G.R. No.

L-46533 October 28, 1939

THE MANILA RACING CLUB, INC., plaintiff-appellant,

vs.
THE MANILA JOCKEY CLUB, ET AL., defendants-appellees.

Sotto & Sotto for appellant.

Araneta, Zaragoza and Araneta for appellees, Manila Jockey Club et al.
Orense and Belmonte for appellees Napkil Vda, de Bautista and Montenegro de Butte.

AVANCEÑA, C. J.:p

On September 18, 1936 Rafael J. Campos entered a contract (Exhibit C) with the Manila Jockey Club, an
unregistered partnership, whereby he purchased from it the parcel of land described in transfer certificate of title No.
8724 with its improvements, the good-will, and certain personal property. The price agreed upon in this transaction
is P1,200,000 payable as follows: P50,000 upon the signing of the contract; P50,000 on or before September 28,
1936; P300,000 on or before December 24, 1936; P200,000 on or before March 24, 1937. It was agreed that should
the purchaser fail to pay the amounts paid for itself. One of the clauses of the deed also states that the purchaser
may form a corporation called the Manila Racing Club, Inc., to whom he may transfer all his rights and obligations
under the contract.

The purchaser Campos made the down payment P50,000 upon signing the contract and on September 28, 1938
paid the second installment of P50,000.

On October 22, 1936, the Manila Racing Club, Inc., was organized and Campos transferred to it all his rights and
obligations under his contract with the Manila Jockey Club.

As the third installment of P300,000 became due on December 24, 1936, and the purchaser could not pay it, the
vendor, on January 11, 1937, declared the contract cancelled and kept the amount of P100,000 already paid,
corresponding to the first installments. The purchaser was, however, granted an extension until January 22, 1937, to
revive the contract by paying the P300,000, but having failed to do this, the partners of the vendor ratified on
January 23, 1937, the cancellation of the contract agreed upon by its board of directors and the forfeiture of the
P100,000 paid by the purchaser. Although the plaintiff contends that the Manila Jockey Club granted to purchaser
Campos an indefinite time to pay the P300,000, corresponding to the third installment, there is no sufficient
evidence thereof and, on the contrary, Campos admits, and defendants' evidence so indicate, that January 22,
1937, was the last extension granted to him to make this payment. lâwphi1.nêt

On March 23, 1937 the Manila Jockey Club, Inc., was organized and to it were transferred all the properties, rights
and actions of the Manila Jockey Club.

This action is filed by the plaintiff against the Manila Jockey Club and its partners for the recovery from them of the
forfeited amount of P100,000 and for the payment of P50,000 as damages. The appealed judgment absolves the
defendants.

Assuming these facts to be true, if the clause of the contract referring to the forfeiture of the P100,000 already paid,
should the purchaser Campos fail to pay the subsequent installments, is valid, the case does not present any
difficulty because the contract is clear on this point.

This clause regarding the forfeiture of what has been partially paid is valid. It is in the nature of a penal clause which
may be legally established by the parties (article 1152 and 1255 of the Civil Code). In its double purpose of insuring
compliance with the contract and of otherwise measuring beforehand the damages which may result from non-
compliance, it is not contrary to law, morals or public order because it was voluntarily and knowingly agreed upon by
the parties. Viewing concretely the true effects thereof in the present case, the amount forfeited constitutes only
eight per cent of the stipulated price, which is not excessive if considered as profit which would have been obtained
had the contract been complied with. There is, moreover, evidence that the defendants, because of this contract
with Campos, had to reject other propositions to buy the same property. At any rate, the penal clause does away
with the duty to prove the existence and measure of the damages caused by the breach.

On the other hand, the allegation that the defendants were responsible for non-compliance with the contract is in no
wise justified. It is said that the majority of the members of the Manila Jockey Club promised to subscribe to one-half
of the shares of the plaintiff, and for failure to live up to this promise, the money to pay the third installment of
P300,000 could not be raised. There is, however, no sufficient evidence of such promise which, according to
Campos, was merely verbal. Furthermore, Campos himself attributes the failure to pay the third installment to the
fact that the public, due to the state of the stock market, did not respond to the expectations of the incorporators of
the plaintiff. But it seems that even this is not the cause of the breach, for on the date the third installment became
due, the plaintiff had subscribed shares of its capital stock in the amount of P600,000, paid in part and the
remainder payable on demand. The deduction from all this is that the breach of the contract cannot be attributed to
the defendants and, much less, to the company which, it is also alleged, the defendants brought into being to defeat
the organization of the plaintiff.

In view of the foregoing considerations, the appealed judgment is affirmed, with the costs to the appellant. So
ordered.

Villa-Real, Imperial, Diaz, Laurel, Concepcion and Moran, JJ., concur.

G.R. No. 111238 January 25, 1995

ADELFA PROPERTIES, INC., petitioner,

vs.
COURT OF APPEALS, ROSARIO JIMENEZ-CASTAÑEDA and SALUD JIMENEZ, respondents.

REGALADO, J.:

The main issues presented for resolution in this petition for review on certiorari of the judgment of respondent Court
of appeals, dated April 6, 1993, in CA-G.R. CV No. 347671 are (1) whether of not the "Exclusive Option to Purchase"
executed between petitioner Adelfa Properties, Inc. and private respondents Rosario Jimenez-Castañeda and Salud
Jimenez is an option contract; and (2) whether or not there was a valid suspension of payment of the purchase price
by said petitioner, and the legal effects thereof on the contractual relations of the parties.

The records disclose the following antecedent facts which culminated in the present appellate review, to wit:

1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were the registered co-owners of a
parcel of land consisting of 17,710 square meters, covered by Transfer Certificate of Title (TCT) No.
309773,2situated in Barrio Culasi, Las Piñas, Metro Manila.

2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of one-half of said parcel of land,
specifically the eastern portion thereof, to herein petitioner pursuant to a "Kasulatan sa Bilihan ng
Lupa."3Subsequently, a "Confirmatory Extrajudicial Partition Agreement"4 was executed by the Jimenezes, wherein
the eastern portion of the subject lot, with an area of 8,855 square meters was adjudicated to Jose and Dominador
Jimenez, while the western portion was allocated to herein private respondents.

3. Thereafter, herein petitioner expressed interest in buying the western portion of the property from private
respondents. Accordingly, on November 25, 1989, an "Exclusive Option to Purchase"5 was executed between
petitioner and private respondents, under the following terms and conditions:

1. The selling price of said 8,655 square meters of the subject property is TWO MILLION EIGHT
HUNDRED FIFTY SIX THOUSAND ONE HUNDRED FIFTY PESOS ONLY (P2,856,150.00)
 2. The sum of P50,000.00 which we received from ADELFA PROPERTIES, INC. as an option
money shall be credited as partial payment upon the consummation of the sale and the balance in
the sum of TWO MILLION EIGHT HUNDRED SIX THOUSAND ONE HUNDRED FIFTY PESOS
(P2,806,150.00) to be paid on or before November 30, 1989;

3. In case of default on the part of ADELFA PROPERTIES, INC. to pay said balance in accordance
with paragraph 2 hereof, this option shall be cancelled and 50% of the option money to be forfeited
in our favor and we will refund the remaining 50% of said money upon the sale of said property to a
third party;

4. All expenses including the corresponding capital gains tax, cost of documentary stamps are for
the account of the VENDORS, and expenses for the registration of the deed of sale in the Registry
of Deeds are for the account of ADELFA PROPERTIES, INC.

Considering, however, that the owner's copy of the certificate of title issued to respondent Salud Jimenez had been
lost, a petition for the re-issuance of a new owner's copy of said certificate of title was filed in court through Atty.
Bayani L. Bernardo, who acted as private respondents' counsel. Eventually, a new owner's copy of the certificate of
title was issued but it remained in the possession of Atty. Bernardo until he turned it over to petitioner Adelfa
Properties, Inc.

4. Before petitioner could make payment, it received summons6 on November 29, 1989, together with a copy of a
complaint filed by the nephews and nieces of private respondents against the latter, Jose and Dominador Jimenez,
and herein petitioner in the Regional Trial Court of Makati, docketed as Civil Case No. 89-5541, for annulment of the
deed of sale in favor of Household Corporation and recovery of ownership of the property covered by TCT No.
309773.7

5. As a consequence, in a letter dated November 29, 1989, petitioner informed private respondents that it would
hold payment of the full purchase price and suggested that private respondents settle the case with their nephews
and nieces, adding that ". . . if possible, although November 30, 1989 is a holiday, we will be waiting for you and
said plaintiffs at our office up to 7:00 p.m."8 Another letter of the same tenor and of even date was sent by petitioner
to Jose and Dominador Jimenez.9 Respondent Salud Jimenez refused to heed the suggestion of petitioner and
attributed the suspension of payment of the purchase price to "lack of word of honor."

6. On December 7, 1989, petitioner caused to be annotated on the title of the lot its option contract with private
respondents, and its contract of sale with Jose and Dominador Jimenez, as Entry No. 1437-4 and entry No. 1438-4,
respectively.

7. On December 14, 1989, private respondents sent Francisca Jimenez to see Atty. Bernardo, in his capacity as
petitioner's counsel, and to inform the latter that they were cancelling the transaction. In turn, Atty. Bernardo offered
to pay the purchase price provided that P500,000.00 be deducted therefrom for the settlement of the civil case. This
was rejected by private respondents. On December 22, 1989, Atty. Bernardo wrote private respondents on the
same matter but this time reducing the amount from P500,000.00 to P300,000.00, and this was also rejected by the
latter.

8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil Case No. 89-5541. Thus, on February
28, 1990, petitioner caused to be annotated anew on TCT No. 309773 the exclusive option to purchase as Entry No.
4442-4.

9. On the same day, February 28, 1990, private respondents executed a Deed of Conditional Sale 10 in favor of
Emylene Chua over the same parcel of land for P3,029,250, of which P1,500,000.00 was paid to private
respondents on said date, with the balance to be paid upon the transfer of title to the specified one-half portion.

10. On April 16, 1990, Atty. Bernardo wrote private respondents informing the latter that in view of the dismissal of
the case against them, petitioner was willing to pay the purchase price, and he requested that the corresponding
deed of absolute sale be executed. 11 This was ignored by private respondents.
11. On July 27, 1990, private respondents' counsel sent a letter to petitioner enclosing therein a check for
P25,000.00 representing the refund of fifty percent of the option money paid under the exclusive option to purchase.
Private respondents then requested petitioner to return the owner's duplicate copy of the certificate of title of
respondent Salud Jimenez. 12 Petitioner failed to surrender the certificate of title, hence private respondents filed
Civil Case No. 7532 in the Regional Trial Court of Pasay City, Branch 113, for annulment of contract with damages,
praying, among others, that the exclusive option to purchase be declared null and void; that defendant, herein
petitioner, be ordered to return the owner's duplicate certificate of title; and that the annotation of the option contract
on TCT No. 309773 be cancelled. Emylene Chua, the subsequent purchaser of the lot, filed a complaint in
intervention.

12. The trial court rendered judgment 13 therein on September 5, 1991 holding that the agreement entered into by
the parties was merely an option contract, and declaring that the suspension of payment by herein petitioner
constituted a counter-offer which, therefore, was tantamount to a rejection of the option. It likewise ruled that herein
petitioner could not validly suspend payment in favor of private respondents on the ground that the vindicatory
action filed by the latter's kin did not involve the western portion of the land covered by the contract between
petitioner and private respondents, but the eastern portion thereof which was the subject of the sale between
petitioner and the brothers Jose and Dominador Jimenez. The trial court then directed the cancellation of the
exclusive option to purchase, declared the sale to intervenor Emylene Chua as valid and binding, and ordered
petitioner to pay damages and attorney's fees to private respondents, with costs.

13. On appeal, respondent Court of appeals affirmed in toto the decision of the court a quo and held that the failure
of petitioner to pay the purchase price within the period agreed upon was tantamount to an election by petitioner not
to buy the property; that the suspension of payment constituted an imposition of a condition which was actually a
counter-offer amounting to a rejection of the option; and that Article 1590 of the Civil Code on suspension of
payments applies only to a contract of sale or a contract to sell, but not to an option contract which it opined was the
nature of the document subject of the case at bar. Said appellate court similarly upheld the validity of the deed of
conditional sale executed by private respondents in favor of intervenor Emylene Chua.

In the present petition, the following assignment of errors are raised:

1. Respondent court of appeals acted with grave abuse of discretion in making its finding that the agreement
entered into by petitioner and private respondents was strictly an option contract;

2. Granting arguendo that the agreement was an option contract, respondent court of Appeals acted with grave
abuse of discretion in grievously failing to consider that while the option period had not lapsed, private respondents
could not unilaterally and prematurely terminate the option period;

3. Respondent Court of Appeals acted with grave abuse of discretion in failing to appreciate fully the attendant facts
and circumstances when it made the conclusion of law that Article 1590 does not apply; and

4. Respondent Court of Appeals acted with grave abuse of discretion in conforming with the sale in favor of appellee
Ma. Emylene Chua and the award of damages and attorney's fees which are not only excessive, but also without in
fact and in law. 14

An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to
the conclusion that the agreement between the parties is a contract to sell, and not an option contract or a contract
of sale.

1. In view of the extended disquisition thereon by respondent court, it would be worthwhile at this juncture to briefly
discourse on the rationale behind our treatment of the alleged option contract as a contract to sell, rather than a
contract of sale. The distinction between the two is important for in contract of sale, the title passes to the vendee
upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is
retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and
failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming
effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that
title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right
to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. 15

There are two features which convince us that the parties never intended to transfer ownership to petitioner except
upon the full payment of the purchase price. Firstly, the exclusive option to purchase, although it provided for
automatic rescission of the contract and partial forfeiture of the amount already paid in case of default, does not
mention that petitioner is obliged to return possession or ownership of the property as a consequence of non-
payment. There is no stipulation anent reversion or reconveyance of the property to herein private respondents in
the event that petitioner does not comply with its obligation. With the absence of such a stipulation, although there is
a provision on the remedies available to the parties in case of breach, it may legally be inferred that the parties
never intended to transfer ownership to the petitioner to completion of payment of the purchase price.

In effect, there was an implied agreement that ownership shall not pass to the purchaser until he had fully paid the
price. Article 1478 of the civil code does not require that such a stipulation be expressly made. Consequently, an
implied stipulation to that effect is considered valid and, therefore, binding and enforceable between the parties. It
should be noted that under the law and jurisprudence, a contract which contains this kind of stipulation is considered
a contract to sell.

Moreover, that the parties really intended to execute a contract to sell, and not a contract of sale, is bolstered by the
fact that the deed of absolute sale would have been issued only upon the payment of the balance of the purchase
price, as may be gleaned from petitioner's letter dated April 16, 1990 16 wherein it informed private respondents that
it "is now ready and willing to pay you simultaneously with the execution of the corresponding deed of absolute
sale."

Secondly, it has not been shown there was delivery of the property, actual or constructive, made to herein petitioner.
The exclusive option to purchase is not contained in a public instrument the execution of which would have been
considered equivalent to delivery. 17 Neither did petitioner take actual, physical possession of the property at any
given time. It is true that after the reconstitution of private respondents' certificate of title, it remained in the
possession of petitioner's counsel, Atty. Bayani L. Bernardo, who thereafter delivered the same to herein petitioner.
Normally, under the law, such possession by the vendee is to be understood as a delivery.18 However, private
respondents explained that there was really no intention on their part to deliver the title to herein petitioner with the
purpose of transferring ownership to it. They claim that Atty. Bernardo had possession of the title only because he
was their counsel in the petition for reconstitution. We have no reason not to believe this explanation of private
respondents, aside from the fact that such contention was never refuted or contradicted by petitioner.

2. Irrefragably, the controverted document should legally be considered as a perfected contract to sell. On this
particular point, therefore, we reject the position and ratiocination of respondent Court of Appeals which, while
awarding the correct relief to private respondents, categorized the instrument as "strictly an option contract."

The important task in contract interpretation is always the ascertainment of the intention of the contracting parties
and that task is, of course, to be discharged by looking to the words they used to project that intention in their
contract, all the words not just a particular word or two, and words in context not words standing alone. 19 Moreover,
judging from the subsequent acts of the parties which will hereinafter be discussed, it is undeniable that the intention
of the parties was to enter into a contract to sell. 20 In addition, the title of a contract does not necessarily determine
its true nature. 21 Hence, the fact that the document under discussion is entitled "Exclusive Option to Purchase" is
not controlling where the text thereof shows that it is a contract to sell.

An option, as used in the law on sales, is a continuing offer or contract by which the owner stipulates with another
that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance
with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It is
also sometimes called an "unaccepted offer." An option is not of itself a purchase, but merely secures the privilege
to buy. 22 It is not a sale of property but a sale of property but a sale of the right to purchase. 23 It is simply a contract
by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed
price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something,
that it is, the right or privilege to buy at the election or option of the other party. 24 Its distinguishing characteristic is
that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer.
Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to,
or any interest or right in the subject matter, but is merely a contract by which the owner of property gives the
optionee the right or privilege of accepting the offer and buying the property on certain terms. 25

On the other hand, a contract, like a contract to sell, involves a meeting of minds two persons whereby one binds
himself, with respect to the other, to give something or to render some service. 26 Contracts, in general, are perfected
by mere consent, 27 which is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the acceptance absolute. 28

The distinction between an "option" and a contract of sale is that an option is an unaccepted offer. It states the terms
and conditions on which the owner is willing to sell the land, if the holder elects to accept them within the time
limited. If the holder does so elect, he must give notice to the other party, and the accepted offer thereupon
becomes a valid and binding contract. If an acceptance is not made within the time fixed, the owner is no longer
bound by his offer, and the option is at an end. A contract of sale, on the other hand, fixes definitely the relative
rights and obligations of both parties at the time of its execution. The offer and the acceptance are concurrent, since
the minds of the contracting parties meet in the terms of the agreement. 29

A perusal of the contract in this case, as well as the oral and documentary evidence presented by the parties,
readily shows that there is indeed a concurrence of petitioner's offer to buy and private respondents' acceptance
thereof. The rule is that except where a formal acceptance is so required, although the acceptance must be
affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may
be made either in a formal or an informal manner, and may be shown by acts, conduct, or words of the accepting
party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance
may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale. 30

The records also show that private respondents accepted the offer of petitioner to buy their property under the terms
of their contract. At the time petitioner made its offer, private respondents suggested that their transfer certificate of
title be first reconstituted, to which petitioner agreed. As a matter of fact, it was petitioner's counsel, Atty. Bayani L.
Bernardo, who assisted private respondents in filing a petition for reconstitution. After the title was reconstituted, the
parties agreed that petitioner would pay either in cash or manager's check the amount of P2,856,150.00 for the lot.
Petitioner was supposed to pay the same on November 25, 1989, but it later offered to make a down payment of
P50,000.00, with the balance of P2,806,150.00 to be paid on or before November 30, 1989. Private respondents
agreed to the counter-offer made by petitioner. 31 As a result, the so-called exclusive option to purchase was
prepared by petitioner and was subsequently signed by private respondents, thereby creating a perfected contract
to sell between them.

It cannot be gainsaid that the offer to buy a specific piece of land was definite and certain, while the acceptance
thereof was absolute and without any condition or qualification. The agreement as to the object, the price of the
property, and the terms of payment was clear and well-defined. No other significance could be given to such acts
that than they were meant to finalize and perfect the transaction. The parties even went beyond the basic
requirements of the law by stipulating that "all expenses including the corresponding capital gains tax, cost of
documentary stamps are for the account of the vendors, and expenses for the registration of the deed of sale in the
Registry of Deeds are for the account of Adelfa properties, Inc." Hence, there was nothing left to be done except the
performance of the respective obligations of the parties.

