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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 abovementioned Consolidation Subdivision Plan, Lot 4. containing4,182.2 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.
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 Espaol 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.
G.R. No. L-55665 February 8, 1989
DELTA MOTOR CORPORATION, petitioner,
vs.
EDUARDA SAMSON GENUINO, JACINTO S. GENUINO, Jr., VICTOR S. GENUINO,
HECTOR S. GENUINO, EVELYN S. GENUINO, and The COURT OF
APPEALS, respondents.
Alcasid, Villanueva & Associates for petitioner.
Luna, Puruganan, Sison & Ongkiko for respondents.

The letter dated July 3, 1972 quoted Delta's selling price for 1,200 length of black iron
pipes schedule 40, 2" x 20' including delivery at P66,000.00 with the following terms of
payment:
a. 20% of the net contract price or P13,200.00 will be due and
payable upon signing of the contract papers.
b. 20% of the net contract price or P13,200.00 will be due and
payable before commencement of delivery.
c. The balance of 60% of the net contract price or P39,600.00 with
8% financing charge per annum will be covered by a Promissory Note
bearing interest at the rate of 14% per annum and payable in
TWELVE (12) equal monthly installment (sic), the first of which will
become due thirty (30) days after the completion of delivery.
Additional 14% will be charged for all delayed payments. [Exh. "A";
Exh. 1.]
The second letter-quotation dated July 18, 1972 provides for the selling price of 150
lengths of black iron pipes schedule 40, 1 1/4" x 20' including delivery at P5,400.00 with
the following terms of payment:
a. 50% of the net contract price or P 2,700.00 will be due and payable
upon signing of the contract papers.
b. 50% of the net contract price or P 2,700.00 will be due and payable
before commencement of delivery. [Exh. "C"; Exh. "2".]

CORTES, J.:
Petitioner, through this petition for review by certiorari, appeals from the decision of
respondent appellate court in CA-G.R. No. 59848-R entitled "Eduarda Samson
Genuino, et al. v. Delta Motor Corporation" promulgated on October 27, 1980.
The facts are as follows:
Petitioner Delta Motor Corporation (hereinafter referred to as Delta) is a corporation duly
organized and existing under Philippine laws.
On the other hand, private respondents are the owners of an iceplant and cold storage
located at 1879 E. Rodriguez Sr. Avenue, Quezon City doing business under the name
"Espaa Extension Iceplant and Cold Storage."
In July 1972, two letter-quotations were submitted by Delta to Hector Genuino offering
to sell black iron pipes. T

Both letter-quotations also contain the following stipulations as to delivery and price
offer:
DELIVERY
Ex-stock subject to prior sales.
xxx xxx xxx
Our price offer indicated herein shall remain firm within a period of
thirty (30) days from the date hereof. Any order placed after said
period will be subject to our review and confirmation. [Exh. "A" and
"C"; Exhs. "l" and "2".]
Hector Genuino was agreeable to the offers of Delta hence, he manifested his
conformity thereto by signing his name in the space provided on July 17, 1972 and July
24, 1972 for the first and second letter-quotations, respectively.

It is undisputed that private respondents made initial payments on both contracts for
the first contract, P13,200.00 and, for the second, P2,700.00 for a total sum of
P15,900.00 on July 28, 1972 (Exhs. "B" and "D"].

3. Ordering plaintiffs to pay defendant the sum of P10,000.00 as


attorney's fees; and,
4. To pay the costs of suit. [CFI Decision, pp. 13-14; Rollo, pp. 53-54.]

Likewise unquestionable are the following. the non-delivery of the iron pipes by Delta;
the non-payment of the subsequent installments by the Genuinos; and the nonexecution by the Genuinos of the promissory note called for by the first contract.
The evidence presented in the trial court also showed that sometime in July 1972 Delta
offered to deliver the iron pipes but the Genuinos did not accept the offer because the
construction of the ice plant building where the pipes were to be installed was not yet
finished.
Almost three years later, on April 15, 1975, Hector Genuino, in behalf of Espaa
Extension Ice Plant and Cold Storage, asked Delta to deliver the iron pipes within thirty
(30) days from its receipt of the request. At the same time private respondents
manifested their preparedness to pay the second installment on both contracts upon
notice of Delta's readiness to deliver.
Delta countered that the black iron pipes cannot be delivered on the prices quoted as of
July 1972. The company called the attention of the Genuinos to the stipulation in their
two (2) contracts that the quoted prices were good only within thirty (30) days from date
of offer. Whereupon Delta sent new price quotations to the Genuinos based on its
current price of black iron pipes, as follows:
P241,800.00 for 1,200 lengths of black iron pjpes schedule 40, 2" x
20' [Exh. "G-1".]
P17,550.00 for 150 lengths of black iron pipes schedule 40, 1 1/4" x
20' [Exh. "G-2".]
The Genuinos rejected the new quoted prices and instead filed a complaint for specific
performance with damages seeking to compel Delta to deliver the pipes. Delta, in its
answer prayed for rescission of the contracts pursuant to Art. 1191 of the New Civil
Code. The case was docketed as Civil Case No. Q-20120 of the then Court of First
Instance of Rizal, Branch XVIII, Quezon City.
After trial the Court of First Instance ruled in favor of Delta,the dispositive portion of its
decision reading as follows:
WHEREFORE, premises considered, judgment is rendered:
1. Declaring the contracts, Annexes "A" and "C" of the complaint
rescinded;
2. Ordering defendant to refund to plaintiffs the sum of P15,900.00
delivered by the latter as downpayments on the aforesaid contracts;

On appeal, the Court of Appeals reversed and ordered private respondents to make the
payments specified in "Terms of Payment (b)" of the contracts and to execute the
promissory note required in the first contract and thereafter, Delta should immediately
commence delivery of the black iron pipes.* [CA Decision, p. 20; Rollo, p. 75.]
The Court of Appeals cited two main reasons why it reversed the trial court, namely:
1. As Delta was the one who prepared the contracts and admittedly, it
had knowledge of the fact that the black iron pipes would be used by
the Genuinos in their cold storage plant which was then undergoing
construction and therefore, would require sometime before the
Genuinos would require delivery, Delta should have included in said
contracts a deadline for delivery but it did not. As a matter of fact
neither did it insist on delivery when the Genuinos refused to accept
its offer of delivery. [CA Decision, pp. 16-17; Rollo, pp. 71-72.]
2. Delta's refusal to make delivery in 1975 unless the Genuinos pay a
price very much higher than the prices it previously quoted would
mean an amendment of the contracts. It would be too unfair for the
plaintiffs if they will be made to bear the increase in prices of the black
iron pipes when they had already paid quite an amount for said items
and defendant had made use of the advance payments. That would
be unjust enrichment on the part of the defendant at the expense of
the plaintiffs and is considered an abominable business practice. [CA
Decision, pp. 18-19; Rollo, pp. 73-74.]
Respondent court denied Delta's motion for reconsideration hence this petition for
review praying for the reversal of the Court of Appeals decision and affirmance of that of
the trial court.
Petitioner argues that its obligation to deliver the goods under both contracts is subject
to conditions required of private respondents as vendees. These conditions are:
payment of 20% of the net contract price or P13,200.00 and execution of a promissory
note called for by the first contract; and payment of 50% of the net contract price or
P2,700.00 under the second contract. These, Delta posits, are suspensive conditions
and only upon their performance or compliance would its obligation to deliver the pipes
arise [Petition, pp. 9-12; Rollo, pp. 1720.] Thus, when private respondents did not
perform their obligations; when they refused to accept petitioner's offer to deliver the
goods; and, when it took them three (3) long years before they demanded delivery of
the iron pipes that in the meantime, great and sudden fluctuation in market prices have
occurred; Delta is entitled to rescind the two (2) contracts.
Delta relies on the following provision of law on rescission:

Art. 1191. The power to rescind obligations is implied in reciprocal


ones, in case one of the obligors should not comply with what is
incumbent upon him.

A Yes, well, we take the word of Mr. Evangelista.


We could not deliver the said black iron pipes,
because as per information the Ice Plant is not yet
finished.

The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.

Q Did you not report that fact to ... any other


defendant-officials of the Delta Motor Corporation?
A No.

The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.

Q And you did not do anything after that?

This is understood to be without prejudice to the rights of third


persons who have acquired the thing, in accordance with articles
1385 and 1388 and the Mortgage Law.

A Because taking the word of my Engineer we did


not do anything. [TSN, December 8, 1975, pp. 1819.]

In construing Art. 1191, the Supreme Court has stated that, "[r]escission will be ordered
only where the breach complained of is substantial as to defeat the object of the parties
in entering into the agreement. It will not be granted where the breach is slight or
casual." [Phil. Amusement Enterprises, Inc. v. Natividad, G.R. No. L-21876, September
29, 1967, 21 SCRA 284, 290.] Further, "[t]he question of whether a breach of a contract
is substantial depends upon the attendant circumstances." [Universal Food Corporation
v. Court of Appeals, G. R. No. L-29155, May 13,1970,33 SCRA 1, 18].
In the case at bar, the conduct of Delta indicates that the Genuinos' non-performance of
its obligations was not a substantial breach, let alone a breach of contract, as would
warrant rescission.
Firstly, it is undisputed that a month after the execution of the two (2) contracts, Delta's
offer to deliver the black iron pipes was rejected by the Genuinos who were "not ready
to accept delivery because the cold storage rooms have not been constructed yet.
Plaintiffs (private respondents herein) were short-funded, and did not have the space to
accommodate the pipes they ordered" [CFI Decision, p. 9; Rollo, p. 49].
Given this answer to its offer, Delta did not do anything. As testified by Crispin
Villanueva, manager of the Technical Service department of petitioner:
Q You stated that you sent a certain Evangelista to
the Espaa Extension and Cold Storage to offer the
delivery subject matter of the contract and then you
said that Mr. Evangelista reported (sic) to you that
plaintiff would not accept delivery, is that correct, as
a summary of your statement?
A A Yes, sir.
Q Now, what did you do in the premises (sic)?

xxx xxx xxx


And secondly, three (3) years later when the Genuinos offered to make payment Delta
did not raise any argument but merely demanded that the quoted prices be increased.
Thus, in its answer to private respondents' request for delivery of the pipes, Delta
countered:
Thank you for your letter dated April 15, 1975, requesting for delivery
of Black Iron pipes;.
We regret to say, however, that we cannot base our price on our
proposals dated July 3 and July 18, 1972 as per the following
paragraph quoted on said proposal:
Our price offer indicated herein shall remain firm
within a period of thirty (30) days from the date
hereof. Any order placed after said period will be
subject to our review and confirmation.
We are, therefore, enclosing our re-quoted proposal based on our
current price. [Exh. "G".]
Moreover, the power to rescind under Art. 1191 is not absolute. "[T]he 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 otherand is always provisional, being ever
subject to scrutiny and review by the proper court." [University of the Phils. v. De los
Angeles, G. R. No. L-28602, September 29, 1970, 35 SCRA 102, 107; Emphasis
supplied.]
In the instant case, Delta made no manifestation whatsoever that it had opted to rescind
its contracts with f-he Genuinos. It only raised rescission as a defense when it was sued
for specific performance by private respondents.

