G.R. No. L-61623 December 26, 1984 Miguela Sto.

Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo

and Jose Fernandez, subject to existing PHHC rules and regulations. The
PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant, prices would be the same as those of the adjoining lots. The awardees were
vs. required to deposit an amount equivalent to 20% of the total selling price
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R. (Exh. F).
MENDOZA, respondents-appellees.
The five awardees made the initial deposit. The corresponding deeds of sale
Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for were executed in their favor. The subdivision of Lot 4 into five lots was
petitioner PHHC. approved by the city council and the Bureau of Lands.

Tolentino, Cruz, Reyes, Lava and Manuel for private respondents. On March 16, 1966 the Mendoza spouses asked for reconsideration of the
withdrawal of the previous award to them of Lot 4 and for the cancellation of
the re-award of said lot to Sto. Domingo and four others. Before the request
could be acted upon, the spouses filed the instant action for specific
performance and damages.
AQUINO, J.:
The trial court sustained the withdrawal of the award. The Mendozas
The question in this case is whether the People's Homesite & Housing appealed. The Appellate Court reversed that decision and declared void the
Corporation bound itself to sell to the Mendoza spouses Lot 4 (Road) Pcs- re-award of Lot 4 and the deeds of sale and directed the PHHC to sell to the
4564 of the revised consolidation subdivision plan with an area of 2,6,08.7 Mendozas Lot 4 with an area of 2,603.7 square meters at P21 a square
(2,503.7) square meters located at Diliman, Quezon City. meter and pay to them P4,000 as attorney's fees and litigation expenses.
The PHHC appealed to this Court.
The PHHC board of directors on February 18, 1960 passed Resolution No.
513 wherein it stated "that subject to the approval of the Quezon City The issue is whether there was a perfected sale of Lot 4, with the reduced
Council of the above-mentioned Consolidation Subdivision Plan, Lot 4. area, to the Mendozas which they can enforce against the PHHC by an
containing 4,182.2 square meters be, as it is hereby awarded to Spouses action for specific performance.
Rizalino Mendoza and Adelaida Mendoza, at a price of twenty-one pesos
(P21.00) per square meter" and "that this award shall be subject to the
approval of the OEC (PHHC) Valuation Committee and higher authorities". We hold that there was no perfected sale of Lot 4. It was conditionally or
contingently awarded to the Mendozas subject to the approval by the city
council of the proposed consolidation subdivision plan and the approval of
The city council disapproved the proposed consolidation subdivision plan on the award by the valuation committee and higher authorities.
August 20, 1961 (Exh. 2). The said spouses were advised by registered mail
of the disapproval of the plan (Exh. 2-PHHC). Another subdivision plan was
The city council did not approve the subdivision plan. The Mendozas were
prepared and submitted to the city council for approval. The revised plan,
advised in 1961 of the disapproval. In 1964, when the plan with the area of
which included Lot 4, with a reduced area of 2,608.7, was approved by the
Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should
city council on February 25, 1964 (Exh. H).
have manifested in writing their acceptance of the award for the purchase of
Lot 4 just to show that they were still interested in its purchase although the
On April 26, 1965 the PHHC board of directors passed a resolution recalling area was reduced and to obviate ally doubt on the matter. They did not do
all awards of lots to persons who failed to pay the deposit or down payment so. The PHHC board of directors acted within its rights in withdrawing the
for the lots awarded to them (Exh. 5). The Mendozas never paid the price of tentative award.
the lot nor made the 20% initial deposit.
"The contract of sale is perfected at the moment there is a meeting of minds
On October 18, 1965 the PHHC board of directors passed Resolution No. upon the thing which is the object of the contract and upon the price. From
218, withdrawing the tentative award of Lot 4 to the Mendoza -spouses under that moment, the parties may reciprocally demand performance, subject to
Resolution No. 513 and re-awarding said lot jointly and in equal shares to the law governing the form of contracts." (Art. 1475, Civil Code).
"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la
voluntad de las partes o de la ley, se celebra la venta bajo una condicion
suspensiva, y en los cuales no se perfecciona la venta hasta el cumplimiento
de la condicion" (4 Castan Tobenas, Derecho Civil Español 8th ed. p. 81).

"In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition. (Art. 1181, Civil
Code). "Se llama suspensive la condicion de la que depende la perfeccion, o
sea el principio del contrato". (9 Giorgi, Teoria de las Obligaciones, p. 57).

Under the facts of this case, we cannot say there was a meeting of minds on
the purchase of Lot 4 with an area of 2,608.7 square meters at P21 a square
meter.

The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point
because the awardee in that case applied for the purchase of the lot, paid the
10% deposit and a conditional contract to sell was executed in his favor. The
PHHC could not re-award that lot to another person.

WHEREFORE, the decision of the Appellate Court is reversed and set aside
and the judgment of the trial court is affirmed. No costs.

SO ORDERED.

Makasiar (Chairman), Concepcion, Jr., Abad Santos, Escolin and Cuevas,

JJ., concur.
 price of our inherited house and lot, covered by TCT No.
119627 of the Registry of Deeds of Quezon City, in the total
G.R. No. 103577 October 7, 1996 amount of P1,240,000.00.

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. We bind ourselves to effect the transfer in our names from
CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of our deceased father, Constancio P. Coronel, the transfer
Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, certificate of title immediately upon receipt of the down
FLORAIDA A. ALMONTE, and CATALINA BALAIS payment above-stated.
MABANAG, petitioners,
vs. On our presentation of the TCT already in or name, We will
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA immediately execute the deed of absolute sale of said
PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in- property and Miss Ramona Patricia Alcaraz shall
fact, respondents. immediately pay the balance of the P1,190,000.00.

Clearly, the conditions appurtenant to the sale are the

following:

MELO, J.:p 1. Ramona will make a down payment of Fifty Thousand

(P50,000.00) Pesos upon execution of the document
The petition before us has its roots in a complaint for specific performance to aforestated;
compel herein petitioners (except the last named, Catalina Balais Mabanag)
to consummate the sale of a parcel of land with its improvements located 2. The Coronels will cause the transfer in their names of the
along Roosevelt Avenue in Quezon City entered into by the parties sometime title of the property registered in the name of their deceased
in January 1985 for the price of P1,240,000.00. father upon receipt of the Fifty Thousand (P50,000.00)
Pesos down payment;
The undisputed facts of the case were summarized by respondent court in
this wise: 3. Upon the transfer in their names of the subject property,
the Coronels will execute the deed of absolute sale in favor
On January 19, 1985, defendants-appellants Romulo of Ramona and the latter will pay the former the whole
Coronel, et al. (hereinafter referred to as Coronels) executed balance of One Million One Hundred Ninety Thousand
a document entitled "Receipt of Down Payment" (Exh. "A") in (P1,190,000.00) Pesos.
favor of plaintiff Ramona Patricia Alcaraz (hereinafter
referred to as Ramona) which is reproduced hereunder: On the same date (January 15, 1985), plaintiff-appellee
Concepcion D. Alcaraz (hereinafter referred to as
RECEIPT OF DOWN PAYMENT Concepcion), mother of Ramona, paid the down payment of
Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2").
P1,240,000.00 — Total amount
On February 6, 1985, the property originally registered in the
name of the Coronels' father was transferred in their names
50,000 — Down payment under TCT
——————————— No. 327043 (Exh. "D"; Exh. "4")
P1,190,000.00 — Balance
On February 18, 1985, the Coronels sold the property
Received from Miss Ramona Patricia Alcaraz of 146 Timog, covered by TCT No. 327043 to intervenor-appellant Catalina
Quezon City, the sum of Fifty Thousand Pesos purchase B. Mabanag (hereinafter referred to as Catalina) for One
 Million Five Hundred Eighty Thousand (P1,580,000.00) down by Judge Roura from his regular bench at Macabebe, Pampanga for
Pesos after the latter has paid Three Hundred Thousand the Quezon City branch, disposing as follows:
(P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")
WHEREFORE, judgment for specific performance is hereby
For this reason, Coronels canceled and rescinded the rendered ordering defendant to execute in favor of plaintiffs
contract (Exh. "A") with Ramona by depositing the down a deed of absolute sale covering that parcel of land
payment paid by Concepcion in the bank in trust for Ramona embraced in and covered by Transfer Certificate of Title No.
Patricia Alcaraz. 327403 (now TCT No. 331582) of the Registry of Deeds for
Quezon City, together with all the improvements existing
On February 22, 1985, Concepcion, et al., filed a complaint thereon free from all liens and encumbrances, and once
for specific performance against the Coronels and caused accomplished, to immediately deliver the said document of
the annotation of a notice of lis pendens at the back of TCT sale to plaintiffs and upon receipt thereof, the said document
No. 327403 (Exh. "E"; Exh. "5"). of sale to plaintiffs and upon receipt thereof, the plaintiffs are
ordered to pay defendants the whole balance of the
purchase price amounting to P1,190,000.00 in cash.
On April 2, 1985, Catalina caused the annotation of a notice
Transfer Certificate of Title No. 331582 of the Registry of
of adverse claim covering the same property with the
Deeds for Quezon City in the name of intervenor is hereby
Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").
canceled and declared to be without force and effect.
Defendants and intervenor and all other persons claiming
On April 25, 1985, the Coronels executed a Deed of under them are hereby ordered to vacate the subject
Absolute Sale over the subject property in favor of Catalina property and deliver possession thereof to plaintiffs.
(Exh. "G"; Exh. "7"). Plaintiffs' claim for damages and attorney's fees, as well as
the counterclaims of defendants and intervenors are hereby
On June 5, 1985, a new title over the subject property was dismissed.
issued in the name of Catalina under TCT No. 351582 (Exh.
"H"; Exh. "8"). No pronouncement as to costs.

(Rollo, pp. 134-136) So Ordered.

In the course of the proceedings before the trial court (Branch 83, RTC, Macabebe, Pampanga for Quezon City, March 1, 1989.
Quezon City) the parties agreed to submit the case for decision solely on the
basis of documentary exhibits. Thus, plaintiffs therein (now private
(Rollo, p. 106)
respondents) proffered their documentary evidence accordingly marked as
Exhibits "A" through "J", inclusive of their corresponding submarkings.
Adopting these same exhibits as their own, then defendants (now petitioners) A motion for reconsideration was filed by petitioner before the new presiding
accordingly offered and marked them as Exhibits "1" through "10", likewise judge of the Quezon City RTC but the same was denied by Judge Estrella T.
inclusive of their corresponding submarkings. Upon motion of the parties, the Estrada, thusly:
trial court gave them thirty (30) days within which to simultaneously submit
their respective memoranda, and an additional 15 days within which to The prayer contained in the instant motion, i.e., to annul the
submit their corresponding comment or reply thereof, after which, the case decision and to render anew decision by the undersigned
would be deemed submitted for resolution. Presiding Judge should be denied for the following reasons:
(1) The instant case became submitted for decision as of
On April 14, 1988, the case was submitted for resolution before Judge April 14, 1988 when the parties terminated the presentation
Reynaldo Roura, who was then temporarily detailed to preside over Branch of their respective documentary evidence and when the
82 of the RTC of Quezon City. On March 1, 1989, judgment was handed Presiding Judge at that time was Judge Reynaldo Roura.
The fact that they were allowed to file memoranda at some
future date did not change the fact that the hearing of the Petitioners thereupon interposed an appeal, but on December 16, 1991, the
case was terminated before Judge Roura and therefore the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered
same should be submitted to him for decision; (2) When the its decision fully agreeing with the trial court.
defendants and intervenor did not object to the authority of
Judge Reynaldo Roura to decide the case prior to the Hence, the instant petition which was filed on March 5, 1992. The last
rendition of the decision, when they met for the first time pleading, private respondents' Reply Memorandum, was filed on September
before the undersigned Presiding Judge at the hearing of a 15, 1993. The case was, however, re-raffled to undersigned ponente only on
pending incident in Civil Case No. Q-46145 on November August 28, 1996, due to the voluntary inhibition of the Justice to whom the
11, 1988, they were deemed to have acquiesced thereto and case was last assigned.
they are now estopped from questioning said authority of
Judge Roura after they received the decision in question
While we deem it necessary to introduce certain refinements in the
which happens to be adverse to them; (3) While it is true that
disquisition of respondent court in the affirmance of the trial court's decision,
Judge Reynaldo Roura was merely a Judge-on-detail at this
we definitely find the instant petition bereft of merit.
Branch of the Court, he was in all respects the Presiding
Judge with full authority to act on any pending incident
submitted before this Court during his incumbency. When he The heart of the controversy which is the ultimate key in the resolution of the
returned to his Official Station at Macabebe, Pampanga, he other issues in the case at bar is the precise determination of the legal
did not lose his authority to decide or resolve such cases significance of the document entitled "Receipt of Down Payment" which was
submitted to him for decision or resolution because he offered in evidence by both parties. There is no dispute as to the fact that
continued as Judge of the Regional Trial Court and is of co- said document embodied the binding contract between Ramona Patricia
equal rank with the undersigned Presiding Judge. The Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the
standing rule and supported by jurisprudence is that a Judge other, pertaining to a particular house and lot covered by TCT No. 119627,
to whom a case is submitted for decision has the authority to as defined in Article 1305 of the Civil Code of the Philippines which reads as
decide the case notwithstanding his transfer to another follows:
branch or region of the same court (Sec. 9, Rule 135, Rule
of Court). Art. 1305. A contract is a meeting of minds between two
persons whereby one binds himself, with respect to the
Coming now to the twin prayer for reconsideration of the other, to give something or to render some service.
Decision dated March 1, 1989 rendered in the instant case,
resolution of which now pertains to the undersigned While, it is the position of private respondents that the "Receipt of Down
Presiding Judge, after a meticulous examination of the Payment" embodied a perfected contract of sale, which perforce, they seek
documentary evidence presented by the parties, she is to enforce by means of an action for specific performance, petitioners on
convinced that the Decision of March 1, 1989 is supported their part insist that what the document signified was a mere executory
by evidence and, therefore, should not be disturbed. contract to sell, subject to certain suspensive conditions, and because of the
absence of Ramona P. Alcaraz, who left for the United States of America,
IN VIEW OF THE FOREGOING, the "Motion for said contract could not possibly ripen into a contract absolute sale.
Reconsideration and/or to Annul Decision and Render Anew
Decision by the Incumbent Presiding Judge" dated March Plainly, such variance in the contending parties' contentions is brought about
20, 1989 is hereby DENIED. by the way each interprets the terms and/or conditions set forth in said
private instrument. Withal, based on whatever relevant and admissible
SO ORDERED. evidence may be available on record, this, Court, as were the courts below,
is now called upon to adjudge what the real intent of the parties was at the
time the said document was executed.
Quezon City, Philippines, July 12, 1989.
The Civil Code defines a contract of sale, thus:
(Rollo, pp. 108-109)
 Art. 1458. By the contract of sale one of the contracting Art. 1479. A promise to buy and sell a determinate thing for a
parties obligates himself to transfer the ownership of and to price certain is reciprocally demandable.
deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent. An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
Sale, by its very nature, is a consensual contract because it is perfected by promissor if the promise is supported by a consideration
mere consent. The essential elements of a contract of sale are the following: distinct from the price.