We do not subscribe to private respondents' submission, which was upheld by both the trial court and respondent
court of appeals, that the offer of petitioner to deduct P500,000.00, (later reduced to P300,000.00) from the
purchase price for the settlement of the civil case was tantamount to a counter-offer. It must be stressed that there
already existed a perfected contract between the parties at the time the alleged counter-offer was made. Thus, any
new offer by a party becomes binding only when it is accepted by the other. In the case of private respondents, they
actually refused to concur in said offer of petitioner, by reason of which the original terms of the contract continued
to be enforceable.

At any rate, the same cannot be considered a counter-offer for the simple reason that petitioner's sole purpose was
to settle the civil case in order that it could already comply with its obligation. In fact, it was even indicative of a
desire by petitioner to immediately comply therewith, except that it was being prevented from doing so because of
the filing of the civil case which, it believed in good faith, rendered compliance improbable at that time. In addition,
no inference can be drawn from that suggestion given by petitioner that it was totally abandoning the original
contract.
More importantly, it will be noted that the failure of petitioner to pay the balance of the purchase price within the
agreed period was attributed by private respondents to "lack of word of honor" on the part of the former. The reason
of "lack of word of honor" is to us a clear indication that private respondents considered petitioner already bound by
its obligation to pay the balance of the consideration. In effect, private respondents were demanding or exacting
fulfillment of the obligation from herein petitioner. with the arrival of the period agreed upon by the parties, petitioner
was supposed to comply with the obligation incumbent upon it to perform, not merely to exercise an option or a right
to buy the property.

The obligation of petitioner on November 30, 1993 consisted of an obligation to give something, that is, the payment
of the purchase price. The contract did not simply give petitioner the discretion to pay for the property. 32 It will be
noted that there is nothing in the said contract to show that petitioner was merely given a certain period within which
to exercise its privilege to buy. The agreed period was intended to give time to herein petitioner within which to fulfill
and comply with its obligation, that is, to pay the balance of the purchase price. No evidence was presented by
private respondents to prove otherwise.

The test in determining whether a contract is a "contract of sale or purchase" or a mere "option" is whether or not
the agreement could be specifically enforced. 33 There is no doubt that the obligation of petitioner to pay the
purchase price is specific, definite and certain, and consequently binding and enforceable. Had private respondents
chosen to enforce the contract, they could have specifically compelled petitioner to pay the balance of
P2,806,150.00. This is distinctly made manifest in the contract itself as an integral stipulation, compliance with which
could legally and definitely be demanded from petitioner as a consequence.

This is not a case where no right is as yet created nor an obligation declared, as where something further remains to
be done before the buyer and seller obligate themselves. 34 An agreement is only an "option" when no obligation
rests on the party to make any payment except such as may be agreed on between the parties as consideration to
support the option until he has made up his mind within the time specified. 35 An option, and not a contract to
purchase, is effected by an agreement to sell real estate for payments to be made within specified time and
providing forfeiture of money paid upon failure to make payment, where the purchaser does not agree to purchase,
to make payment, or to bind himself in any way other than the forfeiture of the payments made. 36 As hereinbefore
discussed, this is not the situation obtaining in the case at bar.

While there is jurisprudence to the effect that a contract which provides that the initial payment shall be totally
forfeited in case of default in payment is to be considered as an option contract, 37 still we are not inclined to conform
with the findings of respondent court and the court a quo that the contract executed between the parties is an option
contract, for the reason that the parties were already contemplating the payment of the balance of the purchase
price, and were not merely quoting an agreed value for the property. The term "balance," connotes a remainder or
something remaining from the original total sum already agreed upon.

In other words, the alleged option money of P50,000.00 was actually earnest money which was intended to form
part of the purchase price. The amount of P50,000.00 was not distinct from the cause or consideration for the sale
of the property, but was itself a part thereof. It is a statutory rule that whenever earnest money is given in a contract
of sale, it shall be considered as part of the price and as proof of the perfection of the contract. 38 It constitutes an
advance payment and must, therefore, be deducted from the total price. Also, earnest money is given by the buyer
to the seller to bind the bargain.

There are clear distinctions between earnest money and option money, viz.: (a) earnest money is part of the
purchase price, while option money ids the money given as a distinct consideration for an option contract; (b)
earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected;
and (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives
option money, he is not required to buy. 39

The aforequoted characteristics of earnest money are apparent in the so-called option contract under review, even
though it was called "option money" by the parties. In addition, private respondents failed to show that the payment
of the balance of the purchase price was only a condition precedent to the acceptance of the offer or to the exercise
of the right to buy. On the contrary, it has been sufficiently established that such payment was but an element of the
performance of petitioner's obligation under the contract to sell. 40

II
1. This brings us to the second issue as to whether or not there was valid suspension of payment of the purchase
price by petitioner and the legal consequences thereof. To justify its failure to pay the purchase price within the
agreed period, petitioner invokes Article 1590 of the civil Code which provides:

Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or
should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure
of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance
or danger to cease, unless the latter gives security for the return of the price in a proper case, or it
has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make
the payment. A mere act of trespass shall not authorize the suspension of the payment of the price.

Respondent court refused to apply the aforequoted provision of law on the erroneous assumption that the true
agreement between the parties was a contract of option. As we have hereinbefore discussed, it was not an option
contract but a perfected contract to sell. Verily, therefore, Article 1590 would properly apply.

Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed against the parties herein involved
only the eastern half of the land subject of the deed of sale between petitioner and the Jimenez brothers, it did not,
therefore, have any adverse effect on private respondents' title and ownership over the western half of the land
which is covered by the contract subject of the present case. We have gone over the complaint for recovery of
ownership filed in said case 41 and we are not persuaded by the factual findings made by said courts. At a glance, it
is easily discernible that, although the complaint prayed for the annulment only of the contract of sale executed
between petitioner and the Jimenez brothers, the same likewise prayed for the recovery of therein plaintiffs' share in
that parcel of land specifically covered by TCT No. 309773. In other words, the plaintiffs therein were claiming to be
co-owners of the entire parcel of land described in TCT No. 309773, and not only of a portion thereof nor, as
incorrectly interpreted by the lower courts, did their claim pertain exclusively to the eastern half adjudicated to the
Jimenez brothers.

Such being the case, petitioner was justified in suspending payment of the balance of the purchase price by reason
of the aforesaid vindicatory action filed against it. The assurance made by private respondents that petitioner did not
have to worry about the case because it was pure and simple harassment 42 is not the kind of guaranty contemplated
under the exceptive clause in Article 1590 wherein the vendor is bound to make payment even with the existence of
a vindicatory action if the vendee should give a security for the return of the price.

2. Be that as it may, and the validity of the suspension of payment notwithstanding, we find and hold that private
respondents may no longer be compelled to sell and deliver the subject property to petitioner for two reasons, that
is, petitioner's failure to duly effect the consignation of the purchase price after the disturbance had ceased; and,
secondarily, the fact that the contract to sell had been validly rescinded by private respondents.

The records of this case reveal that as early as February 28, 1990 when petitioner caused its exclusive option to be
annotated anew on the certificate of title, it already knew of the dismissal of civil Case No. 89-5541. However, it was
only on April 16, 1990 that petitioner, through its counsel, wrote private respondents expressing its willingness to
pay the balance of the purchase price upon the execution of the corresponding deed of absolute sale. At most, that
was merely a notice to pay. There was no proper tender of payment nor consignation in this case as required by
law.

The mere sending of a letter by the vendee expressing the intention to

pay, without the accompanying payment, is not considered a valid tender of payment. 43 Besides, a mere tender of
payment is not sufficient to compel private respondents to deliver the property and execute the deed of absolute
sale. It is consignation which is essential in order to extinguish petitioner's obligation to pay the balance of the
purchase price. 44 The rule is different in case of an option contract 45 or in legal redemption or in a sale with right to
repurchase, 46 wherein consignation is not necessary because these cases involve an exercise of a right or privilege
(to buy, redeem or repurchase) rather than the discharge of an obligation, hence tender of payment would be
sufficient to preserve the right or privilege. This is because the provisions on consignation are not applicable when
there is no obligation to pay. 47 A contract to sell, as in the case before us, involves the performance of an obligation,
not merely the exercise of a privilege of a right. consequently, performance or payment may be effected not by
tender of payment alone but by both tender and consignation.
Furthermore, petitioner no longer had the right to suspend payment after the disturbance ceased with the dismissal
of the civil case filed against it. Necessarily, therefore, its obligation to pay the balance again arose and resumed
after it received notice of such dismissal. Unfortunately, petitioner failed to seasonably make payment, as in fact it
has deposit the money with the trial court when this case was originally filed therein.

By reason of petitioner's failure to comply with its obligation, private respondents elected to resort to and did
announce the rescission of the contract through its letter to petitioner dated July 27, 1990. That written notice of
rescission is deemed sufficient under the circumstances. Article 1592 of the Civil Code which requires rescission
either by judicial action or notarial act is not applicable to a contract to sell. 48 Furthermore, judicial action for
rescission of a contract is not necessary where the contract provides for automatic rescission in case of breach,49 as
in the contract involved in the present controversy.

We are not unaware of the ruling in University of the Philippines vs. De los Angeles, etc. 50 that the right to rescind is
not absolute, being ever subject to scrutiny and review by the proper court. It is our considered view, however, that
this rule applies to a situation where the extrajudicial rescission is contested by the defaulting party. In other words,
resolution of reciprocal contracts may be made extrajudicially unless successfully impugned in court. If the debtor
impugns the declaration, it shall be subject to judicial determination51 otherwise, if said party does not oppose it, the
extrajudicial rescission shall have legal effect. 52

In the case at bar, it has been shown that although petitioner was duly furnished and did receive a written notice of
rescission which specified the grounds therefore, it failed to reply thereto or protest against it. Its silence thereon
suggests an admission of the veracity and validity of private respondents' claim. 53 Furthermore, the initiative of
instituting suit was transferred from the rescinder to the defaulter by virtue of the automatic rescission clause in the
contract. 54 But then, the records bear out the fact that aside from the lackadaisical manner with which petitioner
treated private respondents' latter of cancellation, it utterly failed to seriously seek redress from the court for the
enforcement of its alleged rights under the contract. If private respondents had not taken the initiative of filing Civil
Case No. 7532, evidently petitioner had no intention to take any legal action to compel specific performance from
the former. By such cavalier disregard, it has been effectively estopped from seeking the affirmative relief it now
desires but which it had theretofore disdained.

WHEREFORE, on the foregoing modificatory premises, and considering that the same result has been reached by
respondent Court of Appeals with respect to the relief awarded to private respondents by the court a quo which we
find to be correct, its assailed judgment in CA-G.R. CV No. 34767 is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Puno and Mendoza, JJ., concur.

G.R. No. 119580 September 26, 1996

PHILIPPINE NATIONAL BANK, petitioner,

vs.
COURT OF APPEALS and LAPAZ KAW NGO, respondents.

HERMOSISIMA, JR., J.:

The question at issue, one of law, is whether or not from the undisputed facts there was entered the
Philippine National Bank and Lapaz Kaw Ngo a perfected contract of sale of prime real property located in
the heart of downtown Manila.

Before us is a petition for review on certiorari seeking the reversal of the decision1 of the respondent Court of
Appeals2 in an action for specific performance3 filed in the Regional Trial Court (RTC)4 by private respondent
Lapaz Kaw Ngo against petitioner Philippine National Bank (hereafter, "PNB"). Except for the award of
P610,000.00 as actual damages which was deleted, respondent appellate court affirmed in all other
respects the judgment5 rendered by the RTC in favor of private respondent Ngo.
The facts of this case, as narrated by respondent appellate court, are undisputed:

The subject matter of the case is a parcel of land containing a net area of 1,190.72 square meters
(1391.70 square meters minus 200.98 square meters reserved for road widening and Light Rail
Transit) situated at the corner of Carlos Palanca and Helios Streets, Sta. Cruz, Manila, covered by
and embraced in Transfer Certificate of Title No. 134695 of the Registry of Deeds of Manila . . .
owned and registered in the name of . . . the Philippine National Bank. . . .

xxx xxx xxx

On July 14, 1983 Lapaz made a formal offer to purchase the parcel of land consisting of 1,250.70
[square meters] located at the corner of Carlos Palanca and Helios Streets, Sta. Cruz, Manila,
owned by and registered in the name of . . . PNB . . . PNB advised Lapaz of its approval of the
latter's offer to purchase the subject property subject to the terms and conditions stated in its official
communication to the plaintiff [private respondent] dated September 8, 1983, viz:

xxx xxx xxx

. . . your offer to purchase the Bank-acquired property . . . was approved by the

Bank, subject to the following terms and conditions:

1. That the selling price shall be P5,394,300.00 (P100,000.00 already deposited) . . .

2. (a) That upon your failure to pay the additional deposit of P978,860.00 upon
receipt of advice accepting your offer, your P100,000.00 initial deposit shall be
forfeited and for this purpose the Bank shall be authorized to sell the property to
other interested parties.

xxx xxx xxx

3. That the Bank sells only whatever rights, interests and participation it may have in
the property and you are charged with full knowledge of the nature and extent of said
rights, interests and participation and waives [sic] your right to warranty against
eviction.

xxx xxx xxx

4. That the property shall be cleared of its present tenants/occupation but all
expenses to be incurred in connection with the ejectment proceedings shall be for
your account.

6. That the sale shall be subject to such other terms and conditions that the Legal
Department may impose to protect the interest of the Bank.

xxx xxx xxx

On December 15, 1983, the plaintiff [private respondent] signified her conformity to the above letter-
agreement by affixing her signature thereon . . . .

One of the conditions in the agreement was to clear the subject property of its then accupants; thus,
Lapaz undertook the ejectment of the squatters/tenants at her own expense.

In a letter dated January 23, 1984, Lapaz, citing the then prevailing credit squeeze, requested for
adjustment of payment proposals . . . .
On February 28, 1984, PNB wrote Lapaz reminding her of her failure to remit the amount of
P978,860.00 as embodied in its letter dated December 6, 1983 . . . and of her refusal to send her
letter of conformity to the letter-agreement. Lapaz was likewise advised to remit her cash payment of
the full price amounting to P5,378,902.50; otherwise, the subject property shall be sold to other
interested party/ies and her deposit forfeited. Lapaz's request for adjustment of payments was
likewise denied . . . .

In a letter dated March 1, 1984 . . . Lapaz, due to a significant reduction in the land area being
purchased, requested for the reduction of the selling price from P5,394,300.00 to P5,135,599.17 on
cash basis or a total of P6,066,706.49 on installment . . . .

On May 15, 1984, PNB favorably acted on Lapaz's request . . . .

However, when no further payment was received by PNB from Lapaz, the former notified the latter
by telegram that it was giving her a last chance to pay the balance of the required downpayment of
P563,341.29; failure of which shall cause the cancellation of the sale in her favor and the forfeiture of
her P100,000.00 deposit . . . .

The sale in favor of Lapaz never materialized because of her failure to remit the required amount
agreed upon; hence, the proposed sale was cancelled . . . and the plaintiff's [private respondent's]
deposit of P100,000.00 was forfeited by the defendant [petitioner]. PNB then leased the property to a
certain Morse Rivera . . . .

On October 3, 1984 Lapaz requested for a refund of her deposit in the total amount of P660,000.00
(P550,000.00) with a further request that since the Bank was willing to refund to her her deposit
provided that the P100,000.00 is forfeited in favor of the Bank, the amount of P100,000.00 be
reduced to P30,000.00 because her deposit of P660,000.00 (P550,000.00) had, after all, already
accumulated to a sizable amount of interest and, besides there was a delay in the approval of the
contract or proposal. Lapaz further intimated that her request for refund shall be subject to the
release of the fund within one (1) week from receipt thereof; otherwise, she would insist on
purchasing the property subject to mutually agreed grace
period . . . .

On October 16, 1984, PNB released in favor of Lapaz the amount of P550,000.00 representing the
refund of deposit made on the offer to purchase the subject property . . . .

On August 30, 1985, [Lapaz] wrote a letter to the former President of the Philippines, Ferdinand E.
Marcos, requesting for the lifting of the directive suspending the sale of the subject property, which
letter was transmitted to the then President of the PNB for comment and/or action.

In its letter date May 14, 1986, PNB advised Lapaz of the approval of her request for revival of the
previously approved offer to purchase the subject to the terms and conditions as follows:

1. That the selling price shall be P5,135,599.17 (P200,000.00) already deposited . . .

2.a. That upon your failure to pay the additional deposit of P827,119.83 upon receipt
of advise of approval, your P200,000.00 deposit shall be forfeited and for this
purpose, the Bank can sell the property to other interested parties;

xxx xxx xxx

3. That your previous deposit of P100,000.00 which was forfeited by the Bank due to
your failure to consummate the previously-approved sale, shall not be considered as
part of the purchase price;

4. That the Bank sells only whatever rights, interests and participation it may have in
the property and you are charged with full knowledge of the nature and extent of said
 rights, interest and participation and waives [sic] your right to warranty against
eviction;

xxx xxx xxx

6. That the property shall be cleared of its present tenants/occupants but all
expenses to be incurred in connection with the ejectment proceedings shall be for
your account;

7. That the sale shall be subject to all terms and conditions covering sale of similar
acquired real estate properties;

8. That the sale shall also be subject to all terms and conditions that the Legal
Department may impose to protect the interest of the Bank. . . .

A copy of the said letter appears to have been received by the plaintiff [private respondent] herself
on May 20, 1986 . . . .

In a letter dated May 23, 1986 . . . Lapaz informed the PNB management that the terms and
conditions set forth in its letter of May 14, 1986 were acceptable to her except condition no. 6 which
says:

6. That the property shall be cleared of its present tenants/occupants but all
expenses to be incurred in connection with the ejectment proceedings shall be for
your account.

She therefore requested for the deletion of the above condition because she had already defrayed
the expenses for the ejectment of the previous occupants of the premises in compliance with the
condition in the original approved offer to purchase. Besides, the present occupants are not
squatters, but lessees of PNB . . . Lapaz's request for modification was not acceptable to the Bank;
thus, she was given up to July 10, 1986 to submit, duly signed, the letter-conforme dated May 14,
1986 to submit, duly signed, the letter-conforme dated May 14, 1986 and to remit the initial amount
of P827,119.83 to comply with the approved terms and conditions; otherwise, the approved sale will
be cancelled and her deposit of P200,000.00 forfeited . . . .

In a letter dated January 14, 1987, Lapaz through counsel informed PNB that she was willing to pay
and remit the amount of P827,119.83 representing the balance of the 20% down payment of the
approved purchase price as soon as the subject property was cleared of its present
tenants/occupants. However, the bank in its letter dated January 30, 1987 informed Lapaz that it
could no longer grant her any extension to pay the above stated amount, and cancelled on January
30, 1987 the approved sale in plaintiff's [private respondent's] favor for being stale and
unimplemented and forfeited her deposit of P200,000.00 . . . .

To demonstrate her protest over the cancellation, Lapaz through counsel sent the letter dated
February 6, 1987 asking for a reconsideration of bank's position on the matter by honoring the
approved sale in plaintiff's [private respondent's] favor as well as her deposit . . . . In reply, the Bank
denied any further extension in favor of the plaintiff [private respondent] and likewise informed her
that it had already decided to sell the property for not less than P7,082,972.00 through negotiated or
sealed bidding . . . .

