G.R. No.

103577 October 7, 1996

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for

herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A.
ALMONTE, and CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-in-fact, respondents.

MELO, J.:p

The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to
consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January
1985 for the price of P1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:

On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as

Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff
Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00 — Total amount

50,000 — Down payment

———————————
P1,190,000.00 — Balance

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

We bind ourselves to effect the transfer in our names from our deceased father, Constancio P.
Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated.

On our presentation of the TCT already in or name, We will immediately execute the deed of
absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance
of the P1,190,000.00.

Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of the
document aforestated;

2. The Coronels will cause the transfer in their names of the title of the property registered in the
name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down
payment;

3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of
absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million
One Hundred Ninety Thousand (P1,190,000.00) Pesos.
 On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred
to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00)
Pesos (Exh. "B", Exh. "2").

On February 6, 1985, the property originally registered in the name of the Coronels' father was
transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")

On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-
appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred
Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand
(P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")

For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by depositing
the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.

On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the
Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh.
"E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same
property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor
of Catalina (Exh. "G"; Exh. "7").

On June 5, 1985, a new title over the subject property was issued in the name of Catalina under
TCT No. 351582 (Exh. "H"; Exh. "8").

(Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit
the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents)
proffered their documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of their
corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners)
accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of their corresponding
submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously
submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment
or reply thereof, after which, the case would be deemed submitted for resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily
detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by
Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:

WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute
in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by
Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon
City, together with all the improvements existing thereon free from all liens and encumbrances, and
once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt
thereof, the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to
pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash.
Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of
intervenor is hereby canceled and declared to be without force and effect. Defendants and
intervenor and all other persons claiming under them are hereby ordered to vacate the subject
property and deliver possession thereof to plaintiffs. Plaintiffs' claim for damages and attorney's fees,
as well as the counterclaims of defendants and intervenors are hereby dismissed.
 No pronouncement as to costs.

So Ordered.

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

(Rollo, p. 106)

A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City RTC but the
same was denied by Judge Estrella T. Estrada, thusly:

The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by
the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case
became submitted for decision as of April 14, 1988 when the parties terminated the presentation of
their respective documentary evidence and when the Presiding Judge at that time was Judge
Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not
change the fact that the hearing of the case was terminated before Judge Roura and therefore the
same should be submitted to him for decision; (2) When the defendants and intervenor did not object
to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision,
when they met for the first time before the undersigned Presiding Judge at the hearing of a pending
incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced
thereto and they are now estopped from questioning said authority of Judge Roura after they
received the decision in question which happens to be adverse to them; (3) While it is true that
Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all
respects the Presiding Judge with full authority to act on any pending incident submitted before this
Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he
did not lose his authority to decide or resolve such cases submitted to him for decision or resolution
because he continued as Judge of the Regional Trial Court and is of co-equal rank with the
undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to
whom a case is submitted for decision has the authority to decide the case notwithstanding his
transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court).

Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in
the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a
meticulous examination of the documentary evidence presented by the parties, she is convinced that
the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and
Render Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is hereby
DENIED.

SO ORDERED.

Quezon City, Philippines, July 12, 1989.

(Rollo, pp. 108-109)

Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-
Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court.

Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply
Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on
August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance
of the trial court's decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the
precise determination of the legal significance of the document entitled "Receipt of Down Payment" which was
offered in evidence by both parties. There is no dispute as to the fact that said document embodied the binding
contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other,
pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of
the Philippines which reads as follows:

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.

While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of
sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part
insist that what the document signified was a mere executory contract to sell, subject to certain suspensive
conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said
contract could not possibly ripen into a contract absolute sale.

Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms
and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence
may be available on record, this, Court, as were the courts below, is now called upon to adjudge what the real intent
of the parties was at the time the said document was executed.

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in
money or its equivalent.

