532 SUPREME COURT REPORTS ANNOTATED

Babasa vs. Court of Appeals

*
G.R. No. 124045. May 21, 1998.

SPOUSES VIVENCIO BABASA and ELENA CANTOS

BABASA, petitioners, vs. COURT OF APPEALS,
TABANGAO REALTY, INC., and SHELL GAS
PHILIPPINES, INC., respondents.

Civil Law; Contracts; Sales; A deed of sale is absolute in

nature although denominated a “conditional sale” absent such
stipulations reserving title to the vendor until full payment of the
purchase price, nor any stipulation giving them the right to
unilaterally rescind the contract in case of non-payment; In such
cases, ownership of the thing sold passes to the vendee upon the
constructive or actual delivery thereof.—Although denominated
“Conditional Sale of Registered Lands,” we hold, as did
respondent court, that the contract of 11 April 1981 between
petitioners and respondent TABANGAO is one of absolute sale.
Aside from the terms and stipulations used therein indicating
such kind of sale, there is absolutely no proviso reserving title in
the BABASAS until full payment of the purchase price, nor any
stipulation giving them the right to unilaterally rescind the
contract in case of non-payment. A deed of sale is absolute in
nature although denominated a “conditional sale” absent such
stipulations. In such cases, ownership of the thing sold passes to
the vendee upon the constructive or actual delivery thereof. In the
instant case, ownership over Lots Nos. 17827-A, 17827-B and
17827-C passed to TABANGAO both by constructive and actual
delivery. Constructive delivery was accomplished upon the
execution of the contract of 11 April 1981 without any reservation
of title on the part of the BABASAS while actual delivery was
made when TABANGAO took unconditional possession of the lots
and leased them to its associate company SHELL which
constructed its multi-million peso LPG Project thereon.

Same; Same; Same; In Romero v. Court of Appeals and Lim v.

Court of Appeals the Court distinguished between a condition
imposed on the perfection of a contract and a condition imposed
merely on the performance of an obligation.—We do not agree with
petitioners that their contract with TABANGAO lost its efficacy
when the 20-month period stipulated therein expired without
petitioners

_______________

* FIRST DIVISION.

533

VOL. 290, MAY 21, 1998 533

Babasa vs. Court of Appeals

being able to deliver clean certificates of title such that

TABANGAO may no longer demand performance of their
obligation. In Romero v. Court of Appeals and Lim v. Court of
Appeals the Court distinguished between a condition imposed on
the perfection of a contract and a condition imposed merely on the
performance of an obligation. While failure to comply with the
first condition results in the failure of a contract, failure to comply
with the second merely gives the other party the option to either
refuse to proceed with the sale or to waive the condition.

Same; Same; Same; The BABASAS’ act of unilaterally

rescinding their contract with TABANGAO is clearly
unwarranted.—Clearly then, the BABASAS’ act of unilaterally
rescinding their contract with TABANGAO is unwarranted. Even
without the abovequoted stipulation in the deed, the failure of
petitioners to deliver clean titles within twenty (20) months from
the signing of the contract merely gives TABANGAO the option to
either refuse to proceed with the sale or to waive the condition in
consonance with Art. 1545 of the New Civil Code. Besides, it
would be the height of inequity to allow the BABASAS to rescind
their contract of sale with TABANGAO by invoking as a ground
therefor their own failure to deliver the titles over the lots within
the stipulated period.

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

     German A. Gineta for petitioners.
     Ezequiel S. Consulta for Shell Gas Phils., Inc.
          Angara, Abello, Concepcion, Regala & Cruz for
Tabangao Realty, Inc.
BELLOSILLO, J.:

On 11 April 1981 a contract of “Conditional Sale of

Registered Lands” was executed between the spouses
Vivencio and Elena Babasa as vendors and Tabangao
Realty, Inc. (TABANGAO) as vendee over three (3) parcels
of land, Lots Nos. 17827-A, 17827-B and 17827-C, situated
in Brgy. Libjo,