a) Consent or meeting of the minds, that is, consent to A contract to sell may thus be defined as a bilateral contract whereby the
transfer ownership in exchange for the price; prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to
b) Determinate subject matter; and sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.
c) Price certain in money or its equivalent.
A contract to sell as defined hereinabove, may not even be considered as a
Under this definition, a Contract to Sell may not be considered as a conditional contract of sale where the seller may likewise reserve title to the
Contract of Sale because the first essential element is lacking. In a contract property subject of the sale until the fulfillment of a suspensive condition,
to sell, the prospective seller explicity reserves the transfer of title to the because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event
prospective buyer, meaning, the prospective seller does not as yet agree or
which may or may not occur. If the suspensive condition is not fulfilled, the
consent to transfer ownership of the property subject of the contract to sell
perfection of the contract of sale is completely abated (cf. Homesite and
until the happening of an event, which for present purposes we shall take as
housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
the full payment of the purchase price. What the seller agrees or obliges
himself to do is to fulfill is promise to sell the subject property when the entire suspensive condition is fulfilled, the contract of sale is thereby perfected,
amount of the purchase price is delivered to him. In other words the full such that if there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically transfers to the
payment of the purchase price partakes of a suspensive condition, the non-
buyer by operation of law without any further act having to be performed by
fulfillment of which prevents the obligation to sell from arising and thus,
the seller.
ownership is retained by the prospective seller without further remedies by
the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court
had occasion to rule: In a contract to sell, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, ownership will not automatically
transfer to the buyer although the property may have been previously
Hence, We hold that the contract between the petitioner and
delivered to him. The prospective seller still has to convey title to the
the respondent was a contract to sell where the ownership or
title is retained by the seller and is not to pass until the full prospective buyer by entering into a contract of absolute sale.
payment of the price, such payment being a positive
suspensive condition and failure of which is not a breach, It is essential to distinguish between a contract to sell and a conditional
casual or serious, but simply an event that prevented the contract of sale specially in cases where the subject property is sold by the
obligation of the vendor to convey title from acquiring binding owner not to the party the seller contracted with, but to a third person, as in
force. the case at bench. In a contract to sell, there being no previous sale of the
property, a third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price, for
Stated positively, upon the fulfillment of the suspensive condition which is the
instance, cannot be deemed a buyer in bad faith and the prospective buyer
full payment of the purchase price, the prospective seller's obligation to sell
cannot seek the relief of reconveyance of the property. There is no double
the subject property by entering into a contract of sale with the prospective
sale in such case. Title to the property will transfer to the buyer after
buyer becomes demandable as provided in Article 1479 of the Civil Code
registration because there is no defect in the owner-seller's title per se, but
which states:
the latter, of course, may be used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the The agreement could not have been a contract to sell because the sellers
suspensive condition, the sale becomes absolute and this will definitely affect herein made no express reservation of ownership or title to the subject parcel
the seller's title thereto. In fact, if there had been previous delivery of the of land. Furthermore, the circumstance which prevented the parties from
subject property, the seller's ownership or title to the property is automatically entering into an absolute contract of sale pertained to the sellers themselves
transferred to the buyer such that, the seller will no longer have any title to (the certificate of title was not in their names) and not the full payment of the
transfer to any third person. Applying Article 1544 of the Civil Code, such purchase price. Under the established facts and circumstances of the case,
second buyer of the property who may have had actual or constructive the Court may safely presume that, had the certificate of title been in the
knowledge of such defect in the seller's title, or at least was charged with the names of petitioners-sellers at that time, there would have been no reason
obligation to discover such defect, cannot be a registrant in good faith. Such why an absolute contract of sale could not have been executed and
second buyer cannot defeat the first buyer's title. In case a title is issued to consummated right there and then.
the second buyer, the first buyer may seek reconveyance of the property
subject of the sale. Moreover, unlike in a contract to sell, petitioners in the case at bar did not
merely promise to sell the properly to private respondent upon the fulfillment
With the above postulates as guidelines, we now proceed to the task of of the suspensive condition. On the contrary, having already agreed to sell
deciphering the real nature of the contract entered into by petitioners and the subject property, they undertook to have the certificate of title changed to
private respondents. their names and immediately thereafter, to execute the written deed of
absolute sale.
It is a canon in the interpretation of contracts that the words used therein
should be given their natural and ordinary meaning unless a technical Thus, the parties did not merely enter into a contract to sell where the sellers,
meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). after compliance by the buyer with certain terms and conditions, promised to
Thus, when petitioners declared in the said "Receipt of Down Payment" that sell the property to the latter. What may be perceived from the respective
they — undertakings of the parties to the contract is that petitioners had already
agreed to sell the house and lot they inherited from their father, completely
Received from Miss Ramona Patricia Alcaraz of 146 Timog, willing to transfer full ownership of the subject house and lot to the buyer if
Quezon City, the sum of Fifty Thousand Pesos purchase the documents were then in order. It just happened, however, that the
price of our inherited house and lot, covered by TCT No. transfer certificate of title was then still in the name of their father. It was
1199627 of the Registry of Deeds of Quezon City, in the total more expedient to first effect the change in the certificate of title so as to bear
amount of P1,240,000.00. their names. That is why they undertook to cause the issuance of a new
transfer of the certificate of title in their names upon receipt of the down
without any reservation of title until full payment of the entire payment in the amount of P50,000.00. As soon as the new certificate of title
is issued in their names, petitioners were committed to immediately execute
purchase price, the natural and ordinary idea conveyed is that they
the deed of absolute sale. Only then will the obligation of the buyer to pay the
sold their property.
remainder of the purchase price arise.
When the "Receipt of Down Payment" is considered in its entirety, it
becomes more manifest that there was a clear intent on the part of There is no doubt that unlike in a contract to sell which is most commonly
entered into so as to protect the seller against a buyer who intends to buy the
petitioners to transfer title to the buyer, but since the transfer certificate of title
property in installment by withholding ownership over the property until the
was still in the name of petitioner's father, they could not fully effect such
buyer effects full payment therefor, in the contract entered into in the case at
transfer although the buyer was then willing and able to immediately pay the
bar, the sellers were the one who were unable to enter into a contract of
purchase price. Therefore, petitioners-sellers undertook upon receipt of the
down payment from private respondent Ramona P. Alcaraz, to cause the absolute sale by reason of the fact that the certificate of title to the property
issuance of a new certificate of title in their names from that of their father, was still in the name of their father. It was the sellers in this case who, as it
were, had the impediment which prevented, so to speak, the execution of an
after which, they promised to present said title, now in their names, to the
contract of absolute sale.
latter and to execute the deed of absolute sale whereupon, the latter shall, in
turn, pay the entire balance of the purchase price.
What is clearly established by the plain language of the subject document is
that when the said "Receipt of Down Payment" was prepared and signed by
petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional immediately upon receipt of the downpayment above-
contract of sale, consummation of which is subject only to the successful stated". The sale was still subject to this suspensive
transfer of the certificate of title from the name of petitioners' father, condition. (Emphasis supplied.)
Constancio P. Coronel, to their names.
(Rollo, p. 16)
The Court significantly notes this suspensive condition was, in fact, fulfilled
on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional Petitioners themselves recognized that they entered into a contract of sale
contract of sale between petitioners and private respondent Ramona P. subject to a suspensive condition. Only, they contend, continuing in the same
Alcaraz became obligatory, the only act required for the consummation paragraph, that:
thereof being the delivery of the property by means of the execution of the
deed of absolute sale in a public instrument, which petitioners unequivocally . . . Had petitioners-sellers not complied with this condition of
committed themselves to do as evidenced by the "Receipt of Down
first transferring the title to the property under their names,
Payment." there could be no perfected contract of sale. (Emphasis
supplied.)
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly
applies to the case at bench. Thus, (Ibid.)

Art. 1475. The contract of sale is perfected at the moment not aware that they set their own trap for themselves, for Article 1186
there is a meeting of minds upon the thing which is the
of the Civil Code expressly provides that:
object of the contract and upon the price.
Art. 1186. The condition shall be deemed fulfilled when the
From the moment, the parties may reciprocally demand obligor voluntarily prevents its fulfillment.
performance, subject to the provisions of the law governing
the form of contracts.
Besides, it should be stressed and emphasized that what is more controlling
than these mere hypothetical arguments is the fact that the condition herein
Art. 1181. In conditional obligations, the acquisition of rights, referred to was actually and indisputably fulfilled on February 6, 1985, when
as well as the extinguishment or loss of those already a new title was issued in the names of petitioners as evidenced by TCT No.
acquired, shall depend upon the happening of the event
327403 (Exh. "D"; Exh. "4").
which constitutes the condition.
The inevitable conclusion is that on January 19, 1985, as evidenced by the
Since the condition contemplated by the parties which is the issuance of a document denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"),
certificate of title in petitioners' names was fulfilled on February 6, 1985, the the parties entered into a contract of sale subject only to the suspensive
respective obligations of the parties under the contract of sale became
condition that the sellers shall effect the issuance of new certificate title from
mutually demandable, that is, petitioners, as sellers, were obliged to present
that of their father's name to their names and that, on February 6, 1985, this
the transfer certificate of title already in their names to private respondent
condition was fulfilled (Exh. "D"; Exh. "4").
Ramona P. Alcaraz, the buyer, and to immediately execute the deed of
absolute sale, while the buyer on her part, was obliged to forthwith pay the
balance of the purchase price amounting to P1,190,000.00. We, therefore, hold that, in accordance with Article 1187 which pertinently
provides —
It is also significant to note that in the first paragraph in page 9 of their
petition, petitioners conclusively admitted that: Art. 1187. The effects of conditional obligation to give, once
the condition has been fulfilled, shall retroact to the day of
the constitution of the obligation . . .
3. The petitioners-sellers Coronel bound themselves "to
effect the transfer in our names from our deceased father
Constancio P. Coronel, the transfer certificate of title
 In obligation to do or not to do, the courts shall determine, in Art. 1431. Through estoppel an admission or representation
each case, the retroactive effect of the condition that has is rendered conclusive upon the person making it, and
been complied with. cannot be denied or disproved as against the person relying
thereon.
the rights and obligations of the parties with respect to the perfected
contract of sale became mutually due and demandable as of the time Having represented themselves as the true owners of the subject
of fulfillment or occurrence of the suspensive condition on February property at the time of sale, petitioners cannot claim now that they
6, 1985. As of that point in time, reciprocal obligations of both seller were not yet the absolute owners thereof at that time.
and buyer arose.
Petitioners also contend that although there was in fact a perfected contract
Petitioners also argue there could been no perfected contract on January 19, of sale between them and Ramona P. Alcaraz, the latter breached her
1985 because they were then not yet the absolute owners of the inherited reciprocal obligation when she rendered impossible the consummation
property. thereof by going to the United States of America, without leaving her
address, telephone number, and Special Power of Attorney (Paragraphs 14
We cannot sustain this argument. and 15, Answer with Compulsory Counterclaim to the Amended Complaint,
p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were
correct in unilaterally rescinding rescinding the contract of sale.
Article 774 of the Civil Code defines Succession as a mode of transferring
ownership as follows:
We do not agree with petitioners that there was a valid rescission of the
contract of sale in the instant case. We note that these supposed grounds for
Art. 774. Succession is a mode of acquisition by virtue of
petitioners' rescission, are mere allegations found only in their responsive
which the property, rights and obligations to be extent and
pleadings, which by express provision of the rules, are deemed controverted
value of the inheritance of a person are transmitted through
his death to another or others by his will or by operation of even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of
law. Court). The records are absolutely bereft of any supporting evidence to
substantiate petitioners' allegations. We have stressed time and again that
allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong,
Petitioners-sellers in the case at bar being the sons and daughters of 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere
the decedent Constancio P. Coronel are compulsory heirs who were allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
called to succession by operation of law. Thus, at the point their
father drew his last breath, petitioners stepped into his shoes insofar
Even assuming arguendo that Ramona P. Alcaraz was in the United States
as the subject property is concerned, such that any rights or
of America on February 6, 1985, we cannot justify petitioner-sellers' act of
obligations pertaining thereto became binding and enforceable upon
unilaterally and extradicially rescinding the contract of sale, there being no
them. It is expressly provided that rights to the succession are
transmitted from the moment of death of the decedent (Article 777, express stipulation authorizing the sellers to extarjudicially rescind the
Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]). contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda.
de Leon, 132 SCRA 722 [1984])
Be it also noted that petitioners' claim that succession may not be declared
Moreover, petitioners are estopped from raising the alleged absence of
unless the creditors have been paid is rendered moot by the fact that they
were able to effect the transfer of the title to the property from the decedent's Ramona P. Alcaraz because although the evidence on record shows that the
name to their names on February 6, 1985. sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had
been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted
for and in behalf of her daughter, if not also in her own behalf. Indeed, the
Aside from this, petitioners are precluded from raising their supposed lack of down payment was made by Concepcion D. Alcaraz with her own personal
capacity to enter into an agreement at that time and they cannot be allowed check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is
to now take a posture contrary to that which they took when they entered into no evidence showing that petitioners ever questioned Concepcion's authority
the agreement with private respondent Ramona P. Alcaraz. The Civil Code to represent Ramona P. Alcaraz when they accepted her personal check.
expressly states that:
Neither did they raise any objection as regards payment being effected by a Should if be immovable property, the ownership shall belong
third person. Accordingly, as far as petitioners are concerned, the physical to the person acquiring it who in good faith first recorded it in
absence of Ramona P. Alcaraz is not a ground to rescind the contract of Registry of Property.
sale.
Should there be no inscription, the ownership shall pertain to
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, the person who in good faith was first in the possession;
insofar as her obligation to pay the full purchase price is concerned. and, in the absence thereof to the person who presents the
Petitioners who are precluded from setting up the defense of the physical oldest title, provided there is good faith.
absence of Ramona P. Alcaraz as above-explained offered no proof
whatsoever to show that they actually presented the new transfer certificate The record of the case shows that the Deed of Absolute Sale dated April 25,
of title in their names and signified their willingness and readiness to execute 1985 as proof of the second contract of sale was registered with the Registry
the deed of absolute sale in accordance with their agreement. Ramona's of Deeds of Quezon City giving rise to the issuance of a new certificate of
corresponding obligation to pay the balance of the purchase price in the title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second
amount of P1,190,000.00 (as buyer) never became due and demandable paragraph of Article 1544 shall apply.
and, therefore, she cannot be deemed to have been in default.
The above-cited provision on double sale presumes title or ownership to
Article 1169 of the Civil Code defines when a party in a contract involving pass to the first buyer, the exceptions being: (a) when the second buyer, in
reciprocal obligations may be considered in default, to wit: good faith, registers the sale ahead of the first buyer, and (b) should there be
no inscription by either of the two buyers, when the second buyer, in good
Art. 1169. Those obliged to deliver or to do something, incur faith, acquires possession of the property ahead of the first buyer. Unless,
in delay from the time the obligee judicially or extrajudicially the second buyer satisfies these requirements, title or ownership will not
demands from them the fulfillment of their obligation. transfer to him to the prejudice of the first buyer.

xxx xxx xxx In his commentaries on the Civil Code, an accepted authority on the subject,
now a distinguished member of the Court, Justice Jose C. Vitug, explains:
In reciprocal obligations, neither party incurs in delay if the
other does not comply or is not ready to comply in a proper The governing principle is prius tempore, potior jure (first in
manner with what is incumbent upon him. From the moment time, stronger in right). Knowledge by the first buyer of the
one of the parties fulfill his obligation, delay by the other second sale cannot defeat the first buyer's rights except
begins. (Emphasis supplied.) when the second buyer first registers in good faith the
second sale (Olivares vs. Gonzales, 159 SCRA 33).
There is thus neither factual nor legal basis to rescind the contract of sale Conversely, knowledge gained by the second buyer of the
between petitioners and respondents. first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith (see also
Astorga vs. Court of Appeals, G.R. No. 58530, 26 December
With the foregoing conclusions, the sale to the other petitioner, Catalina B.
1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984,
Mabanag, gave rise to a case of double sale where Article 1544 of the Civil
129 SCRA 656), it has held that it is essential, to merit the
Code will apply, to wit:
protection of Art. 1544, second paragraph, that the second
realty buyer must act in good faith in registering his deed of
Art. 1544. If the same thing should have been sold to sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99,
different vendees, the ownership shall be transferred to the Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
person who may have first taken possession thereof in good (J. Vitug Compendium of Civil Law and Jurisprudence, 1993
faith, if it should be movable property. Edition, p. 604).
Petitioner point out that the notice of lis pendens in the case at bar was Although there may be ample indications that there was in fact an agency
annoted on the title of the subject property only on February 22, 1985, between Ramona as principal and Concepcion, her mother, as agent insofar
whereas, the second sale between petitioners Coronels and petitioner as the subject contract of sale is concerned, the issue of whether or not
Mabanag was supposedly perfected prior thereto or on February 18, 1985. Concepcion was also acting in her own behalf as a co-buyer is not squarely
The idea conveyed is that at the time petitioner Mabanag, the second buyer, raised in the instant petition, nor in such assumption disputed between
bought the property under a clean title, she was unaware of any adverse mother and daughter. Thus, We will not touch this issue and no longer
claim or previous sale, for which reason she is buyer in good faith. disturb the lower courts' ruling on this point.

We are not persuaded by such argument. WHEREFORE, premises considered, the instant petition is hereby
DISMISSED and the appealed judgment AFFIRMED.
In a case of double sale, what finds relevance and materiality is not whether
or not the second buyer was a buyer in good faith but whether or not said SO ORDERED.
second buyer registers such second sale in good faith, that is, without
knowledge of any defect in the title of the property sold. Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.

As clearly borne out by the evidence in this case, petitioner Mabanag could Panganiban, J., took no part.
not have in good faith, registered the sale entered into on February 18, 1985
because as early as February 22, 1985, a notice of lis pendens had been
annotated on the transfer certificate of title in the names of petitioners,
whereas petitioner Mabanag registered the said sale sometime in April,
1985. At the time of registration, therefore, petitioner Mabanag knew that the
same property had already been previously sold to private respondents, or,
at least, she was charged with knowledge that a previous buyer is claiming
title to the same property. Petitioner Mabanag cannot close her eyes to the
defect in petitioners' title to the property at the time of the registration of the
property.

This Court had occasions to rule that:

If a vendee in a double sale registers that sale after he has

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

Thus, the sale of the subject parcel of land between petitioners and Ramona
P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners
and Catalina B. Mabanag on February 18, 1985, was correctly upheld by
both the courts below.
[G.R. NO. 153820 : October 16, 2009] d) That in case, BUYER have complied with the terms and conditions of this
contract, then the SELLERS shall execute and deliver to the BUYER the
DELFIN TAN, Petitioner, v. ERLINDA C. BENOLIRAO, ANDREW C. appropriate Deed of Absolute Sale;
BENOLIRAO, ROMANO C. BENOLIRAO, DION C. BENOLIRAO, SPS.
REYNALDO TANINGCO and NORMA D. BENOLIRAO, EVELYN T. Pursuant to the Deed of Conditional Sale, Tan issued and delivered to the
MONREAL, and ANN KARINA TANINGCO, Respondents. co-owners/vendors Metrobank Check No. 904407 for P200,000.00 as down
payment for the property, for which the vendors issued a corresponding
DECISION receipt.