Further, it would be highly inequitable for petitioner Delta to rescind the two (2) contracts
considering the fact that not only does it have in its possession and ownership the black
iron pipes, but also the P15,900.00 down payments private respondents have paid. And
if petitioner Delta claims the right to rescission, at the very least, it should have offered
to return the P15,900.00 down payments [See Art. 1385, Civil Code and Hodges v.
Granada, 59 Phil. 429 (1934)].

than the sale covered by the contracts.. . once the offer is accepted, the company has
no more option to change the price." [CFI Decision, p. 5; Rollo, p. 45; Emphasis
supplied.] Thus, petitioner cannot claim for higher prices for the black iron pipes due to
the increase in the cost of goods. Based on the foregoing, petitioner Delta and private
respondents Genuinos should comply with the original terms of their contracts.
WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED.

It is for these same reasons that while there is merit in Delta's claim that the sale is
subject to suspensive conditions, the Court finds that it has, nevertheless, waived
performance of these conditions and opted to go on with the contracts although at a
much higher price. Art. 1545 of the Civil Code provides:
Art. 1545. Where the obligation of either party to a contract of sale is
subject to any condition which is not performed, such party may
refuse to proceed with the contract or he may waived performance of
the condition. . . . [Emphasis supplied.]
Finally, Delta cannot ask for increased prices based on the price offer stipulation in the
contracts and in the increase in the cost of goods. Reliance by Delta on the price offer
stipulation is misplaced. Said stipulation makes reference to Delta's price offer as
remaining firm for thirty (30) days and thereafter, will be subject to its review and
confirmation. The offers of Delta, however, were accepted by the private respondents
within the thirty (30)-day period. And as stipulated in the two (2) letter-quotations,
acceptance of the offer gives rise to a contract between the parties:
In the event that this proposal is acceptable to you, please indicate
your conformity by signing the space provided herein below which
also serves as a contract of this proposal. [Exhs. "A" and "C"; Exhs.
"1" and "2".]
And as further provided by the Civil Code:
Art. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract.
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon thing which is the object of the contract and
upon the price.
Thus, the moment private respondents accepted the offer of Delta, the contract of sale
between them was perfected and neither party could change the terms thereof.
Neither could petitioner Delta rely on the fluctuation in the market price of goods to
support its claim for rescission. As testified to by petitioner's Vice-President of Marketing
for the Electronics, Airconditioning and Refrigeration division, Marcelino Caja, the
stipulation in the two (2) contracts as to delivery, ex-stock subject to prior sales,means
that "the goods have not been delivered and that there are no prior commitments other

SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

of land to plaintiff-appellant (respondent Atilano J. Jabil) for the sum of


P28,000.00, payable in two installments, with an assumption of
indebtedness with the First Insular Bank of Cebu in the sum of
P12,000.00, which was paid and acknowledged by the vendors in the
deed of sale (Exh. C) executed in favor of plaintiff-appellant, and the
next installment in the sum of P4,000.00 to be paid on or before
September 15, 1965.
On November 25, 1965, the Dignos spouses sold the same land in
favor of defendants spouses, Luciano Cabigas and Jovita L. De
Cabigas, who were then U.S. citizens, for the price of P35,000.00. A
deed of absolute sale (Exh. J, also marked Exh. 3) was executed by
the Dignos spouses in favor of the Cabigas spouses, and which was
registered in the Office of the Register of Deeds pursuant to the
provisions of Act No. 3344.
As the Dignos spouses refused to accept from plaintiff-appellant the
balance of the purchase price of the land, and as plaintiff- appellant
discovered the second sale made by defendants-appellants to the
Cabigas spouses, plaintiff-appellant brought the present suit. (Rollo,
pp. 27-28)
After due trial, the Court of first Instance of Cebu rendered its Decision on August
25,1972, the decretal portion of which reads:
G.R. No. L-59266 February 29, 1988
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,
vs.
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.

BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the
9th Division, Court of Appeals dated July 31,1981, affirming with modification the
Decision, dated August 25, 1972 of the Court of First Instance ** of Cebu in civil Case
No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de
Dignos and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de
Cabigas; and (2) its Resolution dated December 16, 1981, denying defendantappellant's (Petitioner's) motion for reconsideration, for lack of merit.
The undisputed facts as found by the Court of Appeals are as follows:
The Dignos spouses were owners of a parcel of land, known as Lot
No. 3453, of the cadastral survey of Opon, Lapu-Lapu City. On June
7, 1965, appellants (petitioners) Dignos spouses sold the said parcel

WHEREFORE, the Court hereby declares the deed of sale executed


on November 25, 1965 by defendant Isabela L. de Dignos in favor of
defendant Luciano Cabigas, a citizen of the United States of America,
null and void ab initio, and the deed of sale executed by defendants
Silvestre T. Dignos and Isabela Lumungsod de Dignos not rescinded.
Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay
the sum, of Sixteen Thousand Pesos (P16,000.00) to the defendantsspouses upon the execution of the Deed of absolute Sale of Lot No.
3453, Opon Cadastre and when the decision of this case becomes
final and executory.
The plaintiff Atilano G. Jabil is ordered to reimburse the defendants
Luciano Cabigas and Jovita L. de Cabigas, through their attorney-infact, Panfilo Jabalde, reasonable amount corresponding to the
expenses or costs of the hollow block fence, so far constructed.
It is further ordered that defendants-spouses Silvestre T. Dignos and
Isabela Lumungsod de Dignos should return to defendants-spouses
Luciano Cabigas and Jovita L. de Cabigas the sum of P35,000.00, as
equity demands that nobody shall enrich himself at the expense of
another.
The writ of preliminary injunction issued on September 23, 1966,
automatically becomes permanent in virtue of this decision.

With costs against the defendants.


From the foregoing, the plaintiff (respondent herein) and defendants-spouss (petitioners
herein) appealed to the Court of Appeals, which appeal was docketed therein as CAG.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al."
On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except
as to the portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses
for the building of a fence upon the land in question. The disposive portion of said
decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the
modification of the judgment as pertains to plaintiff-appellant above
indicated, the judgment appealed from is hereby AFFIRMED in all
other respects.

EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE TERMS


THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL.
II
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY
APPLYING AND OR IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS
WARRANTING THE ERRONEOUS CONCLUSION THAT THE NOTICE OF
RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY
DEMANDED NOR IS IT A NOTARIAL ACT.
III

With costs against defendants-appellants.

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE


APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE AND
ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES
AND ATTORNEY'S FEES TO PETITIONERS.

SO ORDERED.

IV

Judgment MODIFIED.

PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN


DISMISSED, HE HAVING COME TO COURT WITH UNCLEAN HANDS.

A motion for reconsideration of said decision was filed by the defendants- appellants
(petitioners) Dignos spouses, but on December 16, 1981, a resolution was issued by
the Court of Appeals denying the motion for lack of merit.
Hence, this petition.
In the resolution of February 10, 1982, the Second Division of this Court denied the
petition for lack of merit. A motion for reconsideration of said resolution was filed on
March 16, 1982. In the resolution dated April 26,1982, respondents were required to
comment thereon, which comment was filed on May 11, 1982 and a reply thereto was
filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August
9,1982, acting on the motion for reconsideration and on all subsequent pleadings filed,
this Court resolved to reconsider its resolution of February 10, 1982 and to give due
course to the instant petition. On September 6, 1982, respondents filed a rejoinder to
reply of petitioners which was noted on the resolution of September 20, 1982.
Petitioners raised the following assignment of errors:
I
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY,
INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C,
HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP
OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND NOT MERELY A
CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN
MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT,

V
BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING
WITH MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE
MISINTERPRETATION, MISAPPLICATION AND MISAPPREHENSION OF THE
TERMS OF THE QUESTIONED CONTRACT AND THE LAW APPLICABLE THERETO.
The foregoing assignment of errors may be synthesized into two main issues, to wit:
I. Whether or not subject contract is a deed of absolute sale or a
contract Lot sell.
II. Whether or not there was a valid rescission thereof.
There is no merit in this petition.
It is significant to note that this petition was denied by the Second Division of this Court
in its Resolution dated February 1 0, 1 982 for lack of merit, but on motion for
reconsideration and on the basis of all subsequent pleadings filed, the petition was
given due course.
I.
The contract in question (Exhibit C) is a Deed of Sale, with the following conditions:

1. That Atilano G..Jabilis to pay the amount of Twelve Thousand


Pesos P12,000.00) Phil. Philippine Currency as advance payment;
2. That Atilano G. Jabil is to assume the balance of Twelve Thousand
Pesos (P12,000.00) Loan from the First Insular Bank of Cebu;
3. That Atilano G. Jabil is to pay the said spouses the balance of Four.
Thousand Pesos (P4,000.00) on or before September 15,1965;
4. That the said spouses agrees to defend the said Atilano G. Jabil
from other claims on the said property;
5. That the spouses agrees to sign a final deed of absolute sale in
favor of Atilano G. Jabil over the above-mentioned property upon the
payment of the balance of Four Thousand Pesos. (Original Record,
pp. 10-11)
In their motion for reconsideration, petitioners reiterated their contention that the Deed
of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the same is
subject to two (2) positive suspensive conditions, namely: the payment of the balance of
P4,000.00 on or before September 15,1965 and the immediate assumption of the
mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further contended that
in said contract, title or ownership over the property was expressly reserved in the
vendor, the Dignos spouses until the suspensive condition of full and punctual payment
of the balance of the purchase price shall have been met. So that there is no actual sale
until full payment is made (Rollo, pp. 51-52).
In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver
that there is absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell,
convey or transfer their ownership to the alleged vendee. Petitioners insist that Exhibit
"C" (or 6) is a private instrument and the absence of a formal deed of conveyance is a
very strong indication that the parties did not intend "transfer of ownership and title but
only a transfer after full payment" (Rollo, p. 52). Moreover, petitioners anchored their
contention on the very terms and conditions of the contract, more particularly paragraph
four which reads, "that said spouses has agreed to sell the herein mentioned property to
Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to
sign a final deed of absolute sale over the mentioned property upon the payment of the
balance of four thousand pesos."
Such contention is untenable.
By and large, the issues in this case have already been settled by this Court in
analogous cases.
Thus, it has been held that a deed of sale is absolute in nature although denominated
as a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso
or stipulation to the effect that title to the property sold is reserved in the vendor until full
payment of the purchase price, nor is there a stipulation giving the vendor the right to

