Republic of the Philippines and a residential apartment building; that since 1990, she had been operating a drugstore

dential apartment building; that since 1990, she had been operating a drugstore and
Supreme Court
cosmetics store on the ground floor of RBJ Building where she also had been residing while the other
Manila
areas of the buildings including the sidewalks were being leased and occupied by tenants and street
SECOND DIVISION vendors.
MILA A. REYES , G.R. No. 188064
In December 1989, respondent leased from petitioner a space on the ground floor of
Petitioner,
Present: the RBJ Building for her pawnshop business for a monthly rental of ₱4,000.00. A close friendship
CARPIO, J., Chairperson, developed between the two which led to the respondent investing thousands of pesos in petitioners
NACHURA,
financing/lending business from February 7, 1990 to May 27, 1990, with interest at the rate of 6%
PERALTA,
- versus - ABAD, and a month.

MENDOZA, JJ On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings

Bank and Loan Bank, Inc. (FSL Bank) to secure a loan of ₱2,000,000.00 payable in installments.
Promulgated:
VICTORIA T. TUPARAN, June 1, 2011 On November 15, 1990, petitioners outstanding account on the mortgage reached ₱2,278,078.13.
Respondent. Petitioner then decided to sell her real properties for at least ₱6,500,000.00 so she could liquidate

her bank loan and finance her businesses. As a gesture of friendship, respondent verbally offered to
X -----------------------------------------------------------------------------------------------------X
conditionally buy petitioners real properties for ₱4,200,000.00 payable on installment basis without

DECISION interest and to assume the bank loan. To induce the petitioner to accept her offer, respondent offered

the following conditions/concessions:

MENDOZA, J.:
Subject of this petition for review is the February 13, 2009 Decision[1] of the Court of
Appeals (CA) which affirmed with modification the February 22, 2006 Decision[2] of the Regional Trial
Court, Branch 172, Valenzuela City (RTC), in Civil Case No. 3945-V-92, an action for Rescission of
Contract with Damages.
1. That the conditional sale will be cancelled if the plaintiff ( petitioner)
can find a buyer of said properties for the amount of ₱6,500,000.00 within the
next three (3) months provided all amounts received by the plaintiff from the
defendant (respondent) including payments actually made by defendant to
Farmers Savings and Loan Bank would be refunded to the defendant with
additional interest of six (6%) monthly;

2. That the plaintiff would continue using the space occupied by her and
On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of drugstore and cosmetics store without any rentals for the duration of the
installment payments;
Contract with Damages against Victoria T. Tuparan (respondent) before the RTC. In her Complaint,

petitioner alleged, among others, that she was the registered owner of a 1,274 square meter 3. That there will be a lease for fifteen (15) years in favor of the plaintiff
over the space for drugstore and cosmetics store at a monthly rental of only
residential and commercial lot located in Karuhatan, Valenzuela City, and covered by TCT No. V- ₱8,000.00 after full payment of the stipulated installment payments are made by
4130; that on that property, she put up a three-storey commercial building known as RBJ Building the defendant;

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4. That the defendant will undertake the renewal and payment of the fire
insurance policies on the two (2) subject buildings following the expiration of the
then existing fire insurance policy of the plaintiff up to the time that plaintiff is fully
paid of the total purchase price of ₱4,200,000.00.[3]
After petitioners verbal acceptance of all the conditions/concessions, both parties worked
together to obtain FSL Banks approval for respondent to assume her (petitioners) outstanding bank
account. The assumption would be part of respondents purchase price for petitioners mortgaged real
properties. FSL Bank approved their proposal on the condition that petitioner would sign or remain
as co-maker for the mortgage obligation assumed by respondent.
On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of
Conditional Sale of Real Properties with Assumption of Mortgage. Due to their close personal
friendship and business relationship, both parties chose not to reduce into writing the other terms of
their agreement mentioned in paragraph 11 of the complaint. Besides, FSL Bank did not want to
incorporate in the Deed of Conditional Sale of Real Properties with Assumption of Mortgage any other
side agreement between petitioner and respondent.
Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage,
respondent was bound to pay the petitioner a lump sum of ₱1.2 million pesos without interest as
part of the purchase price in three (3) fixed installments as follows:
a) ₱200,000.00 due January 31, 1991
b) ₱200,000.00 due June 30, 1991
c) ₱800,000.00 due December 31, 1991
Respondent, however, defaulted in the payment of her obligations on their due dates.
Instead of paying the amounts due in lump sum on their respective maturity dates, respondent paid
petitioner in small amounts from time to time. To compensate for her delayed payments, respondent
agreed to pay petitioner an interest of 6% a month. As of August 31, 1992, respondent had only
paid ₱395,000.00, leaving a balance of ₱805,000.00 as principal on the unpaid installments and
₱466,893.25 as unpaid accumulated interest.
Petitioner further averred that despite her success in finding a prospective buyer for the
subject real properties within the 3-month period agreed upon, respondent reneged on her promise
to allow the cancellation of their deed of conditional sale. Instead, respondent became interested in
owning the subject real properties and even wanted to convert the entire property into a modern
commercial complex. Nonetheless, she consented because respondent repeatedly professed
friendship and assured her that all their verbal side agreement would be honored as shown by the
fact that since December 1990, she (respondent) had not collected any rentals from the petitioner
for the space occupied by her drugstore and cosmetics store.
On March 19, 1992, the residential building was gutted by fire which caused the petitioner
to lose rental income in the amount of ₱8,000.00 a month since April 1992. Respondent neglected
to renew the fire insurance policy on the subject buildings.
Since December 1990, respondent had taken possession of the subject real properties and
had been continuously collecting and receiving monthly rental income from the tenants of the
buildings and vendors of the sidewalk fronting the RBJ building without sharing it with petitioner.
On September 2, 1992, respondent offered the amount of ₱751,000.00 only payable
on September 7, 1992, as full payment of the purchase price of the subject real properties and
demanded the simultaneous execution of the corresponding deed of absolute sale.
Respondents Answer
Respondent countered, among others, that the tripartite agreement erroneously designated
by the petitioner as a Deed of Conditional Sale of Real Property with Assumption of Mortgage was
actually a pure and absolute contract of sale with a term period. It could not be considered a
conditional sale because the acquisition of contractual rights and the performance of the obligation
therein did not depend upon a future and uncertain event. Moreover, the capital gains and
documentary stamps and other miscellaneous expenses and real estate taxes up to 1990 were
supposed to be paid by petitioner but she failed to do so.
2|P a g e
 Respondent further averred that she successfully rescued the properties from a definite
foreclosure by paying the assumed mortgage in the amount of ₱2,278,078.13 plus interest and other
finance charges. Because of her payment, she was able to obtain a deed of cancellation of mortgage
and secure a release of mortgage on the subject real properties including petitioners ancestral
residential property in Sta. Maria, Bulacan.
Petitioners claim for the balance of the purchase price of the subject real properties was
baseless and unwarranted because the full amount of the purchase price had already been paid, as
she did pay more than ₱4,200,000.00, the agreed purchase price of the subject real properties, and
she had even introduced improvements thereon worth more than ₱4,800,000.00. As the parties could
no longer be restored to their original positions, rescission could not be resorted to.
Respondent added that as a result of their business relationship, petitioner was able to
obtain from her a loan in the amount of ₱400,000.00 with interest and took several pieces of jewelry
worth ₱120,000.00. Petitioner also failed and refused to pay the monthly rental of ₱20,000.00
since November 16, 1990 up to the present for the use and occupancy of the ground floor of the
building on the subject real property, thus, accumulating arrearages in the amount of ₱470,000.00
as of October 1992.
Ruling of the RTC
On February 22, 2006, the RTC handed down its decision finding that respondent failed to pay in full
the ₱4.2 million total purchase price of the subject real properties leaving a balance of ₱805,000.00.
It stated that the checks and receipts presented by respondent refer to her payments of the mortgage
obligation with FSL Bank and not the payment of the balance of ₱1,200,000.00. The RTC also
considered the Deed of Conditional Sale of Real Property with Assumption of Mortgage executed by
and among the two parties and FSL Bank a contract to sell, and not a contract of sale. It was of the
opinion that although the petitioner was entitled to a rescission of the contract, it could not be
permitted because her non-payment in full of the purchase price may not be considered as
substantial and fundamental breach of the contract as to defeat the object of the parties in entering
into the contract.[4] The RTC believed that the respondents offer stated in her counsels letter
dated September 2, 1992 to settle what she thought was her unpaid balance of ₱751,000.00 showed
her sincerity and willingness to settle her obligation. Hence, it would be more equitable to give
respondent a chance to pay the balance plus interest within a given period of time.
Finally, the RTC stated that there was no factual or legal basis to award damages and attorneys fees
because there was no proof that either party acted fraudulently or in bad faith.
Thus, the dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Allowing the defendant to pay the plaintiff within thirty (30) days from
the finality hereof the amount of ₱805,000.00, representing the unpaid purchase
price of the subject property, with interest thereon at 2% a month from January
1, 1992 until fully paid. Failure of the defendant to pay said amount within the said
period shall cause the automatic rescission of the contract (Deed of Conditional
Sale of Real Property with Assumption of Mortgage) and the plaintiff and the
defendant shall be restored to their former positions relative to the subject
property with each returning to the other whatever benefits each derived from the
transaction;
2. Directing the defendant to allow the plaintiff to continue using the
space occupied by her for drugstore and cosmetic store without any rental pending
payment of the aforesaid balance of the purchase price.
3. Ordering the defendant, upon her full payment of the purchase price
together with interest, to execute a contract of lease for fifteen (15) years in favor
of the plaintiff over the space for the drugstore and cosmetic store at a fixed
monthly rental of ₱8,000.00; and
4. Directing the plaintiff, upon full payment to her by the defendant of
the purchase price together with interest, to execute the necessary deed of sale,
as well as to pay the Capital Gains Tax, documentary stamps and other
miscellaneous expenses necessary for securing the BIR Clearance, and to pay the
real estate taxes due on the subject property up to 1990, all necessary to transfer
ownership of the subject property to the defendant.
No pronouncement as to damages, attorneys fees and costs.
SO ORDERED.[5]
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Ruling of the CA
On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision. The
CA agreed with the RTC that the contract entered into by the parties is a contract to sell but ruled
that the remedy of rescission could not apply because the respondents failure to pay the petitioner
the balance of the purchase price in the total amount of ₱805,000.00 was not a breach of contract,
but merely an event that prevented the seller (petitioner) from conveying title to the purchaser
(respondent). It reasoned that out of the total purchase price of the subject property in the amount
of ₱4,200,000.00, respondents remaining unpaid balance was only ₱805,000.00. Since respondent
had already paid a substantial amount of the purchase price, it was but right and just to allow her
to pay the unpaid balance of the purchase price plus interest. Thus, the decretal portion of the CA
Decision reads:
WHEREFORE, premises considered, the Decision dated 22 February 2006
and Order dated 22 December 2006 of the Regional Trial Court of Valenzuela City,
Branch 172 in Civil Case No. 3945-V-92 are AFFIRMED with MODIFICATION in that
defendant-appellant Victoria T. Tuparan is hereby ORDERED to pay plaintiff-
appellee/appellant Mila A. Reyes, within 30 days from finality of this Decision, the
amount of ₱805,000.00 representing the unpaid balance of the purchase price of
the subject property, plus interest thereon at the rate of 6% per annum from 11
September 1992 up to finality of this Decision and, thereafter, at the rate of 12%
per annum until full payment. The ruling of the trial court on the automatic
rescission of the Deed of Conditional Sale with Assumption of Mortgage is hereby
DELETED. Subject to the foregoing, the dispositive portion of the trial courts
decision is AFFIRMED in all other respects.
SO ORDERED.[6]
After the denial of petitioners motion for reconsideration and respondents motion for partial
reconsideration, petitioner filed the subject petition for review praying for the reversal and setting
aside of the CA Decision anchored on the following
ASSIGNMENT OF ERRORS
A. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN DISALLOWING THE OUTRIGHT RESCISSION OF THE
SUBJECT DEED OF CONDITIONAL SALE OF REAL PROPERTIES WITH
ASSUMPTION OF MORTGAGE ON THE GROUND THAT RESPONDENT
TUPARANS FAILURE TO PAY PETITIONER REYES THE BALANCE OF THE
PURCHASE PRICE OF ₱805,000.00 IS NOT A BREACH OF CONTRACT
DESPITE ITS OWN FINDINGS THAT PETITIONER STILL RETAINS
OWNERSHIP AND TITLE OVER THE SUBJECT REAL PROPERTIES DUE TO
RESPONDENTS REFUSAL TO PAY THE BALANCE OF THE TOTAL
PURCHASE PRICE OF ₱805,000.00 WHICH IS EQUAL TO 20% OF THE
TOTAL PURCHASE PRICE OF ₱4,200,000.00 OR 66% OF THE
STIPULATED LAST INSTALLMENT OF ₱1,200,000.00 PLUS THE INTEREST
THEREON. IN EFFECT, THE COURT OF APPEALS AFFIRMED AND
ADOPTED THE TRIAL COURTS CONCLUSION THAT THE RESPONDENTS
NON-PAYMENT OF THE ₱805,000.00 IS ONLY A SLIGHT OR CASUAL
BREACH OF CONTRACT.
B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN DISREGARDING AS GROUND FOR THE RESCISSION OF
THE SUBJECT CONTRACT THE OTHER FRAUDULENT AND MALICIOUS
ACTS COMMITTED BY THE RESPONDENT AGAINST THE PETITIONER
WHICH BY THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE
PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT WITHIN WHICH
TO PAY TO THE PETITIONER THE ₱805,000.00 PLUS INTEREST
THEREON.
C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT
ENTITLED TO THE RESCISSION OF THE SUBJECT CONTRACT, THE COURT
OF APPEALS STILL SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN
REDUCING THE INTEREST ON THE ₱805,000.00 TO ONLY 6% PER
ANNUM STARTING FROM THE DATE OF FILING OF THE COMPLAINT ON
SEPTEMBER 11, 1992 DESPITE THE PERSONAL COMMITMENT OF THE
RESPONDENT AND AGREEMENT BETWEEN THE PARTIES THAT
RESPONDENT WILL PAY INTEREST ON THE ₱805,000.00 AT THE RATE
OF 6% MONTHLY STARTING THE DATE OF DELINQUENCY ON
DECEMBER 31, 1991.
D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN THE APPRECIATION AND/OR MISAPPRECIATION OF
FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER
REYES FOR ACTUAL DAMAGES WHICH CORRESPOND TO THE MILLIONS
OF PESOS OF RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES
WHICH RESPONDENT TUPARAN COLLECTED CONTINUOUSLY SINCE
DECEMBER 1990, EVEN WITH THE UNPAID BALANCE OF ₱805,000.00
AND DESPITE THE FACT THAT RESPONDENT DID NOT CONTROVERT
SUCH CLAIM OF THE PETITIONER AS CONTAINED IN HER AMENDED
COMPLAINT DATED APRIL 22, 2006.
4|P a g e
 E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS 1. The subject deed of conditional sale is a reciprocal obligation whose
DISCRETION IN THE APPRECIATION OF FACTS RESULTING INTO THE outstanding characteristic is reciprocity arising from identity of cause by virtue of
DENIAL OF THE CLAIM OF PETITIONER REYES FOR THE ₱29,609.00 which one obligation is correlative of the other.
BACK RENTALS THAT WERE COLLECTED BY RESPONDENT TUPARAN
FROM THE OLD TENANTS OF THE PETITIONER.
2. The petitioner was rescinding not enforcing the subject Deed of
Conditional Sale pursuant to Article 1191 of the Civil Code because of the
F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS respondents failure/refusal to pay the ₱805,000.00 balance of the total purchase
DISCRETION IN DENYING THE PETITIONERS EARLIER URGENT price of the petitioners properties within the stipulated period ending December
MOTION FOR ISSUANCE OF A PRELIMINARY MANDATORY AND 31, 1991.
PROHIBITORY INJUNCTION DATED JULY 7, 2008 AND THE
SUPPLEMENT THERETO DATED AUGUST 4, 2008 THEREBY CONDONING
3. There was no slight or casual breach on the part of the respondent
THE UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE FLORO ALEJO TO
because she (respondent) deliberately failed to comply with her contractual
RESOLVE WITHIN ELEVEN (11) YEARS THE PETITIONERS THREE (3)
obligations with the petitioner by violating the terms or manner of payment of the
SEPARATE MOTIONS FOR PRELIMINARY INJUNCTION/ TEMPORARY
₱1,200,000.00 balance and unjustly enriched herself at the expense of the
RESTRAINING ORDER, ACCOUNTING AND DEPOSIT OF RENTAL INCOME
petitioner by collecting all rental payments for her personal benefit and enjoyment.
DATED MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7, 2006
THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY ENRICH
Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate
HERSELF BY CONTINUOUSLY COLLECTING ALL THE RENTALS/FRUITS
OF THE SUBJECT REAL PROPERTIES WITHOUT ANY ACCOUNTING AND of 6% per month on her unpaid installment of ₱805,000.00 from the date of the
COURT DEPOSIT OF THE COLLECTED RENTALS/FRUITS AND THE
delinquency, December 31, 1991, because she obligated herself to do so.
PETITIONERS URGENT MOTION TO DIRECT DEFENDANT VICTORIA
TUPARAN TO PAY THE ACCUMULATED UNPAID REAL ESTATE TAXES AND
Finally, the petitioner asserts that her claim for damages or lost income as well as for the
SEF TAXES ON THE SUBJECT REAL PROPERTIES DATED JANUARY 13,
2007 THEREBY EXPOSING THE SUBJECT REAL PROPERTIES TO back rentals in the amount of ₱29,609.00 has been fully substantiated and, therefore, should have
IMMINENT AUCTION SALE BY THE CITY TREASURER
OF VALENZUELA CITY. been granted by the CA. Her claim for moral and exemplary damages and attorneys fees has been

