LAND" (Exh. A), and by virtue and on the strength of which declaring
the "Heirs of the Deceased Francisco N. Domingo" as the owners of
the 274.50 sq. m. land, denominated as Lot 3223-A, (LRC) Psd-
146255 under the technical description (exh. D) and reflected in the
Plan of Subdivision Survey which was approved By Commissioner of
Land Registration on August 13, 1971 (exh. C), representing one-half
portion [of] lot 3223, situated at the corner of Malolos Avenue and G.
de Jesus St., Bagong Barrio, Caloocan City, and covered by TCT No.
7435 of the Registry of Deeds of Caloocan City (exh. B); and
(3) Ordering the defendants-appellees to pay the costs.
SO ORDERED. 11
The Court of Appeals ruled that the deed of sale in question reveals the clear intention of
Vicente Pingol to part with the ownership of the one-half portion of the land by way of an
absolute sale; that the failure to fully pay the agreed price was not a ground for the
cancellation of the sale; and that the plaintiffs' action is imprescriptible since it is akin to
an action to quiet title to property in one's possession.12
Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter
referred to as the petitioners, filed this petition for certiorari on 9 January 1992. Plaintiffs,
hereinafter referred to as the private respondents, filed their comment thereto on 10
September 1992 to which the petitioners filed a reply 11 November 1992. We gave due
course to the petition and required the parties to submit their respective
memoranda, 13 which they subsequently complied with.
Petitioners contend that the Court of Appeals erred:
I Furthermore, as found by the Court of Appeals, the acts of the parties, contemporaneous
IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED
AS "ABSOLUTE DEED OF SALE OF ONE-HALF (½) OF AN
29
UNDIVIDED PORTION OF A PARCEL OF LAND" IS AN ABSOLUTE
DEED OF SALE SUFFICIENT TO CONFER OWNERSHIP ON THE
VENDEE AND HIS SUCCESSORS-IN-INTEREST, DESPITE THE
FACT THAT BY ITS TERMS AND CONDITIONS, LIKE THE PRICE
BEING PAYABLE ON INSTALLMENTS WITHIN A FIXED PERIOD,
THE SAME IS A CONDITIONAL DEED OF SALE.
II
IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE
VENDEE FAILED TO COMPLY WITH THE TERMS OF THE
CONTRACT (EXHIBIT "A") SPECIFICALLY TO COMPLETE THE
PAYMENT OF THE CONSIDERATION ON THE DATE STIPULATED
IN THE CONTRACT WHICH WAS SUPPOSED TO BE IN JANUARY
1976, COMPLETE PAYMENT THEREOF CAN STILL BE ENFORCED
IN AN ACTION INSTITUTED BY THE HEIRS OF THE VENDEE
FILED ON OCTOBER 19, 1988 OR A PERIOD OF MORE THAN
TWELVE (12) YEARS FROM THE TIME COMPLETE PAYMENT
SHOULD HAVE BEEN MADE;
III
IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE
WHICH IS AN OFFER TO COMPLETE THE PAYMENT LEFT
UNPAID BY PRIVATE RESPONDENTS' FATHER WHICH DOES NOT
PRESCRIBE;
IV
IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION
HAS NOT PRESCRIBE.14
The decisive issue in this case is whether Exhibit "A" embodies a contract of sale or a
contract to sell. The distinction between the two is important for in a contract of sale, the
title passes to the vendee upon the delivery of the thing sold, whereas in a contract to
sell, by agreement, ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded, whereas in a contract to
sell, title is retained by the vendor until the full payment of the price, such payment being
a positive suspensive condition, failure of which is not a breach but an event that
prevented the obligation of the vendor to convey title from becoming
effective.15
A perusal of Exhibit "A" leads to no other conclusion than that it embodies a contract of
sale. The plain and clear tenor of the "DEED OF ABSOLUTE SALE OF ONE-HALF (1/2)
[OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" is that "the VENDOR hereby
. . . SELL, CONVEY AND CONVEY by way Absolute Sale the one-half (1/2) portion . . .
to the VENDEE . . . his heirs, assigns and successors-in-interest." That the vendor,
petitioner Vicente Pingol, had that clear intention was further evidenced by his failure to
reserve his title thereto until the full payment of the price.
