G.R. No.

156405             February 28, 2007

SPS. GIL TORRECAMPO and BRENDA TORRECAMPO, Petitioners

vs.
DENNIS ALINDOGAN, SR. and HEIDE DE GUZMAN ALINDOGAN, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Review on Certiorari1 assailing the Decision2 of the Court of Appeals dated
November 18, 2002 in CA-G.R. CV No. 68583.

The facts are:

On May 24, 1997, spouses Jose and Lina Belmes executed a deed of sale in favor of spouses Dennis and Heide
Alindogan, respondents, over Lot No. 5524-H and the house constructed thereon located in Rawis, Legazpi City.

On July 4, 1997, Lina Belmes wrote respondents wherein she delivered the constructive possession of the house and lot
to them. However, on July 5, 1997, before they could take actual possession of the property, spouses Gil and Brenda
Torrecampo, petitioners, and spouses Jonathan Lozares and Jocelyn Torrecampo, entered and occupied the premises.

Despite respondents’ repeated demands, petitioners failed and refused to vacate the property. Thus, respondents filed
with the Regional Trial Court (RTC) Branch 10, Legazpi City, a Complaint for Recovery of Ownership, Possession and
Damages against petitioners, docketed as Civil Case No. 9421.1avvphi1.net

In their Answer to the complaint, petitioners claimed that on March 25, 1997, spouses Belmes received from them
₱73,000.00 as advance payment for the sale of the house and lot. On April 8, 1997, petitioners and spouses Belmes
executed a "Contract to Buy and Sell" covering the same property. The parties agreed as follows: that the total
consideration is ₱350,000.00; that upon the signing of the contract, petitioners shall pay spouses Belmes ₱220,000.00;
and that the balance of ₱130,000.00 shall be paid upon the issuance of the certificate of title in the names of petitioners.
To complete the agreed partial payment of ₱220,000.00 mentioned in the contract, petitioners paid spouses Belmes
₱130,000.00, but the latter refused to accept the amount. Thus, on July 7, 1997, petitioners filed with the RTC, Branch 18,
Tabaco, Albay, Civil Case No. T-1914, a Complaint for Specific Performance against spouses Belmes.

On July 14, 2000, the RTC, in Civil Case No. 9421, now before us, rendered a Decision3 in favor of respondents, thus:

WHEREFORE, premises considered, judgment is hereby rendered:

a) declaring the plaintiffs as the owners and entitled to the possession of the lot in question more particularly
described in par. 2 of the complaint including the improvements thereon;

b) ordering the defendants or anyone acting for or with them to vacate the premises; and

c) directing the defendants and/or their agents to turn over the possession of the property in question to the
plaintiffs.

No pronouncement as to costs.

SO ORDERED.

The trial court held that the transaction between petitioners and spouses Belmes is a mere contract to sell. Thus, the latter
did not transfer ownership of the house and lot to petitioners.

On appeal, the Court of Appeals, in its assailed Decision,4 affirmed in toto the RTC judgment.

In affirming the trial court’s finding that the transaction between petitioners and spouses Belmes is a mere contract to sell,
the Court of Appeals held:

Thus, we shall now look into the transaction entered into by the defendants with the Belmeses, with reference to the
intention of the parties. The Contract to Buy and Sell reads:

"That whereas, the vendor agreed to sell and the vendee agreed to buy the above-described parcel of land, together with
improvements therein, for the sum of Three Hundred Fifty Thousand Pesos (P350, 000.00), Philippine currency, under the
following terms and conditions xxx"1awphi1.net

The tenor of the afore-quoted provision of the contract clearly confirms that the transaction between the transaction
between the defendants and the Belmeses was not a contract of sale, as defined by Art. 1458 of the Civil Code. The
1
reason for the same was clearly explained by defendants’ own witness, Lourdes Narito, during her direct examination.
She testified that herein defendants themselves refused to enter into a contract of sale and execute a deed of sale unless
and until the Belmeses will transfer the title to the property. This was the reason why a mere contract to sell was
executed. x x x (Emphasis ours)

In a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, we review only
errors of law and not errors of facts. The factual findings of the appellate court are generally binding on this Court. This
applies with greater force when both the trial court and the Court of Appeals are in complete agreement on their factual
findings, as in this case. Here, the facts relied upon by the trial and appellate courts are sustained by the record. There is
no reason to deviate from their findings.5

Nevertheless, in order to put rest all doubts on the matter, we hold that the agreement between petitioners and spouses
Belmes is not a contract of sale but only a contract to sell. The distinction between a contract of sale and a contract to sell
is well-settled:

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. (Underscoring supplied)6

Indeed, the true agreement between petitioners and spouses Belmes is a contract to sell. Not only did the parties
denominate their contract as "Contract to Buy and Sell," but also specified therein that the balance of the purchase price
in the amount of ₱130,000.00 is to be paid by petitioners upon the issuance of a certificate of title. That spouses Belmes
have in their possession the certificate of title indicates that ownership of the subject property did not pass to petitioners.

In Ursal v. Court of Appeals, et al.,7 we held:

Indeed, in contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the
suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of
the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the
existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if there is a
contract to sell between them.

Petitioners further contend that when respondents bought the property on May 24, 1997 from spouses Belmes, they knew
that the same property was previously sold to them (petitioners). Therefore, since respondents are buyers in bad faith,
ownership of the property must pertain to petitioners who, in good faith, were first in possession.

The argument is misplaced.

Petitioners invoke Article 1544 of the Civil Code which reads:

Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in
the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and in
the absence thereof, to the person who presents the oldest title, provided there is good faith. (Emphasis ours)

The above provision does not apply to the instant case considering that the transaction between petitioners and spouses
Belmes is a mere contract to sell, not a contract of sale.

WHEREFORE, we DENY the petition and AFFIRM the assailed Decision of the Court of Appeals dated November 18,
2002 in CA-G.R. CV No. 68583.

Costs against petitioners.

SO ORDERED.

2
 ECOND DIVISION

[G.R. NO. 152164 : November 23, 2007]

ADELFA DEMAFELIS, Petitioner, v. COURT OF APPEALS and FERNANDO CONDEZ,* Respondents.

RESOLUTION

QUISUMBING, J.:

On appeal are the Decision1 dated September 6, 2001 and the Resolution2 dated February 8, 2002 of the Court of
Appeals in CA-G.R. SP No. 58859. The appellate court had reversed the Decision3 dated July 28, 1995 of the Regional
Trial Court (RTC), Branch 274, Parañaque City.

The facts of the case are as follows:

On April 17, 1987, petitioner Adelfa Demafelis bought from the heirs of Hermogenes Rodriguez a 155-square meter parcel
of land, part of a larger undivided parcel, Lot No. Psu-103596 covered by Tax Declaration No. D-010-07184. The land is
situated in the Barrio of San Dionisio, Parañaque City. Petitioner said that she had allowed respondent Fernando Condez
to stay in the property but later, she asked respondent to vacate the property. However, respondent did not leave. Thus,
she filed with the Metropolitan Trial Court (MeTC), Branch 78, Parañaque City, a complaint for ejectment against
respondent.