As a consequence of the cancellation of the approved offer to purchase in her favor, Lapaz filed [an]
action for Specific Performance and Damages with Prayer for a Writ of Preliminary Injunction and
Temporary Restraining Order.

After trial, the lower court, on November 15, 1990, rendered judgment in favor of the plaintiff [private
respondent] . . .6
In the decretal portion of the trial court's judgment, petitioner was ordered to comply with the approved sale
of the subject property but without the right to impose the condition that private respondent shall bear the
expenses for ejecting the occupants of the subject property. Petitioner was also ordered to pay P610,000.00
as actual expenses, P100,000.00 as attorney's fees, plus P1,000.00 per appearance, and the costs of suit.

The aforeceited judgment of the court a quo, totally unacceptable to petitioner, was appealed to the
respondent court. Petitioner took exception to the following postulations of the trial court: (1) that there was a
perfected contract of sale between herein private parties notwithstanding the suspensive condition imposed
upon private respondent for her to bear the expenses for ejecting the occupants of the subject property; (2)
that the deposit of P200,000.00 given by private respondent was earnest money which is proof of the
perfection of the contract of sale albeit the said condition imposed thereon; and (3) that the cancellation of
the second sale was baseless notwithstanding proof of private respondent's refusal to pay the balance of the
20% down payment of the purchase price of the subject property.

The respondent court disagreed with and answered each of, the aforegoing asseverations of petitioner in
this wise:

The plaintiff-appellee's [private respondent's] offer to purchase the subject property was originally
approved by the defendant-appellant [petitioner] on September 8, 1983 subject however to the terms
and conditions enumerated therein. . . .

From the moment the plaintiff-appellee [private respondent] signed the letter-agreement signifying
her conformity thereto, which simply means that she was accepting the terms and conditions therein
absolutely, there was created between the parties, a perfected contract of sale.

xxx xxx xxx

The failure of the plaintiff [private respondent] to remit the required downpayment does not negate
the perfection of the first contract of sale between the parties. The failure of the vendee . . . to pay
the price agreed upon in the contract only gives the vendor . . . the right to exact the fulfillment or to
rescind the contract (Art. 1191, supra.; Jacinto vs. Kaparaz, 209 SCRA 246).

The terms and conditions in the letter-agreement need not be complied with before it could be said
that the contract had already attained its perfection. A reading of the letter-agreement would reveal
that the perfection of the contract does not depend on the fulfillment of the terms and conditions
therein. Since there was a meeting of the minds between the parties upon the object of the contract
and upon the price, the contract of sale had already been perfected. Thus, whether or not the
conditions were fulfilled, the agreement remains to be valid and each party may reciprocally demand
for its performance. . . .

Admittedly, the . . . [private respondent] failed to remit the required downpayment for the first
contract after several notices for payment therefor . . . Thus, it was just proper for the defendant-
Bank [petitioner] to cancel the agreement to protect its interests. Anyway, it was merely exercising its
right under Article 1191 of the New Civil Code which right was clearly stipulated in the agreement . . .
.

The agreement nonetheless was subsequently revived, pursuant to which, another letter-agreement
dated May 14, 1986 was sent by appellant [petitioner] to appellee [private respondent] . . . . The
latter did not sign the letter-agreement but instead sent a letter to the appellant [petitioner] dated
May 23, 1986 expressing her conformity to the terms and conditions stipulated therein except for the
condition which states that the subject "property shall be cleared of its present tenants/occupants" at
her
expense . . . . On the other hand, appellant [petitioner] posits the view that since the approval of the
revival of the offer to purchase was made subject to the terms and conditions stated therein, which
conditions were necessary for the enforceability of the obligation against the appellant [petitioner],
and there being no absolute acceptance by the plaintiff [petitioner], and there being no absolute
acceptance by the plaintiff [private respondent] of such terms and conditions, then no contract of
sale was perfected between the parties.
 Appellant's [petitioner's] view is devoid of merit.

We note that the appellant [petitioner] itself admitted that the second agreement was merely a
revival of the first agreement which was duly approved by the bank, and the terms and conditions
thereof accepted by the appellee [private respondent] . . . Although there were some changes in the
second agreement, such changes were not substantial so as to make it a different contract of sale
from that of the first agreement of the parties . . . .

xxx xxx xxx

Considering that there was already an ejectment case filed by the appellant [petitioner] against its
lessees, then there was no longer any need for the plaintiff-appellee [private respondent] to initiate
another ejectment case at her expense, much less was there a need to incorporate condition no. 6 in
the agreement. Thus, the forfeiture of the plaintiff's [private respondent's] deposit of P200,000.00
and the subsequent unilateral cancellation of the agreement have no legal basis at all. Such
cancellation was made without the appellant's [petitioner's] action on the appellee's [private
respondent's] request for reconsideration of the PNB's denial of her request for deletion of condition
no. 6 . . . .

xxx xxx xxx

Appellant [petitioner] likewise argues that the deposits given by the appellee [private respondent]
were expressly subject to conditions agreed upon by the parties; hence, cannot be deemed as
earnest money contemplated in Article 1482 of the New Civil Code.

xxx xxx xxx

A close scrutiny of the two letters-agreement shows that the deposits of P100,000.00 . . . and
P20,000.00 . . . were made part of the selling/purchase price. . . .

On the basis of the above, there can be no other conclusion than that the deposits made . . . were
actually earnest money, such that from the total selling price the arras (earnest money) must be
deducted and the balance is all that has to be paid . . . .

xxx xxx xxx

The appellant [petitioner] likewise assigns as error the findings of the lower court on the absence of
proof that the appellee [private respondent] refused to pay the . . . downpayment in the second
agreement. . .

. . . The only reason which prevented the appellee [private respondent] from paying the required
downpayment was the stipulation in the agreement requiring her to eject the present occupants of
the premises when in fact she already spent for the eviction of its previous tenants . . . . However . . .
there is no need for such stipulation because anyway the appellant [petitioner] had already instituted
an action against its tenants . . . Besides, the protest letter sent by appellee's [private respondent's]
lawyer . . . as well as the filing of this case are eloquent proofs of the appellee's [private
respondent's] desire, capacity and willingness to proceed with the sale of the property. As we noted
above, the appellant [petitioner] never replied to the appellee's [private respondent's] request for
reconsideration of its refusal a delete condition no. 6. PNB's inaction must have made Lapaz to
suspend payment.7

Likewise rebuffed by the respondent Court of Appeals which, however, deleted the P610,000.00 award for
actual damages granted by the trial court to private respondent, petitioner prays that the herein assailed
decision be set aside because the respondent court apparently decided questions of substance not in
accord with statutory and case law:

THE COURT OF APPEALS ERRED:

 I

IN HOLDING THAT THERE WAS A PERFECTED CONTRACT BETWEEN PNB

AND MS. NGO DESPITE THEIR CLEAR DISAGREEMENT ON THE
SUBSTANTIVE CONDITION THAT THE LATTER SHOULDER THE EXPENSES
FOR THE EJECTMENT OF THE OCCUPANTS OF THE LOT TO BE SOLD

A. PNB's acceptance of Ms. Ngo's offer to revive her

purchase of subject lot was subject to certain
substantive conditions.

B. PNB's acceptance of Ms. Ngo's offer was in fact a

counter-offer which she rejected by her insistence that
PNB delete condition number 6.

C. PNB's Condition Number 6 is material and should

be agreed upon at inception of contract.

D. The area of agreement in PNB's counter

offer/acceptance extends to Condition number 6
together with all other conditions PNB specified.

II

IN HOLDING THAT MS. NGO'S REFUSAL TO PAY THE P827,199.83

DOWNPAYMENT IS NOT A VALID BASIS FOR PNB'S CANCELLATION OF THE
"APPROVED" SALE."8

The petition is meritorious.

There are two separate transactions

in the instant case; the first having been
unconditionally cancelled, effects thereof
cannot be deemed applicable to the
second transaction

Even private respondent admits in her pleadings that she failed to remit the required down payment under
the first letter-agreement, dated September 8, 1983. On this basis, respondent appellate court held that
"[t]hus, it was just proper for the [petitioner] Bank to cancel the agreement to protect its
interests9," as it did so on October 16, 1984. Notwithstanding such ruling, however, respondent court
theorized that because private respondent accepted the terms and conditions in that first letter-agreement,
and petitioner approved the revival thereof in another letter-agreement, dated May 14, 1986, conformity to
this second letter-agreement by private respondent would be superfluous, the letter-agreement dated May
14, 1986 being "merely a revival of the first agreement which was duly approved by the bank and the terms
and conditions thereof accepted by the appellee [private respondent]"10. Needless to say, this postulation of
respondent court is in complete disregard of the status of the first letter-agreement as being non-existent
and totally inefficacious as a result of its cancellation.

Respondent court then proceeded to state that petitioner having already complied with the condition that the
shoulder all expenses for the ejectment of the occupants of the subject property under the first letter-
agreement, "it would have been too cumbersome and inequitable if the plaintiff-appellee [private respondent]
were again made to shoulder the expenses for the eviction of the subsequent tenants/occupants of the
subject property.11". Evidently, respondent court perceived the two letter-agreements to be a single
transaction such that it justified private respondent's non-compliance with condition No. 6 in the second
letter-agreement by invoking her earlier compliance with the same condition in the first letter-agreement.
This confused sophism. When the first letter-agreement was cancelled by petitioner, and private respondent
agreed to that cancellation upon receiving P550,000.00 as refund of her aggregate deposit, all the effects of
that agreement were terminated. Upon mutual assent to that cancellation, the agreement so cancelled
thereafter no longer existed. Thus, compliance by private respondent with the terms and conditions of that
first agreement served the purposes of that agreement and cannot be made to serve the purpose of the
second letter-agreement. Respondent court fallaciously tacked the two agreements with each other and
commingled their effects; in incorrectly considered petitioner's successful ejectment of the subject property's
1983 occupants under the first letter-agreement to be sufficient compliance with the condition under the
second letter-agreement that the subject property be cleared of its 1986 occupants.

The records attest to the fact that private respondent refused to accept condition No. 6 of the second letter-
agreement, dated May 14, 1986. Private respondent offered, for the second time, after the first letter-
agreement was cancelled, to buy the subject property from petitioner who accepted such offer but subject to
specified terms and conditions. Thus, petitioner's acceptance of private respondent's offer was qualified
acceptance, which effect, is a counter-offer necessitating private respondent's acceptance in return.
Refusing to bind herself to bear the expenses for a second ejectment suit involving the subject property,
private respondent in effect rejectment petitioner's counter offer or at the least, accepted the same subject to
the deletion of condition No. 6. This, it has to be noted, is another counter-offer necessitating acceptance
this time by petitioner. Petitioner was unwilling to accept the same and demanded remittance of the
remainder of the down payment, the failure of which payment, petitioner warned private respondent, would
result in the forfeiture of the initial deposit of P200,000.00 and the ipso facto cancellation of the second
letter-agreement enabling petitioner to sell the subject property through sealed bidding.

From the foregoing, it is clear that private respondent and petitioner were negotiating for terms mutually
acceptable to them. Unfortunately, a mutually acceptable set of terms was not reached between them, and
petitioner exercised its right under the second letter-agreement to cancel the same. This process of
negotiation undertaken in 1986 by herein private parties is undeniably distinct from and entirely independent
of the events that transpired in 1983 in the context of the first letter agreement. Precisely another negotiation
was necessary because this 1986 transaction is different and separate from that undertaken by the said
parties in 1983.

Both letter-agreements are in the nature of contracts to sell; non-compliance with the suspensive conditions
set forth therein prevents the obligation of the vendor to convey title from having obligatory force

The fundamental flaw in the reasoning of both the trial court and the respondent appellate court is their
admitted premise that both letter-agreements are contracts of sale the perfection of which are proven by the
earnest money tendered to and accepted by petitioner in the form of deposits of P100,000.00 and
P200,000.00 under the first and second letter-agreements, respectively.

A perusal of the letter-agreements shows that they are contracts to sell and not contracts of sale.

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation
to transfer title is subordinated to the happening of future and uncertain event so that if the suspensive
condition does not take place, the parties would stand as if the conditional obligation had never existed12.
The suspensive condition is commonly full payment of the purchase price13.

Thus it has been held that a deed of sale is absolute in nature although denominated as a "Deed of
Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect
that title to the property is sold is reversed in the vendor until full payment of the purchase price, nor
is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the
vendee fails to pay within a fixed period . . . .14

If it were not full payment of the purchase price upon which depends the passing of title from the vendor to
the vendee, it may be some other condition or conditions that have been stipulated and must be fulfilled
before the contract is converted from a contract to sell or at the most an executory sale into an executed
one15.
 . . . Where the seller promised to execute a deed of absolute sale upon completing payment of the
price, it is a contract to sell. In the case at bar, the sale is still in the executory stage, namely, that if
private respondent is able to secure the needed funds to be used in the purchase of the two lots
owned by petitioners. A mere executory sale, one where the sellers merely promise to transfer the
property at some future date, or where some conditions have to be fulfilled before the contract is
converted from an executory to an executed one, does not pass ownership over the real estate
being sold.

In our jurisdiction, it has been held that an acceptable bilateral promise to buy and sell is in a sense
similar to, but not exactly the same, as a perfected contract of sale because there is already a
meeting of minds upon the thing which is the object of the contract and upon the price but a contract
of sale is consummated only upon delivery and payment. . . .

. . . Petitioners as promisors were never obliged to convey title before the happening of the
suspensive condition. In fact, nothing stood in the way of their selling the property to another after
unsuccessful demand for said price upon the expiration of the time agreed upon.16

The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early
as 1951, we have held that:

. . . [a] distinction must be made between a contract of sale in which title passes to the buyer upon
delivery of the thing sold and a contract to sell . . . where by agreement the ownership is reserved in
the seller and is not to pass until the full payment of the purchase price is made. In the first case,
non-payment of the price is a negative resolutory condition; in the second case, full payment is a
positive suspensive condition. Being contraries, their effect in law cannot be identical. In the fist
case, the vendor has lost and cannot recover the ownership of the land sold until and unless the
contract of sale is itself resolved and set aside. In the second case, however, the title remains in the
vendor if the vendee does not comply with the condition precedent of making payment at the time
specified in the contract.17

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until
full payment of the price or the fulfillment of some other conditions either which is a future and uncertain
event the non-happening of which is not a breach, casual or serious, but simply an event that prevents the
obligation of the vendor to convey title from acquiring binding force.18 To illustrate the effect of a positive
suspensive condition upon the nature of the transaction, as to whether it is a contract to sell or a contract of
sale, we have held thus:

In the agreement in question, entitlement PURCHASE AND SALE OF SCRAP IRON, the seller
bound and promised itself to sell the scrap iron upon the fulfillment by the private respondent of his
obligation to make or indorse an irrevocable and unconditional letter of credit in payment of the
purchase price. Its principal stipulation reads, to wit:

xxx xxx xxx

Witnesseth:

That the SELLER agrees to sell, and the BUYER agrees to buy . . . on the following
terms and conditions:

1. . . .

2. To cover payment of the purchase price, BUYER will open, make or indorse an
irrevocable and unconditional letter of credit not later than May 15, 1983 at the
Consolidated Bank and Trust Company, Dumaguete City Branch, in favor of the
SELLER in the sum of . . . (P250,000.00) . . .

3. . . .
 4. . . .

The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive

condition, i.e., the private respondent's opening, making or indorsing of an irrevocable and
unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment of the
purchase price by means of an irrevocable and unconditional letter of credit. Otherwise stated, the
contract is not one of sale where the buyer acquired ownership over the property subject to the
resolutory condition that the purchase price would be paid after delivery. Thus, there was to be no
actual sale until the opening, making or indorsing of the irrevocable and unconditional letter of credit.
Since what obtains in the case at bar is a mere promise to sell, the failure of the private respondent
to comply with the positive suspensive condition cannot even be considered a breach-casual or
serious-but simply an event that prevented the obligation of petitioner corporation to convey title from
acquiring binding force.

xxx xxx xxx

In the instant case, . . . private respondent fail[ed] to open, make or indorse an irrevocable and
unconditional letter of credit . . .

Consequently, the obligation of the petitioner corporation to sell did not arise; it therefore cannot be
compelled by specific performance to comply with its prestation. . . .19

In the instant case, private respondent does not dispute the fact that, under identical provisions in the two
letter-agreements, her obligation was to deposit an initial amount (P100,000.00 under the first letter-
agreement and P200,000.00 under the second letter-agreement) and then subsequently to deposit an
additional amount representing roughly 20% of the purchase price (P978,860.00 under the first letter
agreement and P827,119.83 under the second letter-agreement). Under both letter-agreements, the
consequences of private respondent's failure to remit the additional deposit, are unequivocal and plainly
comprehensive: ". . . deposit shall be forfeited and for this purpose, the Bank can sell the property to other
interested parties . . . due to your [private respondent's] failure to consummate the previously-approved sale
. . ."20.

This right reserved in the petitioner to in effect cancel the agreement to sell upon failure of petitioner to remit
the additional deposit and to consequently open the subject property anew to purchase offers, is in the
nature of a stipulation reserving title in the vendor until full payment of the purchase price or giving the
vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period.

We had already made the finding that the letter-agreements in question indeed bear the provisions reserving
title in petitioner until payment of the additional deposit representing more or less 20% of the purchase price.
We also find, however, that the intention of the private parties herein to make the sale dependent on
petitioner's compliance with a certain other conditions, is undeniable and plainly evident in the letter-
agreements. Identical provisions therein relating to petitioner's waiver of her right to warranty against
eviction and her accountability for the expense for the ejectment proceeding, are not so called "standard"
provisions that are more of a rhetorical device than conditions genuinely meant by the parties to be
suspensive conditions in the legal sense. In fact we find the inclusion of these provisions to be part of the
consideration of petitioner in considering private respondent's offer to purchase the subject property.
Corollarily, we find condition No. 6 under the second letter-agreement relating to the accountability of
petitioner for the expenses for the ejectment proceedings, to be a positive suspensive condition, among the
other positive suspensive conditions embodied in the letter-agreement, non-compliance of which prevents
petitioner's obligation to proceed with the sale and ultimately transfer title to private respondent, from having
obligatory force.

Moreover, no less revealing is the fact that the letter-agreements are not deeds of sale, thereunder no title
having been passed from petitioner to private respondent. Herein lies another important distinction between
a contract to sell and a contract of sale.

. . . The distinction between the two is important for in a contract of sale, the title passes to the
vendee upon the delivery of the thing sold, whereas in a contract to sell, by agreement, ownership is
 reserved in the vendor and is not pass until the full payment of the price. In a contract of sale, the
vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded,
whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition, failure of which is not breach but an event that
prevented the obligation of the vendor to convey title from becoming effective.21

We have often stated that it is not enough to say that the contract of sale, being consensual, became
automatically and immediately effective.22

Manuel v. Rodriguez, 109 Phil. 1, was one such occasion. In Manuel, "only the price and the terms
of payment were in writing," but the most important matter in the controversy, the alleged transfer of
title was never "reduced to any written document. It was held that the contract should not considered
. . . a sale but a promise to sell; and that "the absence of a formal deed of conveyance" was a strong
indication "that the parties did not intend immediate transfer of title, but only a transfer after full
payment of the price." Under these circumstances, the Court ruled Article 1504 of the Civil Code of
1889 (Art. 1592 of the present Code) to be inapplicable to the contract in controversy — a contract to
sell or promise to sell — "where title remains with the vendor until fulfillment of a positive suspensive
condition . . ."23

Thus, we have applied the above doctrine not in a few cases and looked into, in determining the true nature
of an alleged sale transaction, whether or not there was transfer of title. In one case, we found that:

Applying these distinctions, the Court finds that the agreement between PBC and the private
respondent was only a contract to sell, not a contract of sale. And the reasons are obvious.

