Republic of the Philippines I, LEONARDO A.
TIRO, of legal age, married and a resident of
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-48194 March 15, 1990
JOSE M. JAVIER and ESTRELLA F. JAVIER, petitioners,  of which shall be made in the following manner:
vs.
COURT OF APPEALS and LEONARDO TIRO, respondents.
Eddie Tamondong for petitioners.
Lope Adriano and Emmanuel Pelaez, Jr. for private respondent.
REGALADO, J.:
Petitioners pray for the reversal of the decision of respondent Court of Appeals in
CA-G.R. No. 52296-R, dated March 6, 1978, 1 the dispositive portion whereof
decrees:
WHEREFORE, the judgment appealed from is hereby set aside
and another one entered ordering the defendants-appellees,
jointly and solidarily, to pay plaintiff-appellant the sum of
P79,338.15 with legal interest thereon from the filing of the
complaint, plus attorney's fees in the amount of P8,000.00. Costs
against defendants-appellees.2
As found by respondent court or disclosed by the records, 3 this case was generated
by the following antecedent facts.
Private respondent is a holder of an ordinary timber license issued by the Bureau of
Forestry covering 2,535 hectares in the town of Medina, Misamis Oriental. On
February 15, 1966 he executed a "Deed of Assignment" 4 in favor of herein
petitioners the material parts of which read as follows:
x x x           x x x          x x x
Medina, Misamis Oriental, for and in consideration of the sum
of ONE HUNDRED TWENTY THOUSAND PESOS
(P120,000.00), Philippine Currency, do by these presents,
ASSIGN, TRANSFER AND CONVEY, absolutely and forever
unto JOSE M. JAVIER and ESTRELLA F. JAVIER, spouses,
of legal age and a resident (sic) of 2897 F.B. Harrison, Pasay
City, my shares of stocks in the TIMBERWEALTH
CORPORATION in the total amount of P120,000.00, payment
1. Twenty thousand (P20,000.00) Pesos
upon signing of this contract;
2. The balance of P100,000.00 shall be paid
P10,000.00 every shipment of export logs
actually produced from the forest concession
of Timberwealth Corporation.
That I hereby agree to sign and endorse the stock certificate in
favor of Mr. & Mrs. Jose M. Javier, as soon as stock certificates
are issued.
x x x           x x x          x x x
At the time the said deed of assignment was executed, private respondent had a
pending application, dated October 21, 1965, for an additional forest concession
covering an area of 2,000 hectares southwest of and adjoining the area of the
concession subject of the deed of assignment. Hence, on February 28, 1966, private
respondent and petitioners entered into another "Agreement" 5 with the following
stipulations:
x x x           x x x          x x x
1. That LEONARDO TIRO hereby agrees and binds himself to
transfer, cede and convey whatever rights he may acquire,
absolutely and forever, to TIMBERWEALTH
CORPORATION, a corporation duly organized and existing
under the laws of the Philippines, over a forest concession which
is now pending application and approval as additional area to his
existing licensed area under O.T. License No. 391-103166,
situated at Medina, Misamis Oriental;
 2. That for and in consideration of the aforementioned transfer
of rights over said additional area to TIMBERWEALTH
CORPORATION, ESTRELLA F. JAVIER and JOSE M.
JAVIER, both directors and stockholders of said corporation, do
hereby undertake to pay LEONARDO TIRO, as soon as said
additional area is approved and transferred to
TIMBERWEALTH CORPORATION the sum of THIRTY
THOUSAND PESOS (P30,000.00), which amount of money
shall form part of their paid up capital stock in
TIMBERWEALTH CORPORATION;
3. That this Agreement is subject to the approval of the members
of the Board of Directors of the TIMBERWEALTH
CORPORATION.
x x x           x x x          x x x
On November 18, 1966, the Acting Director of Forestry wrote private respondent
that his forest concession was renewed up to May 12, 1967 under O.T.L. No. 391-
51267, but since the concession consisted of only 2,535 hectares, he was therein
informed that:
In pursuance of the Presidential directive of May 13, 1966, you
are hereby given until May 12, 1967 to form an organization
such as a cooperative, partnership or corporation with other
adjoining licensees so as to have a total holding area of not less
than 20,000 hectares of contiguous and compact territory and an
aggregate allowable annual cut of not less than 25,000 cubic
meters, otherwise, your license will not be further renewed. 6
Consequently, petitioners, now acting as timber license holders by virtue of the deed
of assignment executed by private respondent in their favor, entered into a Forest
Consolidation Agreement 7 on April 10, 1967 with other ordinary timber license
holders in Misamis Oriental, namely, Vicente L. De Lara, Jr., Salustiano R. Oca and
Sanggaya Logging Company. Under this consolidation agreement, they all agreed to
pool together and merge their respective forest concessions into a working unit, as
envisioned by the aforementioned directives. This consolidation agreement was
approved by the Director of Forestry on May 10, 1967. 8 The working unit was
subsequently incorporated as the North Mindanao Timber Corporation, with the
petitioners and the other signatories of the aforesaid Forest Consolidation
Agreement as incorporators. 9
On July 16, 1968, for failure of petitioners to pay the balance due under the two
deeds of assignment, private respondent filed an action against petitioners, based on
the said contracts, for the payment of the amount of P83,138.15 with interest at 6%
per annum from April 10, 1967 until full payment, plus P12,000.00 for attorney's
fees and costs.
On September 23, 1968, petitioners filed their answer admitting the due execution of
the contracts but interposing the special defense of nullity thereof since private
respondent failed to comply with his contractual obligations and, further, that the
conditions for the enforceability of the obligations of the parties failed to
materialize. As a counterclaim, petitioners sought the return of P55,586.00 which
private respondent had received from them pursuant to an alleged management
agreement, plus attorney's fees and costs.
On October 7, 1968, private respondent filed his reply refuting the defense of nullity
of the contracts in this wise:
What were actually transferred and assigned to the defendants
were plaintiff's rights and interest in a logging concession
described in the deed of assignment, attached to the complaint
and marked as Annex A, and agreement Annex E; that the
"shares of stocks" referred to in paragraph II of the complaint
are terms used therein merely to designate or identify those
rights and interests in said logging concession. The defendants
actually made use of or enjoyed not the "shares of stocks" but
the logging concession itself; that since the proposed
Timberwealth Corporation was owned solely and entirely by
defendants, the personalities of the former and the latter are one
and the same. Besides, before the logging concession of the
plaintiff or the latter's rights and interests therein were assigned
or transferred to defendants, they never became the property or
assets of the Timberwealth Corporation which is at most only an
association of persons composed of the defendants. 10
and contending that the counterclaim of petitioners in the amount of P55,586.39 is
actually only a part of the sum of P69,661.85 paid by the latter to the former in
partial satisfaction of the latter's claim. 11
After trial, the lower court rendered judgment dismissing private respondent's
complaint and ordering him to pay petitioners the sum of P33,161.85 with legal
interest at six percent per annum from the date of the filing of the answer until
complete payment. 12
As earlier stated, an appeal was interposed by private respondent to the Court of
Appeals which reversed the decision of the court of a quo.
On March 28, 1978, petitioners filed a motion in respondent court for extension of
time to file a motion for reconsideration, for the reason that they needed to change
counsel. 13 Respondent court, in its resolution dated March 31, 1978, gave
petitioners fifteen (15) days from March 28, 1978 within which to file said motion
for reconsideration, provided that the subject motion for extension was filed on
time. 14 On April 11, 1978, petitioners filed their motion for reconsideration in the
Court of Appeals. 15 On April 21, 1978, private respondent filed a consolidated
opposition to said motion for reconsideration on the ground that the decision of
respondent court had become final on March 27, 1978, hence the motion for
extension filed on March 28, 1978 was filed out of time and there was no more
period to extend. However, this was not acted upon by the Court of Appeals for the
reason that on April 20, 1978, prior to its receipt of said opposition, a resolution was
issued denying petitioners' motion for reconsideration, thus:
The motion for reconsideration filed on April 11, 1978 by
counsel for defendants-appellees is denied. They did not file any
brief in this case. As a matter of fact this case was submitted for
decision without appellees' brief. In their said motion, they
merely tried to refute the rationale of the Court in deciding to
reverse the appealed judgment. 16
Petitioners then sought relief in this Court in the present petition for review
on certiorari. Private respondent filed his comment, reiterating his stand that the
decision of the Court of Appeals under review is already final and executory.
Petitioners countered in their reply that their petition for review presents substantive
and fundamental questions of law that fully merit judicial determination, instead of
being suppressed on technical and insubstantial reasons. Moreover, the aforesaid one
(1) day delay in the filing of their motion for extension is excusable, considering that
petitioners had to change their former counsel who failed to file their brief in the
appellate court, which substitution of counsel took place at a time when there were
many successive intervening holidays.
On July 26, 1978, we resolved to give due course to the petition.
The one (1) day delay in the filing of the said motion for extension can justifiably be
excused, considering that aside from the change of counsel, the last day for filing the
said motion fell on a holiday following another holiday, hence, under such
circumstances, an outright dismissal of the petition would be too harsh. Litigations
should, as much as possible, be decided on their merits and not on technicalities. In a
number of cases, this Court, in the exercise of equity jurisdiction, has relaxed the
stringent application of technical rules in order to resolve the case on its
merits. 17Rules of procedure are intended to promote, not to defeat, substantial
justice and, therefore, they should not be applied in a very rigid and technical sense.
We now proceed to the resolution of this case on the merits.
The assignment of errors of petitioners hinges on the central issue of whether the
deed of assignment dated February 15, 1966 and the agreement of February 28,
1966 are null and void, the former for total absence of consideration and the latter
for non-fulfillment of the conditions stated therein.
Petitioners contend that the deed of assignment conveyed to them the shares of
stocks of private respondent in Timberwealth Corporation, as stated in the deed
itself. Since said corporation never came into existence, no share of stocks was ever
transferred to them, hence the said deed is null and void for lack of cause or
consideration.
We do not agree. As found by the Court of Appeals, the true cause or consideration
of said deed was the transfer of the forest concession of private respondent to
petitioners for P120,000.00. This finding is supported by the following
considerations, viz:
1. Both parties, at the time of the execution of the deed of assignment knew that the
Timberwealth Corporation stated therein was non-existent. 18
2. In their subsequent agreement, private respondent conveyed to petitioners his
inchoate right over a forest concession covering an additional area for his existing
forest concession, which area he had applied for, and his application was then
pending in the Bureau of Forestry for approval.
3. Petitioners, after the execution of the deed of assignment, assumed the operation
of the logging concessions of private respondent. 19
4. The statement of advances to respondent prepared by petitioners stated:
"P55,186.39 advances to L.A. Tiro be applied to succeeding shipments. Based on
the agreement, we pay P10,000.00 every after (sic) shipment. We had only 2
shipments" 20
5. Petitioners entered into a Forest Consolidation Agreement with other holders of
forest concessions on the strength of the questioned deed of assignment. 21
The aforesaid contemporaneous and subsequent acts of petitioners and private
respondent reveal that the cause stated in the questioned deed of assignment is false.
It is settled that the previous and simultaneous and subsequent acts of the parties are
properly cognizable indica of their true intention. 22 Where the parties to a contract
have given it a practical construction by their conduct as by acts in partial
performance, such construction may be considered by the court in construing the
contract, determining its meaning and ascertaining the mutual intention of the parties
at the time of contracting. 23 The parties' practical construction of their contract has
been characterized as a clue or index to, or as evidence of, their intention or meaning
and as an important, significant, convincing, persuasive, or influential factor in
determining the proper construction of the agreement. 24
The deed of assignment of February 15, 1966 is a relatively simulated contract
which states a false cause or consideration, or one where the parties conceal their
true agreement. 25 A contract with a false consideration is not null and void per
se. 26 Under Article 1346 of the Civil Code, a relatively simulated contract, when it
does not prejudice a third person and is not intended for any purpose contrary to law,
morals, good customs, public order or public policy binds the parties to their real
agreement.
The Court of Appeals, therefore, did not err in holding petitioners liable under the
said deed and in ruling that —
. . . In view of the analysis of the first and second assignment of
errors, the defendants-appellees are liable to the plaintiff-
appellant for the sale and transfer in their favor of the latter's
forest concessions. Under the terms of the contract, the parties
agreed on a consideration of P120,000.00. P20,000.00 of which
was paid, upon the signing of the contract and the balance of
P100,000.00 to be paid at the rate of P10,000.00 for every
shipment of export logs actually produced from the forest
concessions of the appellant sold to the appellees. Since
plaintiff-appellant's forest concessions were consolidated or
merged with those of the other timber license holders by
appellees' voluntary act under the Forest Consolidation
Agreement (Exhibit D), approved by the Bureau of Forestry
(Exhibit D-3), then the unpaid balance of P49,338.15 (the
amount of P70,661.85 having been received by the plaintiff-
appellant from the defendants-appellees) became due and
demandable. 27
As to the alleged nullity of the agreement dated February 28, 1966, we agree with
petitioners that they cannot be held liable thereon. The efficacy of said deed of
assignment is subject to the condition that the application of private respondent for
an additional area for forest concession be approved by the Bureau of Forestry.
Since private respondent did not obtain that approval, said deed produces no effect.
When a contract is subject to a suspensive condition, its birth or effectivity can take
place only if and when the event which constitutes the condition happens or is
fulfilled. 28 If the suspensive condition does not take place, the parties would stand
as if the conditional obligation had never existed. 29
The said agreement is a bilateral contract which gave rise to reciprocal obligations,
that is, the obligation of private respondent to transfer his rights in the forest
concession over the additional area and, on the other hand, the obligation of
petitioners to pay P30,000.00. The demandability of the obligation of one party
depends upon the fulfillment of the obligation of the other. In this case, the failure of
private respondent to comply with his obligation negates his right to demand
performance from petitioners. Delivery and payment in a contract of sale, are so
interrelated and intertwined with each other that without delivery of the goods there
is no corresponding obligation to pay. The two complement each other. 30
Moreover, under the second paragraph of Article 1461 of the Civil Code, the
efficacy of the sale of a mere hope or expectancy is deemed subject to the condition
that the thing will come into existence. In this case, since private respondent never
acquired any right over the additional area for failure to secure the approval of the
Bureau of Forestry, the agreement executed therefor, which had for its object the
transfer of said right to petitioners, never became effective or enforceable.
WHEREFORE, the decision of respondent Court of Appeals is hereby MODIFIED.
The agreement of the parties dated February 28, 1966 is declared without force and
effect and the amount of P30,000.00 is hereby ordered to be deducted from the sum
awarded by respondent court to private respondent. In all other respects, said
decision of respondent court is affirmed.
SO ORDERED.
  
ABAD, J.:
 
This case is about the legal consequences when a buyer in a contract to
sell on installment fails to make the next payments that he promised.
 
The Facts and the Case
 
Petitioner Heirs of Paulino Atienza, namely, Rufina L. Atienza, Anicia A. Ignacio,
Roberto Atienza, Maura A. Domingo, Ambrocio Atienza, Maxima Atienza, Luisito
Atienza, Celestina A. Gonzales, Regalado Atienza and Melita A. Dela Cruz
(collectively, the Atienzas)[1] own a 21,959 square meters of registered agricultural
land at Valle Cruz, Cabanatuan City. [2] They acquired the land under an
emancipation patent[3] through the governments land reform program.[4]
 
On August 12, 2002 the Atienzas and respondent Domingo P. Espidol entered into a
contract called Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad (contract
to sell land with a down payment) covering the property. [5] They agreed on a price
of P130.00 per square meter or a total of P2,854,670.00, payable in three
installments: P100,000.00 upon the signing of the contract; P1,750,000.00 in
SECOND DIVISION December 2002, and the remaining P974,670.00 in June 2003. Respondent Espidol
  paid the Atienzas P100,000.00 upon the execution of the contract and
  paid P30,000.00 in commission to the brokers.
HEIRS OF PAULINO ATIENZA, G.R. No. 180665  
namely, RUFINA L. ATIENZA, When the Atienzas demanded payment of the second installment
ANICIA A. IGNACIO, ROBERTO of P1,750,000.00 in December 2002, however, respondent Espidol could not pay
ATIENZA, MAURA A. DOMINGO, it. He offered to pay the Atienzas P500.000.00 in the meantime,[6] which they did not
AMBROCIO ATIENZA, MAXIMA accept. Claiming that Espidol breached his obligation, on February 21, 2003 the
ATIENZA, LUISITO ATIENZA, Atienzas filed a complaint [7] for the annulment of their agreement with damages
CELESTINA A. GONZALES, before the Regional Trial Court (RTC) of Cabanatuan City in Civil Case 4451.
REGALADO ATIENZA and  
MELITA A. DELA CRUZ In his answer,[8] respondent Espidol admitted that he was unable to pay the
Petitioners, Present: December 2002 second installment, explaining that he lost access to the money
CARPIO, J., Chairperson, which he shared with his wife because of an injunction order issued by an American
- versus - NACHURA, court in connection with a domestic violence case that she filed against him. [9] In his
PERALTA, desire to abide by his obligation, however, Espidol took time to travel to
ABAD, and the Philippines to offer P800,000.00 to the Atienzas.
MENDOZA,   
JJ. Respondent Espidol also argued that, since their contract was one of sale
DOMINGO P. ESPIDOL, on installment, his failure to pay the installment due in December 2002 did not
Respondent. Promulgated: amount to a breach. It was merely an event that justified the Atienzas not to convey
August 11, 2010 the title to the property to him. The non-payment of an installment is not a legal
x --------------------------------------------------------------------------------------- x ground for annulling a perfected contract of sale. Their remedy was to bring an
  action for specific performance. Moreover, Espidol contended that the action was
DECISION premature since the last payment was not due until June 2003.
 In a decision[10] dated January 24, 2005, the RTC ruled that, inasmuch as
the non-payment of the purchase price was not considered a breach in a contract to
sell on installment but only an event that authorized the vendor not to convey title,
the proper issue was whether the Atienzas were justified in refusing to accept
respondent Espidols offer of an amount lesser than that agreed upon on the second
installment.
 
The trial court held that, although respondents legal problems abroad cannot justify
his failure to comply with his contractual obligation to pay an installment, it could
not be denied that he made an honest effort to pay at least a portion of it.  His
traveling to the Philippines from America showed his willingness and desire to make
good on his obligation. His good faith negated any notion that he intended to renege
on what he owed. The Atienzas brought the case to court prematurely considering
that the last installment was not then due.
Furthermore, said the RTC, any attempt by the Atienzas to cancel the contract would
have to comply with the provisions of Republic Act (R.A.) 6552 or the Realty
Installment Buyer Protection Act (R.A. 6552), particularly the giving of the required
notice of cancellation, that they omitted in this case. The RTC thus declared the
contract between the parties valid and subsisting and ordered the parties to comply
with its terms and conditions.
 
On appeal,[11] the Court of Appeals (CA) affirmed the decision of the trial court.
[12]
 Not satisfied, the Atienzas moved for reconsideration. [13] They argued that R.A.
6552 did not apply to the case because the land was agricultural and respondent
Espidol had not paid two years worth of installment that the law required for
coverage. And, in an apparent shift of theory, the Atienzas now also impugn the
validity of their contract to sell, claiming that, since the property was covered by an
emancipation patent, its sale was prohibited and void. But the CA denied the motion
for reconsideration, hence, the present petition. [14]
 
Questions Presented
 
The questions presented for resolution are:
 
1. Whether or not the Atienzas could validly sell to respondent Espidol the
subject land which they acquired through land reform under Presidential Decree
27[15] (P.D. 27);
 
2. Whether or not the Atienzas were entitled to the cancellation of the
contract to sell they entered into with respondent Espidol on the ground of the latters
failure to pay the second installment when it fell due; and
 
3. Whether or not the Atienzas action for cancellation of title was
premature absent the notarial notice of cancellation required by R.A. 6552.
 
The Courts Rulings
One. That the Atienzas brought up the illegality of their sale of subject
land only when they filed their motion for reconsideration of the CA decision is not
lost on this Court. As a rule, no question will be entertained on appeal unless it was
raised before the court below. This is but a rule of fairness.[16]
 
Nonetheless, in order to settle a matter that would apparently undermine a
significant policy adopted under the land reform program, the Court cannot simply
shirk from the issue. The Atienzas title shows on its face that the government
granted title to them on January 9, 1990 by virtue of P.D. 27. This law explicitly
prohibits any form of transfer of the land granted under it except to the government
or by hereditary succession to the successors of the farmer beneficiary.
Upon the enactment of Executive Order 228 [17] in 1987, however, the
restriction ceased to be absolute. Land reform beneficiaries were allowed to transfer
ownership of their lands provided that their amortizations with the Land Bank of
the Philippines (Land Bank) have been paid in full.[18] In this case, the Atienzas title
categorically states that they have fully complied with the requirements for the final
grant of title under P.D. 27. This means that they have completed payment of their
amortization with Land Bank.Consequently, they could already legally transfer their
title to another.
Two. Regarding the right to cancel the contract for non-payment of an
installment, there is need to initially determine if what the parties had was a contract
of sale or a contract to sell. In a contract of sale, the title to the property passes to the
buyer upon the delivery of the thing sold. In a contract to sell, on the other hand, the
ownership is, by agreement, retained by the seller and is not to pass to the vendee
until full payment of the purchase price. In the contract of sale, the buyers non-
payment of the price is a negative resolutory condition; in the contract to sell, the
buyers full payment of the price is a positive suspensive condition to the coming into
effect of the agreement. In the first case, the seller has lost and cannot recover the
ownership of the property unless he takes action to set aside the contract of sale. In
the second case, the title simply remains in the seller if the buyer does not comply
with the condition precedent of making payment at the time specified in the contract.
[19]
 Here, it is quite evident that the contract involved was one of a contract to sell
since the Atienzas, as sellers, were to retain title of ownership to the land until
respondent Espidol, the buyer, has paid the agreed price. Indeed, there seems no
question that the parties understood this to be the case. [20]
 
Admittedly, Espidol was unable to pay the second installment
of P1,750,000.00 that fell due in December 2002. That payment, said both the RTC
and the CA, was a positive suspensive condition failure of which was not regarded a
breach in the sense that there can be no rescission of an obligation (to turn over title)
that did not yet exist since the suspensive condition had not taken place. And this is
correct so far. Unfortunately, the RTC and the CA concluded that should Espidol offered to settle the full amount of the price in June 2003, when the last installment
eventually pay the price of the land, though not on time, the Atienzas were bound to fell due, or during the whole time the case was pending before the RTC.
comply with their obligation to sell the same to him.  
  Three. Notice of cancellation by notarial act need not be given before the
But this is error. In the first place, since Espidol failed to pay the contract between the Atienzas and respondent Espidol may be validly declare non-
installment on a day certain fixed in their agreement, the Atienzas can afterwards existent. R.A. 6552 which mandated the giving of such notice does not apply to this
validly cancel and ignore the contract to sell because their obligation to sell under it case. The cancellation envisioned in that law pertains to extrajudicial cancellation or
did not arise. Since the suspensive condition did not arise, the parties stood as if the one done outside of court,[25] which is not the mode availed of here. The Atienzas
conditional obligation had never existed.[21] came to court to seek the declaration of its obligation under the contract to sell
  cancelled. Thus, the absence of that notice does not bar the filing of their action.
Secondly, it was not a pure suspensive condition in the sense that the  
Atienzas made no undertaking while the installments were not yet due. Mr. Justice Since the contract has ceased to exist, equity would, of course, demand that, in the
Edgardo L. Paras gave a fitting example of suspensive condition: Ill buy your land absence of stipulation, the amount paid by respondent Espidol be returned, the
for P1,000.00 if you pass the last bar examinations. This he said was suspensive for purpose for which it was given not having been attained; [26] and considering that the
the bar examinations results will be awaited. Meantime the buyer is placed under no Atienzas have consistently expressed their desire to refund the P130,000.00 that
immediate obligation to the person who took the examinations. [22] Espidol paid.[27]
   
Here, however, although the Atienzas had no obligation as yet to turn over WHEREFORE, the Court GRANTS the petition and REVERSES and SETS
title pending the occurrence of the suspensive condition, it was implicit that they ASIDE the August 31, 2007 decision and November 5, 2007 resolution of the Court
were under immediate obligation not to sell the land to another in the of Appeals in CA-G.R. CV 84953. The Court declares the Kasunduan sa Pagbibili
meantime. When Espidol failed to pay within the period provided in their ng Lupa na may Paunang-Bayad between petitioner Heirs of Paulino Atienza and
agreement, the Atienzas were relieved of any obligation to hold the property in respondent Domingo P. Espidol dated August 12, 2002 cancelled and the Heirs
reserve for him. obligation under it non-existent. The Court directs petitioner Heirs of Atienza to
  reimburse the P130,000.00 down payment to respondent Espidol.
The ruling of the RTC and the CA that, despite the default in payment, the  
Atienzas remained bound to this day to sell the property to Espidol once he is able to SO ORDERED.
raise the money and pay is quite unjustified. The total price was P2,854,670.00. The
Atienzas decided to sell the land because petitioner Paulino Atienza urgently needed
money for the treatment of his daughter who was suffering from leukemia.
[23]
 Espidol paid a measly P100,000.00 in down payment or about 3.5% of the total
price, just about the minimum size of a brokers commission. Espidol failed to pay
the bulk of the price, P1,750,000.00, when it fell due four months later in December
2002. Thus, it was not such a small default as to justify the RTC and the CAs
decision to continue to tie up the Atienzas to the contract to sell upon the excuse that
Espidol tried his honest best to pay.
 
Although the Atienzas filed their action with the RTC on February 21,
2003, four months before the last installment of P974,670.00 fell due in June 2003,
it cannot be said that the action was premature. Given Espidols failure to pay the
second installment of P1,750,000.00 in December 2002 when it was due, the
Atienzas obligation to turn over ownership of the property to him may be regarded
as no longer existing.[24] The Atienzas had the right to seek judicial declaration of
such non-existent status of that contract to relieve themselves of any liability should
they decide to sell the property to someone else. Parenthetically, Espidol never
 G.R. No. 112127 July 17, 1995

CENTRAL PHILIPPINE UNIVERSITY, petitioner, 

vs.
COURT OF APPEALS, REMEDIOS FRANCO, FRANCISCO N. LOPEZ,
CECILIA P. VDA. DE LOPEZ, REDAN LOPEZ AND REMARENE
LOPEZ, respondents.

BELLOSILLO, J.:

CENTRAL PHILIPPINE UNIVERSITY filed this petition for review

on certiorari of the decision of the Court of Appeals which reversed that of the
Regional Trial Court of Iloilo City directing petitioner to reconvey to private
respondents the property donated to it by their predecessor-in-interest.

Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the
Board of Trustees of the Central Philippine College (now Central Philippine
University [CPU]), executed a deed of donation in favor of the latter of a parcel of
land identified as Lot No. 3174-B-1 of the subdivision plan Psd-1144, then a portion
of Lot No. 3174-B, for which Transfer Certificate of Title No. T-3910-A was issued
in the name of the donee CPU with the following annotations copied from the deed
of donation —

1. The land described shall be utilized by the CPU exclusively

for the establishment and use of a medical college with all its
buildings as part of the curriculum;

2. The said college shall not sell, transfer or convey to any third
party nor in any way encumber said land;

3. The said land shall be called "RAMON LOPEZ CAMPUS",

and the said college shall be under obligation to erect a
cornerstone bearing that name. Any net income from the land or
Republic of the Philippines any of its parks shall be put in a fund to be known as the
SUPREME COURT "RAMON LOPEZ CAMPUS FUND" to be used for
Manila improvements of said campus and erection of a building
thereon.1
FIRST DIVISION
On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez, Sr.,
filed an action for annulment of donation, reconveyance and damages against CPU
alleging that since 1939 up to the time the action was filed the latter had not
complied with the conditions of the donation. Private respondents also argued that
petitioner had in fact negotiated with the National Housing Authority (NHA) to
exchange the donated property with another land owned by the latter.
In its answer petitioner alleged that the right of private respondents to file the action
had prescribed; that it did not violate any of the conditions in the deed of donation
because it never used the donated property for any other purpose than that for which
it was intended; and, that it did not sell, transfer or convey it to any third party.
On 31 May 1991, the trial court held that petitioner failed to comply with the
conditions of the donation and declared it null and void. The court a quo further
directed petitioner to execute a deed of the reconveyance of the property in favor of
the heirs of the donor, namely, private respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the
annotations at the back of petitioner's certificate of title were resolutory conditions
breach of which should terminate the rights of the donee thus making the donation
revocable.
The appellate court also found that while the first condition mandated petitioner to
utilize the donated property for the establishment of a medical school, the donor did
not fix a period within which the condition must be fulfilled, hence, until a period
was fixed for the fulfillment of the condition, petitioner could not be considered as
having failed to comply with its part of the bargain. Thus, the appellate court
rendered its decision reversing the appealed decision and remanding the case to the
court of origin for the determination of the time within which petitioner should
comply with the first condition annotated in the certificate of title.
Petitioner now alleges that the Court of Appeals erred: (a) in holding that the quoted
annotations in the certificate of title of petitioner are onerous obligations and
resolutory conditions of the donation which must be fulfilled non-compliance of
which would render the donation revocable; (b) in holding that the issue of
prescription does not deserve "disquisition;" and, (c) in remanding the case to the
trial court for the fixing of the period within which petitioner would establish a
medical college.2
We find it difficult to sustain the petition. A clear perusal of the conditions set forth
in the deed of donation executed by Don Ramon Lopez, Sr., gives us no alternative
but to conclude that his donation was onerous, one executed for a valuable
consideration which is considered the equivalent of the donation itself, e.g., when a
donation imposes a burden equivalent to the value of the donation. A gift of land to
the City of Manila requiring the latter to erect schools, construct a children's
playground and open streets on the land was considered an onerous
donation.3 Similarly, where Don Ramon Lopez donated the subject parcel of land to
petitioner but imposed an obligation upon the latter to establish a medical college
thereon, the donation must be for an onerous consideration.
Under Art. 1181 of the Civil Code, on 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. Thus, when a
person donates land to another on the condition that the latter would build upon the
land a school, the condition imposed was not a condition precedent or a suspensive
condition but a resolutory one.4 It is not correct to say that the schoolhouse had to be
constructed before the donation became effective, that is, before the donee could
become the owner of the land, otherwise, it would be invading the property rights of
the donor. The donation had to be valid before the fulfillment of the condition. 5 If
there was no fulfillment or compliance with the condition, such as what obtains in
the instant case, the donation may now be revoked and all rights which the donee
may have acquired under it shall be deemed lost and extinguished.
The claim of petitioner that prescription bars the instant action of private
respondents is unavailing.
The condition imposed by the donor, i.e., the building of a medical school
upon the land donated, depended upon the exclusive will of the donee as
to when this condition shall be fulfilled. When petitioner accepted the
donation, it bound itself to comply with the condition thereof. Since the
time within which the condition should be fulfilled depended upon the
exclusive will of the petitioner, it has been held that its absolute
acceptance and the acknowledgment of its obligation provided in the deed
of donation were sufficient to prevent the statute of limitations from
barring the action of private respondents upon the original contract which
was the deed of donation.6
Moreover, the time from which the cause of action accrued for the revocation of the
donation and recovery of the property donated cannot be specifically determined in
the instant case. A cause of action arises when that which should have been done is
not done, or that which should not have been done is done. 7 In cases where there is
no special provision for such computation, recourse must be had to the rule that the
period must be counted from the day on which the corresponding action could have
been instituted. It is the legal possibility of bringing the action which determines the
starting point for the computation of the period. In this case, the starting point begins
with the expiration of a reasonable period and opportunity for petitioner to fulfill
what has been charged upon it by the donor.
The period of time for the establishment of a medical college and the necessary
buildings and improvements on the property cannot be quantified in a specific
number of years because of the presence of several factors and circumstances
involved in the erection of an educational institution, such as government laws and
regulations pertaining to education, building requirements and property restrictions
which are beyond the control of the donee.
Thus, when the obligation does not fix a period but from its nature and
circumstances it can be inferred that a period was intended, the general rule provided
in Art. 1197 of the Civil Code applies, which provides that the courts may fix the
duration thereof because the fulfillment of the obligation itself cannot be demanded
until after the court has fixed the period for compliance therewith and such period
has arrived.8
This general rule however cannot be applied considering the different set of
circumstances existing in the instant case. More than a reasonable period of fifty
(50) years has already been allowed petitioner to avail of the opportunity to comply
with the condition even if it be burdensome, to make the donation in its favor
forever valid. But, unfortunately, it failed to do so. Hence, there is no more need to
fix the duration of a term of the obligation when such procedure would be a mere
technicality and formality and would serve no purpose than to delay or lead to an
unnecessary and expensive multiplication of suits. 9 Moreover, under Art. 1191 of
the Civil Code, when one of the obligors cannot comply with what is incumbent
upon him, the obligee may seek rescission and the court shall decree the same unless
there is just cause authorizing the fixing of a period. In the absence of any just cause
for the court to determine the period of the compliance, there is no more obstacle for
the court to decree the rescission claimed.
Finally, since the questioned deed of donation herein is basically a gratuitous one,
doubts referring to incidental circumstances of a gratuitous contract should be
resolved in favor of the least transmission of rights and interests. 10Records are clear
and facts are undisputed that since the execution of the deed of donation up to the
time of filing of the instant action, petitioner has failed to comply with its obligation
as donee. Petitioner has slept on its obligation for an unreasonable length of time.
Hence, it is only just and equitable now to declare the subject donation already
ineffective and, for all purposes, revoked so that petitioner as donee should now
return the donated property to the heirs of the donor, private respondents herein, by
means of reconveyance.
WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May
1991 is REINSTATED and AFFIRMED, and the decision of the Court of Appeals
of 18 June 1993 is accordingly MODIFIED. Consequently, petitioner is directed to
reconvey to private respondents Lot No. 3174-B-1 of the subdivision plan Psd-1144
covered by Transfer Certificate of Title No. T-3910-A within thirty (30) days from
the finality of this judgment. Costs against petitioner. SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24190             July 13, 1926
GEORGE L. PARKS, plaintiff-appellant, 
vs.
PROVINCE OF TARLAC, MUNICIPALITY OF TARLAC, CONCEPCION
CIRER, and JAMES HILL, her husband,defendants-appellees.
Jos. N. Wolfson for appellant.
Provincial Fiscal Lopez de Jesus for the Province and Municipality of Tarlac.
No appearance for the other appellees.
AVANCEÑA, C. J.:
On October 18, 1910, Concepcion Cirer and James Hill, the owners of parcel of land
No. 2 referred to in the complaint, donated it perpetually to the municipality of
Tarlac, Province of Tarlac, under certain conditions specified in the public document
in which they made this donation. The donation was accepted by Mr. Santiago de
Jesus in the same document on behalf of the municipal council of Tarlac of which he
was the municipal president. The parcel thus donated was later registered in the
name of the donee, the municipality of Tarlac. On January 15, 1921, Concepcion
Cirer and James Hill sold this parcel to the herein plaintiff George L. Parks. On
August 24, 1923, the municipality of Tarlac transferred the parcel to the Province of
Tarlac which, by reason of this transfer, applied for and obtained the registration
thereof in its name, the corresponding certificate of title having been issued to it.
The plaintiff, George L. Parks, alleging that the conditions of the donation had not
been complied with and invoking the sale of this parcel of land made by Concepcion
Cirer and James Hill in his favor, brought this action against the Province of Tarlac,
the municipality of Tarlac, Concepcion Cirer and James Hill and prayed that he be
declared the absolute owner entitled to the possession of this parcel, that the transfer
of the same by the municipality of Tarlac to the Province of Tarlac be annulled, and
the transfer certificate issued to the Province of Tarlac cancelled.
The lower court dismissed the complaint.
The plaintiff has no right of action. If he has any, it is only by virtue of the sale of
this parcel made by Concepcion Cirer and James Hill in his favor on January 15,
1921, but that sale cannot have any effect. This parcel having been donated by
Concepcion Cirer and James Hill to the municipality of Tarlac, which donation was
accepted by the latter, the title to the property was transferred to the municipality of
Tarlac. It is true that the donation might have been revoked for the causes, if any,
provided by the law, but the fact is that it was not revoked when Concepcion Cirer
and James Hill made the sale of this parcel to the plaintiff. Even supposing that
causes existed for the revocation of this donation, still, it was necessary, in order to
consider it revoked, either that the revocation had been consented to by the donee,
the municipality of Tarlac, or that it had been judicially decreed. None of these
circumstances existed when Concepcion Cirer and James Hill sold this parcel to the
plaintiff. Consequently, when the sale was made Concepcion Cirer and James Hill
were no longer the owners of this parcel and could not have sold it to the plaintiff,
nor could the latter have acquired it from them.
And not only this, — the law itself recognizes the prescriptibility of the action for
the revocation of a donation, providing a special period of five years for the
revocation by the subsequent birth of children (art. 646, Civil Code), and one year
for the revocation by reason of ingratitude. If no special period is provided for the
prescription of the action for revocation for noncompliance of the conditions of the
donation (art. 647, Civil Code), it is because in this respect the donation is
considered onerous and is governed by the law of contracts and the general rules of
prescription. Under the law in force (sec. 43, Code of Civ. Proc.) the period of
prescription of this class of action is ten years. The action for the revocation of the
donation for this cause arose on April 19, 1911, that is six months after the
ratification of the instrument of donation of October 18, 1910. The complaint in this
action was presented July 5, 1924, more than ten years after this cause accrued.
By virtue of the foregoing, the judgment appealed from is affirmed, with the costs
against the appellant. So ordered.

But the appellant contends that a condition precedent having been imposed in the
donation and the same not having been complied with, the donation never became
effective. We find no merit in this contention. The appellant refers to the condition
imposed that one of the parcels donated was to be used absolutely and exclusively
for the erection of a central school and the other for a public park, the work to
commence in both cases within the period of six months from the date of the
ratification by the partes of the document evidencing the donation. It is true that this
condition has not been complied with. The allegation, however, that it is a condition
precedent is erroneous. The characteristic of a condition precedent is that the
acquisition of the right is not effected while said condition is not complied with or is
not deemed complied with. Meanwhile nothing is acquired and there is only an
expectancy of right. Consequently, when a condition is imposed, the compliance of
which cannot be effected except when the right is deemed acquired, such condition
cannot be a condition precedent. In the present case the condition that a public
school be erected and a public park made of the donated land, work on the same to
commence within six months from the date of the ratification of the donation by the
parties, could not be complied with except after giving effect to the donation. The
donee could not do any work on the donated land if the donation had not really been
effected, because it would be an invasion of another's title, for the land would have
continued to belong to the donor so long as the condition imposed was not complied
with.

The appellant also contends that, in any event, the condition not having been
complied with, even supposing that it was not a condition precedent but subsequent,
the non-compliance thereof is sufficient cause for the revocation of the donation.
This is correct. But the period for bringing an action for the revocation of the
donation has prescribed. That this action is prescriptible, there is no doubt. There is
no legal provision which excludes this class of action from the statute of limitations.