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 explicity 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 is promise to sell the
subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of
the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell
from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:

Hence, We hold that the contract between the petitioner and the respondent was a contract to sell
where the ownership or title is retained by the seller and is not to pass until the full payment of the
price, such payment being a positive suspensive condition and failure of which is not a breach,
casual or serious, but simply an event that prevented the obligation of the vendor to convey title from
acquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective seller's obligation to sell the subject property by entering into a contract of sale with the prospective
buyer becomes demandable as provided in Article 1479 of the Civil Code which states:
 Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a consideration distinct from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to
sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the
seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133
SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such
that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to
him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute
sale.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case
at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property
despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance,
cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the
property. There is no double sale in such case. Title to the property will transfer to the buyer after registration
because there is no defect in the owner-seller's title per se, but the latter, of course, may be used for damages by
the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes
absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the
subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the
seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such
second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title,
or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract
entered into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when
petitioners declared in the said "Receipt of Down Payment" that they —

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of
Deeds of Quezon City, in the total amount of P1,240,000.00.

without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea
conveyed is that they sold their property.
When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear
intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the
name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from
private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of
their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed
of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price.

The agreement could not have been a contract to sell because the sellers herein made no express reservation of
ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from
entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their
names) and not the full payment of the purchase price. Under the established facts and circumstances of the case,
the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time,
there would have been no reason why an absolute contract of sale could not have been executed and
consummated right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly to
private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell
the subject property, they undertook to have the certificate of title changed to their names and immediately
thereafter, to execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with
certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective
undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they
inherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if the
documents were then in order. It just happened, however, that the transfer certificate of title was then still in the
name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their
names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names
upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in
their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the
obligation of the buyer to pay the remainder of the purchase price arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller
against a buyer who intends to buy the property in installment by withholding ownership over the property until the
buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the one who were
unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was
still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented,
so to speak, the execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said "Receipt of Down
Payment" was prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional
contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the
name of petitioners' father, Constancio P. Coronel, to their names.

The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4").
Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz
became obligatory, the only act required for the consummation thereof being the delivery of the property by means
of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed
themselves to do as evidenced by the "Receipt of Down Payment."

Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price.

From the moment, the parties may reciprocally demand performance, subject to the provisions of the
law governing the form of contracts.
 Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the happening of the event which constitutes the
condition.

Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names
was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became
mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in
their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute
sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to
P1,190,000.00.

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted
that:

3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our
deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of
the downpayment above-stated". The sale was still subject to this suspensive condition. (Emphasis
supplied.)

(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only,
they contend, continuing in the same paragraph, that:

. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property
under their names, there could be no perfected contract of sale. (Emphasis supplied.)

(Ibid.)

not aware that they set their own trap for themselves, for Article 1186 of the Civil Code expressly provides
that:

Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical
arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985,
when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of
Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensive
condition that the sellers shall effect the issuance of new certificate title from that of their father's name to their
names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").

We, therefore, hold that, in accordance with Article 1187 which pertinently provides —

Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation . . .

In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect of the
condition that has been complied with.

the rights and obligations of the parties with respect to the perfected contract of sale became mutually due
and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985.
As of that point in time, reciprocal obligations of both seller and buyer arose.

Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet
the absolute owners of the inherited property.
We cannot sustain this argument.

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations
to be extent and value of the inheritance of a person are transmitted through his death to another or
others by his will or by operation of law.

Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel
are compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew
his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any
rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided
that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil
Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).

Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is
rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedent's
name to their names on February 6, 1985.

Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at
that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into
the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.

Having represented themselves as the true owners of the subject property at the time of sale, petitioners
cannot claim now that they were not yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P.
Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by
going to the United States of America, without leaving her address, telephone number, and Special Power of
Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p.
43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding rescinding the contract of
sale.

We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note
that these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive
pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs
(Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to
substantiate petitioners' allegations. We have stressed time and again that allegations must be proven by sufficient
evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation
is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we
cannot justify petitioner-sellers' act of unilaterally and extradicially rescinding the contract of sale, there being no
express stipulation authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158
SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])

Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the
evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been
dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also
in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check
(Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever
questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal check.
Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of
sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full
purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of
Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new
transfer certificate of title in their names and signified their willingness and readiness to execute the deed of
absolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of the
purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she
cannot be deemed to have been in default.

Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered
in default, to wit:

Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.

xxx xxx xxx

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties
fulfill his obligation, delay by the other begins. (Emphasis supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.