BRION, J.: On November 6, 1992, Lamberto Benolirao died intestate. Erlinda Benolirao
(his widow and one of the vendors of the property) and her children, as heirs
Is an annotation made pursuant to Section 4, Rule 74 of the Rules of Court of the deceased, executed an extrajudicial settlement of Lamberto's estate
(Rules) on a certificate of title covering real property considered an on January 20, 1993. On the basis of the extrajudicial settlement, a new
certificate of title over the property, TCT No. 27335, was issued on March 26,
encumbrance on the property? We resolve this question in the Petition for
1
Review on Certiorari filed by Delfin Tan (Tan) to assail the decision of the 1993 in the names of the Spouses Reynaldo and Norma Taningco and
2 Erlinda Benolirao and her children. Pursuant to Section 4, Rule 74 of the
Court of Appeals (CA) in CA-G.R. CV No. 52033 and the decision of the
3 Rules, the following annotation was made on TCT No. 27335:
Regional Trial Court (RTC) that commonly declared the forfeiture of
his P200,000.00 down payment as proper, pursuant to the terms of his
contract with the respondents. x x x any liability to credirots (sic), excluded heirs and other persons having
right to the property, for a period of two (2) years, with respect only to the
share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao
THE ANTECEDENTS

The facts are not disputed. Spouses Lamberto and Erlinda Benolirao and the As stated in the Deed of Conditional Sale, Tan had until March 15, 1993 to
pay the balance of the purchase price. By agreement of the parties, this
Spouses Reynaldo and Norma Taningco were the co-owners of a 689-
period was extended by two months, so Tan had until May 15, 1993 to pay
square meter parcel of land (property) located in Tagaytay City and covered
the balance. Tan failed to pay and asked for another extension, which the
by Transfer Certificate of Title (TCT) No. 26423. On October 6, 1992, the co-
vendors again granted. Notwithstanding this second extension, Tan still failed
owners executed a Deed of Conditional Sale over the property in favor of
Tan for the price of P1,378,000.00. The deed stated: to pay the remaining balance due on May 21, 1993. The vendors thus wrote
him a letter demanding payment of the balance of the purchase price within
five (5) days from notice; otherwise, they would declare the rescission of the
a) An initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND conditional sale and the forfeiture of his down payment based on the terms of
PESOS, Philippine Currency, upon signing of this contract; then the the contract.
remaining balance of ONE MILLION ONE HUNDRED SEVENTY EIGHT
THOUSAND (P1,178,000.00) PESOS, shall be payable within a period of
Tan refused to comply with the vendors' demand and instead wrote them a
one hundred fifty (150) days from date hereof without interest;
letter (dated May 28, 1993) claiming that the annotation on the title, made
pursuant to Section 4, Rule 74 of the Rules, constituted an encumbrance on
b) That for any reason, BUYER fails to pay the remaining balance within the property that would prevent the vendors from delivering a clean title to
above mentioned period, the BUYER shall have a grace period of sixty (60) him. Thus, he alleged that he could no longer be required to pay the balance
days within which to make the payment, provided that there shall be an of the purchase price and demanded the return of his down payment.
interest of 15% per annum on the balance amount due from the SELLERS;
When the vendors refused to refund the down payment, Tan, through
c) That should in case (sic) the BUYER fails to comply with the terms and counsel, sent another demand letter to the vendors on June 18, 1993. The
conditions within the above stated grace period, then the SELLERS shall vendors still refused to heed Tan's demand, prompting Tan to file on June
have the right to forfeit the down payment, and to rescind this conditional 19, 1993 a complaint with the RTC of Pasay City for specific performance
sale without need of judicial action; against the vendors, including Andrew Benolirao, Romano Benolirao, Dion
Benolirao as heirs of Lamberto Benolirao, together with Evelyn Monreal and period, so that Tan will pay the remaining balance of the purchase price only
Ann Karina Taningco (collectively, the respondents). In his complaint, Tan after the lapse of the required two-year encumbrance on the title. Tan posits
alleged that there was a novation of the Deed of Conditional Sale done that the CA erroneously disregarded the alternative remedy of reformation of
without his consent since the annotation on the title created an encumbrance contract when it affirmed the removal of the lis pendens annotation on the
over the property. Tan prayed for the refund of the down payment and the title.
rescission of the contract.
Tan further contends that the CA erred when it recognized the validity of the
On August 9, 1993, Tan amended his Complaint, contending that if the forfeiture of the down payment in favor of the vendors. While admitting that
respondents insist on forfeiting the down payment, he would be willing to pay the Deed of Conditional Sale contained a forfeiture clause, he insists that this
the balance of the purchase price provided there is reformation of the Deed clause applies only if the failure to pay the balance of the purchase price was
of Conditional Sale. In the meantime, Tan caused the annotation on the title through his own fault or negligence. In the present case, Tan claims that he
of a notice of lis pendens. was justified in refusing to pay the balance price since the vendors would not
have been able to comply with their obligation to deliver a "clean" title
On August 21, 1993, the respondents executed a Deed of Absolute Sale covering the property.
over the property in favor of Hector de Guzman (de Guzman) for the price
of P689,000.00. Lastly, Tan maintains that the CA erred in ordering him to pay the
respondents P30,000.00, plus P1,000.00 per court appearance as attorney's
Thereafter, the respondents moved for the cancellation of the notice of lis fees, since he filed the foregoing action in good faith, believing that he is in
pendens on the ground that it was inappropriate since the case that Tan filed the right.
was a personal action which did not involve either title to, or possession of,
real property. The RTC issued an order dated October 22, 1993 granting the The respondents, on the other hand, assert that the petition should be
respondents' motion to cancel the lis pendens annotation on the title. dismissed for raising pure questions of fact, in contravention of the provisions
of Rule 45 of the Rules which provides that only questions of law can be
Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman raised in Petitions for Review on Certiorari .
registered the property and TCT No. 28104 was issued in his name. Tan
then filed a motion to carry over the lis pendens annotation to TCT No. 28104 THE COURT'S RULING
registered in de Guzman's name, but the RTC denied the motion.
The petition is granted.
On September 8, 1995, after due proceedings, the RTC rendered judgment
ruling that the respondents' forfeiture of Tan's down payment was proper in No new issues can be raised in the Memorandum
accordance with the terms and conditions of the contract between the
4
parties. The RTC ordered Tan to pay the respondents the amount At the onset, we note that Tan raised the following additional assignment of
of P30,000.00, plus P1,000.00 per court appearance, as attorney's fees, and errors in his Memorandum: (a) the CA erred in holding that the petitioner
to pay the cost of suit.
could seek reformation of the Deed of Conditional Sale only if he paid the
balance of the purchase price and if the vendors refused to execute the deed
On appeal, the CA dismissed the petition and affirmed the ruling of the trial of absolute sale; and (b) the CA erred in holding that the petitioner was
court in toto. Hence, the present petition. estopped from asking for the reformation of the contract or for specific
performance.
THE ISSUES
The Court's September 27, 2004 Resolution expressly stated that "No new
Tan argues that the CA erred in affirming the RTC's ruling to cancel the lis issues may be raised by a party in his/its Memorandum." Explaining the
pendens annotation on TCT No. 27335. Due to the unauthorized novation of reason for this rule, we said that:
the agreement, Tan presented before the trial court two alternative remedies
in his complaint - either the rescission of the contract and the return of the The raising of additional issues in a memorandum before the Supreme Court
down payment, or the reformation of the contract to adjust the payment is irregular, because said memorandum is supposed to be in support merely
of the position taken by the party concerned in his petition, and the raising of Tan's complaint prayed for either the rescission or the reformation of the
new issues amounts to the filing of a petition beyond the reglementary Deed of Conditional Sale. While the Deed does have real property for its
period. The purpose of this rule is to provide all parties to a case a fair object, we find that Tan's complaint is an in personam action, as Tan asked
opportunity to be heard. No new points of law, theories, issues or arguments the court to compel the respondents to do something - either to rescind the
may be raised by a party in the Memorandum for the reason that to permit contract and return the down payment, or to reform the contract by extending
these would be offensive to the basic rules of fair play, justice and due the period given to pay the remaining balance of the purchase price. Either
5
process. way, Tan wants to enforce his personal rights against the respondents, not
against the property subject of the Deed. As we explained in Domagas v.
7
Tan contravened the Court's explicit instructions by raising these additional Jensen:
errors. Hence, we disregard them and focus instead on the issues previously
raised in the petition and properly included in the Memorandum. The settled rule is that the aim and object of an action determine its
character. Whether a proceeding is in rem, or in personam, or quasi in
Petition raises a question of law rem for that matter, is determined by its nature and purpose, and by these
only. A proceeding in personam is a proceeding to enforce personal rights
and obligations brought against the person and is based on the jurisdiction of
Contrary to the respondents' claim, the issue raised in the present petition -
the person, although it may involve his right to, or the exercise of ownership
defined in the opening paragraph of this Decision - is a pure question of law.
of, specific property, or seek to compel him to control or dispose of it in
Hence, the petition and the issue it presents are properly cognizable by this
accordance with the mandate of the court. The purpose of a proceeding in
Court.
personam is to impose, through the judgment of a court, some responsibility
or liability directly upon the person of the defendant. Of this character are
Lis pendens annotation not proper in personal actions suits to compel a defendant to specifically perform some act or actions to
fasten a pecuniary liability on him.
Section 14, Rule 13 of the Rules enumerates the instances when a notice of
lis pendens can be validly annotated on the title to real property: Furthermore, as will be explained in detail below, the contract between the
parties was merely a contract to sell where the vendors retained title and
Sec. 14. Notice of lis pendens. ownership to the property until Tan had fully paid the purchase price. Since
Tan had no claim of ownership or title to the property yet, he obviously had
In an action affecting the title or the right of possession of real property, no right to ask for the annotation of a lis pendens notice on the title of the
the plaintiff and the defendant, when affirmative relief is claimed in his property.
answer, may record in the office of the registry of deeds of the province in
which the property is situated a notice of the pendency of the action. Said Contract is a mere contract to sell
notice shall contain the names of the parties and the object of the action or
defense, and a description of the property in that province affected thereby. A contract is what the law defines it to be, taking into consideration its
Only from the time of filing such notice for record shall a purchaser, or 8
essential elements, and not what the contracting parties call it. Article 1485
encumbrancer of the property affected thereby, be deemed to have of the Civil Code defines a contract of sale as follows:
constructive notice of the pendency of the action, and only of its pendency
against the parties designated by their real names.
Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership and to deliver a determinate thing, and the
The notice of lis pendens hereinabove mentioned may be cancelled only other to pay therefor a price certain in money or its equivalent.
upon order of the court, after proper showing that the notice is for the
purpose of molesting the adverse party, or that it is not necessary to protect
A contract of sale may be absolute or conditional.
the rights of the party who caused it to be recorded.

The litigation subject of the notice of lis pendens must directly involve a The very essence of a contract of sale is the transfer of ownership in
9
6 exchange for a price paid or promised.
specific property which is necessarily affected by the judgment.
In contrast, a contract to sell is defined as a bilateral contract whereby the This annotation was placed on the title pursuant to Section 4, Rule 74 of the
prospective seller, while expressly reserving the ownership of the property Rules, which reads:
despite delivery thereof to the prospective buyer, binds himself to sell the
property exclusively to the prospective buyer upon fulfillment of the condition Sec. 4. Liability of distributees and estate. - If it shall appear at any time
10
agreed, i.e., full payment of the purchase price. A contract to sell may not within two (2) years after the settlement and distribution of an estate in
even be considered as a conditional contract of sale where the seller may accordance with the provisions of either of the first two sections of this rule,
likewise reserve title to the property subject of the sale until the fulfillment of that an heir or other person has been unduly deprived of his lawful
a suspensive condition, because in a conditional contract of sale, the first participation in the estate, such heir or such other person may compel the
element of consent is present, although it is conditioned upon the happening settlement of the estate in the courts in the manner hereinafter provided for
11
of a contingent event which may or may not occur. the purpose of satisfying such lawful participation. And if within the same
time of two (2) years, it shall appear that there are debts outstanding
In the present case, the true nature of the contract is revealed by paragraph against the estate which have not been paid, or that an heir or other
D thereof, which states: person has been unduly deprived of his lawful participation payable in
money, the court having jurisdiction of the estate may, by order for that
xxx purpose, after hearing, settle the amount of such debts or lawful
participation and order how much and in what manner each distributee
shall contribute in the payment thereof, and may issue execution, if
d) That in case, BUYER has complied with the terms and conditions of this
circumstances require, against the bond provided in the preceding
contract, then the SELLERS shall execute and deliver to the BUYER the
section or against the real estate belonging to the deceased, or both.
appropriate Deed of Absolute Sale;
Such bond and such real estate shall remain charged with a liability to
creditors, heirs, or other persons for the full period of two (2) years after such
xxx distribution, notwithstanding any transfers of real estate that may have been
made. [Emphasis supplied.]
Jurisprudence has established that where the seller promises to execute a
deed of absolute sale upon the completion by the buyer of the payment of Senator Vicente Francisco discusses this provision in his book The Revised
12
the price, the contract is only a contract to sell. Thus, while the contract is 13
Rules of Court in the Philippines, where he states:
denominated as a Deed of Conditional Sale, the presence of the above-
quoted provision identifies the contract as being a mere contract to sell.
The provision of Section 4, Rule 74 prescribes the procedure to be followed if
within two years after an extrajudicial partition or summary distribution is
A Section 4, Rule 74 annotation is an encumbrance on the property made, an heir or other person appears to have been deprived of his lawful
participation in the estate, or some outstanding debts which have not been
While Tan admits that he refused to pay the balance of the purchase price, paid are discovered. When the lawful participation of the heir is not payable
he claims that he had valid reason to do so - the sudden appearance of an in money, because, for instance, he is entitled to a part of the real property
annotation on the title pursuant to Section 4, Rule 74 of the Rules, which Tan that has been partitioned, there can be no other procedure than to cancel the
considered an encumbrance on the property. partition so made and make a new division, unless, of course, the heir
agrees to be paid the value of his participation with interest. But in case the
We find Tan's argument meritorious. lawful participation of the heir consists in his share in personal property of
money left by the decedent, or in case unpaid debts are discovered within
The annotation placed on TCT No. 27335, the new title issued to reflect the the said period of two years, the procedure is not to cancel the partition, nor
extrajudicial partition of Lamberto Benolirao's estate among his heirs, states: to appoint an administrator to re-assemble the assets, as was allowed under
the old Code, but the court, after hearing, shall fix the amount of such debts
or lawful participation in proportion to or to the extent of the assets they have
x x x any liability to credirots (sic), excluded heirs and other persons having
respectively received and, if circumstances require, it may issue execution
right to the property, for a period of two (2) years, with respect only to the
against the real estate belonging to the decedent, or both. The present
share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao
procedure is more expedient and less expensive in that it dispenses with the
[Emphasis supplied.]
appointment of an administrator and does not disturb the possession enjoyed March 26, 1993, which contained the encumbrance on the property; the
14
by the distributees. [Emphasis supplied.] encumbrance would remain so attached until the expiration of the two-year
period. Clearly, at this time, the vendors could no longer compel Tan to pay
An annotation is placed on new certificates of title issued pursuant to the the balance of the purchase since considering they themselves could not
distribution and partition of a decedent's real properties to warn third persons fulfill their obligation to transfer a clean title over the property to Tan.
on the possible interests of excluded heirs or unpaid creditors in these
properties. The annotation, therefore, creates a legal encumbrance or lien on Contract to sell is not rescinded but terminated
the real property in favor of the excluded heirs or creditors. Where a buyer
purchases the real property despite the annotation, he must be ready for the What then happens to the contract?cralawred
possibility that the title could be subject to the rights of excluded parties. The
cancellation of the sale would be the logical consequence where: (a) the 18
We have held in numerous cases that the remedy of rescission under
annotation clearly appears on the title, warning all would-be buyers; (b) the
Article 1191 cannot apply to mere contracts to sell. We explained the reason
sale unlawfully interferes with the rights of heirs; and (c) the rightful heirs 19
for this in Santos v. Court of Appeals, where we said:
bring an action to question the transfer within the two-year period provided by
law.
[I]n a contract to sell, title remains with the vendor and does not pass on to
15 the vendee until the purchase price is paid in full. Thus, in a contract to sell,
As we held in Vda. de Francisco v. Carreon: the payment of the purchase price is a positive suspensive condition. Failure
to pay the price agreed upon is not a mere breach, casual or serious,
And Section 4, Rule 74 xxx expressly authorizes the court to give to every but a situation that prevents the obligation of the vendor to convey title
heir his lawful participation in the real estate "notwithstanding any transfers of from acquiring an obligatory force. This is entirely different from the
such real estate" and to "issue execution" thereon. All this implies that, when situation in a contract of sale, where non-payment of the price is a negative
within the amendatory period the realty has been alienated, the court in re- resolutory condition. The effects in law are not identical. In a contract of sale,
dividing it among the heirs has the authority to direct cancellation of such the vendor has lost ownership of the thing sold and cannot recover it, unless
alienation in the same estate proceedings, whenever it becomes necessary the contract of sale is rescinded and set aside. In a contract to sell, however,
to do so. To require the institution of a separate action for such annulment the vendor remains the owner for as long as the vendee has not complied
would run counter to the letter of the above rule and the spirit of these fully with the condition of paying the purchase price. If the vendor should
summary settlements. [Emphasis supplied.] eject the vendee for failure to meet the condition precedent, he is enforcing
the contract and not rescinding it. x x x Article 1592 speaks of non-payment
16
Similarly, in Sps. Domingo v. Roces, we said: of the purchase price as a resolutory condition. It does not apply to a contract
to sell. As to Article 1191, it is subordinated to the provisions of Article 1592
The foregoing rule clearly covers transfers of real property to any person, as when applied to sales of immovable property. Neither provision is applicable
long as the deprived heir or creditor vindicates his rights within two years [to a contract to sell]. [Emphasis supplied.]
from the date of the settlement and distribution of estate. Contrary to
petitioners' contention, the effects of this provision are not limited to the heirs We, therefore, hold that the contract to sell was terminated when the vendors
or original distributees of the estate properties, but shall affect any transferee could no longer legally compel Tan to pay the balance of the purchase price
of the properties. [Emphasis supplied.] as a result of the legal encumbrance which attached to the title of the
property. Since Tan's refusal to pay was due to the supervening event of a
17 legal encumbrance on the property and not through his own fault or
Indeed, in David v. Malay, although the title of the property had already
been registered in the name of the third party buyers, we cancelled the sale negligence, we find and so hold that the forfeiture of Tan's down payment
and ordered the reconveyance of the property to the estate of the deceased was clearly unwarranted.
for proper disposal among his rightful heirs.
Award of Attorney's fees
By the time Tan's obligation to pay the balance of the purchase price arose
on May 21, 1993 (on account of the extensions granted by the respondents),
a new certificate of title covering the property had already been issued on
As evident from our previous discussion, Tan had a valid reason for refusing
to pay the balance of the purchase price for the property. Consequently,
there is no basis for the award of attorney's fees in favor of the respondents.

On the other hand, we award attorney's fees in favor of Tan, since he was
compelled to litigate due to the respondents' refusal to return his down
payment despite the fact that they could no longer comply with their
obligation under the contract to sell, i.e., to convey a clean title. Given the
facts of this case, we find the award of P50,000.00 as attorney's fees proper.

Monetary award is subject to legal interest

Undoubtedly, Tan made a clear and unequivocal demand on the vendors to

return his down payment as early as May 28, 1993. Pursuant to our definitive
20
ruling in Eastern Shipping Lines, Inc. v. Court of Appeals, we hold that the
vendors should return the P200,000.00 down payment to Tan, subject to the
legal interest of 6% per annum computed from May 28, 1993, the date of the
first demand letter.???
G.R. No. 196251 July 9, 2014 August 8, 2000 500,000.00

OLIVAREZ REALTY CORPORATION and DR. PABLO R. September 8, 2000 500,000.00

OLIVAREZ, Petitioner,
vs. October 8, 2000 500,000.00
BENJAMIN CASTILLO, Respondent. 7
November 8, 2000 500,000.00
DECISION
As to the balance of ₱14,080,490.00, Olivarez Realty Corporation agreed to
LEONEN, J.: pay in 30 equal monthly installments every eighth day of the month beginning
in the month that the parties would receive a decision voiding the Philippine
8
Tourism Authority’s title to the property. Under the deed of conditional sale,
Trial may be dispensed with and a summary judgment rendered if the case
Olivarez RealtyCorporation shall file the action against the Philippine Tourism
can be resolved judiciously by plain resort to the pleadings, affidavits, 9
Authority "with the full assistance of [Castillo]." Paragraph C of the deed of
depositions, and other papers filed by the parties.
conditional sale provides:
1
This is a petition for review on certiorari of the Court of Appeals'
2 3 C. [Olivarez Realty Corporation] assumes the responsibility of taking
decision dated July 20, 2010 and resolution dated March 18, 2011 in
necessary legal action thru Court to have the claim/title TCT T-18493 of
CAG.R. CV No. 91244.
Philippine Tourism Authority over the above-described property be nullified
10
and voided; with the full assistance of [Castillo][.]
The facts as established from the pleadings of the parties are as follows:
Should the action against the Philippine Tourism Authority be denied, Castillo
Benjamin Castillo was the registered owner of a 346,918-squaremeter parcel agreed to reimburse all the amounts paid by Olivarez Realty Corporation.
of land located in Laurel, Batangas, covered by Transfer Certificate of Title Paragraph D of the deed of conditional sale provides:
4
No. T-19972. The Philippine Tourism Authority allegedly claimed ownership
of the sameparcel of land based on Transfer Certificate of Title No. T-
5 D. In the event that the Court denie[s] the petition against the Philippine
18493. On April 5, 2000, Castillo and Olivarez Realty Corporation,
Tourism Authority, all sums received by [Castillo] shall be reimbursed to
represented by Dr. Pablo R. Olivarez, entered into a contract of conditional 11
6 [Olivarez Realty Corporation] without interest[.]
sale over the property. Under the deed of conditional sale, Castillo agreed to
sell his property to Olivarez Realty Corporation for ₱19,080,490.00. Olivarez
Realty Corporation agreed toa down payment of ₱5,000,000.00, to be paid As to the "legitimate tenants" occupying the property, Olivarez Realty
according to the following schedule: Corporation undertook to pay them "disturbance compensation," while
Castillo undertook to clear the land of the tenants within six months from the
signing of the deed of conditional sale. Should Castillo fail to clear the land
DATE AMOUNT within six months, Olivarez Realty Corporation may suspend its monthly
down payment until the tenants vacate the property. Paragraphs E and F of
April 8, 2000 500,000.00 the deed of conditional sale provide: E. That [Olivarez Realty Corporation]
shall pay the disturbance compensation to legitimate agricultural tenants and
May 8, 2000 500,000.00
fishermen occupants which in no case shall exceed ONE MILLION FIVE
May 16, 2000 500,000.00 HUNDRED THOUSAND (₱1,500,000.00) PESOS. Said amountshall not
form part of the purchase price. In excess of this amount, all claims shall be
1,000,000.0 for the account of [Castillo];
June 8, 2000
0
F. That [Castillo] shall clear the land of [the] legitimate tenants within a period
July 8, 2000 500,000.00 of six (6) months upon signing of this Contract, and in case [Castillo] fails,
[Olivarez Realty Corporation] shall have the right to suspend the monthly corporation in filing an action against the Philippine Tourism Authority.
12
down payment until such time that the tenants [move] out of the land[.] Neither did Castillo clear the property of the tenants within six months from
the signing of the deed of conditional sale. Thus, according to defendants,
The parties agreed thatOlivarez Realty Corporation may immediately occupy the corporation had "all the legal right to withhold the subsequent payments
20
the property upon signing of the deed of conditional sale. Should the contract to [fully pay] the purchase price."
be cancelled, Olivarez RealtyCorporation agreed to return the property’s
possession to Castillo and forfeit all the improvements it may have Olivarez Realty Corporation and Dr. Olivarez prayedthat Castillo’s complaint
introduced on the property. Paragraph I of the deed of conditional sale be dismissed. By way of compulsory counterclaim, they prayed for
21
states: ₱100,000.00 litigation expenses and ₱50,000.00 attorney’s fees.

22
I. Immediately upon signing thisContract, [Olivarez Realty Corporation] shall Castillo replied to the counterclaim, arguing that Olivarez Realty
be entitled to occupy, possess and develop the subject property. In case this Corporation and Dr. Olivarez had no right to litigation expenses and
Contract is canceled [sic], any improvement introduced by [the corporation] attorney’s fees. According to Castillo, the deed of conditional sale clearly
13
on the property shall be forfeited in favor of [Castillo][.] states that the corporation "assume[d] the responsibility of taking necessary
23
legal action" against the Philippine Tourism Authority, yet the corporation
14 did not file any case. Also, the corporation did not pay the tenants
On September 2, 2004, Castillo filed a complaint against Olivarez Realty
Corporation and Dr. Olivarez with the Regional Trial Court of Tanauan City, disturbance compensation. For the corporation’s failure to fully pay the
Batangas. purchase price, Castillo claimed that hehad "all the right to pray for the
24
rescission of the [contract]," and he "should not be held liable . . . for any
25
alleged damages by way of litigation expenses and attorney’s fees."
Castillo alleged that Dr. Olivarez convinced him into selling his property to
Olivarez Realty Corporation on the representation that the corporation shall 26
be responsible in clearing the property of the tenants and in paying them On January 10, 2005, Castillo filed a request for admission, requesting Dr.
disturbance compensation. He further alleged that Dr. Olivarez solely Olivarez to admit under oath the genuineness of the deed of conditional sale
prepared the deed of conditional sale and that he was made to sign the and Transfer Certificate of Title No. T-19972. He likewise requested Dr.
15 Olivarez to admit the truth of the following factual allegations:
contract with its terms "not adequately explained [to him] in Tagalog."

After the parties had signed the deed of conditional sale, Olivarez Realty 1. That Dr. Olivarez is the president of Olivarez Realty Corporation;
Corporation immediately took possession of the property. However, the
corporation only paid 2,500,000.00 ofthe purchase price. Contrary to the 2. That Dr. Olivarez offered to purchase the parcel of land from
agreement, the corporation did not file any action against the Philippine Castillo and that he undertook to clear the property of the tenants
Tourism Authority to void the latter’s title to the property. The corporation and file the court action to void the Philippine Tourism Authority’s title
neither cleared the land of the tenants nor paid them disturbance to the property;
compensation. Despite demand, Olivarez Realty Corporation refused to fully
16
pay the purchase price. 3. That Dr. Olivarez caused the preparation of the deed of
conditional sale;
Arguing that Olivarez Realty Corporation committed substantial breach of the
contract of conditional sale and that the deed of conditional sale was a 4. That Dr. Olivarez signed the deed of conditional sale for and on
contract of adhesion, Castillo prayed for rescission of contract under Article behalf of Olivarez Realty Corporation;
1191 of the Civil Code of the Philippines. He further prayed that Olivarez
Realty Corporation and Dr. Olivarez be made solidarily liable for moral
17 5. That Dr. Olivarez and the corporation did not file any action
damages, exemplary damages, attorney’s fees, and costs of suit.
against the Philippine Tourism Authority;
18
In their answer, Olivarez Realty Corporation and Dr. Olivarez admitted that 6. That Dr. Olivarez and the corporation did not pay the tenants
the corporation only paid ₱2,500,000.00 ofthe purchase price. In their
19 disturbance compensation and failed to clear the property of the
defense, defendants alleged that Castillo failed to "fully assist" the
tenants; and
 7. That Dr. Olivarez and the corporation only paid ₱2,500,000.00 of In reply to the opposition to the motion for summary judgment and/or
27 44
the agreed purchase price. judgment on the pleadings, Castillo maintained that Olivarez Realty
Corporation was responsible for the filing of an action against the Philippine
On January 25, 2005, Dr. Olivarez and Olivarez Realty Corporation filed their Tourism Authority. Thus, the corporation could not fault Castillo for not suing
28 45
objections to the request for admission, stating that they "reiterate[d] the the PhilippineTourism Authority. The corporation illegally withheld
29 payments of the purchase price.
allegations [and denials] in their [answer]."

The trial court conducted pre-trial conference on December 17, 2005. As to the claim that the case should proceed to trial because a title adverse
to his title existed, Castillo argued that the Philippine Tourism Authority’s title
46
covered another lot, not his property.
On March 8, 2006, Castillo filed a motion for summary judgment and/or
30
judgment on the pleadings. He argued that Olivarez Realty Corporation and
Dr. Olivarez "substantially admitted the material allegations of [his] During the hearing on August 3, 2006, Olivarez Realty Corporation and Dr.
31 Olivarez prayed that they be given 30 days to file a supplemental
complaint," specifically:
memorandum on Castillo’s motion for summary judgment and/or judgment
47
on the pleadings.
1. That the corporation failed to fully pay the purchase price for his
32
property;
The trial court granted the motion. Itgave Castillo 20 days to reply to the
2. That the corporation failed to file an action to void the Philippine memorandum and the corporation and Dr. Olivarez 15 days to respond to
48
33 Castillo’s reply.
Tourism Authority’s title to his property; and
49
In their supplemental memorandum, Olivarez Realty Corporation and Dr.
3. That the corporation failed to clear the property of the tenants and 50
pay them disturbance compensation.
34 Olivarez argued that there was "an obvious ambiguity" as to which should
occur first — the payment of disturbance compensation to the tenants or the
51
clearing of the property of the tenants. This ambiguity, according to
Should judgment on the pleadings beimproper, Castillo argued that summary defendants, is a genuine issue and "oughtto be threshed out in a full blown
judgment may still be rendered asthere is no genuine issue as to any trial."
52
35
material fact. He cited Philippine National Bank v. Noah’s Ark Sugar
36
Refinery as authority.
Olivarez Realty Corporation and Dr. Olivarez added that Castillo prayed for
irreconcilable reliefs of reformation of instrument and rescission of
Castillo attached to his motion for summary judgment and/or judgment on the 53
contract. Thus, Castillo’s complaint should be dismissed.
37 38
pleadings his affidavit and the affidavit of a Marissa Magsino attesting to
the truth of the material allegations of his complaint. 54
Castillo replied to the memorandum, arguing that there was no genuine
39 issue requiring trial of the case. According to Castillo, "common sense
Olivarez Realty Corporation and Dr. Olivarez opposed the motion for dictates . . . that the legitimate tenants of the [property] shall not vacate the
summary judgment and/or judgment on the pleadings, arguing that the 55
premises without being paid any disturbance compensation . . ." Thus, the
40
motion was "devoid of merit." They reiterated their claim that the payment of disturbance compensation should occur first before clearing the
corporation withheld further payments of the purchase price because "there property of the tenants.
ha[d] been no favorable decision voiding the title of the Philippine Tourism
41
Authority." They added that Castillo sold the property to another person and
42 With respect to the other issuesraised in the supplemental memorandum,
that the sale was allegedly litigated in Quezon City.
specifically, that Castillo sold the property to another person, he argued that
these issues should not be entertained for not having been presented during
Considering that a title adverse to that of Castillo’s existed, Olivarez Realty pre-trial.
56
Corporation and Dr. Olivarez argued that the case should proceed to trial and
Castillo be required to prove that his title to the property is "not spurious or 57
43 In their comment on the reply memorandum, Olivarez Realty Corporation
fake and that he had not sold his property to another person."
and Dr. Olivarez reiterated their arguments that certain provisions of the
deed of conditional sale were ambiguous and that the complaint prayed for Olivarez Realty Corporation and Dr. Olivarez appealed to the Court of
58 67
irreconcilable reliefs. Appeals.

68
As to the additional issues raised in the supplemental memorandum, In its decision dated July 20, 2010, the Court of Appeals affirmed in totothe
defendants argued that issues not raised and evidence not identified and trial court’s decision. According to the appellate court, the trial court "did not
premarked during pre-trial may still be raised and presented during trial for err in its finding that there is no genuine controversy as to the facts involved
69
good cause shown. Olivarez Realty Corporation and Dr. Olivarez prayed that [in this case]." The trial court, therefore, correctly rendered summary
59 70
Castillo’s complaint be dismissed for lack of merit. judgment.

Ruling of the trial court As to the trial court’s award of damages, the appellatecourt ruled that a court
may award damages through summary judgment "if the parties’ contract
The trial court found that Olivarez Realty Corporation and Dr. Olivarez’s categorically [stipulates] the respective obligations of the parties in case of
71
answer "substantially [admitted the material allegations of Castillo’s] default." As found by the trial court,paragraph I of the deed of conditional
complaint and [did] not . . . raise any genuine issue [as to any material sale categorically states that "in case [the deed of conditional sale] is
60 cancelled, any improvementintroduced by [Olivarez Realty Corporation] on
fact]." 72
the property shall be forfeited infavor of [Castillo]." Considering that
Olivarez Realty Corporation illegally retained possession of the property,
Defendants admitted that Castillo owned the parcel of land covered by 73
Transfer Certificate of Title No. T-19972. They likewise admitted the Castillo forewent rentto the property and "lost business opportunities." The
genuineness of the deed of conditional sale and that the corporation only ₱2,500,000.00 down payment, according to the appellate court, shouldbe
61 forfeited in favor of Castillo. Moral and exemplary damages and costs ofsuit
paid ₱2,500,000.00 of the agreed purchase price.
were properly awarded.
According to the trial court, the corporation was responsible for suing the
Philippine Tourism Authority and for paying the tenants disturbance On August 11, 2010, Olivarez RealtyCorporation and Dr. Olivarez filed their
74
compensation. Since defendant corporation neither filed any case nor paid motion for reconsideration, arguing that the trial court exceeded its authority
in forfeiting the ₱2,500,000.00 down payment and awarding ₱500,000.00 in
the tenants disturbance compensation, the trial court ruled that defendant
62 moral damages to Castillo. They argued that Castillo only prayed for a total
corporation had no right to withhold payments from Castillo. 75
of ₱500,000.00 as actual and moral damages in his complaint. Appellants
76
prayed that the Court of Appeals "take a second hard look" at the case and
As to the alleged ambiguity of paragraphs E and F of the deed of conditional reconsider its decision.
sale, the trial court ruled that Castillo and his witness, Marissa Magsino,
63
"clearly established" in their affidavits that the deed of conditional sale was 77
In the resolution dated March 18, 2011, the Court of Appeals denied the
a contract of adhesion. The true agreement between the parties was that the
motion for reconsideration.
corporation would both clear the land of the tenants and pay them
disturbance compensation.
Proceedings before this court
With these findings, the trial court ruled that Olivarez Realty Corporation
64 Olivarez Realty Corporation and Dr. Olivarez filed their petition for review on
breached the contract ofconditional sale.1âwphi1 In its decision dated April 78
23, 2007, the trial court ordered the deed of conditional sale rescinded and certiorari with this court. Petitionersargue that the trial court and the Court
the ₱2,500,000.00 forfeited in favor of Castillo "as damages under Article of Appeals erred in awarding damages to Castillo. Under Section 3, Rule 35
65 of the 1997 Rules ofCivil Procedure, summary judgment may be rendered
1191 of the Civil Code."
except as to the amountof damages. Thus, the Court of Appeals "violated the
79
procedural steps in rendering summary judgment."
The trial court declared Olivarez Realty Corporation and Dr. Olivarez
solidarily liable to Castillo for 500,000.00 as moral damages, ₱50,000.00 as
66 Petitioners reiterate that there are genuine issues ofmaterial fact to be
exemplary damages, and ₱50,000.00 as costs of suit.
resolved in this case. Thus, a full-blown trial is required, and the trial court
prematurely decided the case through summary judgment. They cite Torres
Ruling of the Court of Appeals
 80
v. Olivarez Realty Corporation and Dr. Pablo Olivarez, a case decided by I. Whether the trial court erred in rendering summary judgment;
the Ninth Division of the Court of Appeals.
II. Whether proper docket fees were paid in this case.
In Torres, Rosario Torres was the registeredowner of a parcel of land
covered by Transfer Certificate of Title No. T-19971. Under a deed of The petition lacks merit.
conditional sale, she sold her property to OlivarezRealty Corporation for
₱17,345,900.00. When the corporation failed to fully pay the purchase price, I
she sued for rescission of contractwith damages. In their answer, the The trial court correctly rendered
corporation and Dr. Olivarez argued thatthey discontinued payment because
summary judgment, as there were no
Rosario Torres failed to clear the land of the tenants.
genuine issues of material fact in this case
Similar to Castillo, Torres filed a motion for summary judgment, which the
trial court granted. On appeal, the Court of Appeals set aside the trial court’s
summary judgment and remanded the case to the trial court for further Trial "is the judicial examination and determination of the issues between the
89
81
proceedings. The Court of Appeals ruled that the material allegations of the parties to the action." During trial, parties "present their respective evidence
90
complaint "were directly disputed by [the corporation and Dr. Olivarez] in of their claims and defenses." Parties to an action have the right "to a
91
82
their answer" when they argued that they refused to pay because Torres plenary trial of the case" to ensure that they were given a right to fully
failed to clear the land of the tenants. present evidence on their respective claims.

With the Court of Appeals’ decision in Torres,Olivarez Realty Corporation There are instances, however, whentrial may be dispensed with. Under Rule
and Dr. Olivarez argue that this case should likewise be remanded to the trial 35 of the 1997 Rules of Civil Procedure, a trial court may dispense with trial
court for further proceedings under the equipoise rule. and proceed to decide a case if from the pleadings, affidavits, depositions,
and other papers on file, there is no genuine issue as to any material fact. In
such a case, the judgment issued is called a summary judgment.
Petitioners maintain that Castillo availed himself of the irreconcilable reliefs of
83
reformation of instrument and rescission of contract. Thus, the trial court
should have dismissed the case outright. A motion for summary judgment is filed either by the claimant or the
92
defending party. The trial court then hears the motion for summary
judgment. If indeed there are no genuine issues of material fact, the trial
Petitioners likewise argue that the trial court had no jurisdiction to decide the
84 court shall issue summary judgment. Section 3, Rule 35 of the 1997 Rules of
case as Castillo failed topay the correct docket fees. Petitioners argue that
Civil Procedure provides:
Castillo should have paid docket fees based on the property’s fair market
85
value since Castillo’s complaint is a real action.
SEC. 3. Motion and proceedings thereon. – The motion shall be served at
86 least ten (10) days beforethe time specified for the hearing. The adverse
In his comment, Castillo maintains that there are no genuine issues as to
party may serve opposing affidavits, depositions, or admission at least three
any material fact inthis case. The trial court, therefore, correctly rendered
(3) days before the hearing. After the hearing, the judgment sought shall be
summary judgment.
rendered forthwith ifthe pleadings, supporting affidavits, depositions, and
admissions on file, showthat, except as to the amount of damages, there is
As to petitioners’ claim that the trial court had no jurisdiction to decide the no genuine issue as to any material fact and that the moving party is entitled
case, Castillo argues that he prayed for rescission of contract in his to a judgment as a matter of law.
complaint. This action is incapable of pecuniary estimation, and the Clerk of
87
Court properly computed the docket fees based on this prayer. Olivarez
88 An issue of material fact exists if the answer or responsive pleading filed
Realty Corporation and Dr. Olivarez replied, reiterating their arguments in
specifically denies the material allegations of fact set forth in the complaint or
the petition for review on certiorari. pleading. If the issue offact "requires the presentation of evidence, it is a
93
genuine issue of fact." However, if the issue "could be resolved judiciously
The issues for our resolution are the following: 94
by plain resort" to the pleadings, affidavits, depositions, and other paperson
 99
file, the issue of fact raised is sham, and the trial court may resolve the action Castillo’s alleged failureto "fully assist" the corporation in filing the case is
through summary judgment. not a defense. As the trial court said, "how can [Castillo] assist [the
100
corporation] when [the latter] did not file the action [in the first place?]"
A summary judgment is usually distinguished from a judgment on the
pleadings. Under Rule 34 of the 1997 Rules of Civil Procedure, trial may Neither can Olivarez Realty Corporation argue that it refused to fully pay the
likewise be dispensed with and a case decided through judgment on the purchase price due to the Philippine Tourism Authority’s adverse claim on
pleadings if the answer filed fails to tender an issue or otherwise admits the the property. The corporation knew of this adverse claim when it entered into
95
material allegations of the claimant’s pleading. a contract of conditional sale. It even obligated itself under paragraph C of
the deed of conditional sale to sue the Philippine Tourism Authority. This
Judgment on the pleadings is proper when the answer filed fails to tender defense, therefore, is sham.
96
any issue, or otherwise admitsthe material allegations in the complaint. On
101
the other hand, in a summary judgment, the answer filed tenders issues as Contrary to petitioners’ claim, there is no "obvious ambiguity" as to which
specific denials and affirmative defenses are pleaded, but the issues raised should occur first — the payment of the disturbance compensation or the
97
are sham, fictitious, or otherwise not genuine. clearing of the land within six months from the signing of the deed of
conditional sale. The obligations must be performed simultaneously. In this
In this case, Olivarez Realty Corporation admitted that it did not fully pay the case, the parties should have coordinated to ensure that tenants on the
purchase price as agreed upon inthe deed of conditional sale. As to why it property were paid disturbance compensation and were made to vacate the
withheld payments from Castillo, it set up the following affirmative defenses: property six months after the signingof the deed of conditional sale.
First, Castillo did not filea case to void the Philippine Tourism Authority’s title
to the property; second,Castillo did not clear the land of the tenants; third, On one hand, pure obligations, or obligations whose performance do not
Castillo allegedly sold the property to a third person, and the subsequent sale depend upon a future or uncertainevent, or upon a past event unknown to
102
is currently being litigated beforea Quezon City court. the parties, are demandable at once. On the other hand, obligations with a
resolutory period also take effect at once but terminate upon arrival of the
103
Considering that Olivarez RealtyCorporation and Dr. Olivarez’s answer day certain.
tendered an issue, Castillo properly availed himself of a motion for summary
judgment. Olivarez Realty Corporation’s obligation to pay disturbance compensation is
a pure obligation. The performance of the obligation to pay disturbance
However, the issues tendered by Olivarez Realty Corporation and Dr. compensation did not depend on any condition. Moreover, the deed of
Olivarez’s answer are not genuine issues of material fact. These are issues conditional sale did not give the corporation a period to perform the
that can be resolved judiciously by plain resort to the pleadings, affidavits, obligation. As such, the obligation to pay disturbance compensation was
depositions, and other papers on file; otherwise, these issues are sham, demandable at once. Olivarez RealtyCorporation should have paid the
fictitious, or patently unsubstantial. tenants disturbance compensation upon execution of the deed of conditional
sale.
Petitioner corporation refused to fully pay the purchase price because no
court case was filed to void the Philippine Tourism Authority’s title on the With respect to Castillo’s obligation to clear the land of the tenants within six
property. However, paragraph C of the deed of conditional sale is clear that months from the signing of the contract, his obligation was an obligation with
petitioner Olivarez Realty Corporation is responsible for initiating court action a resolutory period. The obligation to clear the land of the tenants took effect
against the Philippine Tourism Authority: at once, specifically, upon the parties’ signing of the deed of conditional sale.
Castillo had until October 2, 2000, six months from April 5, 2000 when the
parties signed the deed of conditional sale, to clear the land of the tenants.
C. [Olivarez Realty Corporation] assumes the responsibility of taking
necessary legal action thru Court to have the claim/title TCT T-18493 of
Philippine Tourism Authority over the above-described property be nullified Olivarez Realty Corporation, therefore, had no right to withhold payments of
98 the purchase price. As the trial court ruled, Olivarez Realty Corporation "can
and voided; with the full assistance of [Castillo].
only claim non-compliance [of the obligation to clear the land of the tenants
104
in] October 2000." It said:
. . . it is clear that defendant [Olivarez Realty Corporation] should have paid In a contract of conditional sale, the buyer automatically acquires title to the
112
the installments on the ₱5 million downpayment up to October 8, 2000, or a property upon full payment of the purchase price. This transfer of title is
total of ₱4,500,000.00. That is the agreement because the only time that "by operation of law without any further act having to be performed by the
113
defendant [corporation] can claim non-compliance of the condition is after seller." In a contract to sell, transfer of title to the prospective buyer is not
114
October, 2000 and so it has the clear obligation topay up to the October 2000 automatic. "The prospective seller [must] convey title to the property
115
the agreed installments. Since it paid only 2,500,000.00, then a violation of [through] a deed of conditional sale."
105
the contract has already been committed. . . .
The distinction is important to determine the applicable laws and remedies in
The claim that Castillo sold the property to another is fictitious and was made case a party does not fulfill his or her obligations under the contract. In
in bad faith to prevent the trial court from rendering summary judgment. contracts of conditional sale, our laws on sales under the Civil Code of the
Petitioners did not elaborate on this defense and insisted on revealing the Philippines apply. On the other hand, contracts to sell are not governed by
106 116
identity of the buyer only during trial. Even in their petition for review on our law on sales but by the Civil Code provisions on conditional
certiorari, petitioners never disclosed the name of this alleged buyer. Thus, obligations.
as the trial court ruled, this defense did not tender a genuine issue of fact,
107
with the defense "bereft of details." Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal
117
obligations does not apply to contracts to sell. As this court explained in
118
Castillo’s alleged prayer for the irreconcilable reliefs of rescission of contract Ong v. Court of Appeals, failure to fully pay the purchase price in contracts
119
and reformation of instrument is not a ground to dismiss his complaint. A to sell is not the breach of contract under Article 1191. Failure to fully pay
plaintiff may allege two or more claims in the complaint alternatively or the purchase price is "merely an event which prevents the [seller’s] obligation
120
hypothetically, either in one cause of action or in separate causes of action to convey title from acquiring binding force." This is because "there can be
108
per Section 2, Rule 8 of the 1997 Rules of Civil Procedure. It is the filing of no rescission of an obligation that is still nonexistent, the suspensive
121
two separatecases for each of the causes of action that is prohibited since condition not having [happened]."
the subsequently filed case may be dismissed under Section 4, Rule 2 of the
109
1997 Rules of Civil Procedure on splitting causes of action. In this case, Castillo reserved his title to the property and undertook to
execute a deed of absolute sale upon Olivarez Realty Corporation’s full
122
As demonstrated, there are no genuineissues of material fact in this case. payment of the purchase price. Since Castillo still has to execute a deed of
These are issues that can be resolved judiciously by plain resort to the absolute sale to Olivarez RealtyCorporation upon full payment of the
pleadings, affidavits, depositions, and other papers on file. As the trial court purchase price, the transfer of title is notautomatic. The contract in this case
found, Olivarez Realty Corporation illegally withheld payments of the is a contract to sell.
purchase price. The trial court did not err in rendering summary judgment.
As this case involves a contract tosell, Article 1191 of the Civil Code of the
II Philippines does not apply. The contract to sell is instead cancelled, and the
123
Castillo is entitled to cancel the contract parties shall stand as if the obligation to sell never existed.
of conditional sale
Olivarez Realty Corporation shall return the possession of the property to
Since Olivarez Realty Corporation illegally withheld payments of the Castillo. Any improvement that Olivarez Realty Corporation may have
purchase price, Castillo is entitled to cancel his contract with petitioner introduced on the property shall be forfeited in favor of Castillo per paragraph
corporation. However, we properly characterize the parties’ contract as a I of the deed of conditional sale:
contract to sell, not a contract of conditional sale.
I. Immediately upon signing thisContract, [Olivarez Realty Corporation] shall
In both contracts to sell and contracts of conditional sale, title to the property be entitled to occupy, possess and develop the subject property. In case this
110
remains with the seller until the buyer fully pays the purchase price. Both Contract is cancelled, any improvement introduced by [Olivarez Realty
124
contracts are subject to the positive suspensive condition of the buyer’s full Corporation] on the property shall be forfeited in favor of [Castillo.]
111
payment of the purchase price.
As for prospective sellers, thiscourt generally orders the reimbursement of Nonetheless, we hold that Castillois entitled to moral damages, exemplary
the installments paidfor the property when setting aside contracts to damages, and attorney’s fees.
125
sell. This is true especially ifthe property’s possession has not been
delivered to the prospective buyer prior to the transfer of title. Moral damages may be awarded in case the claimant experienced physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation,
128
In this case, however, Castillo delivered the possession of the property to wounded feelings, moral shock, social humiliation, and similar injury.
Olivarez Realty Corporation prior to the transfer of title. We cannot order the
reimbursement of the installments paid. As for exemplary damages, they are awarded in addition to moral damages
129
by way of example or correction for the public good. Specifically in
126
In Gomez v. Court of Appeals, the City of Manila and Luisa Gomez contracts, exemplary damages may be awarded if the defendant acted in a
130
entered into a contract to sell over a parcel of land. The city delivered the wanton, fraudulent,reckless, oppressive, or malevolent manner.
property’s possession to Gomez. She fully paid the purchase price for the
property but violated the terms of the contract to sell by renting out the Under the deed of conditional sale, Olivarez Realty Corporation may only
property to other persons. This court set aside the contract to sell for her suspend the monthly down payment in case Castillo fails to clear the land of
violation of the terms of the contract to sell. It ordered the installments paid the tenants six months from the signing of the instrument. Yet, even before
forfeited in favor of the City of Manila "as reasonable compensation for the sixth month arrived, Olivarez Realty Corporation withheld payments for
127
[Gomez’s] use of the [property]" for eight years. Castillo’s property. It evenused as a defense the fact that no case was filed
against the PhilippineTourism Authority when, under the deed of conditional
In this case, Olivarez Realty Corporation failed to fully pay the purchase price sale, Olivarez Realty Corporation was clearly responsible for initiating action
for the property. It only paid ₱2,500,000.00 out of the ₱19,080,490.00 agreed against the Philippine Tourism Authority. These are oppressive and
purchase price. Worse, petitioner corporation has been in possession of malevolent acts, and we find Castillo entitled to ₱500,000.00 moral damages
Castillo’s property for 14 years since May 5, 2000 and has not paid for its use and ₱50,000.00 exemplary damages:
of the property.
Plaintiff Castillo is entitled to moral damages because of the evident bad faith
Similar to the ruling in Gomez, we order the ₱2,500,000.00 forfeited in favor exhibited by defendants in dealing with him regarding the sale of his lot to
of Castillo as reasonable compensation for Olivarez Realty Corporation’s use defendant [Olivarez Realty Corporation]. He suffered much prejudice due to
of the property. the failure of defendants to pay him the balance of purchase price which he
expected touse for his needs which caused him wounded feelings, sorrow,
III mental anxiety and sleepless nights for which defendants should pay
Olivarez Realty Corporation is liable for ₱500,000.00 as moral damages more than six (6) years had elapsed and
moral and exemplary damages and defendants illegally and unfairly failed and refused to pay their legal
attorney’s fees obligations to plaintiff, unjustly taking advantage of a poor uneducated man
like plaintiff causing much sorrow and financial difficulties. Moral damages in
We note that the trial court erred in rendering summary judgment on the favor of plaintiff is clearly justified . . . [Castillo] is also entitled to ₱50,000.00
as exemplary damages to serve as a deterrent to other parties to a contract
amount of damages. Under Section 3, Rule 35 of the 1997 Rules of Civil 131
to religiously comply with their prestations under the contract.
Procedure, summary judgment may be rendered, except as to the amount of
damages.
We likewise agree that Castillo is entitled to attorney’s fees in addition to the
132
In this case, the trial court erred in forfeiting the ₱2,500,000.00 in favor of exemplary damages. Considering that Olivarez Realty Corporation refused
133
to satisfy Castillo’splainly valid, just, and demandable claim, the award of
Castillo as damages under Article 1191 of the Civil Code of the Philippines.
₱50,000.00 as attorney’s fees is in order. However, we find that Dr. Pablo
As discussed, there is nobreach of contract under Article 1191 in this case.
R.Olivarez is not solidarily liable with Olivarez Realty Corporation for the
amount of damages.
The trial court likewise erred inrendering summary judgment on the amount
of moral and exemplary damages and attorney’s fees.
 140
Under Article 1207 of the Civil Code of the Philippines, there is solidary We rule for Castillo. In De Leon v. Court of Appeals, this court held that an
liability only when the obligation states it or when the law or the nature of the action for rescission of contract of sale of real property is an action incapable
134
obligation requires solidarity. In case of corporations, they are solely liable of pecuniary estimation. In De Leon, the action involved a real property.
135
for their obligations. The directors or trustees and officers are not liable Nevertheless, this court held that "it is the nature of the action as one for
141
with the corporation even if it is through their acts that the corporation rescission of contract which is controlling." Consequently, the docket fees
incurred the obligation. This is because a corporation is separate and distinct to be paid shall be for actions incapableof pecuniary estimation, regardless if
136
from the persons comprising it. the claimant may eventually recover the real property. This court said:

As an exception to the rule, directors or trustees and corporate officers may . . . the Court in Bautista v.Lim, held that an action for rescission of contract
be solidarily liable with the corporation for corporate obligations if they acted is one which cannot be estimated and therefore the docket fee for its filing
137
"in bad faith or with gross negligence in directing the corporate affairs." should be the flat amount of ₱200.00 as then fixed in the former Rule 141,
§141, §5(10). Said this Court:
In this case, we find that Castillo failed to prove with preponderant evidence
that it was through Dr. Olivarez’s bad faith or gross negligence that Olivarez We hold that Judge Dalisay did not err in considering Civil Case No. V-144
Realty Corporation failed to fully pay the purchase price for the property. Dr. as basically one for rescission or annulment of contract which is not
Olivarez’s alleged act of making Castillo sign the deed of conditional sale susceptible of pecuniary estimation (1 Moran's Comments on the Rules of
without explaining to the latter the deed’s terms in Tagalog is not reason to Court, 1970 Ed, p. 55; Lapitan vs. Scandia, Inc., L-24668, July 31, 1968, 24
hold Dr. Olivarez solidarily liable with the corporation. Castillo had a choice SCRA 479, 781-483).
not to sign the deed of conditional sale. He could have asked that the deed of
conditional sale be written in Tagalog. Thus, Olivarez Realty Corporation Consequently, the fee for docketing it is ₱200, an amount already paid by
issolely liable for the moral and exemplary damages and attorney’s fees to plaintiff, now respondent Matilda Lim.1âwphi1(She should pay also the two
Castillo. pesos legal research fund fee, if she has not paid it, as required in Section 4
of Republic Act No. 3870, the charter of the U.P. Law Center).
IV
The trial court acquired jurisdiction over Thus, although eventually the result may be the recovery of land, it is the
Castillo’s action as he paid the correct nature of the action as one for rescission of contract which is controlling. The
docket fees Court of Appeals correctly applied these cases to the present one. As it said:

Olivarez Realty Corporation and Dr. Olivarez claimed that the trial court had We would like to add the observations that since the action of petitioners
no jurisdiction to take cognizance of the case. In the reply/motion to dismiss [private respondents] against private respondents [petitioners] is solely for
138
the complaint they filed with the Court of Appeals, petitioners argued that annulment or rescission which is not susceptible of pecuniary estimation, the
Castillo failed to pay the correct amount of docket fees. Stating that this action should not be confused and equated with the "value of the property"
action is a real action, petitioners argued that the docket fee Castillo paid subject of the transaction; that by the very nature of the case, the allegations,
should have been based on the fair market value of the property. In this and specific prayer in the complaint, sans any prayer for recovery of money
case, Castillo only paid 4,297.00, which is insufficient "if the real nature of the and/or value of the transaction, or for actual or compensatory damages, the
action was admitted and the fair market value of the property was disclosed assessment and collection of the legal fees should not be intertwined with the
and made the basis of the amount of docket fees to be paid to the merits of the case and/or what may be its end result; and that to sustain
139
court." Thus, according to petitioners, the case should be dismissed for private respondents' [petitioners'] position on what the respondent court may
lack of jurisdiction. decide after all, then the assessment should be deferred and finally assessed
only after the court had finally decided the case, which cannot be done
Castillo countered that his action for rescission is an action incapable of because the rules require that filing fees should be based on what is alleged
pecuniary estimation. Thus, the Clerk of Court of the Regional Trial Court of and prayed for in the face of the complaint and paid upon the filing of the
142
Tanauan City did not err in assessing the docket fees based on his prayer. complaint.
Although we discussed that there isno rescission of contract to speak of in
contracts of conditional sale, we hold that an action to cancel a contract to
sell, similar to an action for rescission of contract of sale, is an action
incapable of pecuniary estimation. Like any action incapable of pecuniary
estimation, an action to cancel a contract to sell "demands an inquiry into
143
other factors" aside from the amount of money to be awarded to the
claimant. Specifically in this case, the trial court principally determined
whether Olivarez Realty Corporation failed to pay installments of the
property’s purchase price as the parties agreed upon in the deed of
conditional sale. The principal natureof Castillo’s action, therefore, is
incapable of pecuniary estimation.

All told, there is no issue that the parties in this case entered into a contract
to sell a parcel of land and that Olivarez Realty Corporation failed to fully pay
the installments agreed upon.Consequently, Castillo is entitled to cancel the
contract to sell.

WHEREFORE, the petition for review on certiorari is DENIED. The Court of

Appeals’ decision dated July 20, 2010 and in CA-G.R. CV No. 91244 is
AFFIRMEDwith MODIFICATION.

The deed of conditional sale dated April 5, 2000 is declared CANCELLED.

Petitioner Olivarez Realty Corporation shall RETURN to respondent
Benjamin Castillo the possession of the property covered by Transfer
Certificate of Title No. T-19972 together with all the improvements that
petitioner corporation introduced on the property. The amount of
₱2,500,000.00 is FORFEITED in favor of respondent Benjamin Castillo as
reasonable compensation for the use of petitioner Olivarez Realty
Corporation of the property.

Petitioner Olivarez Realty Corporation shall PAY respondent Benjamin

Castillo ₱500,000.00 as moral damages, ₱50,000.00 as exemplary
damages, and ₱50,000.00 as attorney's fees with interest at 6% per annum
from the time this decision becomes final and executory until petitioner

144
corporation fully pays the amount of damages.

SO ORDERED.

MARVIC MARIO VICTOR F. LEONEN

Associate Justice
G.R. No. 107207 November 23, 1995 This Contract, made and executed in the Municipality of
Makati, Philippines this 9th day of June, 1988 by and
VIRGILIO R. ROMERO, petitioner, between:
vs.
HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ENRIQUETA CHUA VDA. DE ONGSIONG,
ONGSIONG, respondents. of legal age, widow, Filipino and residing at
105 Simoun St., Quezon City, Metro Manila,
hereinafter referred to as the VENDOR;

VITUG, J.: -and-

The parties pose this question: May the vendor demand the rescission of a VIRGILIO R. ROMERO, married to Severina
contract for the sale of a parcel of land for a cause traceable to his own L. Lat, of Legal age, Filipino, and residing at
failure to have the squatters on the subject property evicted within the 110 San Miguel St., Plainview Subd.,
contractually-stipulated period? Mandaluyong Metro Manila, hereinafter
referred to as the VENDEE:
Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business
of production, manufacture and exportation of perlite filter aids, permalite W I T N E S S E T H : That
insulation and processed perlite ore. In 1988, petitioner and his foreign
partners decided to put up a central warehouse in Metro Manila on a land WHEREAS, the VENDOR is the owner of One (1) parcel of
area of approximately 2,000 square meters. The project was made known to land with a total area of ONE THOUSAND NINE HUNDRED
several freelance real estate brokers. FIFTY TWO (1,952) SQUARE METERS, more or less,
located in Barrio San Dionisio, Municipality of Parañaque,
A day or so after the announcement, Alfonso Flores and his wife, Province of Rizal, covered by TCT No. 361402 issued by the
accompanied by a broker, offered a parcel of land measuring 1,952 square Registry of Deeds of Pasig and more particularly described
meters. Located in Barangay San Dionisio, Parañaque, Metro Manila, the lot as follows:
was covered by TCT No. 361402 in the name of private respondent
Enriqueta Chua vda. de Ongsiong. Petitioner visited the property and, except xxx xxx xxx
for the presence of squatters in the area, he found the place suitable for a
central warehouse. WHEREAS, the VENDEE, for (sic) has offered to buy a
parcel of land and the VENDOR has accepted the offer,
Later, the Flores spouses called on petitioner with a proposal that should he subject to the terms and conditions hereinafter stipulated:
advance the amount of P50,000.00 which could be used in taking up an
ejectment case against the squatters, private respondent would agree to sell NOW, THEREFORE, for and in consideration of the sum of
the property for only P800.00 per square meter. Petitioner expressed his ONE MILLION FIVE HUNDRED SIXTY ONE THOUSAND
concurrence. On 09 June 1988, a contract, denominated "Deed of SIX HUNDRED PESOS (P1,561,600.00) ONLY, Philippine
Conditional Sale," was executed between petitioner and private respondent. Currency, payable by VENDEE to in to (sic) manner set
The simply-drawn contract read: forth, the VENDOR agrees to sell to the VENDEE, their
heirs, successors, administrators, executors, assign, all her
DEED OF CONDITIONAL SALE rights, titles and interest in and to the property mentioned in
the FIRST WHEREAS CLAUSE, subject to the following
KNOW ALL MEN BY THESE PRESENTS: terms and conditions:

1. That the sum of FIFTY THOUSAND

PESOS (P50,000.00) ONLY Philippine
 Currency, is to be paid upon signing and (Sgd.) (Sgd.)
execution of this instrument.
VIRGILIO R. ROMERO ENRIQUETA CHUA
2. The balance of the purchase price in the VDA.
amount of ONE MILLION FIVE HUNDRED
ELEVEN THOUSAND SIX HUNDRED DE ONGSIONG
PESOS (P1,511,600.00) ONLY shall be paid
45 days after the removal of all squatters Vendee Vendor
from the above described property.
SIGNED IN THE PRESENCE OF:
3. Upon full payment of the overall purchase
price as aforesaid, VENDOR without
necessity of demand shall immediately sign, (Sgd.) (Sgd.)
execute, acknowledged (sic) and deliver the
1
corresponding deed of absolute sale in favor Rowena C. Ongsiong Jack M. Cruz
of the VENDEE free from all liens and
encumbrances and all Real Estate taxes are Alfonso Flores, in behalf of private respondent, forthwith received
2 3
all paid and updated. and acknowledged a check for P50,000.00 from petitioner.

It is hereby agreed, covenanted and stipulated by and Pursuant to the agreement, private respondent filed a complaint for
between the parties hereto that if after 60 days from the date ejectment (Civil Case No. 7579) against Melchor Musa and 29 other squatter
of the signing of this contract the VENDOR shall not be able families with the Metropolitan Trial Court of Parañaque. A few months later,
to remove the squatters from the property being purchased, or on 21 February 1989, judgment was rendered ordering the defendants to
the downpayment made by the buyer shall be vacate the premises. The decision was handed down beyond the 60-day
returned/reimbursed by the VENDOR to the VENDEE. period (expiring 09 August 1988) stipulated in the contract. The writ of
execution of the judgment was issued, still later, on 30 March 1989.
That in the event that the VENDEE shall not be able to pay
the VENDOR the balance of the purchase price of ONE In a letter, dated 07 April 1989, private respondent sought to return the
MILLION FIVE HUNDRED ELEVEN THOUSAND SIX P50,000.00 she received from petitioner since, she said, she could not "get
HUNDRED PESOS (P1,511,600.00) ONLY after 45 days rid of the squatters" on the lot. Atty. Sergio A.F. Apostol, counsel for
from written notification to the VENDEE of the removal of the petitioner, in his reply of 17 April 1989, refused the tender and stated:.
squatters from the property being purchased, the FIFTY
THOUSAND PESOS (P50,000.00) previously paid as Our client believes that with the exercise of reasonable
downpayment shall be forfeited in favor of the VENDOR. diligence considering the favorable decision rendered by the
Court and the writ of execution issued pursuant thereto, it is
Expenses for the registration such as registration fees, now possible to eject the squatters from the premises of the
documentary stamp, transfer fee, assurances and such other subject property, for which reason, he proposes that he shall
fees and expenses as may be necessary to transfer the title take it upon himself to eject the squatters, provided, that
to the name of the VENDEE shall be for the account of the expenses which shall be incurred by reason thereof shall be
4
VENDEE while capital gains tax shall be paid by the chargeable to the purchase price of the land.
VENDOR.
Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"),
IN WITNESS WHEREOF, the parties hereunto signed those through its Regional Director for Luzon, Farley O. Viloria, asked the
(sic) presents in the City of Makati MM, Philippines on this Metropolitan Trial Court of Parañaque for a grace period of 45 days from 21
9th day of June, 1988. April 1989 within which to relocate and transfer the squatter families. Acting
favorably on the request, the court suspended the enforcement of the writ of Furthermore, your client has not complied with her obligation
execution accordingly. under their contract in good faith. It is undeniable that Ms.
Ongsiong deliberately refused to exert efforts to eject the
On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of squatters from the premises of the subject property and her
the 45-day grace period and his client's willingness to "underwrite the decision to retain the property was brought about by the
expenses for the execution of the judgment and ejectment of the sudden increase in the value of realties in the surrounding
5 areas.
occupants."

In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private Please consider this letter as a tender of payment to your
7
respondent, advised Atty. Apostol that the Deed of Conditional Sale had client and a demand to execute the absolute Deed of Sale.
been rendered null and void by virtue of his client's failure to evict the
squatters from the premises within the agreed 60-day period. He added that A few days later (or on 27 June 1989), private respondent, prompted by
6
private respondent had "decided to retain the property." petitioner's continued refusal to accept the return of the P50,000.00 advance
payment, filed with the Regional Trial Court of Makati, Branch 133, Civil Case
On 23 June 1989, Atty. Apostol wrote back to explain: No. 89-4394 for rescission of the deed of "conditional" sale, plus damages,
and for the consignation of P50,000.00 cash.
The contract of sale between the parties was perfected from
the very moment that there was a meeting of the minds of Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued
the parties upon the subject lot and the price in the amount an alias writ of execution in Civil Case No. 7579 on motion of private
of P1,561,600.00. Moreover, the contract had already been respondent but the squatters apparently still stayed on.
partially fulfilled and executed upon receipt of the
downpayment of your client. Ms. Ongsiong is precluded from Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of
8
rejecting its binding effects relying upon her inability to eject Makati rendered decision holding that private respondent had no right to
the squatters from the premises of subject property during rescind the contract since it was she who "violated her obligation to eject the
the agreed period. Suffice it to state that, the provision of the squatters from the subject property" and that petitioner, being the injured
Deed of Conditional Sale do not grant her the option or party, was the party who could, under Article 1191 of the Civil Code, rescind
prerogative to rescind the contract and to retain the property the agreement. The court ruled that the provisions in the contract relating to
should she fail to comply with the obligation she has (a) the return/reimbursement of the P50,000.00 if the vendor were to fail in
assumed under the contract. In fact, a perusal of the terms her obligation to free the property from squatters within the stipulated period
and conditions of the contract clearly shows that the right to or (b), upon the other hand, the sum's forfeiture by the vendor if the vendee
rescind the contract and to demand the were to fail in paying the agreed purchase price, amounted to "penalty
return/reimbursement of the downpayment is granted to our clauses". The court added:
client for his protection.
This Court is not convinced of the ground relied upon by the
Instead, however, of availing himself of the power to rescind plaintiff in seeking the rescission, namely: (1) he (sic) is
the contract and demand the return, reimbursement of the afraid of the squatters; and (2) she has spent so much to
downpayment, our client had opted to take it upon himself to eject them from the premises (p. 6, tsn, ses. Jan. 3, 1990).
eject the squatters from the premises. Precisely, we refer Militating against her profession of good faith is plaintiffs
you to our letters addressed to your client dated April 17, conduct which is not in accord with the rules of fair play and
1989 and June 8, 1989. justice. Notably, she caused the issuance of an alias writ of
execution on August 25, 1989 (Exh. 6) in the ejectment suit
Moreover, it is basic under the law on contracts that the which was almost two months after she filed the complaint
power to rescind is given to the injured party. Undoubtedly, before this Court on June 27, 1989. If she were really afraid
under the circumstances, our client is the injured party. of the squatters, then she should not have pursued the
issuance of an alias writ of execution. Besides, she did not
 even report to the police the alleged phone threats from the In determining the real character of the contract, the title given to it by the
squatters. To the mind of the Court, the so-called squatter parties is not as much significant as its substance. For example, a deed of
9
factor is simply factuitous (sic). sale, although denominated as a deed of conditional sale, may be treated as
absolute in nature, if title to the property sold is not reserved in the vendor or
The lower court, accordingly, dismissed the complaint and ordered, if the vendor is not granted the right to unilaterally rescind the contract
instead, private respondent to eject or cause the ejectment of the predicated
squatters from the property and to execute the absolute deed of on the fulfillment or non-fulfillment, as the case may be, of the prescribed
14
conveyance upon payment of the full purchase price by petitioner. condition.

Private respondent appealed to the Court of Appeals. On 29 May 1992, the The term "condition" in the context of a perfected contract of sale pertains, in
10 reality, to the compliance by one party of an undertaking the fulfillment of
appellate court rendered its decision. It opined that the contract entered into
by the parties was subject to a resolutory condition, i.e., the ejectment of the which would beckon, in turn, the demandability of the reciprocal prestation of
squatters from the land, the non-occurrence of which resulted in the failure of the other party. The reciprocal obligations referred to would normally be, in
the object of the contract; that private respondent substantially complied with the case of vendee, the payment of the agreed purchase price and, in the
her obligation to evict the squatters; that it was petitioner who was not ready case of the vendor, the fulfillment of certain express warranties (which, in the
to pay the purchase price and fulfill his part of the contract, and that the case at bench is the timely eviction of the squatters on the property).
provision requiring a mandatory return/reimbursement of the P50,000.00 in
case private respondent would fail to eject the squatters within the 60-day It would be futile to challenge the agreement here in question as not being a
period was not a penal clause. Thus, it concluded. duly perfected contract. A sale is at once perfected when a person (the
seller) obligates himself, for a price certain, to deliver and to transfer
WHEREFORE, the decision appealed from is REVERSED ownership of a specified thing or right to another (the buyer) over which the
15
and SET ASIDE, and a new one entered declaring the latter agrees.
contract of conditional sale dated June 9, 1988 cancelled
and ordering the defendant-appellee to accept the return of The object of the sale, in the case before us, was specifically identified to be
the downpayment in the amount of P50,000.00 which was a 1,952-square meter lot in San Dionisio, Parañaque, Rizal, covered by
deposited in the court below. No pronouncement as to Transfer Certificate of Title No. 361402 of the Registry of Deeds for Pasig
11
costs. and therein technically described. The purchase price was fixed at
P1,561,600.00, of which P50,000.00 was to be paid upon the execution of
Failing to obtain a reconsideration, petitioner filed this petition for review the document of sale and the balance of P1,511,600.00 payable "45 days
on certiorari raising issues that, in fine, center on the nature of the contract after the removal of all squatters from the above described property."
adverted to and the P50,000.00 remittance made by petitioner.
From the moment the contract is perfected, the parties are bound not only to
A perfected contract of sale may either be absolute or the fulfillment of what has been expressly stipulated but also to all the
12 consequences which, according to their nature, may be in keeping with good
conditional depending on whether the agreement is devoid of, or subject to,
any condition imposed on the passing of title of the thing to be conveyed or faith, usage and law. Under the agreement, private respondent is obligated to
on the obligation of a party thereto. When ownership is retained until the evict the squatters on the property. The ejectment of the squatters is
fulfillment of a positive condition the breach of the condition will simply a condition the operative act of which sets into motion the period of
prevent the duty to convey title from acquiring an obligatory force. If the compliance by petitioner of his own obligation, i.e., to pay the balance of the
condition is imposed on an obligationof a party which is not complied with, purchase price. Private respondent's failure "to remove the squatters from
the other party may either refuse to proceed or waive said condition (Art. the property" within the stipulated period gives petitioner the right to either
1545, Civil Code). Where, of course, the condition is imposed upon refuse to proceed with the agreement or waive that condition in consonance
16
the perfection of the contract itself, the failure of such condition would with Article 1545 of the Civil Code. This option clearly belongs to petitioner
13 and not to private respondent.
prevent the juridical relation itself from coming into existence.
We share the opinion of the appellate court that the undertaking required of Feliciano, Romero, Melo and Panganiban, JJ., concur.
private respondent does not constitute a "potestative condition dependent
solely on his will" that might, otherwise, be void in accordance with Article
17
1182 of the Civil Code but a "mixed" condition "dependent not on the will of
the vendor alone but also of third persons like the squatters and government
18
agencies and personnel concerned." We must hasten to add, however, that
where the so-called "potestative condition" is imposed not on the birth of the
obligation but on its fulfillment, only the obligation is avoided, leaving
19
unaffected the obligation itself.

In contracts of sale particularly, Article 1545 of the Civil Code,

aforementioned, allows the obligee to choose between proceeding with the
agreement or waiving the performance of the condition. It is this provision
which is the pertinent rule in the case at bench. Here, evidently, petitioner
has waived the performance of the condition imposed on private respondent
20
to free the property from squatters.

In any case, private respondent's action for rescission is not warranted. She
21
is not the injured party. The right of resolution of a party to an obligation
under Article 1191 of the Civil Code is predicated on a breach of faith by the
22
other party that violates the reciprocity between them. It is private
respondent who has failed in her obligation under the contract. Petitioner did
not breach the agreement. He has agreed, in fact, to shoulder the expenses
of the execution of the judgment in the ejectment case and to make
arrangements with the sheriff to effect such execution. In his letter of 23 June
1989, counsel for petitioner has tendered payment and demanded forthwith
the execution of the deed of absolute sale. Parenthetically, this offer to pay,
having been made prior to the demand for rescission, assuming for the sake
23
of argument that such a demand is proper under Article 1592 of the Civil
Code, would likewise suffice to defeat private respondent's prerogative to
rescind thereunder.

There is no need to still belabor the question of whether the P50,000.00

advance payment is reimbursable to petitioner or forfeitable by private
respondent, since, on the basis of our foregoing conclusions, the matter has
ceased to be an issue. Suffice it to say that petitioner having opted to
proceed with the sale, neither may petitioner demand its reimbursement from
private respondent nor may private respondent subject it to forfeiture.

WHEREFORE, the questioned decision of the Court of Appeals is hereby

REVERSED AND SET ASIDE, and another is entered ordering petitioner to
pay private respondent the balance of the purchase price and the latter to
execute the deed of absolute sale in favor of petitioner. No costs.

SO ORDERED.
[G.R. NO. 179653 : July 31, 2009] the Mayor of Zamboanga City and its City Housing Board which will act as
"Originator" in the acquisition of said property which will enable UMCUPAI to
UNITED MUSLIM AND CHRISTIAN URBAN POOR ASSOCIATION, INC. avail of its Community Mortgage Program;
represented by its President, MANUEL V. BUEN, Petitioner, v. BRYC-V
DEVELOPMENT CORPORATION represented by its President, WHEREAS, it appears that UMCUPAI will ultimately apply with the Home
BENJAMIN QUIDILLA; and SEA FOODS CORPORATION, represented Mortgage and Finance Corporation for a loan to pay the acquisition price of
by its Executive Vice President, VICENTE T. HERNANDEZ, Respondents. said land;

DECISION WHEREAS, as one of the steps required by the government authorities to

initiate proceedings is to receive a formal manifestation of Intent to Sell from
NACHURA, J.: [SFC];

1 NOW, THEREFORE, for and in consideration of the foregoing premises, the

This Petition for Review on Certiorari seeks to set aside the Decision of the
Court of Appeals (CA) in CA G.R. CV No. 62557 which affirmed in toto the parties hereto agree as follows:
2
Decision of the Regional Trial Court (RTC), Branch 16, Zamboanga City in
Civil Case No. 467(4544). 1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of
61,736 square meters situated in Lower Calarian, Zamboanga City and
The facts are simple. covered by TCT No. 576 of the Registry of Deeds of Zamboanga City to
UMCUPAI at the price of P105.00 per square meter, free from all liens,
charges and encumbrances;
Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No.
300 located in Lower Calainan, Zamboanga City and covered by Transfer
Certificate of Title (TCT) No. 3182 (T-576). 2. That UMCUPAI hereby expressly declares its intention to buy the
aforesaid property and shall endeavor to raise the necessary funds to
acquire same at the abovementioned price of P105.00 per square meter;
Sometime in 1991, petitioner United Muslim and Christian Urban Poor
Association, Inc. (UMCUPAI), an organization of squatters occupying Lot No.
300, through its President, Carmen T. Diola, initiated negotiations with SFC 3. That the Absolute Deed of Sale shall be executed, signed and delivered
for the purchase thereof. UMCUPAI expressed its intention to buy the subject together with the title and all other pertinent documents upon full payment of
property using the proceeds of its pending loan application with National the purchase price;
Home Mortgage Finance Corporation (NHMF). Thereafter, the parties
executed a Letter of Intent to Sell by [SFC] and Letter of Intent to Purchase 4. That [SFC] shall pay the capital gains tax and documentary stamps,
by UMCUPAI, providing, in pertinent part: Registration, transfer tax and other expenses shall be paid by the
3
UMCUPAI.
WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as
Lot No. 300 situated in Lower Calarian, Zamboanga City, consisting of However, the intended sale was derailed due to UMCUPAI's inability to
61,736 square meters, and more particularly described in Transfer Certificate secure the loan from NHMF as not all its members occupying Lot No. 300
of Title No. 576 of the Registry of Deeds of Zamboanga City; were willing to join the undertaking. Intent on buying the subject property,
UMCUPAI, in a series of conferences with SFC, proposed the subdivision of
WHEREAS, UMCUPAI, an association duly registered with the SEC Lot No. 300 to allow the squatter-occupants to purchase a smaller portion
(Registration No. 403410) and duly accredited with the Presidential thereof.
Commission for the Urban Poor, has approached [SFC] and negotiated for
the ACQUISITION of the above-described property of [SFC]; Consequently, sometime in December 1994, Lot No. 300 was subdivided into
three (3) parts covered by separate titles:
WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI,
the latter has taken steps with the proper government authorities particularly
1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T- loan from NHMF for its intended purchase of Lot No. 300. According to the
117,448; RTC, the Letter of Intent was simply SFC's declaration of intention to sell,
and not a promise to sell, the subject lot. On the whole, the RTC concluded
2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T- that the Letter of Intent was neither a promise, nor an option contract, nor an
117,449; andcralawlibrary offer contemplated under Article 1319 of the Civil Code, or a bilateral contract
to sell and buy.
3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-
117,450. As previously adverted to, the CA, on appeal, affirmed in toto the RTC's
ruling.
On January 11, 1995, UMCUPAI purchased Lot No. 300-A for
P4,350,801.58. In turn, Lot No. 300-B was constituted as road right of way Hence, this recourse by UMCUPAI positing a sole issue for our resolution:
and donated by SFC to the local government.
IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY
UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, A BILATERAL RECIPROCAL CONTRACT WITHIN THE MEANING OR
1995, UMCUPAI negotiated anew with SFC and was given by the latter CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE
4
another three months to purchase Lot No. 300-C. However, despite the OF THE PHILIPPINES?
extension, the three-month period lapsed with the sale not consummated
because UMCUPAI still failed to obtain a loan from NHMF. Thus, on July 20, The petition deserves scant consideration. We completely agree with the
1995, SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V lower courts' rulings.
Development Corporation (BRYC).
Well-entrenched in jurisprudence is the rule that factual findings of the trial
A year later, UMCUPAI filed with the RTC a complaint against respondents court, especially when affirmed by the appellate court, are accorded the
SFC and BRYC seeking to annul the sale of Lot No. 300-C, and the highest degree of respect and are considered conclusive between the
5
cancellation of TCT No. T-121,523. UMCUPAI alleged that the sale between parties. A review of such findings by this Court is not warranted except upon
the respondents violated its valid and subsisting agreement with SFC a showing of highly meritorious circumstances, such as: (1) when the
embodied in the Letter of Intent. According to UMCUPAI, the Letter of Intent findings of a trial court are grounded entirely on speculation, surmises or
granted it a prior, better, and preferred right over BRYC in the purchase of conjectures; (2) when a lower court's inference from its factual findings is
Lot No. 300-C. manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion in the appreciation of facts; (4) when the findings of the appellate
In refutation, BRYC said that UMCUPAI's complaint did not state a cause of court go beyond the issues of the case, or fail to notice certain relevant facts
action since UMCUPAI had unequivocally recognized its ownership of Lot which, if properly considered, would justify a different conclusion; (5) when
No. 300-C when UMCUPAI likewise sent BRYC a Letter of Intent dated there is a misappreciation of facts; (6) when the findings of fact are
August 18, 1995 imploring BRYC to re-sell the subject lot. conclusions without mention of the specific evidence on which they are
based, or are premised on the absence of evidence, or are contradicted by
6
evidence on record. None of the foregoing exceptions necessitating a
In a separate Answer, SFC countered that the Letter of Intent dated October
reversal of the assailed decision obtain in this instance.
4, 1991 is not, and cannot be considered, a valid and subsisting contract of
sale. On the contrary, SFC averred that the document was drawn and
executed merely to accommodate UMCUPAI and enable it to comply with the UMCUPAI is adamant, however, that the CA erred when it applied the
loan documentation requirements of NHMF. In all, SFC maintained that the second paragraph of Article 1479 of the Civil Code instead of the first
Letter of Intent dated October 4, 1991 was subject to a condition i.e., paragraph thereof. UMCUPAI urges us that the first paragraph of Article
payment of the acquisition price, which UMCUPAI failed to do when it did not 1479 contemplates a bilateral reciprocal contract which is binding on the
obtain the loan from NHMF. parties. Yet, UMCUPAI is careful not to designate the Letter of Intent as a
Contract to Sell. UMCUPAI simply insists that the Letter of Intent is not a
After trial, the RTC dismissed UMCUPAI's complaint. The lower court found unilateral promise to sell or buy which has to be supported by a consideration
distinct from the price for it to be binding on the promissor. In short,
that the Letter of Intent was executed to facilitate the approval of UMCUPAI's
UMCUPAI claims that the Letter of Intent did not merely grant the parties the delivered to him. The prospective seller still has to convey title to the
option to respectively sell or buy the subject property. Although not stated prospective buyer by entering into a contract of absolute sale.
plainly, UMCUPAI claims that the Letter of Intent is equivalent to a
conditional contract of sale subject only to the suspensive condition of It is essential to distinguish between a contract to sell and a conditional
payment of the purchase price. contract of sale specially in cases where the subject property is sold by the
owner not to the party the seller contracted with, but to a third person, as in
UMCUPAI appears to labor under a cloud of confusion. The first paragraph the case at bench. In a contract to sell, there being no previous sale of the
of Article 1479 contemplates the bilateral relationship of a contract to sell as property, a third person buying such property despite the fulfillment of the
distinguished from a contract of sale which may be absolute or conditional suspensive condition such as the full payment of the purchase price, for
7
under Article 1458 of the same code. It reads: instance, cannot be deemed a buyer in bad faith and the prospective buyer
cannot seek the relief of reconveyance of the property. There is no double
Art. 1479. A promise to buy and sell a determinate thing for a price certain is sale in such case. Title to the property will transfer to the buyer after
reciprocally demandable. registration because there is no defect in the owner-seller's title per se, but
the latter, of course, may be sued for damages by the intending buyer.
An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported by a In a conditional contract of sale, however, upon the fulfillment of the
consideration distinct from the price. suspensive condition, the sale becomes absolute and this will definitely affect
the seller's title thereto. In fact, if there had been previous delivery of the
8
The case of Coronel v. Court of Appeals is illuminating and explains the subject property, the seller's ownership or title to the property is automatically
transferred to the buyer such that, the seller will no longer have any title to
distinction between a conditional contract of sale under Article 1458 of the
transfer to any third person. Applying Article 1544 of the Civil Code, such
Civil Code and a bilateral contract to sell under Article 1479 of the same
second buyer of the property who may have had actual or constructive
code:
knowledge of such defect in the seller's title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good faith. Such
A contract to sell may thus be defined as a bilateral contract whereby the second buyer cannot defeat the first buyer's title. In case a title is issued to
prospective seller, while expressly reserving the ownership of the subject the second buyer, the first buyer may seek reconveyance of the property
property despite delivery thereof to the prospective buyer, binds himself to subject of the sale.
sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.
In the instant case, however, the parties executed a Letter of Intent, which is
neither a contract to sell nor a conditional contract of sale. As found by the
A contract to sell as defined hereinabove, may not even be considered as a RTC, and upheld by the CA, the Letter of Intent was executed to
conditional contract of sale where the seller may likewise reserve title to the accommodate UMCUPAI and facilitate its loan application with NHMF. The
property subject of the sale until the fulfillment of a suspensive condition, 4th and 5th paragraphs of the recitals (whereas clauses) specifically provide:
because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event
WHEREAS, it appears that UMCUPAI will ultimately apply with the Home
which may or may not occur. If the suspensive condition is not fulfilled, the
Mortgage and Finance Corporation for a loan to pay the acquisition price of
perfection of the contract of sale is completely abated. However, if the
said land;
suspensive condition is fulfilled, the contract of sale is thereby perfected,
such that if there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically transfers to the WHEREAS, as one of the steps required by the government authorities to
buyer by operation of law without any further act having to be performed by initiate proceedings is to receive a formal manifestation of Intent to Sell from
the seller. [SFC].

In a contract to sell, upon the fulfillment of the suspensive condition which is Nowhere in the Letter of Intent does it state that SFC relinquishes its title
the full payment of the purchase price, ownership will not automatically over the subject property, subject only to the condition of complete payment
transfer to the buyer although the property may have been previously of the purchase price; nor, at the least, that SFC, although expressly
retaining ownership thereof, binds itself to sell the property exclusively to be plain and unconditional. Moreover, the Letter of Intent/Agreement does
UMCUPAI. The Letter of Intent to Buy and Sell is just that - a manifestation of not contain a promise or commitment to enter into a contract of sale as it
SFC's intention to sell the property and UMCUPAI's intention to acquire the merely declared the intention of the parties to enter into a contract of sale
same. This is quite obvious from the reference to the execution of an upon fulfillment of a condition that UMCUPAI could secure a loan to pay for
9
Absolute Deed of Sale in paragraph three of the Letter of Intent. the price of a land.

As the CA did, we quote with favor the RTC's disquisition: The Letter of Intent/Agreement is not an "option contract" because aside
from the fact that it is merely a declaration of intention to sell and to buy
The Decision in this case hinges on the legal interpretation of the Agreement subject to the condition that UMCUPAI shall raise the necessary funds to pay
entered into by SFC and UMCUPAI denominated as "Letter of Intent to Sell the price of the land, and does not contain a binding promise to sell and buy,
by Landowner and Letter of Intent to Purchase by United Muslim and it is not supported by a distinct consideration distinct from the price of the
Christian Urban Poor Association, Inc." land intended to be sold and to be bought x x x No option was granted to
UMCUPAI under the Letter of Intent/Agreement to buy subject land to the
Black's Law Dictionary says that a Letter of Intent is customarily employed to exclusion of all others within a fixed period nor was SFC bound under said
Agreement to Sell exclusively to UMCUPAI only the said land within the fixed
reduce to writing a preliminary understanding of parties who intend to enter
period.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
into contract. It is a phrase ordinarily used to denote a brief memorandum of
the preliminary understanding of parties who intend to enter into a contract. It
is a written statement expressing the intention of the parties to enter into a Neither can the Letter of Intent/Agreement be considered a bilateral
formal agreement especially a business arrangement or transaction. reciprocal contract to sell and to buy contemplated under Article 1479 of the
Civil Code which is reciprocally demandable. The Letter of Intent/Agreement
does not contain a PROMISE to sell and to buy subject property. There was
In their Agreement, SFC expressly declared its "intention" to sell and
no promise or commitment on the part of SFC to sell subject land to
UMCUPAI expressly declared its "intention" to buy subject property. An
UMCUPAI, but merely a declaration of its intention to buy the land, subject to
intention is a mere idea, goal, or plan. It simply signifies a course of action
that one proposes to follow. It simply indicates what one proposes to do or the condition that UMCUPAI could raise the necessary funds to acquire the
same at the price of P105.00 per square meter x x x
accomplish. A mere "intention" cannot give rise to an obligation to give, to do
or not to do (Article 1156, Civil Code). One cannot be bound by what he
proposes or plans to do or accomplish. A Letter of Intent is not a contract While UMCUPAI succeeded in raising funds to acquire a portion of Lot No.
between the parties thereto because it does not bind one party, with respect 300-A, it failed to raise funds to pay for Lot No. 300-C. From October 4, 1991
to the other, to give something, or to render some service (Art. 1305, Civil when the Letter of Intent was signed to June, 1995, UMCUPAI had about
Code). three (3) years and eight (8) months within which to pursue its intention to
buy subject land from SFC. Within that period, UMCUPAI had ample time
within which to acquire Lot No. 300-C, as in fact it had acquired Lot No. 300-
xxx xxx xxx
A which is much bigger than Lot No. 300-C and occupied by more members
of UMCUPAI. The failure of UMCUPAI to acquire Lot No. 300-C before it was
The Letter of Intent/Agreement between SFC and UMCUPAI is merely a sold to BRYC-V cannot be blamed on SFC because all that UMCUPAI had to
written preliminary understanding of the parties wherein they declared their do was to raise funds to pay for Lot No. 300-C which it did with respect to Lot
intention to enter into a contract of sale. It is subject to the condition that No. 300-A. SFC had nothing to do with SFC's unilateral action through Mrs.
UMCUPAI will "apply with the Home Mortgage and Finance Corporation for a Antonina Graciano to "postpone" the processing of the acquisition of Lot No.
loan to pay the acquisition price of said land." One of the requirements for 300-C, which it referred to as Phase II, until after the payment to SFC of the
such loan is "a formal manifestation of Intent to Sell" from SFC. Thus, the acquisition price for Lot No. 300-A or Phase I x x x
Letter of Intent to Sell fell short of an "offer" contemplated in Article 1319 of
the Civil Code because it is not a certain and definite proposal to make a
WHEREFORE, premises considered, the petition is hereby DENIED. The
contract but merely a declaration of SFC's intention to enter into a contract.
Decision of the Court of Appeals in CA G.R. CV No. 62557 and the Regional
UMCUPAI's declaration of intention to buy is also not certain and definite as
Trial Court in Civil Case No. 467(4544) are AFFIRMED. Costs against the
it is subject to the condition that UMCUPAI shall endeavor to raise funds to
acquire subject land. The acceptance of the offer must be absolute; it must petitioner.
SO ORDERED.
G.R. No. 200602 December 11, 2013 subject products amounting to ₱646,464.00 (purchase price). Thereafter, or
on March 4, 2002, MTCL delivered the said products to ACE Foods as
11
ACE FOODS, INC., Petitioner, reflected in Invoice No. 7733 (Invoice Receipt). The fine print of the invoice
vs. states, inter alia, that "[t]itle to sold property is reserved in MICROPACIFIC
1 TECHNOLOGIES CO., LTD. until full compliance of the terms and conditions
MICRO PACIFIC TECHNOLOGIES CO., LTD. , Respondent. 12
of above and payment of the price" (title reservation stipulation). After
delivery, the subject products were then installed and configured in ACE
DECISION
Foods’s premises. MTCL’s demands against ACE Foods to pay the purchase
13
price, however, remained unheeded. Instead of paying the purchase price,
PERLAS-BERNABE, J.: 14
ACE Foods sent MTCL a Letter dated September 19, 2002, stating that it
2 3
"ha[s] been returning the [subject products] to [MTCL] thru [its] sales
Assailed in this petition for review on certiorari are the Decision dated representative Mr. Mark Anteola who has agreed to pull out the said
4
October 21, 2011 and Resolution dated February 8, 2012 of the Court of [products] but had failed to do so up to now."
Appeals (CA) in CA-G.R. CV No. 89426 which reversed and set aside the
5
Decision dated February 28, 2007 of the Regional Trial Court of Makati, Eventually, or on October 16, 2002, ACE Foods lodged a
Branch 148 (RTC) in Civil Case No. 02-1248, holding petitioner ACE Foods, 15
Complaint against MTCL before the RTC, praying that the latter pull out
Inc. (ACE Foods) liable to respondent Micro Pacific Technologies Co., Ltd. from its premises the subject products since MTCL breached its "after
(MTCL) for the payment of Cisco Routers and Frame Relay Products delivery services" obligations to it, particularly, to: (a) install and configure the
(subject products) amounting to ₱646,464.00 pursuant to a perfected subject products; (b) submit a cost benefit study to justify the purchase of the
contract of sale. subject products; and (c) train ACE Foods’s technicians on how to use and
16
maintain the subject products. ACE Foods likewise claimed that the
17
The Facts subject products MTCL delivered are defective and not working.

18
ACE Foods is a domestic corporation engaged in the trading and distribution For its part, MTCL, in its Answer with Counterclaim, maintained that it had
6
of consumer goods in wholesale and retail bases, while MTCL is one duly complied with its obligations to ACE Foods and that the subject products
7
engaged in the supply of computer hardware and equipment. were in good working condition when they were delivered, installed and
configured in ACE Foods’s premises. Thereafter, MTCL even conducted a
8
On September 26, 2001, MTCL sent a letter-proposal for the delivery and training course for ACE Foods’s representatives/employees; MTCL,
sale of the subject products to be installed at various offices of ACE Foods. however, alleged that there was actually no agreement as to the purported
Aside from the itemization of the products offered for sale, the said proposal "after delivery services." Further, MTCL posited that ACE Foods refused and
further provides for the following terms, viz.:
9
failed to pay the purchase price for the subject products despite the latter’s
use of the same for a period of nine (9) months. As such, MTCL prayed that
TERMS : Thirty (30) days upon delivery ACE Foods be compelled to pay the purchase price, as well as damages
19
related to the transaction.
VALIDITY : Prices are based on current dollar rate and subject to changes
without prior notice. The RTC Ruling

20
DELIVERY : Immediate delivery for items on stock, otherwise thirty (30) to On February 28, 2007, the RTC rendered a Decision, directing MTCL to
forty-five days upon receipt of [Purchase Order] remove the subject products from ACE Foods’s premises and pay actual
damages and attorney fees in the amounts of ₱200,000.00 and ₱100,000.00,
21
respectively.
WARRANTY : One (1) year on parts and services. Accessories not included
in warranty.
At the outset, it observed that the agreement between ACE Foods and MTCL
is in the nature of a contract to sell. Its conclusion was based on the fine print
On October 29, 2001, ACE Foods accepted MTCL’s proposal and
10 of the Invoice Receipt which expressly indicated that "title to sold property is
accordingly issued Purchase Order No. 100023 (Purchase Order) for the
reserved in MICROPACIFIC TECHNOLOGIES CO., LTD. until full The Issue Before the Court
compliance of the terms and conditions of above and payment of the price,"
noting further that in a contract to sell, the prospective seller explicitly The essential issue in this case is whether ACE Foods should pay MTCL the
reserves the transfer of title to the prospective buyer, and said transfer is purchase price for the subject products.
22
conditioned upon the full payment of the purchase price. Thus,
notwithstanding the execution of the Purchase Order and the delivery and The Court’s Ruling
installation of the subject products at the offices of ACE Foods, by express
stipulation stated in the Invoice Receipt issued by MTCL and signed by ACE
Foods, i.e., the title reservation stipulation, it is still the former who holds title The petition lacks merit.
to the products until full payment of the purchase price therefor. In this
relation, it noted that the full payment of the price is a positive suspensive A contract is what the law defines it to be, taking into consideration its
33
condition, the non-payment of which prevents the obligation to sell on the essential elements, and not what the contracting parties call it. The real
23
part of the seller/vendor from materializing at all. Since title remained with nature of a contract may be determined from the express terms of the written
MTCL, the RTC therefore directed it to withdraw the subject products from agreement and from the contemporaneous and subsequent acts of the
ACE Foods’s premises. Also, in view of the foregoing, the RTC found it contracting parties. However, in the construction or interpretation of an
unnecessary to delve into the allegations of breach since the non-happening instrument, the intention of the parties is primordial and is to be
of the aforesaid suspensive condition ipso jure prevented the obligation to pursued. The denomination or title given by the parties in their contract is
24 34
sell from arising. not conclusive of the nature of its contents.

25
Dissatisfied, MTCL elevated the matter on appeal. The very essence of a contract of sale is the transfer of ownership in
35
exchange for a price paid or promised. This may be gleaned from Article
The CA Ruling 1458 of the Civil Code which defines a contract of sale as follows:

26
In a Decision dated October 21, 2011, the CA reversed and set aside the Art. 1458. By the contract of sale one of the contracting parties obligates
RTC’s ruling, ordering ACE Foods to pay MTCL the amount of ₱646,464.00, himself to transfer the ownership and to deliver a determinate thing, and the
plus legal interest at the rate of 6% per annum to be computed from April 4, other to pay therefor a price certain in money or its equivalent.
27
2002, and attorney’s fees amounting to ₱50,000.00.
A contract of sale may be absolute or conditional. (Emphasis supplied)
It found that the agreement between the parties is in the nature of a contract
of sale, observing that the said contract had been perfected from the time Corollary thereto, a contract of sale is classified as a consensual contract,
ACE Foods sent the Purchase Order to MTCL which, in turn, delivered the which means that the sale is perfected by mere consent. No particular form is
subject products covered by the Invoice Receipt and subsequently installed required for its validity. Upon perfection of the contract, the parties may
28
and configured them in ACE Foods’s premises. Thus, considering that reciprocally demand performance, i.e., the vendee may compel transfer of
MTCL had already complied with its obligation, ACE Foods’s corresponding ownership of the object of the sale, and the vendor may require the vendee
36
obligation arose and was then duty bound to pay the agreed purchase price to pay the thing sold.
29
within thirty (30) days from March 5, 2002. In this light, the CA concluded
that it was erroneous for ACE Foods not to pay the purchase price therefor, In contrast, a contract to sell is defined as a bilateral contract whereby the
despite its receipt of the subject products, because its refusal to pay prospective seller, while expressly reserving the ownership of the property
30
disregards the very essence of reciprocity in a contract of sale. The CA also despite delivery thereof to the prospective buyer, binds himself to sell the
dismissed ACE Foods’s claim regarding MTCL’s failure to perform its "after property exclusively to the prospective buyer upon fulfillment of the condition
delivery services" obligations since the letter-proposal, Purchase Order and agreed upon, i.e., the full payment of the purchase price. A contract to sell
31
Invoice Receipt do not reflect any agreement to that effect. may not even be considered as a conditional contract of sale where the
seller may likewise reserve title to the property subject of the sale until the
Aggrieved, ACE Foods moved for reconsideration which was, however, fulfillment of a suspensive condition, because in a conditional contract of
32
denied in a Resolution dated February 8, 2012, hence, this petition. sale, the first element of consent is present, although it is conditioned upon
37
the happening of a contingent event which may or may not occur.
In this case, the Court concurs with the CA that the parties have agreed to a absent any clear indication that the title reservation stipulation was actually
contract of sale and not to a contract to sell as adjudged by the RTC. Bearing agreed upon, the Court must deem the same to be a mere unilateral
in mind its consensual nature, a contract of sale had been perfected at the imposition on the part of MTCL which has no effect on the nature of the
precise moment ACE Foods, as evinced by its act of sending MTCL the parties’ original agreement as a contract of sale. Perforce, the obligations
Purchase Order, accepted the latter’s proposal to sell the subject products in arising thereto, among others, ACE Foods’s obligation to pay the purchase
40
consideration of the purchase price of ₱646,464.00. From that point in time, price as well as to accept the delivery of the goods, remain enforceable
the reciprocal obligations of the parties – i.e., on the one hand, of MTCL to and subsisting.1âwphi1
deliver the said products to ACE Foods, and, on the other hand, of ACE
Foods to pay the purchase price therefor within thirty (30) days from delivery As a final point, it may not be amiss to state that the return of the subject
– already arose and consequently may be demanded. Article 1475 of the 41
products pursuant to a rescissory action is neither warranted by ACE
Civil Code makes this clear: Foods’s claims of breach – either with respect to MTCL’s breach of its
purported "after delivery services" obligations or the defective condition of the
Art. 1475. The contract of sale is perfected at the moment there is a meeting products - since such claims were not adequately proven in this case. The
of minds upon the thing which is the object of the contract and upon the rule is clear: each party must prove his own affirmative allegation; one who
price. asserts the affirmative of the issue has the burden of presenting at the trial
such amount of evidence required by law to obtain a favorable judgment,
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From that moment, the parties may reciprocally demand performance, which in civil cases, is by preponderance of evidence. This, however, ACE
subject to the provisions of the law governing the form of contracts. Foods failed to observe as regards its allegations of breach. Hence, the
same cannot be sustained.
At this juncture, the Court must dispel the notion that the stipulation anent
MTCL’s reservation of ownership of the subject products as reflected in the WHEREFORE, the petition is DENIED. Accordingly, the Decision dated
Invoice Receipt, i.e., the title reservation stipulation, changed the complexion October 21, 2011 and Resolution dated February 8, 2012 of the Court of
of the transaction from a contract of sale into a contract to sell. Records are Appeals in CA-G.R. CV No. 89426 are hereby AFFIRMED.
bereft of any showing that the said stipulation novated the contract of sale
between the parties which, to repeat, already existed at the precise moment SO ORDERED.
ACE Foods accepted MTCL’s proposal. To be sure, novation, in its broad
concept, may either be extinctive or modificatory. It is extinctive when an old ESTELA M. PERLAS-BERNABE
obligation is terminated by the creation of a new obligation that takes the Associate Justice
place of the former; it is merely modificatory when the old obligation subsists
to the extent it remains compatible with the amendatory agreement. In either
case, however, novation is never presumed, and the animus novandi,
whether totally or partially, must appear by express agreement of the parties,
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or by their acts that are too clear and unequivocal to be mistaken.

In the present case, it has not been shown that the title reservation
stipulation appearing in the Invoice Receipt had been included or had
subsequently modified or superseded the original agreement of the parties.
The fact that the Invoice Receipt was signed by a representative of ACE
Foods does not, by and of itself, prove animus novandi since: (a) it was not
shown that the signatory was authorized by ACE Foods (the actual party to
the transaction) to novate the original agreement; (b) the signature only
proves that the Invoice Receipt was received by a representative of ACE
Foods to show the fact of delivery; and (c) as matter of judicial notice,
invoices are generally issued at the consummation stage of the contract and
not its perfection, and have been even treated as documents which are not
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actionable per se, although they may prove sufficient delivery. Thus,