unilaterally rescind the contract the moment the vendee fails to pay within a fixed period
Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building
Co., Inc., 86 SCRA 305).
A careful examination of the contract shows that there is no such stipulation reserving
the title of the property on the vendors nor does it give them the right to unilaterally
rescind the contract upon non-payment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under Article 1458 of the
Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477
of the same Code provides that "The ownership of the thing sold shall be transferred to
the vendee upon actual or constructive delivery thereof." As applied in the case of
Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the
absence of stipulation to the contrary, the ownership of the thing sold passes to the
vendee upon actual or constructive delivery thereof.
While it may be conceded that there was no constructive delivery of the land sold in the
case at bar, as subject Deed of Sale is a private instrument, it is beyond question that
there was actual delivery thereof. As found by the trial court, the Dignos spouses
delivered the possession of the land in question to Jabil as early as March 27,1965 so
that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach
Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's
Beach Resort on September 1, 1965. Such facts were admitted by petitioner spouses
(Decision, Civil Case No. 23-L; Record on Appeal, p. 108).
Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the
acts of petitioners, contemporaneous with the contract, clearly show that an absolute
deed of sale was intended by the parties and not a contract to sell.
Be that as it may, it is evident that when petitioners sold said land to the Cabigas
spouses, they were no longer owners of the same and the sale is null and void.
II.
Petitioners claim that when they sold the land to the Cabigas spouses, the contract of
sale was already rescinded.
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all
fours with the case at bar, the contract of sale being absolute in nature is governed by
Article 1592 of the Civil Code. It is undisputed that petitioners never notified private
respondents Jabil by notarial act that they were rescinding the contract, and neither did
they file a suit in court to rescind the sale. The most that they were able to show is a
letter of Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos
spouses not to go to the house of Jabil because the latter had no money and further
advised petitioners to sell the land in litigation to another party (Record on Appeal, p.
23). As correctly found by the Court of Appeals, there is no showing that Amistad was
properly authorized by Jabil to make such extra-judicial rescission for the latter who, on
the contrary, vigorously denied having sent Amistad to tell petitioners that he was

already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it
is required that acts and contracts which have for their object the extinguishment of real
rights over immovable property must appear in a public document.

The parties pose this question: May the vendor demand the rescission of a contract for
the sale of a parcel of land for a cause traceable to his own failure to have the squatters
on the subject property evicted within the contractually-stipulated period?

Petitioners laid considerable emphasis on the fact that private respondent Jabil had no
money on the stipulated date of payment on September 15,1965 and was able to raise
the necessary amount only by mid-October 1965.

Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of


production, manufacture and exportation of perlite filter aids, permalite insulation and
processed perlite ore. In 1988, petitioner and his foreign partners decided to put up a
central warehouse in Metro Manila on a land area of approximately 2,000 square
meters. The project was made known to several freelance real estate brokers.

It has been ruled, however, that "where time is not of the essence of the agreement, a
slight delay on the part of one party in the performance of his obligation is not a
sufficient ground for the rescission of the agreement" (Taguba v. Vda. de Leon, supra).
Considering that private respondent has only a balance of P4,000.00 and was delayed
in payment only for one month, equity and justice mandate as in the aforecited case
that Jabil be given an additional period within which to complete payment of the
purchase price.
WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed
decision of the Court of Appeals is Affirmed in toto.
SO ORDERED.
Fernan (Chairman), Gutierrez, Jr., Feliciano and Cortes, JJ., concur.

A day or so after the announcement, Alfonso Flores and his wife, accompanied by a
broker, offered a parcel of land measuring 1,952 square meters. Located in Barangay
San Dionisio, Paraaque, Metro Manila, the lot was covered by TCT No. 361402 in the
name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the
property and, except for the presence of squatters in the area, he found the place
suitable for a central warehouse.
Later, the Flores spouses called on petitioner with a proposal that should he advance
the amount of P50,000.00 which could be used in taking up an ejectment case against
the squatters, private respondent would agree to sell the property for only P800.00 per
square meter. Petitioner expressed his concurrence. On 09 June 1988, a contract,
denominated "Deed of Conditional Sale," was executed between petitioner and private
respondent. The simply-drawn contract read:
DEED OF CONDITIONAL SALE
KNOW ALL MEN BY THESE PRESENTS:
This Contract, made and executed in the Municipality of Makati,
Philippines this 9th day of June, 1988 by and between:
ENRIQUETA CHUA VDA. DE ONGSIONG, of legal
age, widow, Filipino and residing at 105 Simoun St.,
Quezon City, Metro Manila, hereinafter referred to
as the VENDOR;
-and-

G.R. No. 107207 November 23, 1995


VIRGILIO R. ROMERO, petitioner,
vs.
HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE
ONGSIONG, respondents.

VITUG, J.:

VIRGILIO R. ROMERO, married to Severina L. Lat,


of Legal age, Filipino, and residing at 110 San
Miguel St., Plainview Subd., Mandaluyong Metro
Manila, hereinafter referred to as the VENDEE:
W I T N E S S E T H : That
WHEREAS, the VENDOR is the owner of One (1) parcel of land with
a total area of ONE THOUSAND NINE HUNDRED FIFTY TWO
(1,952) SQUARE METERS, more or less, located in Barrio San

Dionisio, Municipality of Paraaque, Province of Rizal, covered by


TCT No. 361402 issued by the Registry of Deeds of Pasig and more
particularly described as follows:
xxx xxx xxx
WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land
and the VENDOR has accepted the offer, subject to the terms and
conditions hereinafter stipulated:
NOW, THEREFORE, for and in consideration of the sum of ONE
MILLION FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED
PESOS (P1,561,600.00) ONLY, Philippine Currency, payable by
VENDEE to in to (sic) manner set forth, the VENDOR agrees to sell to
the VENDEE, their heirs, successors, administrators, executors,
assign, all her rights, titles and interest in and to the property
mentioned in the FIRST WHEREAS CLAUSE, subject to the following
terms and conditions:
1. That the sum of FIFTY THOUSAND PESOS
(P50,000.00) ONLY Philippine Currency, is to be
paid upon signing and execution of this instrument.
2. The balance of the purchase price in the amount
of ONE MILLION FIVE HUNDRED ELEVEN
THOUSAND SIX HUNDRED PESOS
(P1,511,600.00) ONLY shall be paid 45 days after
the removal of all squatters from the above
described property.
3. Upon full payment of the overall purchase price
as aforesaid, VENDOR without necessity of
demand shall immediately sign, execute,
acknowledged (sic) and deliver the corresponding
deed of absolute sale in favor of the VENDEE free
from all liens and encumbrances and all Real
Estate taxes are all paid and updated.
It is hereby agreed, covenanted and stipulated by and between the
parties hereto that if after 60 days from the date of the signing of this
contract the VENDOR shall not be able to remove the squatters from
the property being purchased, the downpayment made by the buyer
shall be returned/reimbursed by the VENDOR to the VENDEE.
That in the event that the VENDEE shall not be able to pay the
VENDOR the balance of the purchase price of ONE MILLION FIVE
HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS
(P1,511,600.00) ONLY after 45 days from written notification to the
VENDEE of the removal of the squatters from the property being

purchased, the FIFTY THOUSAND PESOS (P50,000.00) previously


paid as downpayment shall be forfeited in favor of the VENDOR.
Expenses for the registration such as registration fees, documentary
stamp, transfer fee, assurances and such other fees and expenses as
may be necessary to transfer the title to the name of the VENDEE
shall be for the account of the VENDEE while capital gains tax shall
be paid by the VENDOR.
IN WITNESS WHEREOF, the parties hereunto signed those (sic)
presents in the City of Makati MM, Philippines on this 9th day of June,
1988.
(Sgd.) (Sgd.)
VIRGILIO R. ROMERO ENRIQUETA CHUA VDA.
DE ONGSIONG
Vendee Vendor
SIGNED IN THE PRESENCE OF:
(Sgd.) (Sgd.)
Rowena C. Ongsiong Jack M. Cruz 1
Alfonso Flores, in behalf of private respondent, forthwith received and
acknowledged a check for P50,000.00 2 from petitioner. 3
Pursuant to the agreement, private respondent filed a complaint for ejectment (Civil
Case No. 7579) against Melchor Musa and 29 other squatter families with the
Metropolitan Trial Court of Paraaque. A few months later, or on 21 February 1989,
judgment was rendered ordering the defendants to vacate the premises. The decision
was handed down beyond the 60-day period (expiring 09 August 1988) stipulated in the
contract. The writ of execution of the judgment was issued, still later, on 30 March 1989.
In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she
received from petitioner since, she said, she could not "get rid of the squatters" on the
lot. Atty. Sergio A.F. Apostol, counsel for petitioner, in his reply of 17 April 1989, refused
the tender and stated:.
Our client believes that with the exercise of reasonable diligence
considering the favorable decision rendered by the Court and the writ
of execution issued pursuant thereto, it is now possible to eject the
squatters from the premises of the subject property, for which reason,
he proposes that he shall take it upon himself to eject the squatters,

provided, that expenses which shall be incurred by reason thereof


shall be chargeable to the purchase price of the land. 4
Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"), through its
Regional Director for Luzon, Farley O. Viloria, asked the Metropolitan Trial Court of
Paraaque for a grace period of 45 days from 21 April 1989 within which to relocate and
transfer the squatter families. Acting favorably on the request, the court suspended the
enforcement of the writ of execution accordingly.
On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of the 45-day
grace period and his client's willingness to "underwrite the expenses for the execution of
the judgment and ejectment of the occupants." 5
In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private respondent,
advised Atty. Apostol that the Deed of Conditional Sale had been
rendered null and void by virtue of his client's failure to evict the squatters from the
premises within the agreed 60-day period. He added that private respondent had
"decided to retain the property." 6
On 23 June 1989, Atty. Apostol wrote back to explain:
The contract of sale between the parties was perfected from the very
moment that there was a meeting of the minds of the parties upon the
subject lot and the price in the amount of P1,561,600.00. Moreover,
the contract had already been partially fulfilled and executed upon
receipt of the downpayment of your client. Ms. Ongsiong is precluded
from rejecting its binding effects relying upon her inability to eject the
squatters from the premises of subject property during the agreed
period. Suffice it to state that, the provision of the Deed of Conditional
Sale do not grant her the option or prerogative to rescind the contract
and to retain the property should she fail to comply with the obligation
she has assumed under the contract. In fact, a perusal of the terms
and conditions of the contract clearly shows that the right to rescind
the contract and to demand the return/reimbursement of the
downpayment is granted to our client for his protection.
Instead, however, of availing himself of the power to rescind the
contract and demand the return, reimbursement of the downpayment,
our client had opted to take it upon himself to eject the squatters from
the premises. Precisely, we refer you to our letters addressed to your
client dated April 17, 1989 and June 8, 1989.
Moreover, it is basic under the law on contracts that the power to
rescind is given to the injured party. Undoubtedly, under the
circumstances, our client is the injured party.
Furthermore, your client has not complied with her obligation under
their contract in good faith. It is undeniable that Ms. Ongsiong
deliberately refused to exert efforts to eject the squatters from the