In Dignos vs. Court of Appeals, 16 we held that a deed of sale is absolute in nature
although denominated as a "Deed of Conditional Sale" where there is no stipulation in
the deed that title to the property sold is reserved in the seller until the full payment of the
price, nor is there a stipulation giving the vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay within a fixed period. Exhibit "A" contains
neither stipulation. What is merely stated therein is that "the VENDEE agrees that in case
of default in the payment of the installments due the same shall earn a legal rate of
interest, and to which the VENDOR likewise agrees."
and subsequent to the contract, clearly show that an absolute deed of sale was intended,
by the parties and not a contract to sell:

[P]ursuant to the deed, the vendor delivered actual and constructive
possession of the property to the vendee, who occupied and took such
possession, constructed a building thereon, had the property surveyed
and subdivided and a plan of the property was prepared and submitted
to the Land Registration Commission which approved it preparatory to
segregating the same and obtaining the corresponding TCT in his
name. Since the sale, appellee continuously possessed and occupied
the property as owner up to his death on July 13, 1984 and his heirs,
after his death, continued the occupancy and possession of the
property up to the present. Those contemporaneous and subsequent
events are demonstrative acts that the vendor since the sale
recognized the vendee as the absolute owner of the property sold. All
those attributes of ownership are admitted by defendants in their
answer, specifically in paragraphs 7 and 9 of their special and
affirmative defenses.17
The contract here being one of absolute sale, the ownership of the subject lot was
transferred to the buyer upon the actual and constructive delivery thereof. The
constructive delivery of the subject lot was made upon the execution of the deed of
sale 18 while the actual delivery was effected when the private respondents took
possession of and constructed a house on Lot No. 3223-A.
The delivery of the object of the contract divested the vendor of the ownership over the
same and he cannot recover the title unless the contract is resolved or rescinded
pursuant to Article 1592 of the New Civil Code which provides that:
In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay,
even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or
by a notarial act. After the demand, the court may not grant him a new
term.
Both the trial court and the Court of Appeals did not find that a notarial or judicial
rescission of the contract had been made. Although Vicente Pingol asserts that he had
declared to Francisco Donasco that he was cancelling the contract, he did not prove that
his demand for rescission was made either judicially or by a notarial act.
Petitioners fault the respondent Court for holding that the action of the petitioners is not
barred by the statute of limitations. They argue that the private respondents' action, being
based upon a written contract, has prescribed since it was brought only in 1988 or more
than ten years from the time when the latter could have lawfully demanded
performance.19
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.
30
That a cloud has been cast on the title of the private respondents is indubitable. Despite
the fact that the title had been transferred to them by the execution of the deed of sale
and the delivery of the object of the contract, the petitioners adamantly refused to accept
the tender of payment by the private respondents and steadfastly insisted that their
obligation to transfer title had been rendered ineffective.
A vendee in an oral contract to convey land who had made part payment thereof, entered
upon the land and had made valuable improvements thereon, is entitled to bring suit to
clear his title against the vendor who had refused to transfer the title to him. It is not
necessary that the vendee has an absolute title, an equitable title being sufficient to
clothe him with personality to bring an action to quiet title. 21
Prescription thus cannot be invoked against the private respondents for it is aphoristic
that an action to quiet title to property in one's possession is
imprescriptible. 22 The rationale for this rule has been aptly stated thus:
The owner of real property who is in possession thereof may wait until
his possession is invaded or his title is attacked before taking steps to
vindicate his right. A person claiming title to real property, but not in
possession thereof, must act affirmatively and within the time provided
by the statute. Possession is a continuing right as is the right to defend
such possession. So it has been determined that an owner of real
property in possession has a continuing right to invoke a court of equity
to remove a cloud that is a continuing menace to his title. Such a
menace is compared to a continuing nuisance or trespass which is
treated as successive nuisances or trespasses, not barred by statute
until continued without interruption for a length of time sufficient to
affect a change of title as a matter of law.23
Private respondents shall, however, be liable to pay the legal rate of interest on the
unpaid balance of the purchase price from the date default or on 6 January 1976, when
the entire balance should have been paid, pursuant to the provision in the deed of sale.
WHEREFORE, except as above modified, the Decision appealed from is hereby
AFFIRMED. As modified, the interest on the unpaid balance of P10,161.00, at the legal
rate, shall be computed from 6 January 1976. Upon the payment by the private
respondents to the petitioners of the said amount and the interest thereon, the latter are
ordered to deliver Transfer Certificate of Title No. 7435 to the Register of Deeds of
Caloocan City who shall cancel the same and issue two new transfer certificates of title in
lieu thereof, one of which shall be in the name of the herein private respondents covering
Lot No. 3223-A and the other in the name of the petitioners covering the remainder of the
lot.
SO ORDERED.
Cruz, Griño-Aquino, Bellosillo and Quiason, JJ., concur.