likewise substantiated.
G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS
DISCRETION IN DENYING THE PETITIONERS CLAIM FOR MORAL AND Position of the Respondent
EXEMPLARY DAMAGES AND ATTORNEYS FEES AGAINST THE
RESPONDENT. The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage

entered into between the parties is a contract to sell and not a contract of sale because the title of
In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in
the subject properties still remains with the petitioner as she failed to pay the installment payments
ruling that there was no legal basis for the rescission of the Deed of Conditional Sale with Assumption
in accordance with their agreement.
of Mortgage.
Respondent echoes the RTC position that her inability to pay the full balance on the purchase price
Position of the Petitioner
may not be considered as a substantial and fundamental breach of the subject contract and it would
The petitioner basically argues that the CA should have granted the rescission of the subject Deed
be more equitable if she would be allowed to pay the balance including interest within a certain
of Conditional Sale of Real Properties with Assumption of Mortgage for the following reasons:
period of time. She claims that as early as 1992, she has shown her sincerity by offering to pay a

certain amount which was, however, rejected by the petitioner.

5|P a g e

Finally, respondent states that the subject deed of conditional sale explicitly provides that the
installment payments shall not bear any interest. Moreover, petitioner failed to prove that she was
entitled to back rentals.
The Courts Ruling
The petition lacks merit.
The Court agrees with the ruling of the courts below that the subject Deed of Conditional
Sale with Assumption of Mortgage entered into by and among the two parties and FSL Bank
on November 26, 1990 is a contract to sell and not a contract of sale. The subject contract was
correctly classified as a contract to sell based on the following pertinent stipulations:
8. That the title and ownership of the subject real properties shall remain
with the First Party until the full payment of the Second Party of the balance of
the purchase price and liquidation of the mortgage obligation of ₱2,000,000.00.
Pending payment of the balance of the purchase price and liquidation of the
mortgage obligation that was assumed by the Second Party, the Second Party shall
not sell, transfer and convey and otherwise encumber the subject real properties
without the written consent of the First and Third Party.
9. That upon full payment by the Second Party of the full balance of the
purchase price and the assumed mortgage obligation herein mentioned the Third
Party shall issue the corresponding Deed of Cancellation of Mortgage and the First
Party shall execute the corresponding Deed of Absolute Sale in favor of the Second
Party.[7]
Based on the above provisions, the title and ownership of the subject properties remains
with the petitioner until the respondent fully pays the balance of the purchase price and the assumed
mortgage obligation. Thereafter, FSL Bank shall then issue the corresponding deed of cancellation
of mortgage and the petitioner shall execute the corresponding deed of absolute sale in favor of the
respondent.
Accordingly, the petitioners obligation to sell the subject properties becomes demandable
only upon the happening of the positive suspensive condition, which is the respondents full payment
of the purchase price. Without respondents full payment, there can be no breach of contract to speak
of because petitioner has no obligation yet to turn over the title. Respondents failure to pay in full
the purchase price is not the breach of contract contemplated under Article 1191 of the New Civil
Code but rather just an event that prevents the petitioner from being bound to convey title to the
respondent. The 2009 case of Nabus v. Joaquin & Julia Pacson[8] is enlightening:
The Court holds that the contract entered into by the Spouses Nabus and
respondents was a contract to sell, not a contract of sale.
A contract of sale is defined in Article 1458 of the Civil Code, thus:
Art. 1458. By the contract of sale, one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its equivalent.
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.
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.
6|P a g e
 An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as
a conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition, because
in a conditional contract of sale, the first element of consent is present, although
it is conditioned upon the happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated. However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous
delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act
having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition
which is the full payment of the purchase price, ownership will not automatically
transfer to the buyer although the property may have been previously delivered to
him. The prospective seller still has to convey title to the prospective buyer by
Espidol, [9] where it was written:
entering into a contract of absolute sale.
Further, Chua v. Court of Appeals, cited this distinction between a
contract of sale and a contract to sell:
In a contract of sale, the title to the property passes to
the vendee upon the delivery of the thing sold; in a contract to
sell, ownership is, by agreement, reserved in the vendor and is
not to pass to the vendee until full payment of the purchase
price. Otherwise stated, in a contract of sale, the vendor loses
ownership over the property and cannot recover it until and
unless the contract is resolved or rescinded; whereas, in a
contract to sell, title is retained by the vendor until full payment
of the price. In the latter contract, payment of the price is a
positive suspensive condition, failure of which is not a breach
but an event that prevents the obligation of the vendor to
convey title from becoming effective.
It is not the title of the contract, but its express terms or stipulations that
determine the kind of contract entered into by the parties. In this case, the contract
entitled Deed of Conditional Sale is actually a contract to sell. The contract
stipulated that as soon as the full consideration of the sale has been paid by the
vendee, the corresponding transfer documents shall be executed by the vendor to
the vendee for the portion sold. Where the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price, the
contract is only a contract to sell. The aforecited stipulation shows that the vendors
reserved title to the subject property until full payment of the purchase price.
Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale
executed in their favor was merely a contract to sell, the obligation of the seller to
sell becomes demandable only upon the happening of the suspensive
condition. The full payment of the purchase price is the positive suspensive
condition, the failure of which is not a breach of contract, but simply an event
that prevented the obligation of the vendor to convey title from
acquiring binding force. Thus, for its non-fulfilment, there is no contract to
speak of, the obligor having failed to perform the suspensive condition which
enforces a juridical relation. With this circumstance, there can be no rescission or
fulfillment of an obligation that is still non-existent, the suspensive condition not
having occurred as yet. Emphasis should be made that the breach
contemplated in Article 1191 of the New Civil Code is the obligors failure
to comply with an obligation already extant, not a failure of a condition
to render binding that obligation. [Emphases and underscoring supplied]
Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v.
Regarding the right to cancel the contract for non-payment of
an installment, there is need to initially determine if what the parties
had was a contract of sale or a contract to sell. In a contract of sale, the title
to the property passes to the buyer upon the delivery of the thing sold. In a
contract to sell, on the other hand, the ownership is, by agreement, retained by
the seller and is not to pass to the vendee until full payment of the purchase
price. In the contract of sale, the buyers non-payment of the price is a negative
resolutory condition; in the contract to sell, the buyers full payment of the price is
a positive suspensive condition to the coming into effect of the agreement. In the
first case, the seller has lost and cannot recover the ownership of the property
unless he takes action to set aside the contract of sale. In the second case, the
title simply remains in the seller if the buyer does not comply with the condition
precedent of making payment at the time specified in the contract. Here, it is quite
evident that the contract involved was one of a contract to sell since the Atienzas,
as sellers, were to retain title of ownership to the land until respondent Espidol,
the buyer, has paid the agreed price. Indeed, there seems no question that the
parties understood this to be the case.
7|P a g e
 Admittedly, Espidol was unable to pay the second installment
of P1,750,000.00 that fell due in December 2002. That payment, said both the
RTC and the CA, was a positive suspensive condition failure of which
was not regarded a breach in the sense that there can be no rescission of an
obligation (to turn over title) that did not yet exist since the suspensive
condition had not taken place. x x x. [Emphases and underscoring supplied]
Thus, the Court fully agrees with the CA when it resolved: Considering, however, that the
Deed of Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that out of the total
purchase price of the subject property in the amount of ₱4,200,000.00, the remaining unpaid balance
of Tuparan (respondent) is only ₱805,000.00, a substantial amount of the purchase price has already
been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the purchase
price to Reyes.[10]
Granting that a rescission can be permitted under Article 1191, the Court still cannot allow
it for the reason that, considering the circumstances, there was only a slight or casual breach in the
fulfillment of the obligation.
Unless the parties stipulated it, rescission is allowed only when the breach of the contract
is substantial and fundamental to the fulfillment of the obligation. Whether the breach is slight or
substantial is largely determined by the attendant circumstances.[11] In the case at bench, the subject
contract stipulated the following important provisions:
2. That the purchase price of ₱4,200,000.00 shall be paid as follows:
a) ₱278,078.13 received in cash by the First Party but directly paid to the
Third Party as partial payment of the mortgage obligation of the First Party in order
to reduce the amount to ₱2,000,000.00 only as of November 15, 1990;
b) ₱721,921.87 received in cash by the First Party as additional payment
of the Second Party;
c) ₱1,200,000.00 to be paid in installments as follows:
1. ₱200,000.00 payable on or before January 31, 1991;
2. ₱200,000.00 payable on or before June 30, 1991;
3. ₱800,000.00 payable on or before December 31, 1991;
Note: All the installments shall not bear any interest.
d) ₱2,000,000.00 outstanding balance of the mortgage
obligation as of November 15, 1990 which is hereby assumed by the Second Party.
xxx
3. That the Third Party hereby acknowledges receipts from the Second
Party P278,078.13 as partial payment of the loan obligation of First Party in order
to reduce the account to only ₱2,000,000.00 as of November 15, 1990 to be
assumed by the Second Party effective November 15, 1990.[12]
From the records, it cannot be denied that respondent paid to FSL Bank petitioners
mortgage obligation in the amount of ₱2,278,078.13, which formed part of the purchase price of the
subject property. Likewise, it is not disputed that respondent paid directly to petitioner the amount
of ₱721,921.87 representing the additional payment for the purchase of the subject property. Clearly,
out of the total price of ₱4,200,000.00, respondent was able to pay the total amount of
₱3,000,000.00, leaving a balance of ₱1,200,000.00 payable in three (3) installments.
Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates the first and
second installments of ₱200,000.00 each. She, however, failed to pay the third and last installment
of ₱800,000.00 due on December 31, 1991. Nevertheless, on August 31, 1992, respondent, through
counsel, offered to pay the amount of ₱751,000.00, which was rejected by petitioner for the reason
that the actual balance was ₱805,000.00 excluding the interest charges.
Considering that out of the total purchase price of ₱4,200,000.00, respondent has already
paid the substantial amount of ₱3,400,000.00, more or less, leaving an unpaid balance of only
₱805,000.00, it is right and just to allow her to settle, within a reasonable period of time, the balance
of the unpaid purchase price. The Court agrees with the courts below that the respondent showed
her sincerity and willingness to comply with her obligation when she offered to pay the petitioner
the amount of ₱751,000.00.
On the issue of interest, petitioner failed to substantiate her claim that respondent made a
personal commitment to pay a 6% monthly interest on the ₱805,000.00 from the date of
delinquency, December 31, 1991. As can be gleaned from the contract, there was a stipulation
8|P a g e
stating that: All the installments shall not bear interest. The CA was, however, correct in imposing

interest at the rate of 6% per annum starting from the filing of the complaint on September 11,

1992.

Finally, the Court upholds the ruling of the courts below regarding the non-imposition of

damages and attorneys fees. Aside from petitioners self-serving statements, there is not enough

evidence on record to prove that respondent acted fraudulently and maliciously against the

petitioner. In the case of Heirs of Atienza v. Espidol,[13] it was stated:

Respondents are not entitled to moral damages because contracts are

not referred to in Article 2219 of the Civil Code, which enumerates the cases when
moral damages may be recovered. Article 2220 of the Civil Code allows the
recovery of moral damages in breaches of contract where the defendant acted
fraudulently or in bad faith. However, this case involves a contract to sell,
wherein full payment of the purchase price is a positive suspensive condition, the
non-fulfillment of which is not a breach of contract, but merely an event that
prevents the seller from conveying title to the purchaser. Since there is no breach
of contract in this case, respondents are not entitled to moral damages.

In the absence of moral, temperate, liquidated or compensatory

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

WHEREFORE, the petition is DENIED.

SO ORDERED.