There was no immediate transfer of title to the private respondents as would have happened if there
had been a sale at the outset. The supposed sale was never registered and TCT No. 218661 in
favor of PBC was not replaced with another certificate of title of favor of the private respondents. . .
.24

In the instant case, there was apparently no transfer of title, not even mention of such a transfer in the
future, considering that all the parties were aware of the occupancy of the subject property by third persons.
This circumstance all the more reinforces our finding that the transaction contemplated under the letter-
agreements was a contract to sell or a conditional sale which absolutely depends, for its efficacy, upon the
happening of the conditions specified in the said letter-agreements.

Private respondent also asseverates that the initial deposit of P200,000.00 under the second letter-
agreement is earnest money, that is, by express provision of the Civil Code, considered part of the purchase
price and proof of the perfection of the sale.

Indeed under Article 1482 of the Civil Code, earnest money given in a sale transaction is considered part of
the purchase price and proof of the perfection of the sale. This provision, however, gives no more than a
disputable presumption that prevails in the absence of contrary or rebuttal evidence. In the instant case, the
letter-agreements themselves are the evidence of an intention on the part of herein private parties to enter
into negotiations leading to a contract of sale that is mutually acceptable as to absolutely bind them to the
performance of their obligations thereunder. The letter-agreements are replete with substantial condition
precedents, acceptance of which on the part of private respondent must first be made in order for petitioner
to proceed to the next step in the negotiations. The initial deposits under the two letter-agreements,
therefore, should rather be construed, not strictly as earnest money, but as part of the consideration for
petitioner's promise to reserve the subject property for private respondent. Certainly in excluding all other
prospective buyers from bidding for the subject property, petitioner was in effect giving up what may have
been more lucrative offers or better deals.

WHEREFORE, the Petition for Review is HEREBY GRANTED. The decision of the Court of Appeals in CA-
G.R. CV No. 33490 and the decision of the Regional Trial Court of Manila, Branch XXVI, in Civil Case No.
87-39598, are hereby reversed and set aside. Private respondent's complaint for specific performance and
damages in Civil Case No. 87-39598 is dismissed.
 No pronouncement as to costs.

SO ORDERED.

Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.

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.

BELLOSILLO, J.:

On 11 April 1981 El 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, 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
improvement 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. 5191 and Petition No.
3732for 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 their obligation to deliver clean titles over the
properties.3TABANGAO 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 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 for and in their behalf upon
filing of a P2-million bond.4

Eventually, judgment was rendered in favor of TABANGAO and SHELL.5 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 —

xxx xxx xxx

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;

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 the issuance of the restraining order of April 10, 1990. 6

The BABASAS appealed to the Court of Appeals 7 which on 29 February 1996 affirmed the decision of the trial court
rejecting the contention of the BABASAS that the contract of 11 April 1981 was one of lease, not of sale;8 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 . . . 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 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 wish and desire, or even
against his better judgment.9 Besides, a threat of eminent domain proceedings by the government cannot be
legally classified as the kind of imminent, serious and wrongful injury to a contracting party as to vitiate his
consent. 10 Private landowners ought to realize, and eventually accept, that property rights must yield to the
valid exercise by the state of its all-important power of eminent domain.11

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 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.12 In such cases, ownership of the thing
sold passes to the vendee upon the constructive or actual delivery thereof. 13 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. 14

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 of their obligation. In Romero v. Court of
Appeals 15 and Lim v. Court of Appeals 16 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. 17

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 No. 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 —

. . . 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
. . . and whatever balance remaining after said settlement shall be paid to the Vendor.

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. 18Besides, 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.

G.R. No. 83588 September 29, 1997

Spouses ADORACION C. PANGILINAN and GEORGE B. PANGILINAN represented in this suit by their
Attorney-in-fact. ARCADIO S. MALLARI, petitioners,
vs.
COURT OF APPEALS, JOSE R. CANLAS and LUIS R. CANLAS and RURAL BANK OF STA. RITA,
INC., respondents.

TORRES, JR., J.:

This petition for review seeks to set aside the January 14, 1988 decision1 and May 31, 1988 resolution of the Court
of Appeals in CA-GR CV No. 09175 which reversed the December 12, 1985 decision of the Regional Trial Court,
Third Judicial Region, Branch XLVIII, San Fernando, Pampanga.

On May 18, 1968, petitioners Pangilinan (husband and wife), and the private respondents Jose R. Canlas and Luis
R. Canlas entered into a Contract to Buy and To Sell a subdivision lot at Sto. Niño Village, San Fernando,
Pampanga, particularly Lot No. 1, Block 3; with an area of 577 square meters at P30.00 per square meter, for a total
contract price of P17,310.00, payable on installment basis at P189.02 a month for 120 months.2 The sum of P1,731
representing 10% of the total price of the lot was paid by the petitioners to the private respondents and thereafter
monthly installments which amounted to about 85% of the total price were effected as of January, 1974; the last
payment thereof was made on May 14, 1975 (Exh. C-54).3 Paragraph 5 of the contract provided for automatic
extrajudicial rescission upon default in payment of three (3) consecutive monthly installments or to comply with any
of the terms and conditions, with forfeitures of installments as rents and as payment for damages. The said contract
to buy and to sell as well as the receipts of various payments made by petitioners in favor of private respondents
were given by the former to Mr. Arcadio S. Mallari. Mr. Mallari equipped with a Special Power of Attorney dated May
15, 1983 from the spouses Adoracion C. Pangilinan and George Pangilinan went personally to the private
respondents and requested them to release the title of the lot as he would pay in full the alleged remaining balance
of P1,875.00. The private respondents told him to return after two weeks as they would confer with each other.
When he returned, the private respondent Jose R. Canlas told him that they were not in a position to release the title
to said lot because the same had already been disposed of Mr. Mallari discovered that the lot was mortgaged to the
Rural Bank of Sta. Rita. On July 25, 1983, after the lapse of eight years from the last date of payment, he instituted
a complaint for Specific Performance and Damages docketed as Civil Case No. 6843 entitled "Spouses Adoracion
G. Pangilinan, et. al. vs. Jose R. Canlas, et. al." before the Regional Trial Court, Branch XLVIII, San Fernando,
Pampanga. On December 12, 1985, the trial court rendered its decision, the decretal part of which provides:

In view of all the foregoing, judgment is hereby rendered against the defendants Jose R. Canlas and
Luis R. Canlas ordering them the following:

1) to accept the final payment or balance of the consideration of the lot in the amount
of P2,277.82;

2) to execute the final deed of sale of the lot in question in favor of herein plaintiffs;

3) to pay the mortgage loan to the defendant Rural bank for the purpose of releasing
the said lot embraced in Transfer Certificate of Title No. 89745-R, Registry of Deeds
for the Province of Pampanga in order to free the said lot from encumbrances;

4) to pay plaintiff the amount of P5,000.00 for attorney's fees; P2,000.00 for litigation
expenses;

5) to pay plaintiff the amount of P10,000.00 for exemplary damages as a corrective

measure due to malevolent act of defendants Canlases;

6) to pay the costs of the suit.

The counterclaim interposed by the defendant Jose R. Canlas and Luis R. Canlas are hereby
dismissed for lack of evidence.

The defendant Rural Bank of Sta. Rita Incorporated is hereby absolved of any liability but its
counterclaim is hereby dismissed for lack of evidence.

SO ORDERED.4

Private respondents appealed the abovementioned decision to the Court of Appeals which on January 14, 1988,
promulgated its judgment which reversed and set aside the decision of the trial court, to wit:

WHEREFORE, the decision appealed from is hereby SET ASIDE. Another judgment is hereby
entered DISMISSING Civil Case No. 6843 before the court below. The counter-claim of defendants-
appellants is hereby DISMISSED.

SO ORDERED.5

Petitioners filed a motion for reconsideration but it was denied for lack of merit by the Court of Appeals in its
resolution of May 31, 1988. Hence, petitioner instituted the instant petition for review raising two (2) assignment of
errors, viz.:

1) THE COURT OF APPEALS ERRED THAT A CREDITOR CAN UNILATERALLY

AND SUMMARILY RESCIND A CONTRACT TO SELL A SUBDIVISION LOT;
 2) THE COURT OF APPEALS ERRED IN RULING THAT HEREIN PETITIONERS
ARE GUILTY OF LACHES.

Petitioners vigorously argue that automatic rescission of a contract extrajudicially undertaken by a creditor maybe
effected only if the defaulter was duly informed of the intention of the creditor to rescind the contract. If the defaulter
will not object, then the creditor may proceed to extrajudicially rescind or cancel the contract, however, if the
defaulter will manifest his objection, then the matter of rescission will be subjected to judicial determination. They
further alleged that even if there is a waiver stipulated in the contract of adhesion, regarding rescission, such waiver
will not apply because the waiver must be unequivocal and intelligently made. Moreover, granting that petitioners
have committed a breach of contract for their failure to pay the balance of the consideration, yet this breach is slight,
considering that 85% of the total consideration for the lot has been paid.

The Court is not persuaded.

The fifth paragraph of the Contract to Buy and to Sell pertinently reads:

This contract shall be considered automatically rescinded and canceled and of no further force or
effect, upon failure of the VENDEE to pay when due, three (3) consecutive monthly installments or to
comply with any of the terms and conditions hereof, in which case the VENDORS shall have the
right to resell said parcel of land to any person or purchaser, as if this contract has never been
entered into. In such case of cancellation of this contract, all amounts paid in accordance with the
agreement together with all the improvements made on the premises shall be considered as rents
paid for the use and occupation of the above-mentioned premises and as payment for the damages
suffered for the failure of the VENDEE to fulfill his part of this agreement; and for the VENDEE
hereby renounces his right to demand or reclaim the return of the same obliges himself to peacefully
vacate the premises and deliver the same to the VENDORS.6

Article 15927 of the New Civil Code, requiring demand by suit or by notarial act in case the vendor of realty wants to
rescind does not apply to a contract to sell but only to contract of sale. In contracts to sell, where ownership is
retained by the seller and is not to pass until the full payment, such payment, as we said, is a positive suspensive
condition, the 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. To argue that there was only a casual breach is to proceed
from the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is
not the case.8

The applicable provision of law in instant case is Article 1191 of the New Civil Code which provides as follows:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.

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

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

This is understood to be without prejudice to the rights of third persons who have acquired the thing,
in accordance with articles 1385 and 1388 and the Mortgage Law. (1124)

Pursuant to the above, the law makes it available to the injured party alternative remedies such as the power to
rescind or enforce fulfillment of the contract, with damages in either case if the obligor does not comply with what is
incumbent upon him. There is nothing in this law which prohibits the parties from entering into an agreement that a
violation of the terms of the contract would cause its cancellation even without court intervention. The rationale for
the foregoing is that in contracts providing for automatic revocation, judicial intervention is necessary not for
purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an
agreement providing for rescission even without judicial intervention, but in order to determine whether or not the
rescission was proper. Where such propriety is sustained, the decision of the court will be merely declaratory of the
revocation, but it is not in itself the revocatory act.9 Moreover, the vendor's right in contracts to sell with reserved title
to extrajudicially cancel the sale upon failure of the vendee to pay the stipulated installments and retain the sums
and installments already received has long been recognized by the well-established doctrine of 39 years
standing. 10The validity of the stipulation in the contract providing for automatic rescission upon non-payment cannot
be doubted. It is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of
breach without need of going to court. Thus, rescission under Article 1191 was inevitable due to petitioners' failure
to pay the stipulated price within the original period fixed in the agreement.

On the second assigned error, petitioners aver that the doctrine of laches is not applicable in this particular case
because (1) petitioner's failure to pay in full the balance of 15% of the total price of the lot was due to the reneged
obligation of the private respondent to improve the subdivision and install facilities; and, (2) the mortgage of the lot
to the Rural Bank of Sta. Rita was done without their consent and knowledge.

The same has no merit. It must be noted that upon a careful examination of the records of this case, it appears that
the contention of the petitioners that their failure to pay the balance of 15% of the total contract price of the lot was
due to the inability of the private respondent to improve the subdivision and install facilities which was raised only for
the first time on appeal. They did not raise this issue before the lower courts. It is settled that an issue which was
neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on
appeal. 11 Issues of fact and arguments not adequately brought to the attention of the trial court need not be and
ordinarily will not be considered by a reviewing court as they cannot be raised for the first time on
appeal. 12Assuming arguendo that it was raised before the trial court, the same would be without merit because the
failure of the private respondents to install facilities would not deter them from asking for the rescission of the
agreement if petitioners failed to comply with their obligation to pay the monthly installments when they become due,
otherwise, the right of rescission would be rendered inutile. In the same vein, petitioners by virtue of their contract
with private respondents should have complied in good faith with its terms and conditions being the law between
them. From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all consequences which, according to their nature, may be in keeping with good
faith, usage and law. 13 The Contract to Buy and to Sell, specifically paragraph 5 thereof, not being contrary to law,
morals, good customs, public order or public policy, is valid and binding between the parties thereto.

As stated by the appellate court, thus:

The peculiar fact that militates against the cause of the appellees is that the appellees spouses
Pangilinan did not directly and personally prosecute the present proceedings. As shown from the
records, Mr. Mallari had equipped himself with the special power of attorney in his favor by the
appellees executed only on May 15, 1983 or about six (should be eight) years from the date of last
payment, made on May 14, 1975 for the January, 1974 installment, during which time, the actual
buyers, the Pangilinans had not by themselves personally shown interest in compelling the
appellants to accept the remaining balance of the purchase price of the said subdivision lot, to
execute in their favor the Deed of Absolute Sale and deliver to them the Transfer Certificate of Title
over the said property. The aforesaid circumstances constitute laches. There was failure or neglect
on the part of the Pangilinan spouses for an unreasonable and unexplained length of time to do that
which by exercising due diligence or could have been done earlier, such failure or negligence
warrants a presumption that they had abandoned or declined to assert such right (Tejado vs.
Zamacoma, 138 SCRA 78).

Further, the Court of Appeals, stated:

The disturbing fact in the case at bar is that the spouses Pangilinan who bought the subject lot from
the appellant seller did not directly and personally prosecute the present case from May, 1975 (date
of last payment for January, 1974 installment). Mr. Arcadio S. Mallari, the alleged attorney-in-fact of
the said spouses, represented them in the instant case which was filed only on July 25, 1983. He
has an alleged special power of attorney in his favor by the appellees which appears to have been
executed on May 15, 1983 or about eight (8) years from the date of last payment on May 14, 1975
by the buyer spouses for the January, 1974 installment. Mr. Mallari was the only witness for the
prosecution. He alone identified the said power of attorney executed in his favor and testified on its
due execution. The notary public who appears to have notarized the said document was not
 presented neither did the Pangilinan spouses appear in the lower court. There was no mention in his
(Mallari) testimony of the whereabouts of the said Pangilinan spouses nor why the instant case had
to be filed by him for them. The Court has doubts whether or not the said Pangilinan spouses are
really interested in the prosecution of this case. And more than this, in the mind of the Court, the
genuineness of the said special power of attorney has not been satisfactorily proved.

It also bears emphasis that from the said last payment on May 14, 1975, for the January, 1974
installment up to the execution of the alleged special power of attorney (assuming the same to be
true) in favor of Mr. Mallari, on May 15, 1983, and the filing of Mallari of the instant case (which
covers a period of eight (8) years)* the actual buyers, the Pangilinan spouses had not by themselves
personally shown interest in compelling the appellants to accept the remaining balance of the
purchase price of the subdivision lot, to execute in their favor the Deed of Absolute Sale and deliver
to them the Transfer Certificate of Title over the said lot. Such failure/neglect on their part constitutes
laches because for an unreasonable and unexplained length of time [eight (8) years], they
failed/neglected to do that which by exercising due diligence could or should have been done earlier,
and as stated in the decision rendered in the present appeal, such failure or negligence warrants a
presumption that they had abandoned or declined to assert such right.

Explicitly, spouses Pangilinan instead of being vigilant and diligent in asserting their rights over the subject property
had failed to assert their rights when the law requires them to act. Laches or "stale demands" is based upon
grounds of public policy which requires, for the peace of society, the discouragement of stale claims and unlike the
statute of limitations, is not a mere question of time but is principally a question of the inequity or unfairness of
permitting a right or claim to be enforced or asserted. 14

The legal adage finds application in the case at bar. Tempus enim modus tollendi obligationes et actiones, quia
tempus currit contra desides et sui juris contemptores — For time is a means of dissipating obligations and actions,
because time runs against the slothful and careless of their own rights.

IN VIEW WHEREOF, the petition is hereby DENIED and the decision of respondent court AFFIRMED in toto.

Regalado and Puno, JJ., concur.

Mendoza, J., is on leave.

G.R. No. 125347 June 19, 1997

EMILIANO RILLO, petitioner,

vs.
COURT OF APPEALS and CORB REALTY INVESTMENT, CORP., respondents.

PUNO, J.:

This is an appeal under Rule 45 of the Rules of Court to set aside the decision 1 of the Court of Appeals in CA G.R.
CV No. 39108 cancelling the "Contract to Sell" between petitioner Emiliano Rillo and private respondent Corb Realty
Investment Corporation. It also ordered Rillo to vacate the premises subject of the contract and Corb Realty to
return 50% of P158,184.00 or P79,092.00 to Rillo.

The facts of the case are the following:

On June 18, 1985, petitioner Rillo signed a "Contract To Sell of Condominium Unit" with private respondent Corb
Realty Investment Corporation. Under the contract, CORB REALTY agreed to sell to RILLO a 61.5 square meter
condominium unit located in Mandaluyong, Metro Manila. The contract price was P150,000.00, one half of which
was paid upon its execution, while the balance of P75,000.00 was to be paid in twelve (12) equal monthly
installments of P7,092.00 beginning July 18, 1985. It was also stipulated that all outstanding balance would bear an
interest of 24% per annum; the installment in arrears would be subject to liquidated penalty of 1.5% for every month
of default from due date. It was further agreed that should petitioner default in the payment of three (3) or four (4)
monthly installments, forfeiture proceedings would be governed by existing laws, particularly the Condominium Act. 2

On July 18, 1985, RILLO failed to pay the initial monthly amortization. On August 18, 1985, he again defaulted in his
payment. On September 20, 1985, he paid the first monthly installment of P7,092.00. On October 2, 1985, he paid
the second monthly installment of P7,092.00. His third payment was on February 2, 1986 but he paid only
P5,000.00 instead of the stipulated P7,092.00. 3

On July 20, 1987 or seventeen (17) months after RILLO's last payment, CORB REALTY informed him by letter that
it is cancelling their contract due to his failure to settle his accounts on time. CORB REALTY also expressed its
willingness to refund RILLO's money. 4

CORB REALTY, however, did not cancel the contract for on September 28, 1987, it received P60,000.00 from
petitioner. 5

RILLO defaulted again in his monthly installment payment. Consequently, CORB REALTY informed RILLO through
letter that it was proceeding to rescind their contract. 6 In a letter dated August 29, 1988, it requested RILLO to come
to its office and withdraw P102,459.35 less the rentals of the unit from July 1, 1985 to February 28, 1989. 7 Again the
threatened rescission did not materialize. A "compromise" was entered into by the parties on March 12, 1989, which
stipulated the following:

1. Restructure Outstanding Balance Down to P50,000.00

2. Payment @ P2,000.00/Month @
18% (Eighteen Percent)
— Monthly — To Compute No. of
Installments

3. To Pay Titling Plus Any Real Estate Tax Due

4. Installments to start April 15, 1989. 8

Rillo once more failed to honor their agreement. RILLO was able to pay P2,000.00 on April 25, 1989 and P2,000.00
on May 15, 1989. 9

On April 3, 1990, CORB REALTY sent RILLO a statement of accounts which fixed his total arrears, including
interests and penalties, to P155,129.00. When RILLO failed to pay this amount, CORE REALTY filed a
complaint 10for cancellation of the contract to sell with the Regional Trial Court of Pasig.

In his answer to the complaint, RILLO averred, among others, that while he had already paid a total of P149,000.00,
CORB REALTY could not deliver to him his individual title to the subject property; that CORB REALTY could not
claim any right under their previous agreement as the same was already novated by their new agreement for him to
pay P50,000.00 representing interest charges and other penalties spread through twenty-five (25) months beginning
April 1989; and that CORB REALTY's claim of P155,129.99 over and above the amount he already paid has no
legal basis. 11

At the pre-trial, the parties stipulated that RILLO's principal outstanding obligation as of March 12, 1989 was
P50,000.00 and he has paid only P4,000.00 thereof and that the monthly amortization of P2,000.00 was to bear
18% interest per annum based on the unpaid balance. The issues were defined as: (1) whether or not CORB
REALTY was entitled to a rescission of the contract; and (2) if not, whether or not RILLO's current obligation to
CORB REALTY amounts to P62,000.00 only inclusive of accrued interests. 12

The Regional Trial Court held that CORB REALTY cannot rescind the "Contract to Sell" because petitioner did not
commit a substantial breach of its terms. It found that RILLO substantially complied with the "Contract to Sell" by
paying a total of P154,184.00. It ruled that the remedy of CORB REALTY is to file a case for specific performance to
collect the outstanding balance of the purchase price.
CORB REALTY appealed the aforesaid decision to public respondent Court of Appeals assigning the following
errors, to wit:

THE TRIAL COURT ERRED IN DISREGARDING OTHER FACTS OF THE CASE, INCLUDING
THE FACT THAT THE CONTRACT TO SELL, AS NOVATED, CREATED RECIPROCAL
OBLIGATIONS ON BOTH PARTIES;

THE TRIAL COURT ERRED IN DISREGARDING ARTICLE 1191 OF THE CIVIL CODE;

THE TRIAL COURT ERRED IN RENDERING JUDGMENT BY SIMPLY DISREGARDING THE

CASE OF ROQUE V. LAPUZ, 96 SCRA 744, AND WITHOUT INDICATING THE APPLICABLE LAW
ON THE CASE.

THE TRIAL COURT ERRED IN RENDERING A DECISION WHICH DID NOT COMPLETELY
DISPOSE OF THE CASE.

The respondent Court of Appeals reversed the decision. It ruled: (1) that rescission does not apply as the contract
between the parties is not an absolute conveyance of real property but is a contract to sell; (2) that the
Condominium Act (Republic Act No. 4726, as amended by R.A. 7899) does not provide anything on forfeiture
proceedings in cases involving installment sales of condominium units, hence, it is Presidential Decree No. 957
(Subdivision and Condominium Buyers Protective Decree) which should be applied to the case at bar. Under
Presidential Decree No. 957, the rights of a buyer in the event of failure to pay installment due, other than the failure
of the owner or developer to develop the project, shall be governed by Republic Act No. 6552 or the REALTY
INSTALLMENT BUYER PROTECTION ACT also known as the Maceda Law (enacted on September 14, 1972).
The dispositive portion of its Decision states:

WHEREFORE, the decision appealed from is hereby SET ASIDE. The Contract to Sell is hereby
declared cancelled and rendered ineffective. Plaintiff-Appellant is hereby ordered to return 50% of
P158,184.00 or P79,092.00 to appellee who is hereby ordered to vacate the subject premises.

SO ORDERED. 13

Hence, this appeal with the following assignment of errors:

THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN HOLDING AND
DECIDING THAT RESCISSION IS THE PROPER REMEDY ON A PERFECTED AND
CONSUMMATED CONTRACT;

THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN NOT HOLDING
AND DECIDING THAT THE OLD CONSUMMATED CONTRACT HAS BEEN SUPERSEDED BY A
NEW, SEPARATE, INDEPENDENT AND SUBSEQUENT CONTRACT BY NOVATION.

The petition is without merit.

The respondent court did not err when it did not apply Articles 1191 and 1592 of the Civil Code on rescission to the
case at bar. The contract between the parties is not an absolute conveyance of real property but a contract to sell. In
a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive
condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the
obligation of the vendor to convey title from acquiring any obligatory force." 14 The transfer of ownership and title
would occur after full payment of the purchase price. We held in Luzon Brokerage Co., Inc. v. Maritime Building
Co., Inc. 15 that there can be no rescission of an obligation that is still non-existent, the suspensive condition not
having happened.

Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No. 6552. Known
as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is
simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. 16 It also
provides the right of the buyer on installments in case he defaults in the payment of succeeding installments, viz:

(1) Where he has paid at least two years of installments,

(a) To pay, without additional interest, the unpaid installments due within the total grace period
earned by him, which is hereby fixed at the rate of one month grace period for every one year of
installment payments made: Provided, That this right shall be exercised by the buyer only once in
every five years of the life of the contract and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent of the total payments made and, after five years
of installments, an additional five per cent every year but not to exceed ninety per cent of the total
payments made: Provided, That the actual cancellation of the contract shall take place after
cancellation or the demand for rescission of the contract by a notarial act and upon full payment of
the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total
number of installments made.

(2) Where he has paid less than two years in installments,

Sec. 4. . . . the seller shall give the buyer a grace period of not less than sixty days from the date the
installment became due. If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act.

Petitioner RILLO paid less than two years in installment payments, hence, he is only entitled to a grace period of not
less than sixty (60) days from the due date within which to make his installment payment. CORB REALTY, on the
otherhand, has the right to cancel the contract after thirty (30) days from receipt by RILLO of the notice of
cancellation. Hence, the respondent court did not err when it upheld CORB REALTY's right to cancel the subject
contract upon repeated defaults in payment by RILLO.

Petitioner further contends that the contract to sell has been novated by the parties agreement of March 12, 1989.
The contention cannot be sustained. Article 1292 of the Civil Code provides that "In order that an obligation may be
extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or
that the old and the new obligations be on every point incompatible with each other." Novation is never
presumed. 17Parties to a contract must expressly agree that they are abrogating their old contract in favor of a new
one. 18 In the absence of an express agreement, novation takes place only when the old and the new obligations are
incompatible on every point. 19 In the case at bar, the parties executed their May 12, 1989 "compromise agreement"
precisely to give life to their "Contract to Sell". It merely clarified the total sum owed by petitioner RILLO to private
respondent CORB REALTY with the view that the former would find it easier to comply with his obligations under the
Contract to Sell. In fine, the "compromise agreement" can stand together with the Contract to Sell.

Nevertheless, we do not agree with the respondent Court so far as it ordered private respondent CORB REALTY to
refund 50% of P158,184.00 or P79,092.00 to petitioner RILLO. Under Republic Act No. 6552, the right of the buyer
to a refund accrues only when he has paid at least two (2) years of installments. In the case at bar, RILLO has paid
less than two (2) years in installments, hence, he is not entitled to a refund.

IN VIEW WHEREOF, the decision appealed from is AFFIRMED with the MODIFICATION that the refund of 50%
P158,184.00 or P79,092.00 made in favor of petitioner Emiliano Rillo is deleted. No costs.

SO ORDERED.

Regalado, Romero, Mendoza and Torres, Jr., JJ., concur.

G.R. No. 107992 October 8, 1997

ODYSSEY PARK, INC., petitioner,
vs.
HONORABLE COURT OF APPEALS and UNION BANK OF THE PHILIPPINES, respondents.

VITUG, J.:

Assailed in the instant petition for review on certiorari is the decision, dated 07 September 1992, of the Court of
Appeals affirming that of the Regional Trial Court, Branch 152, of Pasig, Metro Manila, which has adjudged the
contract to sell entered into between petitioner and private respondent as having been validly rescinded.

The Court adopts the factual findings, hereunder narrated, of the appellate court:

1. On November 4, 1981, Bancom Development Corporation and plaintiff-appellant Odyssey Park,

Inc., entered into a Contract to Sell (Exhibit B-1), whereby the former agreed to sell to the latter the
parcel of land with an area of 8,499 square meters situated in Baguio City and the structure
constructed thereon identified as the Europa Clubhouse.

2. Subsequently on February 11, 1982, in a document entitled "Separate Deed of Conveyance"

(Annex F of the Affidavit of Carmelito A. Montano, pages 152-154 of the Record), Bancom confirmed
and acknowledged that it has ceded, transferred and conveyed in favor of defendant-appellee Union
Bank all the rights, title and interest it has over the property.

3. The purchase price of P3,500,000.00 was, per Section 2 of the Contract to Sell, agreed to be paid
as follows:

a) SEVEN HUNDRED THOUSAND PESOS (P700,000.00) as down payment, to be

paid by Odyssey as follows:

(i) ONE HUNDRED THOUSAND (P100,000.00) PESOS upon signing

of this Contract;

(ii) TWO HUNDRED THOUSAND PESOS (P200,000.00), sixty (60)

days from and after the date of this Contract. The said amount shall
be covered by a check postdated sixty (60) days after the date of this
Contract issued and delivered by Odyssey to Bancom upon the
signing of this Contract; and

(iii) FOUR HUNDRED THOUSAND PESOS (P400,000.00), ninety

(90) days from and after the date of this Contract. The said amount
shall be covered by a check postdated ninety (90) days after the date
of this Contract issued and delivered by Odyssey to Bancom upon
signing of this Contract.

b) The balance of TWO MILLION EIGHT HUNDRED THOUSAND PESOS

(P2,800,000.00) shall be paid by Odyssey to Bancom within a period of three (3)
years by twelve (12) equal quarterly amortizations of P298,346.08 each, inclusive of
the interest and service charge set forth in Section 3 hereof, the first amortization to
become due and payable four (4) months and fifteen (15) days after the date of this
Contract, and the succeeding amortizations at the end of each quarter thereafter until
the balance of the purchase price of the Property is paid in full.

4. It was also agreed in Section 5 of the Contract to Sell that:

Sec. 5: In the event Odyssey fails to pay any portion of the purchase price of the
Property or the interest and service charge thereon as and when it falls due, or
otherwise fails to comply with or violate any of the provisions of this
Contract, Bancom may at its absolute discretion cancel and rescind this Contract and
declare the same as null, void and no further force and effect by serving on Odyssey
a written notice of cancellation and rescission thirty (30) days in advance.

In the event this Contract is cancelled and rescinded as provided in this Section, all
the amounts which the Odyssey may have paid to Bancom pursuant to and in
accordance with this Contract shall be forfeited in favor of Bancom as rentals for the
use and occupancy of the Property and as penalty for the breach and violation of this
Contract. Furthermore, all the improvements which Odyssey may have introduced on
the Property shall form part thereof and belong to Bancom without right of
reimbursements to Odyssey; Provided, that Bancom may at its absolute discretion
instead require Odyssey to remove such improvements from the Property at expense
of Odyssey.

5. On November 26, 1981, twenty-two (22) days after the execution of the contract
plaintiff-appellant paid the amount of P100,000.00. Other payments, also beyond the
stipulated period, (see Odyssey Park, Inc., Statement of Application of Payment,
Annex A of the Supportive Affidavit of Nicefero S. Agaton, p. 309 of the record) in the
total sum of P110,000.00 were made as follows:

September 22, 1982 P20,000.00

April 13, 1983 10,000.00
April 30, 1983 10,000.00
July 20, 1983 50,000.00
September 19, 1983 20,000.00.

6. On December 23, 1981, Mr. Vicente A. Araneta, President of Europa

Condominium Villas, Inc., wrotes defendant-appellee Union Bank, a letter, Exhibit E,
stating that the Europa Center was reported to prospective buyers as well as
government authorities as part of common areas and amenities under the
condominium concept of selling to the public and for that reason wants to make it of
record that Europa Condominium Villas, Inc., questions the propriety of the contract
to sell.

7. On January 4, 1982, plaintiff-appellant Odyssey Park, Inc., through its Chairman of

the Board, Mr. Carmelito A. Montano, wrote Bancom Development Corp. a letter,
Exhibit F, stating that it acknowledges receipt of a copy of the letter-protest from the
Europa Condominium Villas, Inc., and that in the meantime that there is a question
on the propriety of the sale, it is stopping/withholding payments of the amortization.

8. On the same date, January 4, 1982, Bancom, through its Senior Vice-President,
wrote Europa Condominium Villas, Inc. a letter, Exhibit H, explaining that the Europa
Center and the parcel of land on which it is built are not part of the Europa
Condominium Villas, Inc.

9. On March 29, 1983, defendant-appellee Union Bank wrote plaintiff-appellant

Odyssey Park, Inc., a letter (Annexes F, F-1 of the Supportive Affidavit of Nicefero S.
Agaton, pp. 317-318 of the record) demanding payment of the overdue account of
P2,193,720.91, inclusive of interest and service charges, otherwise the contract to
sell would be cancelled and rescinded;

10. On April 12, 1983, plaintiff-appellant Odyssey wrote defendant-appellee Union

Bank a letter (Annex F-2 of the Supportive Affidavit of Nicefero S. Agaton, pp. 319-
320 of the record) proposing a manner of settlement which defendant-appellee Union
Bank answered (Annex F-3, p. 321 of the record) asking for more details of the
 proposal. The series of communications led to the drafting of a Memorandum of
Agreement (Exhibit N) which was not, however, signed by the parties.

11. On January 6, 1984, defendant-appellee Union Bank, through counsel, wrote

plaintiff-appellant Odyssey Park, Inc., a letter (Exhibit O) formally rescinding and/or
cancelling the contract to sell and demanding that plaintiff-appellant vacate and
peaceably surrender possession of the premises.

12. On or about August 20, 1984, for failure of plaintiff-appellant to vacate,

defendant-appellee filed a case for illegal detainer and damages (Exhibit P).

13. On July 5, 1988, plaintiff-appellant filed this case for "Declaration of the Nullity of
the Rescission of the Contract to Sell With Damages".1 (Emphasis ours.)

After the trial, the lower court rendered judgment in favor of private respondent, declaring the Contract to Sell of 04
November 1981 to have been properly rescinded; dismissing the complaint for being frivolous and unfounded; and
ordering the plaintiff to pay the defendant P300,000.00 by way of attorney's fees and litigation expenses. The
judgment, as so heretofore stated, was affirmed by respondent appellate court.

Its motion for reconsideration having been denied on 22 November 1992, petitioner corporation seasonably filed the
present petition questioning the decision of the appellate court.

The Court rules for affirmance of the appealed decision.

The issues raised by petitioner which generally are factual in nature and previously taken up by the appellate court
cannot in this instance be freely examined all over again. It is not the function of the Supreme Court to analyze and
to weigh anew the evidence already passed upon by the Court of Appeals. The authority of this Court is confined to
correcting errors of law, if any, that might have been committed below.2 Absent the recognized exceptions, which
are not here extant, factual findings of the Court of Appeals are conclusive.

Hardly, in this case, can it be said that there was no basis at all for debunking the contention of petitioner to the
effect that because Europa Condominium Villas, Inc., had questioned the right of Bancom to sell the property,
petitioner thereby was enfranchised to suspend or withhold payment to Bancom. Respondent appellate court,
seconding the findings of the trial court, quoted the latter; thus:

First, the title of Union Bank over the property (TCT No. T-33725) is clear without any encumbrance
or adverse claim. Second, Europa condominium Villas, Inc. has not earnestly questioned Bancom's
right to sell. If Europa is in earnest, it should have filed the necessary action in Court to protect its
right to a valuable property. Third, Europa would not have offered to buy the property from Bancom
for P6 Million if it was claiming ownership over it. Fourth, the letters which plaintiff claim to be proof
of Europa's persistence in questioning Bancom's right to sell the property do not really question
Bancom's right to do so but are actually money claims of Europa Condominium Villas, Inc. against
Odyssey for unpaid water bills and other services rendered by Europa.3

The only real legal issue, it appears to the Court, is whether or not the rescission of the contract to sell by private
respondent accords with the requirements of Republic Act ("R.A.") No. 6552, also known as "An Act to Protect
Buyers of Real Estate on Installment Payments" which, petitioner insists, requires a cancellation or rescission of the
contract by means of a notarial act. A mere letter (dated 06 January 1984), or short of such a notarial act, according
to petitioner, would be utterly deficient.

Unfortunately for petitioner, the invocation of Republic Act No. 6552 is misplaced. This law, which normally applies
to the sale or financing of real estate on installment payments, excludes "industrial lots, commercial buildings, and
sales to tenants under R.A. No. 3844." The appellate court has thus aptly said:

While the law applies to all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments, excluded are industrial lots,
commercial buildings and sales to tenants under R.A. 3844 as amended. The property subject of the
 contract to sell is not a residential condominium apartment. Even on the basis of the letter of Mr.
Vicente A. Araneta, Exhibit E, the building is merely "part of common areas and amenities under the
Condominium concept of selling to the public". The property subject of the contract to sell is more of
a commercial building.4

Neither would Article 1191 of the Civil Code govern. Article 1191, in full, provides:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.

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

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

This is understood to be without prejudice to the rights of third persons who have acquired the thing,
in accordance with articles 1385 and 1388 and the Mortgage Law.

In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not
a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring
an obligatory force.5 The breach contemplated in Article 1191 of the Code is the obligor's failure to comply with an
obligation already extant, not a failure of a condition to render binding that obligation. In any event, the failure of
petitioner to even complete the downpayment stipulated in the contract to sell puts petitioner corporation far from
good stead in urging that there has been substantial compliance with the contract to sell within the meaning of
Article 1191 of the Code.

So, too, must Article 1592 of the Civil Code be held inapplicable. This law states:

Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take place,
the vendee may pay, even after the expiration of the period, as long as no demand for rescission of
the contract has been made upon him either judicially or by a notarial act. After the demand, the
court may not grant him a new term.

It is clear that the above provisions contemplate neither a conditional sale nor a contract to sell but an
absolute sale.6

What must instead be held to rule in the case at bar is the agreement of the parties themselves. Section 5 of their
contract to sell reads:

Sec. 5: In the event Odyssey fails to pay any portion of the purchase price of the Property or the
interest and service charge thereon as and when it falls due, or otherwise fails to comply with or
violate any of the provisions of this Contract, Bancom may at its absolute discretion cancel and
rescind this Contract and declare the same as null, void and no further force and effect by serving on
Odyssey a written notice of cancellation and rescission thirty (30) days in advance.

In the event this Contract is cancelled and rescinded as provided in this Section, all the amounts
which the Odyssey may have paid to Bancom pursuant to and in accordance with this Contract shall
be forfeited in favor of Bancom as rentals for the use and occupancy of the Property and as penalty
for the breach and violation of this Contract. Furthermore, all the improvements which Odyssey may
have introduced on the Property shall form part thereof and belong to Bancom without right of
reimbursements to Odyssey; Provided, that Bancom may at its absolute discretion instead require
Odyssey to remove such improvements from the Property at expense of Odyssey.7
 It is a familiar doctrine in the law on contracts that the parties are bound by the stipulations, clauses, terms
and conditions they have agreed to,8 the only limitation being that these stipulations, clauses, terms and
conditions are not contrary to law, morals, public order or public policy.9 Not being repugnant to any legal
proscription, the agreement entered into by the parties herein involved must be respected and held to be the
law between them.

WHEREFORE, the decision appealed from is AFFIRMED in toto. Costs against petitioner.

SO ORDERED.

Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.

G.R. No. L-32811 March 31, 1980

FELIPE C. ROQUE, petitioner,

vs.
NICANOR LAPUZ and THE COURT OF APPEALS, respondents.

Tañada, Sanchez, Tañada, Tañada for petitioner.

N.M. Lapuz for respondent.

GUERRERO, J.:

Appeal by certiorari from the Resolution of the respondent court 1 dated October 12, 1970 in CA-G.R. No. L-33998-R
entitled "Felipe C. Roque, plaintiff-appellee, versus Nicanor Lapuz, defendant-appellant" amending its original
decision of April 23, 1970 which affirmed the decision of the Court of First Instance of Rizal (Quezon City Branch) in
Civil Case No. Q-4922 in favor of petitioner, and the Resolution of the respondent court denying petitioner's motion
for reconsideration.

The facts of this case are as recited in the decision of the Trial Court which was adopted and affirmed by the Court
of Appeals:

Sometime in 1964, prior to the approval by the National Planning Commission of the consolidation
and subdivision plan of plaintiff's property known as the Rockville Subdivision, situated in
Balintawak, Quezon City, plaintiff and defendant entered into an agreement of sale covering Lots 1,
2 and 9, Block 1, of said property, with an aggregate area of 1,200 square meters, payable in 120
equal monthly installments at the rate of P16.00, P15.00 per square meter, respectively. In
accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit and the
further sum of P740.56 to complete the payment of four monthly installments covering the months of
July, August, September, and October, 1954. (Exhs. A and B). When the document Exhibit "A" was
executed on June 25, 1954, the plan covering plaintiff's property was merely tentative, and the
plaintiff referred to the proposed lots appearing in the tentative plan.

After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955, defendant
requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and 9, the subject matter
of their previous agreement, with Lots 4 and 12, Block 2 of the approved subdivision plan, of the
Rockville Subdivision, with a total area of 725 square meters, which are corner lots, to which request
plaintiff graciously acceded.

The evidence discloses that defendant proposed to plaintiff modification of their previous contract to
sell because he found it quite difficult to pay the monthly installments on the three lots, and besides
the two lots he had chosen were better lots, being corner lots. In addition, it was agreed that the
 purchase price of these two lots would be at the uniform rate of P17.00 per square (meter) payable
in 120 equal monthly installments, with interest at 8% annually on the balance unpaid. Pursuant to
this new agreement, defendant occupied and possessed Lots 4 and 12, Block 2 of the approved
subdivision plan, and enclosed them, including the portion where his house now stands, with barbed
wires and adobe walls.

However, aside from the deposit of P150.00 and the amount of P740.56 which were paid under their
previous agreement, defendant failed to make any further payment on account of the agreed
monthly installments for the two lots in dispute, under the new contract to sell. Plaintiff demanded
upon defendant not only to pay the stipulated monthly installments in arrears, but also to make up-
to-date his payments, but defendant, instead of complying with the demands, kept on asking for
extensions, promising at first that he would pay not only the installments in arrears but also make up-
to-date his payment, but later on refused altogether to comply with plaintiff's demands.

Defendant was likewise requested by the plaintiff to sign the corresponding contract to sell in
accordance with his previous commitment. Again, defendant promised that he would sign the
required contract to sell when he shall have made up-to-date the stipulated monthly installments on
the lots in question, but subsequently backed out of his promise and refused to sign any contract in
noncompliance with what he had represented on several occasions. And plaintiff relied on the good
faith of defendant to make good his promise because defendant is a professional and had been
rather good to him (plaintiff).

On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant to vacate the
lots in question and to pay the reasonable rentals thereon at the rate of P60.00 per month from
August, 1955. (Exh. "B"). Notwithstanding the receipt of said letter, defendant did not deem it wise
nor proper to answer the same.

In reference to the mode of payment, the Honorable Court of Appeals found —

Both parties are agreed that the period within which to pay the lots in question is ten years. They
however, disagree on the mode of payment. While the appellant claims that he could pay the
purchase price at any time within a period of ten years with a gradual proportionate discount on the
price, the appellee maintains that the appellant was bound to pay monthly installments.

On this point, the trial court correctly held that —

It is further argued by defendant that under the agreement to sell in question, he has the right or
option to pay the purchase price at anytime within a period of ten years from 1954, he being entitled,
at the same time, to a graduated reduction of the price. The Court is constrained to reject this
version not only because it is contradicted by the weight of evidence but also because it is not
consistent with what is reasonable, plausible and credible. It is highly improbable to expect plaintiff,
or any real estate subdivision owner for that matter, to agree to a sale of his land which would be
payable anytime in ten years at the exclusive option of the purchaser. There is no showing that
defendant is a friend, a relative, or someone to whom plaintiff had to be grateful, as would justify an
assumption that he would have agreed to extend to defendant such an extra- ordinary concession.
Furthermore, the context of the document, Exhibit "B", not to mention the other evidences on records
is indicative that the real intention of the parties is for the payment of the purchase price of the lot in
question on an equal monthly installment basis for a period of ten years (Exhibits "A", "II", "J" and
"K").

On January 22, 1960, petitioner Felipe C, Roque (plaintiff below) filed the complaint against defendant Nicanor
Lapuz (private respondent herein) with the Court of First Instance of Rizal, Quezon City Branch, for rescission and
cancellation of the agreement of sale between them involving the two lots in question and prayed that judgment be
rendered ordering the rescission and cancellation of the agreement of sale, the defendant to vacate the two parcels
of land and remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00
a month from August 1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00
as attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and equitable in
the premises.
Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action, which motion was
denied by the court. Thereafter, defendant filed his Answer alleging that he bought three lots from the plaintiff
containing an aggregate area of 1,200 sq. meters and previously known as Lots 1, 2 and 9 of Block 1 of Rockville
Subdivision at P16.00, P15.00 and P15.00, respectively, payable at any time within ten years. Defendant admits
having occupied the lots in question.

As affirmative and special defenses, defendant alleges that the complaint states no cause of action; that the present
action for rescission has prescribed; that no demand for payment of the balance was ever made; and that the action
being based on reciprocal obligations, before one party may compel performance, he must first comply what is
incumbent upon him.

As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots containing an area of 800
sq. meters and as a consequence, he suffered moral damages in the amount of P200.000.00; that due to the filing
of the present action, he suffered moral damages amounting to P100,000.00 and incurred expenses for attorney's
fees in the sum of P5,000.00.

Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof.

After due hearing, the trial court rendered judgment, the dispositive portion of which reads:

WHEREFORE, the Court renders judgment in favor of plain. plaintiff and against the defendant, as
follows:

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question
(Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded,
resolved and cancelled;

(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay
plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he
shall have actually vacated the premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the
costs of the suit. (Record on Appeal, p. 118)

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question
(Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded,
resolved and cancelled;

(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay
plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he
shall have actually vacated premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the
costs of the suit. (Record on Appeal. p. 118)

Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The latter court, finding
the judgment appealed from being in accordance with law and evidence, affirmed the same.

In its decision, the appellate court, after holding that the findings of fact of the trial court are fully supported by the
evidence, found and held that the real intention of the parties is for the payment of the purchase price of the lots in
question on an equal monthly installment basis for the period of ten years; that there was modification of the original
agreement when defendant actually occupied Lots Nos. 4 and 12 of Block 2 which were corner lots that commanded
a better price instead of the original Lots Nos. 1, 2 and 9, Block I of the Rockville Subdivision; that appellant's bare
assertion that the agreement is not rescindable because the appellee did not comply with his obligation to put up the
requisite facilities in the subdivision was insufficient to overcome the presumption that the law has been obeyed by
the appellee; that the present action has not prescribed since Article 1191 of the New Civil Code authorizing
rescission in reciprocal obligations upon noncompliance by one of the obligors is the applicable provision in relation
to Article 1149 of the New Civil Code; and that the present action was filed within five years from the time the right of
action accrued.

Defendant filed a Motion for Reconsideration of the appellate court's decision on the following grounds:

First — Neither the pleadings nor the evidence, testimonial, documentary or circumstantial, justify
the conclusion as to the existence of an alleged subsequent agreement novatory of the original
contract admittedly entered into between the parties:

Second — There is nothing so unusual or extraordinary, as would render improbable the fixing of ten
ears as the period within which payment of the stipulated price was to be payable by appellant;

Third — Appellee has no right, under the circumstances on the case at bar, to demand and be
entitled to the rescission of the contract had with appellant;

Fourth — Assuming that any action for rescission is availability to appellee, the same, contrary to the
findings of the decision herein, has prescribed;

Fifth — Assumming further that appellee's action for rescission, if any, has not yet prescribed, the
same is at least barred by laches;

Sixth — Assuming furthermore that a cause of action for rescission exists, appellant should
nevertheless be entitled to tile fixing of a period within which to comply with his obligation; and

Seventh — At all events, the affirmance of the judgment for the payment of rentals on the premises
from August, 1955 and he taxing of attorney's fees against appellant are not warranted b the
circumstances at bar. (Rollo, pp. 87-88)

Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by the appellant,
that assuming that a cause of action for rescission exists, he should nevertheless be entitled to the fixing of a period
within which to comply with his obligation. The Court of Appeals, therefore, amended its original decision in the
following wise and manner:

WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that the defendant
Nicanor Lapuz is hereby granted a period of ninety (90) days from entry hereof within which to pay
the balance of the purchase price in the amount of P11,434,44 with interest thereon at the rate of 8%
per annum from August 17, 1955 until fully paid. In the event that the defendant fails to comply with
his obligation as above stated within the period fixed herein, our original judgment stands.

Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals denied it. He
now comes and appeals to this Court on a writ of certiorari.

The respondent Court of Appeals rationalizes its amending decision by considering that the house presently erected
on the land subject of the contract is worth P45,000.00, which improvements introduced by defendant on the lots
subject of the contract are very substantial, and thus being the case, "as a matter of justice and equity, considering
that the removal of defendant's house would amount to a virtual forfeiture of the value of the house, the defendant
should be granted a period within which to fulfill his obligations under the agreement." Cited as authorities are the
cases of Kapisanan Banahaw vs. Dejarme and Alvero, 55 Phil. 338, 344, where it is held that the discretionary
power of the court to allow a period within which a person in default may be permitted to perform the stipulation
upon which the claim for resolution of the contract is based should be exercised without hesitation in a case where a
virtual forfeiture of valuable rights is sought to be enforced as an act of mere reprisal for a refusal of the debtor to
submit to a usurious charge, and the case of Puerto vs. Go Ye Pin, 47 O.G. 264, holding that to oust the defendant
from the lots without giving him a chance to recover what his father and he himself had spent may amount to a
virtual forfeiture of valuable rights.

As further reasons for allowing a period within which defendant could fulfill his obligation, the respondent court held
that there exists good reasons therefor, having in mind that which affords greater reciprocity of rights (Ramos vs.
Blas, 51 O.G. 1920); that after appellant had testified that plaintiff failed to comply with his part of the contract to put
up the requisite facilities in the subdivision, plaintiff did not introduce any evidence to rebut defendant's testimony
but simply relied. upon the presumption that the law has been obeyed, thus said presumption had been successfully
rebutted as Exhibit "5-D" shows that the road therein shown is not paved The Court, however, concedes that
plaintiff's failure to comply with his obligation to put up the necessary facilities in the subdivision will not deter him
from asking f•r the rescission of the agreement since this obligation is not correlative with defendant's obligation to
buy the property.

Petitioner assails the decision of the Court of Appeals for the following alleged errors:

I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the Civil Code
which refers to reciprocal obligations in general and, pursuant thereto, in granting respondent Lapuz
a period of ninety (90) days from entry of judgment within which to pay the balance of the purchase
price.

II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same Code, which
specifically covers sales of immovable property and which constitutes an exception to the third
paragraph of Article 1191 of said Code, is applicable to the present case.

III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot avail of the
provisions of Article 1191, paragraph 3 of the Civil Code aforesaid because he did not raise in his
answer or in any of the pleadings he filed in the trial court the question of whether or not he is
entitled, by reason of a just cause, to a fixing of a new period.

IV. Assuming arguendo that the agreement entered into by and between petitioner and respondent
Lapuz was a mere promise to sell or contract to sell, under which title to the lots in question did not
pass from petitioner to respondent, still the Honorable Court of Appeals erred in not holding that
aforesaid respondent is not entitled to a new period within which to pay petitioner the balance of
P11,434.44 interest due on the purchase price of P12.325.00 of the lots.

V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable and may be
availed of by respondent, the Honorable Court of Appeals nonetheless erred in not declaring that aid
respondent has not shown the existence of a just cause which would authorize said Court to fix a
new period within which to pay the balance aforesaid.

VI. The Honorable Court of Appeals erred in reconsidering its original decision promulgated on April
23, 1970 which affirmed the decision of the trial court.

The above errors may, however, be synthesized into one issue and that is, whether private respondent is entitled to
the Benefits of the third paragraph of Article 1191, New Civil Code, for the fixing of period within which he should
comply with what is incumbent upon him, and that is to pay the balance of P11,434,44 with interest thereon at the
rate of 8% 1et annum from August 17, 1955 until fully paid since private respondent had paid only P150.00 as
deposit and 4 months intallments amounting to P740.46, or a total of P890.46, the total price of the two lots agreed
upon being P12,325.00.

For his part, petitioner maintains that respondent is not entitled to the Benefits of paragraph 3, Article 1191, NCC
and that instead, Article 1592 of the New Civil Code which specifically covers sales of immovable property and
which constitute an exception to the third paragraph of Art. 1191 of aid Code, is the applicable law to the case at
bar.

In resolving petitioner's assignment of errors, it is well that We lay clown the oda provisions and pertinent rulings of
the Supreme Court bearing on the crucial issue of whether Art. 1191, paragraph 3 of the New Civil Code applies to
the case at Bar as held by the appellate court and supported by the private respondent, or Art. 1592 of the same
Code which petitioner strongly argues in view of the peculiar facts and circumstances attending this case. Article
1191, New Civil Code, provides:
 Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one at the obligors
should not comply with hat is incumbent upon him

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

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

This is understood to be without prejudice to the rights of third persons who have acquired the thing,
in accordance with articles 1385 and 1388 and the Mortgage Law.

Article 1592 also provides:

Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take place,
the vendee may pay, even after the expiration of the period, as long as no demand for rescission of
the contract has been made upon him either judicially or by a notarial act. After the demand, the
court may not grant him a new term.

The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon Brokerage Co.,
Inc. vs. Maritime Building Co., Inc. and Myers Building Co., G.R. No. L-25885, January 31, 1972, 43 SCRA 93,
originally decided in 1972, reiterated in the Resolution on Motion to Reconsider dated August 18, 1972, 46 SCRA
381 and emphatically repeated in the Resolution on Second Motion for Reconsideration promulgated November 16,
1978, 86 SCRA 309, which once more denied Maritimes Second Motion for Reconsideration of October 7, 1972. In
the original decision, the Supreme Court speaking thru Justice J.B.L. Reyes said:

Under the circumstances, the action of Maritime in suspending payments to Myers Corporation was
a breach of contract tainted with fraud or malice (dolo), as distinguished from mere negligence
(culpa), "dolo" being succinctly defined as a "conscious and intention design to evade the normal
fulfillment of existing obligations" (Capistrano, Civil Code of the Philippines, Vol. 3, page 38), and
therefore incompatible with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo,
Teoria de Obligaciones, Vol. 1, page 116).

Maritime having acted in bad faith, it was not entitled to ask the court to give it further time to make
payment and thereby erase the default or breach that it had deliberately incurred. Thus the lower
court committed no error in refusing to extend the periods for payment. To do otherwise would be to
sanction a deliberate and reiterated infringement of the contractual obligations incurred by Maritime,
an attitude repugnant to the stability and obligatory force of contracts.

The decision reiterated the rule pointed out by the Supreme Court in Manuel vs. Rodriguez, 109 Phil. 1, p. 10, that:

In contracts to sell, where ownership is retained by the seller and is not to pass until the fun payment
of the price, such payment, as we said is a positive suspensive condition, the 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 i force in accordance with Article 1117 of the Old Civil Code. To argue
that there was only a casual breach is to proceed from the assumption that the contract is one of
absolute sale, where non-payment is a resolutory condition, which is not the case." Continuing, the
Supreme Court declared:

... appellant overlooks that its contract with appellee Myers s not the ordinary sale envisaged by
Article 1592, transferring ownership simultaneously with the delivery of the real property sold, but
one in which the vendor retained ownership of the immovable object of the sale, merely undertaking
to convey it provided the buyer strictly complied with the terms of the contract (see paragraph [d],
ante page 5). In suing to recover possession of the building from Maritime appellee Myers is not
after the resolution or setting aside of the contract and the restoration of the parties to the status quo
 ante as contemplated by Article 1592, but precisely enforcing the Provisions of the agreement that it
is no longer obligated to part with the ownership or possession of the property because Maritime
failed to comply with the specific condition precedent, which is to pay the installments as they fell
due.

The distinction between contracts of sale and contracts to sell with reserved title has been
recognized by this Court in repeated decisions upholding the power of promisors under contracts to
sell in case of failure of the other party to complete payment, to extrajudicially terminate the
operation of the contract, refuse conveyance and retain the sums or installments already received,
where such rights are expressly provided for, as in the case at bar.

In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again speaking thru Justice
J.B.L. Reyes, reiterated the rule that in a contract to sell, the full payment of the price through the punctual
performance of the monthly payments is a condition precedent to the execution of the final sale 4nd to the transfer
of the property from the owner to the proposed buyer; so that there will be no actual sale until and unless full
payment is made.

The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon, Myers was not
rescinding (or more properly, resolving) the contract but precisely enforcing it according to its expressed terms. In its
suit, Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such
restoration being the logical consequence of the fulfillment of a resolutory condition, expressed or implied (Art.
1190); neither was it seeking a declaration that its obligation to sell was extinguished. What is sought was a judicial
declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to
sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the
property object of the contract, possession being a mere incident to its right of ownership.