With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double
sale where Article 1544 of the Civil Code will apply, to wit:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.

Should if be immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first
in the possession; and, in the absence thereof to the person who presents the oldest title, provided
there is good faith.

The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of
sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title
in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.

The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions
being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be
no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property
ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to
him to the prejudice of the first buyer.

In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the
Court, Justice Jose C. Vitug, explains:

The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by
the first buyer of the second sale cannot defeat the first buyer's rights except when the second buyer
first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely,
knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register,
since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R.
 No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA
656), it has held that it is essential, to merit the protection of Art. 1544, second paragraph, that the
second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court
of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject property
only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was
supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner
Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or
previous sale, for which reason she is buyer in good faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in
good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge
of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the
sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been
annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the
said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same
property had already been previously sold to private respondents, or, at least, she was charged with knowledge that
a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners' title to the property at the time of the registration of the property.

This Court had occasions to rule that:

If a vendee in a double sale registers that sale after he has acquired knowledge that there was a
previous sale of the same property to a third party or that another person claims said property in a
pervious sale, the registration will constitute a registration in bad faith and will not confer upon him
any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil.
146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6,
1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both
the courts below.

Although there may be ample indications that there was in fact an agency between Ramona as principal and
Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not
Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the
lower courts' ruling on this point.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment
AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.

Panganiban, J., took no part

G.R. No. 188064 June 1, 2011

MILA A. REYES, Petitioner,

vs.
VICTORIA T. TUPARAN, Respondent.

DECISION

MENDOZA, J.:

Subject of this petition for review is the February 13, 2009 Decision1 of the Court of Appeals (CA) which affirmed
with modification the February 22, 2006 Decision2 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.

On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages
against Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner alleged, among others, that
she was the registered owner of a 1,274 square meter residential and commercial lot located in Karuhatan,
Valenzuela City, and covered by TCT No. V-4130; that on that property, she put up a three-storey commercial
building known as RBJ Building and a residential apartment building; that since 1990, she had been operating a
drugstore and cosmetics store on the ground floor of RBJ Building where she also had been residing while the other
areas of the buildings including the sidewalks were being leased and occupied by tenants and street vendors.

In December 1989, respondent leased from petitioner a space on the ground floor of the RBJ Building for her
pawnshop business for a monthly rental of ₱4,000.00. A close friendship developed between the two which led to
the respondent investing thousands of pesos in petitioner’s financing/lending business from February 7, 1990 to
May 27, 1990, with interest at the rate of 6% a month.

On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank,
Inc. (FSL Bank) to secure a loan of ₱2,000,000.00 payable in installments. On November 15, 1990, petitioner’s
outstanding account on the mortgage reached ₱2,278,078.13. Petitioner then decided to sell her real properties for
at least ₱6,500,000.00 so she could liquidate her bank loan and finance her businesses. As a gesture of friendship,
respondent verbally offered to conditionally buy petitioner’s real properties for ₱4,200,000.00 payable on installment
basis without interest and to assume the bank loan. To induce the petitioner to accept her offer, respondent offered
the following conditions/concessions:

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 drugstore and cosmetics store
without any rentals for the duration of the installment payments;

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 ₱8,000.00 after full payment of the stipulated installment
payments are made by the defendant;

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 petitioner’s verbal acceptance of all the conditions/concessions, both parties worked together to obtain FSL
Bank’s approval for respondent to assume her (petitioner’s) outstanding bank account. The assumption would be
part of respondent’s purchase price for petitioner’s 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.

Respondent’s Answer

Respondent countered, among others, that the tripartite agreement erroneously designated by the petitioner as a
Deed of Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and absolute contract
of sale with a term period. It could not be considered a conditional sale because the acquisition of contractual rights
and the performance of the obligation therein did not depend upon a future and uncertain event. Moreover, the
capital gains and documentary stamps and other miscellaneous expenses and real estate taxes up to 1990 were
supposed to be paid by petitioner but she failed to do so.