9|P a g e
 Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 193787 April 7, 2014
SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with deceased Jose C.
Roque represented by his substitute heir JOVETTE ROQUE-LIBREA, Petitioners,
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF
CHURCHES IN THE PHILIPPINES (NCCP), represented by its Secretary General
SHARON ROSE JOY RUIZ-DUREMDES, LAND BANK OF THE PHILIPPINES (LBP),
represented by Branch Manager EVELYN M. MONTERO, ATTY. MARIO S.P. DIAZ, in his
Official Capacity as Register of Deeds for Rizal, Morong Branch, and CECILIO U. PULAN,
in his Official Capacity as Sheriff, Office of the Clerk of Court, Regional Trial Court,
Binangonan, Rizal,Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated May 12, 2010 and the
Resolution3 dated September 15, 2010 of the Court of Appeals (CA) in CA G.R. CV No. 92113 which
affirmed the Decision4 dated July 8, 2008 of the Regional Trial Court of Binangonan, Rizal, Branch
69 (RTC) that dismissed Civil Case Nos. 03-022 and 05-003 for reconveyance, annulment of sale,
deed of real estate mortgage, foreclosure and certificate of sale, and damages.
The Facts
The property subject of this case is a parcel of land with an area of 20,862 square meters (sq. m.),
located in Sitio Tagpos, Barangay Tayuman, Binangonan, Rizal, known as Lot 18089.5
On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque) and
the original owners of the then unregistered Lot 18089 – namely, Velia R. Rivero (Rivero), Magdalena
Aguilar, Angela Gonzales, Herminia R. Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R. Topacio,
and Augusto Rivero (Rivero, et al.) – executed a Deed of Conditional Sale of Real Property6 (1977
Deed of Conditional Sale) over a 1,231-sq. m. portion of Lot 18089 (subject portion) for a
consideration of ₱30,775.00. The parties agreed that Sps. Roque shall make an initial payment of
₱15,387.50 upon signing, while the remaining balance of the purchase price shall be payable upon
the registration of Lot 18089, as well as the segregation and the concomitant issuance of a separate
title over the subject portion in their names. After the deed’s execution, Sps. Roque took possession
and introduced improvements on the subject portion which they utilized as a balut factory.7
On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National Council of
Churches in the Philippines (NCCP), applied for a free patent over the entire Lot 18089 and was
eventually issued Original Certificate of Title (OCT) No. M-59558 in his name on October 21, 1991.
On June 24, 1993, Sabug, Jr. and Rivero, in her personal capacity and in representation of Rivero,
et al., executed a Joint Affidavit9 (1993 Joint Affidavit), acknowledging that the subject portion
belongs to Sps. Roque and expressed their willingness to segregate the same from the entire area
of Lot 18089.
On December 8, 1999, however, Sabug, Jr., through a Deed of Absolute Sale 10 (1999 Deed of
Absolute Sale), sold Lot 18089 to one Ma. Pamela P. Aguado (Aguado) for ₱2,500,000.00, who, in
turn, caused the cancellation of OCT No. M-5955 and the issuance of Transfer Certificate of Title
(TCT) No. M-96692 dated December 17, 199911 in her name.
Thereafter, Aguado obtained an ₱8,000,000.00 loan from the Land Bank of the Philippines (Land
Bank) secured by a mortgage over Lot 18089.12 When she failed to pay her loan obligation, Land
Bank commenced extra-judicial foreclosure proceedings and eventually tendered the highest bid in
the auction sale. Upon Aguado’s failure to redeem the subject property, Land Bank consolidated its
ownership, and TCT No. M-11589513 was issued in its name on July 21, 2003.14
On June 16, 2003, Sps. Roque filed a complaint15 for reconveyance, annulment of sale, deed of real
estate mortgage, foreclosure, and certificate of sale, and damages before the RTC, docketed as Civil
Case No. 03-022, against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong,
Rizal, and Sheriff Cecilio U. Pulan, seeking to be declared as the true owners of the subject portion
which had been erroneously included in the sale between Aguado and Sabug, Jr., and, subsequently,
the mortgage to Land Bank, both covering Lot 18089 in its entirety.
In defense, NCCP and Sabug, Jr. denied any knowledge of the 1977 Deed of Conditional Sale through
which the subject portion had been purportedly conveyed to Sps. Roque.16
For her part, Aguado raised the defense of an innocent purchaser for value as she allegedly derived
her title (through the 1999 Deed of Absolute Sale) from Sabug, Jr., the registered owner in OCT No.
M-5955, covering Lot 18089, which certificate of title at the time of sale was free from any lien and/or
encumbrances. She also claimed that Sps. Roque’s cause of action had already prescribed because
their adverse claim was made only on April 21, 2003, or four (4) years from the date OCT No. M-
5955 was issued in Sabug, Jr.’s name on December 17, 1999.17
On the other hand, Land Bank averred that it had no knowledge of Sps. Roque’s claim relative to the
subject portion, considering that at the time the loan was taken out, Lot 18089 in its entirety was
registered in Aguado’s name and no lien and/or encumbrance was annotated on her certificate of
title.18
Meanwhile, on January 18, 2005, NCCP filed a separate complaint19 also for declaration of nullity of
documents and certificates of title and damages, docketed as Civil Case No. 05-003. It claimed to be
the real owner of Lot 18089 which it supposedly acquired from Sabug, Jr. through an oral contract
of sale20 in the early part of 1998, followed by the execution of a Deed of Absolute Sale on December
2, 1998 (1998 Deed of Absolute Sale).21 NCCP also alleged that in October of the same year, it
entered into a Joint Venture Agreement (JVA) with Pilipinas Norin Construction Development
Corporation (PNCDC), a company owned by Aguado’s parents, for the development of its real
properties, including Lot 18089, into a subdivision project, and as such, turned over its copy of OCT
No. M-5955 to PNCDC.22 Upon knowledge of the purported sale of Lot 18089 to Aguado, Sabug, Jr.
denied the transaction and alleged forgery. Claiming that the Aguados 23 and PNCDC conspired to
defraud NCCP, it prayed that PNCDC’s corporate veil be pierced and that the Aguados be ordered to
pay the amount of ₱38,092,002.00 representing the unrealized profit from the JVA. 24 Moreover,
NCCP averred that Land Bank failed to exercise the diligence required to ascertain the true owners
of Lot 18089. Hence, it further prayed that: (a) all acts of ownership and dominion over Lot 18089
that the bank might have done or caused to be done be declared null and void; (b) it be declared
the true and real owners of Lot 18089; and (c) the Register of Deeds of Morong, Rizal be ordered to
cancel any and all certificates of title covering the lot, and a new one be issued in its name. 25 In its
answer, Land Bank reiterated its stance that Lot 18089 was used as collateral for the ₱8,000,000.00
loan obtained by the Countryside Rural Bank, Aguado, and one Bella Palasaga. There being no lien
10 | P a g e
and/ or encumbrance annotated on its certificate of title, i.e., TCT No. M-115895, it cannot be held
liable for NCCP’s claims. Thus, it prayed for the dismissal of NCCP’s complaint.26
On September 7, 2005, Civil Case Nos. 02-022 and 05-003 were ordered consolidated.27
The RTC Ruling
After due proceedings, the RTC rendered a Decision28 dated July 8, 2008, dismissing the complaints
of Sps. Roque and NCCP.
With respect to Sps. Roque’s complaint, the RTC found that the latter failed to establish their
ownership over the subject portion, considering the following: (a) the supposed owners-vendors,
i.e., Rivero, et al., who executed the 1977 Deed of Conditional Sale, had no proof of their title over
Lot 18089; (b) the 1977 Deed of Conditional Sale was not registered with the Office of the Register
of Deeds;29 (c) the 1977 Deed of Conditional Sale is neither a deed of conveyance nor a transfer
document, as it only gives the holder the right to compel the supposed vendors to execute a deed
of absolute sale upon full payment of the consideration; (d) neither Sps. Roque nor the alleged
owners-vendors, i.e., Rivero, et al., have paid real property taxes in relation to Lot 18089; and (e)
Sps. Roque’s occupation of the subject portion did not ripen into ownership that can be considered
superior to the ownership of Land Bank.30 Moreover, the RTC ruled that Sps. Roque’s action for
reconveyance had already prescribed, having been filed ten (10) years after the issuance of OCT No.
M-5955.31
On the other hand, regarding NCCP’s complaint, the RTC observed that while it anchored its claim
of ownership over Lot 18089 on the 1998 Deed of Absolute Sale, the said deed was not annotated
on OCT No. M-5955. Neither was any certificate of title issued in its name nor did it take possession
of Lot 18089 or paid the real property taxes therefor. Hence, NCCP’s claim cannot prevail against
Land Bank’s title, which was adjudged by the RTC as an innocent purchaser for value. Also, the RTC
disregarded NCCP’s allegation that the signature of Sabug, Jr. on the 1999 Deed of Absolute Sale in
favor of Aguado was forged because his signatures on both instruments bear semblances of similarity
and appear genuine. Besides, the examiner from the National Bureau of Investigation, who
purportedly found that Sabug, Jr.’s signature thereon was spurious leading to the dismissal of a
criminal case against him, was not presented as a witness in the civil action. 32
Finally, the RTC denied the parties’ respective claims for damages.33
The CA Ruling
On appeal, the Court of Appeals (CA) affirmed the foregoing RTC findings in a Decision34 dated May
12, 2010. While Land Bank was not regarded as a mortgagee/purchaser in good faith with respect
to the subject portion considering Sps. Roque’s possession thereof,35 the CA did not order its
reconveyance or segregation in the latter’s favor because of Sps. Roque’s failure to pay the remaining
balance of the purchase price. Hence, it only directed Land Bank to respect Sps. Roque’s possession
with the option to appropriate the improvements introduced thereon upon payment of
compensation.36
As regards NCCP, the CA found that it failed to establish its right over Lot 18089 for the following
reasons: (a) the sale to it of the lot by Sabug, Jr. was never registered; and (b) there is no showing
that it was in possession of Lot 18089 or any portion thereof from 1998. Thus, as far as NCCP is
concerned, Land Bank is a mortgagee/purchaser in good faith.37
Aggrieved, both Sps. Roque38 and NCCP39 moved for reconsideration but were denied by the CA in
a Resolution40dated September 15, 2010, prompting them to seek further recourse before the Court.
The Issue Before the Court
The central issue in this case is whether or not the CA erred in not ordering the reconveyance of the
subject portion in Sps. Roque’s favor.
Sps. Roque maintain that the CA erred in not declaring them as the lawful owners of the subject
portion despite having possessed the same since the execution of the 1977 Deed of Conditional Sale,
sufficient for acquisitive prescription to set in in their favor. 41 To bolster their claim, they also point
to the 1993 Joint Affidavit whereby Sabug, Jr. and Rivero acknowledged their ownership
thereof.42 Being the first purchasers and in actual possession of the disputed portion, they assert
that they have a better right over the 1,231- sq. m. portion of Lot 18089 and, hence, cannot be
ousted therefrom by Land Bank, which was adjudged as a ortgagee/purchaser in bad faith, pursuant
to Article 1544 of the Civil Code.43
In opposition, Land Bank espouses that the instant petition should be dismissed for raising questions
of fact, in violation of the proscription under Rule 45 of the Rules of Court which allows only pure
questions of law to be raised.44 Moreover, it denied that ownership over the subject portion had been
acquired by Sps. Roque who admittedly failed to pay the remaining balance of the purchase
price.45 Besides, Land Bank points out that Sps. Roque’s action for reconveyance had already
prescribed.46
Instead of traversing the arguments of Sps. Roque, NCCP, in its Comment47 dated December 19,
2011, advanced its own case, arguing that the CA erred in holding that it failed to establish its claimed
ownership over Lot 18089 in its entirety. Incidentally, NCCP’s appeal from the CA Decision dated May
12, 2010 was already denied by the Court,48 and hence, will no longer be dealt with in this case.
The Court’s Ruling
The petition lacks merit.
The essence of an action for reconveyance is to seek the transfer of the property which was
wrongfully or erroneously registered in another person’s name to its rightful owner or to one with a
better right.49 Thus, it is incumbent upon the aggrieved party to show that he has a legal claim on
the property superior to that of the registered owner and that the property has not yet passed to the
hands of an innocent purchaser for value.50
Sps. Roque claim that the subject portion covered by the 1977 Deed of Conditional Sale between
them and Rivero, et al. was wrongfully included in the certificates of title covering Lot 18089, and,
hence, must be segregated therefrom and their ownership thereof be confirmed. The salient portions
of the said deed state:
DEED OF CONDITIONAL SALE OF REAL PROPERTY
KNOW ALL MEN BY THESE PRESENTS:
xxxx
That for and in consideration of the sum of THIRTY THOUSAND SEVEN HUNDRED SEVENTY FIVE
PESOS (₱30,775.00), Philippine Currency, payable in the manner hereinbelow specified, the
VENDORS do hereby sell, transfer and convey unto the VENDEE, or their heirs, executors,
administrators, or assignors, that unsegregated portion of the above lot, x x x.
That the aforesaid amount shall be paid in two installments, the first installment which is in the
amount of __________ (₱15,387.50) and the balance in the amount of __________ (₱15,387.50),
shall be paid as soon as the described portion of the property shall have been registered under the
Land Registration Act and a Certificate of Title issued accordingly;
11 | P a g e
That as soon as the total amount of the property has been paid and the Certificate of Title has been It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
issued, an absolute deed of sale shall be executed accordingly; cases where the subject property is sold by the owner not to the party the seller contracted with,
x x x x51 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 fulfilment of the suspensive condition
Examining its provisions, the Court finds that the stipulation above-highlighted shows that the 1977
such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith
Deed of Conditional Sale is actually in the nature of a contract to sell and not one of sale contrary to
and the prospective buyer cannot seek the relief of reconveyance of the property.
Sps. Roque’s belief.52 In this relation, it has been consistently ruled that where the seller promises
to execute a deed of absolute sale upon the completion by the buyer of the payment of the purchase There is no double sale in such case.1âwphi1 Title to the property will transfer to the buyer after
price, the contract is only a contract to sell even if their agreement is denominated as a Deed of registration because there is no defect in the owner-seller’s title per se, but the latter, of course, may
Conditional Sale,53 as in this case. This treatment stems from the legal characterization of a contract be sued for damages by the intending buyer. (Emphasis supplied)
to sell, that is, a bilateral contract whereby the prospective seller, while expressly reserving the On the matter of double sales, suffice it to state that Sps. Roque’s reliance64 on Article 154465 of the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to Civil Code has been misplaced since the contract they base their claim of ownership on is, as earlier
sell the subject property exclusively to the prospective buyer upon fulfillment of the condition agreed stated, a contract to sell, and not one of sale. In Cheng v. Genato,66 the Court stated the
upon, such as, the full payment of the purchase price.54 Elsewise stated, in a contract to sell, circumstances which must concur in order to determine the applicability of Article 1544, none of
ownership is retained by the vendor and is not to pass to the vendee until full payment of the which are obtaining in this case, viz.:
purchase price.55 Explaining the subject matter further, the Court, in Ursal v. CA,56 held that: (a) The two (or more) sales transactions in issue must pertain to exactly the same subject
[I]n contracts to sell the obligation of the seller to sell becomes demandable only upon the happening matter, and must be valid sales transactions;
of the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only (b) The two (or more) buyers at odds over the rightful ownership of the subject matter
upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership must each represent conflicting interests; and
of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter
to transfer the ownership to the buyer, even if there is a contract to sell between them.
must each have bought from the same seller.
Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price.57 As
Finally, regarding Sps. Roque’s claims of acquisitive prescription and reimbursement for the value of
such, the condition which would have triggered the parties’ obligation to enter into and thereby
the improvements they have introduced on the subject property,67 it is keenly observed that none of
perfect a contract of sale in order to effectively transfer the ownership of the subject portion from
the arguments therefor were raised before the trial court or the CA.68 Accordingly, the Court applies
the sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be deemed to have been fulfilled.
the well-settled rule that litigants cannot raise an issue for the first time on appeal as this would
Consequently, the latter cannot validly claim ownership over the subject portion even if they had
contravene the basic rules of fair play and justice. In any event, such claims appear to involve
made an initial payment and even took possession of the same.58
questions of fact which are generally prohibited under a Rule 45 petition.69
The Court further notes that Sps. Roque did not even take any active steps to protect their claim
With the conclusions herein reached, the Court need not belabor on the other points raised by the
over the disputed portion. This remains evident from the following circumstances appearing on
parties, and ultimately finds it proper to proceed with the denial of the petition.
record: (a) the 1977 Deed of Conditional Sale was never registered; (b) they did not seek the
actual/physical segregation of the disputed portion despite their knowledge of the fact that, as early WHEREFORE, the petition is DENIED. The Decision dated May 12, 2010 and the Resolution dated
as 1993, the entire Lot 18089 was registered in Sabug, Jr.’s name under OCT No. M-5955; and (c) September 15, 2010 of the Court of Appeals in CAG.R. CV No. 92113 are hereby AFFIRMED.
while they signified their willingness to pay the balance of the purchase price, 59Sps. Roque neither SO ORDERED.
compelled Rivero et al., and/or Sabug, Jr. to accept the same nor did they consign any amount to
the court, the proper application of which would have effectively fulfilled their obligation to pay the
purchase price.60 Instead, Sps. Roque waited 26 years, reckoned from the execution of the 1977
Deed of Conditional Sale, to institute an action for reconveyance (in 2003), and only after Lot 18089
was sold to Land Bank in the foreclosure sale and title thereto was consolidated in its name. Thus,
in view of the foregoing, Sabug, Jr. – as the registered owner of Lot 18089 borne by the grant of his
free patent application – could validly convey said property in its entirety to Aguado who, in turn,
mortgaged the same to Land Bank. Besides, as aptly observed by the RTC, Sps. Roque failed to
establish that the parties who sold the property to them, i.e., Rivero, et al., were indeed its true and
lawful owners.61 In fine, Sps. Roque failed to establish any superior right over the subject portion as
against the registered owner of Lot 18089, i.e., Land Bank, thereby warranting the dismissal of their
reconveyance action, without prejudice to their right to seek damages against the vendors, i.e.,
Rivero et al.62 As applied in the case of Coronel v. CA:63

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FIRST DIVISION RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY
TCT NO. T-9905, LAS PIAS, METRO MANILA
SPOUSES ONNIE SERRANO AND G.R. No. 139173
AMPARO HERRERA, RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE
HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF
Petitioners,
OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH
Present: AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
PUNO, C.J., Chairperson, BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL
DEED OF SALE ON THIS DATE.
SANDOVAL-GUTIERREZ,
SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.
CORONA,
- versus - *AZCUNA,
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]
and
GARCIA, JJ. On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote
Promulgated: petitioners informing them of his readiness to pay the balance of the contract price and requesting
them to prepare the final deed of sale.[3]
GODOFREDO CAGUIAT, February 28, 2007 On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter[4] to respondent
Respondent.
stating that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they
are canceling the transaction. Petitioners also informed respondent that he can recover the earnest
x------------------------------------------------------------------------------------------------------x
money of P100,000.00 anytime.