The decision also stressed that "there can be no rescission or resolution of an obligation as yet non-existent,
because the suspensive condition did not happen. Article 1592 of the New Civil Code (Art. 1504 of Old Civil Code)
requiring demand by suit or notarial act in case the vendor of realty wants to rescind does not apply to a contract to
sell or promise to sell, where title remains with the vendor until fulfillment to a positive condition, such as full
payment of the price." (Manuel vs, Rodriguez, 109 Phil. 9)

Maritime's Second Motion for Reconsideration was denied in the Resolution of the Court dated November 16, 1978,
86 SCRA 305, where the governing law and precedents were briefly summarized in the strong and emphatic
language of Justice Teehankee, thus:

(a) The contract between the parties was a contract to sell or conditional sale with title expressly
reserved in the vendor Myers Building Co., Inc. Myers until the suspensive condition of full and
punctual payment of the full price shall have been met on pain of automatic cancellation of the
contract upon failure to pay any of the monthly installments when due and retention of the sums
theretofore paid as rentals. When the vendee, appellant Maritime, willfully and in bad faith failed
since March, 1961 to pay the P5,000. — monthly installments notwithstanding that it was punctually
collecting P10,000. — monthly rentals from the lessee Luzon Brokerage Co., Myers was entitled, as
it did in law and fact, to enforce the terms of the contract to sell and to declare the same terminated
and cancelled.

(b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such contracts to
self or conditional sales and no error was committed by the trial court in refusing to extend the
periods for payment.

(c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's infringement of
its contract was casual or serious" for as pointed out in Manuel vs. Rodriguez, '(I)n contracts to self.
whether ownership is retained by the seller and is not to pass until the full payment of the price, such
payment, as we said, is a positive suspensive condition, the 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 ...
 (d) It should be noted, however, that Maritimes breach was far from casual but a most serious
breach of contract ...

(e) Even if the contract were considered an unconditional sale so that Article 1592 of the Civil Code
could be deemed applicable, Myers' answer to the complaint for interpleaded in the court below
constituted a judicial demand for rescission of the contract and by the very provision of the cited
codal article, 'after the demand, the court may not grant him a new term for payment; and

(f) Assumming further that Article 1191 of the new Civil Code governing rescission of reciprocal
obligations could be applied (although Article 1592 of the same Code is controlling since it deals
specifically with sales of real property), said article provides that '(T)he court shall decree the
rescission claimed, unless there be just cause authorizing the fixing of a period' and there exists to
"just cause" as shown above for the fixing of a further period. ...

Under the first and second assignments of error which petitioner jointly discusses, he argues that the agreement
entered into between him and the respondent is a perfected contract of purchase and sale within the meaning of
Article 1475 of the New Civil Code which provides that "the contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the
parties may reciprocally demand performance, subject to the provisions of the law governing the form of contract."

Petitioner contends that "(n)othing in the decision of the courts below would show that ownership of the property
remained with plaintiff for so long as the installments have not been fully paid. Which yields the conclusion that, by
the delivery of the lots to defendant, ownership likewise was transferred to the latter." (Brief for the Petitioner, p. 15)
And he concludes that the sale was consummated by the delivery of the two lots, the subject thereof, by him to the
respondent.

Under the findings of facts by the appellate court, it appears that the two lots subject of the agreement between the
parties herein were delivered by the petitioner to the private respondent who took possession thereof and occupied
the same and thereafter built his house thereon, enclosing the lots with adobe stone walls and barbed wires. But the
property being registered under the Land Registration Act, it is the act of registration of the Deed of Sale which
could legally effect the transfer of title of ownership to the transferee, pursuant to Section 50 of Act 496. (Manuel vs.
Rodriguez, et al., 109 Phil. 1; Buzon vs. Lichauco, 13 Phil. 354; Tuazon vs. Raymundo, 28 Phil. 635: Worcestor vs.
Ocampo, 34 Phil. 646). 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.

In the case at bar, there is no writing or document evidencing the agreement originally entered into between
petitioner and private respondent except the receipt showing the initial deposit of P150.00 as shown in Exh. "A" and
the payment of the 4- months installment made by respondent corresponding to July, 1954 to October, 1954 in the
sum of P740.56 as shown in Exh. "B". Neither is there any writing or document evidencing the modified agreement
when the 3 lots were changed to Lots 4 and 12 with a reduced area of 725 sq. meters, which are corner lots. This
absence of a formal deed of conveyance is a very strong indication that the parties did not intend immediate transfer
of ownership and title, but only a transfer after full payment of the price. Parenthetically, We must say that the
standard printed contracts for the sale of the lots in the Rockville Subdivision on a monthly installment basis showing
the terms and conditions thereof are immaterial to the case at bar since they have not been signed by either of the
parties to this case.

Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or agreement
between petitioner and respondent which We affirm and sustain to be a contract to sell, the following resolutions of
petitioner's assignment of errors necessarily arise, and so We hold that:

1. The first and second assignments of errors are without merit.

The overwhelming weight of authority culminating in the Luzon Brokerage vs. Maritime cases has laid down the rule
that Article 1592 of the New Civil Code does not apply to a contract to sell where title remains with the vendor until
full payment of the price as in the case at bar. This is the ruling in Caridad Estates vs. Santero, 71 Phil. 120; Aldea
vs. Inquimboy 86 Phil. 1601; Jocon vs. Capitol Subdivision, Inc., L-6573, Feb. 28, 1955; Miranda vs. Caridad
Estates, L-2077 and Aspuria vs. Caridad Estates, L-2121 Oct. 3, 1950, all reiterated in Manuel vs. Rodriguez, et
al.109 Phil. 1, L-13435, July 27, 1960. We agree with the respondent Court of Appeals that Art, 1191 of the New
Civil Code is the applicable provision where the obligee, like petitioner herein, elects to rescind or cancel his
obligation to deliver the ownership of the two lots in question for failure of the respondent to pay in fun the purchase
price on the basis of 120 monthly equal installments, promptly and punctually for a period of 10 years.

2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been in
default, he is not entitled to the new period of 90 days from entry of judgment within which to pay petitioner the
balance of P11,434.44 with interest due on the purchase price of P12,325.00 for the two lots.

Respondent a paid P150.00 as deposit under Exh. "A" and P740.56 for the 4-months installments corresponding to
the months of July to October, 1954. The judgment of the lower court and the Court of Appeals held that respondent
was under the obligation to pay the purchase price of the lots m question on an equal monthly installment basis for a
period of ten years, or 120 equal monthly installments. Beginning November, 1954, respondent began to default in
complying with his obligation and continued to do so for the remaining 116 monthly interest. His refusal to pay
further installments on the purchase price, his insistence that he had the option to pay the purchase price any time
in ten years inspire of the clearness and certainty of his agreement with the petitioner as evidenced further by the
receipt, Exh. "B", his dilatory tactic of refusing to sign the necessary contract of sale on the pretext that he will sign
later when he shall have updated his monthly payments in arrears but which he never attempted to update, and his
failure to deposit or make available any amount since the execution of Exh "B" on June 28, 1954 up to the present
or a period of 26 years, are all unreasonable and unjustified which altogether manifest clear bad faith and malice on
the part of respondent puzzle making inapplicable and unwarranted the benefits of paragraph 3, Art. 1191, N.C.C.
To allow and grant respondent an additional period for him to pay the balance of the purchase price, which balance
is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the deliberate
infringement of a contractual obligation that is repugnant and contrary to the stability, security and obligatory force of
contracts. Moreover, respondent's failure to pay the succeeding 116 monthly installments after paying only 4
monthly installments is a substantial and material breach on his part, not merely casual, which takes the case out of
the application of the benefits of pa paragraph 3, Art. 1191, N.C.C.

At any rate, the fact that respondent failed to comply with the suspensive condition which is the full payment of the
price through the punctual performance of the monthly payments rendered petitioner's obligation to sell ineffective
and, therefore, petitioner was entitled to repossess the property object of the contract, possession being a mere
incident to his right of ownership (Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., et al. 46 SCRA 381).

3. We further rule that there exists no just cause authorizing the fixing of a new period within which private
respondent may pay the balance of the purchase price. The equitable grounds or considerations which are the basis
of the respondent court in the fixing of an additional period because respondent had constructed valuable
improvements on the land, that he has built his house on the property worth P45,000.00 and placed adobe stone
walls with barbed wires around, do not warrant the fixing of an additional period. We cannot sanction this claim for
equity of the respondent for to grant the same would place the vendor at the mercy of the vendee who can easily
construct substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he elects
to rescind the contract by reason of the vendee's default or deliberate refusal to pay or continue paying the
purchase price of the land. Under this design, strategem or scheme, the vendee can cleverly and easily "improve
out" the vendor of his land.

More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it would not be fair
and reasonable to the petitioner to apply a solution that affords greater reciprocity of rights which the appealed
decision tried to effect between the parties. As matters stand, respondent has been enjoying the possession and
occupancy of the land without paying the other 116 monthly installments as they fall due. The scales of justice are
already tipped in respondent,s favor under the amended decision of the respondent court. It is only right that We
strive and search for the application of the law whereby every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, New
Civil Code)

In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has twisted the clear
import of his agreement with the petitioner in order to suit his ends and delay the fulfillment of his obligation to pay
the land he had enjoyed for the last 26 years, more than twice the period of ten years that he obliged himself to
complete payment of the price.
4. Respondent's contention that petitioner has not complied with his obligation to put up the necessary facilities in
the Rockville Subdivision is not sufficient nor does it constitute good reason to justify the grant of an additional
period of 90 days from entry of judgment within which respondent may pay the balance of the purchase price agreed
upon. The Judgment of the appellate court concedes that petitioner's failure to comply with his obligation to put up
the necessary facilities in the subdivision will not deter him from asking for the rescission of the agreement since his
obligation is not correlative with respondent's obligation to buy the property. Since this is so conceded, then the right
of the petitioner to rescind the agreement upon the happening or in the event that respondent fails or defaults in any
of the monthly installments would be rendered nugatory and ineffective. The right of rescission would then depend
upon an extraneous consideration which the law does not contemplate.

Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at the uniform
price of P17.00 per sq. meter making a total price of P12,325.00, it is highly doubtful if not improbable that aside
from his obligation to deliver title and transfer ownership to the respondent as a reciprocal obligation to that of the
respondent in paying the price in full and promptly as the installments fall due, petitioner would have assumed the
additional obligation "to provide the subdivision with streets ... provide said streets with street pavements concrete
curbs and gutters, fillings as required by regulations, adequate drainage facilities, tree plantings, adequate water
facilities" as required under Ordinance No. 2969 of Quezon City approved on May 11, 1956 (Answer of Defendant,
Record on Appeal, pp. 35-36) which was two years after the agreement in question was entered into June, 1y54.

The fact remains, however, that respondent has not protested to the petitioner nor to the authorities concerned the
alleged failure of petitioner to put up and provide such facilities in the subdivision because he knew too well that he
has paid only the aggregate sum of P890.56 which represents more or less 7% of the agreed price of P12,325.00
and that he has not paid the real estate taxes assessed by the government on his house erected on the property
under litigation. Neither has respondent made any allegation in his Answer and in all his pleadings before the court
up to the promulgation of the Resolution dated October 12, 1970 by the Court of Appeals, to the effect that he was
entitled to a new period within which to comply with his obligation, hence the Court could not proceed to do so
unless the Answer is first amended. (Gregorio Araneta, Inc. vs. Philippine Sugar Estates Development Co., Ltd.,
G.R. No. L-22558, May 31, 1967, 20 SCRA 330, 335). It is quite clear that it is already too late in the day for
respondent to claim an additional period within which to comply with his obligation.

Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real property
additional period within which to complete payment of the purchase price on grounds of equity and justice as in
(1) J.M. Tuazon Co., Inc. vs. Javier, 31 SCRA 829 where the vendee religiously satisfied the monthly installments
for eight years and paid a total of P4,134.08 including interests on the principal obligation of only P3,691.20, the
price of the land; after default, the vendee was willing to pay all arrears, in fact offered the same to the vendor; the
court granted an additional period of 60 days -from receipt of judgment for the vendee to make all installment in
arrears plus interest; (2) in Legarda Hermanos vs. Saldaña, 55 SCRA 324, the Court ruled that where one purchase,
from a subdivision owner two lots and has paid more than the value of one lot, the former is entitled to a certificate
of title to one lot in case of default.

On the other hand there are also cases where rescission was not granted and no new or additional period was
authorized. Thus, in Caridad Estates vs. Santero, 71 Phil. 114, the vendee paid, totalling P7,590.00 or about 25% of
the purchase price of P30,000.00 for the three lots involved and when the vendor demanded revocation upon the
vendee's default two years after, the vendee offered to pay the arears in check which the vendor refused; and the
Court sustained the revocation and ordered the vendee ousted from the possession of the land. In Ayala y Cia vs.
Arcache, 98 Phil. 273, the total price of the land was P457,404.00 payable in installments; the buyer initially paid
P100,000.00 or about 25% of the agreed price; the Court ordered rescission in view of the substantial breach and
granted no extension to the vendee to comply with his obligation.

The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must be so
substantial and fundamental to defeat the object of the parties" (Gregorio Araneta Inc. vs. Tuazon de Paterno, L-
2886, August 22, 1962; Villanueva vs. Yulo, L-12985, Dec. 29,1959); that "where time is not of the essence of t
agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for
the rescission of the agreement"( Biando vs. Embestro L-11919, July 27, 1959; cases cited in Notes appended to
Universal Foods Corporation vs. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar
where the breach, delay or default was committed as early as in the payment of the fifth monthly installment for
November, 1954, that such failure continued and persisted the next month and every month thereafter in 1955,
1956, 1957 and year after year to the end of the ten-year period in 1964 (10 years is respondent's contention) and
even to this time, now more than twice as long a time as the original period without respondent adding, or even
offering to add a single centavo to the sum he had originally paid in 1954 which represents a mere 7% of the total
price agreed upon, equity and justice may not be invoked and applied. One who seeks equity and justice must come
to court with clean hands, which can hardly be said of the private respondent.

One final point, on the supposed substantial improvements erected on the land, respondent's house. To grant the
period to the respondent because of the substantial value of his house is to make the land an accessory to the
house. This is unjust and unconscionable since it is a rule in Our Law that buildings and constructions are regarded
as mere accessories to the land which is the principal, following the Roman maxim "omne quod solo inadeficatur
solo cedit" (Everything that is built on the soil yields to the soil).

Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial
court and the appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00 per
month from August, 1955 until respondent shall have actually vacated the premises, plus P2,000.00 as attorney's
fees. We affirm the same to be fair and reasonable. We also sustain the right of the petitioner to the possession of
the land, ordering thereby respondent to vacate the same and remove his house therefrom.

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12, 1970 is hereby
REVERSED. The decision of the respondent court dated April 23, 1970 is hereby REINSTATED and AFFIRMED,
with costs against private respondent.

SO ORDERED.

G.R. No. L-42283 March 18, 1985

BUENAVENTURA ANGELES, ET AL., plaintiffs-appellees,

vs.
URSULA TORRES CALASANZ, ET AL., defendants-appellants.

GUTIERREZ, JR., J.:

This is an appeal from the decision of the Court of First Instance of Rizal, Seventh Judicial District, Branch X,
declaring the contract to sell as not having been validly cancelled and ordering the defendants-appellants to execute
a final deed of sale in favor of the plaintiffs-appellees, to pay P500.00 attorney's fees and costs.

The facts being undisputed, the Court of Appeals certified the case to us since only pure questions of law have been
raised for appellate review.

On December 19, 1957, defendants-appellants Ursula Torres Calasanz and Tomas Calasanz and plaintiffs-
appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of land located in Cainta,
Rizal for the amount of P3,920.00 plus 7% interest per annum.

The plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract. They promised to pay
the balance in monthly installments of P 41.20 until fully paid, the installments being due and payable on the 19th
day of each month. The plaintiffs-appellees paid the monthly installments until July 1966, when their aggregate
payment already amounted to P4,533.38. On numerous occasions, the defendants-appellants accepted and
received delayed installment payments from the plaintiffs-appellees.

On December 7, 1966, the defendants-appellants wrote the plaintiffs-appellees a letter requesting the remittance of
past due accounts.

On January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffs-appellees failed
to meet subsequent payments. The plaintiffs' letter with their plea for reconsideration of the said cancellation was
denied by the defendants-appellants.
The plaintiffs-appellees filed Civil Case No. 8943 with the Court of First Instance of Rizal, Seventh Judicial District,
Branch X to compel the defendants-appellants to execute in their favor the final deed of sale alleging inter alia that
after computing all subsequent payments for the land in question, they found out that they have already paid the
total amount of P4,533.38 including interests, realty taxes and incidental expenses for the registration and transfer
of the land.

The defendants-appellants alleged in their answer that the complaint states no cause of action and that the
plaintiffs-appellees violated paragraph six (6) of the contract to sell when they failed and refused to pay and/or offer
to pay the monthly installments corresponding to the month of August, 1966 for more than five (5) months, thereby
constraining the defendants-appellants to cancel the said contract.

The lower court rendered judgment in favor of the plaintiffs-appellees. The dispositive portion of the decision reads:

WHEREFORE, based on the foregoing considerations, the Court hereby renders judgment in favor
of the plaintiffs and against the defendants declaring that the contract subject matter of the instant
case was NOT VALIDLY cancelled by the defendants. Consequently, the defendants are ordered to
execute a final Deed of Sale in favor of the plaintiffs and to pay the sum of P500.00 by way of
attorney's fees. Costs against the defendants.

A motion for reconsideration filed by the defendants-appellants was denied.

As earlier stated, the then Court of Appeals certified the case to us considering that the appeal involves pure
questions of law.

The defendants-appellants assigned the following alleged errors of the lower court:

First Assignment of Error

THE LOWER COURT ERRED IN NOT HOLDING THE CONTRACT TO SELL (ANNEX "A" OF
COMPLIANCE) AS HAVING BEEN LEGALLY AND VALIDLY CANCELLED.

Second Assignment of Error

EVEN ASSUMING ARGUENDO THAT THE SAID CONTRACT TO SELL HAS NOT BEEN
LEGALLY AND VALIDLY CANCELLED, THE LOWER COURT ERRED IN ORDERING
DEFENDANTS TO EXECUTE A FINAL DEED OF SALE IN FAVOR OF THE PLAINTIFF.

Third Assignment of Error

THE LOWER COURT ERRED IN ORDERING DEFENDANTS TO PAY PLAINTIFFS THE SUM OF
P500.00 AS ATTORNEY'S FEES.

The main issue to be resolved is whether or not the contract to sell has been automatically and validly cancelled by
the defendants-appellants.

The defendants-appellants submit that the contract was validly cancelled pursuant to paragraph six of the contract
which provides:

xxx xxx xxx

SIXTH.—In case the party of the SECOND PART fails to satisfy any monthly installments, or any
other payments herein agreed upon, he is granted a month of grace within which to make the
retarded payment, together with the one corresponding to the said month of grace; it is understood,
however, that should the month of grace herein granted to the party of the SECOND PART expired;
without the payments corresponding to both months having been satisfied, an interest of 10% per
annum will be charged on the amounts he should have paid; it is understood further, that should a
period of 90 days elapse, to begin from the expiration of the month of grace herein mentioned, and
 the party of SECOND PART has not paid all the amounts he should have paid with the
corresponding interest up to that date, the party of the FIRST PART has the right to declare this
contract cancelled and of no effect, and as consequence thereof, the party of the FIRST PART may
dispose of the parcel of land covered by this contract in favor of other persons, as if this contract had
never been entered into. In case of such cancellation of the contract, all the amounts paid in
accordance with this agreement together with all the improvements made on the premises, shall be
considered as rents paid for the use and occupation of the above mentioned premises, and as
payment for the damages suffered by failure of the party of the SECOND PART to fulfill his part of
the agreement; and the party of the SECOND PART hereby renounces all his right to demand or
reclaim the return of the same and obliges himself to peacefully vacate the premises and deliver the
same to the party of the FIRST PART. (Emphasis supplied by appellant)

xxx xxx xxx

The defendants-appellants argue that the plaintiffs-appellees failed to pay the August, 1966 installment despite
demands for more than four (4) months. The defendants-appellants point to Jocson v. Capitol Subdivision (G.R. No.
L-6573, February 28, 1955) where this Court upheld the right of the subdivision owner to automatically cancel a
contract to sell on the strength of a provision or stipulation similar to paragraph 6 of the contract in this case. The
defendants-appellants also argue that even in the absence of the aforequoted provision, they had the right to cancel
the contract to sell under Article 1191 of the Civil Code of the Philippines.