Respondent for his part maintains that on March 7, 1988, he bought the property from Antonio F. Bernabe4 and that he
had stayed in the said property as early as 1985, even before he acquired it from Bernabe.

The MeTC ordered respondent's eviction.5 Respondent appealed to the RTC which affirmed the findings of the MeTC.The
dispositive portion of the decision reads:

WHEREFORE, the decision of the court a quo is hereby affirmed in its entirety, and that, the court a quo is hereby
ordered to issue a writ of execution in favor of the [petitioner].

SO ORDERED.6

Respondent appealed to the Court of Appeals, asking whether the affirmation by the RTC of the decision of the MeTC
was proper under the circumstances.7 The Court of Appeals held:

Comparing the two lots, i.e., 75 square meters allegedly purchased by petitioner from Antonio Bernabe, Jr., and the 115
square meters portion allegedly bought by respondent from Ismael Favila, it appears that the lot sold by Favila to Bernabe
on March 7, 1998, which consists of 115,132 square meters, a portion of 75 square meters of which was in turn sold by
Bernabe to petitioner Condes, is described as Lot 1, Psu-55940, and covered by TCT No. 272. On the other hand, the lot
sold by Favila to respondent Demafelis with an area of 115 square meters is a portion of the 86,320 square meters known
as Lot No. Psu-103592, and covered by Tax Declaration No. 010-07184. On the basis of the Psu number alone, it shows
that the origin of the lot claimed by petitioner is different from the origin of the lot claimed by respondent.

Correspondingly, there is no certainty as to the identity of the property purchased by petitioner and that of respondent,
except the bare contracts executed in their favor. Had there been a relocation survey of the boundaries of the property in
question, the controversy as to the identity of the lot subject matter of the instant case would have been avoided. If there
is no identity between the property purchased by petitioner and the property purchased by respondent, the instant case
for ejectment will not prosper as the parties have exclusive rights over their respective property.

WHEREFORE, the Decision, dated July 28, 1995, of the Regional Trial Court affirming the Decision, dated March 12,
1995, of the Metropolitan Trial Court is REVERSED and SET ASIDE. Civil Case No. 9216 of the M[e]TC, Branch 78,
Parañaque City, is DISMISSED.

SO ORDERED.8

The Court of Appeals later denied petitioner's subsequent motion for reconsideration.9

Hence, the instant petition, which raises the following issues:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS, SEVENTH DIVISION WENT BEYOND THE ISSUES
RAISED IN THE PETITION FOR REVIEW IN RENDERING THE DECISION SOUGHT TO BE REVIEWED.

II.
3
WHETHER OR NOT THE HONORABLE COURT OF APPEALS, SEVENTH DIVISION ERRED IN ITS FINDINGS THAT
THERE IS NO IDENTITY OF THE PROPERTY SUBJECT OF EJECTMENT BEING CONTRARY TO THE EVIDENCE
ON RECORD.

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS, SEVENTH DIVISION ERRED IN CONCLUDING THAT
THE DOCUMENT OF SALE IN FAVOR OF RESPONDENT FERNANDO CONDES TRANSFERRED OWNERSHIP
CONTRARY TO THE FINDINGS OF THE LOWER COURT THAT THE DOCUMENT NAMELY: "KASUNDUAN SA
BILIHAN NG LUPA" IS ACTUALLY AN AGREEMENT TO ENTER INTO A CONTRACT TO SELL AND DID NOT
TRANSFER THE OWNERSHIP OF THE LOT SUBJECT THEREIN.

IV.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS, SEVENTH DIVISION ERRED IN NOT REMANDING
THE CASE TO THE COURT OF ORIGIN FOR THE PURPOSE OF ESTABLISHING IDENTITY OF THE PROPERTY
RATHER THAN DISMISSING OUTRIGHT CIVIL CASE NO. 9216 OF THE M[e]TC, BRANCH 78, PARAÑAQUE CITY.10

More simply stated, the issues for resolution now are: (1) Did the Court of Appeals err in going beyond the issues raised in
the Petition for Review ? (2) Did the Court of Appeals err in finding that the identity of the property in question has not
been established? (3) Lastly, did the Court of Appeals err in concluding that the document of sale in favor of respondent
transferred ownership?cra lawlibrary

On the first issue, petitioner contends that a review of the arguments of respondent in the MeTC would clearly reveal that
the matter of identity of the property subject of ejectment was not raised. In fact, the first time that the matter surfaced was
when the Court of Appeals rendered the decision which is sought to be reviewed in this appeal.11

Respondent, on the other hand, states that the Court of Appeals is clothed with ample authority to review matters
although not assigned as errors if their consideration is necessary in arriving at a just decision.12

The pertinent rule is Section 8, Rule 51 of the Revised Rules of Court. It states:

SEC. 8. Questions that may be decided. − No error which does not affect the jurisdiction over the subject matter or the
validity of the judgment appealed from or the proceedings therein will be considered unless stated in the assignment of
errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may
pass upon plain errors and clerical errors.

In several cases we have also explained that the Court of Appeals is imbued with sufficient authority and discretion to
review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a
complete and just resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal
justice.13 In Sesbreño v. Central Board of Assessment Appeals 14 we held that an appellate court has an inherent authority
to review unassigned errors, e.g. (1) which are closely related to an error properly raised; (2) upon which the
determination of the error properly assigned is dependent; or (3) where the Court finds that consideration of them is
necessary in arriving at a just decision of the case.15

We note that the issue raised in the court a quo was:

Whether the affirmance by the Regional Trial Court, Branch 274, Parañaque City, of the decision of the Metropolitan Trial
Court, Branch 78, Parañaque City is proper under the circumstances.16

Patently, the matter of identity of the property subject of ejectment is closely related to the error raised. Even the petitioner
herself in her Memorandum admitted that the issue raised was broad enough to cover a lot of issues.17 Here therefore, the
resolution of the assigned error is dependent on the matter of identity of the property subject of ejectment, and the
identification of the property is necessary in arriving at a just decision of the case. Thus, we agree that the appellate court
did not err in tackling the issue.