premises of the subject property and her decision to retain the


property was brought about by the sudden increase in the value of
realties in the surrounding areas.
Please consider this letter as a tender of payment to your client and a
demand to execute the absolute Deed of Sale. 7
A few days later (or on 27 June 1989), private respondent, prompted by petitioner's
continued refusal to accept the return of the P50,000.00 advance payment, filed with
the Regional Trial Court of Makati, Branch 133, Civil Case No. 89-4394 for rescission of
the deed of "conditional" sale, plus damages, and for the consignation of P50,000.00
cash.
Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias writ of
execution in Civil Case No. 7579 on motion of private respondent but the squatters
apparently still stayed on.
Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of
Makati 8 rendered decision holding that private respondent had no right to rescind the
contract since it was she who "violated her obligation to eject the squatters from the
subject property" and that petitioner, being the injured party, was the party who could,
under Article 1191 of the Civil Code, rescind the agreement. The court ruled that the
provisions in the contract relating to (a) the return/reimbursement of the P50,000.00 if
the vendor were to fail in her obligation to free the property from squatters within the
stipulated period or (b), upon the other hand, the sum's forfeiture by the vendor if the
vendee were to fail in paying the agreed purchase price, amounted to "penalty clauses".
The court added:
This Court is not convinced of the ground relied upon by the plaintiff in
seeking the rescission, namely: (1) he (sic) is afraid of the squatters;
and (2) she has spent so much to eject them from the premises (p. 6,
tsn, ses. Jan. 3, 1990). Militating against her profession of good faith
is plaintiffs conduct which is not in accord with the rules of fair play
and justice. Notably, she caused the issuance of an alias writ of
execution on August 25, 1989 (Exh. 6) in the ejectment suit which
was almost two months after she filed the complaint before this Court
on June 27, 1989. If she were really afraid of the squatters, then she
should not have pursued the issuance of an alias writ of execution.
Besides, she did not even report to the police the alleged phone
threats from the squatters. To the mind of the Court, the so-called
squatter factor is simply factuitous (sic). 9
The lower court, accordingly, dismissed the complaint and ordered, instead,
private respondent to eject or cause the ejectment of the squatters from the
property and to execute the absolute deed of conveyance upon payment of the
full purchase price by petitioner.
Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate
court rendered its decision.10 It opined that the contract entered into by the parties was

subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the
non-occurrence of which resulted in the failure of the object of the contract; that private
respondent substantially complied with her obligation to evict the squatters; that it was
petitioner who was not ready to pay the purchase price and fulfill his part of the contract,
and that the provision requiring a mandatory return/reimbursement of the P50,000.00 in
case private respondent would fail to eject the squatters within the 60-day period was
not a penal clause. Thus, it concluded.
WHEREFORE, the decision appealed from is REVERSED and SET
ASIDE, and a new one entered declaring the contract of conditional
sale dated June 9, 1988 cancelled and ordering the defendantappellee to accept the return of the downpayment in the amount of
P50,000.00 which was deposited in the court below. No
pronouncement as to costs. 11
Failing to obtain a reconsideration, petitioner filed this petition for review
on certiorari raising issues that, in fine, center on the nature of the contract adverted to
and the P50,000.00 remittance made by petitioner.
12

A perfected contract of sale may either be absolute or conditional depending on


whether the agreement is devoid of, or subject to, any condition imposed on
the passing of title of the thing to be conveyed or on the obligation of a party thereto.
When ownership is retained until the fulfillment of a positive condition the breach of the
condition will simply prevent the duty to convey title from acquiring an obligatory force. If
the condition is imposed on an obligation of a party which is not complied with, the other
party may either refuse to proceed or waive said condition (Art. 1545, Civil Code).
Where, of course, the condition is imposed upon the perfection of the contract itself, the
failure of such condition would prevent the juridical relation itself from coming into
existence. 13
In determining the real character of the contract, the title given to it by the parties is not
as much significant as its substance. For example, a deed of sale, although
denominated as a deed of conditional sale, may be treated as absolute in nature, if title
to the property sold is not reserved in the vendor or if the vendor is not granted the right
to unilaterally rescind the contract predicated
on the fulfillment or non-fulfillment, as the case may be, of the prescribed condition. 14
The term "condition" in the context of a perfected contract of sale pertains, in reality, to
the compliance by one party of an undertaking the fulfillment of which would beckon, in
turn, the demandability of the reciprocal prestation of the other party. The reciprocal
obligations referred to would normally be, in the case of vendee, the payment of the
agreed purchase price and, in the case of the vendor, the fulfillment of certain express
warranties (which, in the case at bench is the timely eviction of the squatters on the
property).
It would be futile to challenge the agreement here in question as not being a duly
perfected contract. A sale is at once perfected when a person (the seller) obligates
himself, for a price certain, to deliver and to transfer ownership of a specified thing or
right to another (the buyer) over which the latter agrees. 15

The object of the sale, in the case before us, was specifically identified to be a 1,952square meter lot in San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of
Title No. 361402 of the Registry of Deeds for Pasig and therein technically described.
The purchase price was fixed at P1,561,600.00, of which P50,000.00 was to be paid
upon the execution of the document of sale and the balance of P1,511,600.00 payable
"45 days after the removal of all squatters from the above described property."
From the moment the contract is perfected, the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. Under the
agreement, private respondent is obligated to evict the squatters on the property. The
ejectment of the squatters is a condition the operative act of which sets into motion the
period of compliance by petitioner of his own obligation, i.e., to pay the balance of the
purchase price. Private respondent's failure "to remove the squatters from the property"
within the stipulated period gives petitioner the right to either refuse to proceed with the
agreement or waive that condition in consonance with Article 1545 of the Civil
Code. 16This option clearly belongs to petitioner and not to private respondent.
We share the opinion of the appellate court that the undertaking required of private
respondent does not constitute a "potestative condition dependent solely on his will"
that might, otherwise, be void in accordance with Article 1182 of the Civil Code 17 but a
"mixed" condition "dependent not on the will of the vendor alone but also of third
persons like the squatters and government agencies and personnel concerned." 18 We
must hasten to add, however, that where the so-called "potestative condition" is
imposed not on the birth of the obligation but on its fulfillment, only the obligation is
avoided, leaving unaffected the obligation itself. 19
In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows
the obligee to choose between proceeding with the agreement or waiving the
performance of the condition. It is this provision which is the pertinent rule in the case at
bench. Here, evidently, petitioner has waived the performance of the condition imposed
on private respondent to free the property from squatters. 20
In any case, private respondent's action for rescission is not warranted. She is not the
injured party. 21 The right of resolution of a party to an obligation under Article 1191 of
the Civil Code is predicated on a breach of faith by the other party that violates the
reciprocity between them. 22 It is private respondent who has failed in her obligation
under the contract. Petitioner did not breach the agreement. He has agreed, in fact, to
shoulder the expenses of the execution of the judgment in the ejectment case and to
make arrangements with the sheriff to effect such execution. In his letter of 23 June
1989, counsel for petitioner has tendered payment and demanded forthwith the
execution of the deed of absolute sale. Parenthetically, this offer to pay, having been
made prior to the demand for rescission, assuming for the sake of argument that such a
demand is proper under Article 1592 23 of the Civil Code, would likewise suffice to defeat
private respondent's prerogative to rescind thereunder.
There is no need to still belabor the question of whether the P50,000.00 advance
payment is reimbursable to petitioner or forfeitable by private respondent, since, on the
basis of our foregoing conclusions, the matter has ceased to be an issue. Suffice it to

say that petitioner having opted to proceed with the sale, neither may petitioner demand
its reimbursement from private respondent nor may private respondent subject it to
forfeiture.
WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED
AND SET ASIDE, and another is entered ordering petitioner to pay private respondent
the balance of the purchase price and the latter to execute the deed of absolute sale in
favor of petitioner. No costs.
SO ORDERED.
[G.R. No. 103577. October 7, 1996]
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL,
ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as
attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA
BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D.
ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific performance to
compel herein petitioners (except the last named, Catalina Balais Mabanag) to
consummate the sale of a parcel of land with its improvements located along Roosevelt
Avenue in Quezon City entered into by the parties sometime in January 1985 for the
price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this
wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter
referred to as Coronels) executed a document entitled Receipt of Down Payment (Exh.
A) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona)
which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
-----------------------------------------P1,190,000.00 - Balance

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT
No. 119627 of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject
property in favor of Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the name of
Catalina under TCT No. 351582 (Exh. H; Exh. 8).

We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the
down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the
deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall
immediately pay the balance of theP1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon
execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property
registered in the name of their deceased father upon receipt of the Fifty Thousand
(P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the
deed of absolute sale in favor of Ramona and the latter will pay the former the whole
balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz
(hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of
Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels
father was transferred in their names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One
Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona
Patricia Alcaraz.

(Rollo, pp. 134-136)


In the course of the proceedings before the trial court (Branch 83, RTC, Quezon
City) the parties agreed to submit the case for decision solely on the basis of
documentary exhibits.Thus, plaintiffs therein (now private respondents) proffered their
documentary evidence accordingly marked as Exhibits A through J, inclusive of their
corresponding submarkings. Adopting these same exhibits as their own, then
defendants (now petitioners) accordingly offered and marked them as Exhibits 1
through 10, likewise inclusive of their corresponding submarkings.Upon motion of the
parties, the trial court gave them thirty (30) days within which to simultaneously submit
their respective memoranda, and an additional 15 days within which to submit their
corresponding comment or reply thereto, after which, the case would be deemed
submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo
Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of
Quezon City. OnMarch 1, 1989, judgment was handed down by Judge Roura from his
regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as
follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering
defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of
land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No.
331582) of the Registry of Deeds for Quezon City, together with all the improvements
existing thereon free from all liens and encumbrances, and once accomplished, to
immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the
plaintiffs are ordered to pay defendants the whole balance of the purchase price
amounting toP1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the
Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and
declared to be without force and effect. Defendants and intervenor and all other persons
claiming under them are hereby ordered to vacate the subject property and deliver
possession thereof to plaintiffs. Plaintiffs claim for damages and attorneys fees, as well
as the counterclaims of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.