D E C I S I O N Again, on April 6, 1990,[5] petitioners wrote respondent stating that they delivered to his
SANDOVAL-GUTIERREZ, J.: counsel Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the amount
of P100,000.00 payable to him.
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial
amended, assailing the Decision[1] of the Court of Appeals dated January 29, 1999 and its Resolution
Court, Branch 63, Makati City a complaint against them for specific performance and damages,
dated July 14, 1999 in CA-G.R. CV No. 48824.
docketed as Civil Case No. 90-1067.[6]
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located
On June 27, 1994, after hearing, the trial court rendered its Decision[7] finding there was a perfected
in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905.
contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the
of respondent. The trial court held:
lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave
xxx
petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the corresponding In the evaluation of the evidence presented by the parties as to the issue
as to who was ready to comply with his obligation on the verbal agreement to sell
receipt stating that respondent promised to pay the balance of the purchase price on or before March
on March 23, 1990, shows that plaintiffs position deserves more weight and
23, 1990, thus: credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or
earnest money showed that there was already a perfected contract. Art. 1482 of
Las Pias, Metro Manila
the Civil Code of the Philippines, reads as follows, to wit:
March 19, 1990

13 | P a g e
 Art. 1482. Whenever earnest money is given in a contract of
sale, it shall be considered as part of the price and as proof of the
perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to push through
with the sale by sending defendants the letter dated March 25, 1990. (Exh. D) and
reiterated the same intent to pursue the sale in a letter dated April 6, 1990. Third,
plaintiff had the balance of the purchase price ready for payment (Exh.
C). Defendants mere allegation that it was plaintiff who did not appear
on March 23, 1990 is unavailing. Defendants letters (Exhs. 2 and 5) appear to
be mere afterthought.
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the
trial courts judgment.
Forthwith, petitioners filed their motion for reconsideration but it was denied by the
appellate court in its Resolution[8] dated July 14, 1999.
Hence, the present recourse.
The basic issue to be resolved is whether the document entitled Receipt for Partial Payment
signed by both parties earlier mentioned is a contract to sell or a contract of sale.
Petitioners contend that the Receipt is not a perfected contract of sale as provided for in
Article 1458[9] in relation to Article 1475[10] of the Civil Code. The delivery to them of P100,000.00 as
down payment cannot be considered as proof of the perfection of a contract of sale under Article
1482[11] of the same Code since there was no clear agreement between the parties as to the
amount of consideration.
Generally, the findings of fact of the lower courts are entitled to great weight and should
not be disturbed except for cogent reasons.14 Indeed, they should not be changed on appeal in the
absence of a clear showing that the trial court overlooked, disregarded, or
misinterpreted some facts of weight and significance, which if considered would have
altered the result of the case.[12] In the present case, we find that both the trial court and the
Court of Appeals interpreted some significant facts resulting in an erroneous resolution of the issue
involved.
In holding that there is a perfected contract of sale, both courts mainly relied on the
earnest money given by respondent to petitioners. They invoked Article 1482 of the Civil Code which
provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part
of the price and as proof of the perfection of the contract."
We are not convinced.
In San Miguel Properties Philippines, Inc. v. Spouses Huang,[13] we held that the stages of
a contract of sale are: (1) negotiation, covering the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which
takes place upon the concurrence of the essential elements of the sale, which is the meeting of the
minds of the parties as to the object of the contract and upon the price; and (3) consummation,
which begins when the parties perform their respective undertakings under the contract of sale,
culminating in the extinguishment thereof.
With the above postulates as guidelines, we now proceed to determine the real nature of
the contract entered into by the parties.
It is a canon in the interpretation of contracts that the words used therein should be given
their natural and ordinary meaning unless a technical meaning was intended.[14] Thus, when
petitioners declared in the said Receipt for Partial Payment that they
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE
HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF
OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH
AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL
DEED OF SALE ON THIS DATE.
there can be no other interpretation than that they agreed to a conditional contract of sale,
consummation of which is subject only to the full payment of the purchase price.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the
vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event,
so that if the suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed. The suspensive condition is commonly full payment of the
purchase price.[15]
14 | P a g e
 It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given

The differences between a contract to sell and a contract of sale are well-settled in in a contract of sale, it shall be considered as part of the price and proof of the perfection of the

jurisprudence. As early as 1951, in Sing Yee v. Santos,[16] we held that:
x x x [a] distinction must be made between a contract of sale in which title passes
to the buyer upon delivery of the thing sold and a contract to sell x x x where by
agreement the ownership is reserved in the seller and is not to pass until the full
payment, of the purchase price is made. In the first case, non-payment of the
price is a negative resolutory condition; in the second case, full payment is a
positive suspensive condition. Being contraries, their effect in law cannot be
identical. In the first case, the vendor has lost and cannot recover the ownership
of the land sold until and unless the contract of sale is itself resolved and set
aside. In the second case, however, the title remains in the vendor if the vendee
does not comply with the condition precedent of making payment at the time
specified in the contract.
In other words, in a contract to sell, ownership is retained by the seller and is not to pass
to the buyer until full payment of the price.[17]
In this case, the Receipt for Partial Payment shows that the true agreement between the
contract. However, this article speaks of earnest money given in a contract of sale. In this case,
the earnest money was given in a contract to sell. The earnest money forms part of the
consideration only if the sale is consummated upon full payment of the purchase price.[21] Now, since
the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale,
does not apply.
As previously discussed, the suspensive condition (payment of the balance by respondent)
did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the
property to him.
WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the
Court of Appeals is REVERSED and respondents complaint is DISMISSED.

parties is a contract to sell. SO ORDERED.

First, ownership over the property was retained by petitioners and was not to pass to
respondent until full payment of the purchase price. Thus, petitioners need not push through with

the sale should respondent fail to remit the balance of the purchase price before the deadline
on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract the

moment respondent fails to pay within the fixed period.[18]

Second, the agreement between the parties was not embodied in a deed of sale. The
absence of a formal deed of conveyance is a strong indication that the parties did not intend

immediate transfer of ownership, but only a transfer after full payment of the purchase price.[19]

Third, petitioners retained possession of the certificate of title of the lot. This is an additional
indication that the agreement did not transfer to respondent, either by actual or constructive delivery,
ownership of the property.[20]

15 | P a g e
FIRST DIVISION
On January 6, 1995, respondent accepted the offer of petitioner and bought two condominium units
CEBU WINLAND DEVELOPMENT G.R. No. 173215
CORPORATION, designated as Unit Nos. 2405 and 2406, as well as four parking slots designated as slots 91, 99, 101
Petitioner, and 103 (subject properties).
Present:
The area per condominium unit as indicated in petitioners price list is 155 square meters and the
PUNO, C.J., Chairperson,
- versus - CARPIO, price per square meter is P22,378.95. The price for the parking slot is P240,000 each. Respondent,

CORONA, therefore, paid P2,298,655.08 as down payment and issued 24 postdated checks in the amount
LEONARDO-DE CASTRO, and of P223,430.70 per check for the balance of the purchase price in the total amount of P5,362,385.19
BERSAMIN, JJ.
computed as follows:[4]
ONG SIAO HUA, Promulgated:
Respondent. May 21, 2009 155 sq.m./unit x 2 units x P22,378.95/sq.m. P6,937,474.50
x------------------------------------------------x
4 parking slots at P240,000/slot 960,000.00
DECISION

Sub-total P 7,897,474.50
PUNO, C.J.:
Less: 3% discount ( 236,924.23)
Before us is a Petition for Review[1] filed under Rule 45 of the Rules of Court assailing the

Decision[2] dated February 14, 2006 of the Court of Appeals and its Resolution[3] dated June 2, 2006 Net purchase price P 7,660,550.27

denying petitioners motion for reconsideration of the said decision. 30% down payment ( 2,298,165.08)
The facts are undisputed.
Balance at P223,430.70 per month for 24 months P 5,362,385.19
Petitioner, Cebu Winland Development Corporation, is the owner and developer of a condominium

project called the Cebu Winland Tower Condominium located in Juana Osmea Extension, Cebu City.
The parties did not execute any written document setting forth the said transaction.
Respondent, Ong Siao Hua, is a buyer of two condominium units and four parking slots from
On October 10, 1996, possession of the subject properties was turned over to respondent. [5]
petitioner.
After the purchase price was fully paid with the last check dated January 31, 1997, respondent
Sometime before January 6, 1995 while the Cebu Winland Tower Condominium was under
requested petitioner for the condominium certificates of title evidencing ownership of the
construction, petitioner offered to sell to respondent condominium units at promotional prices. As an
units. Petitioner then sent to respondent, for the latters signature, documents denominated as Deeds
added incentive, petitioner offered a 3% discount provided 30% of the purchase price is paid as
of Absolute Sale for the two condominium units.
down payment and the balance paid in 24 equal monthly installments.

16 | P a g e
Upon examination of the deed of absolute sale of Unit No. 2405 and the identical document for Unit
Consequently, the counterclaim is likewise dismissed for it finds no evidence
No. 2406, respondent was distressed to find that the stated floor area is only 127 square meters that Complainant acted in bad faith in filing this complaint.
contrary to the area indicated in the price list which was 155 square meters. Respondent caused a
Cost against the parties.
verification survey of the said condominium units and discovered that the actual area is only 110
SO ORDERED.[11]
square meters per unit.Respondent demanded from petitioner to refund the amount
Aggrieved, respondent filed a Petition for Review of said decision with the Board of Commissioners
of P2,014,105.50 representing excess payments for the difference in the area, computed as
of the HLURB (the Board). In the course of its proceedings, the Board ordered that an ocular
follows:[6]
inspection of Unit Nos. 2405 and 2406 be conducted by an independent engineer. The Board further
155 sq.m.-110 = 45 x 2 units = 90 sq.m. x P22,378.95 = P2,014,105.50
ordered that there should be two measurements of the areas in controversy, one based on the
Petitioner refused to refund the said amount to respondent. Consequently, respondent filed a
master deed and another based on the internal surface of the perimeter wall. After the ocular
Complaint[7] on August 7, 1998 in the Regional Office of the Housing and Land Use Regulatory Board
inspection, the independent geodetic engineer found the following measurements:
(HLURB) in Cebu City, praying for the refund of P2,014,105.50 plus interest, moral damages and Unit 2405- Based on internal face of perimeter wall = 109 sq. m. Based on master
attorneys fees, including the suspension of petitioners license to sell. The case was docketed as deed = 115 sq. m.

HLURB Case No. REM-0220-080798.

Unit 2406- Based on internal face of perimeter wall = 110 sq. m.
On December 6, 1999, the Housing and Land Use Arbiter (the Arbiter) rendered a Based on master deed = 116 sq. m.[12]
Decision[8] dismissing the complaint. The Arbiter found petitioner not guilty of
Thereafter, the Board rendered its Decision[13] dated June 8, 2004 affirming the Arbiters finding that
misrepresentation. Considering further that the subject properties have been delivered on October
respondents action had already prescribed. However, the Board found that there was a mistake
10, 1996 and respondent filed his complaint only on August 7, 1998, the Arbiter further ruled that
regarding the object of the sale constituting a ground for rescission based on Articles 1330 and
respondents action had already prescribed pursuant to Article 1543,[9] in relation to Articles 1539 and
1331[14] of the Civil Code. Hence, the Board modified the decision
1542,[10] of the Civil Code. The dispositive portion of the said decision reads:
of the Arbiter as follows:
Wherefore[,] the decision of the [O]ffice below is hereby modified with the
WHEREFORE, Premises Considered, judgment is hereby following additional directive:
rendered DISMISSING this Complaint, and ordering the parties to do the
In the alternative, and at the option of the complainant, the contract is rescinded
following, to wit:
and the respondent is directed to refund to (sic) P7,660,550[.]27 while
complainant is directed to turn over possession of the units 2405, 2406 and the
1. For the Complainant to SIGN the two (2) Deed[s] of Absolute Sale which four parking lots to the respondent.
this Board finds to be in order within 30 days from finality of this decision;
and
So ordered.[15]

2. For the Respondent to DELIVER the corresponding condominium certificate

of title for the two units namely units 2405 and 2406 free from all liens and
encumbrances.
17 | P a g e

