THIRD DIVISION

[G.R. No. 118203. July 5, 1996.]

EMILIO A. SALAZAR and TERESITA DIZON , petitioners, vs . COURT OF

APPEALS and JONETTE BORRES , respondents.

Puruganan Chato Tan & Geronimo Law Offices for petitioners.

Esteban B. Bautista for private respondent.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; SALES; CONTRACT OF SALE;

DISTINGUISH FROM CONTRACT TO SELL. — In a contract of sale, the title to the
property passes to the vendee upon the delivery of the thing sold; in a contract to sell,
ownership is, by agreement, reserved in the vendor and is not to pass to the vendee
until full payment of the purchase price. Otherwise stated, in a contract of sale, the,
vendor loses ownership over the property and cannot recover it until and unless the
contract is resolved or rescinded; whereas in a contract to sell, title is retained by the
vendor until full payment of the price. In the latter contract, payment of the price is a
positive suspensive condition, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from becoming effective.
2. ID.; ID.; ID.; GENERALLY, EXECUTION OF A DEED OF ABSOLUTE SALE
CONSTITUTES CONSTRUCTIVE DELIVERY OF OWNERSHIP; EXCEPTION. — The
withholding by Salazar through Dizon of the Deed of Absolute Sale, the certi cates of
title, and all other documents relative to the two lots is an additional indubitable proof
that Salazar did not transfer to Borres either by actual or constructive delivery the
ownership of the two lots. While generally the execution of a deed of absolute sale
constitutes constructive delivery of ownership, the withholding by the vendor of that
deed under explicit agreement that it be delivered together with the certi cates of titles
to the vendee only upon the latter's full payment of the consideration amounts to a
suspension of the effectivity of the deed of sale as a binding contract.
3. ID.; CONTRACTS; INTERPRETATION; FORM OF INSTRUMENT CANNOT
PREVAIL OVER THE TRUE INTENT OF THE PARTIES. — If we are to consider only the
Deed of Absolute Sale, we can easily say that the contract between Salazar and Borres
is one of sale. However, the Deed of Warranty and the oral testimony on the
circumstances surrounding the execution of the Deed of Absolute Sale, as well as the
other pieces of evidence submitted by Borres, sustain the nding and conclusion of the
trial court that the true agreement between the parties was a contract to sell in that the
true intent of Salazar was to transfer ownership of the property to Borres only after the
latter pays the full consideration.
4. ID.; OBLIGATIONS; SUSPENSIVE CONDITION; NON-FULFILLMENT
THEREOF BARS THE OBLIGATION FROM TAKING EFFECT. — Accordingly, since Borres
was unable to pay the consideration, which was a suspensive condition, Salazar cannot
be compelled to deliver to her the deed of sale, certi cates of title, and other
documents concerning the two lots. In other words, no right in her favor and no
corresponding obligation on the part of Salazar were created.
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 5. ID.; DAMAGES; ATTORNEY'S FEES; SHOULD NOT BE CHARGED AGAINST A
PARTY IN THE ABSENCE OF BAD FAITH ON HIS PART. — The challenged decision of
the Court of Appeals must then be reversed. That of the trial court must be a rmed,
with the modi cation consisting in the deletion of the award of attorney's fees in favor
of the petitioners which we nd to be without basis. The award of attorney's fees as
damages is the exception rather than the rule; it is not to be given to the defendant
every time the latter prevails. The right to litigate is so precious that a penalty should
not be charged on those who may exercise it erroneously, unless, of course such party
acted in bad faith.
6. COMMERCIAL LAW; NEGOTIABLE INSTRUMENT; CROSSED CHECK OF
SIMPLE TYPE; CANNOT BE PAID TO ANYONE EXCEPT THE PAYEE, OR IT CAN BE
DEPOSITED WITH A BANK WHERE THE LATTER MAINTAINS AN ACCOUNT. — Even
granting for the sake of argument that, as ruled by the Court of Appeals, the agreement
of Salazar and Borres as evidenced by the Deed of Absolute Sale was a perfected
contract of sale, Borres' action for speci c performance must likewise fail. We are in
full accord with the trial court and, perforce, disagree with the Court of Appeals, that
Borres was not ready to pay P500,000.00 on or before 15 June 1989. That Borres had
a check of P1.5 million, or of more than the full consideration of the two lots, is of no
moment. The check, dated 15 June 1989, is a crossed check payable to "Atty. Jonette
Borres," or herein private respondent. The crossing is of simple type — two parallel lines
at the upper left hand corner without the words "and company" between the lines.
Accordingly, it cannot be paid to anyone except Borres, or it can be deposited with a
bank where she keeps an account.