On the second issue, petitioner contends that the Court of Appeals simply overlooked the existence of the Location Plan
submitted in evidence by petitioner in the lower court when it found that there was no identity of the property subject of
ejectment.18

Respondent counters that the issue as to the identity of the subject land is a question of fact already determined by the
appellate court which cannot be raised in a Petition for Review on Certiorari and cannot be disturbed by this Court unless
those findings are not supported by the evidence.19

In the case of Towne & City Development Corporation v. Court of Appeals,20 the Court said that there is a question of fact
when a doubt or difference arises as to the truth or the falsehood of alleged facts, while there is a question of law when
such doubt or difference refers to what the law is on a certain state of facts.21 The identity of the subject land is a factual
finding supported by evidence, hence, cannot be disturbed in this petition. We are bound by this factual finding of the

4
appellate court, and cannot review again the credibility of witnesses and calibrate the probative value of the evidence on
record.22

At this juncture, it is worthy to note that the petitioner's Location Plan was not even mentioned in her Complaint23 before
the MeTC. Nor was it attached to her Motion for Reconsideration and Reply to Comment in the Court of Appeals when
she raised this as the main ground for the reconsideration of the Court of Appeals' decision. But assuming arguendo that
the Location Plan was attached, there is still not enough reason to say that the Court of Appeals overlooked the Location
Plan submitted by petitioner. Lending more credence to the evidence of one party does not necessarily mean overlooking
the evidence of the other.

On the third issue, petitioner contends that the statement of the Court of Appeals that respondent was the owner of the lot
that he allegedly purchased from Antonio F. Bernabe is contrary to the statements of the lower courts which should be
binding and conclusive upon the Court of Appeals.24 She further argues in her reply that the findings of facts by the Court
of Appeals are subject to review by the Court.25

On the other hand, respondent reiterates that the findings of the Court of Appeals as to the lack of identity of the subject
lot, are amply supported by evidence, hence, they should not be disturbed by the Court, as these are now conclusive on
the parties and are not reviewable by this Court.26

The trial court held that there was a contract to sell or conditional sale between Bernabe and respondent, while, according
to the petitioner, the Court of Appeals implied that the parties had entered into a contract of sale. Since there was an
apparent conflict between the findings of the Court of Appeals and the trial court, we went through the records of the case.

The Kasunduan sa Bilihan ng Lupa27 or Kasunduan between Bernabe and the respondent reads:

SA SINUMANG MAKAKAALAM:

Ako si Ginoong Antonio F. Bernabe, may asawa nakatira sa 54 Bonn st. BF Homes, Paranaque Metro Manila. May-ari sa
isang parcelang lupa na aking pinahuhulugang sa mababang halaga.

Ang kabuang sukat ng lupa ay humigit kumulang sa 75 metro kuadrado. Bilang may-ari ng lupa ay sumangayon ako sa
[kasunduan] ng bilihan ng lupa sa murang halaga.

Ako si Ginoong Fernando Condez may asawa nakatira sa Sucat Paranaque. Bumili ng lupa kay Ginoong Antonio F.
Bernabe sa murang halaga. Aking pong huhulugan ang lote sa mababang halaga.

Na si Ginoong Fernando Condez ay nangangako na ang halagang P18,550.00 (labing walo libo limangdaan limangpung
piso) ay babayaran niya sa may-ari sa [loob] [ng] labing dalawang taon (12 years) sa halagang P250.00 ang hulog buwan
buwan.

Na kung hindi makahulog si G. Fernando Condez sa buwaanang hulog siya ay magbabayad ng multang P50.00 isang
buwan.

Sa katunayan, si G. Antonio F. Bernabe at si G. Fernando Condez ay lumagda ngayon ika 7 Marso 1988 Bernabe Subd.
Sucat Parque., Metro Manila.

(Nilagdaan) (Nilagdaan)
G. Antonio F. Bernabe G. Fernando Condez
NAGBIBILI BUMILI
Lumagda sa harap nina:
(Nilagdaan) (Nilagdaan)

The case of Gomez v. Court of Appeals held:

To be sure, a contract of sale may either be absolute or conditional.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

One form of conditional sale is what is now popularly termed as a "Contract to Sell," where ownership or title is retained
until the fulfillment of a positive suspensive condition normally the payment of the purchase price in the manner agreed
upon.28

It would seem that the Kasunduan, showing payment by installment, embodied a contract to sell or a conditional sale,
reserving ownership in the vendor Bernabe until the full payment by respondent of the purchase price. However, the fact
that the Kasunduan was a contract to sell does not necessarily mean that the Court of Appeals erred when it said "a
portion of 75 square meters of which was in turn sold by Bernabe to petitioner Condez, is described as Lot 1, Psu-55940,
and covered by TCT No. 272." Patently, the Court of Appeals implied only that ownership had transferred to the
respondent when it said this, a fact which is not inconsistent with the Deed of Sale being conditional at first. That the Court
5
of Appeals concluded that the document of sale or the Kasunduan in favor of respondent transferred ownership cannot be
inferred in its assailed Decision or Resolution.chanrobles virtual law library

WHEREFORE, the instant petition is DENIED for lack of merit. The Decision dated September 6, 2001 and the Resolution
dated February 8, 2002 of the Court of Appeals in CA-G.R. SP No. 58859 are AFFIRMED.

Costs against petitioner.

SO ORDERED.

6
 THIRD DIVISION

G.R. No. 170405               February 2, 2010

RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG.1 Respondent.

DECISION

CORONA, J.:

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with improvements situated in Antipolo,
Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association,
Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of
mortgage3 stating:

x x x           x x x          x x x

That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (₱1.1 million), Philippine
currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable,
unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and other
improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:

1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE
HUNDRED (₱415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of
[respondent] without any further cost whatsoever;

2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR
THOUSAND FIVE HUNDRED PESOS (₱684,500) with REAL SAVINGS AND LOAN,4 Cainta, Rizal… (emphasis
supplied)

x x x           x x x          x x x

Pursuant to this deed, respondent gave petitioner ₱415,500 as partial payment. Petitioner, on the other hand, handed the
keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondent
and release the certificates of title.

Thereafter, respondent undertook repairs and made improvements on the properties.5 Respondent likewise informed
RSLAI of her agreement with petitioner for her to assume petitioner’s outstanding loan. RSLAI required her to undergo
credit investigation.

Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10,
1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire
about the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken
back the certificates of title.

Respondent persistently contacted petitioner but her efforts proved futile.

On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and
damages6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that
since petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to
Viloria. Thus, petitioner fraudulently deprived her of the properties.

Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently
prayed for the dismissal of the complaint. He claimed that since the transaction was subject to a condition (i.e., that RSLAI
approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a
loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose of the
properties. Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with gross and
evident bad faith.

Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was
subject to a condition. The perfection of a contract of sale depended on RSLAI’s approval of the assumption of mortgage.
Since RSLAI did not allow respondent to assume petitioner’s obligation, the RTC held that the sale was never perfected.

7
In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of cause of action and ordered
respondent to pay petitioner ₱100,000 moral damages, ₱20,000 attorney’s fees and the cost of suit.

Aggrieved, respondent appealed to the Court of Appeals (CA),8 asserting that the court a quo erred in dismissing the
complaint.

The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and held
that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties when he
sold them to Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral and exemplary
damages for fraudulently depriving respondent of the properties.

In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise
ordered respondent to reimburse petitioner ₱715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was
ordered to deliver the certificates of titles to respondent and pay her ₱50,000 moral damages and ₱15,000 exemplary
damages.

Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005.10 Hence, this
petition,11 with the sole issue being whether the parties entered into a contract of sale or a contract to sell.

Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive
condition, that is, the approval by RSLAI of respondent’s assumption of mortgage. Because RSLAI did not allow
respondent to assume his (petitioner’s) obligation, the condition never materialized. Consequently, there was no sale.

Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full
ownership of the subject properties upon the execution of the deed.

We modify the decision of the CA.

Contract of Sale or Contract to Sell?

The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to
sell while the CA held that it was a contract of sale.

In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should
the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.12

On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership
of the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the
seller can only sue for damages.13

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a
manner absolute and irrevocable" for a sum of ₱1.1 million.14 With regard to the manner of payment, it required
respondent to pay ₱415,500 in cash to petitioner upon the execution of the deed, with the balance15 payable directly to
RSLAI (on behalf of petitioner) within a reasonable time.16 Nothing in said instrument implied that petitioner reserved
ownership of the properties until the full payment of the purchase price.17 On the contrary, the terms and conditions of the
deed only affected the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized
contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the
performance of the contract, not the perfection thereof nor the transfer of ownership.

Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer.18 In this
regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a notarized deed of sale is equivalent to
the delivery of a thing sold.

In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did
petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from
respondent and release his certificates of title to her. The totality of petitioner’s acts clearly indicates that he had
unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the
parties entered into.

Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to
approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by
paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this
connection, Article 1186 of the Civil Code provides:

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Void Sale Or Double Sale?

8
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate
occasions.20 However, the second sale was not void for the sole reason that petitioner had previously sold the same
properties to respondent. On this account, the CA erred.

This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same
seller to the two different buyers in good faith.

Article 1544 of the Civil Code provides:

Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith. (emphasis supplied)

This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to
say, it disqualifies any purchaser in bad faith.

A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or
an interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has
notice of some other person’s claim or interest in the property.21 The law requires, on the part of the buyer, lack of notice
of a defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of any
defect in the seller’s title.

Was respondent a purchaser in good faith? Yes.

Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her
agreement with petitioner, respondent had the obligation to assume the balance of petitioner’s outstanding obligation to
RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioner’s obligation. However,
because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself
rendered respondent’s obligation to assume petitioner’s indebtedness to RSLAI impossible to perform.

Article 1266 of the Civil Code provides:

Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically impossible
without the fault of the obligor.

Since respondent’s obligation to assume petitioner’s outstanding balance with RSLAI became impossible without her fault,
she was released from the said obligation. Moreover, because petitioner himself willfully prevented the condition vis-à-vis
the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article 1186 of
the Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is deemed
to have fully complied with the condition of the payment of the remainder of the purchase price.

Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which
she undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent.
Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of
deeds, the one who took prior possession of the properties shall be the lawful owner thereof.

In this instance, petitioner delivered the properties to respondent when he executed the notarized deed22 and handed over
to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof
by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993.
Thus, respondent became the lawful owner of the properties.

Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled,
respondent’s obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner.

Therefore, respondent must pay petitioner ₱684,500, the amount stated in the deed. This is because the provisions, terms
and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the
assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the
certificates of title to respondent. We likewise affirm the award of damages.

9
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No.
59748 are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner
Raymundo de Leon ₱684,500 representing the balance of the purchase price as provided in their March 10, 1993
agreement.

Costs against petitioner.

SO ORDERED.

10
 SECOND DIVISION

G.R. No. 180665               August 11, 2010

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 Petitioners,
vs.
DOMINGO P. ESPIDOL, Respondent.

DECISION

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 patent3 through the government’s 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 ₱130.00 per square meter or a total of ₱2,854,670.00, payable in three installments: ₱100,000.00
upon the signing of the contract; ₱1,750,000.00 in December 2002, and the remaining ₱974,670.00 in June 2003.
Respondent Espidol paid the Atienzas ₱100,000.00 upon the execution of the contract and paid ₱30,000.00 in
commission to the brokers.

When the Atienzas demanded payment of the second installment of ₱1,750,000.00 in December 2002, however,
respondent Espidol could not pay it. He offered to pay the Atienzas ₱500.000.00 in the meantime,6 which they did not
accept. Claiming that Espidol breached his obligation, on February 21, 2003 the Atienzas filed a complaint7 for the
annulment of their agreement with damages before the Regional Trial Court (RTC) of Cabanatuan City in Civil Case 4451.

In his answer,8 respondent Espidol admitted that he was unable to pay the December 2002 second installment, explaining
that he lost access to the money which he shared with his wife because of an injunction order issued by an American
court in connection with a domestic violence case that she filed against him.9 In his desire to abide by his obligation,
however, Espidol took time to travel to the Philippines to offer ₱800,000.00 to the Atienzas.

Respondent Espidol also argued that, since their contract was one of sale on installment, his failure to pay the installment
due in December 2002 did not amount to a breach. It was merely an event that justified the Atienzas’ not to convey the
title to the property to him. The non-payment of an installment is not a legal 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
premature since the last payment was not due until June 2003.

In a decision10 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 Espidol’s offer of an amount lesser
than that agreed upon on the second installment.

The trial court held that, although respondent’s 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

11
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 2715 (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 latter’s 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 Court’s 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 22817 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 buyer’s
non-payment of the price is a negative resolutory condition; in the contract to sell, the buyer’s 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 ₱1,750,000.00 that fell due in December 2002.1awph!
1 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 eventually pay the price of the land, though not on time, the Atienzas were bound to comply with their
obligation to sell the same to him.

But this is error. In the first place, since Espidol failed to pay the installment on a day certain fixed in their agreement, the
Atienzas can afterwards validly cancel and ignore the contract to sell because their obligation to sell under it did not arise.
Since the suspensive condition did not arise, the parties stood as if the conditional obligation had never existed.21

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 Edgardo L. Paras gave a fitting example of suspensive condition: "I’ll buy your
land for ₱1,000.00 if you pass the last bar examinations." This he said was suspensive for the bar examinations results
will be awaited. Meantime the buyer is placed under no immediate obligation to the person who took the examinations.22

Here, however, although the Atienzas had no obligation as yet to turn over title pending the occurrence of the suspensive
condition, it was implicit that they were under immediate obligation not to sell the land to another in the meantime. When
Espidol failed to pay within the period provided in their agreement, the Atienzas were relieved of any obligation to hold the
property in reserve for him.

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 raise the money and pay is quite unjustified. The total price was ₱2,854,670.00. The
Atienzas decided to sell the land because petitioner Paulino Atienza urgently needed money for the treatment of his
12
daughter who was suffering from leukemia.23 Espidol paid a measly ₱100,000.00 in down payment or about 3.5% of the
total price, just about the minimum size of a broker’s commission. Espidol failed to pay the bulk of the price,
₱1,750,000.00, 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 CA’s 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
₱974,670.00 fell due in June 2003, it cannot be said that the action was premature. Given Espidol’s failure to pay the
second installment of ₱1,750,000.00 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 offered to settle the full amount of the price in June 2003, when the last
installment fell due, or during the whole time the case was pending before the RTC.