On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance
against the Coronels and caused the annotation of a notice of lis pendens at the back of
TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering
the same property with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).

Macabebe, Pampanga for Quezon City, March 1, 1989.


(Rollo, p. 106)

A motion for reconsideration was filed by petitioners before the new presiding
judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada,
thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render
anew decision by the undersigned Presiding Judge should be denied for the following
reasons: (1) The instant case became submitted for decision as of April 14, 1988 when
the parties terminated the presentation of their respective documentary evidence and
when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they
were allowed to file memoranda at some future date did not change the fact that the
hearing of the case was terminated before Judge Roura and therefore the same should
be submitted to him for decision; (2) When the defendants and intervenor did not object
to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the
decision, when they met for the first time before the undersigned Presiding Judge at the
hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they
were deemed to have acquiesced thereto and they are now estopped from questioning
said authority of Judge Roura after they received the decision in question which
happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was
merely a Judge-on-detail at this Branch of the Court, he was in all respects the
Presiding Judge with full authority to act on any pending incident submitted before this
Court during his incumbency. When he returned to his Official Station at Macabebe,
Pampanga, he did not lose his authority to decide or resolve cases submitted to him for
decision or resolution because he continued as Judge of the Regional Trial Court and is
of co-equal rank with the undersigned Presiding Judge. The standing rule and
supported by jurisprudence is that a Judge to whom a case is submitted for decision
has the authority to decide the case notwithstanding his transfer to another branch or
region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
rendered in the instant case, resolution of which now pertains to the undersigned
Presiding Judge, after a meticulous examination of the documentary evidence
presented by the parties, she is convinced that the Decision of March 1, 1989 is
supported by evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul
Decision and Render Anew Decision by the Incumbent Presiding Judge dated March
20, 1989 is hereby DENIED.

Hence, the instant petition which was filed on March 5, 1992. The last pleading,
private respondents Reply Memorandum, was filed on September 15, 1993. The case
was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the
voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of
respondent court in the affirmance of the trial courts decision, we definitely find the
instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other
issues in the case at bar is the precise determination of the legal significance of the
document entitled Receipt of Down Payment which was offered in evidence by both
parties. There is no dispute as to the fact that the said document embodied the binding
contract between Ramona Patricia Alcaraz on the one hand, and the heirs of
Constancio P. Coronel on the other, pertaining to a particular house and lot covered by
TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which
reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service.
While, it is the position of private respondents that the Receipt of Down Payment
embodied a perfected contract of sale, which perforce, they seek to enforce by means
of an action for specific performance, petitioners on their part insist that what the
document signified was a mere executory contract to sell, subject to certain suspensive
conditions, and because of the absence of Ramona P. Alcaraz, who left for the United
States of America, said contract could not possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties contention is brought about by the
way each interprets the terms and/or conditions set forth in said private
instrument. Withal, based on whatever relevant and admissible evidence may be
available on record, this Court, as were the courts below, is now called upon to adjudge
what the real intent of the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, 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.

SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court
of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully
agreeing with the trial court.

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. In Roque vs.
Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass
until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force.
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 of 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 (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA
777 [1984]). 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.
With the above postulates as guidelines, we now proceed to the task of
deciphering the real nature of the contract entered into by petitioners and private
respondents.
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
(Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in
the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of
Fifty Thousand Pesos purchase price of our inherited house and lot, covered by
TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural
and ordinary idea conveyed is that they sold their property.

When the Receipt of Down payment is considered in its entirety, it becomes more
manifest that there was a clear intent on the part of petitioners to transfer title to the
buyer, but since the transfer certificate of title was still in the name of petitioners father,
they could not fully effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers undertook upon
receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the
issuance of a new certificate of title in their names from that of their father, after which,
they promised to present said title, now in their names, to the latter and to execute the
deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the
purchase price.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of ownership or title to the subject parcel of
land. Furthermore, the circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves (the certificate of title was
not in their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-sellers at that time, there
would have been no reason why an absolute contract of sale could not have been
executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely
promise to sell the property to private respondent upon the fulfillment of the suspensive
condition. On the contrary, having already agreed to sell the subject property, they
undertook to have the certificate of title change to their names and immediately
thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after
compliance by the buyer with certain terms and conditions, promised to sell the property
to the latter.What may be perceived from the respective undertakings of the parties to
the contract is that petitioners had already agreed to sell the house and lot they
inherited from their father, completely willing to transfer ownership of the subject house
and lot to the buyer if the documents were then in order. It just so happened, however,
that the transfer certificate of title was then still in the name of their father. It was more
expedient to first effect the change in the certificate of title so as to bear their
names. That is why they undertook to cause the issuance of a new transfer of the
certificate of title in their names upon receipt of the down payment in the amount
of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners
were committed to immediately execute the deed of absolute sale. Only then will the
obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered
into so as to protect the seller against a buyer who intends to buy the property in
installment by withholding ownership over the property until the buyer effects full
payment therefor, in the contract entered into in the case at bar, the sellers were the
ones who were unable to enter into a contract of absolute sale by reason of the fact that
the certificate of title to the property was still in the name of their father. It was the
sellers in this case who, as it were, had the impediment which prevented, so to speak,
the execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that
when the said Receipt of Down Payment was prepared and signed by petitioners
Romulo A. Coronel,et. al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of title
from the name of petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on
February 6, 1985 (Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale
between petitioners and private respondent Ramona P. Alcaraz became obligatory, the
only act required for the consummation thereof being the delivery of the property by
means of the execution of the deed of absolute sale in a public instrument, which
petitioners unequivocally committed themselves to do as evidenced by the Receipt of
Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies
to the case at bench. Thus,
Art. 1475. 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
provisions of the law governing the form of contracts.
Art. 1181. 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.
Since the condition contemplated by the parties which is the issuance of a
certificate of title in petitioners names was fulfilled on February 6, 1985, the respective
obligations of the parties under the contract of sale became mutually demandable, that
is, petitioners, as sellers, were obliged to present the transfer certificate of title already
in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately
execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith
pay the balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition,
petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the transfer in
our names from our deceased father Constancio P. Coronel, the transfer
certificate of title immediately upon receipt of the downpayment abovestated". The sale was still subject to this suspensive
condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject
to a suspensive condition. Only, they contend, continuing in the same paragraph, that:

. . . Had petitioners-sellers not complied with this condition of first transferring the title
to the property under their names, there could be no perfected contract of
sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil
Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents
its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than
these mere hypothetical arguments is the fact that the condition herein referred to
was actually and indisputably fulfilled on February 6, 1985, when a new title was
issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the
document denominated as Receipt of Down Payment (Exh. A; Exh. 1), the parties
entered into a contract of sale subject to the suspensive condition that the sellers shall
effect the issuance of new certificate title from that of their fathers name to their names
and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides
Art. 1187. The effects of conditional obligation to give, once the condition has been
fulfilled, shall retroact to the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive
effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale
became mutually due and demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in time, reciprocal
obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985
because they were then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring
ownership as follows:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to the extent and value of the inheritance of a person are transmitted
through his death to another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent
Constancio P. Coronel are compulsory heirs who were called to succession by
operation of law.Thus, at the point their father drew his last breath, petitioners stepped
into his shoes insofar as the subject property is concerned, such that any rights or
obligations pertaining thereto became binding and enforceable upon them. It is
expressly provided that rights to the succession are transmitted from the moment of
death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850
[1952]).
Be it also noted that petitioners claim that succession may not be declared unless
the creditors have been paid is rendered moot by the fact that they were able to effect
the transfer of the title to the property from the decedents name to their names on
February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of
capacity to enter into an agreement at that time and they cannot be allowed to now take
a posture contrary to that which they took when they entered into the agreement with
private respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person
relying thereon.
Having represented themselves as the true owners of the subject property at the time of
sale, petitioners cannot claim now that they were not yet the absolute owners thereof at
that time.
Petitioners also contend that although there was in fact a perfected contract of
sale between them and Ramona P. Alcaraz, the latter breach her reciprocal obligation
when she rendered impossible the consummation thereof by going to the United States
of America, without leaving her address, telephone number, and Special Power of
Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they
were correct in unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of
sale in the instant case. We note that these supposed grounds for petitioners rescission,
are mere allegations found only in their responsive pleadings, which by express
provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs
(Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any
supporting evidence to substantiate petitioners allegations. We have stressed time and
again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong,
110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not
an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of
America on February 6, 1985, we cannot justify petitioners-sellers act of unilaterally and
extrajudicially rescinding the contract of sale, there being no express stipulation
authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA,
158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P.
Alcaraz because although the evidence on record shows that the sale was in the name
of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D.
Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter, if not also in
her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with
her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There
is no evidence showing that petitioners ever questioned Concepcions authority to
represent Ramona P. Alcaraz when they accepted her personal check. Neither did they
raise any objection as regards payment being effected by a third person. Accordingly,
as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a
ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as
her obligation to pay the full purchase price is concerned. Petitioners who are precluded
from setting up the defense of the physical absence of Ramona P. Alcaraz as aboveexplained offered no proof whatsoever to show that they actually presented the new
transfer certificate of title in their names and signified their willingness and readiness to
execute the deed of absolute sale in accordance with their agreement. Ramonas
corresponding obligation to pay the balance of the purchase price in the amount
of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she
cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving
reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or
is not ready to comply in a proper manner with what is incumbent upon him. From
the moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis
supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between
petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B.
Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will
apply, to wit:

Art. 1544. 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 record of the case shows that the Deed of Absolute Sale dated April 25, 1985
as proof of the second contract of sale was registered with the Registry of Deeds of
Quezon City giving rise to the issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall
apply.
The above-cited provision on double sale presumes title or ownership to pass to
the buyer, the exceptions being: (a) when the second buyer, in good faith, registers the
sale ahead of the first buyer, and (b) should there be no inscription by either of the two
buyers, when the second buyer, in good faith, acquires possession of the property
ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or
ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now
a distinguished member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in
right). Knowledge by the first buyer of the second sale cannot defeat the first buyers
rights except when the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second
buyer of the first sale defeats his rights even if he is first to register, since knowledge
taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No.
58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129
SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in registering his deed of
sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No.
95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was
annotated on the title of the subject property only on February 22, 1985, whereas, the
second sale between petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time
petitioner Mabanag, the second buyer, bought the property under a clean title, she was
unaware of any adverse claim or previous sale, for which reason she is a buyer in good
faith.

