SPS. FORTUNATO SANTOS and ROSALINDA R. SANTOS, petitioners, vs.

COURT OF
APPEALS, SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.
Remedial Law; Appeals; There is a question of law in a given case when the doubt or
difference arises as to what the law is on a certain set of facts, and there is a question
of fact when the doubt or difference arises as to the truth or falsehood of the alleged
facts.—There is a question of law in a given case when the doubt or difference arises
as to what the law is on a certain set of facts, and there is a question of fact when the
doubt or difference arises as to the truth or falsehood of the alleged facts. But we note
that the first assignment of error submitted by respondents for consideration by the
appellate court dealt with the trial court’s finding that herein petitioners got back the
property in question because respondents did not have the means to pay the
installments and/or amortization of the loan. The resolution of this question involved
an evaluation of proof, and not only a consideration of the applicable statutory and
case laws. Clearly, CA-G.R. CV No. 30955 did not involve pure questions of law, hence
the Court of Appeals had jurisdiction and there was no violation of our Circular No. 2-
90.
Civil Law; Contracts; Sale; A contract is what the law defines it to be, taking into
consideration its essential elements, and not what the contracting parties call it; The
transfer of ownership in exchange for a price paid or promised is the very essence of a
contract of sale.—It must be emphasized from the outset that a contract is what the
law defines it to be, taking into consideration its essential elements, and not what the
contracting parties call it. Article 1458 of the Civil Code defines a contract of sale. Note
that the said article expressly obliges the vendor to transfer ownership of the thing
sold as an essential element of a contract of sale. This is because the transfer of
ownership in exchange for a price paid or promised is the very essence of a contract of
sale.
Same; Same; Same; Contract of Sale Distinguished from a Contract to Sell.—As we
earlier pointed out, in a contract to sell, title remains with the vendor and does not
pass on to the vendee until the purchase price is paid in full. Thus, in a contract to
sell, 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, but a situation that
prevents the obligation of the vendor to convey title from acquiring an obligatory force.
This is entirely different from the situation in a contract of sale, where non-payment of
the price is a negative resolutory condition. The effects in law are not identical. In a
contract of sale, the vendor has lost ownership of the thing sold and cannot recover it,
unless the contract of sale is rescinded and set aside. In a contract to sell, however,
the vendor remains the owner for as long as the vendee has not complied fully with the
condition of paying the purchase price. If the vendor should eject the vendee for failure
to meet the condition precedent, he is enforcing the contract and not rescinding it.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
     P.C. Jose & Associates for petitioner.
     Felix D. Gragasin for private respondents.
QUISUMBING, J.:
For review on certiorari is the decision of the Court of Appeals, dated March 28, 1995,
in CA-G.R. CV No. 30955, which reversed and set aside the judgment of the Regional
Trial Court of Makati, Branch 133, in Civil Case No. 89-4759. Petitioners (the
Santoses) were the owners of a house and lot informally sold, with conditions, to
herein private respondents (the Casedas). In the trial court, the Casedas had
complained that the Santoses refused to deliver said house and lot despite repeated
demands. The trial court dismissed the complaint for specific performance and
damages, but in the Court of Appeals, the dismissal was reversed, as follows:
“WHEREFORE, in view of the foregoing, the decision appealed from is hereby
REVERSED and SET ASIDE and a new one entered:
“1. GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the
finality of judgment within which to pay the balance of the obligation in accordance
with their agreement;
“2. Ordering appellees to restore possession of the subject house and lot to the
appellants upon receipt of the full amount of the balance due on the purchase price;
and
“3. No pronouncement as to costs.
“SO ORDERED.”1
The undisputed facts of this case are as follows: The spouses Fortunato and Rosalinda
Santos owned the house and lot consisting of 350 square meters located at Lot 7,
Block 8, Better Living Subdivision, Parañaque, Metro Manila, as evidenced by TCT (S-
11029) 28005 of the Register of Deeds of Parañaque. The land together with the
house, was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of
P150,000.00 maturing on June 16, 1987.
Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of
hers in Pasay City and soon became very good friends with her. The duo even became
kumadres when Carmen stood as a wedding sponsor of Rosalinda’s nephew.
On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of
P16,915.84 in unpaid interest and other charges. Since the Santos couple had no
funds, Rosalinda offered to sell the house and lot to Carmen. After inspecting the real
property, Carmen and her husband agreed.