Three. Notice of cancellation by notarial act need not be given before the contract between the Atienzas and respondent
Espidol may be validly declare non-existent. R.A. 6552 which mandated the giving of such notice does not apply to this
case. The cancellation envisioned in that law pertains to extrajudicial cancellation or one done outside of court,25 which is
not the mode availed of here. The Atienzas 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.

Since the contract has ceased to exist, equity would, of course, demand that, in the absence of stipulation, the amount
paid by respondent Espidol be returned, the purpose for which it was given not having been attained;26 and considering
that the Atienzas have consistently expressed their desire to refund the ₱130,000.00 that Espidol paid.27

WHEREFORE, the Court GRANTS the petition and REVERSES and SETS ASIDE the August 31, 2007 decision and
November 5, 2007 resolution of the Court of Appeals in CA-G.R. CV 84953. The Court declares the Kasunduan sa
Pagbibili ng Lupa na may Paunang-Bayad between petitioner Heirs of Paulino Atienza and respondent Domingo P.
Espidol dated August 12, 2002 cancelled and the Heirs’ obligation under it non-existent. The Court directs petitioner Heirs
of Atienza to reimburse the ₱130,000.00 down payment to respondent Espidol.

SO ORDERED.

13
G.R. No. 172036               April 23, 2010

SPOUSES FAUSTINO AND JOSEFINA GARCIA, SPOUSES MELITON GALVEZ AND HELEN GALVEZ, and
CONSTANCIA ARCAIRA represented by their Attorney-in-Fact JULIANA O. MOTAS, Petitioners,
vs.
COURT OF APPEALS, EMERLITA DE LA CRUZ, and DIOGENES G. BARTOLOME, Respondents.

DECISION

CARPIO, J.:

G.R. No. 172036 is a petition for review1 assailing the Decision2 promulgated on 25 January 2006 as well as the
Resolution3 promulgated on 16 March 2006 of the Court of Appeals (appellate court) in CA-G.R. CV No. 63651. The
appellate court reversed and set aside the decision of Branch 23 of the Regional Trial Court of Trece Martires City, Cavite
(trial court) in Civil Case No. TM-622. The appellate court ordered Emerlita Dela Cruz (Dela Cruz) to return to spouses
Faustino and Josefina Garcia, spouses Meliton and Helen Galvez, and Constancia Arcaira (collectively, petitioners) the
amount in excess of one-half percent of ₱1,500,000. Dela Cruz’s co-defendant, Diogenes Bartolome (Bartolome), did not
incur any liability.

The appellate court narrated the facts as follows:

On May 28, 1993, plaintiffs spouses Faustino and Josefina Garcia and spouses Meliton and Helen Galvez (herein
appellees) and defendant Emerlita dela Cruz (herein appellant) entered into a Contract to Sell wherein the latter agreed to
sell to the former, for Three Million One Hundred Seventy Thousand Two Hundred Twenty (₱3,170,220.00) Pesos, five (5)
parcels of land situated at Tanza, Cavite particularly known as Lot Nos. 47, 2768, 2776, 2767, 2769 and covered by
Transfer Certificate of Title Nos. T-340674, T-340673, T-29028, T-29026, T-29027, respectively. At the time of the
execution of the said contract, three of the subject lots, namely, Lot Nos. 2776, 2767, and 2769 were registered in the
name of one Angel Abelida from whom defendant allegedly acquired said properties by virtue of a Deed of Absolute Sale
dated March 31, 1989.

As agreed upon, plaintiffs shall make a down payment of Five Hundred Thousand (₱500,000.00) Pesos upon signing of
the contract. The balance of Two Million Six Hundred Seventy Thousand Two Hundred Twenty (₱2,670,220.00) Pesos
shall be paid in three installments, viz: Five Hundred Thousand (₱500,000.00) Pesos on June 30, 1993; Five Hundred
Thousand (₱500,000.00) Pesos on August 30, 1993; One Million Six Hundred Seventy Thousand Two Hundred Twenty
(₱1,670,220.00) Pesos on December 31, 1993.

On its due date, December 31, 1993, plaintiffs failed to pay the last installment in the amount of One Million Six Hundred
Seventy Thousand Two Hundred Twenty (₱1,670,220.00) Pesos. Sometime in July 1995, plaintiffs offered to pay the
unpaid balance, which had already been delayed by one and [a] half year, which defendant refused to accept. On
September 23, 1995, defendant sold the same parcels of land to intervenor Diogenes G. Bartolome for Seven Million
Seven Hundred Ninety Three Thousand (₱7,793,000.00) Pesos.

In order to compel defendant to accept plaintiffs’ payment in full satisfaction of the purchase price and, thereafter, execute
the necessary document of transfer in their favor, plaintiffs filed before the RTC a complaint for specific performance.

In their complaint, plaintiffs alleged that they discovered the infirmity of the Deed of Absolute Sale covering Lot Nos. 2776,
2767 and 2769, between their former owner Angel Abelida and defendant, the same being spurious because the
signature of Angel Abelida and his wife were falsified; that at the time of the execution of the said deed, said spouses
were in the United States; that due to their apprehension regarding the authenticity of the document, they withheld
payment of the last installment which was supposedly due on December 31, 1993; that they tendered payment of the
unpaid balance sometime in July 1995, after Angel Abelida ratified the sale made in favor [of] defendant, but defendant
refused to accept their payment for no jusitifiable reason.

In her answer, defendant denied the allegation that the Deed of Absolute Sale was spurious and argued that plaintiffs
failed to pay in full the agreed purchase price on its due date despite repeated demands; that the Contract to Sell contains
a proviso that failure of plaintiffs to pay the purchase price in full shall cause the rescission of the contract and forfeiture of
one-half (1/2%) percent of the total amount paid to defendant; that a notarized letter stating the indended rescission of the
contract to sell and forfeiture of payments was sent to plaintiffs at their last known address but it was returned with a
notation "insufficient address."

Intervenor Diogenes G. Bartolome filed a complaint in intervention alleging that the Contract to Sell dated May 31, 1993
between plaintiffs and defendant was rescinded and became ineffective due to unwarranted failure of the plaintiffs to pay
the unpaid balance of the purchase price on or before the stipulated date; that he became interested in the subject parcels
of land because of their clean titles; that he purchased the same from defendant by virtue of an Absolute Deed of Sale
executed on September 23, 1995 in consideration of the sum of Seven Million Seven Hundred Ninety Three Thousand
(₱7,793,000.00) Pesos.4

The Decision of the Trial Court

14
In its Decision dated 15 April 1999, the trial court ruled that Dela Cruz’s rescission of the contract was not valid. The trial
court applied Republic Act No. 6552 (Maceda Law) and stated that Dela Cruz is not allowed to unilaterally cancel the
Contract to Sell. The trial court found that petitioners are justified in withholding the payment of the balance of the
consideration because of the alleged spurious sale between Angel Abelida and Emerlita Dela Cruz. Moreover, intervenor
Diogenes Bartolome (Bartolome) is not a purchaser in good faith because he was aware of petitioners’ interest in the
subject parcels of land.