Not satisfied with the decision of the Board, petitioner filed an appeal to the Office of the
President arguing that the Board erred in granting relief to respondent considering that the latters
The issue before us is whether respondents action has prescribed pursuant to Article 1543, in relation
action had already prescribed. On March 11, 2005, the Office of the President rendered a
to Articles 1539 and 1542 of the Civil Code, to wit:
Decision[16] finding that respondents action had already prescribed pursuant to Article 1543 of the
Civil Code. The dispositive portion of said decision reads as follows:
WHEREFORE, premises considered, the Decision dated June 8, 2004 of the
HLURB is hereby MODIFIED and the Decision dated December 6, 1999 of the
Housing and Land Use Arbiter is hereby REINSTATED.
SO ORDERED.[17]
Respondent filed a Motion for Reconsideration but the same was denied by the Office of
the President in a Resolution[18] dated June 20, 2005. Hence, respondent filed a Petition for Review
before the Court of Appeals.
On February 14, 2006, the Court of Appeals rendered the assailed Decision finding that
respondents action has not prescribed. The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered
by us GRANTING the petition filed in this case, REVERSING and SETTING
ASIDE the assailed Decision and Resolution of the Office of the President dated
March 11, 2005 and June 20, 2005, respectively, and reinstating the Decision
promulgated by the Board of Commissioners of the HLURB on June 8, 2004.
SO ORDERED.[19]
Petitioners Motion for Reconsideration[20] of the assailed decision having been denied in the
Resolution dated June 2, 2006, petitioner is now before us, in this petition for review raising the
following grounds:
I.
The Court of Appeals Erred in Holding That in A Contract of Sale Ownership Is Not
Transferred by Delivery[.]
II.
The Court of Appeals Erred in Holding That Respondents Action Has Not
Prescribed.
III.
The Court of Appeals Erred And Exceeded Its Jurisdiction When It Found Petitioner
Guilty Of Misrepresentation As The Decision Of The HLURB Board of
Commissioners On The Same Matter Is Final With Respect To Respondent Who
Did Not Appeal Said Decision That Petitioner Did Not Commit Misrepresentation.[21]
ARTICLE 1539. The obligation to deliver the thing sold includes that of placing in
the control of the vendee all that is mentioned in the contract, in conformity with
the following rules:
If the sale of real estate should be made with a statement of its
area, at the rate of a certain price for a unit of measure or number, the
vendor shall be obliged to deliver to the vendee, if the latter should demand it, all
that may have been stated in the contract; but, should this be not possible, the
vendee may choose between a proportional reduction of the price and the
rescission of the contract, provided that, in the latter case, the lack in the area be
not less than one-tenth of that stated.
The same shall be done, even when the area is the same, if any part of
the immovable is not of the quality specified in the contract.
The rescission, in this case, shall only take place at the will of the vendee,
when the inferior value of the thing sold exceeds one-tenth of the price agreed
upon.
Nevertheless, if the vendee would not have bought the immovable had
he known of its smaller area or inferior quality, he may rescind the sale. (1469a)
[Emphasis supplied]
ARTICLE 1542. In the sale of real estate, made for a lump sum and not
at the rate of a certain sum for a unit of measure or number, there shall be no
increase or decrease of the price, although there be a greater or lesser area or
number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold
for a single price; but if, besides mentioning the boundaries, which is indispensable
in every conveyance of real estate, its area or number should be designated in the
contract, the vendor shall be bound to deliver all that is included within said
boundaries, even when it exceeds the area or number specified in the contract;
and, should he not be able to do so, he shall suffer a reduction in the price, in
proportion to what is lacking in the area or number, unless the contract is
rescinded because the vendee does not accede to the failure to deliver what has
been stipulated. (1471) [Emphasis supplied]
18 | P a g e
 ARTICLE 1543. The actions arising from Articles 1539 and 1542
shall prescribe in six months, counted from the day of delivery. (1472a)
[Emphasis supplied]
Petitioner argues that it delivered possession of the subject properties to respondent on October 10,
1996, hence, respondents action filed on August 7, 1998 has already prescribed.
Respondent, on the one hand, contends that his action has not prescribed because the prescriptive
period has not begun to run as the same must be reckoned from the execution of the deeds of sale
which has not yet been done.
The resolution of the issue at bar necessitates a scrutiny of the concept of delivery in the context of
the Law on Sales or as used in Article 1543 of the Civil Code. Under the Civil Code, the vendor is
bound to transfer the ownership of and deliver the thing which is the object of the sale. The pertinent
provisions of the Civil Code on the obligation of the vendor to deliver the object of the sale provide:
ARTICLE 1495. The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the sale. (1461a)
ARTICLE 1496. The ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in Articles 1497
to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee. (n)
ARTICLE 1497. The thing sold shall be understood as delivered, when it
is placed in the control and possession of the vendee. (1462a)
ARTICLE 1498. When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which is the object
of the contract, if from the deed the contrary does not appear or cannot clearly be
inferred.
Under the Civil Code, ownership does not pass by mere stipulation but only by
delivery.[22] Manresa explains, the delivery of the thing . . . signifies that title has passed
from the seller to the buyer."[23] According to Tolentino, the purpose of delivery is not only for
the enjoyment of the thing but also a mode of acquiring dominion and determines the transmission
of ownership, the birth of the real right.The delivery under any of the forms provided by Articles
1497 to 1505 of the Civil Code signifies that the transmission of ownership from vendor to
vendee has taken place.[24]
Article 1497 above contemplates what is known as real or actual delivery, when the thing sold is
placed in the control and possession of the vendee. Article 1498, on the one hand, refers to symbolic
delivery by the execution of a public instrument. It should be noted, however, that Article 1498 does
not say that the execution of the deed provides a conclusive presumption of the delivery of
possession. It confines itself to providing that the execution thereof is equivalent to delivery, which
means that the presumption therein can be rebutted by means of clear and convincing
evidence. Thus, the presumptive delivery by the execution of a public instrument can be negated by
the failure of the vendee to take actual possession of the land sold.[25]
In Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,[26] the concept of delivery
was explained as follows:
Delivery has been described as a composite act, a thing in which both parties must
join and the minds of both parties concur. It is an act by which one party parts
with the title to and the possession of the property, and the other
acquires the right to and the possession of the same. In its natural sense,
delivery means something in addition to the delivery of property or title; it means
transfer of possession. In the Law on Sales, delivery may be either actual
or constructive, but both forms of delivery contemplate
"the absolute giving up of the control and custody of the property on the
part of the vendor, and the assumption of the same by the
vendee." (Emphasis supplied)
In light of the foregoing, delivery as used in the Law on Sales refers to the
concurrent transfer of two things: (1) possession and (2) ownership. This is the rationale
behind the jurisprudential doctrine that presumptive delivery via execution of a public instrument is
negated by the reality that the vendee actually failed to obtain material possession of the land subject
of the sale.[27] In the same vein, if the vendee is placed in actual possession of the
property, but by agreement of the parties ownership of the same is retained by the
vendor until the vendee has fully paid the price, the mere transfer of the possession of
the property subject of the sale is not the delivery contemplated in the Law on Sales or
as used in Article 1543 of the Civil Code.
19 | P a g e

In the case at bar, it appears that respondent was already placed in possession of the
subject properties. However, it is crystal clear that the deeds of absolute sale were still to be executed
by the parties upon payment of the last installment. This fact shows that ownership of the said
properties was withheld by petitioner. Following case law, it is evident that the parties did not intend
to immediately transfer ownership of the subject properties until full payment and the execution of
the deeds of absolute sale.[28] Consequently, there is no delivery to speak of in this case since what
was transferred was possession only and not ownership of the subject properties.
We, therefore, hold that the transfer of possession of the subject properties on October 10,
1996 to respondent cannot be considered as delivery within the purview of Article 1543 of the Civil
Code. It follows that since there has been no transfer of ownership of the subject properties since
the deeds of absolute sale have not yet been executed by the parties, the action filed by respondent
has not prescribed.
The next issue is whether the sale in the case at bar is one made with a statement of its
area or at the rate of a certain price for a unit of measure and not for a lump sum. Article 1539
provides that If the sale of real estate should be made with a statement of its area, at the rate of a
certain price for a unit of measure or number, the vendor shall be obliged to deliver to the vendeeall
that may have been stated in the contract; but, should this be not possible, the vendee may choose
between a proportional reduction of the price and the rescission of the contract. Article 1542, on the
one hand, provides that In the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or decrease of the price,
although there be a greater or lesser area or number than that stated in the contract."
The distinction between Article 1539 and Article 1542 was explained by Manresa[29] as
follows:
. . . If the sale was made for a price per unit of measure or number, the
consideration of the contract with respect to the vendee, is the number of such
units, or, if you wish, the thing purchased as determined by the stipulated number
of units. But if, on the other hand, the sale was made for a lump sum, the
consideration of the contract is the object sold, independently of its number or
measure, the thing as determined by the stipulated boundaries, which has been
called in law a determinate object.
This difference in consideration between the two cases implies a distinct
regulation of the obligation to deliver the object, because, for an acquittance
delivery must be made in accordance with the agreement of the parties, and the
performance of the agreement must show the confirmation, in fact, of the
consideration which induces each of the parties to enter into the contract.
In Rudolf Lietz, Inc. v. Court of Appeals,[30] we held:
Article 1539 governs a sale of immovable by the unit, that is, at a stated
rate per unit area. In a unit price contract, the statement of area of immovable is
not conclusive and the price may be reduced or increased depending on the area
actually delivered. If the vendor delivers less than the area agreed upon, the
vendee may oblige the vendor to deliver all that may be stated in the contract or
demand for the proportionate reduction of the purchase price if delivery is not
possible. If the vendor delivers more than the area stated in the contract, the
vendee has the option to accept only the amount agreed upon or to accept the
whole area, provided he pays for the additional area at the contract rate.
In some instances, a sale of an immovable may be made for a lump sum
and not at a rate per unit. The parties agree on a stated purchase price for an
immovable the area of which may be declared based on an estimate or where both
the area and boundaries are stated.
In the case where the area of the immovable is stated in the contract
based on an estimate, the actual area delivered may not measure up exactly with
the area stated in the contract. According to Article 1542 of the Civil Code, in the
sale of real estate, made for a lump sum and not at the rate of a certain sum for
a unit of measure or number, there shall be no increase or decrease of the price
although there be a greater or lesser area or number than that stated in the
contract. However, the discrepancy must not be substantial. A vendee of land,
when sold in gross or with the description "more or less" with reference to its area,
does not thereby ipso facto take all risk of quantity in the land. The use of "more
or less" or similar words in designating quantity covers only a reasonable excess
or deficiency.
Where both the area and the boundaries of the immovable are declared,
the area covered within the boundaries of the immovable prevails over the stated
area. In cases of conflict between areas and boundaries, it is the latter which
should prevail. What really defines a piece of ground is not the area, calculated
with more or less certainty, mentioned in its description, but the boundaries therein
laid down, as enclosing the land and indicating its limits. In a contract of sale of
land in a mass, it is well established that the specific boundaries stated in the
contract must control over any statement with respect to the area contained within
its boundaries. It is not of vital consequence that a deed or contract of sale of land
20 | P a g e
 should disclose the area with mathematical accuracy. It is sufficient if its extent is
objectively indicated with sufficient precision to enable one to identify it. An error
as to the superficial area is immaterial. Thus, the obligation of the vendor is to
In the case at bar, the relief sought by respondent was for a refund and he continued to occupy the
deliver everything within the boundaries, inasmuch as it is the entirety thereof that
distinguishes the determinate object. subject properties after he found out that the same were smaller in area. All these show that

respondent did not consider the error in size significant enough to vitiate the contract. Hence, the
In the case at bar, it is undisputed by the parties that the purchase price of the subject
Court of Appeals erred in affirming the Boards decision to grant rescission based on Articles 1330
properties was computed based on the price list prepared by petitioner, or P22,378.95 per square
and 1331 of the Civil Code.
meter. Clearly, the parties agreed on a sale at a rate of a certain price per unit of measure and not

one for a lump sum. Hence, it is Article 1539 and not Article 1542 which is the applicable IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals is

law. Accordingly, respondent is entitled to the relief afforded to him under Article 1539, that is, either AFFIRMED but with the MODIFICATION that the decision of the HLURB is not reinstated. Petitioner

a proportional reduction of the price or the rescission of the contract, at his option. Respondent is ordered to refund the amount of Two Million Fourteen Thousand One Hundred Five Pesos and

chose the former remedy since he prayed in his Complaint for the refund of the amount Fifty Centavos (P2,014,105.50) to respondent with legal interest of six percent (6%) per annum from

of P2,014,105.50 representing the proportional reduction of the price paid to petitioner. August 7, 1998, the date of judicial demand. A twelve percent (12%) interest per annum, in lieu of

six percent (6%), shall be imposed on such amount from the date of promulgation of this decision
In its decision, the Court of Appeals held that the action filed by respondent has not prescribed and
until the payment thereof. Costs against petitioner.
reinstated the decision of the Board. It is an error to reinstate the decision of the Board. The Board,

in its decision, held that there was a mistake regarding the object of the sale constituting a ground SO ORDERED.

for rescission based on Articles 1330 and 1331 of the Civil Code. It then granted the relief of

rescission at the option of respondent. Articles 1330 and 1331 of the Civil Code provide:
ARTICLE 1330. A contract where consent is given through mistake,
violence, intimidation, undue influence, or fraud is voidable. (1265a)

ARTICLE 1331. In order that mistake may invalidate consent, it should

refer to the substance of the thing which is the object of the contract, or to those
conditions which have principally moved one or both parties to enter into the
contract.

We find that these articles are inapplicable to the case at bar. In order that mistake may invalidate

consent and constitute a ground for annulment of contract based on Article 1331, the mistake must

be material as to go to the essence of the contract; that without such mistake, the agreement would

not have been made.[31] The effect of error must be determined largely by its influence upon the

party. If the party would have entered into the contract even if he had knowledge of the true fact,
then the error does not vitiate consent.[32]

21 | P a g e
SECOND DIVISION TCT No. 145182[6] was registered in Eldons name. Lot No. 5095-B under TCT No. 145183[7] was
registered in Samuel, Sr.s name.
MR. SERGIO VILLADAR, JR. & MRS. CARLOTA A. G.R. No. 166458
On April 20, 1997, Estelita made an additional payment of P22,500,[8] leaving a balance of
VILLADAR,
only P36,500 after deducting all previous payments. Later, however, the spouses Samuel, Sr. and
Petitioners, Present:
Maria Luz decided to cancel the sale after a confrontation with Estelita at the Office of the Barangay
Captain of Barangay Basak, San Nicolas, Cebu City.
QUISUMBING, J., Chairperson,
Samuel, Sr. together with his son Samuel Zabala, Jr. also filed a complaint for ejectment
CARPIO,
- versus - with the Office of the Lupong Tagapamayapa of Barangay Basak against Estelitas son, petitioner
CARPIO MORALES,
TINGA, and Sergio Villadar, Jr., who occupied one of the houses that stood on the property. On June 14, 1998,

VELASCO, JR., JJ.
ELDON ZABALA and SAMUEL ZABALA, SR.,* Promulgated:
Respondents.
February 14, 2008
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DECISION
QUISUMBING, J.:
Petitioners Mr. and Mrs. Sergio Villadar, Jr. appeal the Decision [1] dated November 28,
2003 of the Court of Appeals in CA-G.R. SP No. 71439 and the Resolution[2] dated December 1,
2004, denying the motion for reconsideration. The Court of Appeals had reversed the
Decision[3] dated April 15, 2002 of the Regional Trial Court (RTC), Branch 58, Cebu City in Civil Case
No. CEB-27050, and ordered petitioners to surrender possession of portions of Lot Nos. 5095-A and
5095-B to respondents Eldon Zabala and Samuel Zabala, Sr.
The antecedent facts are as follows:
Respondent Samuel Zabala, Sr. was the owner of Lot No. 5095 covered by Transfer Certificate
of Title (TCT) No. 78269,[4] located at San Nicolas, Cebu City, and comprising 438 square
meters. On January 13, 1995, Samuel, Sr., together with his wife Maria Luz Zabala, sold one-half of Lot
No. 5095 to his mother-in-law Estelita Villadar for P75,000 on installment basis. Except for a note of
partial payment of P6,500,[5] no contract was executed nor was there an agreement on
when Estelita shall pay all installments.
On February 28, 1997, Samuel, Sr. sold the other half of Lot No. 5095 to respondent Eldon
Zabala. Lot No. 5095 was subdivided and upon cancellation of TCT No. 78269, Lot No. 5095-A under
said office issued to Samuel, Sr. a certificate to file action after petitioner Sergio Villadar, Jr. failed
to appear for conciliation.
On October 27, 1998, Eldon and Samuel, Sr. filed a Complaint[9] for unlawful detainer
against petitioners Sergio Villadar, Jr. and his wife Carlota Alimurung before the Municipal Trial Court
in Cities (MTCC), Branch 8, Cebu City. In their complaint, they alleged that they own Lot Nos. 5095-
A and 5095-B, and that in the latter part of 1986, they allowed petitioners to stay in a vacant store
on the lot out of pity, subject to the condition that petitioners would leave once respondents need
the premises for the use of their own families. In January 1998, they demanded that petitioners
vacate the store because they needed the store for the use of their children but petitioners refused
to leave.
In their Answer,[10] petitioners claimed that one-half of Lot No. 5095 was sold on installment to
Sergio Villadar, Jr.s mother, Estelita Villadar, on January 13, 1995 for P75,000; that on January 13, 1995,
Estelita made a downpayment of P6,500 and had an unpaid balance of only P36,500 as of April 20, 1997;
that by virtue of the sale, Estelita became the owner of the premises where their house stood; that they
derive their title from Estelita who promised and agreed to give them one-half of one-half of Lot No. 5095
after she has fully paid the price and obtained a separate title in her name; that they constructed a
residential house, which now straddles Lot Nos. 5095-A and 5095-B because of respondents wrongful
subdivision of Lot No. 5095; that Estelita tried to tender the balance of the purchase price, but Samuel,
Sr. unjustifiably refused to receive the payment; that because of such refusal, Estelita and Sergio Villadar,
Jr. sought the intervention of the Lupon Authority of Barangay Basak, San Nicolas, Cebu City but no
settlement was reached; that assuming that they and Estelita are adjudged to have an inferior right over
one-half of the lot, they are builders in good faith and they should be allowed to retain the lot until they
are paid or reimbursed the amount of P80,000, which is the value of the house they built on the premises.