Sometime that month of June, Carmen and Rosalinda signed a document, which
reads:
“Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to
the (total) amount of 350,000.00 (house and lot) that is own (sic) by Mrs. Rosalinda R.
Santos.
(Mrs.) (Sgd.) Carmen H. Caseda direct buyer
“(Sgd.) Rosalinda Del R. Santos Owner
House and Lot
Better Living Subd. Parañaque, Metro Manila
Section V Don Bosco St.”2
The other terms and conditions that the parties agreed upon were for the Caseda
spouses to pay: (1) the balance of the mortgage loan with the Rural bank amounting to
P135,385.18; (2) the real estate taxes; (3) the electric and water bills; and (4) the
balance of the cash price to be paid not later than June 16, 1987, which was the
maturity date of the loan.3
The Casedas gave an initial payment of P54,100.00 and immediately took possession
of the property, which they then leased out. They also paid in installments,
P81,696.84 of the mortgage loan. The Casedas, however, failed to pay the remaining
balance of the loan because they suffered bankruptcy in 1987. Notwithstanding the
state of their finances, Carmen nonetheless paid in March 1990, the real estate taxes
on the property for 1981-1984. She also settled the electric bills from December 12,
1988 to July 12, 1989. All these payments were made in the name of Rosalinda
Santos.
In January 1989, the Santoses, seeing that the Casedas lacked the means to pay the
remaining installments and/or amortization of the loan, repossessed the property. The
Santoses then collected the rentals from the tenants.
In February 1989, Carmen Caseda sold her fishpond in Batangas. She then
approached petitioners and offered to pay the balance of the purchase price for the
house and lot. The parties, however, could not agree, and the deal could not push
through because the Santoses wanted a higher price. For understandably, the real
estate boom in Metro Manila at this time, had considerably jacked up realty value.
On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of
Makati, to have the Santoses execute the final deed of conveyance over the property,
or in default thereof, to reimburse the amount of P180,000.00 paid in cash and
P249,900.00 paid to the rural bank, plus interest, as well as rentals for eight months
amounting to P32,000.00, plus damages and costs of suit.
After trial on the merits, the lower court disposed of the case as follows:
“WHEREFORE, judgment is hereby ordered:
(a) dismissing plaintiffs’ (Casedas’) complaint; and
(b) declaring the agreement marked as Annex “C” of the complaint rescinded. Costs
against plaintiffs.
“SO ORDERED.”4
Said judgment of dismissal is mainly based on the trial court’s finding that:
“Admittedly, the purchase price of the house and lot was P485,385.18, i.e.
P350,000.00 as cash payment and P135.385.18, assumption of mortgage. Of it
plaintiffs [Casedas] paid the following: (1) P54,100.00 down payment; and (2)
P81,694.64 installment payments to the bank on the loan (Exhs. E to E-19) or a total
of P135,794.64. Thus, plaintiffs were short of the purchase price. They cannot,
therefore, demand specific performance.”5
The trial court further held that the Casedas were not entitled to reimbursement of
payments already made, reasoning that:
“As earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the
purchase price of P485,385.18. The property was in plaintiffs’ possession from June
1984 to January 1989 or a period of fifty-five months. During that time, plaintiffs
leased the property. Carmen said the property was rented for P25.00 a day or P750.00
a month at the start and in 1987 it was increased to P2,000.00 and P4,000.00 a
month. But the evidence is not precise when the different amounts of rental took
place. Be that as it may, fairness demands that plaintiffs must pay defendants for
their exercise of dominical rights over the property by renting it to others. The amount
of P2,000.00 a month would be reasonable based on the average of P750.00,
P2,000.00, P4,000.00 lease-rentals charged. Multiply P2,000.00 by 55 months, the
plaintiffs must pay defendants P110,000.00 for the use of the property. Deducting this
amount from the P135.794.64 payment of the plaintiffs on the property, the difference
is P25,794.64. Should the plaintiffs be entitled to a reimbursement of this amount?
The answer is in the negative. Because of failure of plaintiffs to liquidated the
mortgage loan on time, it had ballooned from its original figure of P135,384.18 as of
June 1984 to P337,280.78 as of December 31, 1988. Defendants [Santoses] had to
pay the last amount to the bank to save the property from foreclosure. Logically,
plaintiffs must share in the burden arising from their failure to liquidate the loan per
their contractual commitment. Hence, the amount of P25,794.64 as their share in the
defendants’ damages in the form of increased loan-amount, is reasonable.”6
On appeal, the appellate court, as earlier noted, reversed the lower court. The
appellate court held that rescission was not justified under the circumstances and
allowed the Caseda spouses a period of ninety days within which to pay the balance of
the agreed purchase price.
Hence, this instant petition for review on certiorari filed by the Santoses.
Petitioners now submit the following issues for our consideration:
WHETHER OR NOT THE COURT OF APPEALS HAS JURISDICTION TO DECIDE
PRIVATE RESPONDENT’S APPEAL INTERPOSING PURELY QUESTIONS OF LAW.
WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE
BUT A MERE ORAL CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND FOR
RESCISSION (ART. 1592,7 CIVIL CODE) IS NOT APPLICABLE.
ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS
REQUIRED, WHETHER PETITIONERS’ DEMAND AND PRAYER FOR RESCISSION
CONTAINED IN THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED THE SAID
REQUIREMENT.
WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE
PURCHASE PRICE INCLUDING THE NONCOMPLIANCE WITH THE STIPULATION TO
LIQUIDATE THE MORTGAGE LOAN ON TIME WHICH CAUSED GRAVE DAMAGE AND
PREJUDICE TO PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO JUSTIFY
RESCISSION OF A CONTRACT TO SELL UNDER ARTICLE 11918 (CIVIL CODE).
On the first issue, petitioners argue that, since both the parties and the appellate
court adopted the findings of trial court,9 no questions of fact were raised before the
Court of Appeals. According to petitioners, CA-G.R. CV No. 30955, involved only pure
questions of law. They aver that the court a quo had no jurisdiction to hear, much less
decide, CA-G.R. CV No. 30955, without running afoul of Supreme Court Circular No.
2-90 (4) [c].10
There is a question of law in a given case when the doubt or difference arises as to
what the law is on a certain set of facts, and there is a question of fact when the doubt
or difference arises as to the truth or falsehood of the alleged facts.11 But we note that
the first assignment of error submitted by respondents for consideration by the
appellate court dealt with the trial court’s finding that herein petitioners got back the
property in question because respondents did not have the means to pay the
installments and/or amortization of the loan.12 The resolution of this question
involved an evaluation of proof, and not only a consideration of the applicable
statutory and case laws. Clearly, CA-G.R. CV No. 30955 did not involve pure questions
of law, hence the Court of Appeals had jurisdiction and there was no violation of our
Circular No. 2-90.
Moreover, we find that petitioners took an active part in the proceedings before the
Court of Appeals, yet they did not raise there the issue of jurisdiction. They should
have raised this issue at the earliest opportunity before the Court of Appeals. A party
taking part in the proceedings before the appellate court and submitting his case for
its decision ought not to later on attack the court’s decision for want of jurisdiction
because the decision turns out to be adverse to him.13
The second and third issues deal with the question: Did the Court of Appeals err in
holding that a judicial rescission of the agreement was necessary? In resolving both
issues, we must first make a preliminary determination of the nature of the contract in
question: Was it a contract of sale, as insisted by respondents or a mere contract to
sell, as contended by petitioners?
Petitioners argue that the transaction between them and respondents was a mere
contract to sell, and not a contract of sale, since the sole documentary evidence (Exh.
D, receipt) referring to their agreement clearly showed that they did not transfer
ownership of the property in question simultaneous with its delivery and hence
remained its owners, pending fulfillment of the other suspensive conditions, i.e., full
payment of the balance of the purchase price and the loan amortizations. Petitioners
point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon Brokerage Co., Inc. v.
Maritime Building Co., Inc., 43 SCRA 93 (1972), where we held that Article 1592 of the
Civil Code is inapplicable to a contract to sell. They charge, the court a quo with
reversible error in holding that petitioners should have judicially rescinded the
agreement with respondents when the latter failed to pay the amortizations on the
bank loan.
Respondents insist that there was a perfected contract of sale, since upon their partial
payment of the purchase price, they immediately took possession of the property as
vendees, and subsequently leased it, thus exercising all the rights of ownership over
the property. This showed that transfer of ownership was simultaneous with the
delivery of the realty sold, according to respondents.
It must be emphasized from the outset that a contract is what the law defines it to be,
taking into consideration its essential elements, and not what the contracting parties
call it.14 Article 145815 of the Civil Code defines a contract of sale. Note that the said
article expressly obliges the vendor to transfer ownership of the thing sold as an
essential element of a contract of sale. This is because the transfer of ownership in
exchange for a price paid or promised is the very essence of a contract of sale.16 We
have carefully examined the contents of the unofficial receipt, Exh. D, with the terms
and conditions informally agreed upon by the parties, as well as the proofs submitted
to support their respective contentions. We are far from persuaded that there was a
transfer of ownership simultaneously with the delivery of the property purportedly
sold. The records clearly show that, notwithstanding the fact that the Casedas first
took then lost possession of the disputed house and lot, the title to the property, TCT
No. 28005 (S-11029) issued by the Register of Deeds of Parañaque, has remained
always in the name of Rosalinda Santos.17 Note further that although the parties had
agreed that the Casedas would assume the mortgage, all amortization payments made
by Carmen Caseda to the bank were in the name of Rosalinda Santos.18 We likewise
find that the bank’s cancellation and discharge of mortgage dated January 20, 1990,
was made in favor of Rosalinda Santos.19 The foregoing circumstances categorically
and clearly show that no valid transfer of ownership was made by the Santoses to the
Casedas. Absent this essential element, their agreement cannot be deemed a contract
of sale. We agree with petitioners’ averment that the agreement between Rosalinda
Santos and Carmen Caseda is a contract to sell. In contracts to sell, ownership is
reserved by the vendor and is not to pass until full payment of the purchase price.
This we find fully applicable and understandable in this case, given that the property
involved is a titled realty under mortgage to a bank and would require notarial and
other formalities of law before transfer thereof could be validly effected.
In view of our finding in the present case that the agreement between the parties is a
contract to sell, it follows that the appellate court erred when it decreed that a judicial
rescission of said agreement was necessary. This is because there was no rescission to
speak of in the first place. As we earlier pointed out, in a contract to sell, title remains
with the vendor and does not pass on to the vendee until the purchase price is paid in
full. Thus, in a contract to sell, 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, but a situation that prevents the obligation of the vendor to convey
title from acquiring an obligatory force.20 This is entirely different from the situation
in a contract of sale, where non-payment of the price is a negative resolutory
condition. The effects in law are not identical. In a contract of sale, the vendor has lost
ownership of the thing sold and cannot recover it, unless the contract of sale is
rescinded and set aside.21 In a contract to sell, however, the vendor remains the
owner for as long as the vendee has not complied fully with the condition of paying the
purchase price. If the vendor should eject the vendee for failure to meet the condition
precedent, he is enforcing the contract and not rescinding it. When the petitioners in
the instant case repossessed the disputed house and lot for failure of private
respondents to pay the purchase price in full, they were merely enforcing the contract
and not rescinding it. As petitioners correctly point out, the Court of Appeals erred
when it ruled that petitioners should have judicially rescinded the contract pursuant
to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the
purchase price as a resolutory condition. It does not apply to a contract to sell.22 As
to Article 1191, it is subordinated to the provisions of Article 1592 when applied to
sales of immovable property.23 Neither provision is applicable in the present case.
As to the last issue, we need not tarry to make a determination of whether the breach
of contract by private respondents is so substantial as to defeat the purpose of the
parties in entering into the agreement and thus entitle petitioners to rescission.
Having ruled that there is no rescission to speak of in this case, the question is moot.
WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court
of Appeals in CA-G.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of
the Regional Trial Court of Makati, Branch 133, with respect to the DISMISSAL of the
complaint in Civil Case No. 89-4759, is hereby REINSTATED. No pronouncement as to
costs.
SO ORDERED.
     Mendoza (Actg. Chairman), Buena and De Leon, Jr., JJ., concur.
     Bellosillo (Chairman), J., On Official leave.
Petition granted, judgment reversed and set aside. Judgment of court a quo reinstated.
Note.—In determining the nature of a contract, the Court looks at the intent of the
parties and not at the nomenclature used to describe it. (Lao vs. Court of Appeals, 275
SCRA 237 [1997])
——o0o—— Santos vs. Court of Appeals, 337 SCRA 67, G.R. No. 120820 August 1,
2000