The dispositive portion of the trial court’s decision reads:

ACCORDINGLY, defendant Emerlita dela Cruz is ordered to accept the balance of the purchase price in the amount of
₱1,670,220.00 within ten (10) days after the judgment of this Court in the above-entitled case has become final and
executory and to execute immediately the final deed of sale in favor of plaintiffs.

Defendant is further directed to pay plaintiffs the amount of ₱400,000.00 as moral damages and ₱100,000.00 as
exemplary damages.

The deed of sale executed by defendant Emerlita dela Cruz in favor of Atty. Diogenes Bartolome is declared null and void
and the amount of ₱7,793,000.00 which was paid by intervenor Bartolome to Emerlita dela Cruz as the consideration of
the sale of the five (5) parcels of land is hereby directed to be returned by Emerlita dela Cruz to Atty. Diogenes Bartolome
within ten (10) days from the finality of judgment.

Further, defendant is directed to pay plaintiff the sum of ₱100,000.00 as attorney’s fees.

SO ORDERED.5

Dela Cruz and Bartolome appealed from the judgment of the trial court.

The Decision of the Appellate Court

The appellate court reversed the trial court’s decision and dismissed Civil Case No. TM-622. Dela Cruz’s obligation under
the Contract to Sell did not arise because of petitioners’ undue failure to pay in full the agreed purchase price on the
stipulated date. Moreover, judicial action for the rescission of a contract is not necessary where the contract provides that
it may be revoked and cancelled for violation of any of its terms and conditions. The dispositive portion of the appellate
court’s decision reads:

WHEREFORE, in view of all the foregoing, the appealed decision of the Regional Trial Court is hereby REVERSED and
SET ASIDE and Civil Case No. TM-622 is, consequently, DISMISSED. Defendant is however ordered to return to
plaintiffs the amount in excess of one-half (1/2%) percent of One Million Five Hundred Thousand (₱1,500,000.00) Pesos
which was earlier paid by plaintiffs.

SO ORDERED.6

The appellate court likewise resolved to deny petitioners’ Motion for Reconsideration for lack of merit.7

Hence, this petition.

Issues

Petitioners raised the following grounds for the grant of their petition:

I. The Honorable Court of Appeals erred when it failed to consider the provisions of Republic Act 6552, otherwise
known as the Maceda Law.

II. The Honorable Court of Appeals erred when it failed to consider that Respondent Dela Cruz could not pass title
over the three (3) properties at the time she entered to a Contract to Sell as her purported ownership was tainted
with fraud, thereby justifying Petitioners Spouses Garcia, Spouses Galvez and Arcaira’s suspension of payment.

III. The Honorable Court of Appeals gravely erred when it failed to consider that Respondent Dela Cruz’s
"rescission" was done in evident bad faith and malice on account of a second sale she entered with Respondent
Bartolome for a much bigger amount.

IV. The Honorable Court of Appeals erred when it failed to declare Respondent Bartolome is not an innocent
purchaser for value despite the presence of evidence as to his bad faith.8

The Court’s Ruling

The petition has no merit.

15
Both parties admit the following: (1) the contract between petitioners and Dela Cruz was a contract to sell; (2) petitioners
failed to pay in full the agreed purchase price of the subject property on the stipulated date; and (3) Dela Cruz did not
want to accept petitioners’ offer of payment and did not want to execute a document of transfer in petitioners’ favor.

The pertinent provisions of the contract, denominated Contract to Sell, between the parties read:

Failure on the part of the vendees to comply with the herein stipulation as to the terms of payment shall cause the
rescission of this contract and the payments made shall be returned to the vendees subject however, to forfeiture in favor
of the Vendor equivalent to 1/2% of the total amount paid.

xxx

It is hereby agreed and covenanted that possession shall be retained by the VENDOR until a Deed of Absolute Sale shall
be executed by her in favor of the Vendees. Violation of this provision shall authorize/empower the VENDOR [to] demolish
any construction/improvement without need of judicial action or court order.

That upon and after the full payment of the balance, a Deed of Absolute Sale shall be executed by the Vendor in favor of
the Vendees.

That the duplicate original of the owner’s copy of the Transfer Certificate of Title of the above subject parcels of land shall
remain in the possession of the Vendor until the execution of the Deed of Absolute Sale.9

Contracts are law between the parties, and they are bound by its stipulations. It is clear from the above-quoted provisions
that the parties intended their agreement to be a Contract to Sell: Dela Cruz retains ownership of the subject lands and
does not have the obligation to execute a Deed of Absolute Sale until petitioners’ payment of the full purchase price.
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. Strictly speaking, there can be no rescission or resolution
of an obligation that is still non-existent due to the non-happening of the suspensive condition.10 Dela Cruz is thus not
obliged to execute a Deed of Absolute Sale in petitioners’ favor because of petitioners’ failure to make full payment on the
stipulated date.

We ruled thus in Pangilinan v. Court of Appeals:11

Article 1592 of the New Civil Code, requiring demand by suit or by notarial act in case the vendor of realty wants to
rescind does not apply to a contract to sell but only to contract of sale. In contracts to sell, where ownership is retained by
the seller and is not to pass until the full payment, such payment, as we said, is a positive suspensive condition, the failure
of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title
from acquiring binding force. To argue that there was only a casual breach is to proceed from the assumption that the
contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case.

The applicable provision of law in instant case is Article 1191 of the New Civil Code which provides as follows:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law. (1124)

Pursuant to the above, the law makes it available to the injured party alternative remedies such as the power to rescind or
enforce fulfillment of the contract, with damages in either case if the obligor does not comply with what is incumbent upon
him. There is nothing in this law which prohibits the parties from entering into an agreement that a violation of the terms of
the contract would cause its cancellation even without court intervention. The rationale for the foregoing is that in
contracts providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a judicial
declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even
without judicial intervention, but in order to determine whether or not the rescission was proper. Where such propriety is
sustained, the decision of the court will be merely declaratory of the revocation, but it is not in itself the revocatory act.
Moreover, the vendor’s right in contracts to sell with reserved title to extrajudicially cancel the sale upon failure of the
vendee to pay the stipulated installments and retain the sums and installments already received has long been recognized
by the well-established doctrine of 39 years standing. The validity of the stipulation in the contract providing for automatic
rescission upon non-payment cannot be doubted. It is in the nature of an agreement granting a party the right to rescind a
contract unilaterally in case of breach without need of going to court. Thus, rescission under Article 1191 was inevitable
due to petitioners’ failure to pay the stipulated price within the original period fixed in the agreement.