We are not persuaded by such argument.


In a case of double sale, what finds relevance and materiality is not whether or not
the second buyer in good faith but whether or not said second buyer registers such
second sale in good faith, that is, without knowledge of any defect in the title of the
property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not
have in good faith, registered the sale entered into on February 18, 1985 because as
early as February 22, 1985, a notice of lis pendens had been annotated on the transfer
certificate of title in the names of petitioners, whereas petitioner Mabanag registered the
said sale sometime in April, 1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already been previously sold to private
respondents, or, at least, she was charged with knowledge that a previous buyer is
claiming title to the same property. Petitioner Mabanag cannot close her eyes to the
defect in petitioners title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that
there was a previous sale of the same property to a third party or that another person
claims said property in a previous sale, the registration will constitute a registration in
bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349
[1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil.
554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P.
Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina
B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between
Ramona as principal and Concepcion, her mother, as agent insofar as the subject
contract of sale is concerned, the issue of whether or not Concepcion was also acting in
her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not touch this issue
and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED
and the appealed judgment AFFIRMED.
SO ORDERED.

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];

UNITED MUSLIM AND CHRISTIAN URBAN POOR


ASSOCIATION, INC.represented by its President, MANUEL V.
BUEN,
Petitioner,
- versus BRYC-V DEVELOPMENT CORPORATION represented by its
President, BENJAMIN QUIDILLA; andSEA FOODS
CORPORATION, represented by its Executive Vice
President, VICENTE T. HERNANDEZ,
Respondents.
x------------------------------------------------------------------------------------x

G.R. No. 179653


Present:
YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
Promulgated:
July 31, 2009

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.
Consequently, sometime in December 1994, Lot No. 300 was subdivided into
three (3) parts covered by separate titles:

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]

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. T117,449; and

The petition deserves scant consideration. We completely agree with the lower courts
rulings.

3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-

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.

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

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:
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 4 th 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).
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.

DELFIN TAN,
Petitioner,

G.R. No. 153820


Present:
*

QUISUMBING, J.,

CARPIO-MORALES,
**

- versus -

NACHURA,

BRION, and
ABAD, JJ.

Is an annotation made pursuant to Section 4, Rule 74 of the


Rules of Court (Rules) on a certificate of title covering real property
considered an encumbrance on the property? We resolve this
question in the petition for review on certiorari[1] filed by Delfin Tan
(Tan) to assail the decision of the Court of Appeals (CA) in CA-G.R.
CV No. 52033[2] and the decision of the Regional Trial Court (RTC)
[3]
that commonly declared the forfeiture of his P200,000.00 down
payment as proper, pursuant to the terms of his contract with the
respondents.

ERLINDA C. BENOLIRAO,
ANDREW C. BENOLIRAO,
ROMANO C. BENOLIRAO,
DION C. BENOLIRAO,
SPS. REYNALDO TANINGCO
and NORMA D. BENOLIRAO,
EVELYN T. MONREAL, and

Promulgated:

THE ANTECEDENTS

ANN KARINA TANINGCO,


Respondents.
October 16, 2009

x-------------------------------------------------------------------------------------- x
DECISION
BRION, J.:

The facts are not disputed. Spouses Lamberto and Erlinda


Benolirao and the Spouses Reynaldo and Norma Taningco were the
co-owners of a 689-square meter parcel of land (property) located in
Tagaytay City and covered by Transfer Certificate of Title (TCT) No.
26423. On October 6, 1992, the co-owners executed a Deed of
Conditional Sale over the property in favor of Tan for the price
of P1,378,000.00. The deed stated:

a)

b)

c)

d)

An initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND


PESOS, Philippine Currency, upon signing of this contract; then the
remaining balance of ONE MILLION ONE HUNDRED SEVENTY EIGHT
THOUSAND (P1,178,000.00) PESOS, shall be payable within a period of
one hundred fifty (150) days from date hereof without interest;

That for any reason, BUYER fails to pay the remaining balance within
above mentioned period, the BUYER shall have a grace period of sixty
(60) days within which to make the payment, provided that there shall be
an interest of 15% per annum on the balance amount due from the
SELLERS;

That should in case (sic) the BUYER fails to comply with the terms and
conditions within the above stated grace period, then the SELLERS shall
have the right to forfeit the down payment, and to rescind this conditional
sale without need of judicial action;

That in case, BUYER have complied with the terms and conditions of this
contract, then the SELLERS shall execute and deliver to the BUYER the
appropriate Deed of Absolute Sale;

Pursuant to the Deed of Conditional Sale, Tan issued and delivered to the coowners/vendors Metrobank Check No. 904407 for P200,000.00 as down payment for
the property, for which the vendors issued a corresponding receipt.

On November 6, 1992, Lamberto Benolirao died intestate. Erlinda Benolirao


(his widow and one of the vendors of the property) and her children, as heirs of the
deceased, executed an extrajudicial settlement of Lambertos estate on January 20,
1993. On the basis of the extrajudicial settlement, a new certificate of title over the
property, TCT No. 27335, was issued on March 26, 1993 in the names of the Spouses
Reynaldo and Norma Taningco and Erlinda Benolirao and her children. Pursuant to
Section 4, Rule 74 of the Rules, the following annotation was made on TCT No. 27335:

x x x any liability to credirots (sic), excluded heirs and other


persons having right to the property, for a period of two (2) years, with
respect only to the share of Erlinda, Andrew, Romano and Dion, all
surnamed Benolirao

As stated in the Deed of Conditional Sale, Tan had until March 15, 1993 to pay
the balance of the purchase price. By agreement of the parties, this period was
extended by two months, so Tan had until May 15, 1993 to pay the balance. Tan failed
to pay and asked for another extension, which the vendors again
granted. Notwithstanding this second extension, Tan still failed to pay the remaining
balance due on May 21, 1993. The vendors thus wrote him a letter demanding payment
of the balance of the purchase price within five (5) days from notice; otherwise, they
would declare the rescission of the conditional sale and the forfeiture of his down
payment based on the terms of the contract.

Tan refused to comply with the vendors demand and instead wrote them a
letter (dated May 28, 1993) claiming that the annotation on the title, made pursuant to
Section 4, Rule 74 of the Rules, constituted an encumbrance on the property that would
prevent the vendors from delivering a clean title to him. Thus, he alleged that he could
no longer be required to pay the balance of the purchase price and demanded the
return of his down payment.

When the vendors refused to refund the down payment, Tan, through counsel,
sent another demand letter to the vendors on June 18, 1993. The vendors still refused
to heed Tans demand, prompting Tan to file on June 19, 1993 a complaint with the RTC
of Pasay City for specific performance against the vendors, including Andrew Benolirao,
Romano Benolirao, Dion Benolirao as heirs of Lamberto Benolirao, together with Evelyn
Monreal and Ann Karina Taningco (collectively, the respondents). In his complaint, Tan
alleged that there was a novation of the Deed of Conditional Sale done without his
consent since the annotation on the title created an encumbrance over the property. Tan
prayed for the refund of the down payment and the rescission of the contract.

On August 9, 1993, Tan amended his Complaint, contending that if the


respondents insist on forfeiting the down payment, he would be willing to pay the
balance of the purchase price provided there is reformation of the Deed of Conditional
Sale. In the meantime, Tan caused the annotation on the title of a notice of lis pendens.

On August 21, 1993, the respondents executed a Deed of Absolute Sale over
the property in favor of Hector de Guzman (de Guzman) for the price of P689,000.00.

Thereafter, the respondents moved for the cancellation of the notice of lis
pendens on the ground that it was inappropriate since the case that Tan filed was a
personal action which did not involve either title to, or possession of, real property. The
RTC issued an order dated October 22, 1993 granting the respondents motion to cancel
the lis pendensannotation on the title.

Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman


registered the property and TCT No. 28104 was issued in his name. Tan then filed a

motion to carry over the lis pendens annotation to TCT No. 28104 registered in de
Guzmans name, but the RTC denied the motion.

On September 8, 1995, after due proceedings, the RTC rendered judgment ruling that
the respondents forfeiture of Tans down payment was proper in accordance with the
terms and conditions of the contract between the parties.[4] The RTC ordered Tan to pay
the respondents the amount of P30,000.00, plus P1,000.00 per court appearance, as
attorneys fees, and to pay the cost of suit.

The petition is granted.

No new issues can be raised in


the Memorandum

On appeal, the CA dismissed the petition and affirmed the ruling of the trial court in
toto. Hence, the present petition.

THE ISSUES

Tan argues that the CA erred in affirming the RTCs ruling to cancel the lis
pendens annotation on TCT No. 27335. Due to the unauthorized novation of the
agreement, Tan presented before the trial court two alternative remedies in his
complaint either the rescission of the contract and the return of the down payment, or
the reformation of the contract to adjust the payment period, so that Tan will pay the
remaining balance of the purchase price only after the lapse of the required two-year
encumbrance on the title. Tan posits that the CA erroneously disregarded the alternative
remedy of reformation of contract when it affirmed the removal of the lis
pendens annotation on the title.

Tan further contends that the CA erred when it recognized the validity of the
forfeiture of the down payment in favor of the vendors. While admitting that the Deed of
Conditional Sale contained a forfeiture clause, he insists that this clause applies only if
the failure to pay the balance of the purchase price was through his own fault or
negligence. In the present case, Tan claims that he was justified in refusing to pay the
balance price since the vendors would not have been able to comply with their
obligation to deliver a clean title covering the property.

At the onset, we note that Tan raised the following additional assignment of
errors in his Memorandum: (a) the CA erred in holding that the petitioner could seek
reformation of the Deed of Conditional Sale only if he paid the balance of the purchase
price and if the vendors refused to execute the deed of absolute sale; and (b) the CA
erred in holding that the petitioner was estopped from asking for the reformation of the
contract or for specific performance.

The Courts September 27, 2004 Resolution expressly stated that No new
issues may be raised by a party in his/its Memorandum. Explaining the reason for this
rule, we said that:

The raising of additional issues in a memorandum before the


Supreme Court is irregular, because said memorandum is supposed
to be in support merely of the position taken by the party concerned in
his petition, and the raising of new issues amounts to the filing of a
petition beyond the reglementary period. The purpose of this rule is to
provide all parties to a case a fair opportunity to be heard. No new
points of law, theories, issues or arguments may be raised by a party
in the Memorandum for the reason that to permit these would be
offensive to the basic rules of fair play, justice and due process.[5]

Lastly, Tan maintains that the CA erred in ordering him to pay the
respondents P30,000.00, plus P1,000.00 per court appearance as attorneys fees, since
he filed the foregoing action in good faith, believing that he is in the right.

The respondents, on the other hand, assert that the petition should be dismissed for
raising pure questions of fact, in contravention of the provisions of Rule 45 of the Rules
which provides that only questions of law can be raised in petitions for review
on certiorari.

THE COURTS RULING

Tan contravened the Courts explicit instructions by raising these additional


errors. Hence, we disregard them and focus instead on the issues previously raised in
the petition and properly included in the Memorandum.

Petition raises a question of


law

Contrary to the respondents claim, the issue raised in the present petition defined in the
opening paragraph of this Decision is a pure question of law. Hence, the petition and
the issue it presents are properly cognizable by this Court.

Lis pendens annotation not


proper in personal actions

Section 14, Rule 13 of the Rules enumerates the instances when a notice of lis
pendens can be validly annotated on the title to real property:

Sec. 14. Notice of lis pendens.


In an action affecting the title or the right of
possession of real property, the plaintiff and the defendant, when
affirmative relief is claimed in his answer, may record in the office of
the registry of deeds of the province in which the property is situated
a notice of the pendency of the action. Said notice shall contain the
names of the parties and the object of the action or defense, and a
description of the property in that province affected thereby. Only from
the time of filing such notice for record shall a purchaser, or
encumbrancer of the property affected thereby, be deemed to have
constructive notice of the pendency of the action, and only of its
pendency against the parties designated by their real names.

The notice of lis pendens hereinabove mentioned may be


cancelled only upon order of the court, after proper showing that the
notice is for the purpose of molesting the adverse party, or that it is
not necessary to protect the rights of the party who caused it to be
recorded.

The litigation subject of the notice of lis pendens must directly involve a
specific property which is necessarily affected by the judgment.[6]

Tans complaint prayed for either the rescission or the reformation of the Deed
of Conditional Sale. While the Deed does have real property for its object, we find that

Tans complaint is an in personam action, as Tan asked the court to compel the
respondents to do something either to rescind the contract and return the down
payment, or to reform the contract by extending the period given to pay the remaining
balance of the purchase price. Either way, Tan wants to enforce his personal rights
against the respondents, not against the property subject of the Deed. As we explained
in Domagas v. Jensen:[7]

The settled rule is that the aim and object of an action


determine its character. Whether a proceeding is in rem, or in
personam, or quasi in rem for that matter, is determined by its
natureand purpose, and by these only. A proceeding in personam is a
proceeding to enforce personal rights and obligations brought against
the person and is based on the jurisdiction of the person, although it
may involve his right to, or the exercise of ownership of, specific
property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a
proceeding in personam is to impose, through the judgment of a
court, some responsibility or liability directly upon the person of the
defendant. Of this character are suits to compel a defendant to
specifically perform some act or actions to fasten a pecuniary liability
on him.

Furthermore, as will be explained in detail below, the contract between the parties was
merely a contract to sell where the vendors retained title and ownership to the property
until Tan had fully paid the purchase price. Since Tan had no claim of ownership or title
to the property yet, he obviously had no right to ask for the annotation of a lis
pendensnotice on the title of the property.

Contract is a mere contract to


sell

A contract is what the law defines it to be, taking into consideration its essential
elements, and not what the contracting parties call it. [8] Article 1485 of the Civil Code
defines a contract of sale as follows:

Art. 1458. By the contract of sale one of the contracting parties


obligates himself to transfer the ownership 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.

While Tan admits that he refused to pay the balance of the purchase price, he
claims that he had valid reason to do so the sudden appearance of an annotation on the
title pursuant to Section 4, Rule 74 of the Rules, which Tan considered an encumbrance
on the property.

The very essence of a contract of sale is the transfer of ownership in exchange for a
price paid or promised.[9]
We find Tans argument meritorious.
In contrast, a contract to sell is defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the property despite
delivery thereof to the prospective buyer, binds himself to sell the property
exclusively to the prospective buyer upon fulfillment of the condition agreed, i.e., full
payment of the purchase price.[10] A contract to sell 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.[11]

In the present case, the true nature of the contract is revealed by paragraph D
thereof, which states:
xxx
d)

That in case, BUYER has complied with the terms and conditions of this
contract, then the SELLERS shall execute and deliver to the BUYER the
appropriate Deed of Absolute Sale;

xxx

Jurisprudence has established that where the seller promises to execute a


deed of absolute sale upon the completion by the buyer of the payment of the price, the
contract is only a contract to sell. [12] Thus, while the contract is denominated as a Deed
of Conditional Sale, the presence of the above-quoted provision identifies the contract
as being a mere contract to sell.

A
Section
4,
Rule
74
annotation is an encumbrance
on the property

The annotation placed on TCT No. 27335, the new title issued to reflect the
extrajudicial partition of Lamberto Benoliraos estate among his heirs, states:

x x x any liability to credirots (sic), excluded heirs and other


persons having right to the property, for a period of two (2)
years, with respect only to the share of Erlinda, Andrew, Romano
and Dion, all surnamed Benolirao [Emphasis supplied.]

This annotation was placed on the title pursuant to Section 4, Rule 74 of the
Rules, which reads:

Sec. 4. Liability of distributees and estate. - If it shall appear at any


time within two (2) years after the settlement and distribution of an
estate in accordance with the provisions of either of the first two
sections of this rule, that an heir or other person has been unduly
deprived of his lawful participation in the estate, such heir or such
other person may compel the settlement of the estate in the courts in
the manner hereinafter provided for the purpose of satisfying such
lawful participation. And if within the same time of two (2) years, it
shall appear that there are debts outstanding against the estate
which have not been paid, or that an heir or other person has
been unduly deprived of his lawful participation payable in
money, the court having jurisdiction of the estate may, by order
for that purpose, after hearing, settle the amount of such debts or
lawful participation and order how much and in what manner
each distributee shall contribute in the payment thereof, and
may issue execution, if circumstances require, against the bond
provided in the preceding section or against the real estate
belonging to the deceased, or both. Such bond and such real estate
shall remain charged with a liability to creditors, heirs, or other
persons for the full period of two (2) years after such distribution,
notwithstanding any transfers of real estate that may have been
made. [Emphasis supplied.]

Senator Vicente Francisco discusses this provision in his book The Revised
Rules of Court in the Philippines,[13] where he states:

The provision of Section 4, Rule 74 prescribes the procedure


to be followed if within two years after an extrajudicial partition or
summary distribution is made, an heir or other person appears to
have been deprived of his lawful participation in the estate, or some
outstanding debts which have not been paid are discovered. When
the lawful participation of the heir is not payable in money,
because, for instance, he is entitled to a part of the real property
that has been partitioned, there can be no other procedure than
to cancel the partition so made and make a new division, unless,
of course, the heir agrees to be paid the value of his participation
with interest. But in case the lawful participation of the heir consists
in his share in personal property of money left by the decedent, or in
case unpaid debts are discovered within the said period of two years,
the procedure is not to cancel the partition, nor to appoint an
administrator to re-assemble the assets, as was allowed under the old
Code, but the court, after hearing, shall fix the amount of such debts
or lawful participation in proportion to or to the extent of the assets
they have respectively received and, if circumstances require, it may
issue execution against the real estate belonging to the decedent, or
both. The present procedure is more expedient and less expensive in
that it dispenses with the appointment of an administrator and does
not disturb the possession enjoyed by the distributees. [14] [Emphasis
supplied.]

An annotation is placed on new certificates of title issued pursuant to the


distribution and partition of a decedents real properties to warn third persons on the
possible interests of excluded heirs or unpaid creditors in these properties. The
annotation, therefore, creates a legal encumbrance or lien on the real property in
favor of the excluded heirs or creditors. Where a buyer purchases the real
property despite the annotation, he must be ready for the possibility that the title
could be subject to the rights of excluded parties. The cancellation of the sale would
be the logical consequence where: (a) the annotation clearly appears on the title,
warning all would-be buyers; (b) the sale unlawfully interferes with the rights of heirs;
and (c) the rightful heirs bring an action to question the transfer within the two-year
period provided by law.

alienation in the same estate proceedings, whenever it becomes


necessary to do so. To require the institution of a separate action for
such annulment would run counter to the letter of the above rule and
the spirit of these summary settlements. [Emphasis supplied.]

Similarly, in Sps. Domingo v. Roces,[16] we said:

The foregoing rule clearly covers transfers of real property


to any person, as long as the deprived heir or creditor vindicates his
rights within two years from the date of the settlement and distribution
of estate. Contrary to petitioners contention, the effects of this
provision are not limited to the heirs or original distributees of
the estate properties, but shall affect anytransferee of the
properties. [Emphasis supplied.]

Indeed, in David v. Malay,[17] although the title of the property had already been
registered in the name of the third party buyers, we cancelled the sale and ordered the
reconveyance of the property to the estate of the deceased for proper disposal among
his rightful heirs.

By the time Tans obligation to pay the balance of the purchase price arose on
May 21, 1993 (on account of the extensions granted by the respondents), a new
certificate of title covering the property had already been issued on March 26, 1993,
which contained the encumbrance on the property; the encumbrance would remain so
attached until the expiration of the two-year period. Clearly, at this time, the vendors
could no longer compel Tan to pay the balance of the purchase since considering they
themselves could not fulfill their obligation to transfer a clean title over the property to
Tan.

Contract to sell is
rescinded but terminated

not

As we held in Vda. de Francisco v. Carreon:[15]


What then happens to the contract?
And Section 4, Rule 74 xxx expressly authorizes the court to
give to every heir his lawful participation in the real estate
notwithstanding any transfers of such real estate and to issue
execution thereon. All this implies that, when within the amendatory
period the realty has been alienated, the court in re-dividing it
among the heirs has the authority to direct cancellation of such

We have held in numerous cases[18] that the remedy of rescission under Article
1191 cannot apply to mere contracts to sell. We explained the reason for this in Santos
v. Court of Appeals,[19] where we said:
[I]n a contract to sell, title remains with the vendor and does not pass
on to the vendee until the purchase price is paid in full. Thus, in
a contract to sell, the payment of the purchase price is a positive
suspensive condition. Failure to pay the price agreed upon is not a
mere breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an
obligatory force. This is entirely different from the situation in a
contract of sale, where non-payment of the price is a negative
resolutory condition. The effects in law are not identical. In a contract
of sale, the vendor has lost ownership of the thing sold and cannot
recover it, unless the contract of sale is rescinded and set aside. In a
contract to sell, however, the vendor remains the owner for as
long as the vendee has not complied fully with the condition of
paying the purchase price. If the vendor should eject the vendee for
failure to meet the condition precedent, he is enforcing the contract
and not rescinding it. x x x Article 1592 speaks of non-payment of the
purchase price as a resolutory condition. It does not apply to a
contract to sell. As to Article 1191, it is subordinated to the provisions
of Article 1592 when applied to sales of immovable property. Neither
provision is applicable [to a contract to sell]. [Emphasis supplied.]

We, therefore, hold that the contract to sell was terminated when the vendors
could no longer legally compel Tan to pay the balance of the purchase price as a result
of the legal encumbrance which attached to the title of the property. Since Tans refusal
to pay was due to the supervening event of a legal encumbrance on the property and
not through his own fault or negligence, we find and so hold that the forfeiture of Tans
down payment was clearly unwarranted.

Award of Attorneys fees

As evident from our previous discussion, Tan had a valid reason for refusing to
pay the balance of the purchase price for the property. Consequently, there is no basis
for the award of attorneys fees in favor of the respondents.

On the other hand, we award attorneys fees in favor of Tan, since he was
compelled to litigate due to the respondents refusal to return his down payment despite
the fact that they could no longer comply with their obligation under the contract to
sell, i.e., to convey a clean title. Given the facts of this case, we find the award
of P50,000.00 as attorneys fees proper.

Monetary award is subject to


legal interest

Undoubtedly, Tan made a clear and unequivocal demand on the vendors to


return his down payment as early as May 28, 1993. Pursuant to

our definitive ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,[20] we hold that
the vendors should return the P200,000.00 down payment to Tan, subject to the legal
interest of 6% per annum computed from May 28, 1993, the date of the first demand
letter.

Furthermore, after a judgment has become final and executory, the rate of legal interest,
whether the obligation was in the form of a loan or forbearance of money or otherwise,
shall be 12% per annum from such finality until its satisfaction. Accordingly, the principal
obligation of P200,000.00 shall bear 6% interest from the date of first demand or
fromMay 28, 1993. From the date the liability for the principal obligation and attorneys
fees has become final and executory, an annual interest of 12% shall be imposed on
these obligations until their final satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.

WHEREFORE, premises considered, we hereby GRANT the petition and,


accordingly, ANNUL and SET ASIDE the May 30, 2002 decision of the Court of Appeals
in CA-G.R. CV No. 52033. Another judgment is rendered declaring the Deed of
Conditional Sale terminated and ordering the respondents to return the P200,000.00
down payment to petitioner Delfin Tan, subject to legal interest of 6% per annum,
computed from May 28, 1993. The respondents are also ordered to pay, jointly and
severally, petitioner Delfin Tan the amount of P50,000.00 as and by way of attorneys
fees. Once this decision becomes final and executory, respondents are ordered to pay
interest at 12% per annum on the principal obligation as well as the attorneys fees, until
full payment of these amounts. Costs against the respondents.

SO ORDERED.

thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and
conditions:
1. That upon full payment of [respondent] of the amount of FOUR HUNDRED
FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall execute
and sign a deed of assumption of mortgage in favor of [respondent] without
any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX
HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500)
with REAL SAVINGS AND LOAN,4 Cainta, Rizal (emphasis supplied)
xxx

xxx

xxx

Pursuant to this deed, respondent gave petitioner P415,500 as partial payment.


Petitioner, on the other hand, handed the keys to the properties and wrote a letter
informing RSLAI of the sale and authorizing it to accept payment from respondent and
release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the
properties.5 Respondent likewise informed RSLAI of her agreement with petitioner for
her to assume petitioners outstanding loan. RSLAI required her to undergo credit
investigation.
G.R. No. 170405

February 2, 2010

Subsequently, respondent learned that petitioner again sold the same properties to one
Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave
her useless. Respondent thus proceeded to RSLAI to inquire about the credit
investigation. However, she was informed that petitioner had already paid the amount
due and had taken back the certificates of title.

RAYMUNDO S. DE LEON, Petitioner,


vs.
BENITA T. ONG.1 Respondent.
DECISION

Respondent persistently contacted petitioner but her efforts proved futile.

CORONA, J.:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with
improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these
properties were mortgaged to Real Savings and Loan Association, Incorporated
(RSLAI), petitioner and respondent executed a notarized deed of absolute sale with
assumption of mortgage3 stating:
xxx

xxx

xxx

That for and in consideration of the sum of ONE MILLION ONE HUNDRED
THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby
acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a
manner absolute and irrevocable, unto said [RESPONDENT], his heirs and assigns
that certain real estate together with the buildings and other improvements existing

On June 18, 1993, respondent filed a complaint for specific performance, declaration of
nullity of the second sale and damages6 against petitioner and Viloria in the Regional
Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had
previously sold the properties to her on March 10, 1993, he no longer had the right to
sell the same to Viloria. Thus, petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause of action
against him and consequently prayed for the dismissal of the complaint. He claimed that
since the transaction was subject to a condition (i.e., that RSLAI approve the
assumption of mortgage), they only entered into a contract to sell. Inasmuch as
respondent did apply for a loan from RSLAI, the condition did not arise. Consequently,
the sale was not perfected and he could freely dispose of the properties. Furthermore,
he made a counter-claim for damages as respondent filed the complaint allegedly with
gross and evident bad faith.

Because respondent was a licensed real estate broker, the RTC concluded that she
knew that the validity of the sale was subject to a condition. The perfection of a contract
of sale depended on RSLAIs approval of the assumption of mortgage. Since RSLAI did
not allow respondent to assume petitioners obligation, the RTC held that the sale was
never perfected.
In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of
cause of action and ordered respondent to pay petitioner P100,000 moral
damages, P20,000 attorneys fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the
court a quo erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed by the parties did not impose
any condition on the sale and held that the parties entered into a contract of sale.
Consequently, because petitioner no longer owned the properties when he sold them to
Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral
and exemplary damages for fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified
the sale to Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or
the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to deliver the
certificates of titles to respondent and pay her P50,000 moral damages and P15,000
exemplary damages.
Petitioner moved for reconsideration but it was denied in a resolution dated November
11, 2005.10 Hence, this petition,11 with the sole issue being whether the parties entered
into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the
transaction was subject to a suspensive condition, that is, the approval by RSLAI of
respondents assumption of mortgage. Because RSLAI did not allow respondent to
assume his (petitioners) obligation, the condition never materialized. Consequently,
there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as
petitioner already conveyed full ownership of the subject properties upon the execution
of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The
RTC ruled that it was a contract to sell while the CA held that it was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. Should the buyer default in the payment of the purchase

price, the seller may either sue for the collection thereof or have the contract judicially
resolved and set aside. The non-payment of the price is therefore a negative resolutory
condition.12
On the other hand, a contract to sell is subject to a positive suspensive condition. The
buyer does not acquire ownership of the property until he fully pays the purchase price.
For this reason, if the buyer defaults in the payment thereof, the seller can only sue for
damages.13
The deed executed by the parties (as previously quoted) stated that petitioner sold the
properties to respondent "in a manner absolute and irrevocable" for a sum of P1.1
million.14 With regard to the manner of payment, it required respondent to pay P415,500
in cash to petitioner upon the execution of the deed, with the balance15payable directly
to RSLAI (on behalf of petitioner) within a reasonable time.16 Nothing in said instrument
implied that petitioner reserved ownership of the properties until the full payment of the
purchase price.17 On the contrary, the terms and conditions of the deed only affected the
manner of payment, not the immediate transfer of ownership (upon the execution of the
notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated,
the said terms and conditions pertained to the performance of the contract, not the
perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and deliver
the same to the buyer.18In this regard, Article 1498 of the Civil Code19 provides that, as a
rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing
sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of
respondent. Moreover, not only did petitioner turn over the keys to the properties to
respondent, he also authorized RSLAI to receive payment from respondent and release
his certificates of title to her. The totality of petitioners acts clearly indicates that he had
unqualifiedly delivered and transferred ownership of the properties to respondent.
Clearly, it was a contract of sale the parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was subject to
the condition that RSLAI had to approve the assumption of mortgage, the said condition
was considered fulfilled as petitioner prevented its fulfillment by paying his outstanding
obligation and taking back the certificates of title without even notifying respondent. In
this connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria
on two separate occasions.20 However, the second sale was not void for the sole reason
that petitioner had previously sold the same properties to respondent. On this account,
the CA erred.

This case involves a double sale as the disputed properties were sold validly on two
separate occasions by the same seller to the two different buyers in good faith.

pursuant to Article 1186 of the Civil Code. For purposes, therefore, of determining
whether respondent was a purchaser in good faith, she is deemed to have fully
complied with the condition of the payment of the remainder of the purchase price.

Article 1544 of the Civil Code provides:


Article 1544. 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. (emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply only to
purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice that
some other person has a right to, or an interest in, such property and pays a full and fair
price for the same at the time of such purchase, or before he has notice of some other
persons claim or interest in the property.21 The law requires, on the part of the buyer,
lack of notice of a defect in the title of the seller and payment in full of the fair price at
the time of the sale or prior to having notice of any defect in the sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the
mortgage to RSLAI. According to her agreement with petitioner, respondent had the
obligation to assume the balance of petitioners outstanding obligation to RSLAI.
Consequently, respondent informed RSLAI of the sale and of her assumption of
petitioners obligation. However, because petitioner surreptitiously paid his outstanding
obligation and took back her certificates of title, petitioner himself rendered respondents
obligation to assume petitioners indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation
become legally or physically impossible without the fault of the obligor.
Since respondents obligation to assume petitioners outstanding balance with RSLAI
became impossible without her fault, she was released from the said obligation.
Moreover, because petitioner himself willfully prevented the condition vis--vis the
payment of the remainder of the purchase price, the said condition is considered fulfilled

Respondent was not aware of any interest in or a claim on the properties other than the
mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the
properties from petitioner after the latter sold them to respondent. Respondent was
therefore a purchaser in good faith. Hence, the rules on double sale are applicable.
Article 1544 of the Civil Code provides that when neither buyer registered the sale of the
properties with the registrar of deeds, the one who took prior possession of the
properties shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he executed the
notarized deed22 and handed over to respondent the keys to the properties. For this
reason, respondent took actual possession and exercised control thereof by making
repairs and improvements thereon. Clearly, the sale was perfected and consummated
on March 10, 1993. Thus, respondent became the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase price
was deemed fulfilled, respondents obligation to pay it subsisted. Otherwise, she would
be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in the deed.
This is because the provisions, terms and conditions of the contract constitute the law
between the parties. Moreover, the deed itself provided that the assumption of
mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must
deliver the certificates of title to respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the
Court of Appeals in CA-G.R. CV No. 59748 are
hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is
ordered to pay petitioner Raymundo de Leon P684,500 representing the balance of the
purchase price as provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.