The plaintiffs-appellees on the other hand contend that the Jocson ruling does not apply. They state that paragraph
6 of the contract to sell is contrary to law insofar as it provides that in case of specified breaches of its terms, the
sellers have the right to declare the contract cancelled and of no effect, because it granted the sellers an absolute
and automatic right of rescission.

Article 1191 of the Civil Code on the rescission of reciprocal obligations provides:

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.

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

xxx xxx xxx

Article 1191 is explicit. In reciprocal obligations, either party the right to rescind the contract upon the failure of the
other to perform the obligation assumed thereunder. Moreover, there is nothing in the law that prohibits the parties
from entering into an agreement that violation of the terms of the contract would cause its cancellation even without
court intervention (Froilan v. Pan Oriental Shipping, Co., et al., 12 SCRA 276)—

Well settled is, however, the rule that a judicial action for the rescission of a contract is not
necessary where the contract provides that it may be revoked and cancelled for violation of any of its
terms and conditions' (Lopez v. Commissioner of Customs, 37 SCRA 327, and cases cited therein)

Resort to judicial action for rescission is obviously not contemplated . . . The validity of the stipulation
can not be seriously disputed. It is in the nature of a facultative resolutory condition which in many
cases has been upheld by this Court. (Ponce Enrile v. Court of Appeals, 29 SCRA 504).

The rule that it is not always necessary for the injured party to resort to court for rescission of the contract when the
contract itself provides that it may be rescinded for violation of its terms and conditions, was qualified by this Court
in University of the Philippines v. De los Angeles, (35 SCRA 102) where we explained that:

Of course, it must be understood that the act of a party in treating a contract as cancelled or
resolved on account of infractions by the other contracting party must be made known to the other
and is always provisional, being ever subject to scrutiny and review by the proper court. If the other
 party denies that rescission is justified, it is free to resort to judicial action in its own behalf, and bring
the matter to court. Then, should the court, after due hearing, decide that the resolution of the
contract was not warranted, the responsible party will be sentenced to damages; in the contrary
case, the resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced.

In other words, the party who deems the contract violated many consider it resolved or rescinded,
and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the
final judgment of the corresponding court that will conclusively and finally settle whether the action
taken was or was not correct in law. ... .

We see no conflict between this ruling and the previous jurisprudence of this Court invoked by
respondent declaring that judicial action is necessary for the resolution of a reciprocal obligation;
(Ocejo, Perez & Co. v. International Banking Corp., 37 Phil. 631; Republic v. Hospital de San Juan
de Dios, et al., 84 Phil. 820) since in every case where the extrajudicial resolution is contested only
the final award of the court of competent jurisdiction can conclusively settle whether the resolution
was proper or not. It is in this sense that judicial action will be necessary, as without it, the
extrajudicial resolution will remain contestable and subject to judicial invalidation, unless attack
thereon should become barred by acquiescence, estoppel or prescription.

The right to rescind the contract for non-performance of one of its stipulations, therefore, is not absolute.
In Universal Food Corp. v. Court of Appeals (33 SCRA 1) the Court stated that—

The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but
only for such substantial and fundamental breach as would defeat the very object of the parties in
making the agreement. (Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821, 827) The question
of whether a breach of a contract is substantial depends upon the attendant circumstances. (Corpus
v. Hon. Alikpala, et al., L-23707 & L-23720, Jan. 17, 1968). ... .

The defendants-appellants state that the plaintiffs-appellees violated Section two of the contract to sell which
provides:

SECOND.—That in consideration of the agreement of sale of the above described property, the
party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum of
THREE THOUSAND NINE HUNDRED TWENTY ONLY (P3,920.00), Philippine Currency, plus
interest at the rate of 7% per annum, as follows:

(a) The amount of THREE HUNDRED NINETY TWO only (P392.00) when this contract is signed;
and

(b) The sum of FORTY ONE AND 20/100 ONLY (P4l.20) on or before the 19th day of each month,
from this date until the total payment of the price above stipulated, including interest.

because they failed to pay the August installment, despite demand, for more than four (4) months.

The breach of the contract adverted to by the defendants-appellants is so slight and casual when we consider that
apart from the initial downpayment of P392.00 the plaintiffs-appellees had already paid the monthly installments for
a period of almost nine (9) years. In other words, in only a short time, the entire obligation would have been paid.
Furthermore, although the principal obligation was only P 3,920.00 excluding the 7 percent interests, the plaintiffs-
appellees had already paid an aggregate amount of P 4,533.38. To sanction the rescission made by the defendants-
appellants will work injustice to the plaintiffs- appellees. (See J.M. Tuazon and Co., Inc. v. Javier, 31 SCRA 829) It
would unjustly enrich the defendants-appellants.

Article 1234 of the Civil Code which provides that:

If the obligation has been substantially performed in good faith, the obligor may recover as though
there had been a strict and complete fulfillment, less damages suffered by the obligee.
also militates against the unilateral act of the defendants-appellants in cancelling the contract.

We agree with the observation of the lower court to the effect that:

Although the primary object of selling subdivided lots is business, yet, it cannot be denied that this
subdivision is likewise purposely done to afford those landless, low income group people of realizing
their dream of a little parcel of land which they can really call their own.

The defendants-appellants cannot rely on paragraph 9 of the contract which provides:

NINTH.-That whatever consideration of the party of the FIRST PART may concede to the party of
the SECOND PART, as not exacting a strict compliance with the conditions of paragraph 6 of this
contract, as well as any other condonation that the party of the FIRST PART may give to the party of
the SECOND PART with regards to the obligations of the latter, should not be interpreted as a
renunciation on the part of the party of the FIRST PART of any right granted it by this contract, in
case of default or non-compliance by the party of the SECOND PART.

The defendants-appellants argue that paragraph nine clearly allows the seller to waive the observance of paragraph
6 not merely once, but for as many times as he wishes.

The defendants-appellants' contention is without merit. We agree with the plaintiffs-appellees that when the
defendants-appellants, instead of availing of their alleged right to rescind, have accepted and received delayed
payments of installments, though the plaintiffs-appellees have been in arrears beyond the grace period mentioned in
paragraph 6 of the contract, the defendants-appellants have waived and are now estopped from exercising their
alleged right of rescission. In De Guzman v. Guieb (48 SCRA 68), we held that:

xxx xxx xxx

But defendants do not deny that in spite of the long arrearages, neither they nor their predecessor,
Teodoro de Guzman, even took steps to cancel the option or to eject the appellees from the home-
lot in question. On the contrary, it is admitted that the delayed payments were received without
protest or qualification. ... Under these circumstances, We cannot but agree with the lower court that
at the time appellees exercised their option, appellants had already forfeited their right to invoke the
above-quoted provision regarding the nullifying effect of the non-payment of six months rentals by
appellees by their having accepted without qualification on July 21, 1964 the full payment by
appellees of all their arrearages.

The defendants-appellants contend in the second assignment of error that the ledger of payments show a balance
of P671,67 due from the plaintiffs-appellees. They submit that while it is true that the total monthly installments paid
by the plaintiffs-appellees may have exceeded P3,920.00, a substantial portion of the said payments were applied to
the interests since the contract specifically provides for a 7% interest per annum on the remaining balance. The
defendants-appellants rely on paragraph 2 of the contract which provides:

SECOND.—That in consideration of the agreement of sale of the above described property, the
party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum of
THREE THOUSAND NINE HUNDRED TWENTY ONLY (P 3,920.00), Philippine Currency, plus
interest at the rate of 7% per annum ... . (Emphasis supplied)

The plaintiffs-appellees on the other hand are firm in their submission that since they have already paid the
defendants-appellants a total sum of P4,533.38, the defendants-appellants must now be compelled to execute the
final deed of sale pursuant to paragraph 12 of the contract which provides:

TWELFTH.—That once the payment of the sum of P3,920.00, the total price of the sale is
completed, the party to the FIRST PART will execute in favor of the party of the SECOND PART, the
necessary deed or deeds to transfer to the latter the title of the parcel of land sold, free from all hens
and encumbrances other than those expressly provided in this contract; it is understood, however,
 that au the expenses which may be incurred in the said transfer of title shall be paid by the party of
the SECOND PART, as above stated.

Closely related to the second assignment of error is the submission of the plaintiffs-appellees that the contract
herein is a contract of adhesion.

We agree with the plaintiffs-appellees. The contract to sell entered into by the parties has some characteristics of a
contract of adhesion. The defendants-appellants drafted and prepared the contract. The plaintiffs-appellees, eager
to acquire a lot upon which they could build a home, affixed their signatures and assented to the terms and
conditions of the contract. They had no opportunity to question nor change any of the terms of the agreement. It was
offered to them on a "take it or leave it" basis. In Sweet Lines, Inc. v. Teves (83 SCRA 36 1), we held that:

xxx xxx xxx

... (W)hile generally, stipulations in a contract come about after deliberate drafting by the parties
thereto. . . . there are certain contracts almost all the provisions of which have been drafted only by
one party, usually a corporation. Such contracts are called contracts of adhesion, because the only
participation of the party is the signing of his signature or his "adhesion" thereto. Insurance contracts,
bills of lading, contracts of sale of lots on the installment plan fall into this category. (Paras, Civil
Code of the Philippines, Seventh ed., Vol. 1, p. 80.) (Emphasis supplied)

While it is true that paragraph 2 of the contract obligated the plaintiffs-appellees to pay the defendants-appellants
the sum of P3,920.00 plus 7% interest per annum, it is likewise true that under paragraph 12 the seller is obligated
to transfer the title to the buyer upon payment of the P3,920.00 price sale.

The contract to sell, being a contract of adhesion, must be construed against the party causing it. We agree with the
observation of the plaintiffs-appellees to the effect that "the terms of a contract must be interpreted against the party
who drafted the same, especially where such interpretation will help effect justice to buyers who, after having
invested a big amount of money, are now sought to be deprived of the same thru the prayed application of a
contract clever in its phraseology, condemnable in its lopsidedness and injurious in its effect which, in essence, and
in its entirety is most unfair to the buyers."

Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-appellees have already
paid an aggregate amount of P4,533.38, the courts should only order the payment of the few remaining installments
but not uphold the cancellation of the contract. Upon payment of the balance of P671.67 without any interest
thereon, the defendants-appellants must immediately execute the final deed of sale in favor of the plaintiffs-
appellees and execute the necessary transfer documents as provided in paragraph 12 of the contract. The
attorney's fees are justified.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision appealed from is AFFIRMED with the
modification that the plaintiffs-appellees should pay the balance of SIX HUNDRED SEVENTY ONE PESOS AND
SIXTY-SEVEN CENTAVOS (P671.67) without any interests. Costs against the defendants-appellants.

SO ORDERED.

Melencio-Herrera, Plana, Relova, De la Fuente and Alampay, JJ., concur.

Teehankee (Chairman), J., took no part.

G.R. No. L-59266 February 29, 1988

SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,

vs.
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.
BIDIN, J.:

This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the 9th Division, Court of Appeals dated July 31,1981, affirming with
modification the Decision, dated August 25, 1972 of the Court of First Instance ** of Cebu in civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and
Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated December 16,
1981, denying defendant-appellant's (Petitioner's) motion for reconsideration, for lack of merit.

The undisputed facts as found by the Court of Appeals are as follows:

The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the cadastral
survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners) Dignos spouses sold the
said parcel of land to plaintiff-appellant (respondent Atilano J. Jabil) for the sum of P28,000.00,
payable in two installments, with an assumption of indebtedness with the First Insular Bank of Cebu
in the sum of P12,000.00, which was paid and acknowledged by the vendors in the deed of sale
(Exh. C) executed in favor of plaintiff-appellant, and the next installment in the sum of P4,000.00 to
be paid on or before September 15, 1965.

On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses,
Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00.
A deed of absolute sale (Exh. J, also marked Exh. 3) was executed by the Dignos spouses in favor
of the Cabigas spouses, and which was registered in the Office of the Register of Deeds pursuant to
the provisions of Act No. 3344.

As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price of
the land, and as plaintiff- appellant discovered the second sale made by defendants-appellants to
the Cabigas spouses, plaintiff-appellant brought the present suit. (Rollo, pp. 27-28)

After due trial, the Court of first Instance of Cebu rendered its Decision on August 25,1972, the decretal portion of
which reads:

WHEREFORE, the Court hereby declares the deed of sale executed on November 25, 1965 by
defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United States
of America, null and void ab initio, and the deed of sale executed by defendants Silvestre T. Dignos
and Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff Atilano G. Jabil is
hereby ordered to pay the sum, of Sixteen Thousand Pesos (P16,000.00) to the defendants-spouses
upon the execution of the Deed of absolute Sale of Lot No. 3453, Opon Cadastre and when the
decision of this case becomes final and executory.

The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and Jovita L.
de Cabigas, through their attorney-in-fact, Panfilo Jabalde, reasonable amount corresponding to the
expenses or costs of the hollow block fence, so far constructed.

It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela Lumungsod de Dignos
should return to defendants-spouses Luciano Cabigas and Jovita L. de Cabigas the sum of
P35,000.00, as equity demands that nobody shall enrich himself at the expense of another.

The writ of preliminary injunction issued on September 23, 1966, automatically becomes permanent
in virtue of this decision.

With costs against the defendants.

From the foregoing, the plaintiff (respondent herein) and defendants-spouss (petitioners herein) appealed to the
Court of Appeals, which appeal was docketed therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T.
Dignos, et al."

On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except as to the portion ordering
Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a fence upon the land in question.
The disposive portion of said decision of the Court of Appeals reads:
 IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of the judgment
as pertains to plaintiff-appellant above indicated, the judgment appealed from is hereby AFFIRMED
in all other respects.

With costs against defendants-appellants.

SO ORDERED.

Judgment MODIFIED.

A motion for reconsideration of said decision was filed by the defendants- appellants (petitioners) Dignos spouses,
but on December 16, 1981, a resolution was issued by the Court of Appeals denying the motion for lack of merit.

Hence, this petition.

In the resolution of February 10, 1982, the Second Division of this Court denied the petition for lack of merit. A
motion for reconsideration of said resolution was filed on March 16, 1982. In the resolution dated April 26,1982,
respondents were required to comment thereon, which comment was filed on May 11, 1982 and a reply thereto was
filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August 9,1982, acting on the motion
for reconsideration and on all subsequent pleadings filed, this Court resolved to reconsider its resolution of February
10, 1982 and to give due course to the instant petition. On September 6, 1982, respondents filed a rejoinder to reply
of petitioners which was noted on the resolution of September 20, 1982.

Petitioners raised the following assignment of errors:

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY, INCORRECTLY

INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE,
EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND
NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN MISAPPLYING
ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE,
DESPITE THE CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL.

II

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND OR IN

MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS CONCLUSION
THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY
DEMANDED NOR IS IT A NOTARIAL ACT.

III

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

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

IV

PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE HAVING
COME TO COURT WITH UNCLEAN HANDS.

BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH MODIFICATION
THE DECISION OF THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION, MISAPPLICATION AND
MISAPPREHENSION OF THE TERMS OF THE QUESTIONED CONTRACT AND THE LAW APPLICABLE
THERETO.

The foregoing assignment of errors may be synthesized into two main issues, to wit:

I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell.

II. Whether or not there was a valid rescission thereof.

There is no merit in this petition.

It is significant to note that this petition was denied by the Second Division of this Court in its Resolution dated
February 1 0, 1 982 for lack of merit, but on motion for reconsideration and on the basis of all subsequent pleadings
filed, the petition was given due course.

I.

The contract in question (Exhibit C) is a Deed of Sale, with the following conditions:

1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil. Philippine
Currency as advance payment;

2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan
from the First Insular Bank of Cebu;

3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos (P4,000.00)
on or before September 15,1965;

4. That the said spouses agrees to defend the said Atilano G. Jabil from other claims on the said
property;

5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the
above-mentioned property upon the payment of the balance of Four Thousand Pesos. (Original
Record, pp. 10-11)

In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale (Exhibit "C") is a mere
contract to sell and not an absolute sale; that the same is subject to two (2) positive suspensive conditions, namely:
the payment of the balance of P4,000.00 on or before September 15,1965 and the immediate assumption of the
mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further contended that in said contract, title or
ownership over the property was expressly reserved in the vendor, the Dignos spouses until the suspensive
condition of full and punctual payment of the balance of the purchase price shall have been met. So that there is no
actual sale until full payment is made (Rollo, pp. 51-52).

In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there is absolutely
nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer their ownership to the alleged
vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of
conveyance is a very strong indication that the parties did not intend "transfer of ownership and title but only a
transfer after full payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the very terms and
conditions of the contract, more particularly paragraph four which reads, "that said spouses has agreed to sell the
herein mentioned property to Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to
sign a final deed of absolute sale over the mentioned property upon the payment of the balance of four thousand
pesos."

Such contention is untenable.

By and large, the issues in this case have already been settled by this Court in analogous cases.
Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of Conditional
Sale" where nowhere in the contract in question is a proviso or stipulation to the effect that title to the property sold
is reserved in the vendor until full payment of the purchase price, nor is there a stipulation giving the vendor the right
to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period Taguba v. Vda. de Leon,
132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305).

A careful examination of the contract shows that there is no such stipulation reserving the title of the property on the
vendors nor does it give them the right to unilaterally rescind the contract upon non-payment of the balance thereof
within a fixed period.

On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are present, such
as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its
equivalent. In addition, Article 1477 of the same Code provides that "The ownership of the thing sold shall be
transferred to the vendee upon actual or constructive delivery thereof." As applied in the case of Froilan v. Pan
Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the
ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof.

While it may be conceded that there was no constructive delivery of the land sold in the case at bar, as subject
Deed of Sale is a private instrument, it is beyond question that there was actual delivery thereof. As found by the
trial court, the Dignos spouses delivered the possession of the land in question to Jabil as early as March 27,1965
so that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach Resort in March, 1965;
Mactan White Beach Resort on January 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts
were admitted by petitioner spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108).

Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of petitioners,
contemporaneous with the contract, clearly show that an absolute deed of sale was intended by the parties and not
a contract to sell.

Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer
owners of the same and the sale is null and void.

II.

Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was already rescinded.

Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the case at bar, the
contract of sale being absolute in nature is governed by Article 1592 of the Civil Code. It is undisputed that
petitioners never notified private respondents Jabil by notarial act that they were rescinding the contract, and neither
did they file a suit in court to rescind the sale. The most that they were able to show is a letter of Cipriano Amistad
who, claiming to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the
latter had no money and further advised petitioners to sell the land in litigation to another party (Record on Appeal,
p. 23). As correctly found by the Court of Appeals, there is no showing that Amistad was properly authorized by Jabil
to make such extra-judicial rescission for the latter who, on the contrary, vigorously denied having sent Amistad to
tell petitioners that he was already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it
is required that acts and contracts which have for their object the extinguishment of real rights over immovable
property must appear in a public document.

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

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

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Feliciano and Cortes, JJ., concur.