534

534 SUPREME COURT REPORTS ANNOTATED

Babasa vs. Court of Appeals

Batangas City. Since the certificates of title over the lots

were in the name of third persons who had already
executed deeds of reconveyance and disclaimer in favor of
the BABASAS, it was agreed that the total purchase price
of P2,121,920.00 would be paid in the following manner:
P300,000.00 upon signing of the contract, and
P1,821,920.00 upon presentation by the BABASAS of
transfer certificates of titles in their name, free from all
liens and encumbrances, and delivery of registerable
documents of sale in favor of TABANGAO within twenty
(20) months from the signing of the contract. In the
meantime, the retained balance of the purchase price
would earn interest at seventeen percent (17%) per annum
or P20,648.43 monthly payable to the BABASAS until 31
December 1982. It was expressly stipulated that
TABANGAO would have the absolute and unconditional
right to take immediate possession of the lots as well as
introduce any improvements thereon.
On 18 May 1981 TABANGAO leased the lots to Shell
Gas Philippines, Inc. (SHELL), which immediately started
the construction thereon of a Liquefied Petroleum Gas
Terminal Project, an approved zone export enterprise of the
Export Processing Zone. TABANGAO is the real estate arm
of SHELL.
The parties substantially complied with the terms of the
contract. TABANGAO paid the first installment of
P300,000.00 to the BABASAS while the latter delivered
actual possession of the lots to the former. In addition,
TABANGAO paid P379,625.00 to the tenants of the lots as
disturbance compensation and as payment for existing
crops as well as P334,700.00 to the owners of the houses
standing thereon in addition to granting them residential
lots with the total area of 2,800 square meters.
TABANGAO likewise paid the stipulated monthly interest
for the 20-month period amounting to P408,580.80.
Meanwhile, the BABASAS filed Civil Case No.

535

VOL. 290, MAY 21, 1998 535

Babasa vs. Court of Appeals

1 2
519 and Petition No. 373 for the transfer of titles of the
lots in their name.
However, two (2) days prior to the expiration of the 20-
month period, specifically on 31 December 1982, the
BABASAS asked TABANGAO for an indefinite extension
within which to deliver clean titles over the lots. They
asked that TABANGAO continue paying the monthly
interest of P20,648.43 starting January 1983 on the ground
that Civil Case No. 519 and Petition No. 373 had not yet
been resolved with finality in their favor. TABANGAO
refused the request. In retaliation the BABASAS executed
a notarized unilateral rescission dated 28 February 1983 to
which TABANGAO responded by reminding the BABASAS
that they were the ones who did not comply with their
contractual obligation to deliver clean titles within the
stipulated 20-month period, hence, had no right to rescind
their contract. The BABASAS insisted on the unilateral
rescission and demanded that SHELL vacate the lots.
On 19 July 1983 TABANGAO instituted an action for
specific performance with damages in the Regional Trial
Court of Batangas City to compel the spouses to comply
with their3 obligation to deliver clean titles over the
properties. TABANGAO alleged that the BABASAS were
already in a position to secure clean certificates of title and
execute registerable documents of sale since execution of
judgment pending appeal had already been granted in their
favor in Civil Case No. 519, while an order directing
reconstitution of the original copies of TCT Nos. T-32565,
T-32566 and T-32567 covering the lots had been issued in
Petition No. 373. The

_______________

1 “Babasa v. Lopez, Jr.,” an Action for Declaration of Nullity of Real

Estate Mortgage filed with the Regional Trial Court of Batangas City.
2 “In re: Judicial Reconstitution of TCT Nos. T-32565, T-32566 and T-
32567, Batangas City,” filed with the Regional Trial Court of Batangas
City.
3 Docketed as Civil Case No. 2310 of the RTC-Batangas City, Br. 4.
 536

536 SUPREME COURT REPORTS ANNOTATED

Babasa vs. Court of Appeals

BABASAS moved to dismiss the complaint on the ground

that their contract with TABANGAO became null and void
with the expiration of the 20-month period given them
within which to deliver clean certificates of title. SHELL
entered the dispute as intervenor praying that its lease
over the premises be respected by the BABASAS.
Despite the pendency of the case the BABASAS put up
several structures within the area in litigation to impede
the movements of persons and vehicles therein, laid claim
to twelve (12) heads of cattle belonging to intervenor
SHELL and threatened to collect levy from all buyers of
liquefied petroleum gas (LPG) for their alleged use of the
BABASA estate in their business transactions with
intervenor SHELL. As a result, SHELL applied for and
was granted on 10 April 1990 a temporary restraining
order against the Babasa spouses and anyone acting 4
for
and in their behalf upon filing of a P2-million bond.
Eventually, judgment 5 was rendered in favor of
TABANGAO and SHELL. The court a quo ruled that the
20-month period stipulated in the contract was never
meant to be its term such that upon its expiration the
respective obligations of the parties would be extinguished.
On the contrary, the expiration thereof merely gave rise to
the right of TABANGAO to either rescind the contract or to
demand that the BABASAS comply with their contractual
obligation to deliver to it clean titles and registerable
documents of sale. The notarial rescission executed by the
BABASAS was declared void and of no legal effect—

