Sales Part XI Page |1
ADELFA PROPERTIES, INC., petitioner, vs. COURT OF APPEALS,
ROSARIO JIMENEZ-CASTAÑEDA and SALUD JIMENEZ, respondents.
Civil Law; Contracts; Contract to Sell; Contract of Sale; 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 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is resolved or rescinded; whereas in a contract to sell, title is retained by the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.—ln 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 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 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is resolved or rescinded; whereas in a contract to sell, title is retained by the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.
Same; Same; Same; An implied agreement that ownership shall not pass to
the purchaser until he had fully paid the price is valid and therefore, binding
and enforceable between the parties. A contract which contains this kind of
stipulation is considered a contract to sell.—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.
Same; Same; Same; Irrefragably, the controverted document should legally
be considered as a perfected contract to sell.—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.”
Same; Same; Same; The important task in contract interpretation is always
the ascertainment of the intention of the contracting parties.—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. 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. In addition, the title of a contract
does not necessarily determine its true nature. Hence, the fact that the
document under discussion is entitled “Exclusive Option to
Same; Same; Option Contract; Sales; An option is not a sale of property but
a sale of the right to purchase. 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 is, the right or
privilege to buy at the election or option of the other party.—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.
It is not a sale of property but a sale of the right to purchase. 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 is, the right or privilege to buy at the election or option of
the other party. 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.
Same; Same; Same; Same; An option is an unaccepted offer. It states the
terms and conditions on which the owner is willing to sell his land, if the
holder elects to accept them within the time limited. 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.—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 his 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.
Same; Same; Same; Same; Except where a formal acceptance is so required,
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.—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.
Same; Same; Same; Same; The test in determining whether a contract is a
“contract of sale or purchase” or a mere “option” is whether or not the
Sales Part XI Page |2
agreement could be specifically enforced.—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. 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.
Same; Same; Same; Same; 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.—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,
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. An option, and not a contract to purchase, is effected by an
agreement to sell real estate for payments to be made within a specified
time and providing for 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. As hereinbefore discussed, this is not the situation
obtaining in the case at bar.
Same; Same; Same; Same; Earnest Money; 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 It
constitutes an advance payment and must, therefore be deducted from the
total price.—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. lt 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.
Same; Same; Earnest Money; Option Money; Distinctions Between Earnest
Money and Option Money.—There are clear distinctions between earnest
money and option money, viz.: (a) earnest money is part of the purchase
price, while option money is 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.
Same; Same; Same; In a perfected contract to sell, Article 1590 would
properly apply.—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.” Respon-dent 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,
Same; Same; Sales; In Article 1590, 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.—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 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.
Sales Part XI Page |3
Same; Same; Same; It is consignation which is essential in order to
extinguish petitioner’s obligation to pay the balance of the purchase price. A
contract to sell involves the performance of an obligation, not merely the
exercise of a privilege or a right. Consequently, performance of payment may
be effected not by tender of payment alone but by both tender and
consignation.—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. 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. The rule is
different in case of an option contract or in legal redemption or in a sale with
right to repurchase, 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. A contract to sell, as ;in the case before us, involves the
performance of an obligation, not merely the exercise of a privilege or a
right. Consequently, performance or payment may be effected not by tender
of payment alone but by both tender and consignation.
Same; Same; Same; Judicial action for rescission of a contract is not
necessary where the contract provides for automatic rescission in case of
breach.—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. Furthermore, judicial action
for rescission of a contract is not necessary where the contract provides for
automatic rescission in case of breach, as in the contract involved in the
present controversy.
Same; Same; Same; 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 determination. Otherwise, if said
party does not oppose it, the extrajudicial rescission shall have legal effect.—
We are not unaware of the ruling in University of the Philippines vs. De los
Angeles, etc. 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
determination. Otherwise, if said party does not oppose it, the extrajudicial
rescission shall have legal effect. Adelfa Properties, Inc. vs. Court of Appeals,
240 SCRA 565, G.R. No. 111238 January 25, 1995
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. 34767 [1] are (1) whether or 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, [2] situated 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.” [3] Subsequently, 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
Sales Part XI Page |4
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 option 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 summons [6] 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 "x x x 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 P3,029,250.00, 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
Sales Part XI Page |5
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 bases 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.
I and jurisprudence, a contract which contains this kind of stipulation is
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 a
contract of sale, the title passes to the vendee upon the delivery of the thing
Sales Part XI Page |6
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 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 prior 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
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 that 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.
Sales Part XI Page |7
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 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 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 between 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 his 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 than that 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."
Sales Part XI Page |8
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 a specified time and providing for 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
Sales Part XI Page |9
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 is 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
S a l e s P a r t X I P a g e | 10
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 or 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 failed to do so up to the
present time, or even to deposit the money with the trial court when this
case was originally filed therein.
 S a l e s P a r t X I P a g e | 11

By reason of petitioner's failure to comply with its obligation, private quo which we find to be correct, its assailed judgment in CA-G.R. CV No.
respondents elected to resort to and did announce the rescission of the 34767 is hereby AFFIRMED. 
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 determination. [51] 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 therefor, 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' letter 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

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.
CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of
Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL,
FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG,
petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ
and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents.
Contracts; Sales; Essential Elements of a Contract of Sale.—Sale, by its very
nature, is a consensual contract because it is perfected by mere consent.
The essential elements of a contract of sale are the following: a) Consent or
meeting of the minds, that is, consent to transfer ownership in exchange for
the price; b) Determinate subject matter; and c) Price certain in money or its
equivalent.
Same; Same; Words and Phrases; “Contract to Sell” and “Contract of Sale,”
Distinguished; In a contract to sell, the prospective seller explicitly reserves
the transfer of title to the prospective buyer, meaning, the prospective seller
does not as yet agree or consent to transfer ownership of the property
subject of the contract to sell until the happening of an event.—Under this
definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the
prospective seller explicitly reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to
transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as the full
payment of the purchase price. What the seller agrees or obliges himself to
do is to fulfill his promise to sell the subject property when the entire amount
of the purchase price is delivered to him. In other words the full payment of
the purchase price partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and thus, ownership is
retained by the prospective seller without further remedies by the
prospective buyer.
Same; Same; Same; Same; “Contract to Sell,” Defined.—A contract to sell
may thus be defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite
delivery thereof to the prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.
S a l e s P a r t X I P a g e | 12
Same; Same; Same; Same; A contract to sell may not even be considered as
a conditional contract of sale because in a conditional contract of sale, the
first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur.—A contract to
sell as defined hereinabove, may not even be considered as a conditional
contract of sale where the seller may likewise reserve title to the property
subject of the sale until the fulfillment of a suspensive condition, because in
a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which
may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated (cf. Homesite and
Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected,
such that if there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by
the seller.
Same; Same; Same; Same; In a contract to sell, upon the fulfillment of the
suspensive condition, ownership will not automatically transfer to the
buyer — the prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.—In a contract to sell,
upon the fulfillment of the suspensive condition which is the full payment of
the purchase price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering
into a contract of absolute sale.
Same; Same; Same; Same; In a contract to sell, there being no previous sale
of the property, a third person buying such property despite the fulfillment of
the suspensive condition such as the full payment of the purchase price
cannot be deemed a buyer in bad faith and the prospective buyer cannot
seek the relief of reconveyance of the property — there is no double sale in
such case.—It is essential to distinguish between a contract to sell and a
conditional contract of sale specially in cases where the subject property is
sold by the owner not to the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell, there being no previous
sale of the property, a third person buying such property despite the
fulfillment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and the

prospective buyer cannot seek the relief of reconveyance of the property.
There is no double sale in such case. Title to the property will transfer to the
buyer after registration because there is no defect in the owner-seller’s title
per se, but the latter, of course, may be sued for damages by the intending
buyer.
Same; Same; Same; Same; In a conditional contract of sale, upon the
fulfillment of the suspensive condition, the sale becomes absolute and this
will definitely affect the seller’s title thereto.—In a conditional contract of
sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the seller’s title thereto. In
fact, if there had been previous delivery of the subject property, the seller’s
ownership or title to the property is automatically transferred to the buyer
such that, the seller will no longer have any title to transfer to any third
person. Applying Article 1544 of the Civil Code, such second buyer of the
property who may have had actual or constructive knowledge of such defect
in the seller’s title, or at least was charged with the obligation to discover
such defect, cannot be a registrant in good faith. Such second buyer cannot
defeat the first buyer’s title. In case a title is issued to the second buyer, the
first buyer may seek reconveyance of the property subject of the sale.
Same; Same; Same; Same; When the sellers declared in the “Receipt of
Down Payment” that they received an amount as purchase price for their
house and lot without any reservation of title until full payment of the entire
purchase price, the natural and ordinary idea conveyed is that they sold their
property.—It is a canon in the interpretation of contracts that the words used
therein should be given their natural and ordinary meaning unless a technical
meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]).
Thus, when petitioners declared in the said “Receipt of Down Payment” that
they — Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon
City, the sum of Fifty Thousand Pesos purchase price of our inherited house
and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon
City, in the total amount of P1,240,000.00. Without any reservation of title
until full payment of the entire purchase price, the natural and ordinary idea
conveyed is that they sold their property.
Sale; Ownership; Succession; Rights to the succession are transmitted from
the moment of death of the decedent.—Article 774 of the Civil Code defines
Succession as a mode of transferring ownership as follows: Art. 774.
Succession is a mode of acquisition by virtue of which the property, rights
S a l e s P a r t X I P a g e | 13
and obligations to the extent and value of the inheritance of a person are
transmitted through his death to another or others by his will or by operation
of law. Petitioners-sellers in the case at bar being the sons and daughters of
the decedent Constancio P. Coronel are compulsory heirs who were called to
succession by operation of law. Thus, at the point their father drew his last
breath, petitioners stepped into his shoes insofar as the subject property is
concerned, such that any rights or obligations pertaining thereto became
binding and enforceable upon them. It is expressly provided that rights to
the succession are
Same; Same; Estoppel; Having represented themselves as the true owners
of the subject property at the time of sale, the sellers cannot claim later that
they were not yet the absolute owners thereof at that time.—Aside from this,
petitioners are precluded from raising their supposed lack of capacity to
enter into an agreement at that time and they cannot be allowed to now
take a posture contrary to that which they took when they entered into the
agreement with private respondent Ramona P. Alcaraz. The Civil Code
expressly states that: Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying thereon. Having
represented themselves as the true owners of the subject property at the
time of sale, petitioners cannot claim now that they were not yet the
absolute owners thereof at that time.
Same; Rescission; Pleadings and Practice; Evidence; Allegations must be
proven by sufficient evidence — mere allegation is not an evidence.—We do
not agree with petitioners that there was a valid rescission of the contract of
sale in the instant case. We note that these supposed grounds for
petitioners’ rescission, are mere allegations found only in their responsive
pleadings, which by express provision of the rules, are deemed controverted
even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of
Court). The records are absolutely bereft of any supporting evidence to
substantiate petitioners’ allegations. We have stressed time and again that
allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong,
110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere
allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Same; Same; A seller cannot unilaterally and extrajudicially rescind a
contract of sale where there is no express stipulation authorizing him to
extrajudicially rescind.—Even assuming arguendo that Ramona P. Alcaraz
 S a l e s P a r t X I P a g e | 14

was in the United States of America on February 6, 1985, we cannot justify
petitioners-sellers’ act of unilaterally and extrajudicially rescinding the
contract of sale, there being no express stipulation authorizing the sellers to
extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375
[1988]; Taguba vs. Vda. de De Leon, 132 SCRA 722 [1984])
(hereinafter referred to as Coronels) executed a document entitled "Receipt
of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz
(hereinafter referred to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT

Same; In case of double sale, what finds relevance and materiality is not P1,240,000.00 - Total amount
whether or not the second buyer was a buyer in good faith but whether or
not said second buyer registers such second sale in good faith, that is, 50,000.00 - Down payment
without knowledge of any defect in the title of the property sold.—In a case
of double sale, what finds relevance and materiality is not whether or not the ------------------------------------------
second buyer was a buyer in good faith but whether or not said second
buyer registers such second sale in good faith, that is, without knowledge of P1,190,000.00 - Balance
any defect in the title of the property sold. As clearly borne out by the
evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the
February 22, 1985, a notice of lis pendens had been annotated on the
sum of Fifty Thousand Pesos purchase price of our inherited house and lot,
transfer certificate of title in the names of petitioners, whereas petitioner covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the
Mabanag registered the said sale sometime in April, 1985. At the time of
total amount of P1,240,000.00.
registration, therefore, petitioner Mabanag knew that the same property had
already been previously sold to private respondents, or, at least, she was
We bind ourselves to effect the transfer in our names from our deceased
charged with knowledge that a previous buyer is claiming title to the same father, Constancio P. Coronel, the transfer certificate of title immediately
property. Petitioner Mabanag cannot close her eyes to the defect in
upon receipt of the down payment above-stated.
petitioners’ title to the property at the time of the registration of the
property. Coronel vs. Court of Appeals, 263 SCRA 15, G.R. No. 103577
On our presentation of the TCT already in or name, We will immediately
October 7, 1996 execute the deed of absolute sale of said property and Miss Ramona Patricia
Alcaraz shall immediately pay the balance of the P1,190,000.00.
MELO, J.:
Clearly, the conditions appurtenant to the sale are the following:
The petition before us has its roots in a complaint for specific performance to
1.       Ramona will make a down payment of Fifty Thousand (P50,000.00)
compel herein petitioners (except the last named, Catalina Balais Mabanag)
pesos upon execution of the document aforestated;
to consummate the sale of a parcel of land with its improvements located
along Roosevelt Avenue in Quezon City entered into by the parties sometime
2.       The Coronels will cause the transfer in their names of the title of the
in January 1985 for the price of P1,240,000.00.
property registered in the name of their deceased father upon receipt of the
Fifty Thousand (P50,000.00) Pesos down payment;
The undisputed facts of the case were summarized by respondent court in
this wise:
3.       Upon the transfer in their names of the subject property, the Coronels
will execute the deed of absolute sale in favor of Ramona and the latter will
On January 19, 1985, defendants-appellants Romulo Coronel, et. al.
pay the former the whole balance of One Million One Hundred Ninety

Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D.
Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the
down payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2").
On February 6, 1985, the property originally registered in the name of the
Coronel’s father was transferred in their names under TCT No. 327043 (Exh.
"D"; Exh "4")
On February 18, 1985, the Coronels sold the property covered by TCT No.
327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to
as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00)
Pesos after the latter has paid Three Hundred Thousand (P300,000.00)
Pesos (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract (Exh. "A") with
Ramona by depositing the down payment paid by Concepcion in the bank in
trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific
performance against the Coronels and caused the annotation of a notice of
lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim
covering the same property with the Registry of Deeds of Quezon City (Exh.
"F"; Exh. "6").
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the
subject property in favor of Catalina (Exh. "G"; Exh. "7").
On June 5, 1985, a new title over the subject property was issued in the
name of Catalina under TCT No. 351582 (Exh. "H"; Exh. "8").
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC,
Quezon City) the parties agreed to submit the case for decision solely on the
basis of documentary exhibits.  Thus, plaintiffs therein (now private
S a l e s P a r t X I P a g e | 15
respondents) proffered their documentary evidence accordingly marked as
Exhibits "A" through "J", inclusive of their corresponding submarkings. 
Adopting these same exhibits as their own, then defendants (now
petitioners) accordingly offered and marked them as Exhibits "1" through
"10", likewise inclusive of their corresponding submarkings.  Upon motion of
the parties, the trial court gave them thirty (30) days within which to
simultaneously submit their respective memoranda, and an additional 15
days within which to submit their corresponding comment or reply thereto,
after which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge
Reynaldo Roura, who was then temporarily detailed to preside over Branch
82 of the RTC of Quezon City.  On March 1, 1989, judgment was handed
down by Judge Roura from his regular bench at Macabebe, Pampanga for
the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering
defendant to execute in favor of plaintiffs a deed of absolute sale covering
that parcel of land embraced in and covered by Transfer Certificate of Title
No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City,
together with all the improvements existing thereon free from all liens and
encumbrances, and once accomplished, to immediately deliver the said
document of sale to plaintiffs and upon receipt thereof, the plaintiffs are
ordered to pay defendants the whole balance of the purchase price
amounting to P1,190,000.00 in cash.  Transfer Certificate of Title No. 331582
of the Registry of Deeds for Quezon City in the name of intervenor is hereby
canceled and declared to be without force and effect.  Defendants and
intervenor and all other persons claiming under them are hereby ordered to
vacate the subject property and deliver possession thereof to plaintiffs. 
Plaintiffs’ claim for damages and attorney’s fees, as well as the counterclaims
of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)

A motion for reconsideration was filed by petitioners before the new
presiding judge of the Quezon City RTC but the same was denied by Judge
Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to
render anew decision by the undersigned Presiding Judge should be denied
for the following reasons:  (1) The instant case became submitted for
decision as of April 14, 1988 when the parties terminated the presentation of
their respective documentary evidence and when the Presiding Judge at that
time was Judge Reynaldo Roura.  The fact that they were allowed to file
memoranda at some future date did not change the fact that the hearing of
the case was terminated before Judge Roura and therefore the same should
be submitted to him for decision;  (2) When the defendants and intervenor
did not object to the authority of Judge Reynaldo Roura to decide the case
prior to the rendition of the decision, when they met for the first time before
the undersigned Presiding Judge at the hearing of a pending incident in Civil
Case No. Q-46145 on November 11, 1988, they were deemed to have
acquiesced thereto and they are now estopped from questioning said
authority of Judge Roura after they received the decision in question which
happens to be adverse to them;  (3) While it is true that Judge Reynaldo
Roura was merely a Judge-on-detail at this Branch of the Court, he was in all
respects the Presiding Judge with full authority to act on any pending
incident submitted before this Court during his incumbency.  When he
returned to his Official Station at Macabebe, Pampanga, he did not lose his
authority to decide or resolve cases submitted to him for decision or
resolution because he continued as Judge of the Regional Trial Court and is
of co-equal rank with the undersigned Presiding Judge.  The standing rule
and supported by jurisprudence is that a Judge to whom a case is submitted
for decision has the authority to decide the case notwithstanding his transfer
to another branch or region of the same court (Sec. 9, Rule 135, Rule of
Court).
Coming now to the twin prayer for reconsideration of the Decision dated
March 1, 1989 rendered in the instant case, resolution of which now pertains
to the undersigned Presiding Judge, after a meticulous examination of the
documentary evidence presented by the parties, she is convinced that the
Decision of March 1, 1989 is supported by evidence and, therefore, should
not be disturbed.
S a l e s P a r t X I P a g e | 16
IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to
Annul Decision and Render Anew Decision by the Incumbent Presiding
Judge" dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the
Court of Appeals (Buena, Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its
decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992.  The last
pleading, private respondents’ Reply Memorandum, was filed on September
15, 1993.  The case was, however, re-raffled to undersigned ponente only
on August 28, 1996, due to the voluntary inhibition of the Justice to whom
the case was last assigned.
While we deem it necessary to introduce certain refinements in the
disquisition of respondent court in the affirmance of the trial court’s decision,
we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of
the other issues in the case at bar is the precise determination of the legal
significance of the document entitled "Receipt of Down Payment" which was
offered in evidence by both parties.  There is no dispute as to the fact that
the said document embodied the binding contract between Ramona Patricia
Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the
other, pertaining to a particular house and lot covered by TCT No. 119627,
as defined in Article 1305 of the Civil Code of the Philippines which reads as
follows:
Art. 1305.  A contract is a meeting of minds between two persons whereby
one binds himself, with respect to the other, to give something or to render
some service.
While, it is the position of private respondents that the "Receipt of Down
Payment" embodied a perfected contract of sale, which perforce, they seek

to enforce by means of an action for specific performance, petitioners on
their part insist that what the document signified was a mere executory
contract to sell, subject to certain suspensive conditions, and because of the
absence of Ramona P. Alcaraz, who left for the United States of America,
said contract could not possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties’ contention is brought about
by the way each interprets the terms and/or conditions set forth in said
private instrument.  Withal, based on whatever relevant and admissible
evidence may be available on record, this Court, as were the courts below, is
now called upon to adjudge what the real intent of the parties was at the
time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458.  By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by
mere consent.  The essential elements of a contract of sale are the following:
a)      Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b)      Determinate subject matter; and
c)      Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract
of Sale because the first essential element is lacking.  In a contract to sell,
the prospective seller explicitly reserves the transfer of title to the
prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell
until the happening of an event, which for present purposes we shall take as
the full payment of the purchase price.  What the seller agrees or obliges
himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him.  In other words the
full payment of the purchase price partakes of a suspensive condition, the
non-fulfillment of which prevents the obligation to sell from arising and thus,
S a l e s P a r t X I P a g e | 17
ownership is retained by the prospective seller without further remedies by
the prospective buyer.  In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court
had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent
was a contract to sell where the ownership or title is retained by the seller
and is not to pass until the full payment of the price, such payment being a
positive suspensive condition and failure of which is not a breach, casual or
serious, but simply an event that prevented the obligation of the vendor to
convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, the prospective seller’s obligation to
sell the subject property by entering into a contract of sale with the
prospective buyer becomes demandable as provided in Article 1479 of the
Civil Code which states:
Art. 1479.  A promise to buy and sell a determinate thing for a price certain
is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor of the promise is supported by a
consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to
sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a
conditional contract of sale where the seller may likewise reserve title to the
property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event
which may or may not occur.  If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated (cf. Homesite and
Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]).   However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected,
such that if there had already been previous delivery of the property subject

of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by
the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, ownership will not automatically
transfer to the buyer although the property may have been previously
delivered to him.  The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional
contract of sale specially in cases where the subject property is sold by the
owner not to the party the seller contracted with, but to a third person, as in
the case at bench.  In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price, for
instance, cannot be deemed a buyer in bad faith and the prospective buyer
cannot seek the relief of reconveyance of the property.  There is no double
sale in such case.  Title to the property will transfer to the buyer after
registration because there is no defect in the owner-seller’s title per se, but
the latter, of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the
suspensive condition, the sale becomes absolute and this will definitely affect
the seller’s title thereto.  In fact, if there had been previous delivery of the
subject property, the seller’s ownership or title to the property is
automatically transferred to the buyer such that, the seller will no longer
have any title to transfer to any third person.  Applying Article 1544 of the
Civil Code, such second buyer of the property who may have had actual or
constructive knowledge of such defect in the seller’s title, or at least was
charged with the obligation to discover such defect, cannot be a registrant in
good faith.  Such second buyer cannot defeat the first buyer’s title.  In case
a title is issued to the second buyer, the first buyer may seek reconveyance
of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of
deciphering the real nature of the contract entered into by petitioners and
private respondents.
S a l e s P a r t X I P a g e | 18
It is a canon in the interpretation of contracts that the words used therein
should be given their natural and ordinary meaning unless a technical
meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). 
Thus, when petitioners declared in the said "Receipt of Down Payment" that
they --
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the
sum of Fifty Thousand Pesos purchase price of our inherited house and
lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in
the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase
price, the natural and ordinary idea conveyed is that they sold their property.
When the "Receipt of Down payment" is considered in its entirety, it
becomes more manifest that there was a clear intent on the part of
petitioners to transfer title to the buyer, but since the transfer certificate of
title was still in the name of petitioner’s father, they could not fully effect
such transfer although the buyer was then willing and able to immediately
pay the purchase price.  Therefore, petitioners-sellers undertook upon
receipt of the down payment from private respondent Ramona P. Alcaraz, to
cause the issuance of a new certificate of title in their names from that of
their father, after which, they promised to present said title, now in their
names, to the latter and to execute the deed of absolute sale whereupon,
the latter shall, in turn, pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers
herein made no express reservation of ownership or title to the subject
parcel of land.  Furthermore, the circumstance which prevented the parties
from entering into an absolute contract of sale pertained to the sellers
themselves (the certificate of title was not in their names) and not the full
payment of the purchase price.  Under the established facts and
circumstances of the case, the Court may safely presume that, had the
certificate of title been in the names of petitioners-sellers at that time, there
would have been no reason why an absolute contract of sale could not have
been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not
merely promise to sell the property to private respondent upon the fulfillment
of the suspensive condition.  On the contrary, having already agreed to sell

the subject property, they undertook to have the certificate of title change to
their names and immediately thereafter, to execute the written deed of
absolute sale.
Thus, the parties did not merely enter into a contract to sell where the
sellers, after compliance by the buyer with certain terms and conditions,
promised to sell the property to the latter.  What may be perceived from the
respective undertakings of the parties to the contract is that petitioners had
already agreed to sell the house and lot they inherited from their father,
completely willing to transfer ownership of the subject house and lot to the
buyer if the documents were then in order.  It just so happened, however,
that the transfer certificate of title was then still in the name of their father. 
It was more expedient to first effect the change in the certificate of title so
as to bear their names.  That is why they undertook to cause the issuance of
a new transfer of the certificate of title in their names upon receipt of the
down payment in the amount of P50,000.00.  As soon as the new certificate
of title is issued in their names, petitioners were committed to immediately
execute the deed of absolute sale.  Only then will the obligation of the buyer
to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly
entered into so as to protect the seller against a buyer who intends to buy
the property in installment by withholding ownership over the property until
the buyer effects full payment therefor, in the contract entered into in the
case at bar, the sellers were the ones who were unable to enter into a
contract of absolute sale by reason of the fact that the certificate of title to
the property was still in the name of their father.  It was the sellers in this
case who, as it were, had the impediment which prevented, so to speak, the
execution of an contract of absolute sale.
What is clearly established by the plain language of the subject document is
that when the said "Receipt of Down Payment" was prepared and signed by
petitioners Romulo A. Coronel, et. al., the parties had agreed to a conditional
contract of sale, consummation of which is subject only to the successful
transfer of the certificate of title from the name of petitioners’ father,
Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact,
fulfilled on February 6, 1985 (Exh. "D"; Exh. "4").  Thus, on said date, the
S a l e s P a r t X I P a g e | 19
conditional contract of sale between petitioners and private respondent
Ramona P. Alcaraz became obligatory, the only act required for the
consummation thereof being the delivery of the property by means of the
execution of the deed of absolute sale in a public instrument, which
petitioners unequivocally committed themselves to do as evidenced by the
"Receipt of Down Payment."
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly
applies to the case at bench.  Thus,
Art. 1475.  The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price.
From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
Art. 1181.  In conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a
certificate of title in petitioner’s names was fulfilled on February 6, 1985, the
respective obligations of the parties under the contract of sale became
mutually demandable, that is, petitioners, as sellers, were obliged to present
the transfer certificate of title already in their names to private respondent
Ramona P. Alcaraz, the buyer, and to immediately execute the deed of
absolute sale, while the buyer on her part, was obliged to forthwith pay the
balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their
petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves "to effect the transfer in
our names from our deceased father Constancio P. Coronel, the transfer
certificate of title immediately upon receipt of the downpayment above-
stated".  The sale was still subject to this suspensive condition. 
(Emphasis supplied.)
(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract of sale
subject to a suspensive condition.  Only, they contend, continuing in the
same paragraph, that:
. . .  Had petitioners-sellers not complied with this condition of first
transferring the title to the property under their names, there could be no
perfected contract of sale.  (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186
of the Civil Code expressly provides that:
Art. 1186.  The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling
than these mere hypothetical arguments is the fact that the condition
herein referred to was actually and indisputably fulfilled on
February 6, 1985, when a new title was issued in the names of petitioners
as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
The inevitable conclusion is that on January 19, 1985, as evidenced by the
document denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"),
the parties entered into a contract of sale subject to the suspensive condition
that the sellers shall effect the issuance of new certificate title from that of
their father’s name to their names and that, on February 6, 1985, this
condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which pertinently
provides -
Art. 1187.  The effects of conditional obligation to give, once the condition
has been fulfilled, shall retroact to the day of the constitution of the
obligation . . .
In obligations to do or not to do, the courts shall determine, in each case,
the retroactive effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected
contract of sale became mutually due and demandable as of the time of
S a l e s P a r t X I P a g e | 20
fulfillment or occurrence of the suspensive condition on February 6, 1985. 
As of that point in time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19,
1985 because they were then not yet the absolute owners of the inherited
property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring
ownership as follows:
Art. 774.  Succession is a mode of acquisition by virtue of which the
property, rights and obligations to the extent and value of the inheritance of
a person are transmitted through his death to another or others by his will or
by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the
decedent Constancio P. Coronel are compulsory heirs who were called to
succession by operation of law.  Thus, at the point their father drew his last
breath, petitioners stepped into his shoes insofar as the subject property is
concerned, such that any rights or obligations pertaining thereto became
binding and enforceable upon them.  It is expressly provided that rights to
the succession are transmitted from the moment of death of the decedent
(Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners’ claim that succession may not be declared
unless the creditors have been paid is rendered moot by the fact that they
were able to effect the transfer of the title to the property from the
decedent’s name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of
capacity to enter into an agreement at that time and they cannot be allowed
to now take a posture contrary to that which they took when they entered
into the agreement with private respondent Ramona P. Alcaraz.  The Civil
Code expressly states that:
Art. 1431.  Through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon.

Having represented themselves as the true owners of the subject property at
the time of sale, petitioners cannot claim now that they were not yet the
absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract
of sale between them and Ramona P. Alcaraz, the latter breach her
reciprocal obligation when she rendered impossible the consummation
thereof by going to the United States of America, without leaving her
address, telephone number, and Special Power of Attorney (Paragraphs 14
and 15, Answer with Compulsory Counterclaim to the Amended Complaint,
p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were
correct in unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the
contract of sale in the instant case.  We note that these supposed grounds
for petitioner’s rescission, are mere allegations found only in their responsive
pleadings, which by express provision of the rules, are deemed controverted
even if no reply is filed by the plaintiffs ( Sec. 11, Rule 6, Revised Rules of
Court).  The records are absolutely bereft of any supporting evidence to
substantiate petitioners’ allegations.  We have stressed time and again that
allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong,
110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]).  Mere
allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of
America on February 6, 1985, we cannot justify petitioners-sellers’ act of
unilaterally and extrajudicially rescinding the contract of sale, there being no
express stipulation authorizing the sellers to extrajudicially rescind the
contract of sale.  (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda.
De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of
Ramona P. Alcaraz because although the evidence on record shows that the
sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had
been dealing with Concepcion D. Alcaraz, Ramona’s mother, who had acted
for and in behalf of her daughter, if not also in her own behalf.  Indeed, the
down payment was made by Concepcion D. Alcaraz with her own personal
Check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz.  There is
no evidence showing that petitioners ever questioned Concepcion’s authority
S a l e s P a r t X I P a g e | 21
to represent Ramona P. Alcaraz when they accepted her personal check. 
Neither did they raise any objection as regards payment being effected by a
third person.  Accordingly, as far as petitioners are concerned, the physical
absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default,
insofar as her obligation to pay the full purchase price is concerned. 
Petitioners who are precluded from setting up the defense of the physical
absence of Ramona P. Alcaraz as above-explained offered no proof
whatsoever to show that they actually presented the new transfer certificate
of title in their names and signified their willingness and readiness to execute
the deed of absolute sale in accordance with their agreement.  Ramona’s
corresponding obligation to pay the balance of the purchase price in the
amount of P1,190,000.00 (as buyer) never became due and demandable
and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving
reciprocal obligations may be considered in default, to wit:
Art. 1169.  Those obliged to deliver or to do something, incur in delay from
the time the obligee judicially or extrajudicially demands from them the
fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is
incumbent upon him.  From the moment one of the parties fulfill his
obligation, delay by the other begins.  (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale
between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B.
Mabanag, gave rise to a case of double sale where Article 1544 of the Civil
Code will apply, to wit:
Art. 1544.  If the same thing should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof to the
person who presents the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25,
1985 as proof of the second contract of sale was registered with the Registry
of Deeds of Quezon City giving rise to the issuance of a new certificate of
title in the name of Catalina B. Mabanag on June 5, 1985.  Thus, the second
paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass
to the buyer, the exceptions being:  (a) when the second buyer, in good
faith, registers the sale ahead of the first buyer, and (b) should there be no
inscription by either of the two buyers, when the second buyer, in good faith,
acquires possession of the property ahead of the first buyer.  Unless, the
second buyer satisfies these requirements, title or ownership will not transfer
to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject,
now a distinguished member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in
right).  Knowledge by the first buyer of the second sale cannot defeat the
first buyer’s rights except when the second buyer first registers in good faith
the second sale (Olivares vs. Gonzales, 159 SCRA 33).  Conversely,
knowledge gained by the second buyer of the first sale defeats his rights
even if he is first to register, since knowledge taints his registration with bad
faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December
1984).  In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656),
it was held that it is essential, to merit the protection of Art. 1544, second
paragraph, that the second realty buyer must act in good faith in registering
his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99,
Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
S a l e s P a r t X I P a g e | 22
Petitioners point out that the notice of lis pendens in the case at bar was
annotated on the title of the subject property only on February 22, 1985,
whereas, the second sale between petitioners Coronels and petitioner
Mabanag was supposedly perfected prior thereto or on February 18, 1985. 
The idea conveyed is that at the time petitioner Mabanag, the second buyer,
bought the property under a clean title, she was unaware of any adverse
claim or previous sale, for which reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether
or not the second buyer in good faith but whether or not said second buyer
registers such second sale in good faith, that is, without knowledge of any
defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could
not have in good faith, registered the sale entered into on February 18, 1985
because as early as February 22, 1985, a notice of lis pendens had been
annotated on the transfer certificate of title in the names of petitioners,
whereas petitioner Mabanag registered the said sale sometime in April,
1985.  At the time of registration, therefore, petitioner Mabanag knew that
the same property had already been previously sold to private respondents,
or, at least, she was charged with knowledge that a previous buyer is
claiming title to the same property.  Petitioner Mabanag cannot close her
eyes to the defect in petitioners’ title to the property at the time of the
registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired
knowledge that there was a previous sale of the same property to a third
party or that another person claims said property in a previous sale, the
registration will constitute a registration in bad faith and will not confer upon
him any right.  (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs.
Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554;
Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona
P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners
and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both
 S a l e s P a r t X I P a g e | 23

the courts below.

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

WHEREFORE, premises considered, the instant petition is

hereby DISMISSED and the appealed judgment AFFIRMED.

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS

and LAPAZ KAW NGO, respondents.

Civil Law; Property; Sales; A contract to sell is akin to a conditional sale

where the efficacy or obligatory force of the vendor’s obligation to transfer

title is subordinated to the happening of a future and uncertain event.—A
contract to sell is akin to a conditional sale where the efficacy or obligatory
force of the vendor’s obligation to transfer title is subordinated to the
happening of a future and uncertain event so that if the suspensive condition
does not take place, the parties would stand as if the conditional obligation
had never existed. The suspensive condition is commonly full payment of the
purchase price.
Same; Same; Same; Distinction Between a Contract to Sell and a Contract of
Sale.—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: “x x x [a]
distinction must be made between a contract of sale in which title passes to
the buyer upon delivery of the thing sold and a contract to sell x x x where
by agreement the ownership is reserved in the seller and is not to pass until
the full payment of the purchase price is made. In the first case, non-
payment of the price is a negative resolutory condition; in the second case,
full payment is a positive suspensive condition. Being contraries, their effect
in law cannot be identical. In the first case, the vendor has lost and cannot
recover the ownership of the land sold until and unless the contract of sale is
itself resolved and set aside. In the second case, however, the title remains
in the vendor if the vendee does not comply with the condition precedent of
making payment at the time specified in the contract.” In other words, in a
contract to sell, ownership is retained by the seller and is not to pass to the
buyer until full payment of the price or the fulfillment of some other
conditions either of 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.
Same; Same; Same; It is not enough to say that the contract of sale, being
consensual became automatically and immediately effective.—We have often
stated that it is not enough to say that the contract of sale, being
consensual, became automatically and immediately effective.
Same; Same; Same; Earnest money given in a sale transaction is 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
S a l e s P a r t X I P a g e | 24
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
Philippine National Bank vs. Court of Appeals, 262 SCRA 464, G.R. No.
119580 September 26, 1996
HERMOSISIMA, JR., J.:
The question at issue, one of law, is whether or not from the undisputed
facts there was entered between 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
decision[1] of the respondent Court of Appeals[2] in an action for specific
performance[3] 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
judgment[5] 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 x x x owned and registered in the name of x x x the
Philippine National Bank x x x
x  x  x

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 x x x PNB x x x 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:
'x x x
x x x your offer to purchase the Bank-acquired property x x x 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) x x x
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
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
4.  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.
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.
x x x'
S a l e s P a r t X I P a g e | 25
On December 15, 1983, the plaintiff  [private respondent] signified her
conformity to the above letter-agreement by affixing her signature thereon x
x x.
One of the conditions in the agreement was to clear the subject property of
its then occupants; 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 x x x.
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 x x x 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 x x x.
In a letter dated March 1, 1984 x x x 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 x x x.
On May 15, 1984, PNB favorably acted on Lapaz's request x x x.
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 x x x.
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 x
x x 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 x x x.

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 x x x.
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 x x x.
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 dated May 14, 1986, PNB advised Lapaz of the approval of her
request for revival of the previously approved offer to purchase the subject
property subject to the terms and conditions as follows:
'1.  That the selling price shall be P5,135,599.17 (P200,000.00) already
deposited x x x
2.  a. That upon your failure to pay the additional deposit of P827,119.83
upon receipt of advice 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
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
S a l e s P a r t X I P a g e | 26
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
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.' x x x
A copy of the said letter appears to have been received by the plaintiff
[private respondent] herself on May 20, 1986 x x x.
In a letter dated May 23, 1986 x x x 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 x x x 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 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 x x x.
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% downpayment of the approved purchase price as
soon as the subject property was cleared of its present tenants/occupants.  the balance of the 20% down payment of the purchase price of the subject
However, the bank in its letter dated January 30, 1987 informed Lapaz that it
could no longer grant her any extension to pay the abovestated 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 x x x.
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 x x x.  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 x x x.
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] x x x."[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 aforecited 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
S a l e s P a r t X I P a g e | 27
condition imposed thereon; and (3) that the cancellation of the second sale
was baseless notwithstanding proof of private respondent's refusal to pay
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 x x x.
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
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 x x x to pay the price agreed
upon in the contract only gives the vendor x x x 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 x x x.
Admittedly, the x x x [private respondent] failed to remit the required
downpayment for the first contract after several notices for payment therefor

x x x 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 x x x.
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] x x x.  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. x
x x.  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 [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] x x x.  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. x x
x.
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
S a l e s P a r t X I P a g e | 28
the appellant's [petitioner's] action on the appellee's [private respondent's]
request for reconsideration of the PNB’s denial other of   her request for
deletion of condition no. 6 x x x.
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
A close scrutiny of the two letters-agreement shows that the deposits of
P100,000.00 x x x and P200,000.00 x x x were made part of the
selling/purchase price. x x x.
On the basis of the above, there can be no other conclusion than that the
deposits made x x x 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 x x x.
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 x x x downpayment in the second agreement x x x
x x x 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 x x x.  However x x x
there is no need for such stipulation because anyway the appellant
[petitioner] had already instituted an action against its tenants x x x Besides,
the protest letter sent by appellee's [private respondent's] lawyer x x x 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 to

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 petitioner approved the revival thereof in another letter-agreement, dated
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
S a l e s P a r t X I P a g e | 29
second transaction.
-------------------------------------------------------
Even private respondent admits in her pleadings that she failed to remit the
required downpayment 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
interests[9]," 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
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 she 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 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 is 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
purposes of the second letter-agreement.  Respondent court fallaciously
tacked the two agreements with each other and commingled their effects; it

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 a qualified acceptance, which in
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 rejected
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
downpayment, 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
S a l e s P a r t X I P a g e | 30
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 a future and uncertain event so that if the suspensive condition
does not take place, the parties would stand as if the conditional obligation
had never existed.[12]The suspensive condition is commonly full payment of
the purchase price.[13]
"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 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 x x x." [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 one.[15]
"x x x 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 accepted 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. x x x
x x x 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:
"x x x [a] distinction must be made between a contract of sale in which title
passes to the buyer upon delivery of the thing sold and a contract to sell x x
x where by agreement the ownership is reserved in the seller and is not to
pass until the full payment, of the purchase price is made.  In the first case,
non-payment of the price is a negative resolutory condition; in the second
case, full payment is a positive suspensive condition.  Being contraries, their
effect in law cannot be identical.  In the first case, the vendor has lost and
cannot recover the ownership of the land sold until and unless the contract
of sale is itself resolved and set aside.  In the second case, however, the title
remains in the vendor if the vendee does not comply with the condition
precedent of making payment at the time specified in the contract." [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 of 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, entitled 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:
S a l e s P a r t X I P a g e | 31
xxx
'Witnesseth:
That the SELLER agrees to sell, and the BUYER agrees to buy x x x on the
following terms and conditions:
1.  x x x
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 x x x (P250,000.00) x x x
3. x x x
4. x x x'
The petitioner corporation's obligation to sell is unequivocally subject to a
positive suspensive condition, i.e., the private respondent's opening, making
or endorsing 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 endorsing 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
In the instant case, x x x private respondent fail[ed] to open, make or
indorse an irrevocable and unconditional letter of credit x x x
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.  x x x"[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 and additional amount representing roughly 20% of the purchase
price (P978,860.00 under the first letter agreement and P827,119.93 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 comprehensible: "x x x deposit shall be forfeited
and for this purpose, the Bank can sell the property to other interested
parties x x x due to your [private respondent's] failure to consummate the
previously-approved sale x x x "[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 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 expenses for the ejectment
proceedings, 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
S a l e s P a r t X I P a g e | 32
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.
"x x x 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 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, failure of which is not a 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 allege transfer of title was never 'reduced to
any written document.  It was held that the contract should not be
considered x x x 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 x
x x."[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:
 S a l e s P a r t X I P a g e | 33

"Applying these distinctions, the Court finds that the agreement between
PBC and the private respondents 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 in favor of the private respondents. x x x" [24]
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.

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 SPOUSES VIVENCIO BABASA and ELENA CANTOS BABASA,
petitioner's promise to reserve the subject property for private respondent.  petitioners, vs. COURT OF APPEALS, TABANGAO REALTY, INC., and
Certainly in excluding all other prospective buyers from bidding for the SHELL GAS PHILIPPINES, INC., respondents.
subject property, petitioner was in effect giving up what may have been Civil Law; Contracts; Sales; A deed of sale is absolute in nature although
more lucrative offers or better deals. denominated a “conditional sale” absent such stipulations reserving title to

the vendor until full payment of the purchase price, nor any stipulation giving
them the right to unilaterally rescind the contract in case of non-payment; In
such cases, ownership of the thing sold passes to the vendee upon the
constructive or actual delivery thereof.—Although denominated “Conditional
Sale of Registered Lands,” we hold, as did respondent court, that the
contract of 11 April 1981 between petitioners and respondent TABANGAO is
one of absolute sale. Aside from the terms and stipulations used therein
indicating such kind of sale, there is absolutely no proviso reserving title in
the BABASAS until full payment of the purchase price, nor any stipulation
giving them the right to unilaterally rescind the contract in case of non-
payment. A deed of sale is absolute in nature although denominated a
“conditional sale” absent such stipulations. In such cases, ownership of the
thing sold passes to the vendee upon the constructive or actual delivery
thereof. In the instant case, ownership over Lots Nos. 17827-A, 17827-B and
17827-C passed to TABANGAO both by constructive and actual delivery.
Constructive delivery was accomplished upon the execution of the contract of
11 April 1981 without any reservation of title on the part of the BABASAS
while actual delivery was made when TABANGAO took unconditional
possession of the lots and leased them to its associate company SHELL
which constructed its multi-million peso LPG Project thereon.
Same; Same; Same; In Romero v. Court of Appeals and Lim v. Court of
Appeals the Court distinguished between a condition imposed on the
perfection of a contract and a condition imposed merely on the performance
of an obligation.—We do not agree with petitioners that their contract with
TABANGAO lost its efficacy when the 20-month period stipulated therein
expired without petitioners being able to deliver clean certificates of title
such that TABANGAO may no longer demand performance of their
obligation. In Romero v. Court of Appeals and Lim v. Court of Appeals the
Court distinguished between a condition imposed on the perfection of a
contract and a condition imposed merely on the performance of an
obligation. While failure to comply with the first condition results in the
failure of a contract, failure to comply with the second merely gives the other
party the option to either refuse to proceed with the sale or to waive the
condition.
Same; Same; Same; The BABASAS’ act of unilaterally rescinding their
contract with TABANGAO is clearly unwarranted.—Clearly then, the
S a l e s P a r t X I P a g e | 34
BABASAS’ act of unilaterally rescinding their contract with TABANGAO is
unwarranted. Even without the abovequoted stipulation in the deed, the
failure of petitioners to deliver clean titles within twenty (20) months from
the signing of the contract merely gives TABANGAO the option to either
refuse to proceed with the sale or to waive the condition in consonance with
Art. 1545 of the New Civil Code. Besides, it would be the height of inequity
to allow the BABASAS to rescind their contract of sale with TABANGAO by
invoking as a ground therefor their own failure to deliver the titles over the
lots within the stipulated period. Babasa vs. Court of Appeals, 290 SCRA 532,
G.R. No. 124045 May 21, 1998
BELLOSILLO, J.:
On 11 April 1981 a contract of “Conditional Sale of Registered Lands”  was
executed between the spouses Vivencio and Elena Babasa as vendors and
Tabangao Realty, Inc. (TABANGAO) as a 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
improvements thereon.
On 18 May 1981 TABANGAO leased the lots to Shell Gas Philippines, Inc.,
(SHELL), which immediately started the construction thereon of a Liquefied
Petroleum Gas Terminal Project, an approved zone export enterprise of the
Export Processing Zone. TABANGAO is the real estate arm of SHELL.
The parties substantially complied with the terms of the contract. TABANGAO
paid the first installment of P300,000.00 to the BABASAS while the latter
delivered actual possession of the lots to the former. In addition, TABANGAO

paid P379,625.00 to the tenants of the lots as disturbance compensation and
as payment for existing crops as well as P334,700.00 to the owners of the
house 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. 519 [1] and Petition No. 373[2] for
the transfer of titles of the lots in their name.
However, two (2) days prior to the expiration of the 20-month period,
specifically on 31 December 1982, the BABASAS asked TABANGAO for an
indefinite extension within which to deliver clean title over the lots. They
asked that TABANGAO continue paying monthly interest of P20,648.43
starting January 1983 on the ground that Civil Case no. 519 and Petition No.
373 had not 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 the 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.[3] TABANGAO alleged that the BABASAS were already in a position
to secure clean certificates of title and execute registerable document 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 BASABAS.
Despite the pendency of the case the BASABAS 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
S a l e s P a r t X I P a g e | 35
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 –
x x x x   
   
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 amount of the
defendant-spouses;  i.e., non-delivery of clean certificates of title and registerable documents of
   
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 P 20,648.43 a month
compounded annually beginning January 1983 until fully paid;     on the sale and purchase of the x x x three parcels of land;” the BABASAS
   
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]  insist that the contract is not what they intended to be.
The BABASAS appealed to the Court of Appeals [7] which on 29 February 1996
affirmed the decision of the trial court 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.
S a l e s P a r t X I P a g e | 36
The BABASAS now come to us reiterating their contention that the contract
of 11 April 1981 was in reality a contract of lease, not for 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,
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
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
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 contract of 11 April 1981
between petitioners and respondent TABANGAO is one of absolute sale.
Aside from the terms and stipulations used therein indicating such kind of
sale, there is absolutely no proviso reserving title in the BABASAS until full
payment of the purchase price, nor any stipulation giving them the right to
unilaterally rescind the contract in case of non-payment. A deed of sale is
absolute in nature although denominated a “conditional sale” absent such
stipulations.[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]  property acquired during marriage is conjugal, does not apply where there is
S a l e s P a r t X I P a g e | 37
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–   
x x x upon the expiration of the 20-month period from the signing of the
contract the Vendee is hereby authorized to settle out of the balance
retained by the Vendee all legally valid and existing obligations on the
properties x x x and whatever balance remaining after said settlement shall
be paid to the Vendor.
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 of to waive the condition in
consonance with Art. 1545 of the New Civil Code.[18] Besides, it would be the
height of inequity to allow the BABASAS to rescind their contract of sale with
TABANGAO by invoking as a ground therefor their own failure to deliver the
titles over the lots within the stipulated period.
WHEREFORE , the petition is DENIED. The appealed decision of the Court of
Appeals in CA-G.R. CV No. 39554 affirming that of the Regional Trial Court of
Batangas City, Br. 4, is AFFIRMED. No Costs.
SO ORDERED.       
JOSEFINA L. VALDEZ and CARLOS L. VALDEZ, JR., petitioners, vs.
COURT OF APPEALS and JOSE LAGON, respondents.
Civil Law; The Family Code; Conjugal Property; The issuance of the title in
the name solely of one spouse is not determinative of the conjugal nature of
the property; The presumption under Article 160 of the New Civil Code, that

no showing as to when the property alleged to be conjugal was acquired;
Presumption cannot prevail when the title is in the name of only one spouse
and the rights of innocent third parties are involved.—We note that TCT No.
T-19529 (T-1902) covering the property was issued on August 18, 1967,
during the marriage of the Spouses Carlos Valdez, Sr. and petitioner
Josefina, under the name “Josefina L. Valdez married to Carlos Valdez, Sr.”
The issuance of the title in the name solely of one spouse is not
determinative of the conjugal nature of the property, since there is no
showing that it was acquired during the marriage of the Spouses Carlos
Valdez, Sr. and Josefina L. Valdez. The presumption under Article 160 of the
New Civil Code, that property acquired during marriage is conjugal, does not
apply where there is no showing as to when the property alleged to be
conjugal was acquired. The presumption cannot prevail when the title is in
the name of only one spouse and the rights of innocent third parties are
involved. Moreover, when the property is registered in the name of only one
spouse and there is no showing as to when the property was acquired by
same spouse, this is an indication that the property belongs exclusively to
the said spouse.
Same; Contracts; Interpretation of Contracts; The real nature of a contract
may be determined from the express terms of the written agreement and
from the contemporaneous and subsequent acts of the parties thereto; In
the construction or interpretation of an instrument, the intention of the
parties is primordial and is to be pursued; The agreement of the parties may
be embodied in only one contract or in two or more separate writings.—The
real nature of a contract may be determined from the express terms of the
written agreement and from the contemporaneous and subsequent acts of
the parties thereto. In the construction or interpretation of an instrument,
the intention of the parties is primordial and is to be pursued. If the terms of
a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control. If the contract
appears to be contrary to the evident intentions of the parties, the latter
shall prevail over the former. The denomination given by the parties in their
contract is not conclusive of the nature of the contents. The agreement of
the parties may be embodied in only one contract or in two or more separate
writings. In such event, the writings of the parties should be read and
interpreted together in such a way as to render their intention effective.
Same; Same; Sales; A sale is at once perfected when a person (the seller)
obligates himself, for a price certain, to deliver and to transfer ownership of
S a l e s P a r t X I P a g e | 38
a specified thing or right to another (the buyer) over which the latter agrees.
—A sale is at once perfected when a person (the seller) obligates himself, for
a price certain, to deliver and to transfer ownership of a specified thing or
right to another (the buyer) over which the latter agrees. From the time the
contract is perfected, the parties are bound not only to the fulfillment of
what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law.
Same; Same; Same; A contract is one of sale, absent any stipulation therein
reserving title over the property to the vendee until full payment of the
purchase price nor giving the vendor the right to unilaterally rescind the
contract in case of non-payment.—In a contract of sale, the title to the
property passes to the vendee upon the constructive or actual delivery
thereof, as provided for in Article 1477 of the New Civil Code. The vendor
loses ownership over the property and cannot recover it until and unless the
contract is resolved or rescinded by a notarial deed or by judicial action as
provided for in Article 1540 of the New Civil Code. A contract is one of sale,
absent any stipulation therein reserving title over the property to the vendee
until full payment of the purchase price nor giving the vendor the right to
unilaterally rescind the contract in case of non-payment. In a contract of
sale, the non-payment of the price is a resolutory condition which
extinguishes the transaction that, for a time, existed and discharges the
obligations created thereunder. In a contract to sell, ownership is, by
agreement, reserved in the vendor and is not to pass to the vendee until full
payment of the purchase price. Such payment is a positive suspensive
condition, failure of which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming effective Valdez vs.
Court of Appeals, 439 SCRA 55, G.R. No. 140715 September 24, 2004
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Amended Decision [1] of the
Court of Appeals in CA-G.R. CV No. 49413 affirming on appeal the Decision
of the Regional Trial Court of Isulan, Sultan Kudarat, Branch 19, in Civil Case
No. 778.
The Antecedents
Carlos Valdez, Sr. and Josefina de Leon Valdez were the owners of a parcel
 S a l e s P a r t X I P a g e | 39

of land with an area of 24,725 square meters located in the commercial
district of Isulan, Sultan Kudarat. The property was designated as Lot No. 3
of Pls-208-D-13 and was covered by Transfer Certificate of Title (TCT) No. T-
19529 (T-1902) issued on August 18, 1967.[2] When Carlos Valdez, Sr. died
intestate on March 26, 1966, he was survived by Josefina and their children,
including Carlos Valdez, Jr., a practicing lawyer.
On December 28, 1978, Josefina caused the subdivision survey of the
property[3] into eight (8) lots, i.e., Lots Nos. 3-A to 3-H, all fronting the
national road. To enhance the value of the property, she decided to sell a
portion thereof to Jose Lagon, a successful businessman in Sultan Kudarat
who owned a construction firm as well as real estate and business
enterprises: the Lagon Enterprises and the Rural Bank of Isulan. He was also
one of the clients of her son, Carlos, Jr., a practicing lawyer.
returned the other check to Lagon’s wife, Nenita, after the latter paid
him P20,000.00 thereby leaving a balance of P61,880.00 of the purchase
price.[8]
Carlos, Jr. prepared an Affidavit dated April 27, 1981 signed by Lagon, where
the latter undertook to transfer the Rural Bank of Isulan to the property and
construct a commercial building thereon, to be in full operation within a
period of five (5) years from May 9, 1979, the date of the deed of absolute
sale, or until May 9, 1984,[9] as part of the condition of the sale; and that if
Lagon failed to do so, the deed of absolute sale shall be declared null and
void without need of demand therefor.[10] Lagon also made it clear in the said
affidavit that the consideration of the said Deed of Absolute Sale was not
only the P80,000.00 purchase price, but also that the subject property be
commercialized.[11]

On May 1, 1979, Josefina executed a Special Power of Attorney authorizing However, Lagon failed to start the construction of a commercial building and
her son, Carlos, Jr. to sell a portion of Lot No. 3-C and Lot. No. 3-D to Lagon. to transfer the rural bank thereon; he, likewise, failed to pay the balance of
The lots subject of the sale had an area of 4,094 square meters, with a the purchase price amounting to P61,880.00.  Consequently, Josefina and
frontage of 64.3 square meters.  Part of the consideration of the transaction Carlos, Jr. refused to deliver to Lagon a torrens title over the purchased
was the condition that Lagon cause the transfer of the Rural Bank of Isulan property. On September 4, 1981, Carlos, Jr. wrote Lagon demanding the
to the subject property and construct a commercial building beside the bank. payment of P61,800.00 within ten days from notice thereof, otherwise, the
[4]
 On May 9, 1979, Josefina, through her son and attorney-in-fact, Carlos, sale would be considered rescinded.[12] Still, Lagon failed to pay or even
Jr., executed a Deed of Absolute Sale of a portion of Lot No. 3 with a respond to the letter. Carlos, Jr. again wrote Lagon on September 25, 1981,
frontage of 64.3 square meters facing the national highway and the National and this time proposed the reduction of the area of the property subject of
Grains Authority office going towards the Buencamino Movie House starting the sale to correspond to the payment so far made by Lagon in the total
from the corner.[5] However, the condition imposed by Josefina was not amount of P90,676.00.[13] There was no response from Lagon.
incorporated in the deed; what was appended thereto was the Special Power
of Attorney executed by Josefina.  It was indicated in the said deed that the In the meantime, TCT No. T-19529 was cancelled on October 9, 1981 by
property was to be sold for P80,000 cash and that Lagon had already paid eight (8) titles bearing the following particulars: 
the said amount to Carlos, Jr. In reality, however, Lagon purchased the TCT No. Lot No. Area
4,094-square-meter property at P40.00 per square meter, or for the amount 16436 3-A 2,586 sq. meters[14]
of P163,760[6] inclusive of Carlos, Jr.’s personal account to Lagon in the 16437 3-B 2,802 sq. meters[15]
amount of P73,760. Lagon had not yet remitted to Josefina the said amount
16438 3-C 2,534 sq. meters[16]
of P163,760.
16439 3-D 3,198 sq. meters[17]
On April 21, 1981, Lagon gave to Carlos, Jr. PCIB Check No. 55007805 in the 16440 3-E 3,359 sq. meters[18]
amount of P8,196.00 dated April 21, 1981, and PCIB Check No. 55007806 16441 3-F 2,952 sq. meters[19]
postdated June 15, 1981 in the amount of P81,880.00 both checks 16442 3-G 3,650 sq. meters[20]
totaling P90,076.00 in full payment of the purchase price of the property, 16443 3-H 3,644 sq. meters[21]
after deducting the account of Carlos, Jr. amounting to P73,684.00.  Josefina
acknowledged the checks, through Carlos, Jr., who signed a cash voucher for
the same.[7] Carlos, Jr. was able to encash PCIB Check No. 55007805, but

All the foregoing subdivision titles were under the name of “Josefina L.
Valdez, married to Carlos Valdez, Sr.”
On December 31, 1982, Josefina and her children executed a deed of
extrajudicial settlement of the estate of Carlos Valdez, Sr. in which the heirs
waived all their rights over the estate in favor of their mother, Josefina.
On December 1, 1983, Geodetic Engineer Santiago C. Alhambra conducted a
subdivision survey of Lot No. 3-C, covered by TCT No. 16438 into three (3)
subdivision lots with the following areas: Lot No. 3-C-1 with 449 square
meters; Lot No. 3-C-2 consisting of 350 square meters; and, Lot No. 3-C-3,
1,735 square meters.  Engr. Alhambra prepared a subdivision plan on his
survey which he submitted to the Bureau of Lands on December 12, 1983.  request for a conference on May 23, 1988.[30] However, Carlos, Jr. was not
Lagon paid for his professional services.
Porfirio L. Cubar, the Bank Manager of the Philippine Commercial Industrial
Bank (PCIB) in Isulan talked to Carlos, Jr. and offered to buy, in behalf of the
PCIB, Lot No. 3-C-2 for P100.00 per square meter.  Carlos, Jr. agreed.  Philippines (DBP) as security for a loan of P150,000.00.[31] Josefina executed
Josefina executed a deed of absolute sale on May 8, 1984, over Lot No. 3-C-
2 for P35,000.00 in favor of PCIB.[22] Carlos, Jr. later learned that Lagon had
been saying that he was responsible for the sale of Lot No. 3-C-2 to the
PCIB, but the latter informed Carlos, Jr. in a Letter dated September 13,
1984 that Lagon had nothing to do with the sale.[23]
On October 3, 1984, the Register of Deeds cancelled TCT No. 16438    and
issued TCT No. 18817 over Lot No. 3-C-2 in the name of PCIB. [24] The
expenses for the issuance of the said title under the name of the bank were
for the account of Josefina.[25]
On June 11, 1987, the deed of extrajudicial settlement earlier executed by
the heirs of Carlos Valdez, Sr. was filed and registered in the Office of the
Register of Deeds.[26] On June 16, 1987, Josefina executed a Deed of Sale
over Lot 3-D in favor of Engr. Rolendo Delfin, who was issued TCT No.
20380 for the property.[27]
In the meantime, in August 1987, a question ensued in connection with
Lagon’s failure to pay the balance of the purchase price of the property, to
cause the construction of a commercial building and the transfer of the Rural
Bank of Isulan to Lot No. 3, as undertaken by him in his Affidavit dated April
27, 1981.  As a reminder, Carlos, Jr. furnished Lagon with a machine copy of
the said affidavit on August 12, 1987.  On August 13, 1987, Lagon’s counsel,
Atty. Ernesto I. Catedral, wrote Carlos, Jr., pointing out that he had earlier
S a l e s P a r t X I P a g e | 40
sought Lagon’s consent for the construction of the PCIB Branch in Lot No. 3.
Catedral posited that by consenting to the sale of the property to PCIB and
the construction thereon of its branch office, Lagon thereby substantially
complied with his undertaking under the deed of absolute sale.  The lawyer
asked Carlos, Jr. to set a conference to thresh out possibilities of an amicable
settlement of the matter.[28] 
On September 21, 1987, Carlos, Jr. furnished Atty. Catedral with copies of
documents, including a Special Power of Attorney, executed by Josefina in
favor of Carlos, Jr., the deed of absolute sale over Lot No. 3 in favor of
Lagon and the deed of absolute sale executed by Josefina in favor of PCIB,
among others.[29]Lagon, through his counsel, Atty. Rex G. Rico, reiterated his
available on the said date.
On August 4, 1988, Josefina executed a real estate mortgage over Lot No. 3-
C-3 covered by TCT No. 18818 in favor of the Development Bank of the
a deed of absolute sale over Lot No. 3-C-1 in favor of her son, Carlos, Jr. on
February 21, 1989. The Register of Deeds thereafter issued TCT No. 21943
in the latter’s name on February 28, 1989.[32] In the meantime, in 1984,
Carlos, Jr. had an edifice constructed on the property where he put up his
law office, a nipa hut behind the PCIB branch, the Ivy Pharmacy, the “K
House” and the headquarters of the Nationalista Party. [33]
On September 24, 1990, Lagon filed a Complaint against Josefina, and
Carlos, Jr., in his capacity as attorney-in-fact of Josefina, for specific
performance and damages with a prayer for a temporary restraining order
and writ of preliminary injunction.  He prayed that, after due proceedings,
judgment be rendered in his favor, thus:
WHEREFORE, it is respectfully prayed that upon the filing of this complaint, a
restraining order be issued enjoining defendants from selling, disposing or
otherwise encumbering the property subject of this case; after due   
hearing, a writ of preliminary prohibitory injunction be issued in the same
tenor as that of the restraining order; and after trial on the merits, judgment
be rendered in favor of plaintiff and against the defendants: 
a) Making the writ of preliminary prohibitory injunction permanent;
b) Ordering defendants to immediately and without delay, deliver to plaintiff
the possession of and the transfer certificate of title over the remaining area
of that parcel of land they sold to plaintiff;
 S a l e s P a r t X I P a g e | 41

branch on Lot 3-C-2, and agreeing to deduct P35,000 from the balance of

c) Ordering defendants to pay plaintiff, jointly and severally, the following Lagon’s account for the purchase price of the property.  Josefina and Carlos,
sums: Jr. interposed counterclaims for damages and attorney’s fees.

i. P500,000.00  representing opportunity loss; Lagon withdrew his petition for the issuance of a writ of preliminary
ii. P50,000.00 for and as attorney’s fees; injunction which the trial court granted, per its Order dated February 24,
iii. P20,000.00 for and as expenses of litigation; and 1993.
iv. P50,000.00 for and as moral, exemplary, temperate and
nominal damages. On January 20, 1995, the trial court rendered judgment in favor of Lagon. 
The fallo of the decision reads:
Other reliefs, just and equitable under the premises, are likewise prayed for. WHEREFORE, upon all the foregoing considerations, judgment is hereby
[34] rendered:

Lagon testified that Josefina failed to deliver the title to the property he
1. ORDERING defendant Josefina L. Valdez, by herself, or
purchased from her, as well as the possession thereof; hence, he was not
through her duly authorized attorney-in-fact, defendant
certain of the metes and bounds of the property and could not secure a   
Carlos L. Valdez, Jr., to execute the necessary registrable
building permit for the transfer and construction of the Rural Bank of Isulan,
document of deed of absolute sale in favor of the plaintiff
as well as the commercial building.  Besides, Carlos, Jr. secured his
over the remaining area of that parcel of land, the defendant
permission for the construction of the PCIB commercial building on Lot No.
sold to plaintiff on May 9, 1979, particularly Lot 3-C-3, Psd-
3-C-2 which was sold to him by Josefina, and even agreed to the deduction
12-005408 covered under Transfer Certificate of Title No. T-
of the purchase price thereof; hence, the balance was only P26,880.  Lagon
18816, in the name of defendant Josefina de Leon Vda. de
demanded that the title to the property be turned over to him and the
Valdez, and for the latter to deliver to plaintiff the possession
occupants thereof be evicted therefrom so that he could comply with the
of and the transfer certificate of title thereof, and ORDERING
conditions of the sale for the construction of the commercial building and the
further  the defendants to pay, jointly and severally, plaintiff
transfer of the Isulan Rural Bank.  However, Carlos, Jr. dilly-dallied, saying
the current fair market value of the remaining area of the
that the heirs of Carlos, Sr. needed time to execute the extrajudicial
land sold to the latter which defendants may not be  able to
settlement of his estate, and thus failed to deliver said title to him. Lagon
deliver and transfer ownership thereof to the plaintiff, minus
averred that his consent to the construction by the PCIB of its branch on a
the amount of P26,880.00 representing the unpaid balance
portion of the property he had purchased from Josefina constituted
of the agreed purchase price of the 4,094 square meter-
substantial compliance of his undertaking under the deed of absolute sale
portion of land sold to plaintiff in the total amount
and the affidavit he executed in favor of Josefina. He also alleged that he
of P163,760.00;
signed the affidavit prepared by Carlos, Jr. without reading and
understanding the same.  He pointed out that although Lot No. 3 had
already been sold to him by Josefina, she still sold Lot No. 3-C-3 to her son,
Carlos, Jr.; Lot No. 3-D to Engr. Rolendo Delfin; and mortgaged Lot No. 3-D
to DBP which acquired title over the property. 2. ORDERING defendants to pay plaintiff, jointly and severally,
the sums of:
In their answer to the complaint, Josefina and her son, the defendants
therein, alleged that Lagon had no cause of action against them because he (a) P50,000.00 representing attorney’s fees for the
failed to comply with the terms of the deed of absolute sale, his undertaking legal services of plaintiff’s counsel, plus P5,000.00,
under his affidavit, and to pay the purchase price of the property in full.  as appearance fee for plaintiff’s counsel, per
Carlos, Jr. denied securing Lagon’s consent to the construction of the PCIB hearing, for not less than ten (10) times;

(b) P2,119.00 as filing fees (Exhibits “W”, “W-1”,
“W-2”, and “W-3”) paid by plaintiff for the filing of
this case;
(c) P23,585.50 representing transportation expenses
of plaintiff’s counsel through PAL flights from Manila
to attend court hearings in this Court, and in going
back to Manila (Exhibits “FF”, “FF-1”, “GG”, “HH”,
“II”, “JJ”, “KK”, “LL”, and “MM”);
(d) P50,000.00 for and as moral and exemplary
damages; and, further  THE PLAINTIFF-APPELLEE.
ORDERING defendants, jointly and severally, to pay the costs of suit.
For lack of merit, the counterclaim interposed by defendants should    be, as
it is hereby, dismissed.
IT IS SO ORDERED.[35]
Josefina and Carlos, Jr. appealed the decision to the Court of Appeals,
contending that –
I. THE LOWER COURT ERRED IN NOT UPHOLDING THE
DEFENSE OF THE DEFENDANTS-APPELLANTS THAT THE
PLAINTIFF-APPELLEE HAS NO VALID CAUSE OF ACTION
AGAINST THEM CONSIDERING THAT HE FAILED TO
COMPLY WITH THE TERMS AND CONDITIONS OF HIS
WRITTEN CONTRACTS WITH THE DEFENDANTS-
APPELLANTS.
II. THE COURT ERRED IN NOT UPHOLDING THAT EXHIBIT “3”
WHICH IS THE AFFIDAVIT OF PLAINTIFF-APPELLEE, WAS
PART OF THE AGREEMENTS OF THE PARTIES AS IT WAS
ADMITTED BY HIM. IT MUST BE ENFORCED AND
PLAINTIFF-APPELLEE IS LIABLE FOR BREACH OF HIS
CONTRACT WITH THE DEFENDANTS-APPELLANTS.
S a l e s P a r t X I P a g e | 42
III. THE LOWER COURT ERRED WHEN IT RULED THAT THE
TERMS AND CONDITIONS IN THE SPECIAL POWER OF
ATTORNEY (EXHIBITS “1-C” AND “A-1”) WERE NOT PART
OF THE DEED OF ABSOLUTE SALE (EXHIBITS “1” AND “A”)
EXECUTED BY THE PARTIES.
IV. THE LOWER COURT ERRED IN NOT DECLARING THAT THE
ACT OF THE DEFENDANTS-APPELLANTS IN RESCINDING
THEIR CONTRACT WITH THE PLAINTIFF-APPELLEE WAS
PERFECTLY LEGAL, VALID, EFFECTIVE AND BINDING ON
V. THE LOWER COURT ERRED IN NOT RENDERING JUDGMENT
IN FAVOR OF THE DEFENDANTS-APPELLANTS DESPITE THE
OVERWHELMING EVIDENCE OF THE MANIFEST
INCREDULITY AND UNWORTHINESS OF THE EVIDENCE OF
THE PLAINTIFF-APPELLEE.
VI. THE LOWER COURT ERRED IN NOT FINDING THAT THE
PLAINTIFF-APPELLEE IS GUILTY OF LACHES OR ESTOPPEL.
VII. THE COURT ERRED IN AWARDING DAMAGES TO THE
PLAINTIFF-APPELLEE AND DISMISSING THE
COUNTERCLAIM OF THE DEFENDANTS-APPELLANTS.[36]
The appellate court rendered judgment on January 28, 1998 reversing the
decision of the RTC.  The fallo of the decision reads:
IN VIEW WHEREOF, the Decision of the Lower Court dated January 20,
1995 is hereby REVERSED and SET ASIDE.  Appellants are hereby ordered
to return to Appellee the sum of P101,880.00 together with 12% interest per
annum from the finality of this decision.  The case filed in the Court a quo is
hereby ordered DISMISSED.[37]

The appellate court ruled that based on the deed of absolute sale, the
Special Power of Attorney executed by Josefina, and the affidavit of the
respondent, the parties had executed a contract to sell.  The respondent filed
a motion for the reconsideration thereof.
On February 4, 1999, the Court of Appeals reversed itself and rendered an
Amended Decision, setting aside its decision and affirming that of the RTC.  contract to sell and not a contract of sale.  The petitioners contend that the
This time, the appellate court held that Josefina had, after all, executed a
deed of absolute sale over the 4,094-square-meter portion of Lot No. 3. It
declared that the Special Power of Attorney executed by Josefina and the
affidavit did not form part of the deed of absolute sale. It further declared
that Lagon’s affidavit could not be considered part of the said deed because
it was merely an afterthought contrived by Carlos, Jr.
The appellate court also held that even if the Special Power of Attorney and
affidavit formed integral parts of the deed of absolute sale, Lagon was
justified in refusing to pay the balance of the purchase price of the property
and to comply with his undertaking thereon, because Josefina’s refusal to
deliver the title to the property made it impossible to determine the metes
and bounds thereof. According to the appellate court, under Article 1186 of
the New Civil Code, the conditions of the sale are deemed fulfilled.  conditions of the sale were deemed fulfilled by their failure to deliver the
Moreover, the Court of Appeals ruled, the appellants failed to comply with
the procedure under Article 1592 of the New Civil Code in rescinding the
sale.
Josefina and Carlos, Jr., now the petitioners, filed their petition for review on
certiorari wherein they raised the following issues:
I. WHETHER OR NOT THE CONTRACT OF THE PARTIES BEING
SUBJECT TO THE SUSPENSIVE CONDITIONS AGREED UPON
WAS A CONTRACT TO SELL OR A CONTRACT OF SALE?
II. WHETHER OF (SIC) NOT THE PETITIONERS HAD THE
RIGHT TO RESCIND THEIR CONTRACT WITH PRIVATE
RESPONDENT?
S a l e s P a r t X I P a g e | 43
III. WHETHER OF (SIC) NOT PRIVATE RESPONDENT IS
ENTITLED TO HIS CLAIM FOR SPECIFIC PERFORMANCE
AND DAMAGES CONSIDERING HIS FAILURE TO COMPLY
WITH THE SUSPENSIVE CONDITIONS AGREED UPON?[38]
The petitioners assert that, the contract agreed upon by the parties was a
three documents, the deed of absolute sale, the special power of attorney
executed by petitioner Josefina and the affidavit of the respondent dated
April 27, 1981, formed integral parts containing the terms and conditions of
one and the same transaction. They emphasize that the respondent knew
that his contract with petitioner Josefina was a contract to sell because he
did not acquire a torrens title over the property nor took possession thereof
after the execution of the deed of absolute sale; the respondent even failed
to register the said deed with the Office of the Register of Deeds and to
declare the same for taxation purposes under his name.  They aver that the
requirements under Article 1592 of the New Civil Code do not apply to a
contract to sell but only to a contract of sale.
The petitioners insist that the Court of Appeals erred in declaring that the
torrens title to the property to the respondent, on its finding that
notwithstanding such failure, the respondent continued making partial
payments of the purchase price of the property to the petitioners.
In his comment on the petition, the respondent reiterates that based on the
evidence on record, the admissions of the petitioners, as well as the special
power of attorney executed by petitioner Josefina, a deed of absolute sale
was executed between him and petitioner Josefina, not merely a contract to
sell of the portions of Lots 3-C and 3-D.  He alleges that under Articles 1477
and 1498 of the New Civil Code, he acquired title and possession of the
property upon the execution of the said deed.
The Ruling of the Court
The Subject Property is the Exclusive Property of Josefina de Leon Valdez
Intricately interwoven with the threshold issue raised by the petitioners is the
issue of the nature of Lot No. 3 of Pls-208-D-13 covered by TCT No. T-19529
(T-1902).

In the deed of absolute sale executed by petitioner Josefina in favor of the
respondent, she declared that she was the absolute owner of the said
property.[39]However, in the deed of extrajudicial settlement of the estate of
Carlos Valdez, Sr. executed by petitioner Josefina and her children on
December 31, 1982, the subject property was declared as part of the estate
of the deceased.[40] The Court of Appeals, under its Amended Decision,
affirmed the finding of the RTC that it was only after the execution of the
said deed of extrajudicial settlement that petitioner Josefina became the
absolute owner of the property.[41] However, we find that both the trial and
appellate courts erred in so ruling.
We note that TCT No. T-19529 (T-1902) covering the property was issued on
August 18, 1967, during the marriage of the Spouses Carlos Valdez, Sr. and
petitioner Josefina, under the name “Josefina L. Valdez married to Carlos
Valdez, Sr.” The issuance of the title in the name solely of one spouse is not
determinative of the conjugal nature of the property, since there is no
showing that it was acquired during the marriage of the Spouses Carlos
Valdez, Sr. and Josefina L. Valdez.[42] The presumption under Article 160 of
the New Civil Code, that property acquired during marriage is conjugal, does
not apply where there is no showing as to when the property alleged to be
conjugal was acquired.  The presumption cannot prevail when the title is in
the name of only one spouse and the rights of innocent third parties are
involved.[43] Moreover, when the property is registered in the name of only
one spouse and there is no showing as to when the property was acquired
by same spouse, this is an indication that the property belongs exclusively to
the said spouse.[44]
In this case, there is no evidence to indicate when the property was acquired
by petitioner Josefina.  Thus, we agree with petitioner Josefina’s declaration
in the deed of absolute sale she executed in favor of the respondent that she
was the absolute and sole owner of the property.  We are convinced that the
declaration in the deed of extrajudicial settlement of the estate of the late
Carlos Valdez, Sr., that the property formed part of his estate and that his
children waived their rights and claims over the property in favor of their
mother, was done merely to facilitate the issuance of a torrens title over the
property in petitioner Josefina’s name with her marital status as widow.
Petitioner Josefina Valdez and the Respondent entered into a Contract of
Sale over the Subject Property
The RTC, as well as the Court of Appeals in its Amended Decision, held that
petitioner Josefina and the respondent entered into a contract of sale, not a
S a l e s P a r t X I P a g e | 44
contract to sell, over the subject property, relying solely on the deed of
absolute sale executed by her on May 9, 1979.  Although it was expressly
stated in the Affidavit executed by the respondent on April 27, 1981
appended to the deed, the appellate court affirmed the ruling of the RTC
that such Special Power of Attorney executed by petitioner Josefina in favor
of her son, petitioner Carlos, Jr., did not form part of the said deed.  Both
tribunals ratiocinated that, indeed, under the Special Power of Attorney, part
of the consideration of the sale of the subject property was the construction
of a commercial building and the transfer of the Isulan Rural Bank thereto
within five (5) years from the execution of the deed. However, since such
condition was not actually incorporated in the said deed, the affidavit
prepared by petitioner Carlos, Jr. and signed by the respondent was but an
afterthought contrived by petitioner Carlos, Jr., thus enabling him to
surreptitiously insert a provision or condition in the deed of absolute sale.
We agree with the trial and appellate courts that petitioner Josefina and the
respondent entered into a contract of sale over the subject property and not
merely a contract to sell the same.
It is not disputed by the parties that petitioner Josefina executed a Special
Power of Attorney in favor of her son, petitioner Carlos, Jr., as her attorney-
in-fact, authorizing the latter to sell the subject property, and petitioner
Josefina, through her son, executed the deed of absolute sale over the
subject property. She also acknowledged receipt of partial payments of the
purchase price of the property on April 21, 1981 through her attorney-in-
fact; the balance of the purchase price thus stood at P61,880.00  There is,
likewise, no dispute that the respondent signed the affidavit on April 27,
1981.  The parties, however, differ on the real nature of their transaction
and on whether the said affidavit formed an integral part of the deed of
absolute sale executed by petitioner Josefina in favor of the respondent.
The real nature of a contract may be determined from the express terms of
the written agreement and from the contemporaneous and subsequent acts
of the parties thereto.[45]
In the construction or interpretation of an instrument, the intention of the
parties is primordial and is to be pursued.[46] If the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control. [47] If the contract appears to
be contrary to the evident intentions of the parties, the latter shall prevail
over the former.[48] The denomination given by the parties in their contract is
not conclusive of the nature of the contents.[49]