22 | P a g e
 On August 27, 2001, the MTCC dismissed the complaint.[11] The MTCC ruled that petitioners
could not be deprived of their possession of the disputed portion because one-half of Lot No. 5095
had already been sold in 1995 to Estelita Villadar, who was the source of petitioners right to possess
it. The dispositive portion of the decision states:
WHEREFORE, upon the premises, judgment is hereby rendered against
[p]laintiffs and this case is DISMISSED; [de]fendants are hereby granted to
recover the costs of this litigation in the sum of P10,000.00 from [p]laintiffs who
are hereby directed to pay the same.
SO ORDERED.[12]
Respondents Eldon and Samuel, Sr. appealed to the RTC which affirmed the MTCCs ruling.
Upon appeal, the Court of Appeals in a Decision dated November 28, 2003 reversed the
rulings of the MTCC and RTC. The Court of Appeals ruled that although there was an oral agreement
between Samuel Zabala, Sr. and Estelita Villadar for the sale of one-half of Lot No. 5095, Samuel
Zabala, Sr. had reserved title to the property in his name until full payment of the purchase price
had been made by Estelita. The pertinent portions of the Court of Appeals decision state:
xxxx
It is undisputed that there was a verbal agreement between petitioner
Samuel Zabala, Sr. and the respondents for the sale of Lot No. 50[95]-B for
P75,000.00 on January 13, 1995. The sale of Lot No. 5095-B, although not in writing,
had been perfected as the parties had agreed upon the object of the contract, which
was Lot 5095-B, and the price, which was P75,000.00 (Article 1475, Civil Code
of the Philippines). Similarly, We sustain the validity of the oral sale as no written
form is really required for the validity of a contract of sale (Article 1483, Civil Code
of the Philippines). But, as correctly observed by the trial court, the term or
manner of payment of the purchase price had not been agreed upon by the parties
in which case petitioner Samuel Zabala, Jr. should seek the intervention of the court
to fix the period when Estelita vda. De Villadar should pay in full the consideration
of the sale. Where the period has been fixed by the court and Estelita refused to pay
the remaining balance of P36,500.00, that would be the opportune time for petitioner
Samuel Zabala, Sr. to cause the rescission of the oral contract. As it is, however,
petitioner Samuel Zabala, Sr. could not rescind or cancel the contract on the ground
that Estelita failed to pay the remaining balance of the purchase price because he
had no cause for cancellation or rescission yet in view of fact that no period had
been agreed upon by him and Estelita when the P36,500.00 should be paid. Thus,
unless the contract of sale is rescinded, it remains to be valid.
On a different light, however, We note and We are inclined to believe,
based on the evidence submitted to Us and in determining the intentions of
petitioner Samuel Zabala, Sr. and the respondents spouses, that the sale, being
one on installment basis, petitioner Samuel Zabala, [Sr.] had reserved title to the
property in his name until full payment of the purchase price had been made by
Estelita. This explains why title of Lot No. 5095-B, specifically TCT No. 145183,
was registered in his name when Lot No. 5095 was divided into two lots and
Estelita had not sought the registration of the lot in her name. Although
respondents occupied the store or house on the common boundary of [Lot Nos.]
50[95]-A and 50[95]-B, their occupation or possession did not constitute delivery
of the land subject of the oral contract of sale so as to have effectively transferred
ownership thereof to Estelita.Therefore, even assuming that respondents were the
ones who constructed the house or store on Lot No. 50[95]-B, they had no right
to construct any structure thereon because their mother, Estelita, did not own the
land until she had fully paid the consideration of the sale.
As no right was acquired by the respondents better than the right
pertaining to Estelita, the occupancy and possession by the respondents of the
subject land was merely tolerated by the owner, herein plaintiff-petitioner Samuel
Zabala, Sr. Similarly, respondents did not have the right to possess or occupy that
portion of the land belonging to petitioner Eldon Zabala. Their occupation with
respect to that portion was, likewise, merely tolerated by the owner and, thus, it
was the duty of the respondents to surrender possession thereof upon demand by
petitioner Eldon. From July 23, 1998 then, when a formal demand (Rollo, p. 63)
was made upon the respondents to vacate the premises, the possession of the
respondents had become unlawful and they were subject to ejectment.
Respondents could not claim that they were builders in good faith of the
house. From their allegations in their Answer with Counterclaim (par. 2.3),
respondent Sergio Villadar, Jr. knew and admitted that Lot No. 5095-B was not yet
fully paid and a separate title thereto had not yet been issued in the name of
Estelita (Rollo, p. 55) from whom he and his wife allegedly derived their title. Being
builders in bad faith, they cannot, as a matter of right, recover the value of the
house or the improvements thereon, if any, from the petitioners, much less retain
possession of the premises (Article 449, Civil Code of
the Philippines). Respondents have no right, whatsoever, except the right to be
reimbursed for necessary expenses which they had incurred for the preservation
of both portions of [Lot] Nos. 50[95]-A and 50[95]-B (Article 452, Civil Code of
the Philippines) occupied by them.
WHEREFORE, in view of the foregoing, the petition
is GIVEN DUE COURSE. The Decision dated April 15, 2002 of the Regional Trial
Court, Branch 58, Cebu City affirming the Decision dated August 27, 2001 of the
Municipal Trial Court in Cities, Branch 8, Cebu City, is
hereby REVERSED and SET ASIDE, and another one entered ordering
defendants-respondents to surrender the physical and material possession of that
portion of Lot No. 50[95]-A and Lot No. 50[95]-B upon which their house was
constructed to petitioners Samuel Zabala, Sr. and Eldon Zabala.
SO ORDERED.[13]
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 On December 1, 2004, the Court of Appeals likewise denied petitioners motion for
reconsideration. Hence, this petition.
Petitioners raise the following issues in their Memorandum:
I.
WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN GIVING DUE
COURSE TO RESPONDENTS PETITION FOR REVIEW AND RENDERING A
DECISION THERE[O]N, INSTEAD OF DISMISSING THE SAME FOR VIOLATION OF
SEC. 2(d) OF RULE 42 OF THE 1997 RULES OF CIVIL PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, AND
MISAPPREHENSION OF FACTS, IN RULING THAT THERE WAS NO DELIVERY OF
POSSESSION TO ESTELITA VILLADAR OF THE PORTION OF LOT [NO.] 5095 SOLD
TO HER IN PETITIONERS EXH. 1 BY RESPONDENT SAMUEL ZABALA[,] SR. AND
WIFE, WHICH IS THE RECEIPT DATED JANUARY 13, 1995 OF THE PARTIAL
PAYMENT OF ESTELITA VILLADAR OF ITS CONSIDERATION ADMITTED BY
RESPONDENT SAMUEL ZABALA SR. [SIC]
III.
WHETHER OR NOT THE HON. COURT OF APPEALS ERRED IN HOLDING THAT
ESTELITA VILLADAR DID NOT OWN THE LAND WHERE HER AND PETITIONERS
HOUSES STAND BECAUSE SHE HAD NOT FULLY PAID THE CONSIDERATION OF
THE SALE.
IV.
WHETHER OR NOT THE HON. COURT OF APPEALS HOLDING. . . THAT
PETITIONERS OCCUPANCY OF THE PREMISES OF LOT [NO.] 5095 WAS BY MERE
TOLERANCE OF THE RESPONDENTS [WAS RIGHT].
V.
WHETHER OR NOT PETITIONERS ARE EJECTIBLE [SIC] FROM THE PREMISES
OF LOT [NO.] 5095.
VI.
ASSUMING THAT THEY ARE, WHETHER OR NOT THE HON. COURT OF APPEALS
HOLDING [WAS] RIGHT THAT PETITIONERS WERE NOT BUILDERS IN GOOD FAITH
OF THEIR RESIDENTIAL HOUSE IN THE PREMISES AT A COST OF P80,000.00 (P.3.
CAS DECISION ANNEX A, PETITION); HENCE NOT REIMBURSABLE FOR SAID
EXPENSES THEREOF, AND HAVE NO RIGHT OF RETENTION.
VII.
WHETHER THE COURT A QUO WAS RIGHT OR NOT IN NOT DISMISSING
OUTRIGHTLY THE [RESPONDENTS] COMPLAINT, FOR NON-COMPLIANCE WITH
THE KATARUNGANG PAMBARANGAY LAW AND THIS HON. COURTS ADM. CIR. NO.
14-93, AND RULE 16, SEC. 1 (j) OF THE 1997 RULES OF CIVIL PROCEDURE.
VIII.
WHETHER OR NOT THE RESPONDENTS COMPLAINT AT THE COURT A QUO IS
DISMISSABLE UNDER THE RULING OF THE SUPREME COURT IN THE CASE
OF SARM[I]ENTO V. COURT OF APPEALS, G.R. NO. 116192, NOV. 16, 1995, ON
THE GROUND THAT IT IS NOT COGNIZABLE BY THE SAID COURT.[14]
Essentially, the main issue for our resolution is whether the appellate court erred in
reversing the RTCs ruling that the respondents can not validly eject petitioners.
Petitioners argue that Estelita owns one-half of Lot No. 5095 and that their possession of the
disputed portion was based on their agreement with Estelita, not upon respondents
tolerance. Petitioners also add that they cannot be summarily ejected from the disputed portion without
first resolving the ownership of the land sold to Estelita in an accion publiciana.[15]
Respondents counter that since Estelita failed to pay the full price within two years, Samuel,
Sr., who reserved his title until full payment, retained ownership. Respondents insist that petitioners
must vacate upon demand since their possession is merely tolerated and they have no better right
than Estelita.[16]
Prefatorily, we restate a now settled doctrine.[17] Where the issue of possession in an
unlawful detainer suit is closely intertwined with the issue of ownership, as in this case, the MTCC
can provisionally resolve the issue of ownership for the sole purpose of determining the issue of
possession.[18] The judgment, however, is not conclusive in any action involving title or ownership
and will not bar an action between the same parties respecting title to the land or building.[19]
After carefully examining the records of this case, we are constrained to reverse the appellate
courts decision. First, we find erroneous and without factual basis the appellate courts conclusion that
Samuel, Sr. reserved his title to the land he sold to Estelita. Rather, the RTC aptly ruled that no evidence
proved that Samuel, Sr. reserved his title. In respondents complaint,[20] position paper[21] and joint
affidavit[22] with the MTCC, and even in their petition for review[23] before the Court of Appeals,
respondents never alleged that Samuel, Sr. reserved his title. While the price was payable on installment,
there was no agreement between Estelita and Samuel, Sr. that the latter reserved his title, conditioning
the transfer of ownership upon full payment of the price.[24]
Patently therefore, the oral contract was a contract of sale, not a contract to sell. It is in a
contract to sell that ownership is, by agreement, reserved in the seller and is not to pass to the buyer
until full payment of the purchase price.[25] Notably, the Court of Appeals stated that unless
rescinded, the perfected contract of sale remains valid.[26] Incidentally, this statement reveals the
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inconsistency of the Court of Appeals in finding that Samuel, Sr. reserved his title and also saying
that the transaction was a contract of sale. Worse, despite the parties common submission that the
sale was between Estelita and Samuel, Sr., the Court of Appeals misappreciated that it was
between petitioners and Samuel, Sr.[27]
We also note respondents inconsistent positions as this case was tried and appealed. Their
complaint was silent on the sale to Estelita. As they appealed to the RTC, respondents advanced a
new but erroneous theory that the sale to Estelita was actually an oral agreement to sell, [28] such
that by agreement ownership was reserved by seller Samuel, Sr.[29] Respondents soon abandoned
that theory in their petition before the Court of Appeals and argued that the sale agreement in 1995
with Estelita was immaterial in this case.[30] Now before us, respondents resurrect their contention
in the RTC and echo the appellate courts error that Samuel, Sr. reserved his title.
Second, the records belie respondents allegation that Estelitas installments were payable in
two years. We note that on April 20, 1997, or more than two years after Estelitas initial payment
of P6,500 on January 13, 1995,[31] Maria Luz accepted Estelitas additional payment of P22,500.[32]
Anent Samuel, Sr.s decision to cancel the sale and refusal to receive Estelitas payment of the
balance of the price,[33] we find that Samuel, Sr. neither notified Estelita by notarial act that he was
rescinding the sale nor did he sue in court to rescind the sale.[34] In addition, the records do not show
Samuel, Sr.s compliance with the requirements of the Realty Installment Buyer Protection Act that actual
cancellation takes place after 30 days from receipt by the buyer of the notice of cancellation or the demand
for rescission of the contract by notarial act and upon full payment of the cash surrender value to the
buyer, which in this case is 50% of Estelitas total payments for more than two years.[35]
Thus, under the circumstances, Estelitas claim of ownership is valid, absent a valid
rescission or cancellation of the contract of sale. Hence, she was properly within her rights when she
allowed petitioners to occupy part of the land she bought upon her promise to sell it to
them. Relatedly, respondents now concede that the land sold to Estelita is Lot No. 5095-B,[36] but
the disputed portion straddles Lot Nos. 5095-B and 5095-A.
comply[41]with Section 412 of the Local Government Code (LGC), which sets forth a pre-condition to
the filing of complaints in court, to wit:
SECTION 412. Conciliation. (a) Pre-condition to filing of complaint in
court. No complaint, petition, action, or proceeding involving any matter within the
authority of the lupon shall be filed or instituted directly in court or any other
government office for adjudication, unless there has been a confrontation between
the parties before the lupon chairman or the pangkat, and that no conciliation or
settlement has been reached as certified by the lupon secretary or pangkat
secretary as attested to by the lupon or pangkat chairman or unless the settlement
has been repudiated by the parties thereto.
xxxx
Conformably with said Section 412, the MTCC should have dismissed Eldons complaint. For our part,
this Court is without authority to refuse to give effect to, and wipe off the statute books, Section 412
of the LGC insofar as this case and other cases governed by the Rules on Summary Procedure are
concerned.[42]
Moreover, we are unconvinced of Eldons claim that out of pity he also allowed petitioners to stay on
the disputed portion in 1986 because he only bought what is now Lot No. 5095-A in 1997.
WHEREFORE, we GRANT the petition and SET ASIDE the assailed Decision dated November
28, 2003 and Resolution dated December 1, 2004 of the Court of Appeals in CA-G.R. SP No. 71439. The
appellate court erred in reversing the RTCs Order to respect petitioners possession of the disputed
property. Respondents unlawful detainer complaint is hereby DISMISSED, without prejudice to any
appropriate suit between the parties respecting title to the disputed portion.
Costs against respondents.
SO ORDERED.