xxxx

1. The unilateral rescission of contract, dated February 28,

1983, executed by the defendant-spouses is null and void,
without any legal force and effect on the agreement dated
April 11, 1981, executed between the plaintiff and the
defendant-spouses;

_______________

4 Original Records, Vol. 2, pp. 962-963.

5 Decision penned by Judge Conrado R. Antona, dated 23 December
1992; Rollo, pp. 56-74.
 537

VOL. 290, MAY 21, 1998 537

Babasa vs. Court of Appeals

2. The lease contract, dated May 18, 1981, executed by the

plaintiff in favor of the intervenor is deemed legally
binding on the defendant-spouses insofar as it affects the
three lots subject of this case;
3. The defendant-spouses Vivencio Babasa and Elena Cantos
are hereby ordered to deliver to the plaintiff Tabangao
Realty, Inc., clean transfer certificates of title in their
name and execute all the necessary deeds and documents
necessary for the Register of Deeds of Batangas City to
facilitate the issuance of Transfer Certificates of Title in
the name of plaintiff, Tabangao Realty, Inc. In the event
the defendant-spouses fail to do so, the Register of Deeds
of Batangas City is hereby directed to cancel the present
transfer certificates of title over the three lots covered by
the Conditional Sale of Registered Lands executed by and
between plaintiff, Tabangao Realty, Inc., and the
defendant-spouses Vivencio Babasa and Elena Cantos-
Babasa on April 11, 1981, upon presentation of credible
proof that said defendant-spouses have received full
payment for the lots or payment thereof duly consigned to
the Court for the account of the defendant-spouses;
4. Plaintiff Tabangao Realty, Inc., is directed to pay the
defendant-spouses Vivencio Babasa and Elena Cantos-
Babasa the remaining balance of P1,821,920.00 out of the
full purchase price for these three lots enumerated in the
agreement dated April 11, 1981 plus interest thereon of
17% per annum or P20,648.43 a month compounded
annually beginning January 1983 until fully paid;
5. The Order dated April 10, 1990 issued in favor of the
intervenor enjoining and restraining defendant-spouses
Vivencio Babasa and Elena Cantos-Babasa and/or anyone
acting for and in their behalf from putting up any
structure on the three lots or interfering in any way in the
activities of the intervenor, its employees and agents, is
made permanent, and the bond posted by the intervenor
cancelled; and,
6. Defendant-spouses Vivencio Babasa and Elena Cantos-
Babasa shall pay the costs of this proceeding as well as
the premium the intervenor may have paid in the posting
of the P2,000,000.00 bond for 6 the issuance of the
restraining order of April 10, 1990.
_______________

6 Id., pp. 71-74.

538

538 SUPREME COURT REPORTS ANNOTATED

Babasa vs. Court of Appeals

7
The BABASAS appealed to the Court of Appeals which on
29 February 1996 affirmed the decision of the trial court
rejecting the contention of the BABASAS that 8
the contract
of 11 April 1981 was one of lease, not of sale; and described
it instead as one of absolute sale though denominated
“conditional.” However, compounded interest was ordered
paid from 19 July 1983 only, the date of filing of the
complaint, not from January 1983 as decreed by the trial
court.
The BABASAS now come to us reiterating their
contention that the contract of 11 April 1981 was in reality
a contract of lease, not of sale; but even assuming that it
was indeed a sale, its nature was conditional only, the
efficacy of which was extinguished upon the non-happening
of the condition, i.e., non-delivery of clean certificates of
title and registerable documents of sale in favor of
TABANGAO within twenty (20) months from the signing of
the contract.
We find no merit in the petition. Respondent appellate
court has correctly concluded that the allegation of
petitioners that the contract of 11 April 1981 is one of
lease, not of sale, is simply incredible. First, the contract is
replete with terms and stipulations clearly indicative of a
contract of sale. Thus, the opening whereas clause states
that the parties desire and mutually “agreed on the sale
and purchase of the x x x three parcels of land”; the
BABASAS were described as the “vendors” while
TABANGAO as the “vendee” from the beginning of the
contract to its end; the amount of P2,121,920.00 was stated
as the purchase price of the lots; TABANGAO, as vendee,
was granted absolute and unconditional right to take
immediate possession of the premises while the BABASAS,
as vendors, warranted such peaceful possession forever;
TABANGAO was to shoulder the capital gains tax, and;
lastly, the BABASAS were expected to execute a Final
Deed of Absolute Sale in favor of TABANGAO necessary for
the issuance of