Respondent further averred that she successfully rescued the properties from a definite foreclosure by paying the
assumed mortgage in the amount of ₱2,278,078.13 plus interest and other finance charges. Because of her
payment, she was able to obtain a deed of cancellation of mortgage and secure a release of mortgage on the
subject real properties including petitioner’s ancestral residential property in Sta. Maria, Bulacan.
Petitioner’s 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 respondent’s offer stated in her counsel’s 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 attorney’s 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, attorney’s fees and costs.

SO ORDERED.5

Ruling of the CA

On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision. The CA agreed
with the RTC that the contract entered into by the parties is a contract to sell but ruled that the remedy of rescission
could not apply because the respondent’s 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, respondent’s 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 court’s
decision is AFFIRMED in all other respects.

SO ORDERED.6

After the denial of petitioner’s motion for reconsideration and respondent’s 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 TUPARAN’S 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 RESPONDENT’S 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 COURT’S
CONCLUSION THAT THE RESPONDENT’S NON-PAYMENT OF THE ₱805,000.00 IS ONLY A SLIGHT OR
CASUAL BREACH OF CONTRACT.

B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DISREGARDING AS
GROUND FOR THE RESCISSION OF THE SUBJECT CONTRACT THE OTHER FRAUDULENT AND
MALICIOUS ACTS COMMITTED BY THE RESPONDENT AGAINST THE PETITIONER WHICH BY
THEMSELVES SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE PERIOD OF THIRTY (30) DAYS TO THE
RESPONDENT WITHIN WHICH TO PAY TO THE PETITIONER THE ₱805,000.00 PLUS INTEREST THEREON.

C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT ENTITLED TO THE RESCISSION OF THE
SUBJECT CONTRACT, THE COURT OF APPEALS STILL SERIOUSLY ERRED AND ABUSED ITS DISCRETION
IN REDUCING THE INTEREST ON THE ₱805,000.00 TO ONLY "6% PER ANNUM STARTING FROM THE DATE
OF FILING OF THE COMPLAINT ON SEPTEMBER 11, 1992" DESPITE THE PERSONAL COMMITMENT OF THE
RESPONDENT AND AGREEMENT BETWEEN THE PARTIES THAT RESPONDENT WILL PAY INTEREST ON
THE ₱805,000.00 AT THE RATE OF 6% MONTHLY STARTING THE DATE OF DELINQUENCY ON DECEMBER
31, 1991.
D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE APPRECIATION
AND/OR MISAPPRECIATION OF FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER
REYES FOR ACTUAL DAMAGES WHICH CORRESPOND TO THE MILLIONS OF PESOS OF RENTALS/FRUITS
OF THE SUBJECT REAL PROPERTIES WHICH RESPONDENT TUPARAN COLLECTED CONTINUOUSLY
SINCE DECEMBER 1990, EVEN WITH THE UNPAID BALANCE OF ₱805,000.00 AND DESPITE THE FACT
THAT RESPONDENT DID NOT CONTROVERT SUCH CLAIM OF THE PETITIONER AS CONTAINED IN HER
AMENDED COMPLAINT DATED APRIL 22, 2006.

E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE APPRECIATION OF
FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR THE ₱29,609.00 BACK
RENTALS THAT WERE COLLECTED BY RESPONDENT TUPARAN FROM THE OLD TENANTS OF THE
PETITIONER.

F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE
PETITIONER’S EARLIER "URGENT MOTION FOR ISSUANCE OF A PRELIMINARY MANDATORY AND
PROHIBITORY INJUNCTION" DATED JULY 7, 2008 AND THE "SUPPLEMENT" THERETO DATED AUGUST 4,
2008 THEREBY CONDONING THE UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE FLORO ALEJO TO
RESOLVE WITHIN ELEVEN (11) YEARS THE PETITIONER’S THREE (3) SEPARATE "MOTIONS FOR
PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING ORDER, ACCOUNTING AND DEPOSIT OF RENTAL
INCOME" DATED MARCH 17, 1995, AUGUST 19, 1996 AND JANUARY 7, 2006 THEREBY PERMITTING THE
RESPONDENT TO UNJUSTLY ENRICH HERSELF BY CONTINUOUSLY COLLECTING ALL THE
RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WITHOUT ANY ACCOUNTING AND COURT
DEPOSIT OF THE COLLECTED RENTALS/FRUITS AND THE PETITIONERS "URGENT MOTION TO DIRECT
DEFENDANT VICTORIA TUPARAN TO PAY THE ACCUMULATED UNPAID REAL ESTATE TAXES AND SEF
TAXES ON THE SUBJECT REAL PROPERTIES" DATED JANUARY 13, 2007 THEREBY EXPOSING THE
SUBJECT REAL PROPERTIES TO IMMINENT AUCTION SALE BY THE CITY TREASURER OF VALENZUELA
CITY.