16
Petitioners justify the delay in payment by stating that they had notice that Dela Cruz is not the owner of the subject land,
and that they took pains to rectify the alleged defect in Dela Cruz’s title. Be that as it may, Angel Abelida’s (Abelida)
affidavit12 confirming the sale to Dela Cruz only serves to strengthen Dela Cruz’s claim that she is the absolute owner of
the subject lands at the time the Contract to Sell between herself and petitioners was executed. Dela Cruz did not
conceal from petitioners that the title to Lot Nos. 2776, 2767 and 2769 still remained under Abelida’s name, and
the Contract to Sell13 even provided that petitioners should shoulder the attendant expenses for the transfer of
ownership from Abelida to Dela Cruz.

The trial court erred in applying R.A. 6552,14 or the Maceda Law, to the present case. The Maceda Law applies to
contracts of sale of real estate on installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants. The subject lands, comprising five (5) parcels and aggregating
69,028 square meters, do not comprise residential real estate within the contemplation of the Maceda Law.15 Moreover,
even if we apply the Maceda Law to the present case, petitioners’ offer of payment to Dela Cruz was made a year and a
half after the stipulated date. This is beyond the sixty-day grace period under Section 4 of the Maceda Law.16 Petitioners
still cannot use the second sentence of Section 4 of the Maceda Law against Dela Cruz for Dela Cruz’s alleged failure to
give an effective notice of cancellation or demand for rescission because Dela Cruz merely sent the notice to the address
supplied by petitioners in the Contract to Sell.

It is undeniable that petitioners failed to pay the balance of the purchase price on the stipulated date of the Contract to
Sell. Thus, Dela Cruz is within her rights to sell the subject lands to Bartolome. Neither Dela Cruz nor Bartolome can be
said to be in bad faith.

WHEREFORE, we DENY the petition. We AFFIRM in toto the Court of Appeals’ Decision promulgated on 25 January
2006 as well as the Resolution promulgated on 16 March 2006 in CA-G.R. CV No. 63651.

Costs against petitioners.

SO ORDERED.

17
 G.R. No. 158646               June 23, 2005

HEIRS OF JESUS M. MASCUÑANA, represented by JOSE MA. R. MASCUÑANA, petitioners,

vs.
COURT OF APPEALS, AQUILINO BARTE, and SPOUSES RODOLFO and CORAZON LAYUMAS, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 53117 affirming
the Decision2 of the Regional Trial Court (RTC) of San Carlos City, Negros Occidental, which ordered the dismissal of the
petitioners’ complaint for recovery of possession and damages.

The Antecedents

Gertrudis Wuthrich and her six other siblings were the co-owners of a parcel of land identified as Lot No. 124 of the San
Carlos City, Negros Occidental Cadastre, with an area of 1,729 square meters and covered by Transfer Certificate of Title
(TCT) No. 1453-R (T-29937)-38.3 Over time, Gertrudis and two other co-owners sold each of their one-seventh (1/7)
shares, or a total area of 741 square meters, to Jesus Mascuñana. The latter then sold a portion of his 140-square-meter
undivided share of the property to Diosdado Sumilhig. Mascuñana later sold an additional 160-square-meter portion to
Sumilhig on April 7, 1961. However, the parties agreed to revoke the said deed of sale and, in lieu thereof, executed a
Deed of Absolute Sale on August 12, 1961. In the said deed, Mascuñana, as vendor, sold an undivided 469-square-meter
portion of the property for ₱4,690.00, with ₱3,690.00 as down payment, and under the following terms of payment:

That the balance of ONE THOUSAND PESOS (₱1,000.00) shall be paid by the VENDEE unto the VENDOR as soon as
the above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of Title in the name of the VENDEE shall have been prepared.4

On December 31, 1961, Mascuñana and Jose G. Estabillo executed a Deed of Exchange and Absolute Sale of Real
Estate,5 in which Estabillo deeded to Mascuñana a portion of his property abutting that of Sumilhig on the southeast.

In the meantime, a survey was conducted for the co-owners of Lot No. 124 on July 9, 1962. The subdivision plan of the
said lot was approved by the Director of Lands on August 2, 1962. The portion of the property deeded to Sumilhig was
identified in the said plan as Lot No. 124-B.6

Meanwhile, Mascuñana died intestate on April 20, 1965 and was survived by his heirs, Eva M. Ellisin, Renee Hewlett,
Carmen Vda. de Opeña, Marilou Dy and Jose Ma. R. Mascuñana.

On April 24, 1968, Sumilhig executed a Deed of Sale of Real Property7 on a portion of Lot No. 124-B with an area of 469
square meters and the improvements thereon, in favor of Corazon Layumas, the wife of Judge Rodolfo Layumas, for the
price of ₱11,000.00. The spouses Layumas then had the property subdivided into two lots: Lot No. 124-B-2 with an area
of 71 square meters under the name of Jesus Mascuñana, and Lot No. 124-B-1, with an area of 469 square meters under
their names.8 The spouses Layumas took possession of the property and caused the cutting of tall grasses thereon. Upon
the plea of a religious organization, they allowed a chapel to be constructed on a portion of the property.9 In January 1985,
the spouses Layumas allowed Aquilino Barte to stay on a portion of the property to ward off squatters.10 Barte and his kin,
Rostom Barte, then had their houses constructed on the property.

On October 1, 1985, the spouses Layumas received a Letter11 from the counsel of Renee Tedrew, offering to buy their
share of the property for US$1,000.00. For her part, Corazon Layumas wrote Pepito Mascuñana, offering to pay the
amount of ₱1,000.00, the balance of the purchase price of the property under the deed of absolute sale executed by
Mascuñana and Sumilhig on August 12, 1961.12 However, the addressee refused to receive the mail matter.13

Unknown to the spouses Layumas, TCT No. 898614 was issued over Lot No. 124-B in the name of Jesus Mascuñana on
March 17, 1986.

On November 17, 1986, the heirs of Mascuñana filed a Complaint15 for recovery of possession of Lot No. 124-B and
damages with a writ of preliminary injunction, alleging that they owned the subject lot by virtue of successional rights from
their deceased father. They averred that Barte surreptitiously entered the premises, fenced the area and constructed a
house thereon without their consent. Attached as annexes to the complaint were TCT No. 8986 and a certification16 from
the Office of the City Treasurer, Land Tax Division, vouching that the property in question was owned by the petitioners
and that they had paid the taxes thereon until 1992.

