1|Page

1. Ramona will make a down payment of Fifty Thousand

ROMULO A. CORONEL, ALARICO A. CORONEL, (P50,000.00) pesos upon execution of the document
ANNETTE A. CORONEL, ANNABELLE C. aforestated;
GONZALES (for herself and on behalf of Floraida
C. Tupper, as attorney-in-fact), CIELITO A.
2. The Coronels will cause the transfer in their names of the
CORONEL, FLORAIDA A. ALMONTE, and
CATALINA BALAIS MABANAG, petitioners, vs. title of the property registered in the name of their deceased
THE COURT OF APPEALS, CONCEPCION D. father upon receipt of the Fifty Thousand (P50,000.00) Pesos
ALCARAZ and RAMONA PATRICIA down payment;
ALCARAZ, assisted by GLORIA F. NOEL as
attorney-in-fact, respondents. 3. Upon the transfer in their names of the subject property, the
Coronels will execute the deed of absolute sale in favor of
Ramona and the latter will pay the former the whole balance of
DECISION
One Million One Hundred Ninety Thousand (P1,190,000.00)
MELO, J.: Pesos.

The petition before us has its roots in a complaint for On the same date (January 15, 1985), plaintiff-appellee
specific performance to compel herein petitioners (except the Concepcion D. Alcaraz (hereinafter referred to as Concepcion),
last named, Catalina Balais Mabanag) to consummate the sale mother of Ramona, paid the down payment of Fifty Thousand
of a parcel of land with its improvements located along (P50,000.00) Pesos (Exh. B, Exh. 2).
Roosevelt Avenue in Quezon City entered into by the parties
sometime in January 1985 for the price of P1,240,000.00. On February 6, 1985, the property originally registered in the
name of the Coronels father was transferred in their names
The undisputed facts of the case were summarized by
under TCT No. 327043 (Exh. D; Exh 4)
respondent court in this wise:
On February 18, 1985, the Coronels sold the property covered
On January 19, 1985, defendants-appellants Romulo
by TCT No. 327043 to intervenor-appellant Catalina B.
Coronel, et. al. (hereinafter referred to as Coronels) executed a
Mabanag (hereinafter referred to as Catalina) for One Million
document entitled Receipt of Down Payment (Exh. A) in favor
Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the
of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as
latter has paid Three Hundred Thousand (P300,000.00) Pesos
Ramona) which is reproduced hereunder:
(Exhs. F-3; Exh. 6-C)

RECEIPT OF DOWN PAYMENT

For this reason, Coronels canceled and rescinded the contract
(Exh. A) with Ramona by depositing the down payment paid
P1,240,000.00 - Total amount by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.
50,000.00 - Down payment
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.
P1,190,000.00 - Balance 327403 (Exh. E; Exh. 5).

Received from Miss Ramona Patricia Alcaraz of 146 Timog, On April 2, 1985, Catalina caused the annotation of a notice of
Quezon City, the sum of Fifty Thousand Pesos purchase price adverse claim covering the same property with the Registry of
of our inherited house and lot, covered by TCT No. 119627 of Deeds of Quezon City (Exh. F; Exh. 6).
the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00. On April 25, 1985, the Coronels executed a Deed of Absolute
Sale over the subject property in favor of Catalina (Exh. G;
We bind ourselves to effect the transfer in our names from our Exh. 7).
deceased father, Constancio P. Coronel, the transfer certificate
of title immediately upon receipt of the down payment above- On June 5, 1985, a new title over the subject property was
stated. issued in the name of Catalina under TCT No. 351582 (Exh. H;
Exh. 8).
On our presentation of the TCT already in or name, We will
immediately execute the deed of absolute sale of said property (Rollo, pp. 134-136)
and Miss Ramona Patricia Alcaraz shall immediately pay the
balance of the P1,190,000.00. In the course of the proceedings before the trial court
(Branch 83, RTC, Quezon City) the parties agreed to submit
Clearly, the conditions appurtenant to the sale are the the case for decision solely on the basis of documentary
following: exhibits.Thus, plaintiffs therein (now private respondents)
2|Page

proffered their documentary evidence accordingly marked as for decision; (2) When the defendants and intervenor did not
Exhibits A through J, inclusive of their corresponding object to the authority of Judge Reynaldo Roura to decide the
submarkings. Adopting these same exhibits as their own, then case prior to the rendition of the decision, when they met for
defendants (now petitioners) accordingly offered and marked the first time before the undersigned Presiding Judge at the
them as Exhibits 1 through 10, likewise inclusive of their hearing of a pending incident in Civil Case No. Q-46145 on
corresponding submarkings.Upon motion of the parties, the November 11, 1988, they were deemed to have acquiesced
trial court gave them thirty (30) days within which to thereto and they are now estopped from questioning said
simultaneously submit their respective memoranda, and an authority of Judge Roura after they received the decision in
additional 15 days within which to submit their corresponding question which happens to be adverse to them; (3) While it is
comment or reply thereto, after which, the case would be true that Judge Reynaldo Roura was merely a Judge-on-detail
deemed submitted for resolution. at this Branch of the Court, he was in all respects the Presiding
Judge with full authority to act on any pending incident
On April 14, 1988, the case was submitted for resolution submitted before this Court during his incumbency. When he
before Judge Reynaldo Roura, who was then temporarily returned to his Official Station at Macabebe, Pampanga, he did
detailed to preside over Branch 82 of the RTC of Quezon not lose his authority to decide or resolve cases submitted to
City. On March 1, 1989, judgment was handed down by Judge him for decision or resolution because he continued as Judge of
Roura from his regular bench at Macabebe, Pampanga for the Regional Trial Court and is of co-equal rank with the
the Quezon City branch, disposing as follows: undersigned Presiding Judge. The standing rule and supported
by jurisprudence is that a Judge to whom a case is submitted
WHEREFORE, judgment for specific performance is hereby for decision has the authority to decide the case
rendered ordering defendant to execute in favor of plaintiffs a notwithstanding his transfer to another branch or region of the
deed of absolute sale covering that parcel of land embraced in same court (Sec. 9, Rule 135, Rule of Court).
and covered by Transfer Certificate of Title No. 327403 (now
TCT No. 331582) of the Registry of Deeds for Quezon City, Coming now to the twin prayer for reconsideration of the
together with all the improvements existing thereon free from Decision dated March 1, 1989 rendered in the instant case,
all liens and encumbrances, and once accomplished, to resolution of which now pertains to the undersigned Presiding
immediately deliver the said document of sale to plaintiffs and Judge, after a meticulous examination of the documentary
upon receipt thereof, the plaintiffs are ordered to pay evidence presented by the parties, she is convinced that the
defendants the whole balance of the purchase price amounting Decision of March 1, 1989 is supported by evidence and,
to P1,190,000.00 in cash. Transfer Certificate of Title No. therefore, should not be disturbed.
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 IN VIEW OF THE FOREGOING, the Motion for
persons claiming under them are hereby ordered to vacate the Reconsideration and/or to Annul Decision and Render Anew
subject property and deliver possession thereof to Decision by the Incumbent Presiding Judge dated March 20,
plaintiffs. Plaintiffs claim for damages and attorneys fees, as 1989 is hereby DENIED.
well as the counterclaims of defendants and intervenors are
hereby dismissed. SO ORDERED.

No pronouncement as to costs. Quezon City, Philippines, July 12, 1989.

So Ordered. (Rollo, pp. 108-109)

Macabebe, Pampanga for Quezon City, March 1, 1989. Petitioners thereupon interposed an appeal, but
on December 16, 1991, the Court of Appeals (Buena, Gonzaga-
(Rollo, p. 106) Reyes, Abad-Santos (P), JJ.) rendered its decision fully
agreeing with the trial court.
A motion for reconsideration was filed by petitioners Hence, the instant petition which was filed on March 5,
before the new presiding judge of the Quezon City RTC but the 1992. The last pleading, private respondents Reply
same was denied by Judge Estrella T. Estrada, thusly: Memorandum, was filed on September 15, 1993. The case was,
however, re-raffled to undersigned ponente only on August 28,
The prayer contained in the instant motion, i.e., to annul the 1996, due to the voluntary inhibition of the Justice to whom the
decision and to render anew decision by the undersigned case was last assigned.
Presiding Judge should be denied for the following reasons: (1) While we deem it necessary to introduce certain
The instant case became submitted for decision as of April 14, refinements in the disquisition of respondent court in the
1988 when the parties terminated the presentation of their affirmance of the trial courts decision, we definitely find the
respective documentary evidence and when the Presiding Judge instant petition bereft of merit.
at that time was Judge Reynaldo Roura. The fact that they were
allowed to file memoranda at some future date did not change The heart of the controversy which is the ultimate key in
the fact that the hearing of the case was terminated before the resolution of the other issues in the case at bar is the precise
Judge Roura and therefore the same should be submitted to him determination of the legal significance of the document entitled
3|Page

Receipt of Down Payment which was offered in evidence by to sell from arising and thus, ownership is retained by the
both parties. There is no dispute as to the fact that the said prospective seller without further remedies by the prospective
document embodied the binding contract between Ramona buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court
Patricia Alcaraz on the one hand, and the heirs of Constancio P. had occasion to rule:
Coronel on the other, pertaining to a particular house and lot
covered by TCT No. 119627, as defined in Article 1305 of the Hence, We hold that the contract between the petitioner and the
Civil Code of the Philippines which reads as follows: 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
Art. 1305. A contract is a meeting of minds between two the price, such payment being a positive suspensive condition
persons whereby one binds himself, with respect to the other, to and failure of which is not a breach, casual or serious, but
give something or to render some service. simply an event that prevented the obligation of the vendor to
convey title from acquiring binding force.
While, it is the position of private respondents that the
Receipt of Down Payment embodied a perfected contract of Stated positively, upon the fulfillment of the suspensive
sale, which perforce, they seek to enforce by means of an condition which is the full payment of the purchase price, the
action for specific performance, petitioners on their part insist prospective sellers obligation to sell the subject property by
that what the document signified was a mere executory contract entering into a contract of sale with the prospective buyer
to sell, subject to certain suspensive conditions, and because of becomes demandable as provided in Article 1479 of the Civil
the absence of Ramona P. Alcaraz, who left for the United Code which states:
States of America, said contract could not possibly ripen into a
contract of absolute sale. Art. 1479. A promise to buy and sell a determinate thing for a
Plainly, such variance in the contending parties contention price certain is reciprocally demandable.
is brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on An accepted unilateral promise to buy or to sell a determinate
whatever relevant and admissible evidence may be available on thing for a price certain is binding upon the promissor of the
record, this Court, as were the courts below, is now called upon promise is supported by a consideration distinct from the price.
to adjudge what the real intent of the parties was at the time the
said document was executed. A contract to sell may thus be defined as a bilateral
contract whereby the prospective seller, while expressly
The Civil Code defines a contract of sale, thus: reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said
Art. 1458. By the contract of sale one of the contracting parties property exclusively to the prospective buyer upon fulfillment
obligates himself to transfer the ownership of and to deliver a of the condition agreed upon, that is, full payment of the
determinate thing, and the other to pay therefor a price certain purchase price.
in money or its equivalent.
A contract to sell as defined hereinabove, may not even
Sale, by its very nature, is a consensual contract because it be considered as a conditional contract of sale where the seller
is perfected by mere consent. The essential elements of a may likewise reserve title to the property subject of the sale
contract of sale are the following: 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
a) Consent or meeting of the minds, that is, consent to transfer contingent event which may or may not occur. If the
ownership in exchange for the price; suspensive condition is not fulfilled, the perfection of the
contract of sale is completely abated (cf. Homesite and
b) Determinate subject matter; and Housing Corp. vs. Court of Appeals, 133 SCRA 777
[1984]). However, if the suspensive condition is fulfilled, the
c) Price certain in money or its equivalent. contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the
Under this definition, a Contract to Sell may not be sale to the buyer, ownership thereto automatically transfers to
considered as a Contract of Sale because the first essential the buyer by operation of law without any further act having to
element is lacking. In a contract to sell, the prospective seller be performed by the seller.
explicitly reserves the transfer of title to the prospective buyer, In a contract to sell, upon the fulfillment of the suspensive
meaning, the prospective seller does not as yet agree or consent condition which is the full payment of the purchase price,
to transfer ownership of the property subject of the contract to ownership will not automatically transfer to the buyer although
sell until the happening of an event, which for present purposes the property may have been previously delivered to him. The
we shall take as the full payment of the purchase price. What prospective seller still has to convey title to the prospective
the seller agrees or obliges himself to do is to fulfill his promise buyer by entering into a contract of absolute sale.
to sell the subject property when the entire amount of the
purchase price is delivered to him. In other words the full It is essential to distinguish between a contract to sell and
payment of the purchase price partakes of a suspensive a conditional contract of sale specially in cases where the
condition, the non-fulfillment of which prevents the obligation subject property is sold by the owner not to the party the seller
4|Page

contracted with, but to a third person, as in the case at bench. In The agreement could not have been a contract to sell
a contract to sell, there being no previous sale of the property, a because the sellers herein made no express reservation of
third person buying such property despite the fulfillment of the ownership or title to the subject parcel of land. Furthermore,
suspensive condition such as the full payment of the purchase the circumstance which prevented the parties from entering into
price, for instance, cannot be deemed a buyer in bad faith and an absolute contract of sale pertained to the sellers themselves
the prospective buyer cannot seek the relief of reconveyance of (the certificate of title was not in their names) and not the full
the property. There is no double sale in such case. Title to the payment of the purchase price. Under the established facts and
property will transfer to the buyer after registration because circumstances of the case, the Court may safely presume that,
there is no defect in the owner-sellers title per se, but the latter, had the certificate of title been in the names of petitioners-
of course, may be sued for damages by the intending buyer. sellers at that time, there would have been no reason why an
absolute contract of sale could not have been executed and
In a conditional contract of sale, however, upon the consummated right there and then.
fulfillment of the suspensive condition, the sale becomes
absolute and this will definitely affect the sellers title Moreover, unlike in a contract to sell, petitioners in the
thereto. In fact, if there had been previous delivery of the case at bar did not merely promise to sell the property to
subject property, the sellers ownership or title to the property is private respondent upon the fulfillment of the suspensive
automatically transferred to the buyer such that, the seller will condition. On the contrary, having already agreed to sell the
no longer have any title to transfer to any third subject property, they undertook to have the certificate of title
person. Applying Article 1544 of the Civil Code, such second change to their names and immediately thereafter, to execute
buyer of the property who may have had actual or constructive the written deed of absolute sale.
knowledge of such defect in the sellers title, or at least was
charged with the obligation to discover such defect, cannot be a Thus, the parties did not merely enter into a contract to
registrant in good faith. Such second buyer cannot defeat the sell where the sellers, after compliance by the buyer with
first buyers title. In case a title is issued to the second buyer, certain terms and conditions, promised to sell the property to
the first buyer may seek reconveyance of the property subject the latter.What may be perceived from the respective
of the sale. undertakings of the parties to the contract is that petitioners had
already agreed to sell the house and lot they inherited from
With the above postulates as guidelines, we now proceed their father, completely willing to transfer ownership of the
to the task of deciphering the real nature of the contract entered subject house and lot to the buyer if the documents were then in
into by petitioners and private respondents. order. It just so happened, however, that the transfer certificate
of title was then still in the name of their father. It was more
It is a canon in the interpretation of contracts that the expedient to first effect the change in the certificate of title so
words used therein should be given their natural and ordinary as to bear their names. That is why they undertook to cause the
meaning unless a technical meaning was intended (Tan vs. issuance of a new transfer of the certificate of title in their
Court of Appeals, 212 SCRA 586 [1992]). Thus, when names upon receipt of the down payment in the amount
petitioners declared in the said Receipt of Down Payment that of P50,000.00. As soon as the new certificate of title is issued
they -- in their names, petitioners were committed to immediately
execute the deed of absolute sale. Only then will the obligation
Received from Miss Ramona Patricia Alcaraz of 146 Timog, of the buyer to pay the remainder of the purchase price arise.
Quezon City, the sum of Fifty Thousand Pesos purchase price
of our inherited house and lot, covered by TCT No. 1199627 There is no doubt that unlike in a contract to sell which is
of the Registry of Deeds of Quezon City, in the total amount most commonly entered into so as to protect the seller against a
of P1,240,000.00. 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
without any reservation of title until full payment of the entire
bar, the sellers were the ones who were unable to enter into a
purchase price, the natural and ordinary idea conveyed is that
they sold their property. contract of absolute sale by reason of the fact that the
certificate of title to the property was still in the name of their
When the Receipt of Down payment is considered in its father. It was the sellers in this case who, as it were, had the
entirety, it becomes more manifest that there was a clear intent impediment which prevented, so to speak, the execution of an
on the part of petitioners to transfer title to the buyer, but since contract of absolute sale.
the transfer certificate of title was still in the name of
What is clearly established by the plain language of the
petitioners father, they could not fully effect such transfer
although the buyer was then willing and able to immediately subject document is that when the said Receipt of Down
pay the purchase price. Therefore, petitioners-sellers undertook Payment was prepared and signed by petitioners Romulo A.
Coronel, et. al., the parties had agreed to a conditional contract
upon receipt of the down payment from private respondent
of sale, consummation of which is subject only to the
Ramona P. Alcaraz, to cause the issuance of a new certificate
successful transfer of the certificate of title from the name of
of title in their names from that of their father, after which, they
petitioners father, Constancio P. Coronel, to their names.
promised to present said title, now in their names, to the latter
and to execute the deed of absolute sale whereupon, the latter The Court significantly notes that this suspensive
shall, in turn, pay the entire balance of the purchase price. condition was, in fact, fulfilled on February 6, 1985 (Exh. D;
Exh. 4). Thus, on said date, the conditional contract of sale
between petitioners and private respondent Ramona P. Alcaraz
5|Page