_______________
 7 Docketed as CA-G.R. CV No. 39554.
8 Decision penned by Justice Jose C. de la Rama with Justices Jaime M.
Lantin and Eduardo G. Montenegro concurring; id., pp. 45-55.

539

VOL. 290, MAY 21, 1998 539

Babasa vs. Court of Appeals

transfer certificates of title the moment they were able to

secure clean certificates of title in their name. Hence, with
all the foregoing, we cannot give credence to the claim of
petitioners that subject contract was one of lease simply
because the word “ownership” was never mentioned
therein. Besides, as correctly pointed out by respondent
court, the BABASAS did not object to the terms and
stipulations employed in the contract at the time of its
execution when they could have easily done so considering
that they were then ably assisted by their counsel, Atty.
Edgardo M. Carreon, whose legal training negates their
pretended ignorance on the matter. Hence, it is too late for
petitioners to insist that the contract is not what they
intended it to be.
But the BABASAS lament that they never intended to
sell their ancestral lots but were merely forced to do so
when TABANGAO dangled the threat of expropriation by
the government (through the Export Processing Zone
Authority) in the event voluntary negotiations failed.
Although a cause to commiserate with petitioners may be
perceived, it is not enough to provide them with an avenue
to escape contractual obligations validly entered into. We
have already held that contracts are valid even though one
of the parties entered into it against his own 9
wish and
desire, or even against his better judgment. Besides, a
threat of eminent domain proceedings by the government
cannot be legally classified as the kind of imminent, serious
and wrongful
10
injury to a contracting party as to vitiate his
consent. Private landowners ought to realize, and
eventually accept, that property rights must yield to the
valid exercise by11 the state of its all-important power of
eminent domain.

_______________

9 Lagunzad v. Soto Vda. de Gonzales, No. L-32066, 6 August 1979, 92

SCRA 476; see also Clarin v. Rulona, No. L-30786, 20 February 1984, 127
SCRA 512.
10 Alarcon v. Kasilag, 40 O.G., Supp. 11, p. 203 [1940], citing Manresa.
 11 J. M. Tuason & Co., Inc. v. Land Tenure Administration, No. L-
21064, 18 February 1970, 31 SCRA 413.

540

540 SUPREME COURT REPORTS ANNOTATED

Babasa vs. Court of Appeals

Finally, petitioners contend that ownership over the three

(3) lots was never transferred to TABANGAO and that the
contract of 11 April 1981 was rendered lifeless when the
20-month period stipulated therein expired without them
being able to deliver clean certificates of title to
TABANGAO through no fault of their own. Consequently,
their unilateral rescission dated 28 February 1983 should
have been upheld as valid.
We disagree. Although denominated “Conditional Sale
of Registered Lands,” we hold, as did respondent court, that
the contract of 11 April 1981 between petitioners and
respondent TABANGAO is one of absolute sale. Aside from
the terms and stipulations used therein indicating such
kind of sale, there is absolutely no proviso reserving title in
the BABASAS until full payment of the purchase price, nor
any stipulation giving them the right to unilaterally
rescind the contract in case of non-payment. A deed of sale
is absolute in nature although12 denominated a “conditional
sale” absent such stipulations. In such cases, ownership of
the thing sold passes to the
13
vendee upon the constructive or
actual delivery thereof. In the instant case, ownership
over Lots Nos. 17827-A, 17827-B and 17827-C passed to
TABANGAO both by constructive and actual delivery.
Constructive delivery was accomplished upon the execution
of the contract of 11 April 1981 without any reservation of
title on the part of the BABASAS while actual delivery was
made when TABANGAO took unconditional possession of
the lots and leased them to its associate company SHELL
which constructed
14
its multi-million peso LPG Project
thereon.