DECISION

DAVIDE, JR. , J : p

Petitioners seek to set aside the decision 1 of 29 November 1994 of the Court of
Appeals in CA-G.R. CV No. 40197, which reversed the decision 2 of 3 September 1992
of Branch 66 of the Regional Trial Court (RTC) of Makati, Metro Manila, in Civil Case No.
89-4468.
The primary issues presented for our resolution are whether (a) the so-called
Deed of Absolute Sale executed by petitioner Emilio A. Salazar in favor of private
respondent Jonette Borres is a perfected contract of sale or a mere contract to sell,
and (b) the action for speci c performance which the latter led will lie to compel the
former to deliver the Deed of Absolute Sale, the Transfer Certi cates of Title, and other
documents relative to the property in question.
The factual antecedents of this case, as summarized by the trial court, are as
follows:
That defendant Dr. Salazar is the owner of the two (2) parcels of land with
improvements thereon located at 2914 Finlandia Street, Makati, Metro Manila and
covered by Transfer Certi cate of Title Nos. 31038 and 31039 of the Registry of
Deeds of Makati; that Dr. Salazar offered to sell his properties to Jonette Borres
for One Million Pesos (P1,000,000.00) (TSN pp. 7 and 8, November 5, 1991). The
initial proposal took place at the Dimsum Restaurant, Makati, whereby it was
proposed that the payment of the consideration was to be made within six (6)
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 months but was objected to by Dr. Salazar and he reduced it to a three (3) months
period (TSN Direct Examination on Jonette Borres p. 22, November 12, 1991); that
sometime on [May] 28, 1989, Jonette Borres together with a certain Emilio T.
Salazar went to see Dr. Salazar at the latter's residence in Bataan bearing a copy
of a Deed of Absolute Sale (Exhibit "C") and Deed of Warranty (Exhibit "D") but Dr.
Salazar refused to sign because Jonette Borres did not have the money ready
then. In said occasion Dr. Salazar further reduced the period within which plaintiff
may purchase the lots, to one (1) month or up to June 30, 1989 (TSN Direct
Examination on Jonette Borres November 5, [1991], pp. 10 and 11).

Jonette Borres then met again Dr. Salazar on June 2, 1989 at the Ninoy
International Airport who was about to leave for the United States of America
where he is a resident. Jonette Borres had with her the Deed of Absolute Sale and
asked Dr. Salazar to sign said document. Dr. Salazar reluctantly agreed to sign
the document provided that Jonette Borres pays one half (1/2) of the
consideration or P500,000.00 in "cash" by June 15, 1989 and the balance was
payable on June 30, 1989 (TSN Direct Examination on Emilio A. Salazar, May 21,
[1991], p. 9; TSN Cross Examination on Jonette Borres, November 12, [1991], pp.
29 and 30). It was during this occasion that Dr. Salazar again emphasized to
Jonette Borres that he needed the money because he was then buying a property
in the United States (TSN pp. 15-20, November 5, 1991; pp. 22 and 23, May 21,
1991; and pp. 56-57, May 21, 1991).

Plaintiff agreed to the above conditions (TSN Cross Examination on

Jonette Borres November 12, 1989, p. 32) and Dr. Salazar constituted co-
defendant Teresa Dizon as custodian at the Deed of Absolute Sale (Exhibit "C")
together with the Titles of the Land in question with the instruction to Teresa
Dizon not to surrender said documents to Jonette Borres until upon payment of
the full price in "cash" (TSN, Direct Examination on Emilio A. Salazar, May 21,
[1991], p. 11).
On June 14, 1989 Jonette Borres informed defendant Dizon that she will
be able to pay the full amount of P1,000,000.00 on June 15, 1989 (TSN, Direct
Examination Jonette Borres, November 5, [1991], p. 25) and on the next day, she
then went to the house of Teresa Dizon to see and get the documents entrusted to
her by Dr. Salazar. The documents not being in Dizon's possession, they agreed
to meet at Metro Bank West Avenue Branch to get the documents and then to
proceed to Makati to meet the plaintiff's business partner a certain Balao who
allegedly gave plaintiff a Far East Bank and Trust Company check for the amount
of P1,500,000.00 (Exhibit "F") with which to buy the property (TSN, Direct
Examination on Jonette Borres November 5, [1991], pp. 30, 32 and 33). For some
reason or another Jonette Borres and defendant Dizon failed to proceed to
Makati.
In the meantime or on June 16, 1992, Dr. Salazar made an overseas call to
co-defendant Dizon to inquire if Jonette Borres had already paid the down
payment of P500,000.00 and Teresa Dizon replied to Dr. Salazar that Jonette
Borres had not paid the down payment. Dr. Salazar then ordered Dizon to stop the
sale (TSN, Direct Examination on Emilio A. Salazar, May 21, [1991], pp. 12 and
13).

As may be seen from the evidence presented by the plaintiff and the
defendants, the terms and conditions of the agreement for the sale of the two (2)
parcels of land owned by Dr. Salazar in favor of the plaintiff Jonette Borres, are
that the purchase price is in the amount of P1,000,000.00, fty percent (50%) of
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 which or P500,000.00 was to be paid on or before June 15, 1989 while the
balance thereof was to be paid on or before June 30, 1989 (TSN, May 21, 1991, p.
27); that the payment was to be made in "cash" (TSN, May 21, 1991, p. 55); that
the place of payment is at defendant's bank, Metropolitan Bank Quezon City
Branch (TSN, October 21, 1991, p. 23). 3

The trial court held that the Deed of Absolute Sale was in reality a contract to sell,
and that since Borres failed to pay Salazar the downpayment of P500,000.00 on the
agreed date, 15 June 1989, the complaint for speci c performance cannot prosper. It
then dismissed the complaint and ordered Borres to pay the petitioners P5,000.00
each as attorney's fees and litigation expenses. 4
In ruling that the Deed of Absolute Sale was a contract to sell, the trial court
considered pertinent the circumstances attending its execution. First, that the Deed of
Absolute Sale was "reluctantly signed" by Dr. Salazar, who was then about to leave for
the United States of America, in order that if Borres would comply with the terms and
conditions of their agreement, he need not come to the Philippines just to sign it; hence,
it does not bind Dr. Salazar until the suspensive condition, i.e., the downpayment of
P500,000.00 to be effected on or before 15 June 1989 and the balance to be paid on or
before 30 June 1989, is complied with. Second, Borres was not, in fact, nancially
prepared to buy the parcels of land on or before 15 June 1989 considering that
[s]he was just looking for possible buyers or business partners. First, she
requested that the pertinent documents like the Deed of Sale (Exhibit "C") and the
corresponding Transfer Certi cates of Titles Nos. 31038 and 31039 of the
Register of Deeds of Rizal (Exhibits "A" and "B") be entrusted to her even before
making the downpayment of P500,000.00 purposely to raise the amount needed.
When Dr. Salazar refused her request, Jonette Borres approached a certain
businessman P.D. Dionisio for loan and was turned down when Jonette Borres
cannot [sic] produce the Deed of Absolute Sale and the Titles of the parcels of
land in question (TSN, November 5, 1991, pp. 20-25). Then she approached a
certain Benjamin Balao, a realtor developer. Although Balao had issued to her his
check in the amount of P1,500,000.00 (Exhibit "F") he instructed his bank not to
honor his check without his presence (TSN, November 14, 1991, pp. 81 to 84).
Jonette Borres admitted that she was not in a position to encash the check
(Exhibit "F") although it was payable to 'cash' (TSN, November 21, 1991, pp. 41
and 44). 5

Salazar's victory was short-lived. On Borres' appeal from the decision of the trial
court, the Court of Appeals, in its challenged decision of 29 November 1994, ruled that
the Deed of Absolute Sale, whose existence and due execution was undisputed, is a
perfected contract of sale, with a de nite object and a speci c consideration which the
parties had agreed upon. As proof that it is a contract of sale and not a contract to sell,
the Court of Appeals stressed the absence of a proviso that the title to the property is
reserved in the vendor until full payment of the purchase price or that the vendor may
unilaterally rescind the contract the moment the vendee fails to pay within the xed
period. 6 Salazar's reluctance to sign it is of no moment, since there is no allegation of
fraud, forgery, or duress. And even assuming that Borres failed to pay the contract
price, such failure did not convert the contract into one without cause or consideration
as to vitiate the validity of the contract, it not being essential for the existence of cause
that payment or full payment be made at the time of the contract. Neither did such
failure ipso facto resolve the contract in question. The remedy of the vendor, Dr. Emilio
A. Salazar, is to demand speci c performance or rescission, with damages in either
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 case. On the other hand, the vendee, Jonette Borres, may demand speci c
performance, i.e. compel the vendor to accept the price and deliver the title of the land
object of the contract.
The Court of Appeals disagreed with the trial court's nding that Borres was not
in a position to pay the downpayment because:
[o]n June 15, 1989, plaintiff-appellant had a Far East Bank check payable
to her order, in the amount of P1,500,000.00 — more than the whole agreed
purchase price of P1,000.000.00. Defendant-appellee Teresa Dizon agreed (on
June 14, 1989) to meet her on June 15, 1989, at Metro Bank West and thereafter
to proceed to Makati in order to encash the Far East Bank check. Defendant-
appellee Teresa Dizon somehow managed to manipulate things by making
herself unavailable so that the payment could not be made on June 15, 1989.
(TSN, Nov. 5, 1991, pp. 27-41). On the next day, June 16, 1989, defendant-
appellee Teresa Dizon informed plaintiff-appellant that defendant-appellee Dr.
Emilio A. Salazar called up in the evening of June 15, 1989 asking whether
plaintiff-appellant paid on that day and upon being answered in the negative, said
vendor said that he is revoking the contract. (TSN, Nov. 5, 1991, pp. 41-42).
Defendant-appellee Teresa Dizon having her own interested buyer, evidently acted
in bad faith, tried and indeed succeeded to frustrate the efforts of plaintiff-
appellant to comply with her reciprocal obligation to pay the agreed purchase
price.

The fact that the Far East Bank check was payable to the Order of plaintiff-
appellant, and it covers the amount of P1,500,000.00 — which is much more than
the agreed purchase price of P1,000,000.00 — reveals that plaintiff-appellant was
nancially prepared to comply with her reciprocal obligation. That plaintiff-
appellant led the present suit for speci c performance on July 6, 1989, bolsters
the fact that she is really willing and able to pay the agreed purchase price. How
and from whom she borrowed/obtained the said amount, is of no consequence. 7

Accordingly, the respondent Court reversed the decision of the trial court and
handed down a new judgment ordering Emilio A. Salazar to accept from Jonette Borres
the payment representing the purchase price in the amount of P1 Million and thereafter
to comply with his reciprocal obligation to surrender the original copies of the deed of
absolute sale and Torrens title covering the parcels of land subject of the contract.
Finding petitioner Teresita Dizon to have "acted in bad faith in frustrating the efforts" of
Borres to comply with her obligation to pay the purchase price, the appellate court
ordered her to pay Borres the amounts of P80,000.00 as moral damages; P50,000.00
as exemplary damages; and P100,000.00 as attorney's fees.
Unable to accept the reversal of the trial court's decision, the petitioners led the
instant petition wherein they submit that the Court of Appeals committed grave and
serious errors:
A. . . . in relying on the Deed of Absolute Sale dated May 30, 1989
notwithstanding the fact that:

1. BORRES EXECUTED A DEED OF WARRANTY (EXHS. "D" AND "2")

STATING THEREIN THAT UNTIL AND UNLESS THE AMOUNT OF
P1,000,000.00 REPRESENTING THE PURCHASE PRICE FOR THAT
PARCELS OF LAND COVERED BY TCT NOS. S-31038 AND S-31039
BE PAID BY HER TO SALAZAR, SHE HAS NO RIGHT WHATSOEVER
TO THE ORIGINAL COPIES OF THE DEED OF ABSOLUTE SALE AND
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 THAT SHE HAS NO LEGAL RIGHT WHATSOEVER TO ANY AND ALL
PERTINENT RECORDS OF THE ABOVE-MENTIONED LOTS;
2. UPON HER BEHEST, BORRES WAS GIVEN A PHOTOCOPY OF THE
DEED OF ABSOLUTE SALE BY DIZON BUT ONLY AFTER THE
LATTER ERASED THE SIGNATURE OF SALAZAR AS THE VENDEE
THEREIN;

3. BORRES HAD NOT PAID ANY PORTION OF THE AGREED

PURCHASE PRICE AND THUS RENDERS THE DEED OF ABSOLUTE
SALE VOID AB INITIO.

B. . . . in concluding that the agreement between SALAZAR and BORRES is a

contract of sale and thus, perfected upon agreement on the subject matter
and consideration, notwithstanding the fact that:
1. THE AGREEMENT BETWEEN THE PARTIES IS ESSENTIALLY
A CONTRACT TO SELL SUBJECT TO SUSPENSIVE CONDITION, THE
BIRTH OR EFFECTIVITY OF WHICH SHOULD TAKE PLACE ONLY IF AND
WHEN THE EVENT WHICH CONSTITUTES THE CONDITION HAPPENS OR
IS FULFILLED. SINCE BORRES FAILED TO COMPLY WITH HER
OBLIGATION, THE AGREEMENT TO SELL BECAME STILLBORN;
2. THERE WAS AN EXPRESS AGREEMENT BETWEEN THE
PARTIES THAT BORRES SHALL BE ENTITLED TO THE PROPERTY OR ANY
RECORDS PERTAINING THERETO OR ORIGINAL COPIES OF THE DEED OF
ABSOLUTE SALE ONLY UPON FULL PAYMENT OF THE PURCHASE PRICE.
C. . . . in holding that DIZON acted in bad faith and succeeded to
frustrate the efforts of BORRES to comply with her reciprocal obligation to
pay the purchase price notwithstanding the fact that:
1. AT THE TIME THAT BORRES WAS OBLIGED TO PAY AT LEAST 50%
OF THE PURCHASE PRICE OR ON JUNE 15, 1989, SHE WAS NOT
READY, WILLING AND ABLE TO DO SO. EVEN ASSUMING FOR THE
SAKE OF ARGUMENT THAT THE LATTER HAD THE FINANCIAL
CAPABILITY TO MEET HER OBLIGATION, THE FACT REMAINS
THAT SHE FAILED TO PROPERLY TENDER PAYMENT OF HER
OBLIGATION AND IN CASE TENDER OF PAYMENT WAS REFUSED,
TO CONSIGN THE SAME IN COURT;
2. DIZON HAD NO REASON TO FRUSTRATE THE EFFORTS OF
BORRES TO COMPLY WITH HER OBLIGATION TO PAY THE
AGREED PURCHASE PRICE SINCE SHE WAS MERELY
CONSTITUTED AS CUSTODIAN OF THE DEED OF ABSOLUTE SALE
AND TITLES OF THE PROPERTY WITH SPECIFIC INSTRUCTIONS
TO RELEASE THE SAME TO BORRES ONLY UPON RECEIPT OF THE
PURCHASE PRICE IN FULL AND IN CASH WITHIN THE AGREED
PERIOD.

D. . . . in ordering Dizon to pay Borres the amount of P80,000.00 moral

damages; P50,000.00 exemplary damages and P100,000.00 as attorney's
fees by way of damages notwithstanding the fact that the evidence
adduced before the trial court clearly shows that BORRES had no cause of
action against the former. 8

CD Technologies Asia, Inc. 2018 cdasiaonline.com

 We shall rst face the issue of whether the agreement between petitioner Salazar
and private respondent Borres is a contract of sale or a contract to sell.
In a contract of sale, the title to the property passes to the vendee upon the
delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved in
the vendor and is not to pass to the vendee until full payment of the purchase price.
Otherwise stated, in a contract of sale, the vendor loses ownership over the property
and cannot recover it until and unless the contract is resolved or rescinded; whereas in
a contract to sell, title is retained by the vendor until full payment of the price. In the
latter contract, payment of the price is a positive suspensive condition, failure of which
is not a breach but a event that prevents the obligation of the vendor to convey title
from becoming effective. 9
If we are to consider only the Deed of Absolute Sale, 1 0 we can easily say that the
contract between Salazar and Borres is one of sale. However, the Deed of Warranty 1 1
and the oral testimony on the circumstances surrounding the execution of the Deed of
Absolute Sale, as well as the other pieces of evidence submitted by Borres, sustain the
nding and conclusion of the trial court that the true agreement between the parties
was a contract to sell in that the true intent of Salazar was to transfer ownership of the
property to Borres only after the latter pays the full consideration.
From the beginning to the end, such intention of Salazar was unequivocal and
manifest. He rejected Borres's offer to pay the consideration within six months to give
her time to secure a loan. When Borres proposed that he lend her the certificates of title
of the lots so that she could secure a loan from the banks in Manila and be able to pay,
within three months, 1 2 the consideration out of the proceeds of the loan, Salazar
agreed provided that she would assure him that the title would not pass to her until he
is fully paid. Borres forthwith promised to execute a warranty. She then prepared a
Deed of Absolute Sale for Salazar's signature and a Deed of Warranty for her signature.
When nally she presented to him the Deed of Absolute Sale, Salazar did not sign it and
insisted that he be paid the purchase price at the end of June 1989; he further told her
that he would not lend her the certi cates of title until he is so paid. He signed it only
after Borres agreed to pay by the end of June 1989 at a bank in Makati. But he did not
give the Deed of Absolute Sale to her; instead, he told her to just meet him at the Ninoy
Aquino International Airport on 2 June 1989, when he would leave for the United States
of America, so she would know to whom he would entrust the document and other
papers relative to the property. We quote verbatim Borres' own testimony on direct
examination upon these points:
Q. Have you met the owner of the lot mentioned a while ago?

A. Yes, your Honor, I met Dr. Salazar, the owner, sometime last week of April,
1989 at Dimsum Restaurant.
Q. You met at Dimsum, in what particular place was that?

A. We met at Dimsum Restaurant in Makati after I was called by Emilio T.

Salazar to meet at Dimsum because Dr. Salazar wanted to sell the property
and he wanted to talk to you [sic].
COURT:

Talk to you?
A. To discuss the matter of sale to me at Dimsum, Sir.
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 ATTY. BORRES:
Q. And so you really met at Dimsum.

A. Yes, Ma'am.
Q. What transpired at Dimsum?
A. Dr. Salazar offered me to buy the properties for a total of ONE MILLION
PESOS (P1,000,000.00) excluding all and any other expenses that may be
involved in the transfer of the properties in case I am interested to by [sic],
in case Atty. Borres wanted to buy.
Q. What then was your reply?

A. I am interested to buy.
Q. Dr. Salazar. . . I asked . . . what did Dr. Salazar say after that?
A. I answered Dr. Salazar that I could buy or able to buy the properties within
six (6) months because I have to go home to the province to secure a loan.
Q. What did Dr. Salazar say regarding your proposal?
A. I told Dr. Salazar. Dr. Salazar said that he could not wait for that, six (6)
months is a very long time.
Q. What else did you say?
A. I told Dr. Salazar that "it is possible that I can pay within three (3) months'
time if you can lend me the title of your property because banks here in
Manila usually release loans in three months' time and I will have less
problem to complete the payment of ONE MILLION PESOS
(P1,000,000.00)."
Q. So, what did Dr. Salazar say?

A. Dr. Salazar said that "if it is the best for our transaction I can lend you the
title provided I can be assured that the title will not pass on you until you
are fully paid.
Q. What was your answer then?

A. I told Dr. Salazar that I can execute a warranty to the effect that the
property could not be transferred to me until I have fully paid him.
Q. What did Dr. Salazar say?

A Dr. Salazar said "I will agree to that."

COURT:
Dr. Salazar told you that he is agreeable to the proposal.
A. Yes, Dr. Salazar said "you prepare a draft, the necessary document and
bring it to Bataan."
ATTY. BORRES:
Q. And what was your answer to Dr. Salazar?
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 A. I answered Dr. Salazar that "I will be ever willing to go to Bataan any time
you wanted me to.
Q. And you really did go to Bataan.
A. Yes, I did.
xxx xxx xxx

ATTY. BORRES:
Q. And what happened while there in Bataan?
xxx xxx xxx
Q. And what happened while you got all seated in the sala of Dr. Salazar.
A. I showed him a document which he instructed me to prepare and he has
read and agreed to the Deed of Absolute Sale and the warranty I made. He
gave me back the documents for signing.
Q. And you did sign the document?
A. Yes, I did sign it and passed it on to Dr. Salazar.
Q. After you passed it to Dr. Salazar, what happened?

A. Dr. Salazar did not sign the document and told me that he is only going to
sign it if I am going to pay by the end of June and that he could not lend
me the title and he said he is going to sign it and not to give me a copy
until the purchase price is fully paid.
Q. And what was your reaction with the statement?
A. I said "what about the loan that we have agreed at Dimsum if you will not
lend me the title and the document that we have signed now?" Dr. Salazar
said "I could not lend you the title and I care less how you are going to loan
the property and raise the money you are going to pay me, what is
important to me is you pay me the whole amount of One Million Pesos
(P1,000,000.00) not later than June 30, 1989".
Q. And what did you say?
A. Since I could not do anything and I really wanted to buy the property, I
agreed to Dr. Salazar's condition that I pay the property by the end of June
and I will pay only at the bank in Makati.
Q. And what did Dr. Salazar say?
A. Dr. Salazar said "okey I will sign this and have this notarized but I could not
lend you and never have a [copy] of the title as well as the Deed of Sale
and you just wait at NAIA and wait if you could have this document
because I am leaving on June 2 for the US. You meet me there".

Q. And after that what did Dr. Salazar do?

A. It was only then that he signed the document after I have agreed to his
proposal but he was very much stand [sic] to the payments and he was no
longer the same when I met at Dimsum. 1 3

CD Technologies Asia, Inc. 2018 cdasiaonline.com

 Clearly then, the original intention in the execution of the Deed of Absolute Sale
was to implement the proposal of Borres that Salazar "lend" her the transfer certificates
of title so that she could secure a loan from a bank in Manila whose proceeds would be
applied to the payment of the purchase price of the property, and the original purpose
of the Deed of Warranty was to assure Salazar that, as demanded by him, title to the
lots will not pass to her until she pays the full consideration. The lending of the
certi cates of title for the above purpose could have been easily accomplished through
a special power of attorney under which Salazar will authorize her to obtain a loan and
to mortgage the property as security therefor. But, perhaps anticipating Salazar's
departure to the United States of America where he resides, Borres, who is a lawyer,
prepared instead a Deed of Absolute Sale and Deed of Warranty. Notwithstanding
Borres' deliberate characterizations of the documents, we are convinced that they were
prepared in connection with and in the implementation of the agreement regarding the
lending of the certi cates of title. They do not weaken the adamantine position of
Salazar not to part with his title to the two lots until full payment of the agreed price
therefor. Borres' execution of the Deed of Warranty was in fact a recognition of
Salazar's position. Despite its careful wordings and phraseology to make some sort of
distinction between Borres' right to the ownership or title over the lots on the one hand,
and her right to possess or keep the Deed of Absolute Sale and the other documents
relative to the lots, the totality of the Deed of Warranty manifests an indubitable
recognition by Borres of the aforementioned intention of Salazar. She declares therein
as follows:
1. That until and unless the amount of ONE MILLION (P1,000,000.00)
PESOS representing the purchase price for that parcels of land covered by
Transfer Certi cate of Title Nos. S-31038 and S-31039 be paid by the
undersigned unto Dr. Emilio A. Salazar, the undersigned has no absolute right
whatsoever to the original copies of the Deed of Absolute Sale executed by said
Dr. Emilio A. Salazar dated May ___, 1989;
2. That she has no legal right whatsoever to any and all pertinent
records of the aforementioned lots;
3. That upon payment of the aforementioned amount Dr. Emilio A.
Salazar or his representative is obliged to surrender the original of these presents
together with all the original documents and titles covering the sale of the
aforementioned lots unto the undersigned. 1 4

Then, too, in her Memorandum of Agreement with Monteland Realty Corporation,

15 dated 15 June 1989, Borres explicitly mentioned only her "rights and interests" under
the Deed of Absolute Sale signed by Salazar and therein conveyed, transferred, and
assigned to the said corporation only such "rights and interests." Also worth noting is
the statement in the second whereas clause of the Memorandum of Agreement that
Monteland Realty Corporation.
has full knowledge of the sales [sic] and conditions of the SELLER-OWNER
of the property . . . that the buyer [Borres] has an obligation to pay DR. EMILIO
SALAZAR the amount of ONE MILLION PESOS (P1,000,000.00) and that there is
already a Deed of Absolute Deed of [sic] Sale in favor of [Borres] of which both
copies of the titles of the properties for sale and all documents including the Deed
of Absolute Sale aforementioned are under the custody of MS. TERESA DIZON
who will only release the Title and the Deed of Absolute Sale after the obligation
of [Borres] is fully paid. 16
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 The withholding by Salazar through Dizon of the Deed of Absolute Sale, the
certi cates of title, and all other documents relative to the two lots is an additional
indubitable proof that Salazar did not transfer to Borres either by actual or constructive
delivery the ownership of the two lots. While generally the execution of a deed of
absolute sale constitutes constructive delivery of ownership, the withholding by the
vendor of that deed under explicit agreement that it be delivered together with the
certi cates of titles to the vendee only upon the latter's full payment of the
consideration amounts to a suspension of the effectivity of the deed of sale as a
binding contract.
Undoubtedly, Salazar and Borres mutually agreed that despite the Deed of
Absolute Sale title to the two lots in question was not to pass to the latter until full
payment of the consideration of P1 million. The form of the instrument cannot prevail
over the true intent of the parties as established by the evidence.
Accordingly, since Borres was unable to pay the consideration, which was a
suspensive condition, Salazar cannot be compelled to deliver to her the deed of sale,
certi cates of title, and other documents concerning the two lots. In other words, no
right in her favor and no corresponding obligation on the part of Salazar were created.
Article 1181 of the Civil Code provides:
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.

Even granting for the sake of argument that, as ruled by the Court of Appeals, the
agreement of Salazar and Borres as evidenced by the Deed of Absolute Sale was a
perfected contract of sale, Borres' action for speci c performance must likewise fail.
We are in full accord with the trial court and, perforce, disagree with the Court of
Appeals, that Borres was not ready to pay P500,000.00 on or before 15 June 1989.
That Borres had a check of P1.5 million, or of more than the full consideration of the
two lots, is of no moment. The check, 1 7 dated 15 June 1989, is a crossed check
payable to "Atty. Jonette Borres," or herein private respondent. The crossing is of
simple type — two parallel lines at the upper left hand corner without the words "and
company" between the lines. Accordingly, it cannot be paid to anyone except Borres, or
it can be deposited with a bank where she keeps an account. 1 8
There is absolutely no evidence that Borres encashed the check and tendered to
Salazar thru Dizon the sum of P500,000.00 on 15 June 1989. On the contrary, the check
itself was cancelled as shown by the word cancelled handwritten across it. Moreover,
the delivery of the check by Monteland Realty Corporation through Balao was not
unconditional. Per the receipt 1 9 Borres signed on 15 June 1989, encashment of the
check "is subject to the veri cations as to the authenticity of documents pertaining to
the subject property." Neither is there evidence that Borres paid the downpayment on
15 June 1989 with money she got from other sources. No payment appears to have
been made thereafter or during the pendency of the case before the trial court or the
Court of Appeals. She should have consigned the payment in court pursuant to Article
1256 of the Civil Code for her to be released from her obligation and, consequently,
exact fulfillment by Salazar of his corresponding obligation.
The challenged decision of the Court of Appeals must then be reversed. That of
the trial court must be a rmed, with the modi cation consisting in the deletion of the
award of attorney's fees in favor of the petitioners which we nd to be without basis.
The award of attorney's fees as damages is the exception rather than the rule; it is not
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 to be given to the defendant every time the latter prevails. The right to litigate is so
precious that a penalty should not be charged on those who may exercise it
erroneously, unless, of course such party acted in bad faith. 2 0
WHEREFORE, the instant petition is hereby GRANTED. The challenged decision of
29 November 1994 of the Court of Appeals in CA-G.R. CV No. 40197 is REVERSED and
SET ASIDE, and the decision of 3 September 1992 of Branch 66 of the Regional Trial
Court of Manila in Civil Case No. 89-4468 is AFFIRMED, subject to the modi cation that
the award for attorney's fees is deleted. No pronouncement as to costs.
SO ORDERED.
Narvasa, C . J ., Melo, Francisco and Panganiban, JJ ., concur.

Footnotes
1. Rollo, 40-46. Per Isnani, A., J., with Ibay-Somera, C., and Lipana-Reyes, C., JJ., concurring.
2. Original Records (OR) 286-295. Per Judge Eriberto U. Rosario, Jr.
3. OR, 287-291.

4. Id., 294-295.
5. OR, 293-294.
6. Citing Visayan Sawmill Co., Inc. vs. Court of Appeals, 219 SCRA 378 [1993].

7. Rollo, 44-45.
8. Rollo, 16-18.
9. Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., 46 SCRA 381, 387 [1972];
Jacinto vs. Kaparaz, 209 SCRA 246 254 [1992]; Visayan Sawmill Co., Inc. vs. Court of
Appeals, supra note 6, at 389; Pingol vs. Court of Appeals, 226 SCRA 118, 126 [1993].
10. Exhibits "C" and "1," Folder of Exhibits, 6 and 22.

11. Exhibit "2," Id., 24.

12. TSN, 5 November 1991, 8.

13. TSN, 5 November 1991, 6-14.

14. Exhibit "2," Folder of Exhibits, 24.

15. Exhibit "G," Id., 16-17.

16. Exhibit "G," Folder of Exhibits, 16.

17. Exhibit "F," Folder of Exhibits, 15.

18. AGUEDO F. AGBAYANI, Commentaries and Jurisprudence on the Commercial Laws of
the Philippines, Vol. 1 [1987 ed.], 449.

19. Exhibit "D," Folder of Exhibits, 8.

20. Tierra International Construction Corp. vs. NLRC, 211 SCRA 73, 81 [1992]; Albenson
Enterprises Corp. vs. Court of Appeals, 217 SCRA 16, 31 [1993]; De La Peña vs. Court of
Appeals, 231 SCRA 456, 462 [1994].
CD Technologies Asia, Inc. 2018 cdasiaonline.com