G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE
PETITIONER’S CLAIM FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES AGAINST THE
RESPONDENT.

In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in ruling that there was no
legal basis for the rescission of the Deed of Conditional Sale with Assumption of Mortgage.

Position of the Petitioner

The petitioner basically argues that the CA should have granted the rescission of the subject Deed of Conditional
Sale of Real Properties with Assumption of Mortgage for the following reasons:

1. The subject deed of conditional sale is a reciprocal obligation whose outstanding characteristic is
reciprocity arising from identity of cause by virtue of which one obligation is correlative of the other.

2. The petitioner was rescinding – not enforcing – the subject Deed of Conditional Sale pursuant to Article
1191 of the Civil Code because of the respondent’s failure/refusal to pay the ₱805,000.00 balance of the
total purchase price of the petitioner’s properties within the stipulated period ending December 31, 1991.

3. There was no slight or casual breach on the part of the respondent because she (respondent) deliberately
failed to comply with her contractual obligations with the petitioner by violating the terms or manner of
payment of the ₱1,200,000.00 balance and unjustly enriched herself at the expense of the petitioner by
collecting all rental payments for her personal benefit and enjoyment.

Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate of 6% per month on her
unpaid installment of ₱805,000.00 from the date of the delinquency, December 31, 1991, because she obligated
herself to do so.
Finally, the petitioner asserts that her claim for damages or lost income as well as for the back rentals in the amount
of ₱29,609.00 has been fully substantiated and, therefore, should have been granted by the CA. Her claim for moral
and exemplary damages and attorney’s fees has been likewise substantiated.

Position of the Respondent

The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage entered into
between the parties is a contract to sell and not a contract of sale because the title of the subject properties still
remains with the petitioner as she failed to pay the installment payments in accordance with their agreement.

Respondent echoes the RTC position that her inability to pay the full balance on the purchase price may not be
considered as a substantial and fundamental breach of the subject contract and it would be more equitable if she
would be allowed to pay the balance including interest within a certain period of time. She claims that as early as
1992, she has shown her sincerity by offering to pay a certain amount which was, however, rejected by the
petitioner.

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

The Court’s 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 petitioner’s obligation to sell the subject properties becomes demandable only upon the happening
of the positive suspensive condition, which is the respondent’s full payment of the purchase price. Without
respondent’s full payment, there can be no breach of contract to speak of because petitioner has no obligation yet to
turn over the title. Respondent’s 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 Pacson8 is enlightening:

The Court holds that the contract entered into by the Spouses Nabus and respondents was a contract to sell, not a
contract of sale.

A contract of sale is defined in Article 1458 of the Civil Code, thus:

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
 xxx

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of
a contract of sale are the following:

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

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential
element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event, which for present purposes we shall take as
the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell
the subject property when the entire amount of the purchase price is delivered to him. In other words, the full
payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the
obligation to sell from arising and, thus, ownership is retained by the prospective seller without further remedies by
the prospective buyer.

xxx xxx xxx

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective seller’s obligation to sell the subject property by entering into a contract of sale with the prospective
buyer becomes demandable as provided in Article 1479 of the Civil Code which states:

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

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor
if the promise is supported by a consideration distinct from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to
sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the
seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated. However, if the suspensive condition is fulfilled, the contract
of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale
to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act
having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to
him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute
sale.

Further, Chua v. Court of Appeals, cited this distinction between a contract of sale and a contract to sell:

In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to
sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the
vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition,
failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming
effective.