became obligatory, the only act required for the consummation Art. 1186. The condition shall be deemed fulfilled when the
thereof being the delivery of the property by means of the obligor voluntarily prevents its fulfillment.
execution of the deed of absolute sale in a public instrument,
which petitioners unequivocally committed themselves to do as Besides, it should be stressed and emphasized that what is
evidenced by the Receipt of Down Payment. more controlling than these mere hypothetical arguments is the
Article 1475, in correlation with Article 1181, both of the fact that the condition herein referred to was actually and
Civil Code, plainly applies to the case at bench. Thus, 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).
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 The inevitable conclusion is that on January 19, 1985, as
contract and upon the price. evidenced by the document denominated as Receipt of Down
Payment (Exh. A; Exh. 1), the parties entered into a contract of
From that moment, the parties may reciprocally demand sale subject to the suspensive condition that the sellers shall
performance, subject to the provisions of the law governing the effect the issuance of new certificate title from that of their
form of contracts. fathers name to their names and that, on February 6, 1985, this
condition was fulfilled (Exh. D; Exh. 4).
Art. 1181. In conditional obligations, the acquisition of rights, We, therefore, hold that, in accordance with Article 1187
as well as the extinguishment or loss of those already acquired, which pertinently provides -
shall depend upon the happening of the event which constitutes
the condition. Art. 1187. The effects of conditional obligation to give, once
the condition has been fulfilled, shall retroact to the day of the
Since the condition contemplated by the parties which is constitution of the obligation . . .
the issuance of a certificate of title in petitioners names was
fulfilled on February 6, 1985, the respective obligations of the In obligations to do or not to do, the courts shall determine, in
parties under the contract of sale became mutually demandable, each case, the retroactive effect of the condition that has been
that is, petitioners, as sellers, were obliged to present the complied with.
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, the rights and obligations of the parties with respect to the
was obliged to forthwith pay the balance of the purchase price perfected contract of sale became mutually due and
amounting to P1,190,000.00. demandable as of the time of fulfillment or occurrence of the
suspensive condition on February 6, 1985. As of that point in
It is also significant to note that in the first paragraph in time, reciprocal obligations of both seller and buyer arose.
page 9 of their petition, petitioners conclusively admitted that:
Petitioners also argue there could been no perfected
3. The petitioners-sellers Coronel bound themselves contract on January 19, 1985 because they were then not yet
to effect the transfer in our names from our the absolute owners of the inherited property.
deceased father Constancio P. Coronel, the
transfer certificate of title immediately upon We cannot sustain this argument.
receipt of the downpayment above-stated". The Article 774 of the Civil Code defines Succession as a
sale was still subject to this suspensive mode of transferring ownership as follows:
condition. (Emphasis supplied.)
Art. 774. Succession is a mode of acquisition by virtue of
(Rollo, p. 16) which the property, rights and obligations to the extent and
value of the inheritance of a person are transmitted through his
Petitioners themselves recognized that they entered into a death to another or others by his will or by operation of law.
contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that: Petitioners-sellers in the case at bar being the sons and
daughters of the decedent Constancio P. Coronel are
. . . Had petitioners-sellers not complied with this condition of compulsory heirs who were called to succession by operation
first transferring the title to the property under their names, of law.Thus, at the point their father drew his last breath,
there could be no perfected contract of sale. (Emphasis petitioners stepped into his shoes insofar as the subject property
supplied.) is concerned, such that any rights or obligations pertaining
thereto became binding and enforceable upon them. It is
(Ibid.) expressly provided that rights to the succession are transmitted
from the moment of death of the decedent (Article 777, Civil
not aware that they have set their own trap for themselves, for Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Article 1186 of the Civil Code expressly provides that: 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
6|Page

title to the property from the decedents name to their names on check. Neither did they raise any objection as regards payment
February 6, 1985. being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P.
Aside from this, petitioners are precluded from raising Alcaraz is not a ground to rescind the contract of sale.
their supposed lack of capacity to enter into an agreement at
that time and they cannot be allowed to now take a posture Corollarily, Ramona P. Alcaraz cannot even be deemed to
contrary to that which they took when they entered into the be in default, insofar as her obligation to pay the full purchase
agreement with private respondent Ramona P. Alcaraz. The price is concerned. Petitioners who are precluded from setting
Civil Code expressly states that: up the defense of the physical absence of Ramona P. Alcaraz as
above-explained offered no proof whatsoever to show that they
Art. 1431. Through estoppel an admission or representation is actually presented the new transfer certificate of title in their
rendered conclusive upon the person making it, and cannot be names and signified their willingness and readiness to execute
denied or disproved as against the person relying thereon. the deed of absolute sale in accordance with their
agreement. Ramonas corresponding obligation to pay the
balance of the purchase price in the amount of P1,190,000.00
Having represented themselves as the true owners of the
(as buyer) never became due and demandable and, therefore,
subject property at the time of sale, petitioners cannot claim
now that they were not yet the absolute owners thereof at that she cannot be deemed to have been in default.
time. Article 1169 of the Civil Code defines when a party in a
contract involving reciprocal obligations may be considered in
Petitioners also contend that although there was in fact a
default, to wit:
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 Art. 1169. Those obliged to deliver or to do something, incur
United States of America, without leaving her address, in delay from the time the obligee judicially or extrajudicially
telephone number, and Special Power of Attorney (Paragraphs demands from them the fulfillment of their obligation.
14 and 15, Answer with Compulsory Counterclaim to the
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so xxx
petitioners conclude, they were correct in unilaterally
rescinding the contract of sale. In reciprocal obligations, neither party incurs in delay if the
We do not agree with petitioners that there was a valid other does not comply or is not ready to comply in a proper
rescission of the contract of sale in the instant case. We note manner with what is incumbent upon him. From the moment
that these supposed grounds for petitioners rescission, are mere one of the parties fulfill his obligation, delay by the other
allegations found only in their responsive pleadings, which by begins. (Emphasis supplied.)
express provision of the rules, are deemed controverted even if
no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules There is thus neither factual nor legal basis to rescind the
of Court). The records are absolutely bereft of any supporting contract of sale between petitioners and respondents.
evidence to substantiate petitioners allegations. We have
With the foregoing conclusions, the sale to the other
stressed time and again that allegations must be proven by
petitioner, Catalina B. Mabanag, gave rise to a case of double
sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 sale where Article 1544 of the Civil Code will apply, to wit:
[1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere
allegation is not an evidence (Lagasca vs. De Vera, 79 Phil.
376 [1947]). Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
Even assuming arguendo that Ramona P. Alcaraz was in may have first taken possession thereof in good faith, if it
the United States of America on February 6, 1985, we cannot should be movable property.
justify petitioners-sellers act of unilaterally and extrajudicially
rescinding the contract of sale, there being no express Should it be immovable property, the ownership shall belong to
stipulation authorizing the sellers to extrajudicially rescind the the person acquiring it who in good faith first recorded it in the
contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Registry of Property.
Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the Should there be no inscription, the ownership shall pertain to
alleged absence of Ramona P. Alcaraz because although the the person who in good faith was first in the possession; and, in
evidence on record shows that the sale was in the name of the absence thereof to the person who presents the oldest title,
Ramona P. Alcaraz as the buyer, the sellers had been dealing provided there is good faith.
with Concepcion D. Alcaraz, Ramonas mother, who had acted
for and in behalf of her daughter, if not also in her own The record of the case shows that the Deed of Absolute
behalf. Indeed, the down payment was made by Concepcion D. Sale dated April 25, 1985 as proof of the second contract of
Alcaraz with her own personal Check (Exh. B; Exh. 2) for and sale was registered with the Registry of Deeds of Quezon City
in behalf of Ramona P. Alcaraz. There is no evidence showing giving rise to the issuance of a new certificate of title in the
that petitioners ever questioned Concepcions authority to name of Catalina B. Mabanag on June 5, 1985. Thus, the
represent Ramona P. Alcaraz when they accepted her personal second paragraph of Article 1544 shall apply.
7|Page

The above-cited provision on double sale presumes title This Court had occasions to rule that:
or ownership to pass to the buyer, the exceptions being: (a)
when the second buyer, in good faith, registers the sale ahead If a vendee in a double sale registers the sale after he has
of the first buyer, and (b) should there be no inscription by acquired knowledge that there was a previous sale of the same
either of the two buyers, when the second buyer, in good faith, property to a third party or that another person claims said
acquires possession of the property ahead of the first property in a previous sale, the registration will constitute a
buyer. Unless, the second buyer satisfies these requirements, registration in bad faith and will not confer upon him any
title or ownership will not transfer to him to the prejudice of the right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing
first buyer. Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs.
In his commentaries on the Civil Code, an accepted Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
authority on the subject, now a distinguished member of the
Court, Justice Jose C. Vitug, explains: Thus, the sale of the subject parcel of land between
petitioners and Ramona P. Alcaraz, perfected on February 6,
The governing principle is prius tempore, potior jure (first in 1985, prior to that between petitioners and Catalina B.
time, stronger in right). Knowledge by the first buyer of the Mabanag on February 18, 1985, was correctly upheld by both
second sale cannot defeat the first buyers rights except when the courts below.
the second buyer first registers in good faith the second sale Although there may be ample indications that there was in
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge fact an agency between Ramona as principal and Concepcion,
gained by the second buyer of the first sale defeats his rights her mother, as agent insofar as the subject contract of sale is
even if he is first to register, since knowledge taints his concerned, the issue of whether or not Concepcion was also
registration with bad faith (see also Astorga vs. Court of acting in her own behalf as a co-buyer is not squarely raised in
Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. the instant petition, nor in such assumption disputed between
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was mother and daughter. Thus, We will not touch this issue and no
held that it is essential, to merit the protection of Art. 1544, longer disturb the lower courts ruling on this point.
second paragraph, that the second realty buyer must act in good
faith in registering his deed of sale (citing Carbonell vs. Court WHEREFORE, premises considered, the instant petition
of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, is hereby DISMISSED and the appealed judgment
02 September 1992). AFFIRMED.
(J. Vitug, Compendium of Civil Law and Jurisprudence,
SO ORDERED.
1993 Edition, p. 604).
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.
8|Page

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT reasonable certainty, the interest shall begin to run from the
OF APPEALS and DR. ERLINDA G. time the claim is made judicially or extrajudicially (Art. 1169,
IBARROLA, respondents. Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall
RESOLUTION begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be
FRANCISCO, J.: deemed to have been reasonably ascertained). The actual base
for the computation of legal interest shall, in any case, be on
As payments for the purchase of medicines, the amount finally adjudged.[10] (Italics ours.)
the Province of Isabela issued several checks drawn against its
accounts with petitioner Philippine National Bank (PNB) in The case at bench does not involve a loan. Forbearance of
favor of the seller, Lyndon Pharmaceuticals Laboratories, a money or judgment involving a loan or forbearance of money
business operated by private respondent Ibarrola. The checks as it arose from a contract of sale whereby Ibarrola did not
were delivered to the sellers agents[1] who turned them over to receive full payment for her merchandise. When an obligation
Ibarrola, except 23 checks amounting to P98,691.90, which the arises from a contract of purchase and sale and not from a
agents appropriated after negotiating them with PNB. For her contract of loan or mutuum, the applicable rate is 6% per
failure to receive the full payment for the medicines, Ibarrola annum as provided in Article 2209 of the NCC and not the rate
filed on November 6, 1974 before the Regional Trial Court of 12% per annum as provided in (CB) Cir. No. 416. [11] Indeed,
(RTC) an action for a sum of money and damages, docketed as PNBs liability is based only on the RTCs judgment where it
Civil Case 4226-P,[2] against the Province of Isabela, its was held solidarily liable with the other defendants due to its
Treasurer, the two agents and PNB. negligence when it failed to assure itself if the Provincial
Treasurer was properly authorized by Ibarrola to make
In its decision dated September 29, 1987, the trial court
endorsements of said checks.[12]
ordered all the defendants in said civil case, except the
treasurer who died in the meantime, to jointly and solidarily The rate of 12% interest referred to in Cir. 416 applies
pay Ibarrola several amounts, among which is: only to:

(1) P98,691.90 with interest thereon at the legal rate from [L]oan or forbearance of money, or to cases where money is
the date of the filing of the complaint until the entire transferred from one person to another and the obligation to
amount is fully paid;[3] (Italics supplied.) return the same or a portion thereof is adjudged. Any other
monetary judgment which does not involve or which has
PNBs appeal to the Court of Appeals (CA)[4] and later to the nothing to do with loans or forbearance of any money, goods
Supreme Court[5] were denied and dismissed, respectively. All or credit does not fall within its coverage for such imposition is
the three courts, however, did not specify whether the legal rate not within the ambit of the authority granted to the Central
of interest referred to in the judgment is 6% or 12%. The Bank. When an obligation not constituting a loan or
judgment in Civil Case 4226-P became final and executory forbearance of money is breached then an interest on the
on November 26, 1993. At the execution stage, the sheriff amount of damages awarded may be imposed at the discretion
computed the interest mentioned in the judgment at the rate of of the court at the rate of 6% per annum in accordance with
12% which PNB opposed insisting that the rate should only be Art. 2209 of the Civil Code. Indeed, the monetary judgment in
6%. Ibarrola sought clarification from the same RTC which favor of private respondent does not involve a loan or
promulgated the decision. On August 4, 1994 said court issued forbearance of money, hence the proper imposable rate of
an order clarifying that the rate is 12%. PNBs direct appeal to interest is six (6%) per cent.[13] (Italics ours.)
this court from that order was referred to the CA which
affirmed the RTC order.Hence, this petition for review under Applying the aforequoted rule, therefore , the proper rate of
Rule 45 where two legal issues are raised: (1) whether in an interest referred to in the judgment under execution is only
action for damages, the legal rate of interest is 6% as provided 6%. This interest according to Eastern Shipping shall be
by Article 2209[6] of the New Civil Code or 12% as provided computed from the time of the filing of the complaint
by CB Circular 416 series of 1974,[7] and (2) whether such rate considering that the amount adjudged (P98,691.90) can be
shall be computed from the filing of the complaint until fully established with reasonable certainty. Said amount being
paid? merely the uncollected balance of the purchase price covered
by the 23 checks encashed and appropriated by Ibarrolas
The issues are not new. In the case of Eastern Shipping
agents. However, once the judgment becomes final and
Lines, Inc. v. CA,[8] this Court had provided a rule of thumb for
executory, the "interim period from the finality of judgment
future guidance,"[9] to wit:
awarding a monetary claim and until payment thereof, is
deemed to be equivalent to a forbearance of credit. [14] Thus, in
When an obligation, not constituting a loan or forbearance of accordance with the pronouncement in Eastern Shipping the
money, is breached, an interest on the amount of damages rate of 12% p.a. should be imposed, and to be computed from
awarded may be imposed at the discretion of the court at the the time the judgment became final and executory until fully
rate of 6% per annum. No interest, however, shall be adjudged satisfied. The actual base for the computation of this 12%
on unliquidated claims or damages except when or until the interest after the judgment in this damage suit became final
demand can be established with reasonable shall be the amount adjudged (P98,691.90).
certainty. Accordingly, where the demand is established with
9|Page

ACCORDINGLY, the appealed decision is

REVERSED. The rate of interest shall be 6% p.a. computed
from the time of the filing of the complaint until its full
payment before finality of judgment. Thereafter, if the amount
adjudged remains unpaid, the interest rate shall be 12% p.a.
computed from the time the judgment became final and
executory on November 26, 1993until fully satisfied.
SO ORDERED
10 | P a g e

SPOUSES VIVENCIO BABASA and ELENA CANTOS BABASAS executed a notarized unilateral rescission dated 28
BABASA, petitioners, vs. COURT OF APPEALS, February 1983 to which TABANGAO responded by reminding
TABANGAO REALTY, INC., and SHELL GAS the BABASAS that they were the ones who did not comply
PHILIPPINES, INC., respondents. with their contractual obligation to deliver clean titles within
the stipulated 20-month period, hence, had no right to rescind
DECISION their contract. The BABASAS insisted on the unilateral
rescission and demanded the SHELL vacate the lots.
BELLOSILLO, J.:
On 19 July 1983 TABANGAO instituted an action for
specific performance with damages in the Regional Trial Court
On 11 April 1981 a contract of Conditional Sale of
of Batangas City to compel the spouses to comply with their
Registered Lands was executed between the spouses Vivencio
obligation to deliver clean titles over the
and Elena Babasa as vendors and Tabangao Realty, Inc.
properties.[3] TABANGAO alleged that the BABASAS were
(TABANGAO) as a vendee over three (3) parcels of land, Lots
already in a position to secure clean certificates of title and
Nos. 17827-A, 17827-B and 17827-C, situated in Brgy. Libjo,
execute registerable document of sale since execution of
Batangas City. Since the certificates of title over the lots were
judgment pending appeal had already been granted in their
in the name of third persons who had already executed deeds of
favor in Civil Case No. 519, while an order directing
reconveyance and disclaimer in favor of the BABASAS, it was
reconstitution of the original copies of TCT Nos. T-32565, T-
agreed that the total purchase price of P2,121,920.00 would be
32566 and T-32567 covering the lots had been issued in
paid in the following manner:
Petition No. 373. The BABASAS moved to dismiss the
complaint on the ground that their contract with TABANGAO
P300,000.00 upon signing of the contract, and P1,821,920.00 became null and void with the expiration of the 20-month
upon presentation by the BABASAS of transfer certificates of period given them within which to deliver clean certificates of
titles in their name, free from all liens and encumbrances, and title. SHELL entered the dispute as intervenor praying that its
delivery of registerable documents of sale in favor of lease over the premises be respected by the BASABAS.
TABANGAO within twenty (20) months from the signing of
the contract. In the meantime, the retained balance of the Despite the pendency of the case the BASABAS put up
purchase price would earn interest at seventeen percent (17%) several structures within the area in litigation to impede the
per annum or P20,648.43 monthly payable to the BABASAS movements of persons and vehicles therein, laid claim to
until 31 December 1982. It was expressly stipulated that twelve (12) heads of cattle belonging to intervenor SHELL and
TABANGAO would have the absolute and unconditional right threatened to collect levy from all buyers of liquefied
to take immediate possession of the lots as well as introduce petroleum gas (LPG) for their alleged use of the BABASA
any improvements thereon. estate in their business transactions with intervenor SHELL. As
a result, SHELL applied for and was granted on 10 April 1990
On 18 May 1981 TABANGAO leased the lots to Shell a temporary restraining order against the Babasa spouses and
Gas Philippines, Inc., (SHELL), which immediately started the anyone acting for and in their behalf upon filing of a P2-million
construction thereon of a Liquefied Petroleum Gas Terminal bond.[4]
Project, an approved zone export enterprise of the Export Eventually, judgment was rendered in favor of
Processing Zone. TABANGAO is the real estate arm of TABANGAO and SHELL.[5] The court a quo ruled that the 20-
SHELL. month period stipulated in the contract was never meant to be
The parties substantially complied with the terms of the its term such that upon its expiration the respective obligations
contract. TABANGAO paid the first installment of the parties would be extinguished. On the contrary, the
of P300,000.00 to the BABASAS while the latter delivered expiration thereof merely gave rise to the right of
actual possession of the lots to the former. In addition, TABANGAO to either rescind the contract or to demand that
TABANGAO paid P379,625.00 to the tenants of the lots as the BABASAS comply with their contractual obligation to
disturbance compensation and as payment for existing crops as deliver to it clean titles and registerable documents of sale. The
well as P334,700.00 to the owners of the house standing notarial rescission executed by the BABASAS was declared
thereon in addition to granting them residential lots with the void and of no legal effect
total area of 2,800 square meters. TABANGAO likewise paid
the stipulated monthly interest for the 20 month period xxxx
amounting to P408,580.80. Meanwhile, the BABASAS filed
Civil Case No. 519[1] and Petition No. 373[2] for the transfer of 1. The unilateral rescission of contract, dated February 28,
titles of the lots in their name. 1983, executed by the defendant-spouses is null and void,
without any legal force and effect on the agreement dated April
However, two (2) days prior to the expiration of the 20-
11, 1981, executed between the plaintiff and the defendant-
month period, specifically on 31 December 1982, the
spouses;
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 2. The lease contract dated, May 18, 1981, executed by the
starting January 1983 on the ground that Civil Case no. 519 and plaintiff in favor of the intervenor is deemed legally binding on
Petition No. 373 had not been resolved with finality in their the defendant-spouses insofar as it affects the three lots subject
favor. TABANGAO refused the request. In retaliation the of this case;
11 | P a g e

3. The defendant-spouses Vivencio Babasa and Elena Cantos opening whereas clause states that the parties desire and
are hereby ordered to deliver to the plaintiff Tabangao Realty, mutually agreed on the sale and purchase of the x x x three
Inc., clean transfer certificates of title in their name and execute parcels of land; the BABASAS were described as the vendors
all the necessary deeds and documents necessary for the while TABANGAO as the vendee from the beginning of the
Register of Deeds of Batangas City to facilitate the issuance of contract to its end; the amount of P2,121,920.00 was stated as
Transfer Certificates of Title in the name of plaintiff, Tabangao the purchase price of the lots; TABANGAO, as vendee, was
Realty, Inc. In the event the defendant-spouses fail to do so, the granted absolute and unconditional right to take immediate
Register of Deeds of Batangas City is hereby directed to cancel possession of the premises while the BABASAS,
the present transfer certificates of title over the three lots as vendors, warranted such peaceful
covered by the Conditional Sale of Registered Lands executed possession forever; TABANGAO was to shoulder the capital
by and between plaintiff, Tabangao Realty, Inc., and the gains tax, and; lastly, the BABASAS were expected to execute
defendant-spouses Vivencio Babasa and Elena Cantos-Babasa a Final Deed of Absolute Sale in favor of TABANGAO
on April 11, 1981, upon presentation of credible proof that said necessary for the issuance of transfer certificates of title the
defendant-spouses have received full payment for the lots or moment they were able to secure clean certificates of title in
payment thereof duly consigned to the Court for the amount of their name. Hence, with all the foregoing, we cannot give
the defendant-spouses; credence to the claim of petitioners that subject contract was
one of lease simply because the word ownership was never
4. Plaintiff Tabangao Realty, Inc., is directed to pay the mentioned therein. Besides, as correctly pointed out by
defendant-spouses Vivencio Babasa and Elena Cantos-Babasa respondent court, the BABASAS did not object to the terms
the remaining balance of P1,821,920.00 out of the full purchase and stipulations employed in the contract at the time of its
price for these three lots enumerated in the agreement dated execution when they could have easily done so considering that
April 11, 1981 plus interest thereon of 17% per annum they were then ably assisted by their counsel, Atty. Edgardo M.
or P 20,648.43 a month compounded annually beginning Carreon, whose legal training negates their pretended ignorance
January 1983 until fully paid; on the matter.Hence, it is too late for petitioners to insist that
the contract is not what they intended to be.
5. The Order dated April 10, 1990 issued in favor of the But the BABASAS lament that they never intended to sell
intervenor enjoining and restraining defendant-spouses their ancestral lots but were merely forced to do so when
Vivencio Babasa and Elena Cantos-Babasa and/or anyone TABANGAO dangled the threat of expropriation by the
acting for and in their behalf from putting up any structure on government (through the Export Processing Zone Authority) in
the three lots or interfering in any way in the activities of the the event voluntary negotiations failed. Although a cause to
intervenor, its employees and agents, is made permanent, and commiserate with petitioners may be perceived, it is not
the bond posted by the intervenor cancelled; and, enough to provide them with an avenue to escape contractual
obligations validly entered into. We have already held that
6. Defendant-spouses Vivencio Babasa and Elena Cantos- contracts are valid even though one of the parties entered into it
Babasa shall pay the costs of this proceeding as well as the against his own wish and desire, or even against his better
premium the intervenor may have paid in the posting of judgment.[9] Besides, a threat of eminent domain proceedings
the P2,000,000.00 bond for the issuance of the restraining order by the government cannot be legally classified as the kind of
of April 10, 1990.[6] imminent, serious and wrongful injury to a contracting party as
to vitiate his consent.[10] Private landowners ought to realize,
The BABASAS appealed to the Court of Appeals[7] which and eventually accept, that property rights must yield to the
on 29 February 1996 affirmed the decision of the trial court valid exercise by the state of its all-important power of eminent
court rejecting the contention of the BABASAS that the domain.[11]
contract of 11 April 1981 was one of lease, not of sale; [8] and Finally, petitioners contend that ownership over the three
described it instead as one of absolute sale though denominated (3) lots was never transferred to TABANGAO and that the
conditional. However, compounded interest was ordered paid contract of 11 April 1981 was rendered lifeless when the 20-
from 19 July 1983 only, the date of filing of the complaint, not month period stipulated therein expired without them being
from January 1983 as decreed by the trial court. able to deliver clean certificates of title to TABANGAO
The BABASAS now come to us reiterating their through no fault of their own. Consequently, their unilateral
contention that the contract of 11 April 1981 was in reality a rescission dated 28 February 1983 should have been upheld as
contract of lease, not for sale; but even assuming that it was valid.
indeed a sale, its nature was conditional only, the efficacy of We disagree. Although denominated Conditional Sale of
which was extinguished upon the non-happening of the Registered Lands, we hold, as did respondent court, that the
condition, i.e., non-delivery of clean certificates of title and contract of 11 April 1981 between petitioners and respondent
registerable documents of sale in favor of TABANGAO within TABANGAO is one of absolute sale. Aside from the terms and
twenty (20) months from the signing of the contract. stipulations used therein indicating such kind of sale, there is
We find no merit in the petition. Respondent appellate absolutely no proviso reserving title in the BABASAS until full
court has correctly concluded that the allegation of petitioners payment of the purchase price, nor any stipulation giving them
that the contract of 11 April 1981 is one of lease, not of sale, is the right to unilaterally rescind the contract in case of non-
simply incredible. First, the contract is replete with terms and payment. A deed of sale is absolute in nature although
stipulations clearly indicative of a contract of sale. Thus, the denominated a conditional sale absent such stipulations.[12] In
12 | P a g e

such cases, ownership of the thing sold passes to the vendee affirming that of the Regional Trial Court of Batangas City, Br.
upon the constructive or actual delivery thereof.[13] In the 4, is AFFIRMED. No Costs.
instant case, ownership over Lots Nos. 17827-A, 17827-B, and
17827-C passed to TABANGAO both by constructive and SO ORDERED.
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 distinguishedbetween a condition imposed on the
perfection of a contract and a condition imposed merely on the
performance of an obligation. While failure to comply with the
first condition results in the failure of a contract, failure to
comply with the second merely gives the other party the option
to either refuse to proceed with the sale or to waive the
condition.[17]
Here, a perfected contract of absolute sale exists between
the BABASAS and TABANGAO when they agreed on the sale
of a determinate subject matter, i.e., Lots no. 17827-A, 17827-
B and 17827-C, and the price certain therefor without any
condition or reservation of title on the part of the
BABASAS. However, the obligation of TABANGAO as
vendee to pay the fullamount 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
13 | P a g e

JOSEFINA L. VALDEZ and CARLOS L. VALDEZ, 1981, and PCIB Check No. 55007806 postdated June 15, 1981
JR., petitioners, vs. COURT OF APPEALS and in the amount of P81,880.00 both checks totaling P90,076.00 in
JOSE LAGON, respondents. full payment of the purchase price of the property, after
deducting the account of Carlos, Jr. amounting
DECISION to P73,684.00. Josefina acknowledged the checks, through
Carlos, Jr., who signed a cash voucher for the same.[7] Carlos,
CALLEJO, SR., J.: Jr. was able to encash PCIB Check No. 55007805, but returned
the other check to Lagons wife, Nenita, after the latter paid
This is a petition for review on certiorari of the Amended him P20,000.00 thereby leaving a balance of P61,880.00 of the
Decision[1] of the Court of Appeals in CA-G.R. CV No. 49413 purchase price.[8]
affirming on appeal the Decision of the Regional Trial Court of
Carlos, Jr. prepared an Affidavit dated April 27, 1981
Isulan, Sultan Kudarat, Branch 19, in Civil Case No. 778.
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
The Antecedents 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
Carlos Valdez, Sr. and Josefina de Leon Valdez were the absolute sale shall be declared null and void without need of
owners of a parcel of land with an area of 24,725 square meters demand therefor.[10] Lagon also made it clear in the said
located in the commercial district of Isulan, Sultan Kudarat. affidavit that the consideration of the said Deed of Absolute
The property was designated as Lot No. 3 of Pls-208-D-13 and Sale was not only the P80,000.00 purchase price, but also that
was covered by Transfer Certificate of Title (TCT) No. T- the subject property be commercialized.[11]
19529 (T-1902) issued on August 18, 1967.[2] When Carlos
Valdez, Sr. died intestate on March 26, 1966, he was survived However, Lagon failed to start the construction of a
by Josefina and their children, including Carlos Valdez, Jr., a commercial building and to transfer the rural bank thereon; he,
practicing lawyer. likewise, failed to pay the balance of the purchase price
amounting to P61,880.00. Consequently, Josefina and Carlos,
On December 28, 1978, Josefina caused the subdivision Jr. refused to deliver to Lagon a torrens title over the purchased
survey of the property[3] into eight (8) lots, i.e., Lots Nos. 3-A property. On September 4, 1981, Carlos, Jr. wrote Lagon
to 3-H, all fronting the national road. To enhance the value of demanding the payment of P61,800.00 within ten days from
the property, she decided to sell a portion thereof to Jose notice thereof, otherwise, the sale would be considered
Lagon, a successful businessman in Sultan Kudarat who owned rescinded.[12] Still, Lagon failed to pay or even respond to the
a construction firm as well as real estate and business letter. Carlos, Jr. again wrote Lagon on September 25, 1981,
enterprises: the Lagon Enterprises and the Rural Bank of and this time proposed the reduction of the area of the property
Isulan. He was also one of the clients of her son, Carlos, Jr., a subject of the sale to correspond to the payment so far made by
practicing lawyer. Lagon in the total amount of P90,676.00.[13] There was no
response from Lagon.
On May 1, 1979, Josefina executed a Special Power of
Attorney authorizing her son, Carlos, Jr. to sell a portion of Lot In the meantime, TCT No. T-19529 was cancelled
No. 3-C and Lot. No. 3-D to Lagon. The lots subject of the sale on October 9, 1981 by eight (8) titles bearing the following
had an area of 4,094 square meters, with a frontage of 64.3 particulars:
square meters. Part of the consideration of the transaction was
the condition that Lagon cause the transfer of the Rural Bank of TCT No. Lot No. Area
Isulan to the subject property and construct a commercial 16436 3-A 2,586 sq. meters[14]
building beside the bank.[4] On May 9, 1979, Josefina, through 16437 3-B 2,802 sq. meters[15]
her son and attorney-in-fact, Carlos, Jr., executed a Deed of 16438 3-C 2,534 sq. meters[16]
Absolute Sale of a portion of Lot No. 3 with a frontage of 64.3 16439 3-D 3,198 sq. meters[17]
square meters facing the national highway and the National 16440 3-E 3,359 sq. meters[18]
Grains Authority office going towards the Buencamino Movie 16441 3-F 2,952 sq. meters[19]
House starting from the corner.[5] However, the condition 16442 3-G 3,650 sq. meters[20]
imposed by Josefina was not incorporated in the deed; what 16443 3-H 3,644 sq. meters[21]
was appended thereto was the Special Power of Attorney All the foregoing subdivision titles were under the name
executed by Josefina. It was indicated in the said deed that the of Josefina L. Valdez, married to Carlos Valdez, Sr.
property was to be sold for P80,000 cash and that Lagon had
already paid the said amount to Carlos, Jr. In reality, however, On December 31, 1982, Josefina and her children
Lagon purchased the 4,094-square-meter property at P40.00 executed a deed of extrajudicial settlement of the estate of
per square meter, or for the amount of P163,760[6] inclusive of Carlos Valdez, Sr. in which the heirs waived all their rights
Carlos, Jr.s personal account to Lagon in the amount over the estate in favor of their mother, Josefina.
of P73,760. Lagon had not yet remitted to Josefina the said
amount of P163,760. On December 1, 1983, Geodetic Engineer Santiago C.
Alhambra conducted a subdivision survey of Lot No. 3-C,
On April 21, 1981, Lagon gave to Carlos, Jr. PCIB Check covered by TCT No. 16438 into three (3) subdivision lots with
No. 55007805 in the amount of P8,196.00 dated April 21, the following areas: Lot No. 3-C-1 with 449 square meters; Lot
14 | P a g e

No. 3-C-2 consisting of 350 square meters; and, Lot No. 3-C-3, nipa hut behind the PCIB branch, the Ivy Pharmacy, the K
1,735 square meters. Engr. Alhambra prepared a subdivision House and the headquarters of the Nationalista Party.[33]
plan on his survey which he submitted to the Bureau of Lands
on December 12, 1983. Lagon paid for his professional On September 24, 1990, Lagon filed a Complaint against
services. Josefina, and Carlos, Jr., in his capacity as attorney-in-fact of
Josefina, for specific performance and damages with a prayer
Porfirio L. Cubar, the Bank Manager of the Philippine for a temporary restraining order and writ of preliminary
Commercial Industrial Bank (PCIB) in Isulan talked to Carlos, injunction. He prayed that, after due proceedings, judgment be
Jr. and offered to buy, in behalf of the PCIB, Lot No. 3-C-2 rendered in his favor, thus:
for P100.00 per square meter. Carlos, Jr. agreed. Josefina
executed a deed of absolute sale on May 8, 1984, over Lot No. WHEREFORE, it is respectfully prayed that upon the filing of
3-C-2 for P35,000.00 in favor of PCIB.[22] Carlos, Jr. later this complaint, a restraining order be issued enjoining
learned that Lagon had been saying that he was responsible for defendants from selling, disposing or otherwise encumbering
the sale of Lot No. 3-C-2 to the PCIB, but the latter informed the property subject of this case; after due hearing, a writ of
Carlos, Jr. in a Letter dated September 13, 1984 that Lagon had preliminary prohibitory injunction be issued in the same tenor
nothing to do with the sale.[23] as that of the restraining order; and after trial on the merits,
On October 3, 1984, the Register of Deeds cancelled TCT judgment be rendered in favor of plaintiff and against the
No. 16438 and issued TCT No. 18817 over Lot No. 3-C-2 in defendants:
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 a) Making the writ of preliminary prohibitory injunction
Josefina.[25] permanent;

On June 11, 1987, the deed of extrajudicial settlement b) Ordering defendants to immediately and without delay,
earlier executed by the heirs of Carlos Valdez, Sr. was filed and deliver to plaintiff the possession of and the transfer certificate
registered in the Office of the Register of Deeds.[26] On June of title over the remaining area of that parcel of land they sold
16, 1987, Josefina executed a Deed of Sale over Lot 3-D in to plaintiff;
favor of Engr. Rolendo Delfin, who was issued TCT No. 20380
for the property.[27]
c) Ordering defendants to pay plaintiff, jointly and severally,
In the meantime, in August 1987, a question ensued in the following sums:
connection with Lagons failure to pay the balance of the
purchase price of the property, to cause the construction of a i. P500,000.00 representing opportunity loss;
commercial building and the transfer of the Rural Bank of ii. P50,000.00 for and as attorneys fees;
Isulan to Lot No. 3, as undertaken by him in his Affidavit iii. P20,000.00 for and as expenses of litigation; and
dated April 27, 1981. As a reminder, Carlos, Jr. furnished iv. P50,000.00 for and as moral, exemplary,
Lagon with a machine copy of the said affidavit on August 12, temperate and nominal damages.
1987. On August 13, 1987, Lagons counsel, Atty. Ernesto I.
Catedral, wrote Carlos, Jr., pointing out that he had earlier
Other reliefs, just and equitable under the premises, are
sought Lagons consent for the construction of the PCIB Branch likewise prayed for.[34]
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 Lagon testified that Josefina failed to deliver the title to
undertaking under the deed of absolute sale. The lawyer asked the property he purchased from her, as well as the possession
Carlos, Jr. to set a conference to thresh out possibilities of an thereof; hence, he was not certain of the metes and bounds of
amicable settlement of the matter.[28] On September 21, 1987, the property and could not secure a building permit for the
Carlos, Jr. furnished Atty. Catedral with copies of documents, transfer and construction of the Rural Bank of Isulan, as well as
including a Special Power of Attorney, executed by Josefina in the commercial building. Besides, Carlos, Jr. secured his
favor of Carlos, Jr., the deed of absolute sale over Lot No. 3 in permission for the construction of the PCIB commercial
favor of Lagon and the deed of absolute sale executed by building on Lot No. 3-C-2 which was sold to him by Josefina,
Josefina in favor of PCIB, among others.[29] Lagon, through his and even agreed to the deduction of the purchase price thereof;
counsel, Atty. Rex G. Rico, reiterated his request for a hence, the balance was only P26,880. Lagon demanded that the
conference on May 23, 1988.[30] However, Carlos, Jr. was not title to the property be turned over to him and the occupants
available on the said date. thereof be evicted therefrom so that he could comply with the
conditions of the sale for the construction of the commercial
On August 4, 1988, Josefina executed a real estate building and the transfer of the Isulan Rural Bank. However,
mortgage over Lot No. 3-C-3 covered by TCT No. 18818 in Carlos, Jr. dilly-dallied, saying that the heirs of Carlos, Sr.
favor of the Development Bank of the Philippines (DBP) as needed time to execute the extrajudicial settlement of his estate,
security for a loan of P150,000.00.[31] Josefina executed a deed and thus failed to deliver said title to him. Lagon averred that
of absolute sale over Lot No. 3-C-1 in favor of her son, Carlos, his consent to the construction by the PCIB of its branch on a
Jr. on February 21, 1989. The Register of Deeds thereafter portion of the property he had purchased from Josefina
issued TCT No. 21943 in the latters name on February 28, constituted substantial compliance of his undertaking under the
1989.[32] In the meantime, in 1984, Carlos, Jr. had an edifice deed of absolute sale and the affidavit he executed in favor of
constructed on the property where he put up his law office, a Josefina. He also alleged that he signed the affidavit prepared
15 | P a g e

by Carlos, Jr. without reading and understanding the same. He ORDERING defendants, jointly and severally, to pay the costs
pointed out that although Lot No. 3 had already been sold to of suit.
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 For lack of merit, the counterclaim interposed by defendants
No. 3-D to DBP which acquired title over the property. should be, as it is hereby, dismissed.
In their answer to the complaint, Josefina and her son, the
defendants therein, alleged that Lagon had no cause of action IT IS SO ORDERED.[35]
against them because he failed to comply with the terms of the
deed of absolute sale, his undertaking under his affidavit, and Josefina and Carlos, Jr. appealed the decision to the Court
to pay the purchase price of the property in full. Carlos, Jr. of Appeals, contending that
denied securing Lagons consent to the construction of the PCIB
branch on Lot 3-C-2, and agreeing to deduct P35,000 from the I. THE LOWER COURT ERRED IN NOT UPHOLDING
balance of Lagons account for the purchase price of the THE DEFENSE OF THE DEFENDANTS-APPELLANTS
property. Josefina and Carlos, Jr. interposed counterclaims for THAT THE PLAINTIFF-APPELLEE HAS NO VALID
damages and attorneys fees. CAUSE OF ACTION AGAINST THEM CONSIDERING
Lagon withdrew his petition for the issuance of a writ of THAT HE FAILED TO COMPLY WITH THE TERMS AND
preliminary injunction which the trial court granted, per its CONDITIONS OF HIS WRITTEN CONTRACTS WITH THE
Order dated February 24, 1993. DEFENDANTS-APPELLANTS.

On January 20, 1995, the trial court rendered judgment in II. THE COURT ERRED IN NOT UPHOLDING THAT
favor of Lagon. The fallo of the decision reads: EXHIBIT 3 WHICH IS THE AFFIDAVIT OF PLAINTIFF-
APPELLEE, WAS PART OF THE AGREEMENTS OF THE
WHEREFORE, upon all the foregoing considerations, PARTIES AS IT WAS ADMITTED BY HIM. IT MUST BE
judgment is hereby rendered: ENFORCED AND PLAINTIFF-APPELLEE IS LIABLE FOR
BREACH OF HIS CONTRACT WITH THE DEFENDANTS-
1. ORDERING defendant Josefina L. Valdez, by herself, or APPELLANTS.
through her duly authorized attorney-in-fact, defendant Carlos
L. Valdez, Jr., to execute the necessary registrable document of III. THE LOWER COURT ERRED WHEN IT RULED THAT
deed of absolute sale in favor of the plaintiff over the THE TERMS AND CONDITIONS IN THE SPECIAL
remaining area of that parcel of land, the defendant sold to POWER OF ATTORNEY (EXHIBITS 1-C AND A-1) WERE
plaintiff on May 9, 1979, particularly Lot 3-C-3, Psd-12- NOT PART OF THE DEED OF ABSOLUTE SALE
005408 covered under Transfer Certificate of Title No. T- (EXHIBITS 1 AND A) EXECUTED BY THE PARTIES.
18816, in the name of defendant Josefina de Leon Vda. de
Valdez, and for the latter to deliver to plaintiff the possession IV. THE LOWER COURT ERRED IN NOT DECLARING
of and the transfer certificate of title thereof, and ORDERING THAT THE ACT OF THE DEFENDANTS-APPELLANTS IN
further the defendants to pay, jointly and severally, plaintiff the RESCINDING THEIR CONTRACT WITH THE PLAINTIFF-
current fair market value of the remaining area of the land sold APPELLEE WAS PERFECTLY LEGAL, VALID,
to the latter which defendants may not be able to deliver and EFFECTIVE AND BINDING ON THE PLAINTIFF-
transfer ownership thereof to the plaintiff, minus the amount APPELLEE.
of P26,880.00 representing the unpaid balance of the agreed
purchase price of the 4,094 square meter-portion of land sold to V. THE LOWER COURT ERRED IN NOT RENDERING
plaintiff in the total amount of P163,760.00; JUDGMENT IN FAVOR OF THE DEFENDANTS-
APPELLANTS DESPITE THE OVERWHELMING
2. ORDERING defendants to pay plaintiff, jointly and EVIDENCE OF THE MANIFEST INCREDULITY AND
severally, the sums of: UNWORTHINESS OF THE EVIDENCE OF THE
PLAINTIFF-APPELLEE.
(a) P50,000.00 representing attorneys fees for the legal services
of plaintiffs counsel, plus P5,000.00, as appearance fee for VI. THE LOWER COURT ERRED IN NOT FINDING THAT
plaintiffs counsel, per hearing, for not less than ten (10) times; THE PLAINTIFF-APPELLEE IS GUILTY OF LACHES OR
ESTOPPEL.
(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; VII. THE COURT ERRED IN AWARDING DAMAGES TO
THE PLAINTIFF-APPELLEE AND DISMISSING THE
(c) P23,585.50 representing transportation expenses of COUNTERCLAIM OF THE DEFENDANTS-
plaintiffs counsel through PAL flights from Manila to attend APPELLANTS.[36]
court hearings in this Court, and in going back to Manila
(Exhibits FF, FF-1, GG, HH, II, JJ, KK, LL, and MM); The appellate court rendered judgment on January 28,
1998 reversing the decision of the RTC. The fallo of the
(d) P50,000.00 for and as moral and exemplary damages; and, decision reads:
further
16 | P a g e

IN VIEW WHEREOF, the Decision of the Lower conditions of one and the same transaction. They emphasize
Court dated January 20, 1995 is hereby REVERSED and SET that the respondent knew that his contract with petitioner
ASIDE. Appellants are hereby ordered to return to Appellee Josefina was a contract to sell because he did not acquire a
the sum of P101,880.00 together with 12% interest per annum torrens title over the property nor took possession thereof after
from the finality of this decision. The case filed in the Court a the execution of the deed of absolute sale; the respondent even
quo is hereby ordered DISMISSED.[37] failed to register the said deed with the Office of the Register of
Deeds and to declare the same for taxation purposes under his
The appellate court ruled that based on the deed of name. They aver that the requirements under Article 1592 of
absolute sale, the Special Power of Attorney executed by the New Civil Code do not apply to a contract to sell but only
Josefina, and the affidavit of the respondent, the parties had to a contract of sale.
executed a contract to sell. The respondent filed a motion for The petitioners insist that the Court of Appeals erred in
the reconsideration thereof. declaring that the conditions of the sale were deemed fulfilled
On February 4, 1999, the Court of Appeals reversed itself by their failure to deliver the torrens title to the property to the
and rendered an Amended Decision, setting aside its decision respondent, on its finding that notwithstanding such failure, the
and affirming that of the RTC. This time, the appellate court respondent continued making partial payments of the purchase
held that Josefina had, after all, executed a deed of absolute price of the property to the petitioners.
sale over the 4,094-square-meter portion of Lot No. 3. It In his comment on the petition, the respondent reiterates
declared that the Special Power of Attorney executed by that based on the evidence on record, the admissions of the
Josefina and the affidavit did not form part of the deed of petitioners, as well as the special power of attorney executed by
absolute sale. It further declared that Lagons affidavit could not petitioner Josefina, a deed of absolute sale was executed
be considered part of the said deed because it was merely an between him and petitioner Josefina, not merely a contract to
afterthought contrived by Carlos, Jr. sell of the portions of Lots 3-C and 3-D. He alleges that under
The appellate court also held that even if the Special Articles 1477 and 1498 of the New Civil Code, he acquired
Power of Attorney and affidavit formed integral parts of the title and possession of the property upon the execution of the
deed of absolute sale, Lagon was justified in refusing to pay the said deed.
balance of the purchase price of the property and to comply
with his undertaking thereon, because Josefinas refusal to
deliver the title to the property made it impossible to determine The Ruling of the Court
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. Moreover, the Court of Appeals The Subject Property is the
ruled, the appellants failed to comply with the procedure under Exclusive Property of
Article 1592 of the New Civil Code in rescinding the sale. Josefina de Leon Valdez
Josefina and Carlos, Jr., now the petitioners, filed their Intricately interwoven with the threshold issue raised by
petition for review on certiorari wherein they raised the the petitioners is the issue of the nature of Lot No. 3 of Pls-208-
following issues: D-13 covered by TCT No. T-19529 (T-1902).
I. WHETHER OR NOT THE CONTRACT OF THE In the deed of absolute sale executed by petitioner
PARTIES BEING SUBJECT TO THE Josefina in favor of the respondent, she declared that she was
SUSPENSIVE CONDITIONS AGREED UPON the absolute owner of the said property.[39] However, in the
WAS A CONTRACT TO SELL OR deed of extrajudicial settlement of the estate of Carlos Valdez,
A CONTRACT OF SALE? Sr. executed by petitioner Josefina and her children
on December 31, 1982, the subject property was declared as
II. WHETHER OF (SIC) NOT THE PETITIONERS
part of the estate of the deceased.[40] The Court of Appeals,
HAD THE RIGHT TO RESCIND THEIR
under its Amended Decision, affirmed the finding of the RTC
CONTRACT WITH PRIVATE
that it was only after the execution of the said deed of
RESPONDENT?
extrajudicial settlement that petitioner Josefina became the
III. WHETHER OF (SIC) NOT PRIVATE absolute owner of the property.[41] However, we find that both
RESPONDENT IS ENTITLED TO HIS CLAIM the trial and appellate courts erred in so ruling.
FOR SPECIFIC PERFORMANCE AND
We note that TCT No. T-19529 (T-1902) covering the
DAMAGES CONSIDERING HIS FAILURE
property was issued on August 18, 1967, during the marriage of
TO COMPLY WITH THE SUSPENSIVE
the Spouses Carlos Valdez, Sr. and petitioner Josefina, under
CONDITIONS AGREED UPON?[38]
the name Josefina L. Valdez married to Carlos Valdez, Sr. The
The petitioners assert that, the contract agreed upon by the issuance of the title in the name solely of one spouse is not
parties was a contract to sell and not a contract of sale. The determinative of the conjugal nature of the property, since there
petitioners contend that the three documents, the deed of is no showing that it was acquired during the marriage of the
absolute sale, the special power of attorney executed by Spouses Carlos Valdez, Sr. and Josefina L. Valdez.[42] The
petitioner Josefina and the affidavit of the respondent dated presumption under Article 160 of the New Civil Code, that
April 27, 1981, formed integral parts containing the terms and property acquired during marriage is conjugal, does not apply
17 | P a g e

where there is no showing as to when the property alleged to be deed of absolute sale executed by petitioner Josefina in favor of
conjugal was acquired. The presumption cannot prevail when the respondent.
the title is in the name of only one spouse and the rights of
innocent third parties are involved.[43] Moreover, when the The real nature of a contract may be determined from the
property is registered in the name of only one spouse and there express terms of the written agreement and from the
is no showing as to when the property was acquired by same contemporaneous and subsequent acts of the parties thereto.[45]
spouse, this is an indication that the property belongs In the construction or interpretation of an instrument, the
exclusively to the said spouse.[44] intention of the parties is primordial and is to be pursued. [46] If
In this case, there is no evidence to indicate when the the terms of a contract are clear and leave no doubt upon the
property was acquired by petitioner Josefina. Thus, we agree intention of the contracting parties, the literal meaning of its
with petitioner Josefinas declaration in the deed of absolute stipulations shall control.[47] If the contract appears to be
sale she executed in favor of the respondent that she was the contrary to the evident intentions of the parties, the latter shall
absolute and sole owner of the property. We are convinced that prevail over the former.[48] The denomination given by the
the declaration in the deed of extrajudicial settlement of the parties in their contract is not conclusive of the nature of the
estate of the late Carlos Valdez, Sr., that the property formed contents.[49]
part of his estate and that his children waived their rights and The agreement of the parties may be embodied in only
claims over the property in favor of their mother, was done one contract or in two or more separate writings. In such event,
merely to facilitate the issuance of a torrens title over the the writings of the parties should be read and interpreted
property in petitioner Josefinas name with her marital status as together in such a way as to render their intention effective. [50]
widow.
A sale is at once perfected when a person (the seller)
Petitioner Josefina Valdez obligates himself, for a price certain, to deliver and to transfer
and the Respondent entered ownership of a specified thing or right to another (the buyer)
into a Contract of Sale over over which the latter agrees.[51] From the time the contract is
the Subject Property perfected, the parties are bound not only to the fulfillment of
The RTC, as well as the Court of Appeals in its Amended what has been expressly stipulated but also to all the
Decision, held that petitioner Josefina and the respondent consequences which, according to their nature, may be in
entered into a contract of sale, not a contract to sell, over the keeping with good faith, usage and law.[52]
subject property, relying solely on the deed of absolute sale In a contract of sale, the title to the property passes to the
executed by her on May 9, 1979. Although it was expressly vendee upon the constructive or actual delivery thereof, as
stated in the Affidavit executed by the respondent on April 27, provided for in Article 1477 of the New Civil Code. The
1981appended to the deed, the appellate court affirmed the vendor loses ownership over the property and cannot recover it
ruling of the RTC that such Special Power of Attorney until and unless the contract is resolved or rescinded by a
executed by petitioner Josefina in favor of her son, petitioner notarial deed or by judicial action as provided for in Article
Carlos, Jr., did not form part of the said deed. Both tribunals 1540 of the New Civil Code. A contract is one of sale, absent
ratiocinated that, indeed, under the Special Power of Attorney, any stipulation therein reserving title over the property to the
part of the consideration of the sale of the subject property was vendee until full payment of the purchase price nor giving the
the construction of a commercial building and the transfer of vendor the right to unilaterally rescind the contract in case of
the Isulan Rural Bank thereto within five (5) years from the non-payment.[53] In a contract of sale, the non-payment of the
execution of the deed. However, since such condition was not price is a resolutory condition which extinguishes the
actually incorporated in the said deed, the affidavit prepared by transaction that, for a time, existed and discharges the
petitioner Carlos, Jr. and signed by the respondent was but an obligations created thereunder.[54] In a contract to sell,
afterthought contrived by petitioner Carlos, Jr., thus enabling ownership is, by agreement, reserved in the vendor and is not
him to surreptitiously insert a provision or condition in the deed to pass to the vendee until full payment of the purchase
of absolute sale. price. Such payment is a positive suspensive condition, failure
We agree with the trial and appellate courts that petitioner of which is not a breach but an event that prevents the
Josefina and the respondent entered into a contract of sale over obligation of the vendor to convey title from becoming
the subject property and not merely a contract to sell the same. effective.[55]

It is not disputed by the parties that petitioner Josefina In this case, the deed of absolute sale executed by
executed a Special Power of Attorney in favor of her son, petitioner Josefina reads:
petitioner Carlos, Jr., as her attorney-in-fact, authorizing the
latter to sell the subject property, and petitioner Josefina, That the Vendor is the registered owner of Lot 3 Allah Valley
through her son, executed the deed of absolute sale over the Pls-208-D-3, located at Isulan, Sultan Kudarat, covered by
subject property. She also acknowledged receipt of partial Transfer Certificate of Title No. (T-19529) T-1902 of the
payments of the purchase price of the property on April 21, Register of Deeds of Cotabato, with eight (8) lots subdivision
1981 through her attorney-in-fact; the balance of the purchase duly approved pursuant to R.A. 440 on March 27, 1979.
price thus stood at P61,880.00 There is, likewise, no dispute
that the respondent signed the affidavit on April 27, 1981. The That for and in consideration of the sum of EIGHTY
parties, however, differ on the real nature of their transaction THOUSAND PESOS (P80,000.00), Philippine Currency, in
and on whether the said affidavit formed an integral part of the hand paid by the VENDEE, receipt of which amount in Full is
18 | P a g e

hereby acknowledged by the VENDOR, to the ENTIRE and building of the Rural Bank of Isulan on the same
full satisfaction of the VENDOR, and who by these presents do lot.[59]
hereby sell, cede, deliver and convey unto the said VENDEE,
his heirs, assigns and successors in interests, a portion of the Clearly, petitioner Carlos, Jr. acted beyond the scope of
above-mentioned lot, more particularly described as follows: his authority when he executed the deed of absolute sale in
contravention of petitioner Josefinas express
instructions. Worse, he falsely declared in the said deed that the
TOTAL AREA: FOUR THOUSAND AND NINETY-FOUR purchase price was P80,000.00 and that he had already
(4,094) SQUARE METERS, WITH SIXTY-FOUR POINT received the said amount, when, in fact, the property was sold
THREE (64.3) METERS, FRONTAGE, FACING THE for P40.00 per square meters, or a total of P163,760.00, and
NATIONAL HIGHWAY and the NGA Office, going towards that as of May 9, 1979, he had not yet received the said
the BUENCAMINO MOVIE HOUSE, starting from the amount. Under Article 1317 of the New Civil Code, contracts
corner. executed by agents who have acted beyond their powers are
unenforceable unless ratified by the principal either expressly
That the Vendor hereby warrants the peaceful possession and or impliedly:
ownership of said vendee against any adverse claim.[56]
Art. 1317. No one may contract in the name of another without
Irrefragably, the deed is one of sale, not a contract to sell. being authorized by the latter, or unless he has by law a right to
The deed specifically states that the property is sold and represent him.
delivered to the respondent as vendee. Petitioner Josefina even
warranted the peaceful possession and ownership of the A contract entered into in the name of another by one who has
respondent over the property subject of the transaction. She did no authority or legal representation, or who has acted beyond
not reserve the ownership over the property, as well as any his powers, shall be unenforceable, unless it is ratified,
right to unilaterally rescind the contract. There has been, by the expressly or impliedly, by the person on whose behalf it has
execution of the said deed, a constructive delivery of the been executed, before it is revoked by the other contracting
property to the respondent; hence, the latter acquired ownership party.
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 Thus, the effectivity of the contract of sale in the case at
new owner and place him, as vendee, in actual possession bar depends upon the ratification thereof by petitioner Josefina
thereof; otherwise, the failure or inability to do so constitutes a as principal. If she ratifies the deed, the sale is validated from
breach of the contract sufficient to justify its rescission.[58] the moment of its commencement, and not merely from the
time of its ratification.[60] In such case, she can no longer
However, we rule that the deed of absolute sale was maintain an action to annul the same based upon defects
unenforceable as of the date of its execution, May 9, 1979. This relating to its original validity.[61]
is so, because under the Special Power of Attorney petitioner
Josefina executed in favor of her son, petitioner Carlos, Jr., the We find that petitioner Josefina ratified the said deed
latter was authorized to sell the property on cash basis only; when she received, through her son and attorney-in-fact
petitioner Josefina likewise required the construction of a petitioner Carlos, Jr., partial payments of the purchase price of
commercial building and the transfer of the Rural Bank of the property from the respondent on April 21, 1981.[62] Such
Isulan, as part of the consideration of the sale to be ratification retroacted to May 9, 1979, the date when petitioner
incorporated in the said deed as part of the respondents Josefina, through her attorney-in-fact, executed the deed of sale
obligation as vendee, thus: covering the subject property in favor of the respondent.
Moreover, we rule that the respondent agreed on to transfer the
(a) To sell sixty four point three meters Rural Bank of Isulan to the subject property, and to cause the
FRONTAGE and the full length of Lot construction of a commercial building within five (5) years
3, ALLAH VALLEY, Pls-208-D-13 described in reckoned from May 9, 1979 or until May 9, 1984, as evidenced
TCT No. T-(19529) T-1902, somewhere in the by his affidavit.
3rd and 4th lots of the 8 lots subdivision, located
at Poblacion, Isulan, Sultan Kudarat, registered We reject the findings of the RTC as affirmed by the CA
in my name, consisting of Four Thousand that the affidavit signed by the respondent on April 27,
Ninety-Four (4,094) Square Meters; 1981 was merely an afterthought contrived by petitioner
Carlos, Jr., and their conclusion that the said affidavit had no
(b) To RECEIVE and SIGN documents and papers binding effect on petitioner Josefina. The affidavit of the
necessary in the CONTRACT OF SALE with respondent reads:
Mr. JOSE LAGON, and to RECEIVE the full
PRICE in CASH, to be determined by my son, 1. That I am the Vendee of a Deed of Absolute Sale where the
CARLOS L. CARLOS, JR.; Vendor is Mrs. Josefina L. Valdez, represented by CARLOS L.
(c) To IMPOSE in the Contract that aside from the CARLOS, JR., through a Special Power of Attorney;
PRICE, another consideration would be for Mr.
JOSE LAGON to transfer the RURAL BANK 2. That the above-mentioned Deed of Absolute Sale is dated
OF ISULAN to the above-mentioned lot and to May 9, 1979 and the Special Power of Attorney also above-
put a commercial building, different from the mentioned was dated May 1, 1979, both duly notarized by
19 | P a g e

Notary Public Atty. Bienvenido Noveno under Doc. No. 77; It is hereby submitted therefore that there is in effect substantial
Page No. 16; Book No. XIX; Series of 1979, and Doc. No. 73; compliance on the part of Mr. Lagon with regards to the
Page No. 15; Book No. XIX; Series of 1979; respectively; additional condition laid down in his affidavit herein-referred
to. If you deem it that Mr. Lagon has not satisfactorily
3. That the subject of the above-mentioned Deed of Absolute complied with all the obligations you imposed upon him to do
Sale is a lot consisting of 4,094 square meters, covered by thereunder, it is made to reasons not of his own making but due
Transfer Certificate of Title No. T-19529 of the Register of to factors brought about by circumstances then prevailing, and
Deeds for the Province of Cotabato, facing the National elaboration on the same can only be properly stated on the
Highway and the Isulan NGA Office going towards the proper to come.[66]
Buencamino Movie House, starting from the corner;
Far from being a mere affidavit, the document embodies
4. That the consideration of the above-mentioned Deed of the unequivocal undertaking of the respondent to construct a
Absolute Sale is EIGHTY THOUSAND PESOS (P80,000.00) fully operational commercial building and to transfer the Rural
and in addition thereto, I hereby declare and manifest that the Bank of Isulan to the subject property as part of the
above-mentioned 4,094 square meters be commercialized by consideration of the sale within five (5) years from the
putting up at least one (1) bank and any other commercial execution of the deed of sale, or until May 9, 1984.
building in the said 4,094 square meters within a period of five The intractable refusal of the respondent to pay the
(5) years from the time of the execution of the above- balance of the purchase price of the property despite the
mentioned Deed of Absolute Sale, in full operation; petitioners demands had no legal basis. As such, petitioner
Josefinas refusal to deliver the torrens title over the subject
5. That should I fail to commercialize the said 4,094 square property under the respondents name was justified, precisely
meters in full operation within a period of five (5) years as because of the respondents refusal to comply with his
stated above, I hereby declare and manifest that said Deed of obligation to pay the balance of the purchase price. Had the
Absolute Sale shall be declared null and void, without need of respondent paid the purchase price of the property, such failure
demand addressed to me; on the part of petitioner Josefina to deliver the torrens title to
and under the name of the respondent would have warranted
6. That the purpose of this Affidavit is to make it clear that the the suspension of the five-year period agreed upon for the
consideration of the said Deed of Absolute Sale is not construction of a fully operational commercial building, as well
only P80,000.00 cash but also the fact that the said 4,094 as the transfer of the aforesaid bank to the property. This is so
square meters be commercialized.[63] because absent such torrens title under the name of the
respondent, no building permit for the construction of the
The respondent admitted in his complaint that he buildings could be secured.
undertook to construct the said building and transfer the Rural Considering all the foregoing, the failure of the
Bank of Isulan to the property he had purchased from petitioner respondent to cause the construction of the commercial
Josefina.[64] The respondent affirmed the authenticity and due building and the transfer of the bank to the property sold under
execution of his affidavit and his obligations therein, and the deed of sale executed between him and petitioner Josefina
testified, thus: was due to the respondents own fault.
ATTY. VALDEZ: There was no need for petitioner Josefina to make a
Q Mr. Lagon, you testified that according to you the notarized demand to the respondent or file an action to rescind
construction of the same, the PCIB Isulan was the deed of absolute sale to enable her to recover the ownership
a compliance of your obligation under your of the property. This is so because the petitioner and the
contract with the Valdezes, do you recall respondent had agreed that upon the latters failure to construct
having testified on that? a new and fully operational commercial building and to cause
the transfer of the Rural Bank of Isulan to the property on or
A Yes, Sir. before May 9, 1984, the deed of absolute sale would be deemed
null and void without need of any demand from the
Q With in (sic) how many years, by the say (sic),
petitioners.Such agreement is evidenced by the affidavit
were you supposed to comply with that
executed by the respondent himself on April 27, 1981.
condition by putting up a bank or a commercial
building in that area? We do not agree with the respondents contentions that
petitioner Josefina, through her son and attorney-in-fact
A Supposed to be five years, Sir.
petitioner Carlos, Jr., had agreed to the sale of a portion of the
Q From when? property, the construction of the PCIB branch office thereon,
and the crediting of the amount paid by the PCIB to the
A According to the affidavit, from the time I respondents account, and deducted from the balance of the
purchased the property up to or from May 9, purchase price. In the first place, the respondent failed to
1979 to 1984, Sir.[65] adduce a morsel of evidence that petitioner Josefina had
In his letter to petitioner Carlos, Jr., the respondent, knowledge of the said agreement and had agreed
through counsel, admitted the binding effect of his affidavit as thereto. Furthermore, the respondent failed to adduce
follows:
20 | P a g e

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 latters 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 latters 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.
SO ORDERED.
21 | P a g e

SILVESTRE DIGNOS and ISABEL WHEREFORE, the Court hereby declares the
LUMUNGSOD, petitioners, deed of sale executed on November 25, 1965
vs. by defendant Isabela L. de Dignos in favor of
HON. COURT OF APPEALS and ATILANO G. defendant Luciano Cabigas, a citizen of the
JABIL, respondents. United States of America, null and void ab
initio, and the deed of sale executed by
This is a petition for review on certiorari seeking the reversal of defendants Silvestre T. Dignos and Isabela
the: (1) Decision * of the 9th Division, Court of Appeals dated Lumungsod de Dignos not rescinded.
July 31,1981, affirming with modification the Decision, dated Consequently, the plaintiff Atilano G. Jabil is
August 25, 1972 of the Court of First Instance ** of Cebu in hereby ordered to pay the sum, of Sixteen
civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Thousand Pesos (P16,000.00) to the
Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, defendants-spouses upon the execution of the
as Attorney-in-Fact of Luciano Cabigas and Jovita L. de Deed of absolute Sale of Lot No. 3453, Opon
Cabigas; and (2) its Resolution dated December 16, 1981, Cadastre and when the decision of this case
denying defendant-appellant's (Petitioner's) motion for becomes final and executory.
reconsideration, for lack of merit.
The plaintiff Atilano G. Jabil is ordered to
The undisputed facts as found by the Court of Appeals are as reimburse the defendants Luciano Cabigas
follows: and Jovita L. de Cabigas, through their
attorney-in-fact, Panfilo Jabalde, reasonable
The Dignos spouses were owners of a parcel amount corresponding to the expenses or
costs of the hollow block fence, so far
of land, known as Lot No. 3453, of the
constructed.
cadastral survey of Opon, Lapu-Lapu City.
On June 7, 1965, appellants (petitioners)
Dignos spouses sold the said parcel of land to It is further ordered that defendants-spouses
plaintiff-appellant (respondent Atilano J. Silvestre T. Dignos and Isabela Lumungsod
Jabil) for the sum of P28,000.00, payable in de Dignos should return to defendants-
two installments, with an assumption of spouses Luciano Cabigas and Jovita L. de
indebtedness with the First Insular Bank of Cabigas the sum of P35,000.00, as equity
Cebu in the sum of P12,000.00, which was demands that nobody shall enrich himself at
paid and acknowledged by the vendors in the the expense of another.
deed of sale (Exh. C) executed in favor of
plaintiff-appellant, and the next installment in The writ of preliminary injunction issued on
the sum of P4,000.00 to be paid on or before September 23, 1966, automatically becomes
September 15, 1965. permanent in virtue of this decision.

On November 25, 1965, the Dignos spouses With costs against the defendants.
sold the same land in favor of defendants
spouses, Luciano Cabigas and Jovita L. De From the foregoing, the plaintiff (respondent herein) and
Cabigas, who were then U.S. citizens, for the defendants-spouss (petitioners herein) appealed to the Court of
price of P35,000.00. A deed of absolute sale Appeals, which appeal was docketed therein as CA-G.R. No.
(Exh. J, also marked Exh. 3) was executed by 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al."
the Dignos spouses in favor of the Cabigas
spouses, and which was registered in the
On July 31, 1981, the Court of Appeals affirmed the decision
Office of the Register of Deeds pursuant to
of the lower court except as to the portion ordering Jabil to pay
the provisions of Act No. 3344. for the expenses incurred by the Cabigas spouses for the
building of a fence upon the land in question. The disposive
As the Dignos spouses refused to accept from portion of said decision of the Court of Appeals reads:
plaintiff-appellant the balance of the purchase
price of the land, and as plaintiff- appellant
IN VIEW OF THE FOREGOING
discovered the second sale made by CONSIDERATIONS, except as to the
defendants-appellants to the Cabigas spouses, modification of the judgment as pertains to
plaintiff-appellant brought the present suit.
plaintiff-appellant above indicated, the
(Rollo, pp. 27-28)
judgment appealed from is hereby
AFFIRMED in all other respects.
After due trial, the Court of first Instance of Cebu rendered its
Decision on August 25,1972, the decretal portion of which With costs against defendants-appellants.
reads:
SO ORDERED.
22 | P a g e

Judgment MODIFIED. IV

A motion for reconsideration of said decision was filed by the PLAINTIFF'S COMPLAINT FOR SPECIFIC
defendants- appellants (petitioners) Dignos spouses, but on PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE
December 16, 1981, a resolution was issued by the Court of HAVING COME TO COURT WITH UNCLEAN HANDS.
Appeals denying the motion for lack of merit.
V
Hence, this petition.
BY AND LARGE, THE COURT OF APPEALS
In the resolution of February 10, 1982, the Second Division of COMMITTED AN ERROR IN AFFIRMING WITH
this Court denied the petition for lack of merit. A motion for MODIFICATION THE DECISION OF THE TRIAL COURT
reconsideration of said resolution was filed on March 16, 1982. DUE TO GRAVE MISINTERPRETATION,
In the resolution dated April 26,1982, respondents were MISAPPLICATION AND MISAPPREHENSION OF THE
required to comment thereon, which comment was filed on TERMS OF THE QUESTIONED CONTRACT AND THE
May 11, 1982 and a reply thereto was filed on July 26, 1982 in LAW APPLICABLE THERETO.
compliance with the resolution of June 16,1 982. On August
9,1982, acting on the motion for reconsideration and on all The foregoing assignment of errors may be synthesized into
subsequent pleadings filed, this Court resolved to reconsider its two main issues, to wit:
resolution of February 10, 1982 and to give due course to the
instant petition. On September 6, 1982, respondents filed a
I. Whether or not subject contract is a deed of
rejoinder to reply of petitioners which was noted on the
absolute sale or a contract Lot sell.
resolution of September 20, 1982.
II. Whether or not there was a valid
Petitioners raised the following assignment of errors: rescission thereof.

I
There is no merit in this petition.

THE COURT OF APPEALS COMMITTED A GRAVE It is significant to note that this petition was denied by the
ERROR OF LAW IN GROSSLY, INCORRECTLY
Second Division of this Court in its Resolution dated February
INTERPRETING THE TERMS OF THE CONTRACT,
1 0, 1 982 for lack of merit, but on motion for reconsideration
EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE,
and on the basis of all subsequent pleadings filed, the petition
EFFECTIVE TO TRANSFER OWNERSHIP OVER THE
was given due course.
PROPERTY IN QUESTION TO THE RESPONDENT AND
NOT MERELY A CONTRACT TO SELL OR PROMISE TO
SELL; THE COURT ALSO ERRED IN MISAPPLYING I.
ARTICLE 1371 AS WARRANTING READING OF THE
AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE The contract in question (Exhibit C) is a Deed of Sale, with the
SALE, DESPITE THE CLARITY OF THE TERMS following conditions:
THEREOF SHOWING IT IS A CONTRACT OF PROMISE
TO SELL. 1. That Atilano G..Jabilis to pay the amount
of Twelve Thousand Pesos P12,000.00) Phil.
II Philippine Currency as advance payment;

THE COURT OF APPEALS COMMITTED AN ERROR OF 2. That Atilano G. Jabil is to assume the
LAW IN INCORRECTLY APPLYING AND OR IN balance of Twelve Thousand Pesos
MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL (P12,000.00) Loan from the First Insular
CODE AS WARRANTING THE ERRONEOUS Bank of Cebu;
CONCLUSION THAT THE NOTICE OF RESCISSION,
EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN 3. That Atilano G. Jabil is to pay the said
JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT. spouses the balance of Four. Thousand Pesos
(P4,000.00) on or before September 15,1965;
III
4. That the said spouses agrees to defend the
THE COURT OF APPEALS COMMITTED AN ERROR OF said Atilano G. Jabil from other claims on the
LAW IN REJECTING THE APPLICABILITY OF said property;
ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE
AND ESTABLISHED JURISPRUDENCE AS TO 5. That the spouses agrees to sign a final deed
WARRANT THE AWARD OF DAMAGES AND of absolute sale in favor of Atilano G. Jabil
ATTORNEY'S FEES TO PETITIONERS. over the above-mentioned property upon the
23 | P a g e

payment of the balance of Four Thousand ownership of the thing sold shall be transferred to the vendee
Pesos. (Original Record, pp. 10-11) upon actual or constructive delivery thereof." As applied in the
case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA
In their motion for reconsideration, petitioners reiterated their 276), this Court held that in the absence of stipulation to the
contention that the Deed of Sale (Exhibit "C") is a mere contrary, the ownership of the thing sold passes to the vendee
contract to sell and not an absolute sale; that the same is subject upon actual or constructive delivery thereof.
to two (2) positive suspensive conditions, namely: the payment
of the balance of P4,000.00 on or before September 15,1965 While it may be conceded that there was no constructive
and the immediate assumption of the mortgage of P12,000.00 delivery of the land sold in the case at bar, as subject Deed of
with the First Insular Bank of Cebu. It is further contended that Sale is a private instrument, it is beyond question that there was
in said contract, title or ownership over the property was actual delivery thereof. As found by the trial court, the Dignos
expressly reserved in the vendor, the Dignos spouses until the spouses delivered the possession of the land in question to Jabil
suspensive condition of full and punctual payment of the as early as March 27,1965 so that the latter constructed thereon
balance of the purchase price shall have been met. So that there Sally's Beach Resort also known as Jabil's Beach Resort in
is no actual sale until full payment is made (Rollo, pp. 51-52). March, 1965; Mactan White Beach Resort on January 15,1966
and Bevirlyn's Beach Resort on September 1, 1965. Such facts
In bolstering their contention that Exhibit "C" is merely a were admitted by petitioner spouses (Decision, Civil Case No.
contract to sell, petitioners aver that there is absolutely nothing 23-L; Record on Appeal, p. 108).
in Exhibit "C" that indicates that the vendors thereby sell,
convey or transfer their ownership to the alleged vendee. Moreover, the Court of Appeals in its resolution dated
Petitioners insist that Exhibit "C" (or 6) is a private instrument December 16,1981 found that the acts of petitioners,
and the absence of a formal deed of conveyance is a very contemporaneous with the contract, clearly show that an
strong indication that the parties did not intend "transfer of absolute deed of sale was intended by the parties and not a
ownership and title but only a transfer after full payment" contract to sell.
(Rollo, p. 52). Moreover, petitioners anchored their contention
on the very terms and conditions of the contract, more Be that as it may, it is evident that when petitioners sold said
particularly paragraph four which reads, "that said spouses has land to the Cabigas spouses, they were no longer owners of the
agreed to sell the herein mentioned property to Atilano G. Jabil same and the sale is null and void.
..." and condition number five which reads, "that the spouses
agrees to sign a final deed of absolute sale over the mentioned
II.
property upon the payment of the balance of four thousand
pesos."
Petitioners claim that when they sold the land to the Cabigas
spouses, the contract of sale was already rescinded.
Such contention is untenable.
Applying the rationale of the case of Taguba v. Vda. de Leon
By and large, the issues in this case have already been settled (supra) which is on all fours with the case at bar, the contract
by this Court in analogous cases.
of sale being absolute in nature is governed by Article 1592 of
the Civil Code. It is undisputed that petitioners never notified
Thus, it has been held that a deed of sale is absolute in nature private respondents Jabil by notarial act that they were
although denominated as a "Deed of Conditional Sale" where rescinding the contract, and neither did they file a suit in court
nowhere in the contract in question is a proviso or stipulation to to rescind the sale. The most that they were able to show is a
the effect that title to the property sold is reserved in the vendor letter of Cipriano Amistad who, claiming to be an emissary of
until full payment of the purchase price, nor is there a Jabil, informed the Dignos spouses not to go to the house of
stipulation giving the vendor the right to unilaterally rescind Jabil because the latter had no money and further advised
the contract the moment the vendee fails to pay within a fixed petitioners to sell the land in litigation to another party (Record
period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon on Appeal, p. 23). As correctly found by the Court of Appeals,
Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA there is no showing that Amistad was properly authorized by
305). Jabil to make such extra-judicial rescission for the latter who,
on the contrary, vigorously denied having sent Amistad to tell
A careful examination of the contract shows that there is no petitioners that he was already waiving his rights to the land in
such stipulation reserving the title of the property on the question. Under Article 1358 of the Civil Code, it is required
vendors nor does it give them the right to unilaterally rescind that acts and contracts which have for their object the
the contract upon non-payment of the balance thereof within a extinguishment of real rights over immovable property must
fixed period. appear in a public document.

On the contrary, all the elements of a valid contract of sale Petitioners laid considerable emphasis on the fact that private
under Article 1458 of the Civil Code, are present, such as: (1) respondent Jabil had no money on the stipulated date of
consent or meeting of the minds; (2) determinate subject payment on September 15,1965 and was able to raise the
matter; and (3) price certain in money or its equivalent. In necessary amount only by mid-October 1965.
addition, Article 1477 of the same Code provides that "The
24 | P a g e

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.
25 | P a g e

UNIVERSITY OF THE PHILIPPINES, petitioner, xxx xxx xxx

vs.
WALFRIDO DE LOS ANGELES, in his capacity as 5. In the event that the DEBTOR fails to
JUDGE of the COURT OF FIRST INSTANCE IN comply with any of its promises or
QUEZON CITY, et al., respondents. undertakings in this document, the DEBTOR
agrees without reservation that the
Three (3) orders of the Court of First Instance of Rizal (Quezon CREDITOR shall have the right and the
City), issued in its Civil Case No. 9435, are sought to be power to consider the Logging Agreement
annulled in this petition for certiorari and prohibition, filed by dated December 2, 1960 as rescinded without
herein petitioner University of the Philippines (or UP) against the necessity of any judicial suit, and the
the above-named respondent judge and the Associated Lumber CREDITOR shall be entitled as a matter of
Manufacturing Company, Inc. (or ALUMCO). The first order, right to Fifty Thousand Pesos (P50,000.00)
dated 25 February 1966, enjoined UP from awarding logging by way of and for liquidated damages;
rights over its timber concession (or Land Grant), situated at
the Lubayat areas in the provinces of Laguna and Quezon; the ALUMCO continued its logging operations, but again incurred
second order, dated 14 January 1967, adjudged UP in contempt an unpaid account, for the period from 9 December 1964 to 15
of court, and directed Sta. Clara Lumber Company, Inc. to July 1965, in the amount of P61,133.74, in addition to the
refrain from exercising logging rights or conducting logging indebtedness that it had previously acknowledged.
operations on the concession; and the third order, dated 12
December 1967, denied reconsideration of the order of That on 19 July 1965, petitioner UP informed respondent
contempt. ALUMCO that it had, as of that date, considered as rescinded
and of no further legal effect the logging agreement that they
As prayed for in the petition, a writ of preliminary injunction had entered in 1960; and on 7 September 1965, UP filed a
against the enforcement or implementation of the three (3) complaint against ALUMCO, which was docketed as Civil
questioned orders was issued by this Court, per its resolution Case No. 9435 of the Court of First Instance of Rizal (Quezon
on 9 February 1968. City), for the collection or payment of the herein before stated
sums of money and alleging the facts hereinbefore specified,
The petition alleged the following: together with other allegations; it prayed for and obtained an
order, dated 30 September 1965, for preliminary attachment
That the above-mentioned Land Grant was segregated from the and preliminary injunction restraining ALUMCO from
public domain and given as an endowment to UP, an institution continuing its logging operations in the Land Grant.
of higher learning, to be operated and developed for the
purpose of raising additional income for its support, pursuant to That before the issuance of the aforesaid preliminary injunction
Act 3608; UP had taken steps to have another concessionaire take over
the logging operation, by advertising an invitation to bid; that
That on or about 2 November 1960, UP and ALUMCO entered bidding was conducted, and the concession was awarded to Sta.
into a logging agreement under which the latter was granted Clara Lumber Company, Inc.; the logging contract was signed
exclusive authority, for a period starting from the date of the on 16 February 1966.
agreement to 31 December 1965, extendible for a further
period of five (5) years by mutual agreement, to cut, collect and That, meantime, ALUMCO had filed several motions to
remove timber from the Land Grant, in consideration of discharge the writs of attachment and preliminary injunction
payment to UP of royalties, forest fees, etc.; that ALUMCO cut but were denied by the court;
and removed timber therefrom but, as of 8 December 1964, it
had incurred an unpaid account of P219,362.94, which, despite That on 12 November 1965, ALUMCO filed a petition to
repeated demands, it had failed to pay; that after it had received enjoin petitioner University from conducting the bidding; on 27
notice that UP would rescind or terminate the logging November 1965, it filed a second petition for preliminary
agreement, ALUMCO executed an instrument, entitled injunction; and, on 25 February 1966, respondent judge issued
"Acknowledgment of Debt and Proposed Manner of the first of the questioned orders, enjoining UP from awarding
Payments," dated 9 December 1964, which was approved by logging rights over the concession to any other party.
the president of UP, and which stipulated the following:
That UP received the order of 25 February 1966 after it had
3. In the event that the payments called for in concluded its contract with Sta. Clara Lumber Company, Inc.,
Nos. 1 and 2 of this paragraph are not and said company had started logging operations.
sufficient to liquidate the foregoing
indebtedness of the DEBTOR in favor of the
That, on motion dated 12 April 1966 by ALUMCO and one
CREDITOR, the balance outstanding after Jose Rico, the court, in an order dated 14 January 1967,
the said payments have been applied shall be declared petitioner UP in contempt of court and, in the same
paid by the DEBTOR in full no later than
order, directed Sta. Clara Lumber Company, Inc., to refrain
June 30, 1965;
from exercising logging rights or conducting logging
operations in the concession.
26 | P a g e

The UP moved for reconsideration of the aforesaid order, but Of course, it must be understood that the act of party in treating
the motion was denied on 12 December 1967. a contract as cancelled or resolved on account of infractions by
the other contracting party must be made known to the other
Except that it denied knowledge of the purpose of the Land and is always provisional, being ever subject to scrutiny and
Grant, which purpose, anyway, is embodied in Act 3608 and, review by the proper court. If the other party denies that
therefore, conclusively known, respondent ALUMCO did not rescission is justified, it is free to resort to judicial action in its
deny the foregoing allegations in the petition. In its answer, own behalf, and bring the matter to court. Then, should the
respondent corrected itself by stating that the period of the court, after due hearing, decide that the resolution of the
logging agreement is five (5) years - not seven (7) years, as it contract was not warranted, the responsible party will be
had alleged in its second amended answer to the complaint in sentenced to damages; in the contrary case, the resolution will
Civil Case No. 9435. It reiterated, however, its defenses in the be affirmed, and the consequent indemnity awarded to the party
court below, which maybe boiled down to: blaming its former prejudiced.
general manager, Cesar Guy, in not turning over management
of ALUMCO, thereby rendering it unable to pay the sum of In other words, the party who deems the contract violated may
P219,382.94; that it failed to pursue the manner of payments, consider it resolved or rescinded, and act accordingly, without
as stipulated in the "Acknowledgment of Debt and Proposed previous court action, but it proceeds at its own risk. For it is
Manner of Payments" because the logs that it had cut turned only the final judgment of the corresponding court that will
out to be rotten and could not be sold to Sta. Clara Lumber conclusively and finally settle whether the action taken was or
Company, Inc., under its contract "to buy and sell" with said was not correct in law. But the law definitely does not require
firm, and which contract was referred and annexed to the that the contracting party who believes itself injured must first
"Acknowledgment of Debt and Proposed Manner of file suit and wait for a judgment before taking extrajudicial
Payments"; that UP's unilateral rescission of the logging steps to protect its interest. Otherwise, the party injured by the
contract, without a court order, was invalid; that petitioner's other's breach will have to passively sit and watch its damages
supervisor refused to allow respondent to cut new logs unless accumulate during the pendency of the suit until the final
the logs previously cut during the management of Cesar Guy be judgment of rescission is rendered when the law itself requires
first sold; that respondent was permitted to cut logs in the that he should exercise due diligence to minimize its own
middle of June 1965 but petitioner's supervisor stopped all damages (Civil Code, Article 2203).
logging operations on 15 July 1965; that it had made several
offers to petitioner for respondent to resume logging operations We see no conflict between this ruling and the previous
but respondent received no reply. jurisprudence of this Court invoked by respondent declaring
that judicial action is necessary for the resolution of a
The basic issue in this case is whether petitioner U.P. can treat reciprocal obligation,1 since in every case where the
its contract with ALUMCO rescinded, and may disregard the extrajudicial resolution is contested only the final award of the
same before any judicial pronouncement to that effect. court of competent jurisdiction can conclusively settle whether
Respondent ALUMCO contended, and the lower court, in the resolution was proper or not. It is in this sense that judicial
issuing the injunction order of 25 February 1966, apparently action will be necessary, as without it, the extrajudicial
sustained it (although the order expresses no specific findings resolution will remain contestable and subject to judicial
in this regard), that it is only after a final court decree declaring invalidation, unless attack thereon should become barred by
the contract rescinded for violation of its terms that U.P. could acquiescence, estoppel or prescription.
disregard ALUMCO's rights under the contract and treat the
agreement as breached and of no force or effect. Fears have been expressed that a stipulation providing for a
unilateral rescission in case of breach of contract may render
We find that position untenable. nugatory the general rule requiring judicial action (v. Footnote,
Padilla, Civil Law, Civil Code Anno., 1967 ed. Vol. IV, page
In the first place, UP and ALUMCO had expressly stipulated in 140) but, as already observed, in case of abuse or error by the
the "Acknowledgment of Debt and Proposed Manner of rescinder the other party is not barred from questioning in court
Payments" that, upon default by the debtor ALUMCO, the such abuse or error, the practical effect of the stipulation being
creditor (UP) has "the right and the power to consider, the merely to transfer to the defaulter the initiative of instituting
Logging Agreement dated 2 December 1960 as rescinded suit, instead of the rescinder.
without the necessity of any judicial suit." As to such special
stipulation, and in connection with Article 1191 of the Civil In fact, even without express provision conferring the power of
Code, this Court stated in Froilan vs. Pan Oriental Shipping cancellation upon one contracting party, the Supreme Court of
Co., et al., L-11897, 31 October 1964, 12 SCRA 276: Spain, in construing the effect of Article 1124 of the Spanish
Civil Code (of which Article 1191 of our own Civil; Code is
there is nothing in the law that prohibits the practically a reproduction), has repeatedly held that, a
parties from entering into agreement that resolution of reciprocal or synallagmatic contracts may be
violation of the terms of the contract would made extrajudicially unless successfully impugned in court.
cause cancellation thereof, even without
court intervention. In other words, it is not El articulo 1124 del Codigo Civil establece la
always necessary for the injured party to facultad de resolver las obligaciones
resort to court for rescission of the contract. reciprocas para el caso de que uno de los
27 | P a g e

obligados no cumpliese lo que le amended answer, such as the misconduct of its former manager
incumbe, facultad que, segun jurisprudencia Cesar Guy, and the rotten condition of the logs in private
de este Tribunal, surge respondent's pond, which said respondent was in a better
immediatamente despuesque la otra parte position to know when it executed the acknowledgment of
incumplio su deber, sin necesidad de una indebtedness, do not constitute on their face sufficient excuse
declaracion previa de los Tribunales. (Sent. for non-payment; and considering that whatever prejudice may
of the Tr. Sup. of Spain, of 10 April 1929; be suffered by respondent ALUMCO is susceptibility of
106 Jur. Civ. 897). compensation in damages, it becomes plain that the acts of the
court a quo in enjoining petitioner's measures to protect its
Segun reiterada doctrina de esta Sala, el Art. interest without first receiving evidence on the issues tendered
1124 regula la resolucioncomo una "facultad" by the parties, and in subsequently refusing to dissolve the
atribuida a la parte perjudicada por el injunction, were in grave abuse of discretion, correctible by
incumplimiento del contrato, la cual tiene certiorari, since appeal was not available or adequate. Such
derecho do opcion entre exigir el injunction, therefore, must be set aside.
cumplimientoo la resolucion de lo
convenido, que puede ejercitarse, ya en la via For the reason that the order finding the petitioner UP in
judicial, ya fuera de ella, por declaracion del contempt of court has open appealed to the Court of Appeals,
acreedor, a reserva, claro es, que si la and the case is pending therein, this Court abstains from
declaracion de resolucion hecha por una de making any pronouncement thereon.
las partes se impugna por la otra, queda
aquella sometida el examen y sancion de los WHEREFORE, the writ of certiorari applied for is granted,
Tribunale, que habran de declarar, en and the order of the respondent court of 25 February 1966,
definitiva, bien hecha la resolucion o por el granting the Associated Lumber Company's petition for
contrario, no ajustada a Derecho. (Sent. TS of injunction, is hereby set aside. Let the records be remanded for
Spain, 16 November 1956; Jurisp. Aranzadi, further proceedings conformably to this opinion.
3, 447).
PALAY, INC. and ALBERT ONSTOTT, petitioner,
La resolucion de los contratos vs.
sinalagmaticos, fundada en el JACOBO C. CLAVE, Presidential Executive Assistant
incumplimiento por una de las partes de su NATIONAL HOUSING AUTHORITY and NAZARIO
respectiva prestacion, puedetener lugar con DUMPIT respondents.
eficacia" 1. o Por la declaracion de voluntad
de la otra hecha extraprocesalmente, si no es
The Resolution, dated May 2, 1980, issued by Presidential
impugnada en juicio luego con exito. y
Executive Assistant Jacobo Clave in O.P. Case No. 1459,
2. 0 Por la demanda de la perjudicada,
directing petitioners Palay, Inc. and Alberto Onstott jointly and
cuando no opta por el cumplimientocon la
severally, to refund to private respondent, Nazario Dumpit, the
indemnizacion de danos y perjuicios amount of P13,722.50 with 12% interest per annum, as
realmente causados, siempre quese acredite, resolved by the National Housing Authority in its Resolution of
ademas, una actitud o conducta persistente y
July 10, 1979 in Case No. 2167, as well as the Resolution of
rebelde de laadversa o la satisfaccion de lo
October 28, 1980 denying petitioners' Motion for
pactado, a un hecho obstativo que de un
Reconsideration of said Resolution of May 2, 1980, are being
modoabsoluto, definitivo o irreformable lo assailed in this petition.
impida, segun el art. 1.124, interpretado por
la jurisprudencia de esta Sala, contenida en
las Ss. de 12 mayo 1955 y 16 Nov. 1956, On March 28, 1965, petitioner Palay, Inc., through its
entre otras, inspiradas por el principio del President, Albert Onstott executed in favor of private
Derecho intermedio, recogido del Canonico, respondent, Nazario Dumpit, a Contract to Sell a parcel of
por el cual fragenti fidem, fides non est Land (Lot No. 8, Block IV) of the Crestview Heights
servanda. (Ss. de 4 Nov. 1958 y 22 Jun. Subdivision in Antipolo, Rizal, with an area of 1,165 square
1959.) (Emphasis supplied). 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
In the light of the foregoing principles, and considering that the
monthly installments of P246.42 until fully paid. Paragraph 6
complaint of petitioner University made out a prima facie case of the contract provided for automatic extrajudicial rescission
of breach of contract and defaults in payment by respondent upon default in payment of any monthly installment after the
ALUMCO, to the extent that the court below issued a writ of
lapse of 90 days from the expiration of the grace period of one
preliminary injunction stopping ALUMCO's logging
month, without need of notice and with forfeiture of all
operations, and repeatedly denied its motions to lift the
installments paid.
injunction; that it is not denied that the respondent company
had profited from its operations previous to the agreement of 5
December 1964 ("Acknowledgment of Debt and Proposed Respondent Dumpit paid the downpayment and several
Manner of Payment"); that the excuses offered in the second installments amounting to P13,722.50. The last payment was
28 | P a g e

made on December 5, 1967 for installments up to September Nazario M. Dumpit thereby denying
1967. substantial justice to the petitioners,
particularly petitioner Onstott
On May 10, 1973, or almost six (6) years later, private
respondent wrote petitioner offering to update all his overdue We issued a Temporary Restraining Order on Feb 11, 1981
accounts with interest, and seeking its written consent to the enjoining the enforcement of the questioned Resolutions and of
assignment of his rights to a certain Lourdes Dizon. He the Writ of Execution that had been issued on December 2,
followed this up with another letter dated June 20, 1973 1980. On October 28, 1981, we dismissed the petition but upon
reiterating the same request. Replying petitioners informed petitioners' motion, reconsidered the dismissal and gave due
respondent that his Contract to Sell had long been rescinded course to the petition on March 15, 1982.
pursuant to paragraph 6 of the contract, and that the lot had
already been resold. On the first issue, petitioners maintain that it was justified in
cancelling the contract to sell without prior notice or demand
Questioning the validity of the rescission of the contract, upon respondent in view of paragraph 6 thereof which
respondent filed a letter complaint with the National Housing provides-
Authority (NHA) for reconveyance with an altenative prayer
for refund (Case No. 2167). In a Resolution, dated July 10, 6. That in case the BUYER falls to satisfy
1979, the NHA, finding the rescission void in the absence of any monthly installment or any other
either judicial or notarial demand, ordered Palay, Inc. and payments herein agreed upon, the BUYER
Alberto Onstott in his capacity as President of the corporation, shall be granted a month of grace within
jointly and severally, to refund immediately to Nazario Dumpit which to make the payment of the t in arrears
the amount of P13,722.50 with 12% interest from the filing of together with the one corresponding to the
the complaint on November 8, 1974. Petitioners' Motion for said month of grace. -It shall be understood,
Reconsideration of said Resolution was denied by the NHA in however, that should the month of grace
its Order dated October 23, 1979. 1 herein granted to the BUYER expire, without
the payment & corresponding to both months
On appeal to the Office of the President, upon the allegation having been satisfied, an interest of ten
that the NHA Resolution was contrary to law (O.P. Case No. (10%) per cent per annum shall be charged
1459), respondent Presidential Executive Assistant, on May 2, on the amounts the BUYER should have
1980, affirmed the Resolution of the NHA. Reconsideration paid; it is understood further, that should a
sought by petitioners was denied for lack of merit. Thus, the period of NINETY (90) DAYS elapse to
present petition wherein the following issues are raised: begin from the expiration of the month of
grace hereinbefore mentioned, and the
I BUYER shall not have paid all the amounts
that the BUYER should have paid with the
Whether notice or demand is not mandatory corresponding interest up to the date, the
under the circumstances and, therefore, may SELLER shall have the right to declare this
contract cancelled and of no effect without
be dispensed with by stipulation in a contract
notice, and as a consequence thereof, the
to sell.
SELLER may dispose of the lot/lots covered
by this Contract in favor of other persons, as
II if this contract had never been entered into.
In case of such cancellation of this Contract,
Whether petitioners may be held liable for all the amounts which may have been paid by
the refund of the installment payments made the BUYER in accordance with the
by respondent Nazario M. Dumpit. agreement, together with all the
improvements made on the premises, shall be
III considered as rents paid for the use and
occupation of the above mentioned premises
Whether the doctrine of piercing the veil of and for liquidated damages suffered by virtue
corporate fiction has application to the case at of the failure of the BUYER to fulfill his part
bar. of this agreement : and the BUYER hereby
renounces his right to demand or reclaim the
return of the same and further obligates
IV
peacefully to vacate the premises and deliver
the same to the SELLER.
Whether respondent Presidential Executive
Assistant committed grave abuse of
Well settled is the rule, as held in previous jurisprudence, 2 that
discretion in upholding the decision of
judicial action for the rescission of a contract is not necessary
respondent NHA holding petitioners
where the contract provides that it may be revoked and
solidarily liable for the refund of the
cancelled for violation of any of its terms and conditions.
installment payments made by respondent
29 | P a g e

However, even in the cited cases, there was at least a written become barred by acquiescense, estoppel or
notice sent to the defaulter informing him of the rescission. As prescription.
stressed in University of the Philippines vs. Walfrido de los
Angeles 3 the act of a party in treating a contract as cancelled Fears have been expressed that a stipulation
should be made known to the other. We quote the pertinent providing for a unilateral rescission in case of
excerpt: breach of contract may render nugatory the
general rule requiring judicial action (v.
Of course, it must be understood that the act Footnote, Padilla Civil Law, Civil Code
of a party in treating a contract as cancelled Anno., 1967 ed. Vol. IV, page 140) but, as
or resolved in account of infractions by the already observed, in case of abuse or error
other contracting party must be made known by the rescinder the other party is not barred
to the other and is always provisional being from questioning in court such abuse or
ever subject to scrutiny and review by the error, the practical effect of the stipulation
proper court. If the other party denies that being merely to transfer to the defaulter the
rescission is justified it is free to resort to initiative of instituting suit, instead of the
judicial action in its own behalf, and bring rescinder (Emphasis supplied).
the matter to court.Then, should the court,
after due hearing, decide that the resolution Of similar import is the ruling in Nera vs. Vacante 4 , reading:
of the contract was not warranted, the
responsible party will be sentenced to A stipulation entitling one party to take
damages; in the contrary case, the resolution possession of the land and building if the
will be affirmed, and the consequent
other party violates the contract does not ex
indemnity awarded to the party prejudiced.
propio vigore confer upon the former the
right to take possession thereof if objected to
In other words, the party who deems the without judicial intervention and
contract violated may consider it resolved or determination.
rescinded, and act accordingly, without
previous court action, but it proceeds at its
This was reiterated in Zulueta vs. Mariano 5 where we held that
own risk. For it is only the final judgment of
extrajudicial rescission has legal effect where the other party
the corresponding court that will conclusively
does not oppose it.6 Where it is objected to, a judicial
and finally settle whether the action taken determination of the issue is still necessary.
was or was not correct in law. But the law
definitely does not require that the
contracting party who believes itself injured In other words, resolution of reciprocal contracts may be made
must first file suit and wait for a judgment extrajudicially unless successfully impugned in Court. If the
before taking extrajudicial steps to protect its debtor impugns the declaration, it shall be subject to judicial
interest. Otherwise, the party injured by the determination. 7
other's breach will have to passively sit and
watch its damages accumulate during the In this case, private respondent has denied that rescission is
pendency of the suit until the final judgment justified and has resorted to judicial action. It is now for the
of rescission is rendered when the law itself Court to determine whether resolution of the contract by
requires that he should exercise due diligence petitioners was warranted.
to minimize its own damages (Civil Code,
Article 2203). We hold that resolution by petitioners of the contract was
ineffective and inoperative against private respondent for lack
We see no conflict between this ruling and of notice of resolution, as held in the U.P. vs. Angeles case,
the previous jurisprudence of this Court supra
invoked by respondent declaring that judicial
action is necessary for the resolution of a Petitioner relies on Torralba vs. De los Angeles 8 where it was
reciprocal obligation (Ocejo Perez & Co., vs. held that "there was no contract to rescind in court because
International Banking Corp., 37 Phil. 631; from the moment the petitioner defaulted in the timely payment
Republic vs. Hospital de San Juan De Dios, of the installments, the contract between the parties was
et al., 84 Phil 820) since in every case where deemed ipso facto rescinded." However, it should be noted that
the extrajudicial resolution is contested only even in that case notice in writing was made to the vendee of
the final award of the court of competent the cancellation and annulment of the contract although the
jurisdiction can conclusively settle whether contract entitled the seller to immediate repossessing of the
the resolution was proper or not. It is in this land upon default by the buyer.
sense that judicial action win be necessary, as
without it, the extrajudicial resolution will The indispensability of notice of cancellation to the buyer was
remain contestable and subject to judicial to be later underscored in Republic Act No. 6551 entitled "An
invalidation unless attack thereon should Act to Provide Protection to Buyers of Real Estate on
30 | P a g e

Installment Payments." which took effect on September 14, private respondent of the total amount the latter had paid to
1972, when it specifically provided: petitioner company. It is basic that a corporation is invested by
law with a personality separate and distinct from those of the
Sec. 3(b) ... the actual cancellation of the persons composing it as wen as from that of any other legal
contract shall take place after thirty days entity to which it may be related. 11 As a general rule, a
from receipt by the buyer of the notice of corporation may not be made to answer for acts or liabilities of
cancellation or the demand for rescission of its stockholders or those of the legal entities to which it may be
the contract by a notarial act and upon full connected and vice versa. However, the veil of corporate
payment of the cash surrender value to the fiction may be pierced when it is used as a shield to further an
buyer. (Emphasis supplied). 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 ;
The contention that private respondent had waived his right to
or to perpetuate fraud or confuse legitimate issues 15 ; or to
be notified under paragraph 6 of the contract is neither
circumvent the law or perpetuate deception 16; or as an alter
meritorious because it was a contract of adhesion, a standard
ego, adjunct or business conduit for the sole benefit of the
form of petitioner corporation, and private respondent had no
freedom to stipulate. A waiver must be certain and stockholders. 17
unequivocal, and intelligently made; such waiver follows only
where liberty of choice has been fully accorded. 9 Moreover, it We find no badges of fraud on petitioners' part. They had
is a matter of public policy to protect buyers of real estate on literally relied, albeit mistakenly, on paragraph 6 (supra) of its
installment payments against onerous and oppressive contract with private respondent when it rescinded the contract
conditions. Waiver of notice is one such onerous and to sell extrajudicially and had sold it to a third person.
oppressive condition to buyers of real estate on installment
payments. In this case, petitioner Onstott was made liable because he was
then the President of the corporation and he a to be the
Regarding the second issue on refund of the controlling stockholder. No sufficient proof exists on record
installment payments made by private that said petitioner used the corporation to defraud private
respondent. Article 1385 of the Civil Code respondent. He cannot, therefore, be made personally liable just
provides: because he "appears to be the controlling stockholder". Mere
ownership by a single stockholder or by another corporation is
not of itself sufficient ground for disregarding the separate
ART. 1385. Rescission creates the obligation
to return the things which were the object of corporate personality. 18 In this respect then, a modification of
the contract, together with their fruits, and the the Resolution under review is called for.
price with its interest; consequently, it can be
carried out only when he who demands WHEREFORE, the questioned Resolution of respondent public
rescission can return whatever he may be official, dated May 2, 1980, is hereby modified. Petitioner
obliged to restore. 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
Neither sham rescission take place when the
the filing of the Complaint. The temporary Restraining Order
things which are the object of the contract are
heretofore issued is hereby lifted.
legally in the possession of third persons who
did not act in bad faith.
No costs.
In this case, indemnity for damages may be
demanded from the person causing the loss. SO ORDERED.

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 appropriate the proceeds of the
second sale to another.

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
31 | P a g e

FRANCISCO LAO LIM, petitioner, the stipulation in the compromise agreement which, in its
vs. formulation, allows the lessee to stay on the premises as long as
COURT OF APPEALS and BENITO VILLAVICENCIO he needs it and can pay rents is valid, being a resolutory
DY, respondents. condition and, therefore, beyond the ambit of Article 1308 of
the Civil Code; and (2) that a compromise has the effect of res
Respondent Court of Appeals having affirmed in toto on June judicata. 8
30, 1988 in CA-G.R. SP No. 13925, 1 the decision of the
Regional Trial Court of Manila, Branch XLVI in Civil Case Petitioner's motion for reconsideration having been denied by
No. 87-42719, entitled "Francisco Lao Lim vs. Benito respondent Court of Appeals, this present petition is now
Villavicencio Dy," petitioner seeks the reversal of such before us. We find the same to be meritorious.
affirmance in the instant petition.
Contrary to the ruling of respondent court, the disputed
The records show that private respondent entered into a stipulation "for as long as the defendant needed the premises
contract of lease with petitioner for a period of three (3) years, and can meet and pay said increases" is a purely potestative
that is, from 1976 to 1979. After the stipulated term expired, condition because it leaves the effectivity and enjoyment of
private respondent refused to vacate the premises, hence, leasehold rights to the sole and exclusive will of the lessee. It is
petitioner filed an ejectment suit against the former in the City likewise a suspensive condition because the renewal of the
Court of Manila, docketed therein as Civil Case No. 051063- lease, which gives rise to a new lease, depends upon said
CV. The case was terminated by a judicially approved condition. It should be noted that a renewal constitutes a new
compromise agreement of the parties providing in part: contract of lease although with the same terms and conditions
as those in the expired lease. It should also not be overlooked
3. That the term of the lease shall be renewed that said condition is not resolutory in nature because it is not a
every three years retroacting from October condition that terminates the lease contract. The lease contract
1979 to October 1982; after which the is for a definite period of three (3) years upon the expiration of
abovenamed rental shall be raised which the lease automatically terminates.
automatically by 20% every three years for as
long as defendant needed the premises and The invalidity of a condition in a lease contract similar to the
can meet and pay the said increases, the one at bar has been resolved in Encarnacion vs. Baldomar, et
defendant to give notice of his intent to al. 9 where we ruled that in an action for ejectment, the defense
renew sixty (60) days before the expiration of interposed by the lessees that the contract of lease authorized
the term; 2 them to continue occupying the premises as long as they paid
the rents is untenable, because it would leave to the lessees the
By reason of said compromise agreement the lease continued sole power to determine whether the lease should continue or
from 1979 to 1982, then from 1982 to 1985. On April 17, 1985, not. As stated therein, "(i)f this defense were to be allowed, so
petitioner advised private respondent that he would no longer long as defendants elected to continue the lease by continuing
renew the contract effective October, 1985.3However, on the payment of the rentals, the owner would never be able to
August 5, 1985, private respondent informed petitioner in discontinue it; conversely, although the owner should desire the
writing of his intention to renew the contract of lease for lease to continue, the lessees could effectively thwart his
another term, commencing November, 1985 to October, purpose if they should prefer to terminate the contract by the
1988. 4 In reply to said letter, petitioner advised private simple expedient of stopping payment of the rentals. This, of
respondent that he did not agree to a renewal of the lease course, is prohibited by the aforesaid article of the Civil Code.
contract upon its expiration in October, 1985. 5 (8 Manresa, 3rd ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil.
100.)
On January 15, 1986, because of private respondent's refusal to
vacate the premises, petitioner filed another ejectment suit, this The continuance, effectivity and fulfillment of a contract of
time with the Metropolitan Trial Court of Manila in Civil Case lease cannot be made to depend exclusively upon the free and
No. 114659-CV. In its decision of September 24, 1987, said uncontrolled choice of the lessee between continuing the
court dismissed the complaint on the grounds that (1) the lease payment of the rentals or not, completely depriving the owner
contract has not expired, being a continuous one the period of any say in the matter. Mutuality does not obtain in such a
whereof depended upon the lessee's need for the premises and contract of lease and no equality exists between the lessor and
his ability to pay the rents; and (2) the compromise agreement the lessee since the life of the contract is dictated solely by the
entered into in the aforesaid Civil Case No. 051063-CV lessee.
constitutes res judicata to the case before it. 6
The interpretation made by respondent court cannot, therefore,
Petitioner appealed to the Regional Trial Court of Manila be upheld. Paragraph 3 of the compromise agreement, read and
which, in its decision of January 28, 1988 in Civil Case No. 87- interpreted in its entirety, is actually to the effect that the last
42719, affirmed the decision of the lower court. 7 portion thereof, which gives the private respondent sixty (60)
days before the expiration of the term the right to give notice of
his intent to renew, is subject to the first portion of said
As stated at the outset, respondent Court of Appeals affirmed in
paragraph that "the term of the lease shall be renewed every
full said decision of the Regional Trial Court and held that (1)
three (3) years," thereby requiring the mutual agreement of the
32 | P a g e

parties. The use of the word "renew" and the designation of the v. Ongsiaco and Cruz v. Alberto should be
period of three (3) years clearly confirm that the contract of and are overruled. 15
lease is limited to a specific period and that it is not a
continuing lease. The stipulation provides for a renewal of the In addition, even assuming that the clause "for as long as the
lease every three (3) years; there could not be a renewal if said defendant needed the premises and can meet and pay, said
lease did not expire, otherwise there is nothing to renew. increases" gives private respondent an option to renew the
lease, the same will be construed as providing for but one
Resultantly, the contract of lease should be and is hereby renewal or extension and, therefore, was satisfied when the
construed as providing for a definite period of three (3) years lease was renewed in 1982 for another three (3) years. A
and that the automatic increase of the rentals by twenty percent general covenant to renew is satisfied by one renewal and will
(20%) will take effect only if the parties decide to renew the not be construed to confer the right to more than one renewal
lease. A contrary interpretation will result in a situation where unless provision is clearly and expressly made for further
the continuation and effectivity of the contract will depend only renewals.16 Leases which may have been intended to be
upon the will of the lessee, in violation of Article 1308 of the renewable in perpetuity will nevertheless be construed as
Civil Code and the aforesaid doctrine in Encarnacion. The importing but one renewal if there is any uncertainty in that
compromise agreement should be understood as bearing that regard. 17
import which is most adequate to render it effectual. 10 Where
the instrument is susceptible of two interpretations, one which The case of Buccat vs. Dispo et al., 18 relied upon by
will make it invalid and illegal and another which will make it responddent court, to support its holding that respondent lessee
valid and legal, the latter interpretation should be adopted. 11 can legally stay on the premises for as long as he needs it and
can pay the rents, is not in point. In said case, the lease contract
Moreover, perpetual leases are not favored in law, nor are provides for an indefinite period since it merely stipulates
covenants for continued renewals tending to create a "(t)hat the lease contract shall remain in full force and effect as
perpetuity, and the rule of construction is well settled that a long as the land will serve the purpose for which it is intended
covenant for renewal or for an additional term should not be as a school site of the National Business Institute, but the
held to create a right to repeated grants in perpetuity, unless by rentals now stipulated shall be subject to review every after ten
plain and unambiguous terms the parties have expressed such (10) years by mutual agreement of the parties." This is in clear
intention. 12 A lease will not be construed to create a right to contrast to the case at bar wherein, to repeat, the lease is fixed
perpetual renewals unless the language employed indicates at a period of three (3) years although subject to renewal upon
dearly and unambiguously that it was the intention and purpose agreement of the parties, and the clause "for as long as
of the parties to do so. 13 A portion in a lease giving the lessee defendant needs the premises and can meet and pay the rents"
and his assignee the right to perpetual renewals is not favored is not an independent stipulation but is controlled by said fixed
by the courts, and a lease will be construed as not making such term and the option for renewal upon agreement of both
a provision unless it does so clearly. 14 parties.

As we have further emphasized: On the second issue, we agree with petitioner that respondent
court erred in holding that the action for ejectment is barred
It is also important to bear in mind that in a by res judicata. While it is true that a compromise agreement
reciprocal contract like a lease, the period of has the effect of res judicata this doctrine does not apply in the
the lease must be deemed to have been present case. It is elementary that for a judgment to be a bar to
agreed upon for the benefit of both parties, a subsequent case, (1) it must be a final judgment, (2) the court
absent language showing that the term was which rendered it had jurisdiction over the subject matter and
deliberately set for the benefit of the lessee or the parties, (3) it must be a judgment on the merits, and (4)
lessor alone. We are not aware of any there must be identity between the two cases as to parties,
presumption in law that the term of a lease is subject matter and cause of action. 19
designed for the benefit of the lessee
alone. Koh andCruz in effect rested upon In the case at bar, the fourth requisite is lacking. Although there
such a presumption. But that presumption is identity of parties, there is no identity of subject matter and
cannot reasonably be indulged in casually in cause of action. The subject matter in the first ejectment case is
an era of rapid economic change, marked by, the original lease contract while the subject matter in the case
among other things, volatile costs of living at bar is the lease created under the terms provided in the
and fluctuations in the value of the domestic subsequent compromise agreement. The lease executed in 1978
currency. The longer the period the more is one thing; the lease constituted in 1982 by the compromise
clearly unreasonable such a presumption agreement is another.
would be. In an age like that we live in, very
specific language is necessary to show an There is also no identity, in the causes of action. The test
intent to grant a unilateral faculty to extend generally applied to determine the identity of causes of action
or renew a contract of lease to the lessee is to consider the identity of facts essential to their
alone, or to the lessor alone for that matter. maintenance, or whether the same evidence would sustain both
We hold that the above-quoted rulings in Koh causes of action. 20 In the case at bar, the delict or the wrong in
the first case is different from that in the second, and the
33 | P a g e

evidence that will support and establish the cause of action in

the former will not suffice to support and establish that in the
latter.

In the first ejectment case, the cause of action was private

respondent's refusal to comply with the lease contract which
expired on December 31, 1978. In the present case, the cause of
action is a similar refusal but with respect to the lease which
expired in October, 1985 under the compromise agreement.
While the compromise agreement may be res judicata as far as
the cause of action and issues in the first ejectment case is
concerned, any cause of action that arises from the application
or violation of the compromise agreement cannot be said to
have been settled in said first case. The compromise agreement
was meant to settle, as it did only settle, the first case. It did
not, as it could not, cover any cause of action that might arise
thereafter, like the present case which was founded on the
expiration of the lease in 1985, which necessarily requires a
different set of evidence. The fact that the compromise
agreement was judicially approved does not foreclose any
cause of action arising from a violation of the terms thereof.

WHEREFORE, the decision of respondent Court of Appeals is

REVERSED and SET ASIDE. Private respondent is hereby
ordered to immediately vacate and return the possession of the
leased premises subject of the present action to petitioner and
to pay the monthly rentals due thereon in accordance with the
compromise agreement until he shall have actually vacated the
same. This judgment is immediately executory.

SO ORDERED.
34 | P a g e

AFP MUTUAL BENEFIT ASSOCIATION, In the present case, there could be no valid annotation on
INC., petitioner, vs. COURT OF APPEALS, the titles issued to AFPMBAI because the case used as basis of
SOLID HOMES, INC., INVESTCO, INC., and the annotation pending with the trial court was an action for
REGISTER OF DEEDS OF collection of a sum of money and did not involve the titles to,
MARIKINA, respondents. possession or ownership of the subject property or an interest
therein. This Court, in its final decision on the case categorized
What is before the Court is Solid Homes, Inc.s motion for the action initiated by Investco, Inc. against Solid Homes, Inc.
reconsideration of the decision promulgated on March 3, 2000, (Civil Case No. 40615 of the Regional Trial Court, Pasig,
reversing the decision of the Court of Appeals and ordering the Metro Manila) as:
Register of Deeds to cancel the notice of lis pendens on the
titles issued to petitioner AFP Mutual Benefit Association, Inc.
(AFPMBAI), declaring it as buyer in good faith and for value. An action for collection of sums of money, damages and
attorneys fees was filed with the Regional Trial Court (Civil
We have defined a purchaser in good faith and for value Case No. 40615) of Pasig by private respondents Investco,
as one who buys the property of another without notice that Angela Perez Staley and Antonio Perez, Jr. against petitioner
some other person has a right to or interest in such property and Solid Homes, Inc.[9]
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 Unquestionably, such action did not directly involve titles
some other person in the property.[1] to, ownership or possession of the subject property, and,
therefore, was not a proper subject of a notice of lis pendens.
Solid Homes, Inc.s motion for reconsideration is based on
the following grounds: (1) that the Court erred in ruling The Torrens System was adopted in this country because
that petitioner was a purchaser in good faith and for value; (2) it was believed to be the most effective measure to guarantee
that the Court erred in failing to appreciate Solid Homes, Inc.s the integrity of land titles and to protect their indefeasibility
cause of action (in Civil Case No. 52999); and (3) that the once the claim of ownership is established and recognized. If a
Court erred in denying Solid Homes, Inc.s petition (in G. R. person purchases a piece of land on the assurance that the
No. 135016) to set aside the trial courts order denying its sellers title thereto is valid, he should not run the risk of being
motion to execute the decision in Civil Case No. 40615. told later that his acquisition was ineffectual after all. This
would not only be unfair to him. What is worse is that if this
We find the motion without merit.
were permitted, public confidence in the system would be
1. Solid Homes, Inc.s position is anchored on the eroded and land transactions would be attended by complicated
preposition that a notice of lis pendens was duly annotated on and not necessarily conclusive investigations and proof of
the vendors title that must be deemed carried over to the titles ownership. The further consequence would be that land
issued to AFPMBAI, subjecting it to the final result of the conflicts could be even more numerous and complex than they
litigation[2] as a transferee pendente lite. are now and possibly also more abrasive, if not even violent. [10]
However, the law is clear.[3] The Revised Rules of Prevailing jurisprudence recognizes that All persons
Court[4] allows the annotation of a notice of lis pendens in dealing with property covered by the torrens certificate of title
actions affecting the title or right of possession of real are not required to go beyond what appears on the face of the
property,[5] or an interest in such real property.[6] We further title.[11] The buyer is not even obligated to look beyond the
declared that the rule of lis pendens applied to suits brought to certificate to investigate the titles of the seller appearing on the
establish an equitable estate, interest, or right in specific real face of the certificate.[12] Hence, we ruled that AFPMBAI is a
property or to enforce any lien, charge, or encumbrance against buyer in good faith and for value.
it x x x.[7]
Consequently, we reject movant Solid Homes, Inc.s
Pencil markings, which even Solid Homes, Inc. admits to contention that AFPMBAI is a transferee pendente lite of
be provisional,[8] are not an accepted form of annotating a Investco, Inc.
notice of lis pendens. The Court cannot accept the argument
2. It should be emphasized that the contractual relation
that such pencil annotation can be considered as a valid
between Investco, Inc. and Solid Homes, Inc., is based on an
annotation of notice of lis pendens, and thus an effective notice
agreement executed in 1976 as a contract to sell and to buy.
to the whole world as to the status of the title to the
AFPMBAI never figured in this contract. The relationship
land. The law requires proper annotation, not provisional
between AFPMBAI and Investco, Inc. arose out of a contract
annotation of a notice of lis pendens.
of absolute sale after Solid Homes, Inc. reneged or defaulted on
If we allow provisional annotations as a valid form of its contract to sell, and Investco, Inc. rescinded extra-legally
annotation of notice of lis pendens, we would be eroding the such contact to sell with Solid Homes, Inc. AFPMBAI did not
very value of the indefeasibility of the torrens system. If there acquire from Solid Homes, Inc. its rights or interest over the
were a valid annotation of notice of lis pendens, the same property in question; Investco, Inc. sold the property itself
would have been carried over to the titles issued to AFPMBAI. which AFPMBAI paid for in full, thus causing the transfer of
As it is, the transfer certificates of titles of the vendor Investco, titles in the name of AFPMBAI.
Inc. conveyed to AFPMBAI were clean and without any
When the contract was entered into between Solid
encumbrance.
Homes, Inc. and Investco, Inc. in September 1976, the titles to
the Quezon City and Marikina property had not been
35 | P a g e

transferred in the name of Investco, Inc. as assignee of the 4. Movant Solid Homes, Inc. finally contends that when
owners. Hence, Investco, Inc. merely agreed to sell, and Solid the decision in Civil Case No. 40615 became final, there was
Homes, Inc. to buy, the formers rights and interest in the no one to move for execution of the decision since Investco,
subject property which at the time was still registered in the Inc. had absconded, and had in fact re-sold the property in
names of Angela Perez Staley and Antonio Perez, Investco, question to AFPMBAI. We find the contention without merit.
Inc.s predecessors-in-interest. Investco, Inc. was the prevailing party which had the right to
demand execution.[16] Once a judgment becomes final and
Under the contract to sell and buy, the vendors bound executory, the prevailing party can have it executed as a
themselves to cause the titles to the land to be transferred in the matter of right, and the issuance of a writ of execution becomes
name of Investco, Inc. after which, should Solid Homes, Inc. a ministerial duty of the court.[17] In fact, the prevailing party is
complete the installment payments, Investco, Inc. would the one really entitled to file a motion for the issuance of a writ
execute a Deed of Absolute Sale in favor of Solid Homes, Inc. of execution. Yet, in this case, it was Solid Homes, Inc. that
and the latter would execute a first preferred mortgage in favor filed on June 19, 1996, a motion for execution of judgment in
of Investco, Inc. The deed of absolute sale would replace the the court of origin (RTC Pasig, Branch 157). The trial court
contract to sell. Only then would Solid Homes, Inc. be entitled denied the motion. Hence, on September 11, 1998, Solid
to take possession of the Quezon City and Marikina parcels of Homes, Inc. filed a petition for certiorari with this Court. [18]
land and introduce improvements thereon.
Assuming that AFPMBAI was bound by the judgment in
On or about March 21, 1979, the titles to the Marikina Civil Case No. 40615, and be substituted for Investco, Inc., it is
property were issued in the name of Investco, Inc. However, clear that Investco, Inc. prevailed in the case. It was the
Investco, Inc. did not execute a deed of absolute sale in favor of winning party.[19] It is the prevailing party which is entitled as
Solid Homes, Inc. because Solid Homes, Inc. never paid in full a matter of right to a writ of execution in its favor. [20] It is not
its stipulated obligation payable in installments. In fact, Solid an option of the losing party to file a motion for execution of
Homes, Inc. did not even bother to register its contract to sell judgment to compel the winning party to take the judgment. As
with the Register of Deeds pursuant to Presidential Decree the losing party in Civil Case No. 40615, Solid Homes, Inc. can
1529, also known as the Property Registration Decree. not now insist on the performance of the very contract on
We find untenable Solid Homes, Inc.s contention that the which it defaulted for more than fourteen (14) years. Hence,
transaction between AFPMBAI, Investco, Inc. and Solid Solid Homes, Inc. has no personality to move for execution of
Homes, Inc. is in the nature of a double sale. The transaction the final judgment in Civil Case No. 40615. The trial court
between Investco, Inc. and Solid Homes, Inc. was correctly denied its motion for execution.
a contract to sell and to buy that was not fully paid because It would be the height of unfairness if Solid Homes, Inc.
Solid Homes, Inc. defaulted on its payments. On the other which has failed to pay anything since 1981 and defaulted since
hand, the contract between Investco, Inc. and AFPMBAI was 1982, would now get the property by performance of the very
an absolute sale that culminated in the registration of the deeds contract which it violated. With the passage of time, more than
and the issuance of certificate of titles in favor of AFPMBAI. fourteen (14) years, and appreciation in the value of real estate,
In Salazar v. Court of Appeals,[13] we explained the the property is now worth billions of pesos,[21] thus enriching
distinction between a contract to sell and a contract of sale: Solid Homes, Inc. for its violation of the contract and default
on its obligation.
In a contract of sale, the title to the property passes to the IN VIEW WHEREOF, we DENY Solid Homes, Inc.s
vendee upon the delivery of the thing sold; in a contract to sell, motion for reconsideration, for lack of merit. The denial is
ownership is, by agreement, reserved in the vendor and is not final.
to pass to the vendee until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses SO ORDERED.
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.