While Samuel, Sr. is the registered owner of Lot No. 5095-B, he has no cause to eject
petitioners for alleged unlawful detainer since a finding of unlawfulness of petitioners possession of
the disputed portion depends upon the rescission of the contract of sale between Samuel, Sr. and
Estelita.[37] We hasten to add that rescission is not even absolute for the court may fix a period
within which Estelita, if she is found in default, may be permitted to comply with her obligation.[38]

As regards Lot No. 5095-A, we find respondent Eldons detainer suit premature for failure
to exhaust all administrative remedies.[39] As aptly pointed out by petitioners,[40] Eldon did not
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 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No.171692 June 3, 2013
SPOUSES DELFIN O. TUMIBAY and AURORA T. TUMIBAY-deceased; GRACE JULIE ANN
TUMIBAY MANUEL, legal representative, Petitioners,
vs.
SPOUSES MELVIN A. LOPEZ and ROWENA GAY T. VISITACION LOPEZ, Respondents.
DECISION
DEL CASTILLO, J.:
In a contract to sell, the seller retains ownership of the property until the buyer has paid the price in
full. A -buyer who covertly usurps the seller's ownership of the property prior to the full payment of
the price is in breach of the contract and the seller is entitled to rescission because the breach is
substantial and fundamental as it defeats the very object of the parties in entering into the contract
to sell.
The Petition for Review on Certiorari1 assails the May 19, 2005 Decision2 of the Court of Appeals (CA)
in CA-G.R. CV No. 79029, which reversed the January 6, 2003 Decision 3 of the Regional Trial Court
(RTC) of Malaybalay City, Branch 9 in Civil Case No. 2759-98, and the February 10, 2006
Resolution4 denying petitioner-spouses Delfin O. Tumibay and Aurora5 T. Tumibay’s Motion for
Reconsideration.6
Factual Antecedents
On March 23, 1998, petitioners filed a Complaint7 for declaration of nullity ab initio of sale, and
recovery of ownership and possession of land with the RTC of Malaybalay City. The case was raffled
to Branch 9 and docketed as Civil Case No. 2759-98.
In their Complaint, petitioners alleged that they are the owners of a parcel of land located in
Sumpong, Malaybalay, Bukidnon covered by Transfer Certificate of Title (TCT) No. T-253348 (subject
land) in the name of petitioner Aurora; that they are natural born Filipino citizens but petitioner Delfin
acquired American citizenship while his wife, petitioner Aurora, remained a Filipino citizen; that
petitioner Aurora is the sister of Reynalda Visitacion (Reynalda); 9that on July 23, 1997, Reynalda
sold the subject land to her daughter, Rowena Gay T. Visitacion Lopez (respondent Rowena), through
a deed of sale10 for an unconscionable amount of ₱95,000.00 although said property had a market
value of more than ₱2,000,000.00; that the subject sale was done without the knowledge and
consent of petitioners; and that, for these fraudulent acts, respondents should be held liable for
damages. Petitioners prayed that (1) the deed of sale dated July 23, 1997 be declared void ab initio,
(2) the subject land be reconveyed to petitioners, and (3) respondents be ordered to pay damages.
On May 19, 1998, respondents filed their Answer11 with counterclaim. Respondents averred that on
December 12, 1990, petitioners executed a special power of attorney (SPA) 12 in favor of Reynalda
granting the latter the power to offer for sale the subject land; that sometime in 1994, respondent
Rowena and petitioners agreed that the former would buy the subject land for the price of
₱800,000.00 to be paid on installment; that on January 25, 1995, respondent Rowena paid in cash
to petitioners the sum of $1,000.00; that from 1995 to 1997, respondent Rowena paid the monthly
installments thereon as evidenced by money orders; that, in furtherance of the agreement, a deed
of sale was executed and the corresponding title was issued in favor of respondent Rowena; that the
subject sale was done with the knowledge and consent of the petitioners as evidenced by the receipt
of payment by petitioners; and that petitioners should be held liable for damages for filing the subject
Complaint in bad faith. Respondents prayed that the Complaint be dismissed and that petitioners be
ordered to pay damages.
On May 25, 1998, petitioners filed an Answer to Counterclaim.13 Petitioners admitted the existence
of the SPA but claimed that Reynalda violated the terms thereof when she (Reynalda) sold the subject
land without seeking the approval of petitioners as to the selling price. Petitioners also claimed that
the monthly payments from 1995 to 1997 were mere deposits as requested by respondent Rowena
so that she (Rowena) would not spend the same pending their agreement as to the purchase price;
and that Reynalda, acting with evident bad faith, executed the deed of sale in her favor but placed
it in the name of her daughter, respondent Rowena, which sale is null and void because an agent
cannot purchase for herself the property subject of the agency.
Ruling of the Regional Trial Court
On January 6, 2003, the RTC rendered a Decision in favor of petitioners, viz:
WHEREFORE, Decision is hereby rendered, as follows;
(1) Ordering the petitioners, jointly and severally, to return the said amount of $12,000.00
at the present rate of exchange less the expenses to be incurred for the transfer of the
property in question under the name of the petitioners;
(2) Ordering the Register of Deeds of Bukidnon to cancel TCT No. T-62674 in the name of
the respondent Rowena Gay T. Visitacion-Lopez and to issue a new TCT in the name of the
petitioners;
(3) Ordering respondents, spouses Melvin and Rowena Gay Lopez, to execute a Deed of
Reconveyance in favor of the petitioners, or if said respondents should refuse to do so or
are unable to do so, the Clerk of Court of the RTC and ex-officio Provincial Sheriff to execute
such Deed of Reconveyance;
(4) No x x x damages are awarded. The respective parties must bear their own expenses
except that respondents, jointly and severally, must pay the costs of this suit.
SO ORDERED.14
In ruling in favor of petitioners, the trial court held: (1) the SPA merely authorized Reynalda to offer
for sale the subject land for a price subject to the approval of the petitioners; (2) Reynalda violated
the terms of the SPA when she sold the subject land to her daughter, respondent Rowena, without
first seeking the approval of petitioners as to the selling price thereof; (3) the SPA does not
sufficiently confer on Reynalda the authority to sell the subject land; (4) Reynalda, through fraud
and with bad faith, connived with her daughter, respondent Rowena, to sell the subject land to the
latter; and, (5) the sale contravenes Article 1491, paragraph 2, of the Civil Code which prohibits the
agent from acquiring the property subject of the agency unless the consent of the principal has been
given. The trial court held that Reynalda, as agent, acted outside the scope of her authority under
the SPA. Thus, the sale is null and void and the subject land should be reconveyed to petitioners.
The trial court further ruled that petitioners are not entirely free from liability because they received
from respondent Rowena deposits totaling $12,000.00. Under the principle of unjust enrichment,
petitioners should, thus, be ordered to reimburse the same without interest.
Petitioners filed a partial motion for reconsideration15 praying for the award of attorney’s fees. In its
January 14, 2003 Order16 denying the aforesaid motion, the trial court clarified that the
reimbursement of $12,000.00 in favor of respondents was without interest because there was also
26 | P a g e
no award of rental income in favor of petitioners. Both parties are deemed mutually compensated
and must bear their own expenses.
From this Decision, respondents appealed to the CA.
Ruling of the Court of Appeals
On May 19, 2005, the CA rendered the assailed Decision reversing the judgment of the trial court,
viz:
WHEREFORE, premises considered, the appealed Decision of the Court a quo is hereby REVERSED
and SET ASIDE. Accordingly, title to the subject property shall remain in the name of the Appellant
ROWENA GAY VISITACION-LOPEZ. The latter and her spouse MELVIN LOPEZ are directed to pay the
balance of Four Hundred Eighty Eight Thousand Pesos (₱488,000.00) to the petitioners effective
within 30 days from receipt of this Decision and in case of delay, to pay the legal rate of interests
[sic] at 12% per annum until fully paid.
SO ORDERED.17
In reversing the trial court’s Decision, the appellate court ruled that: (1) the SPA sufficiently conferred
on Reynalda the authority to sell the subject land; (2) although there is no direct evidence of
petitioners’ approval of the selling price of the subject land, petitioner Aurora’s acts of receiving two
money orders and several dollar checks from respondent Rowena over the span of three years
amount to the ratification of any defect in the authority of Reynalda under the SPA; (3) petitioners
are estopped from repudiating the sale after they had received the deposits totaling $12,000.00; (4)
the sale is not contrary to public policy because there is no rule or law which prohibits the sale of
property subject of the agency between the agent and his children unless it would be in fraud of
creditors which is not the case here; (5) petitioners impliedly ratified the subject SPA and contract
of sale as well as its effects; and, (6) the selling price of ₱800,000.00 for the subject land is deemed
reasonable based on the testimony of respondent Rowena as this was the selling price agreed upon
by her and petitioner Delfin. Considering that respondent Rowena proved that she remitted a total
of $12,000.00 to petitioners and pegging the exchange rate at that time at ₱26.00 per dollar, the
appellate court ruled that ₱312,000.00 of the ₱800,000.00 selling price was already received by
petitioners. Thus, respondents are only liable for the balance of ₱488,000.00.
Hence, this Petition.
Issues
Petitioners raise the following issues for our resolution:
I. Whether the CA erred in resolving the issue in the case at bar.
II. Whether under the SPA Reynalda had the power to sell the subject land.
III. Whether the actuations of petitioner Aurora in receiving money from respondent
Rowena amounted to the ratification of the breach in the exercise of the SPA.
IV. Whether the CA erred in not declaring the sale void on grounds of public policy.
V. Whether the CA erred in adopting the testimony of respondent Rowena as to the
₱800,000.00 selling price of the subject land.18
Petitioners’ Arguments
Petitioners argue that the appellate court went beyond the issues of this case when it ruled that
there was a contract of sale between respondent Rowena and petitioner Aurora because the issues
before the trial court were limited to the validity of the deed of sale dated July 23, 1997 for being
executed by Reynalda beyond the scope of her authority under the SPA. Further, the existence of
the alleged contract of sale was not proven because the parties failed to agree on the purchase price
as stated by petitioner Aurora in her testimony. The money, in cash and checks, given to petitioners
from 1995 to 1997 were mere deposits until the parties could agree to the purchase price. Moreover,
Reynalda acted beyond the scope of her authority under the SPA because she was merely authorized
to look for prospective buyers of the subject land. Even assuming that she had the power to sell the
subject land under the SPA, she did not secure the approval as to the price from petitioners before
executing the subject deed of sale, hence, the sale is null and void. Petitioners also contend that
there was no ratification of the subject sale through petitioners’ acceptance of the monthly checks
from respondent Rowena because the sale occurred subsequent to the receipt of the aforesaid
checks. They further claim that the sale was void because it was not only simulated but violates
Article 1491 of the Civil Code which prohibits the agent from acquiring the property subject of the
agency. Here, Reynalda merely used her daughter, respondent Rowena, as a dummy to acquire the
subject land. Finally, petitioners question the determination by the appellate court that the fair
market value of the subject land is ₱800,000.00 for lack of any factual and legal basis.
Respondents’ Arguments
Respondents counter that the issue as to whether there was a perfected contract of sale between
petitioners and respondent Rowena is inextricably related to the issue of whether the deed of sale
dated July 23, 1997 is valid, hence, the appellate court properly ruled on the former. Furthermore,
they reiterate the findings of the appellate court that the receipt of monthly installments constitutes
an implied ratification of any defect in the SPA and deed of sale dated July 23, 1997. They emphasize
that petitioners received a total of $12,000.00 as consideration for the subject land.
Our Ruling
The Petition is meritorious.
As a general rule, we do not disturb the factual findings of the appellate court. However, this case
falls under one of the recognized exceptions thereto because the factual findings of the trial court
and appellate court are conflicting.19Our review of the records leads us to conclude that the following
are the relevant factual antecedents of this case.
Petitioners were the owners of the subject land covered by TCT No. T-25334 in the name of petitioner
Aurora. On December 12, 1990, petitioners, as principals and sellers, executed an SPA in favor of
Reynalda, as agent, to, among others, offer for sale the subject land provided that the purchase
price thereof should be approved by the former. Sometime in 1994, petitioners and respondent
Rowena agreed to enter into an oral contract to sell over the subject land for the price of ₱800,000.00
to be paid in 10 years through monthly installments.
On January 25, 1995, respondent Rowena paid the first monthly installment of $1,000.00 to
petitioner Aurora which was followed by 22 intermittent monthly installments of $500.00 spanning
almost three years. Sometime in 1997, after having paid a total of $10,000.00, respondent Rowena
called her mother, Reynalda, claiming that she had already bought the subject land from petitioners.
Using the aforesaid SPA, Reynalda then transferred the title to the subject land in respondent
Rowena’s name through a deed of sale dated July 23, 1997 without the knowledge and consent of
petitioners. In the aforesaid deed, Reynalda appeared and signed as attorney-in-fact of petitioner
Aurora, as seller, while respondent Rowena appeared as buyer. After which, a new title, i.e., TCT
No. 62674,20 to thesubject land was issued in the name of respondent Rowena.
We explain these factual findings and the consequences thereof below.
27 | P a g e
Petitioners and respondent
January 31, 1997 500.00
Rowena entered into a contract to sell over the subject land.
Petitioners deny that they agreed to sell the subject land to respondent Rowena for the price of February 28, 1997 500.00
₱800,000.00 payable in 10 years through monthly installments. They claim that the payments
received from respondent Rowena were for safekeeping purposes only pending the final agreement
March 31, 1997 500.00
as to the purchase price of the subject land.
We are inclined to give credence to the claim of the respondents for the following reasons.
May 31, 1997 500.00
First, the payment of monthly installments was duly established by the evidence on record consisting
of money orders21 and checks22 payable to petitioner Aurora. Petitioners do not deny that they
July 19, 1997 500.00
received 23 monthly installments over the span of almost three years. As of November 30, 1997 (i.e.,
the date of the last monthly installment), the payments already totaled $12,000.00, to wit:
August 31, 1997 500.00
Date Amount Paid
(in dollars) September 30, 1997 500.00

January 25, 1995 1,000.0023 October 31, 1997 500.00

February 21, 1995 500.00 November 30, 1997 500.00

March 27, 1995 500.00 Total 12,000.00

April 25, 1995 500.00 Second, in her testimony, petitioner Aurora claimed that the $1,000.00 in cash that she received
from respondent Rowena on January 25, 1995 was a mere deposit until the purchase price of the
subject land would have been finally agreed upon by both parties.24 However, petitioner Aurora failed
June 1, 1995 500.00
to explain why, after receiving this initial sum of $1,000.00, she thereafter accepted from respondent
Rowena 22 intermittent monthly installments in the amount of $500.00. No attempt was made on
June 30, 1995 500.00 the part of petitioners to return these amounts and it is fair to assume that petitioners benefited
therefrom.
July 31, 1995 500.00 Third, it strains credulity that respondent Rowena would make such monthly installments for a
substantial amount of money and for a long period of time had there been no agreement between
May 29, 1996 500.00 the parties as to the purchase price of the subject land.
We are, thus, inclined to rule that there was, indeed, a contractual agreement between the parties
June 30, 1996 500.00 for the purchase of the subject land and that this agreement partook of an oral contract to sell for
the sum of ₱800,000.00. A contract to sell has been defined as "a bilateral contract whereby the
July 31, 1996 500.00 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."25 In
August 31, 1996 500.00
a contract to sell, "ownership is retained by the seller and is not to pass until the full payment of the
price x x x."26 It is "commonly entered into so as to protect the seller against a buyer who intends
September 30, 1996 500.00 to buy the property in installments by withholding ownership over the property until the buyer effects
full payment therefor."27
October 29, 1996 500.00 In the case at bar, while there was no written agreement evincing the intention of the parties to
enter into a contract to sell, its existence and partial execution were sufficiently established by, and
December 31, 1996 500.00 may be reasonably inferred from the actuations of the parties, to wit: (1) the title to the subject land

28 | P a g e
was not immediately transferred, through a formal deed of conveyance, in the name of respondent
Rowena prior to or at the time of the first payment of $1,000.00 by respondent Rowena to petitioner October 29, 1996 500.00 26.2830 13,141.50
Aurora on January 25, 1995;28 (2) after this initial payment, petitioners received 22 intermittent
monthly installments from respondent Rowena in the sum of $500.00; and, (3) in her testimony, December 31, 1996 500.00 26.288035 13,144.00
respondent Rowena admitted that she had the title to the subject land transferred in her name only
later on or on July 23, 1997, through a deed of sale, because she believed that she had substantially January 31, 1997 500.00 26.3440 13,172.00
paid the purchase price thereof,29 and that she was entitled thereto as a form of security for the
installments she had already paid.30 February 28, 1997 500.00 26.3330 13,166.50
Respondent Rowena was in breach of the contract to sell.
Although we rule that there was a contract to sell over the subject land between petitioners and March 31, 1997 500.00 26.3670 13,183.50
respondent Rowena, we find that respondent Rowena was in breach thereof because, at the time
the aforesaid deed of sale was executed on July 23, 1997, the full price of the subject land was yet May 31, 1997 500.00 26.374036 13,187.00
to be paid. In arriving at this conclusion, we take judicial notice31 of the prevailing exchange rates at
the time, as published by the Bangko Sentral ng Pilipinas,32 and multiply the same with the monthly
July 19, 1997 500.00 28.574037 14,287.00
installments respondent Rowena paid to petitioners, as supported by the evidence on record, to wit:

Amount Paid Exchange Rate Total 260,626.50

Date Peso Equivalent
(in dollars) (peso per dollar)
Thus, as of July 19, 1997 or prior to the execution of the deed of sale dated July 23, 1997, the total
amount of monthly installments paid by respondent Rowena to petitioners was only ₱260,626.50 or
January 25, 1995 1,000.00 24.7700 24,770.00
32.58%38 of the ₱800,000.00 purchase price. That the full price was yet to be paid at the time of
the subject transfer of title was admitted by respondent Rowena on cross-examination, viz:
February 21, 1995 500.00 25.1140 12,557.00
ATTY. OKIT:

March 27, 1995 500.00 25.9670 12,983.50 Q - Let us make this clear. You now admit that x x x you agreed to buy the lot at eight hundred
thousand, to which the Plaintiff x x x agreed. Now based on the dollar rate, your total payment did
not reach x x x eight hundred thousand pesos? Is that correct? [sic]
April 25, 1995 500.00 26.0270 13,013.50
A - Yes.
June 1, 1995 500.00 25.8040 12,902.00 Q - Since notwithstanding the fact this eight hundred thousand which you have agreed is not fully
paid why did your mother finalize the deed of sale?
June 30, 1995 500.00 25.5750 12,787.50 A - My mother is equipped with the SPA to transfer the lot to me only for security purposes but
actually there is no full payment.39 (Emphasis supplied)
July 31, 1995 500.00 25.5850 12,792.50 Respondent Rowena tried to justify the premature transfer of title by stating that she had
substantially paid the full amount of the purchase price and that this was necessary as a security for
the installments she had already paid. However, her own evidence clearly showed that she had, by
May 29, 1996 500.00 26.1880 13,094.00
that time, paid only 32.58% thereof. Neither can we accept her justification that the premature
transfer of title was necessary as a security for the installments she had already paid absent proof
June 30, 1996 500.00 26.203033 13,101.50 that petitioners agreed to this new arrangement. Verily, she failed to prove that petitioners agreed
to amend or novate the contract to sell in order to allow her to acquire title over the subject land
July 31, 1996 500.00 26.2280 13,114.00 even if she had not paid the price in full.
Significantly, the evidence on record indicates that the premature transfer of title in the name of
August 31, 1996 500.00 26.202034 13,101.00 respondent Rowena was done without the knowledge and consent of petitioners. In particular,
respondent Rowena’s narration of the events leading to the transfer of title showed that she and her
September 30, 1996 500.00 26.2570 13,128.50 mother, Reynalda, never sought the consent of petitioners prior to said transfer of title, viz:
COURT:

29 | P a g e
Q- Why is this check (in the amount of $1,000.00) in your possession now?
A- This is the check I paid to her (referring to petitioner Aurora) which is in cash. [sic]
ATTY. BARROSO:
Q - Now did you continue x x x paying the $500.00 dollar to him (referring to petitioner Delfin)?
A - Yes.
xxxx
Q - Now having stated substantially paid, what did you do with the land subject of this case? [sic]
A - I called my mother who has equipped with SPA to my Uncle that I have already bought the land.
[sic]
Q - And you called your mother?
A - Yes.
xxxx
Q - Then what transpired next?
A - After two years my mother called me if how much I have paid the land and being equipped with
SPA, so she transferred the land to me. [sic]40 (Emphases supplied)
Respondent Rowena’s reliance on the SPA as the authority or consent to effect the premature transfer
of title in her name is plainly misplaced. The terms of the SPA are clear. It merely authorized Reynalda
to sell the subject land at a price approved by petitioners. The SPA could not have amended or
novated the contract to sell to allow respondent Rowena to acquire the title over the subject land
despite non-payment of the price in full for the reason that the SPA was executed four years prior to
the contract to sell. In fine, the tenor of her testimony indicates that respondent Rowena made a
unilateral determination that she had substantially paid the purchase price and that she is entitled to
the transfer of title as a form of security for the installments she had already paid, reasons, we
previously noted, as unjustified.
The contract to sell is rescissible.
Article 1191 of the Civil Code provides:
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.
The injured party may choose between 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.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period. x x x
As a general rule, "rescission will not be permitted for a slight or casual breach of the contract, but
only for such breaches as are substantial and fundamental as to defeat the object of the parties in
making the agreement."41
In the case at bar, we find that respondent Rowena’s act of transferring the title to the subject land
in her name, without the knowledge and consent of petitioners and despite non-payment of the full
price thereof, constitutes a substantial and fundamental breach of the contract to sell. As previously
noted, the main object or purpose of a seller in entering into a contract to sell is to protect himself
against a buyer who intends to buy the property in installments by withholding ownership over the
property until the buyer effects full payment therefor.42 As a result, the seller’s obligation to convey
and the buyer’s right toconveyance of the property arise only upon full payment of the price. Thus,
a buyer who willfully contravenes this fundamental object or purpose of the contract, by covertly
transferring the ownership of the property in his name at a time when the full purchase price has
yet to be paid, commits a substantial and fundamental breach which entitles the seller to rescission
of the contract.43
Indeed, it would be highly iniquitous for us to rule that petitioners, as sellers, should continue with
the contract to sell even after the discovery of the aforesaid breach committed by respondent
Rowena, as buyer, considering that these acts betrayed in no small measure the trust reposed by
petitioners in her and her mother, Reynalda. Put simply, respondent Rowena took advantage of the
SPA, in the name of her mother and executed four years prior to the contract to sell, to effect the
transfer of title to the subject land in her (Rowena’s) name without the knowledge and consent of
petitioners and despite non-payment of the full price.
We, thus, rule that petitioners are entitled to the rescission of the subject contract to sell.
Petitioners are entitled to moral damages and attorney’s fees while respondent Rowena is entitled
to the reimbursement of the monthly installments with legal interest.
Article 1170 of the Civil Code provides:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages.
Fraud or malice (dolo) has been defined as a "conscious and intentional design to evade the normal
fulfillment of existing obligations" and is, thus, incompatible with good faith.44 In the case at bar, we
find that respondent Rowena was guilty of fraud in the performance of her obligation under the
subject contract to sell because (1) she knew that she had not yet paid the full price (having paid
only 32.58% thereof) when she had the title to the subject land transferred to her name, and (2)
she orchestrated the aforesaid transfer of title without the knowledge and consent of petitioners.
Her own testimony and documentary evidence established this fact. Where fraud and bad faith have
been established, the award of moral damages is proper.45 Further, under Article 2208(2)46 of the
Civil Code, the award of attorney’s fees is proper where the plaintiff is compelled to litigate with third
persons or incur expenses to protect his interest because of the defendant’s act or omission. Here,
respondent Rowena’s aforesaid acts caused petitioners to incur expenses in litigating their just
claims. We, thus, find respondent Rowena liable for moral damages and attorney’s fees which we fix
at ₱100,000.00 and ₱50,000.00, respectively.47
Anent the monthly installments respondent Rowena paid to petitioners, our review of the records
leads us to conclude that respondent Rowena is entitled to the reimbursement of the same with legal
interest. Although respondent Rowena was clearly unjustified in prematurely and covertly
transferring the title to the subject land in her name, we deplore petitioners’ lack of candor in
prosecuting their claims before the trial court and intent to evade recognition of the monthly
installments that they received from respondent Rowena. The records indicate that, in their
Complaint, petitioners made no mention of the fact that they had entered into a contract to sell with
respondent Rowena and that they had received 23 monthly installments from the latter. The
Complaint merely alleged that the subject sale was done without the knowledge and consent of
petitioners. It was only later on, when respondent Rowena presented the proof of payment of the
monthly installments in her Answer to the Complaint, that this was brought to light to which
petitioners readily admitted. Further, no evidence was presented to prove that respondent Rowena
occupied the subject land or benefited from the use thereof upon commencement of the contract to
30 | P a g e
sell which would have justified the setting off of rental income against the monthly installments paid
by respondent Rowena to petitioners. May 31, 1997 500.00 26.3740 13,187.00

In view of the foregoing, the sums paid by respondent Rowena as monthly installments to petitioners
July 19, 1997 500.00 28.5740 14,287.00
should, thus, be returned to her with legal interest. The total amount to be reimbursed by petitioners
to respondent Rowena is computed as follows:
August 31, 1997 500.00 30.1650 15,082.50
Amount Paid Exchange Rate
Date Peso Equivalent
(in dollars) (peso per dollar) September 30, 1997 500.00 33.8730 16,936.50

January 25, 1995 1,000.00 24.7700 24,770.00 October 31, 1997 500.00 34.9380 17,469.00

February 21, 1995 500.00 25.1140 12,557.00 November 30, 1997 500.00 34.6550 17,327.50

March 27, 1995 500.00 25.9670 12,983.50 Total 327,442.00

April 25, 1995 500.00 26.0270 13,013.50 Since this amount is neither a loan nor forbearance of money, we set the interest rate at 6% per
annum computed from the time of the filing of the Answer48 to the Complaint on May 19, 199849 until
finality of judgement and thereafter at 12% per annum until fully paid in accordance with our ruling
June 1, 1995 500.00 25.8040 12,902.00
in Eastern Shipping Lines, Inc. v. Court of Appeals.50 Petitioners are, thus, ordered to pay respondent
Rowena the sum of ₱327,442.00 with an interest of 6% per annum computed from May 19, 1998
June 30, 1995 500.00 25.5750 12,787.50 until finality of judgment and thereafter of 12% per annum until fully paid.
The sale of the subject land, effected through the deed of sale dated July 23, 1997, is void.
July 31, 1995 500.00 25.5850 12,792.50
Having ruled that respondent Rowena was in substantial breach of the contract to sell because she
had the title to the subject land transferred in her name without the knowledge and consent of
May 29, 1996 500.00 26.1880 13,094.00 petitioners and despite lack of full payment of the purchase price, we now rule on the validity of the
deed of sale dated July 23, 1997 which was used to effect the aforesaid transfer of ownership.
June 30, 1996 500.00 26.2030 13,101.50
It will be recalled that on December 12, 1990, petitioners, as principals and sellers, executed an SPA
in favor of Reynalda, as agent. The SPA stated in part:
July 31, 1996 500.00 26.2280 13,114.00
That we spouses, AURORA TUMIBAY and DELFIN TUMIBAY, of legal age and presently residing at
36 Armstrong Drive, Clark, New Jersey, 07066 name, constitute and appoint REYNALDA VISITACION,
August 31, 1996 500.00 26.2020 13,101.00 widow, of legal age and residing at Don Carlos, Bukidnon, Philippines, to be our true and lawful
Attorney-in-fact, for us and in our name, place and stead and for our use and benefit to do and
September 30, 1996 500.00 26.2570 13,128.50 perform the following acts and deed:
To administer our real property located in the Province of Bikidnon, Town of Malaybalay, Barrio of
October 29, 1996 500.00 26.2830 13,141.50 Bantaunon, Towns of Maramag, Paradise, Maramag and Barrio of Kiburiao, Town of Quezon.
To offer for sale said properties, the selling price of which will be subject to our approval.
December 31, 1996 500.00 26.2880 13,144.00 xxxx
To sign all papers and documents on our behalf in a contract of sale x x x.51.
January 31, 1997 500.00 26.3440 13,172.00
As can be seen, the SPA gave Reynalda the power and duty to, among others, (1) offer for sale the
subject land to prospective buyers, (2) seek the approval of petitioners as to the selling price thereof,
February 28, 1997 500.00 26.3330 13,166.50 and (3) sign the contract of sale on behalf of petitioners upon locating a buyer willing and able to
purchase the subject land at the price approved by petitioners. Although the SPA was executed four
March 31, 1997 500.00 26.3670 13,183.50 years prior to the contract to sell, there would have been no obstacle to its use by Reynalda had the

31 | P a g e
ensuing sale been consummated according to its terms. However, as previously discussed, when Based on the foregoing, we rule that (1) Reynalda, as agent, acted beyond the scope of her authority
Reynalda, as attorney-in-fact of petitioner Aurora, signed the subject deed of sale dated July 23, under the SPA when she executed the deed of sale dated July 23, 1997 in favor of respondent
1997, the agreed price of ₱800,000.00 (which may be treated as the approved price) was not yet Rowena, as buyer, without the knowledge and consent of petitioners, and conveyed the subject land
fully paid because respondent Rowena at the time had paid only ₱260,262.50. 52 Reynalda, therefore, to respondent Rowena at a price not approved by petitioners, as principals and sellers, (2) respondent
acted beyond the scope of her authority because she signed the subject deed of sale, on behalf of Rowena was aware of the limits of the authority of Reynalda under the SPA, and (3) petitioners did
petitioners, at a price of ₱95,000.00 which was not approved by the latter. For her part, respondent not ratify, impliedly or expressly, the acts of Reynalda. Under Article 1898 of the Civil Code, the sale
Rowena cannot deny that she was aware of the limits of Reynalda’s power under the SPA because is void and petitioners are, thus, entitled to the reconveyance of the subject land.
she (Rowena) was the one who testified that the agreed price for the subject land was ₱800,000.00. WHEREFORE, the Petition is GRANTED. The May 19, 2005 Decision and February 10, 2006 Resolution
Article 1898 of the Civil Code provides: of the Court of Appeals in CA-G.R. CV No. 79029 are ANNULLED and SET ASIDE. The January 6,
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, 2003 Decision of the Regional Trial Court of Malaybalay City, Branch 9 in Civil Case No. 2759-98 is
and the principal does not ratify the contract, it shall be void if the party with whom the agent REINSTATED and MODIFIED to read as follows:
contracted is aware of the limits of the powers granted by the principal. In this case, however, the 1. The deed of sale dated July 23, 1997 over the subject land, covered by TCT No. T-62674,
agent is liable if he undertook to secure the principal’s ratification. between petitioner Aurora, represented by Reynalda as her attorney-in-fact, and
It should be noted that, under Article 1898 of the Civil Code, the principal’s ratification of the acts of respondent Rowena is declared void.
the agent, done beyond the scope of the latter’s authority, may cure the defect in the contract 2. The contract to sell over the subject land, covered by TCT No. T-25334, between
entered into between the agent and a third person. This seems to be the line of reasoning adopted petitioners, as sellers, and respondent Rowena, as buyer, is declared rescinded. 1âwphi1
by the appellate court in upholding the validity of the subject sale. The appellate court conceded that 3. The Register of Deeds of Malaybalay City is ordered to cancel TCT No. T-62674 in the
there was no evidence that respondents sought the approval of petitioners for the subject sale but name of respondent Rowena and to reinstate TCT No. T-25334 in the name of petitioner
it, nonetheless, ruled that whatever defect attended the sale of the subject land should be deemed Aurora.
impliedly ratified by petitioners’ acceptance of the monthly installments paid by respondent Rowena.
4. Respondent Rowena is ordered to pay petitioners the sum of ₱100,000.00 as moral
Though not clearly stated in its Decision, the appellate court seemed to rely on the four monthly
damages and ₱50,000.00 as attorney’s fees.
installments (i.e., August 31, September 30, October 31, and November 30, 1997) respondent
Rowena paid to petitioners which the latter presumably received and accepted even after the 5. Petitioners are ordered to pay respondent Rowena the sum of ₱327,442.00 with legal
execution of the deed of sale dated July 23, 1997. interest of 6% per annum from May 19, 1998 until finality of this Decision. In case
petitioners fail to pay the amount due upon finality of this Decision, they shall pay legal
We disagree.
interest thereon at the rate of 12% per annum until fully paid.
That petitioners continued to receive four monthly installments even after the premature titling of
No costs.
the subject land in the name of respondent Rowena, through the deed of sale dated July 23, 1997,
did not, by itself, establish that petitioners ratified such sale. On the contrary, the fact that petitioners SO ORDERED.
continued to receive the aforesaid monthly installments tended to establish that they had yet to
discover the covert transfer of title in the name of respondent Rowena. As stated earlier, the evidence
on record established that the subject sale was done without petitioners’ knowledge and consent
which would explain why receipt or acceptance by petitioners of the aforementioned four monthly
installments still occurred. Further, it runs contrary to common human experience and reason that
petitioners, as sellers, would forego the reservation or retention of the ownership over the subject
land, which was intended to guarantee the full payment of the price under the contract to sell,
especially so in this case where respondent Rowena, as buyer, had paid only 32.58% of the purchase
price. In a contract to sell, it would be unusual for the seller to consent to the transfer of ownership
of the property to the buyer prior to the full payment of the purchase price because the reservation
of the ownership in the seller is precisely intended to protect the seller from the buyer. We, therefore,
find that petitioners’ claim that they did not ratify the subject sale, which was done without their
knowledge and consent, and that the subsequent discovery of the aforesaid fraudulent sale led them
to promptly file this case with the courts to be more credible and in accord with the evidence on
record. To rule otherwise would be to reward respondent Rowena for the fraud that she committed
on petitioners.

32 | P a g e