It is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered into
by the parties. In this case, the contract entitled "Deed of Conditional Sale" is actually a contract to sell. The contract
stipulated that "as soon as the full consideration of the sale has been paid by the vendee, the corresponding transfer
documents shall be executed by the vendor to the vendee for the portion sold." Where the vendor promises to
execute a deed of absolute sale upon the completion by the vendee of the payment of the price, the contract is only
a contract to sell." The aforecited stipulation shows that the vendors reserved title to the subject property until full
payment of the purchase price.

xxx

Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a
contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive
condition. The full payment of the purchase price is the positive suspensive condition, the failure of which is not a
breach of contract, but simply an event that prevented the obligation of the vendor to convey title from
acquiring binding force. Thus, for its non-fulfilment, there is no contract to speak of, the obligor having failed to
perform the suspensive condition which enforces a juridical relation. With this circumstance, there can be no
rescission or fulfillment of an obligation that is still non-existent, the suspensive condition not having occurred as
yet. Emphasis should be made that the breach contemplated in Article 1191 of the New Civil Code is the obligor’s
failure to comply with an obligation already extant, not a failure of a condition to render binding that
obligation. [Emphases and underscoring supplied]

Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v. Espidol, 9 where it was
written:

Regarding the right to cancel the contract for non-payment of an installment, there is need to initially determine if
what the parties had was a contract of sale or a contract to sell. In a contract of sale, the title to the property passes
to the buyer upon the delivery of the thing sold. In a contract to sell, on the other hand, the ownership is, by
agreement, retained by the seller and is not to pass to the vendee until full payment of the purchase price. In the
contract of sale, the buyer’s non-payment of the price is a negative resolutory condition; in the contract to sell, the
buyer’s full payment of the price is a positive suspensive condition to the coming into effect of the agreement. In the
first case, the seller has lost and cannot recover the ownership of the property unless he takes action to set aside
the contract of sale. In the second case, the title simply remains in the seller if the buyer does not comply with the
condition precedent of making payment at the time specified in the contract. Here, it is quite evident that the contract
involved was one of a contract to sell since the Atienzas, as sellers, were to retain title of ownership to the land until
respondent Espidol, the buyer, has paid the agreed price. Indeed, there seems no question that the parties
understood this to be the case.

Admittedly, Espidol was unable to pay the second installment of ₱1,750,000.00 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 ₱278,078.13 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 petitioner’s mortgage obligation in the
amount of ₱2,278,078.13, which formed part of the purchase price of the subject property. Likewise, it is not
disputed that respondent paid directly to petitioner the amount of ₱721,921.87 representing the additional payment
for the purchase of the subject property. Clearly, out of the total price of ₱4,200,000.00, respondent was able to pay
the total amount of ₱3,000,000.00, leaving a balance of ₱1,200,000.00 payable in three (3) installments.

Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of
₱200,000.00 each. She, however, failed to pay the third and last installment of ₱800,000.00 due on December 31,
1991. Nevertheless, on August 31, 1992, respondent, through counsel, offered to pay the amount of ₱751,000.00,
which was rejected by petitioner for the reason that the actual balance was ₱805,000.00 excluding the interest
charges.

Considering that out of the total purchase price of ₱4,200,000.00, respondent has already paid the substantial
amount of ₱3,400,000.00, more or less, leaving an unpaid balance of only ₱805,000.00, it is right and just to allow
her to settle, within a reasonable period of time, the balance of the unpaid purchase price. The Court agrees with the
courts below that the respondent showed her sincerity and willingness to comply with her obligation when she
offered to pay the petitioner the amount of ₱751,000.00.

On the issue of interest, petitioner failed to substantiate her claim that respondent made a personal commitment to
pay a 6% monthly interest on the ₱805,000.00 from the date of delinquency, December 31, 1991. As can be
gleaned from the contract, there was a stipulation stating that: "All the installments shall not bear interest." The CA
was, however, correct in imposing interest at the rate of 6% per annum starting from the filing of the complaint on
September 11, 1992. 1avv phi 1

Finally, the Court upholds the ruling of the courts below regarding the non-imposition of damages and attorney’s
fees. Aside from petitioner’s 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.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR: