SALES  AND  LEASE  –  2H  2020-­‐2021  

CASE  TITLE   DELFIN  TAN  VS.  ERLINDA  BENOLIRAO  ET  AL   G.R.  NO.   153820  
   
PONENTE   BRION,  J.   DATE   October  16,  2009  
   
DOCTRINE   [Conditional Sale, Art. 1458]
 
[The Deed of Conditional Sale, as termed by the parties, states that “in case, BUYER has complied
with the terms and conditions of this contract, then the SELLERS shall execute and deliver to the
BUYER the appropriate Deed of Absolute Sale”. The very essence of a contract of sale is the
transfer of ownership in exchange of a priced paid or promised, but where the seller promises to
execute a Deed of Absolute Sale upon the completion by the buyer of the payment of the price, the
contract is only a Contract to Sell, even if it is denominated as a Deed of Conditional Sale.]

FACTS   Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and Norma Taningco were
  the co-owners of a 689-sqm. Parcel of land. On October 6, 1992, the co-owners executed a Deed
of Conditional Sale over the property in favor of Tan for the price of Php 1,378,000.000 with an
initial down-payment of Php 200,000.00 and the remaining balance payable within a period of 150
days, with an extendable period of 60 days on the condition of interest. The Deed also stipulated
that: if Tan fails to comply with the conditions, the sellers shall have the right to forfeit the down
payment and rescind the conditional sale; and if he complied with the terms, they shall execute and
deliver to him the appropriate Deed of Absolute Sale. Tan paid the down payment, but upon the
death of one of the co-owners an encumbrance was annotated in the title to the lot excluding others
from the enjoyment of the same for a period of two years. Tan would then ask for an extension to
pay the purchase price twice which was granted by the parties yet Tan was unable to pay both
times, prompting the vendors to write a demand letter for the payment or they would rescind the
sale and forfeit his down payment. Tan refused to comply with the vendors’ demand and claimed
that the encumbrance on the property would prevent the vendors from delivering a clean title to him
and in effect, he should no longer be required to pay the remaining balance and demanded the
return of his down payment. The vendors refused to refund the down payment and sold the
property in question to one Hector de Guzman.

ISSUE/S   Whether or not Tan had a claim of ownership or title to the property on the ground that they entered
  into a contract of a conditional sale.
RULING/S   NO. Art. 1458 provides that, “by the contract of sale one of the contracting parties obligates himself
  to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent. A contract of sale may be absolute or conditional.” The very
essence of a Contract of Sale is the transfer of ownership in exchange for a price paid or promised.
In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the property despite delivery thereof to the prospective buyer,
binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the
condition agreed. A reading of the terms and conditions of the contract would show that
notwithstanding the fact that it was denominated as a “Conditional Contract of Sale”, it is actually a
mere Contract to Sell. In a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may or may not occur. In
this case, the payment of the purchase price is a suspensive condition that upon fulfillment, the
vendors will deliver a Deed of Absolute Sale to Tan, hence being an effective reservation of
ownership. The failure to pay the price agreed upon is not a mere breach, casual or serious, but a
 SALES  AND  LEASE  –  2H  2020-­‐2021  
situation that prevents the obligation of the vendor to convey title from acquiring obligatory force. As
the sellers remained owners of the land as the condition had not been complied with, they were
within their right to sell the property to a third person.