The agreement of the parties may be embodied in only one contract or in
two or more separate writings.  In such event, the writings of the parties
should be read and interpreted together in such a way as to render their
intention effective.[50]
A sale is at once perfected when a person (the seller) obligates himself, for a
price certain, to deliver and to transfer ownership of a specified thing or right
to another (the buyer) over which the latter agrees. [51] From the time the
contract is perfected, the parties are bound not only to the fulfillment of
what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law.
[52]
In a contract of sale, the title to the property passes to the vendee upon the
constructive or actual delivery thereof, as provided for in Article 1477 of the
New Civil Code.  The vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or rescinded by a notarial
deed or by judicial action as provided for in Article 1540 of the New Civil
Code. A contract is one of sale, absent any stipulation therein reserving title
over the property to the vendee until full payment of the purchase price nor
giving the vendor the right to unilaterally rescind the contract in case of non-
payment.[53] In a contract of sale, the non-payment of the price is a
resolutory condition which extinguishes the transaction that, for a time,
existed and discharges the obligations created thereunder. [54] In a contract to
sell, ownership is, by agreement, reserved in the vendor and is not to pass to
the vendee until full payment of the purchase price.  Such payment is a
positive suspensive condition, failure of which is not a breach but an event
that prevents the obligation of the vendor to convey title from becoming
effective.[55]
In this case, the deed of absolute sale executed by petitioner Josefina reads:
That the Vendor is the registered owner of Lot 3 Allah Valley Pls-208-D-3,
located at Isulan, Sultan Kudarat, covered by Transfer Certificate of Title No.
(T-19529) T-1902 of the Register of Deeds of Cotabato, with eight (8) lots
subdivision duly approved pursuant to R.A. 440 on March 27, 1979.
That for and in consideration of the sum of EIGHTY THOUSAND PESOS
(P80,000.00), Philippine Currency, in hand paid by the VENDEE, receipt of
which amount in Full is hereby acknowledged by the VENDOR, to the ENTIRE
and full satisfaction of the VENDOR, and who by these presents do hereby
sell, cede, deliver and convey unto the said VENDEE, his  heirs, assigns and
S a l e s P a r t X I P a g e | 45
successors in interests, a portion of the above-mentioned lot, more
particularly described as follows:
TOTAL AREA: FOUR THOUSAND AND NINETY-FOUR (4,094) SQUARE
METERS, WITH SIXTY-FOUR POINT THREE (64.3) METERS, FRONTAGE,
FACING THE NATIONAL HIGHWAY and the NGA Office, going towards the
BUENCAMINO MOVIE HOUSE, starting from the corner.
That the Vendor hereby warrants the peaceful possession and ownership of
said vendee against any adverse claim.[56]
Irrefragably, the deed is one of sale, not a contract to sell. The deed
specifically states that the property is sold and delivered to the respondent
as vendee.  Petitioner Josefina even warranted the peaceful possession and
ownership of the respondent over the property subject of the transaction. 
She did not reserve the ownership over the property, as well as any right to
unilaterally rescind the contract.  There has been, by the execution of the
said deed, a constructive delivery of the property to the respondent; hence,
the latter acquired ownership over the same.[57] Upon payment of the
purchase price, petitioner Josefina was obliged to deliver the torrens title
over the property to and under the name of the respondent as the new
owner and place him, as vendee, in actual possession thereof; otherwise, the
failure or inability to do so constitutes a breach of the contract sufficient to
justify its rescission.[58]
However, we rule that the deed of absolute sale was unenforceable as of the
date of its execution, May 9, 1979.  This is so, because under the Special
Power of Attorney petitioner Josefina executed in favor of her son, petitioner
Carlos, Jr., the latter was authorized to sell the property on cash basis only;
petitioner Josefina likewise required the construction of a commercial
building and the transfer of the Rural Bank of Isulan, as part of the
consideration of the sale to be incorporated in the said deed as part of the
respondent’s obligation as vendee, thus: 
(a) To sell sixty four point three meters FRONTAGE and the full length of Lot
3, ALLAH VALLEY, Pls-208-D-13 described in TCT No. T-(19529) T-1902,
somewhere in the 3rd and 4th lots of the 8 lots subdivision, located at 
Poblacion, Isulan, Sultan Kudarat, registered in my name, consisting of Four
Thousand Ninety-Four (4,094) Square Meters;
(b) To RECEIVE and SIGN documents and papers necessary in the
CONTRACT OF SALE with Mr. JOSE LAGON, and to RECEIVE the full PRICE in
CASH, to be determined by my son, CARLOS L. CARLOS, JR.;
(c) To IMPOSE in the Contract that aside from the PRICE, another

consideration would be for Mr. JOSE LAGON to transfer the RURAL BANK OF
ISULAN to the above-mentioned lot and to put a commercial building,
different from the building of the Rural Bank of Isulan on the same lot. [59]
Clearly, petitioner Carlos, Jr. acted beyond the scope of his authority when
he executed the deed of absolute sale in contravention of petitioner
Josefina’s express instructions.  Worse, he falsely declared in the said deed
that the purchase price was P80,000.00 and that he had already received the
said amount, when, in fact, the property was sold for P40.00 per square
meters, or a total of P163,760.00, and that as of May 9, 1979, he had not
yet received the said amount.  Under Article 1317 of the New Civil Code,
contracts executed by agents who have acted beyond their powers are
unenforceable unless ratified by the principal either expressly or impliedly:
Art. 1317. No one may contract in the name of another without being
authorized by the latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority
or legal representation, or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is revoked by the other
contracting party.
Thus, the effectivity of the contract of sale in the case at bar depends upon
the ratification thereof by petitioner Josefina as principal. If she ratifies the
deed, the sale is validated from the moment of its commencement, and not
merely from the time of its ratification.[60] In such case, she can no longer
maintain an action to annul the same based upon defects relating to its
original validity.[61]
We find that petitioner Josefina ratified the said deed when she received,
through her son and attorney-in-fact petitioner Carlos, Jr., partial payments
of the purchase price of the property from the respondent on April 21, 1981.
[62]
 Such ratification retroacted to May 9, 1979, the date when petitioner
Josefina, through her attorney-in-fact, executed the deed of sale covering
the subject property in favor of the respondent. Moreover, we rule that the
respondent agreed on to transfer the Rural Bank of Isulan to the subject
property, and to cause the construction of a commercial building within five
(5) years reckoned from May 9, 1979 or until May 9, 1984, as evidenced by
his affidavit.
We reject the findings of the RTC as affirmed by the CA that the affidavit
signed by the respondent on April 27, 1981 was merely an afterthought
contrived by petitioner Carlos, Jr., and their conclusion that the said affidavit
S a l e s P a r t X I P a g e | 46
had no binding effect on petitioner Josefina.  The affidavit of the respondent
reads:
1. That I am the Vendee of a Deed of Absolute Sale where the
Vendor is Mrs. Josefina L. Valdez, represented by CARLOS L.
CARLOS, JR., through a Special Power of Attorney;
2. That the above-mentioned Deed of Absolute Sale is dated
May 9, 1979 and the Special Power of Attorney  also above-
mentioned was dated May 1, 1979, both duly notarized by
Notary Public Atty. Bienvenido Noveno under Doc. No. 77;
Page No. 16; Book No. XIX; Series of 1979, and Doc. No. 73;
Page No. 15; Book No. XIX; Series of 1979; respectively;
3. That the subject of the above-mentioned Deed of Absolute
Sale is a lot consisting of 4,094 square meters, covered by
Transfer Certificate of Title No. T-19529 of the Register of
Deeds for the Province of Cotabato, facing the National
Highway and the Isulan NGA Office going towards the
Buencamino Movie House, starting from the corner;
4. That the consideration of the above-mentioned Deed of
Absolute Sale is EIGHTY THOUSAND PESOS (P80,000.00)
and in addition thereto, I hereby declare and manifest that
the above-mentioned 4,094 square meters be
commercialized by putting up at least one (1) bank and any
other commercial building in the said 4,094 square meters
within a period of five (5) years from the time of the
execution of the above-mentioned Deed of Absolute Sale, in
full operation;

5. That should I fail to commercialize the said 4,094 square
meters in full operation within a period of five (5) years as
stated above, I hereby declare and manifest that said Deed
of Absolute Sale shall be declared null and void, without
need of demand addressed to me;
6. That the purpose of this Affidavit is to make it clear that the
consideration of the said Deed of Absolute Sale is not
only P80,000.00 cash but also the fact that the said 4,094
square meters be commercialized.[63]
The respondent admitted in his complaint that he undertook to construct the
said building and transfer the Rural Bank of Isulan to the property he had
purchased from petitioner Josefina.[64] The respondent affirmed the
authenticity and due execution of his affidavit and his obligations therein,
and testified, thus:
ATTY. VALDEZ:
Q    Mr. Lagon, you testified that according to you the construction of the
same, the PCIB Isulan was a compliance of your obligation under your
contract with the Valdezes, do you recall having testified on that?
A    Yes, Sir.
Q    With in (sic) how many years, by the say ( sic), were you supposed to
comply with that condition by putting up a bank or a commercial building
in that area?
A    Supposed to be five years, Sir.
Q    From when?
A    According to the affidavit, from the time I purchased  the property up to
or from May 9, 1979 to 1984, Sir.[65]
In his letter to petitioner Carlos, Jr., the respondent, through counsel,
admitted the binding effect of his affidavit as follows:
It is hereby submitted therefore that there is in effect substantial compliance
on the part of Mr. Lagon with regards to the additional condition laid down in
his affidavit herein-referred to.  If you deem it that Mr. Lagon has not
S a l e s P a r t X I P a g e | 47
satisfactorily complied with all the obligations you imposed upon him to do
thereunder, it is made to reasons not of his own making but due to factors
brought about by circumstances then prevailing, and elaboration on the
same can only be properly stated on the proper to come.[66]
Far from being a mere affidavit, the document embodies the unequivocal
undertaking of the respondent to construct a fully operational commercial
building and to transfer the Rural Bank of Isulan to the subject property as
part of the consideration of the sale within five (5) years from the execution
of the deed of sale, or until May 9, 1984.
The intractable refusal of the respondent to pay the balance of the purchase
price of the property despite the petitioners’ demands had no legal basis.  As
such, petitioner Josefina’s refusal to deliver the torrens title over the subject
property under the respondent’s name was justified, precisely because of the
respondent’s refusal to comply with his obligation to pay the balance of the
purchase price. Had the respondent paid the purchase price of the property,
such failure on the part of petitioner Josefina to deliver the torrens title to
and under the name of the respondent would have warranted the suspension
of the five-year period agreed upon for the construction of a fully operational
commercial building, as well as the transfer of the aforesaid bank to the
property. This is so because absent such torrens title under the name of the
respondent, no building permit for the construction of the buildings could be
secured.
Considering all the foregoing, the failure of the respondent to cause the
construction of the commercial building and the transfer of the bank to the
property sold under the deed of sale executed between him and petitioner
Josefina was due to the respondent’s own fault.
There was no need for petitioner Josefina to make a notarized demand to
the respondent or file an action to rescind the deed of absolute sale to
enable her to recover the ownership of the property. This is so because the
petitioner and the respondent had agreed that upon the latter’s failure to
construct a new and fully operational commercial building and to cause the
transfer of the Rural Bank of Isulan to the property on or before May 9,
1984, the deed of absolute sale would be deemed null and void without need
of any demand from the petitioners.  Such agreement is evidenced by the
affidavit executed by the respondent himself on April 27, 1981.
We do not agree with the respondent’s contentions that petitioner Josefina,
through her son and attorney-in-fact petitioner Carlos, Jr., had agreed to the
 S a l e s P a r t X I P a g e | 48

sale of a portion of the property, the construction of the PCIB branch office
thereon, and the crediting of the amount paid by the PCIB to the
respondent’s account, and deducted from the balance of the purchase price. 
In the first place, the respondent failed to adduce a morsel of evidence that
petitioner Josefina had knowledge of the said agreement and had agreed
thereto.  Furthermore, the respondent failed to adduce documentary
evidence that petitioner Josefina authorized her son and attorney-in-fact to
enter into such an agreement.

It bears stressing that petitioner Josefina specifically and unequivocally

required in the special power of attorney, as part of the consideration of the
sale of the property to the respondent, the latter’s obligation to construct a
new and fully operational commercial building and transfer the Rural Bank of
Isulan to the property.  Had she agreed to modify the Special Power of
Attorney she executed in favor of her son, petitioner Carlos, Jr., for sure, she
would have executed a document to that effect.  She did not do so. 
Petitioner Carlos, Jr. could not lawfully bind petitioner Josefina thereon
because he was not so authorized to enter into such an agreement with the
respondent; neither can such authority be implied from the Special Power of
Attorney petitioner Josefina executed in favor of her son, petitioner Carlos,
Jr.

In sum, then, the respondent had no cause for specific performance against
the petitioners.  However, the petitioners are obliged to refund to the
respondent the latter’s partial payments for the subject property. [67]

The petitioners failed to adduce sufficient evidence to prove their

counterclaims, and, as such, the counterclaims must forthwith be dismissed.

IN LIGHT OF ALL THE FOREGOING, the Amended Decision of the Court
of Appeals dated February 4, 1999 is REVERSED and SET ASIDE.  The
complaint of the respondent is DISMISSED.  The petitioners are directed to
refund to the respondent the amount of P101,880.00 with interest thereon at
the rate of 12% per annum from the finality of this decision.  No costs.
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners; vs. HON.
COURT OF APPEALS and ATILANO G, JABIL, respondents.
Civil Law; Sales; Contracts; A deed of sale is absolute in nature although
denominated as Deed of Conditional Sale, absent a proviso that the title to
the property sold is reserved in the vendor until full payment of the purchase
price nor a stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within a fixed period.—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).
Same; Same; Same; All elements of a valid contract of sale are present in
the case at bar.—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.
Same; Same; Same; Delivery; Although there was no constructive delivery of
the land sold, as the deed of sale is a private instrument there was actual
delivery thereof by the delivery of possession of the land to the vendees.—
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).
Same; Same; Same; Same; Same; Contemporaneous acts; The act of the
petitioners of delivering the possession of the land to the vendees,
contemporaneous with the contract, clearly show that an absolute deed of
sale was intended by the parties and not a contract to sell.—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.
Same; Same; Same; Sale of the property by the vendors to a second vendee
is null and void as at the time of sale they were no longer owners of the
property.—Be that as it may, it is evident that when petitioners sold said land
S a l e s P a r t X I P a g e | 49
to the Cabigas spouses, they were no longer owners of the same and the
sale is null and void.
Same; Same; Same; Rescission; Absence of notice to the first vendees of
alleged extrajudicial rescission of the contract by petitioners and of a court
suit to rescind the sale; Public document; Acts and contracts which have for
their object the extinguishments of real rights over immovable property must
appear in a public document.—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.
Same; Same; Same; Same; Slight delay on the part of one party in the
performance of his obligation is not a sufficient ground for rescission of the
agreement; Equity and justice mandate that the vendee be given an
additional period to complete payment of the purchase price.—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. Dignos vs.
Court of Appeals, 158 SCRA 375, No. L-59266 February 29, 1988
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
S a l e s P a r t X I P a g e | 50
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-
spouses (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 dispositive 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, 1982. On August 9, 1982, acting
on the motion for reconsideration and on all subsequent pleadings filed, this
Court resolved to reconsider its resolution of February 10, 1982 and to give
due course to the instant petition. On September 6, 1982, respondents filed
a rejoinder to reply of petitioners which was noted on the resolution of
September 20, 1982.
Petitioners raised the following assignment of errors:
I
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN
GROSSLY, INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT,
EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER
OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT
AND NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE
COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING
READING OF THE AGREEMENT, 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.
S a l e s P a r t X I P a g e | 51
IV
PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE
BEEN DISMISSED, HE HAVING COME TO COURT WITH UNCLEAN HANDS.
V
BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN
AFFIRMING WITH MODIFICATION THE DECISION OF THE TRIAL COURT
DUE TO GRAVE MISINTERPRETATION, MISAPPLICATION AND
MISAPPREHENSION OF THE TERMS OF THE QUESTIONED CONTRACT AND
THE LAW APPLICABLE THERETO.
The foregoing assignment of errors may be synthesized into two main issues,
to wit:
I. Whether or not subject contract is a deed of absolute sale or
a contract to 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 10, 1982 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. Jabil is to pay the amount of Twelve Thousand Pesos
(P12,000. 00) 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 payment1 (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 x x x" 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.
S a l e s P a r t X I P a g e | 52
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.
 S a l e s P a r t X I P a g e | 53