________________

12 Dignos v. Court of Appeals, G.R. No. 59266, 29 February 1988, 158

SCRA 375, 382; see also Pingol v. Court of Appeals, G.R. No. 102909, 6
September 1993, 226 SCRA 118, 127, and Taguba v. Vda. de De Leon,
G.R. No. 59980, 23 October 1984, 132 SCRA 722, 727; Luzon Brokerage
Co., Inc. v. Maritime Building Co., Inc., No. L-25885, 16 November 1978,
86 SCRA 305.
13 Art. 1477, New Civil Code.
 14 See Manuel R. Dulay Enterprises, Inc. v. Court of Appeals, G.R. No.
91889, 27 August 1993, 225 SCRA 678.

541

VOL. 290, MAY 21, 1998 541

Babasa vs. Court of Appeals

We do not agree with petitioners that their contract with

TABANGAO lost its efficacy when the 20-month period
stipulated therein expired without petitioners being able to
deliver clean certificates of title such that TABANGAO
may no longer demand performance
15
of their obligation. In
16
Romero v. Court of Appeals and Lim v. Court of Appeals
the Court distinguished between a condition imposed on
the perfection of a contract and a condition imposed merely
on the performance of an obligation. While failure to
comply with the first condition results in the failure of a
contract, failure to comply with the second merely gives the
other party the option to either 17
refuse to proceed with the
sale or to waive the condition.
Here, a perfected contract of absolute sale exists
between the BABASAS and TABANGAO when they agreed
on the sale of a determinate subject matter, i.e., Lots Nos.
17827-A, 17827-B and 17827-C, and the price certain
therefor without any condition or reservation of title on the
part of the BABASAS. However, the obligation of
TABANGAO as vendee to pay the full amount of the
purchase price was made subject to the condition that
petitioners first deliver the clean titles over the lots within
twenty (20) months from the signing of the contract. If
petitioners succeed in delivering the titles within the
stipulated 20-month period, they would get P1,821,920.00
representing the entire balance of the purchase price
retained by TABANGAO. Otherwise, the deed of sale itself
provides that—

x x x upon the expiration of the 20-month period from the signing

of the contract the Vendee is hereby authorized to settle out of the
balance retained by the Vendee all legally valid and existing
obligations on the properties x x x and whatever balance
remaining after said settlement shall be paid to the Vendor.

_______________

15 G.R. No. 107207, 23 November 1995, 250 SCRA 223.

16 G.R. No. 118347, 24 October 1996, 263 SCRA 569.
17 Lim v. Court of Appeals, supra, at p. 577.
 542

542 SUPREME COURT REPORTS ANNOTATED

Babasa vs. Court of Appeals

Clearly then, the BABASAS’ act of unilaterally rescinding

their contract with TABANGAO is unwarranted. Even
without the abovequoted stipulation in the deed, the failure
of petitioners to deliver clean titles within twenty (20)
months from the signing of the contract merely gives
TABANGAO the option to either refuse to proceed with the
sale or to waive the condition
18
in consonance with Art. 1545
of the New Civil Code. Besides, it would be the height of
inequity to allow the BABASAS to rescind their contract of
sale with TABANGAO by invoking as a ground therefor
their own failure to deliver the titles over the lots within
the stipulated period.
WHEREFORE, the petition is DENIED. The appealed
decision of the Court of Appeals in CA-G.R. CV No. 39554
affirming that of the Regional Trial Court of Batangas City,
Br. 4, is AFFIRMED. No costs.
SO ORDERED.

          Davide, Jr. (Chairman), Vitug, Panganiban and

Quisumbing, JJ., concur.

Petition denied.

Note.—Private respondent fails to distinguish between

a condition imposed in the perfection of the contract and a
condition imposed on the performance of an obligation.
(Lim vs. Court of Appeals, 263 SCRA 569 [1996])

——o0o——

_______________

18 Where the obligation of either party to a contract of sale is subject to

any condition which is not performed, such party may refuse to proceed
with the contract or he may waive performance of the condition. If the
other party has promised that the condition should happen or be
performed, such first mentioned party may also treat the nonperformance
of the condition as a breach of warranty x x x x.

543
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