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.
UNIVERSITY OF THE PHILIPPINES, petitioner, vs. WALFRIDO DE
LOS ANGELES,in his capacity as JUDGE of the COURT OF FIRST
INSTANCE IN QUEZON CITY, ET AL., respondents.
Civil Law; Obligations and Contracts; Rescission; Effect of unilateral
rescission without court intervention.—In the first place, UP and ALUMCO
had expressly stipulated in the “Acknowledgment of Debt and Proposed
Manner of Payment” that, upon default by the debtor ALUMCO, the creditor
(UP) has “the right and the power to consider the Logging Agreement dated
2 December 1960 as rescinded without the necessity of any judicial suit.” As
to such special stipulation, and in connection with Article 1191 of the Civil
Code, this Court stated in Froilan vs. Pan Oriental Shipping Co., et al., L-
11897, 31 October 1964, 12 SCRA 276: “there is nothing in the law that
prohibits the parties from entering into agreement that violation of the terms
of the contract would cause cancellation thereof, even without court

intervention. In other words, it is not always necessary for the injured party
to resort to court for rescission of the contract.” University of the Philippines
vs. De los Angeles, 35 SCRA 102, No. L-28602 September 29, 1970
REYES, J.B.L., J.:
Three (3) orders of the Court of First Instance of Rizal (Quezon City), issued
in its Civil Case No. 9435, are sought to be annulled in this petition for
certiorari and prohibition, filed by herein petitioner University of the
Philippines (or UP) against the above-named respondent judge and the
Associated Lumber Manufacturing Company, Inc. (or ALUMCO).  The first
order, dated 25 February 1966, enjoined UP from awarding logging rights
over its timber concession (or Land Grant), situated at the Lubayat areas in
the provinces of Laguna and Quezon; the second order, dated 14 January
1967, adjudged UP in contempt of court, and directed Sta. Clara Lumber
Company, Inc. to refrain from exercising logging rights or conducting logging
operations on the concession; and the third order, dated 12 December 1967,
denied reconsideration of the order of contempt.
As prayed for in the petition, a writ of preliminary injunction against the
enforcement or implementation of the three (3) questioned orders was
issued by this Court, per its resolution on 9 February 1968.
The petition alleged the following:
That the above-mentioned Land Grant was segregated from the public
domain and given as an endowment to UP, an institution of higher
learning, to be operated and developed for the purpose of raising additional
income for its support, pursuant to Act 3608;
That on or about 2 November 1960, UP and ALUMCO entered into a logging
agreement under which the latter was granted exclusive authority, for a
period starting from the date of the agreement to 31 December 1965,
extendible for a further period of five (5) years by mutual agreement, to cut,
collect and remove timber from the Land Grant, in consideration of payment
to UP of royalties, forest fees, etc.; that ALUMCO cut and removed
timber therefrom but, as of 8 December 1964, it had incurred an unpaid
account of P219,362.94, which, despite repeated demands, it had failed to
pay; that after it had received notice that UP would rescind or terminate the
logging agreement, ALUMCO executed an instrument, entitled "Acknow-
ledgment of Debt and Proposed Manner of Payments", dated 9 December
S a l e s P a r t X I P a g e | 54
1964, which was approved by the president of UP, and which stipulated the
following:
"3.  In the event that the payments called for in Nos. 1 and 2 of this
paragraph are not sufficient to liquidate the foregoing indebtedness of the
DEBTOR in favor of the CREDITOR, the balance outstanding after the said
payments have been applied shall be paid by the DEBTOR in full no later
than June 30, 1965;
"x x x x x                                x x x x x                       x x x x x
"5.  In the event that the DEBTOR fails to comply with any of its promises or
undertakings in this document, the DEBTOR agrees without reservation that
the CREDITOR shall have the right and the power to consider the Logging
Agreement dated December 2, 1960 as rescinded without the necessity of
any judicial suit, and the CREDITOR shall be entitled as a matter of right to
Fifty Thousand Pesos (P50,000.00) by way of and for liquidated damages;"
ALUMCO continued its logging operations, but again incurred an unpaid
account, for the period from 9 December 1964 to 15 July 1965, in the
amount of P61,133.74, in addition to the indebtedness that it had previously
acknowledged.
That on 19 July 1965, petitioner UP informed respondent ALUMCO that it
had, as of that date, considered as rescinded and of no further legal effect
the logging agreement that they had entered in 1960; and on 7 September
1965, UP filed a complaint against ALUMCO, which was docketed as Civil
Case No. 9435 of the Court of First Instance of Rizal (Quezon City), for the
collection or payment of the hereinbefore-stated sums of money and alleging
the facts hereinbefore specified, together with other allegations; it prayed
for and obtained an order, dated 30 September 1965, for preliminary
attachment and preliminary injunction restraining ALUMCO from continuing
its logging operations in the Land Grant.
That before the issuance of the aforesaid preliminary injunction UP had
taken steps to have another concessionaire take over the logging operation,
by advertising an invitation to bid; that bidding was conducted, and the
concession was awarded to Sta. Clara Lumber Company, Inc.; the logging
contract was signed on 16 February 1966.

That, meantime, ALUMCO had filed several motions to discharge the writs of
attachment and preliminary injunction but were denied by the court;
That on 12 November 1965, ALUMCO filed a petition to enjoin petitioner
University from conducting the bidding; on 27 November 1965, it filed a
second petition for preliminary injunction; and, on 25 February 1966, res-
pondent judge issued the first of the questioned orders, enjoining UP from
awarding logging rights over the concession to any other party.
That UP received the order of 25 February 1966 after it had concluded its
contract with Sta. Clara Lumber Company, Inc., and said company had
started logging operations.
That, on motion dated 12 April 1966 by ALUMCO and one Jose Rico, the
court, in an order dated 14 January 1967, declared petitioner UP in contempt
of court and, in the same order, directed Sta. Clara Lumber Company, Inc.,
to refrain from exercising logging rights or conducting logging operations in
the concession.
The UP moved for reconsideration of the aforesaid order, but the motion was
denied on 12 December 1967.
Except that it denied knowledge of the purpose of the Land Grant, which
purpose, anyway, is embodied in Act 3608 and, therefore, conclusively
known, respondent ALUMCO did not deny the foregoing allegations in the
petition.  In its answer, respondent corrected itself by stating that the period
of the logging agreement is five (5) years --- not seven (7) years, as it had
alleged in its second amended answer to the complaint in Civil Case No.
9435.  It reiterated, however, its defenses in the court below, which may be
boiled down to:  blaming its former general manager, Cesar Guy, in not
turning over management of ALUMCO, thereby rendering it unable to pay
the sum of P219,382.94; that it failed to pursue the manner of payments, as
stipulated in the "Acknowledgment of Debt and Proposed Manner of
Payments" because the logs that it had cut turned out to be rotten and could
not be sold to Sta. Clara Lumber Company, Inc., under its contract "to buy
and sell" with said firm, and which contract was referred and annexed to the
"Acknowledgment of Debt and Proposed Manner of Payments"; that UP's
unilateral rescission of the logging contract, without a court order, was
invalid; that petitioner’s supervisor refused to allow respondent to cut new
logs unless the logs previously cut during the management of Cesar Guy be
first sold; that respondent was permitted to cut logs in the middle of June,
S a l e s P a r t X I P a g e | 55
1965 but petitioner's supervisor stopped all logging operations on 15 July
1965; that it had made several offers to petitioner for respondent to
resume logging operations but respondent received no reply.
The basic issue in this case is whether petitioner U.P. can treat its contract
with ALUMCO rescinded, and may disregard the same before any judicial
pronouncement to that effect.  Respondent ALUMCO contended, and the
lower court, in issuing the injunction order of 25 February 1966, apparently
sustained it (although the order expresses no specific findings in this regard),
that it is only after a final court decree declaring the contract rescinded
for violation of itsterms that U.P. could disregard ALUMCO's rights under the
contract and treat the agreement as breached and of no force or effect.
We find that position untenable.
In the first place, UP and ALUMCO had expressly stipulated in the
"Acknowledgment of Debt and Proposed Manner of Payments" that, upon
default by the debtor ALUMCO, the creditor (UP) has "the right
and the power to consider the Logging Agreement dated 2 December 1960
as rescinded without the necessity of any judicial suit".  As to such special
stipulation, and in connection with Article 1191 of the Civil Code, this Court
stated in Froilan vs. Pan Oriental Shipping Co., et al. L-11897, 31 October
1964, 12 SCRA 276:
"there is nothing in the law that prohibits the parties from entering into
agreement that violation of the terms of the contract would cause
cancellation thereof, even without court intervention.  In other words, it is
not always necessary for the injured party to resort to court for rescission of
the contract."
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
reasonable 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 may 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.  But the law definitely does not
require that the contracting party who believes itself injured must first file
suit and wait for a judgment before taking extrajudicial steps to protect its
interest.  Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the pendency of the
suit until the final judgment of rescission is rendered when the law itself
requires that he should exercise due diligence to minimize its own damages
(Civil Code, Article 2203).
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,[1] 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.
Fears have been expressed that a stipulation providing for a
unilateral rescission in case of breach of contract may render nugatory the
general rule requiring judicial action (v. Footnote, Padilla,
Civil Law, Civil Code Anno., 1967 ed. Vol. IV, page 140) but, as already
observed, in case of abuse or error by the rescinder, the other party is not
barred from questioning in court such abuse or error, the practical effect of
the stipulation being merely to transfer to the defaulter the initiative of
instituting suit, instead of the rescinder.
In fact, even without express provision conferring the power of cancellation
upon one contracting party, the Supreme Court of Spain, in construing the
effect of Article 1124 of the Spanish Civil Code (of which Article 1191 of our
own Civil Code is practically a reproduction), has repeatedly held that a
resolution of reciprocal or synallagmatic contracts may be
made extrajudicially unless successfully impugned in court.
"El articulo 1124
del Codigo Civil establece la facultad de resolver las obligaciones reciprocas p
S a l e s P a r t X I P a g e | 56
ara el caso de que uno de los obligados no cumpliese lo que le incumbe, fac
ultad que, jurisprudencia de este Tribunal, surge immediatamente despues q
ue la otra parte incumplio deber, sin necesidad de unadeclaracion previa de l
os Tribunales".  (Sent. of the Tr. Sup. of Spain, of 10 April 1929;
106 Jur. Civ. 897).
"Segun reiterada doctrine de esta Sala, el Art.
1124 regula la resolucion como una 'facultad' atribuida a
la parte perjudicada por el incumplimiento del contrato,
la cual tiene derecho de opcion entre exigir el cumplimiento o
la resolucion de lo convenido, que puede ejercitarse, ya en la via
judicial, yafuera de ella, por declaracion del acreedor,
a reserva, claro es, que si la declaracion de resolucion hecha por una de las 
partes se impugna por la otra, queda aquella sometida al examen y sancion 
de los Tribunales, que habran de declarar,
en definitiva, bien hecha la resolucion o por el contrario,
no ajustada a Derecho." (Sent. TS of Spain, 16 November
1956; Jurisp. Aranzadi, 3, 447).
"La resolucion de los contratos sinalagmaticos, fundada en
el incumplimiento por una de las partes de su respectiva prestacion, puede t
ener lugar con eficacia:  1.° Por la declaracion de voluntad de
la otra hecha extraprocesalmente, si no es impugnada en juicio luego con exi
to; y 2.° Por la demanda de
la perjudicada, cuando no opta por el cumplimiento con
la indemnizacion de daños y perjuicios realmente causados, siempre que se 
acredite, edemas, una actitud o conducta persistente y rebelde de
la adversa o la satisfaccion de lo pactado, o un hecho obstativo que de
un modo absoluto, definitivo o irreformable lo impida, segun el art.
1.124, interpretedo por la jurisprudencia de esta Sala, contenida en las Ss.
de 12 mayo 1955 y 16 nov.
1956, entreotras, inspiradas por el principio del Derecho intermedio, recogido 
del Canonico, por el cual fragenti fidem, fides non est servanda. (Ss de
4 nov. 1958 y 22 jun. 1959.)" (Emphasis supplied)
In the light of the foregoing principles, and considering that the complaint of
petitioner University made out a prima facie case of breach of contract and
defaults in payment by respondent ALUMCO, to the extent that the court
below issued a writ of preliminary injunction stopping ALUMCO's logging
operations, and repeatedly denied its motions to lift the injunction; that it is
 S a l e s P a r t X I P a g e | 57

not denied that the respondent company had profited from its operations
previous to the agreement of 5 December 1964 ("Acknowledgment of Debt
and Proposed Manner of Payment"); that the excuses offered in the second
amended answer, such as the misconduct of its former manager Cesar Guy,
and the rotten condition of the logs in private respondent's pond, which said
respondent was in a better position to know when it executed the
acknowledgment of indebtedness, do not constitute on their face sufficient
excuse for non-payment; and considering that whatever prejudice may be
suffered by respondent ALUMCO is susceptible of compensation in damages,
it becomes plain that the acts of the court a quo in enjoining petitioner's
measures to protect its interest without first receiving evidence on the issues
tendered by the parties, and in subsequently refusing to dissolve the
injunction, were in grave abuse of discretion, correctible by certiorari, since
appeal was not available or adequate.  Such injunction, therefore, must be
set aside.

For the reason that the order finding the petitioner UP in contempt of court
has been appealed to the Court of Appeals, and the case is pending therein,
this Court abstains from making any pronouncement thereon.

WHEREFORE, the writ of certiorari applied for is granted, and the order of
the respondent court of 25 February 1966, granting the Associated Lumber
Company’s petition for injunction, is hereby set aside.  Let the records be
remanded for further proceedings conformably to this opinion.

PALAY, INC. and ALBERT ONSTOTT petitioner, vs. JACOBO C.

CLAVE, Presidential Executive Assistant, NATIONAL HOUSING
AUTHORITY and NAZARIO DUMPIT respondents.

Civil Law; Contracts, Contract to sell real estate subdivision lots on

installment; Rescission; Notice to defaulting lot buyer in his payments,
indispensable; Judicial action for rescission of contract to sell not necessary
where contract provides for its revocation and cancellation for violation of
any of its terms and conditions, provided written notice is sent to defaulter
informing him of the rescission.—Well settled is the role, as held in previous
jurisprudence, that 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. However, even in the cited
cases, there was at least a written notice sent to the defaulter informing him

of the rescission. As stressed in University of the Philippines vs. Walfrido de
los Angeles the act of a party in treating a contract as cancelled should he
made known to the other.
Same; Same; Same; Same; Same; Extrajudicial rescission has legal effect,
unless the other party impugns it.—This was reiterated in Zulueta vs.
Mariano where we held that extrajudicial rescission has legal effect where
the other party does not oppose it. Where it is objected to, a judicial
determination of the issue is still necessary. In other words, resolution of
reciprocal contracts may be made extra judicially unless successfully
impugned in Court. If the debtor impugns the declaration, it shall be subject
to judicial determination.
Same; Same; Same; Same; Same; Waiver of notices; Contract of adhesion;
Waiver of right of defaulting lot buyer to be notified of rescission of contract
must be certain and unequivocal and intelligently made; Contracts to sell by
real estate developers are contracts of adhesion; Public policy to protect
buyers of real estate on installment payments against onerous and
oppressive conditions such as waiver of notice.—The contention that private
respondent had waived his right to be notified under paragraph 6 of the
contract is neither meritorious because it was a contract of adhesion, a
standard form of petitioner corporation, and private respondent had no
freedom to stipulate. A waiver must be certain and unequivocal, and
intelligently made; such waiver follows only where liberty of choice has been
fully accorded. Moreover, it is a matter of public policy to protect buyers of
real estate on installment payments against onerous and oppressive
conditions. Waiver of notice is one such onerous and oppressive condition to
buyers of real estate on installment payments.
Same; Same; Same; Same; Refund of installments to lot buyer, proper,
where property of defaulting lot buyer already sold to a third person and
absent evidence that other lots are still available.—As a consequence of the
resolution by petitioners, rights to the lot should be restored to private
respondent or the same should be replaced by another acceptable lot.
However, considering that the property had already been sold to a third
person and there is no evidence on record that other lots are still available,
private respondent is entitled to the refund of installments paid plus interest
at the legal rate of 12% computed from the date of the institution of the
action. It would be most inequitable if petitioners were to be allowed to
S a l e s P a r t X I P a g e | 58
retain private respondent’s payments and at the same time appropriate the
proceeds of the second sale to another.
Same; Corporation Law; General rule that a corporation may not be made to
answer for acts or liabilities of its stockholders or those of legal entities to
which it may be connected and vice versa; Exceptions to rule that veil of
corporate fiction may not be pierced.—It is basic that a Corporation is
invested by law with a personality separate and distinct from those of the
persons composing it as well as from that of any other legal entity to which it
may be related. As a general rule, a corporation may not be made to answer
for acts or liabilities of its stockholders or those of the legal entities to which
it may be connected and vice versa. However, the veil of corporate fiction
may be pierced when it is used as a shield to further an end subversive of
justice; or for purposes that could not have been intended by the law that
created it; or to defeat public convenience, justify wrong, protect fraud, or
defend crime; or to perpetuate fraud or confuse legitimate issues; or to
circumvent the law or perpetuate deception; or as an alter ego, adjunct or
business conduit for the sole benefit of the stockholders.
Same; Same; Absence of badges of fraud of subdivision owner when it
rescinded a contract to sell extrajudicially and sold the property to a third
person.—We find no badges of fraud on petitioners’ part. They had literally
relied, albeit mistakenly, on paragraph 6 (supra) of its contract with private
respondent when it rescinded the contract to sell extrajudicially and had sold
it to a third person.
Same; Same; President of real estate corporation cannot be held personally
liable where he appears to be controlling stockholder absent sufficient proof
that he used the corporation to defraud defaulting lot buyer; Mere ownership
by a single stockholder or by another corporation of all or nearly all capital
stock of corporation not sufficient ground for disregarding corporate
personality; Case at bar.—In this case, petitioner Onstott was made liable
because he was then the President of the corporation and he appeared to be
the controlling stockholder. No sufficient proof exists on record that said
petitioner used the corporation to defraud private respondent. He cannot,
therefore, be made personally liable just because he “appears to be the
controlling stockholder”. Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a corporation is
not of itself sufficient ground for disregarding the separate corporate
personality. Palay, Inc. vs. Clave, 124 SCRA 638, September 21, 1983

DECISION
MELENCIO-HERRERA, J.:
The Resolution, dated May 2, 1980, issued by Presidential Executive
Assistant Jacobo Clave in O.P. Case No. 1459, directing petitioners Palay,
Inc. and Alberto Onstott, jointly and severally, to refund to private
respondent, Nazario Dumpit, the amount of P13,722.50 with 12% interest
per annum, as resolved by the National Housing Authority in its Resolution of
July 10, 1979 in Case No. 2167, as well as the Resolution of October 28,
1980 denying petitioners' Motion for Reconsideration of said Resolution of
May 2, 1980, are being assailed in this petition.  Executive Assistant, on May 2, 1980, affirmed the Resolution of the NHA.
On March 28, 1965, petitioner Palay, Inc., through its President, Albert
Onstott, executed in favor of private respondent Nazario Dumpit, a Contract
to Sell a parcel of Land (Lot No. 8, Block IV) of the Crestview Heights
Subdivision in Antipolo, Rizal, with an area of 1,165 square meters, covered
by TCT No. 90454, and owned by said corporation. The sale price was
P23,300.00 with 9% interest per annum, payable with a downpayment of
P4,660.00 and monthly installments of P246.42 until fully paid. Paragraph 6
of the contract provided for automatic extrajudicial rescission upon default in
payment of any monthly installment after the lapse of 90 days from the
expiration of the grace period of one month, without need of notice and with
forfeiture of all installments paid.
Respondent Dumpit paid the downpayment and several installments
amounting to P13,722.50. The last payment was made on December 5, 1967
for installments up to September 1967.
On May 10, 1973, or almost six (6) years later, private respondent wrote
petitioner offering to update all his overdue accounts with interest, and
seeking its written consent to the assignment of his rights to a certain
Lourdes Dizon. He followed this up with another letter dated June 20, 1973
reiterating the same request. Replying, petitioners informed respondent that
his Contract to Sell had long been rescinded pursuant to paragraph 6 of the
contract, and that the lot had already been resold.
Questioning the validity of the rescission of the contract, respondent filed a
letter complaint with the National Housing Authority (NHA) for reconveyance
S a l e s P a r t X I P a g e | 59
with an alternative prayer for refund (Case No. 2167). In a Resolution, dated
July 10, 1979, the NHA, finding the rescission void in the absence of either
judicial or notarial demand, ordered Palay, Inc. and Alberto Onstott, in his
capacity as President of the corporation, jointly and severally, to refund
immediately to Nazario Dumpit the amount of P13,722.50 with 12% interest
from the filing of the complaint on November 8, 1974. Petitioners' Motion for
Reconsideration of said Resolution was denied by the NHA in its Order dated
October 23, 1979.[1]
On appeal to the Office of the President, upon the allegation that the NHA
Resolution was contrary to law (O.P. Case No. 1459), respondent Presidential
Reconsideration sought by petitioners was denied for lack of merit. Thus, the
present petition wherein the following issues are raised:
I
"Whether notice or demand is not mandatory under the circumstances and,
therefore, may be dispensed with by stipulation in a contract to sell.
II
Whether petitioners may be held liable for the refund of the installment
payments made by respondent Nazario M. Dumpit.
III
Whether the doctrine of piercing the veil of corporate fiction has application
to the case at bar.
IV
"Whether respondent Presidential Executive Assistant committed grave abuse
of discretion in upholding the decision of respondent NHA holding petitioners
solidarity liable for the refund of the installment payments made by
respondent Nazario M. Dumpit thereby denying substantial justice to the
petitioners, particularly petitioner Onstott."
We issued a Temporary Restraining Order on February 11, 1981 enjoining
the enforcement of the questioned Resolutions and of the Writ of Execution

that had been issued on December 2, 1980. On October 28, 1981, we
dismissed the petition but upon petitioners' motion, reconsidered the
dismissal and gave due course to the petition of March 15, 1982.
On the first issue, petitioners maintain that it was justified in cancelling the
contract to sell without prior notice or demand upon respondent in view of
paragraph 6 thereof which provides;
"6. That in case the BUYER fails to satisfy any monthly installment, or any
other payments herein agree if upon, the BUYER shall be granted a month of
grace within which to make the payment of the account in arrears together
with the one corresponding to the said month of grace. It shall be
understood, however, that should the month5Of grace herein granted to the
BUYER expire, without the payments corresponding to both months having,
been satisfied, an interest of ten (10%) per cent per annum shall be charged
on the amounts the BUYER should have paid; it is understood further, that
should a period of NINETY (90) DAYS elapse to begin from the expiration of
the month of grace hereinbefore mentioned, and the BUYER shall not have
paid all the amounts that the BUYER should have paid with the
corresponding interest up to the date, the SELLER shall have the right to
declare this contract cancelled and of no effect without notice, and as a
consequence thereof, the SELLER may dispose of the lot/lots covered by this
Contract in favor of other persons, as if this contract had never been entered
into. In case of such cancellation of this Contract, all the amounts which may
have been paid by the BUYER 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
for liquidated damages suffered by virtue of the failure of the BUYER to fulfill
his part of this agreement and the BUYER hereby renounces his right to
demand or reclaim the return of the same and further obligates himself
peacefully to vacate the premises and deliver the same to the SELLER."
Well settled is the rule, as held in previous jurisprudence, [2] that 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. However, even in the cited cases, there was at least a
written notice sent to the defaulter informing him of the rescission. A
stressed in University of the Philippines vs. Walfrido de los Angeles [3] the act
of a party in treating a contract as cancelled should be made known to the
other. We quote the pertinent excerpt:
S a l e s P a r t X I P a g e | 60
"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 prejudice.
In other words, the party who deems the contract violated may 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. But the law definitely does not
require that the contracting party who believes itself injured must first file
suit and wait for a judgment before taking extrajudicial steps to protect its
interest. Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the pendency of the
suit until the final judgment of rescission is rendered when the law itself
requires that he should exercise due diligence to minimize its own damages.
(Civil Code, Article 2203)
We see no conflict between this ruling arid 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., vs.
International Banking Corp., 37 Phil. 631; Republic vs. Hospital de San Juan
de Dios, et ai., 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
extrajudical resolution will remain contestable and subject to judicial
invalidation unless attack thereon should become barred by acquiescense,
estoppel or prescription.
Fears have been expressed that a stipulation providing for a unilateral
rescission in case of breach of contract may render nugatory the general rule
requiring judicial action (v. Footnote, Padilla, Civil Law, Civil Code Anno.;

1967 ed. Vol. IV, page 140) but, as already observed, in case of abuse or
error by the rescinder, the other party is not barred from questioning in
court such abuse or error, the practical effect of the stipulation being merely
to transfer to the defaulter the initiative of instituting suit, instead of the
rescinder." (Italics ours)
Of similar import is the ruling in Nera vs. Vacante, [4] reading:
"A stipulation entitling one party to take possession of the land and building
if the other party violates the contract does not exproprio vigore confer upon
the former the right to take possession thereof if objected to without judicial
intervention and determination."
This was reiterated in Zulueta vs. Mariano[5] where we held that extrajudicial
rescission has legal effect where the other party does not oppose it. [6] Where
it is objected to, a judicial determination of the issue is still necessary.
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 determination.[7]
In this case, private respondent has denied that rescission is justified and
has resorted to judicial action. It is now for the Court to determine whether
resolution of the contract by petitioners was warranted.
We hold that resolution by petitioners of the contract was ineffective and
inoperative against private respondent for lack of notice of resolution, as
held in the U.P. vs. Angeles case, supra.
Petitioner relies on Torralba vs. De los Angeles[8] where it was held that
"there was no contract to rescind in court because from the moment the
petitioner defaulted in the timely payment of the installments, the contract
between the parties was deemed ipso facto rescinded." However, it should
be noted that even in that case notice in writing was made to the vendee of
the cancellation and annulment of the contract although the contract entitled
the seller to immediate re-possessing of the land upon default by the buyer.
The indispensability of notice of cancellation to the buyer was to be later
underscored in Republic Act No. 6551 entitled "An Act to Provide Protection
S a l e s P a r t X I P a g e | 61
to Buyers of Real Estate on Installment Payments" which took effect on
September 14, 1972, when it specifically provided:
"Sec. 3(b) . . . the actual cancellation of the contract shall take place 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 and upon full payment
of the cash surrender value to the buyer." (Italics supplied)
The contention that private respondent had waived his right to be notified
under paragraph 6 of the contract is neither meritorious because it was a
contract of adhesion, a standard form of petitioner corporation, and private
respondent had no freedom to stipulate. A waiver must be certain and
unequivocal, and intelligently made; such waiver follows only where liberty of
choice has been fully accorded.[9] Moreover, it is a matter of public policy to
protect buyers of real estate on installment payments against onerous and
oppressive conditions. Waiver of notice is one such onerous and oppressive
condition to buyers of real estate on installment payments. Regarding the
second issue on refund of the installment payments made by private
respondent. Article 1385 of the Civil Code provides:
"ART. 1385. Rescission creates the obligation to return the things which were
the object of the contract, together with their fruits, and the price with its
interest; consequently, it can be carried out only when he who demands
rescission can return whatever he may be obliged to restore.
"Neither shall rescission take place when the things which are the object of
the contract are legally in the possession of third persons who did not act in
bad faith.
"In this case, indemnity for damages may be demanded from the person
causing the loss."
As a consequence of the resolution by petitioners, rights to the lot should be
restored to private respondent or the same should be replaced by another
acceptable lot. However, considering that the property had already been sold
to a third person and there is no evidence on record that other lots are still
available, private respondent is entitled to the refund of installments paid
plus interest at the legal rate of 12% computed from the date of the
institution of the action.[10] It would be most inequitable if petitioners were to
be allowed to retain private respondent's payments and at the same time
 S a l e s P a r t X I P a g e | 62

appropriate the proceeds of the second sale to another. hereby lifted.

We come now to the third and fourth issues regarding the personal liability
of petitioner Onstott, who was made jointly and severally liable with
petitioner corporation for refund to private respondent of the total amount
the latter had paid to petitioner company. It is basic that a corporation is
invested by law with a personality separate and distinct from those of the
persons composing it as well as from that of any other legal entity to which it
may be related.[11] As a general rule, a corporation may not be made to
answer for acts or liabilities of its stockholders or those of the legal entities
to which it may be connected and vice versa. However, the veil of corporate
fiction may be pierced when it is used as a shield to further an end
subversive of justice;[12] or for purposes that could not have been intended
by the law that created it;[13] or to defeat public convenience, justify wrong,
protect fraud, or defend crime;[14] or to perpetuate fraud or confuse
legitimate issues;[15] or to circumvent the law or perpetuate deception;[16] or
as an alter ego, adjunct or business conduit for the sole benefit of the
stockholders.[17]

We find no badges of fraud on petitioners' part. They had literally relied,

albeit mistakenly, on paragraph 6 (supra) of its contract with private
respondent when it rescinded the contract to sell extrajudicially and had sold
it to a third person.

In this case, petitioner Onstott was made liable because he was then the
President of the corporation and he appeared to be the controlling
stockholder. No sufficient proof exists on record that said petitioner used the
corporation to defraud private respondent. He cannot, therefore, be made
personally liable just because he "appears to be the controlling stockholder."
Mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient ground
for disregarding the separate corporate personality.[18] In this respect then, a
modification of the Resolution under review is called for.
WHEREFORE, the questioned Resolution of respondent public official, dated
May 2, 1980, is hereby modified. Petitioner Palay, Inc. is directed to refund
to respondent Nazario M. Dumpit the amount of P13,722.50, with interest at
twelve (12%) percent per annum from November 8, 1974, the date of the
filing of the Complaint. The temporary Restraining Order heretofore issued is
Sps. ENRIQUE and CONSUELO LIM, petitioners, vs. THE
HONORABLE COURT OF APPEALS, Sps. TERESITA and OSCAR
GUEVARRA, Sps. MARCOS and ANITA ORLINO, Sps. ROMULO and
CONSUELO ORLINO, and Sps. FELIX and DOLORES ORLINO,
respondents.
Sales; Contract of Sale and Contract to Sell, Distinguished; In a contract of
sale, the vendor loses and cannot recover ownership of the thing sold until
and unless the contract is itself resolved and set aside, whereas, in a
contract to sell, title remains in the vendor, if vendee fails to make payment
at the time specified in the contract.—According to Sing Yee v. Santos: x x x
A distinction must be made between a contract of sale in which title passes
to the buyer upon delivery of the thing sold and a contract to sell (or of

“exclusive right and privilege to purchase” as in this case) where by
agreement the ownership is reserved in the seller and is not to pass until the
full payment of the purchase price is made. In the first case, non-payment of
the price is a negative resolutory condition; in the second case, full payment
is a positive suspensive condition. Being contraries, their effect in law cannot
be identical. In the first case, the vendor has lost and cannot recover the
ownership of the land sold until and unless the contract of sale is itself
resolved and set aside. In the second case, however, the title remains in the
vendor if the vendee does not comply with the condition precedent of
making payment at the time specified in the contract. Applying these
distinctions, the Court finds that the agreement between PBC and the private
respondents was only a contract to sell, not a contact of sale. And the
reasons are obvious.
Same; Contracts; Rescission; A party to a contract may treat the same as
cancelled or resolved on account of infractions by the other party, but such
extrajudicial rescission must be made known to the other, and is always
subject to scrutiny and review by the proper courts.—It is true that the
contract to sell imposes reciprocal obligations and so cannot be terminated
unilaterally by either party. Judicial rescission is required under Article 1191
of the Civil Code. However, this rule is not absolute. We have held that in
proper cases, a party may take it upon itself to consider the contract
rescinded and act accordingly albeit subject to judicial confirmation, which
may or may not be given. It is true that the rescinding party takes a risk that
its action may not be approved by the court. But as we said in University of
the Philippines v. De los Angeles: 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 may 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
S a l e s P a r t X I P a g e | 63
correct in law. But the law definitely does not require that the contracting
party who believes itself injured must first file suit and wait for a judgment
before taking extrajudicial steps to protect its interest. Otherwise, the party
injured by the other’s breach will have to passively sit and watch its damages
accumulate during the pen-dency of the suit until final judgment of rescission
is rendered when the law itself requires that he should exercise due diligence
to minimize its own damages. Lim vs. Court of Appeals, 182 SCRA 564, G.R.
No. 85733 February 23, 1990
CRUZ, J.:
The subject of this controversy is a parcel of land consisting of 1,101 square
meters and located in Diliman, Quezon City. It was originally owned by Felix,
Manuel and Maria Concepcion Orlino, who mortgaged it to the Progressive
Commercial Bank as security for a P100,000.00 loan on July 1, 1965. The
loan not having been paid, the mortgage was foreclosed and the bank
acquired the property as the highest bidder at the auction sale on March 28,
1969. The mortgagee thereafter transferred all its assets, including the said
land, to the Pacific Banking Corporation (PBC).
On May 22, 1975, the Orlinos, and their respective spouses (hereinafter
referred to as the private respondents), who had remained in possession of
the land, made a written offer to PBC to repurchase the property. In
response, the bank, through its Assistant Vice-President, sent the following
letter dated November 9, 1977, to the private respondents’ counsel: 
This will confirm our agreement concerning the repurchase by your clients,
Mr. and Mrs. Oscar C. Guevarra of that certain property situated at 26 Jose
Abad Santos, Heroes Hills, Quezon City with an area of 1,101 square meters,
more or less, under the following terms and conditions: 
a) The cash consideration shall be P160,000.00 payable in full upon signing
of the Deed of Absolute Sale; 
b) The additional consideration shall consist of your client's conveyance to us
of their share of 2,901.15 square meters on the property situated at
Camarin, Caloocan City. 

We understand that your clients will be applying for a loan with a bank. In
this connection, we are enclosing a xerox copy of the Transfer Certificate of
Title No. 218661-Quezon City, Tax Declaration No. 3092 and Official Receipt
No. E-404723 covering payment of real estate taxes for 1977. Kindly request
your clients to expedite the loan so that we can consummate the transaction
as soon as possible. 
Please request your clients to sign their conformity below and return the
duplicate thereof for our files.[1]
Oscar C. Guevarra, one of the private respondents, indicated the required
conformity.
One year later, on November 2, 1978, PBC advised the private respondents
that if the transaction was not finalized within 30 days, it would consider the
offer of other buyers.[2] The record does not show any further development
until June 8, 1979, when the private respondents requested PBC to allow
them to secure a certified true copy of its Torrens certificate over the land
for purposes of its survey and partition among them preparatory to the
actual transfer of title to them.[3] PBC granted the request subject to the
condition that title would remain with it until the execution of the necessary
deed of conveyance.[4]
On April 8, 1980, or two years later, PBC reminded the private respondents
of its letter of November 2, 1978, but again no action was taken to deliver to
it the stipulated consideration for the sale. Finally, on May 14, 1980, PBC
executed a deed of sale over the land in favor of the herein petitioners, the
spouses Enrique and Consuelo Lim, for the sum of P300,000.00. [5]
On September 30, 1980, the private respondents filed a complaint in the
Regional Trial Court of Quezon City against the petitioners and PBC for the
annulment of the deed of sale on the ground that the subject land had been
earlier sold to them. In its judgment for the plaintiffs, the court held that
both PBC and the spouses Lim had acted in bad faith when they concluded
the sale knowing that "there was a cloud in the status of the property in
question."[6] The decision was affirmed  in toto  by the respondent court,
[7]
 and the petitioners are now before us, urging reversal.
The petitioners claim they are purchasers in good faith, having relied on the
assurances of PBC as verified from the records in the Registry of Deeds of
Quezon City that the land belonged to PBC and was unencumbered. They
S a l e s P a r t X I P a g e | 64
therefore should have preferential right to the disputed land, which they had
registered in their name under TCT No. 268623. For their part, the private
respondents insist that as they had a valid and binding earlier deed of sale in
their favor, the land could no longer be sold by PBC to the petitioners, who
were aware of their prior right.
In support of their position that it was not incumbent upon them to go
beyond the land records to check the real status of the land, the petitioners
cite Seño v. Mangubat,[8] where the Court said: 
In order that a purchaser of land with a Torrens title may be considered as a
purchaser in good faith, it is enough that he examines the latest certificate of
title which in this case is that issued in the name of the immediate
transferor. The purchaser is not bound by the original certificate of title but
only by the certificate of title of the person from whom he has purchased the
property. 
xxx xxx xxx 
Thus, where innocent third persons relying on the correctness of the
certificate of title issued, acquire rights over the property, the court cannot
disregard such rights and order the total cancellation of the certificate for
that would impair public confidence in the certificate of title; otherwise
everyone dealing with property registered under the torrens system would
have to inquire in every instance as to whether the title had been regularly
or irregularly issued by the court. Indeed, this is contrary to the evident
purpose of the law. Every person dealing with registered land may safely rely
on the correctness of the certificate of title issued therefore and the law will
in no way oblige him to go behind the certificate to determine the condition
of the property. Stated differently, an innocent purchaser for value relying on
a torrens title issued is protected.
And even assuming that there was an earlier valid sale of the property to the
private respondents, the petitioners add, they would still prevail under Article
1544 of the Civil Code, providing as follows: 
If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property. 

Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.  can determine the nature of their agreement.
Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.
The private respondents, however, deny that the petitioners had acted in
good faith, pointing to the evidence that Consuelo Lim had, before the
execution of the disputed deed of sale, visited the property and been
informed of their existing adverse claim thereto. [9] Besides, the said deed
contained the following stipulation:  is a positive suspensive condition. Being contraries, their effect in law cannot
That the VENDEE is aware of the fact that the aforementioned property is
presently occupied by the former owners and that clearing of the property of
its occupants shall be for the exclusive responsibility and account of the
vendee.
And, indeed, the Court also said in Seño that:  Applying these distinctions, the Court finds that the agreement between PBC
The well-known rule in this jurisdiction is that a person dealing with a
registered land has a right to rely upon the face of the Torrens Certificate of
Title and to dispense with the need of inquiring further, except when the
party concerned has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry. (Italics supplied.)
As the Court sees it, the real issue is not whether the petitioners acted in
good faith but whether there was in fact a prior sale of the same property to
the private respondents. Only if it is established that there was indeed a
double sale of the property will it be necessary to ascertain if Article 1544 is
applicable.
Stated differently, the question is: Was the transaction between the private
respondents and PBC, as embodied in the letter of November 9, 1977, a
contract to sell or a contract of sale?
It is not enough to say that the contract of sale being consensual, it became
effective between the bank and the private respondents as of November 9,
1977. There is no question about that; but such agreement is like putting the
cart before the horse. Precisely, our purpose is to ascertain to what
S a l e s P a r t X I P a g e | 65
particular undertakings the parties have given their mutual consent so we
According to Sing Yee v. Santos:[10] 
x x x A distinction must be made between a contract of sale in which title
passes to the buyer upon delivery of the thing sold and a contract to sell (or
of "exclusive right and privilege to purchase" as in this case) 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
be identical. In the first case, the vendor has lost and cannot recover the
ownership of the land sold until and unless the contract of sale is itself
resolved and set aside. In the second case, however, the title remains in the
vendor if the vendee does not comply with the condition precedent of
making payment at the time specified in the contract.
and the private respondents 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 in favor of the private respondents. In their
letter to PBC on June 8, 1979, they acknowledged that title to the property
would remain with the bank until their transaction shall have been finalized.
In response, PBC reiterated the same condition. No less important, the
consideration agreed upon by the parties was never paid by the private
respondents, to convert the agreement into a contract of sale. In fact, PBC
reminded them twice — on November 2, 1978, and on April 8, 1980 — to
comply with their obligations. They did not. Their default was not, as the
respondent court described it, "a slight delay" but lasted for all of three years
and in fact continued up to the rendition of the decision in the trial court. As
payment of the consideration was a positive suspensive condition, title to the
subject property never passed to the private respondents. Hence, the
property was legally unencumbered and still belonged to PBC on May 14,
1980, when it was sold by the bank to the petitioners.
 S a l e s P a r t X I P a g e | 66

It is true that the contract to sell imposes reciprocal obligations and so property and there is no record that they were paying rentals. Under the
cannot be terminated unilaterally by either party. Judicial rescission is circumstances, PBC had the right to consider the contract to sell between
required under Article 1191 of the Civil Code. However, this rule is not them terminated for non-payment of the stipulated consideration. We hereby
absolute. We have held that in proper cases, a party may take it upon itself confirm that rescission.
to consider the contract rescinded and act accordingly albeit subject to
judicial confirmation, which may or may not be given. It is true that the Having arrived at these conclusions, the Court no longer finds it necessary to
rescinding party takes a risk that its action may not be approved by the determine if the petitioners acted in bad faith when they purchased the
court. But as we said in University of the Philippines v. De los Angeles:[11]   subject property. The private respondents lost all legal interest in the land
when their contract to sell was rescinded by PBC for their non-compliance
Of course, it must be understood that the act of a party in treating a contract with its provisions. As that contract was no longer effective when the land
as cancelled or resolved on account of infractions by the other contracting was sold by PBC to the petitioners, the private respondents had no legal
party must be made known to the other and is always provisional, being ever standing to assail that subsequent transaction. The deed of sale between
subject to scrutiny and review by the proper court. If the other party denies PBC and the petitioners must therefore be sustained.
that rescission is justified, it is free to resort to judicial action its own behalf,
and bring the matter to court. Then, should the court, after due hearing, WHEREFORE, the petition is GRANTED and the challenged decision of the
decide that the resolution of the contract was not warranted, the responsible Court of Appeals is REVERSED. TCT No. 268623 in favor of the petitioners is
party will be sentenced to damages; in the contrary case, the resolution will recognized as valid and the complaint for the annulment of the deed of sale
be affirmed, and the consequent indemnity awarded to the party prejudiced.  dated May 14, 1980, is hereby dismissed. Costs against the private
respondents.
In other words, the party who deems the contract violated may 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. But the law definitely does not
require that the contracting party who believes itself injured must first file
suit and wait for a judgment before taking extrajudicial steps to protect its
interest. Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the pendency of the
suit until final judgment of rescission is rendered when the law itself requires
that he should exercise due diligence to minimize its own damages.

In the case at bar, the private respondents obligated themselves to deliver to

the bank the sum of P160,000.00 and their share of 2,901.15 square meters
on a property situated in Caloocan City. In the letter of PBC dated November
9, 1977, they were requested to "expedite the loan (they were negotiating
for this purpose) so we can consummate the transaction as soon as
possible." That was in 1977. In 1978, they were reminded of their obligation
and asked to comply within thirty days. They did not. On April 8, 1980, they
were reminded of that letter of November 2, 1978, and again asked to
comply; but again they did not. Surely, the bank could not be required to
wait for them forever, especially so since they remained in possession of the
AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. COURT
OF APPEALS, SOLID HOMES, INC., INVESTCO, INC., and REGISTER
OF DEEDS OF MARIKINA, respondents.
G.R. No. 135016. September 10, 2001.*
SOLID HOMES, INC, petitioner, vs. INVESTCO, INC, substituted by
ARMED FORCES OF THE PHILIPPINES MUTUAL BENEFIT
ASSOCIATION, INC, respondent.

Land Titles; Lis Pendens; Pencil markings are not an accepted form of
annotating a notice of lis pendens.—Pencil markings, which even Solid
Homes, Inc. admits to be provisional, are not an accepted form of annotating
a notice of lis pendens. The Court cannot accept the argument that such
pencil annotation can be considered as a valid annotation of notice of lis
pendens, and thus an effective notice to the whole world as to the status of
the title to the land. The law requires proper annotation, not “provisional”
annotation of a notice of lis pendens.
Same; Same; If we allow provisional annotations as a valid form of
annotation of lis pendens, we would be eroding the very value of the
indefeasibility of the torrens system.—If we allow provisional annotations as
a valid form of annotation of notice of lis pendens, we would be eroding the
very value of the indefeasibility of the torrens system. If there were a valid
annotation of notice of lis pendens, the same would have been carried over
to the titles issued to AFPMBAI. As it is, the transfer certificates of titles of
the vendor Investco, Inc. conveyed to AFPMBAI were clean and without any
encumbrance.
Same; Same; Actions; There could be no valid annotation on the titles where
the case used as basis of the annotation pending with the trial court is an
action for collection of a sum of money and does not involve the titles to,
possession or ownership of the subject property or an interest therein.—In
the present case, there could be no valid annotation on the titles issued to
AFPMBAI because the case used as basis of the annotation pending with the
trial court was an action for collection of a sum of money and did not involve
the titles to, possession or ownership of the subject property or an interest
therein. This Court, in its final decision on the case categorized the action
initiated by Investco, Inc. against Solid Homes, Inc. (Civil Case No. 40615 of
the Regional Trial Court, Pasig, Metro Manila) as: “An action for collection of
sums of money, damages and attorney’s fees was filed with the Regional
Trial Court (Civil Case No. 40615) of Pasig by private respondents Investco,
Angela Perez Staley and Antonio Perez, Jr. against petitioner Solid Homes,
Inc” Unquestionably, such action did not directly involve titles to, ownership
or possession of the subject property, and, therefore, was not a proper
subject of a notice of lis pendens.
S a l e s P a r t X I P a g e | 67
Same; Same; Torrens System; The Torrens System was adopted in this
country because it was believed to be the most effective measure to
guarantee the integrity of land titles and to protect their indefeasibility once
the claim of ownership is established and recognized.—“The Torrens System
was adopted in this country because it was believed to be the most effective
measure to guarantee the integrity of land titles and to protect their
indefeasibility once the claim of ownership is established and recognized. If a
person purchases a piece of land on the assurance that the seller’s title
thereto is valid, he should not run the risk of being told later that his
acquisition was ineffectual after all. This would not only be unfair to him.
What is worse is that if this were permitted, public confidence in the system
would be eroded and land transactions would be attended by complicated
and not necessarily conclusive investigations and proof of ownership. The
further consequence would be that land conflicts could be even more
numerous and complex than they are now and possibly also more abrasive, if
not even violent.”
Same; Same; Sales; “Contract of Sale” and “Contract to Sell,” Distinguished.
—In Salazar v. Court of Appeals, we explained the distinction between a
contract to sell and a contract of sale: “In a contract of sale, the title to the
property passes to the vendee upon the delivery of the thing sold; in a
contract to sell, ownership is, by agreement, reserved in the vendor and is
not to pass to the vendee until full payment of the purchase price. Otherwise
stated, in a contract of sale, the vendor loses ownership over the property
and cannot recover it until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until full payment
of the price. In the latter contract, payment of the price is a positive
suspensive condition, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming
effective.”
Same; Same; Same; Rescission; Failure by one of the parties to abide by the
conditions in a contract to sell results in the rescission of the contract.—Upon
Solid Homes, Inc.’s failure to comply with its obligation thereunder, there
was no need to judicially rescind the contract to sell. Failure by one of the
parties to abide by the conditions in a contract to sell resulted in the
rescission of the contract. Unquestionably, Solid Homes, Inc. reneged on its
obligation to pay the installments for the purchase of the Quezon City and

Marikina property of Investco, Inc. on the dates specified in the contract to
sell.
Judgments; Writs of Execution; It is the prevailing party which is entitled as
a matter of right to a writ of execution in its favor—it is not an option of the
losing party to file a motion for execution of judgment to compel the winning
party to take the judgment.—Movant Solid Homes, Inc. finally contends that
when the decision in Civil Case No. 40615 became final, there was no one to
move for execution of the decision since Investco, Inc. had absconded, and
had in fact re-sold the property in question to AFPMBAI. We find the
contention without merit. Investco, Inc. was the prevailing party which had
the right to demand execution. “Once a judgment becomes final and
executory, the prevailing party can have it executed as a matter of right, and
the issuance of a writ of execution becomes a ministerial duty of the court.”
In fact, the prevailing party is the one really entitled to file a motion for the
issuance of a writ of execution. Yet, in this case, it was Solid Homes, Inc.
that filed on June 19, 1996, a motion for execution of judgment in the court
of origin (RTC Pasig, Branch 157). The trial court denied the motion. Hence,
on September 11, 1998, Solid Homes, Inc. filed a petition for certiorari with
this Court. Assuming that AFPMBAI was bound by the judgment in Civil Case
No. 40615, and be substituted for Investco, Inc., it is clear that Investco,
Inc. prevailed in the case. It was the winning party. It is the prevailing party
which is entitled as a matter of right to a writ of execution in its favor. It is
not an option of the losing party to file a motion for execution of judgment to
compel the winning party to take the judgment. As the losing party in Civil
Case No. 40615, Solid Homes, Inc. cannot now insist on the performance of
the very contract on which it defaulted for more than fourteen (14) years.
Hence, Solid Homes, Inc. has no personality to move for execution of the
final judgment in Civil Case No. 40615. The trial court correctly denied its
motion for execution. AFP Mutual Benefit Association, Inc. vs. Court of
Appeals, 364 SCRA 768, G.R. No. 104769, G.R. No. 135016 September 10,
2001
RESOLUTION
PARDO, J.:
What is before the Court is Solid Homes, Inc.'s motion for reconsideration of
the decision promulgated on March 3, 2000, reversing the decision of the
Court of Appeals  and ordering the Register of Deeds to cancel the notice
of lis pendens on the titles issued to petitioner AFP Mutual Benefit
S a l e s P a r t X I P a g e | 68
Association, Inc. (AFPMBAI), declaring it as buyer in good faith and for value.
We have defined a purchaser in good faith and for value as one who buys
the property of another without notice that some other person has a right to
or interest in such property and pays a full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or interest of
some other person in the property.[1]
Solid Homes, Inc.'s motion for reconsideration is based on the following
grounds: (1) that the Court erred in ruling that  petitioner was a purchaser in
good faith and for value; (2) that the Court erred in failing to appreciate
Solid Homes, Inc.'s cause of action (in Civil Case No. 52999); and (3) that
the Court erred in denying Solid Homes, Inc.'s petition (in G. R. No. 135016)
to set aside the trial court's order denying its motion to execute the decision
in Civil Case No. 40615.
We find the motion without merit.
1. Solid Homes, Inc.'s position is anchored on the preposition that a notice
of lis pendens was duly annotated on the vendor's title that must be deemed
carried over to the titles issued to AFPMBAI, subjecting it to the final result of
the litigation[2] as a transferee pendente lite.
However, the law is clear.[3] The Revised Rules of Court[4] allows the
annotation of a notice of lis pendens in actions affecting the title or right of
possession of real property,[5] or an interest in such real property.[6] We
further declared that the rule of lis pendens applied to suits brought "to
establish an equitable estate, interest, or right in specific real property or to
enforce any lien, charge, or encumbrance against it x x x."[7]
Pencil markings, which even Solid Homes, Inc. admits to be provisional, [8] are
not an accepted form of annotating a notice of lis pendens. The Court cannot
accept the argument that such pencil annotation can be considered as a valid
annotation of  notice of  lis pendens, and thus an effective notice to the whole
world as to the status of the title to the land. The  law  requires proper
annotation, not "provisional" annotation of a notice of lis pendens.
If we allow provisional annotations as a valid form of annotation of notice
of lis pendens, we would be eroding the very value of the indefeasibility of

the torrens system.  If there were a valid annotation of notice of lis
pendens, the same would have been carried over to the titles issued to
AFPMBAI. As it is, the transfer certificates of titles of the vendor Investco,
Inc. conveyed to AFPMBAI were clean and without any encumbrance.
In the present case, there could be no valid annotation on the titles issued to
AFPMBAI because the case used as basis of the annotation pending with the
trial court was an action for collection of a sum of money and did not involve
the titles to, possession or ownership of the subject property or an interest
therein. This Court, in its final decision on the case categorized the action
initiated by Investco, Inc. against Solid Homes, Inc. (Civil Case No. 40615 of
the Regional Trial Court, Pasig, Metro Manila) as:
"An action for collection of sums of money, damages and attorney's
fees was filed with the Regional Trial Court (Civil Case No. 40615) of Pasig
by private respondents Investco, Angela Perez Staley and Antonio Perez, Jr.
against petitioner Solid Homes, Inc."[9]
Unquestionably, such action did not directly involve titles to, ownership or
possession of the subject property, and, therefore, was not a proper subject
of a notice of lis pendens.
"The Torrens System was adopted in this country because it was believed to
be the most effective measure to guarantee the integrity of land titles and to
protect their indefeasibility once the claim of ownership is established and
recognized. If a person purchases a piece of land on the assurance that the
seller's title thereto is valid, he should not run the risk of being told later that
his acquisition was ineffectual after all. This would not only be unfair to him.
What is worse is that if this were permitted, public confidence in the system
would be eroded and land transactions would be attended by complicated
and not necessarily conclusive investigations and proof of ownership. The
further consequence would be that land conflicts could be even more
numerous and complex than they are now and possibly also more abrasive, if
not even violent."[10]
Prevailing jurisprudence recognizes that "All persons dealing with property
covered by the torrens certificate of title are not required to go beyond what
appears on the face of the title."[11] "The buyer is not even obligated to look
beyond the certificate to investigate the titles of the seller appearing on the
S a l e s P a r t X I P a g e | 69
face of the certificate."[12] Hence, we ruled that AFPMBAI is a buyer in good
faith and for value.
Consequently, we reject movant Solid Homes, Inc.'s contention that
AFPMBAI is a transferee pendente lite of Investco, Inc.
2.    It should be emphasized that the contractual relation between Investco,
Inc. and Solid Homes, Inc., is based on an agreement executed in 1976 as a
contract to sell and to buy. AFPMBAI never figured in this contract. The
relationship between AFPMBAI and Investco, Inc. arose out of a contract of
absolute sale after Solid Homes, Inc. reneged or defaulted on its contract to
sell, and Investco, Inc. rescinded extra-legally such contact to sell with Solid
Homes, Inc. AFPMBAI did not acquire from Solid  Homes, Inc. its rights or
interest over the property in question; Investco, Inc. sold the  property itself
which AFPMBAI paid for in full, thus causing the transfer of titles in the name
of AFPMBAI.
When the contract was entered into between Solid Homes, Inc. and
Investco, Inc. in September 1976, the titles to the Quezon City and Marikina
property had not been transferred in the name of Investco, Inc. as assignee
of the owners. Hence, Investco, Inc. merely agreed to sell, and Solid Homes,
Inc. to buy, the former's "rights and interest" in the subject property which
at the time was still registered in the names of Angela Perez Staley and
Antonio Perez, Investco, Inc.'s predecessors-in-interest.
Under the contract to sell and buy, the vendors bound themselves to cause
the titles to the land to be transferred in the name of Investco, Inc. after
which, should Solid Homes, Inc. complete the installment payments,
Investco, Inc. would execute a "Deed of Absolute Sale" in favor of Solid
Homes, Inc. and the latter would execute a first preferred mortgage in favor
of Investco, Inc. The deed of absolute sale would replace the contract to
sell.  Only then would Solid Homes, Inc. be entitled to take possession of the
Quezon City and Marikina parcels of land and introduce improvements
thereon.
On or about March 21, 1979, the titles to the Marikina property were issued
in the name of Investco, Inc. However, Investco, Inc. did  not execute a
deed of absolute sale in favor of Solid Homes, Inc. because Solid Homes,
Inc. never paid in full its stipulated obligation payable in installments. In fact,

Solid Homes, Inc. did not even bother to register its contract to sell with the
Register of Deeds pursuant to Presidential Decree 1529, also known as the
"Property Registration Decree."
3.    We find untenable Solid Homes, Inc.'s contention that the transaction
between AFPMBAI, Investco, Inc. and Solid Homes, Inc. is in the nature of a
double sale. The transaction between Investco, Inc. and Solid Homes, Inc.
was a contract to sell and to  buy  that was not fully paid because Solid
Homes, Inc. defaulted on its payments. On the other hand, the contract
between Investco, Inc. and AFPMBAI was an absolute sale that culminated in
the registration of the deeds and the issuance of certificate of titles in favor
of AFPMBAI.
In Salazar v. Court of Appeals,[13] we explained the distinction between a
contract to sell and a contract of sale:
"In a contract of sale, the title to the property passes to the vendee upon the
delivery of the thing sold; in a contract to sell, ownership is, by agreement,
reserved in the vendor and is not to pass to the vendee until full payment of
the purchase price. Otherwise stated, in a contract of sale, the vendor loses
ownership over the property and cannot recover it until and unless the
contract is resolved or rescinded; whereas in a contract to sell, title is
retained by the vendor until full payment of the price.  In the latter contract,
payment of the price is a positive suspensive condition, failure of which is not
a breach but an event that prevents the obligation of the vendor to convey
title from becoming effective."[14]
Upon Solid Homes, Inc.'s failure to comply with its  obligation thereunder,
there was no need to judicially rescind the contract to sell. Failure by one of
the parties to abide by the conditions  in a  contract to sell resulted in the
rescission of the contract.[15] Unquestionably, Solid Homes, Inc. reneged on
its obligation to pay the installments for the purchase of the Quezon City and
Marikina property of Investco, Inc. on the dates specified in the contract to
sell.
4. Movant Solid Homes, Inc. finally contends that when the decision in Civil
Case No. 40615 became final, there was no one to move for execution of the
decision since Investco, Inc. had absconded, and had in fact re-sold the
property in question to AFPMBAI. We find the contention without merit.
S a l e s P a r t X I P a g e | 70
Investco, Inc. was the prevailing party which had the right to demand
execution.[16] "Once a judgment becomes final and executory, the
prevailing party can have it executed as a matter of right, and the
issuance of a writ of execution becomes a ministerial duty of the court." [17] In
fact, the prevailing party is the one really entitled to file a motion for the
issuance of a writ of execution. Yet, in this case, it was Solid Homes, Inc.
that filed on June 19, 1996, a motion for execution of judgment in the court
of origin (RTC Pasig, Branch 157). The trial court denied the motion. Hence,
on September 11, 1998, Solid Homes, Inc. filed a petition for certiorari with
this Court.[18]
Assuming that AFPMBAI was bound by the judgment in Civil  Case  No.
40615, and be substituted for Investco, Inc., it is clear that Investco, Inc.
prevailed in the case.  It was the winning party.[19] It is the prevailing
party which is entitled as a matter of right to a writ of execution in its favor.
[20]
 It is not an option of the losing party to file a motion for execution of
judgment to compel the winning party to take the judgment. As the losing
party in Civil Case No. 40615, Solid Homes, Inc. can not now insist on the
performance of the very contract on which it defaulted for more than
fourteen (14) years. Hence, Solid Homes, Inc. has no personality to move for
execution of the final judgment in Civil Case No. 40615. The trial court
correctly denied its motion for execution.
It would be the height of unfairness if Solid Homes, Inc. which has failed to
pay anything since 1981 and defaulted since 1982, would now get the
property by performance of the very contract which it violated. With the
passage of time, more than fourteen (14) years, and appreciation in the
value of real estate, the property is now worth billions of pesos,[21] thus
enriching Solid Homes, Inc. for its violation of the contract and default on its
obligation.
IN VIEW WHEREOF, we DENY Solid Homes, Inc.'s motion for
reconsideration, for lack of merit.  The denial is final.