In his answer to the complaint, Barte admitted having occupied a portion of Lot No. 124-B, but claimed that he secured
the permission of Rodolfo Layumas, the owner of the subject property. He added that he did not fence the property, and
that the petitioners did not use the same as a passageway in going to Broce Street from their house. Barte raised the
following special defenses: (a) the petitioners were estopped from asserting ownership over the lot in question because
they did not object when he occupied the said portion of the lot; (b) neither did the petitioners protest when a church was
18
built on the property, or when residential houses were constructed thereon; (c) the petitioners still asked Barte and the
other occupants whether they had notified Rodolfo Layumas of the constructions on the property; and (d) the heirs of
Mascuñana, through the lawyer of Mrs. Renee M. Tedrew, even wrote a letter17 to Rodolfo Layumas on October 1, 1985,
expressing her willingness to buy the subject property for US$1,000.00.

On April 8, 1991, the spouses Layumas filed a Motion for Leave to Intervene,18 alleging therein that they had a legal
interest in Lot No. 124-B-1 as its buyers from Sumilhig, who in turn purchased the same from Mascuñana. In their answer
in intervention,19 the spouses Layumas alleged that they were the true owners of the subject property and that they had
wanted to pay the taxes thereon, but the Land Tax clerk refused to receive their payments on account that the petitioners
had already made such payment. The spouses Layumas further maintained that the petitioners had no cause of action
against Barte, as they had authorized him to occupy a portion of Lot No. 124-B-1. The spouses Layumas also averred that
the petitioners were estopped from denying their right of ownership and possession of the subject lot, as one of them had
even offered to repurchase a portion of Lot No. 124-B via letter. The said spouses interposed a counterclaim for damages,
claiming ownership over the property, and prayed, thus:

WHEREFORE, it is most respectfully prayed that this HONORABLE COURT render judgment in favor of the Intervenors
and the defendant Aquilino Barte, ordering:

1. That the complaint against Aquilino Barte be dismissed with costs against the plaintiff;

2. That the Intervenors spouses Judge Rodolfo S. Layumas and Corazon A. Layumas be declared as the legal
and true owners of Lot 124-B;

3. That the plaintiffs should deliver immediately to the Intervenors, TCT No. 8986 which is in their possession;

4. That the plaintiffs be made to pay to the Intervenors the sum of THIRTY THOUSAND (₱30,000.00) PESOS
moral damages; TEN THOUSAND (₱10,000.00) PESOS attorney’s fees plus THREE HUNDRED (₱300.00)
PESOS as appearance fee per hearing.

Intervenors pray for such other relief and remedies as may be deemed by this Honorable Court as just and equitable in
the premises.

At the trial, intervenor Rodolfo Layumas testified that he and his wife bought the subject property in 1968, and that nobody
objected to their possession of the land, including the petitioners. In 1970, a religious organization asked his permission to
construct a chapel on the disputed lot; he allowed the construction since the same would be used for the fiesta. He further
declared that part of the chapel still stood on the property. In 1985, a fire razed the town’s public market, thereby
dislocating numerous people. Barte was one of the fire victims, who also happened to be a good friend and political
supporter of Rodolfo. Out of goodwill, Barte was allowed to occupy a portion of the said lot, along with some other fire
victims. Rodolfo clarified that the others were to stay there only on a temporary basis, but admitted that Barte’s children
also stayed in the subject property.20

Rodolfo Layumas further narrated that in 1987, Corazon wrote one of the petitioners-heirs, Pepito Mascuñana, requesting
that the title of the lot be transferred in Sumilhig’s name so that they could likewise arrange for the conveyance of the title
in their names. Pepito failed to claim the letter, and thereafter, filed a case of ejectment against Barte and Rodolfo
Layumas’ brother-in-law, Pepito Antonio. The case, the witness added, was dismissed as against the two parties. Offered
in evidence were the following: a Sworn Statement on the Current and Fair Market Value of the Real Property issued in
1973 as required by Presidential Decree No. 76, and tax receipts.21

Rodolfo Layumas admitted on cross-examination that at the time they bought the property from Sumilhig, the title was still
in the possession of the Wuthrich family. He added that he filed an adverse claim before the Register of Deeds of San
Carlos City, Negros Occidental, on Lot No. 124-B in January 1986, or after the case had already been filed in court.
Lastly, the witness deposed that he did not fence the property after buying the same, but that his brother-in-law
constructed a coco-lumber yard thereon upon his authority.22

On January 30, 1996, the trial court rendered judgment in favor of Barte and the spouses Layumas. The fallo of the
decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of Intervenors-counterclaimants and

defendant and against plaintiffs-counterclaim defendants ordering as follows:

1. The dismissal of the plaintiff’s complaint with costs against them;

2. The plaintiffs to jointly pay Intervenors-counterclaimants now RTC Judge Rodolfo S. Layumas and Corazon A.
Layumas:

(a) ₱10,000.00 for attorney’s fees; and

(b) ₱30,000.00 as moral damages;

19
 3. The plaintiffs, as counterclaim defendants, to comply with the above-stated obligation of their late father, Mr.
Jesus Mascuñana, under the Deed of Absolute Sale, Exh. "3", pp. 92-93, Exp., thru plaintiff Mr. Jose Mascuñana,
including the desegragation (sic) survey to desegregate the 469-square-meter portion of said Lot No. 124-B, San
Carlos Cadastre, this province, sold to the late Diosdado Sumilhig, if the same has not yet been done despite
what has been said herein earlier to said effect, and the execution of the Final Deed of Sale in their capacity as
the heirs and successors-in-interest of the late Mr. Jesus Mascuñana, thru Mr. Jose Mascuñana, covering the
469-square-meter desegregated portion of said Lot No. 124-B, within sixty (60) days counted from the finality of
this Decision, in favor of the Intervenors-spouses, after which the said Intervenors-spouses shall pay them, thru
Mr. Jose Mascuñana, the ₱1,000.00 balance due to them as successors-in-interest of the late Mr. Jesus
Mascuñana;

4. In case plaintiffs fail to comply with what are herein ordered for them to do, the Clerk of Court V of this Court to
do all that they were to do as herein ordered in the text and dispositive portion hereof, at the expense of
Intervenors spouses to be later reimbursed by plaintiffs, including the desegragation (sic) survey of said 469-
square-meter portion of said Lot [No.] 124-B, San Carlos Cadastre, Negros Occidental, if the same has not yet
been done and the execution of the Final Deed of Sale on behalf of all the plaintiffs as heirs and successors-in-
interest of the late Mr. Jesus Mascuñana covering the said desegregated portion of 469 square meters of the
aforesaid lot, in favor of Intervenors spouses, to the end that separate title therefor may be issued in their names,
after they shall have paid the ₱1,000.00 balance due plaintiffs under said Deed of Absolute Sale, Exh. "3."

SO ORDERED.23

Forthwith, the petitioners appealed the case to the CA, raising the following issues of fact and law:

a. Whether or not the contract of alienation of Lot No. 124-B in favor of Diosdado Sumilhig in 1961 was a contract
to sell or a contract of sale;

b. Whether or not Diosdado Sumilhig had any right to sell Lot No. 124-B in favor of intervenor Corazon Layumas
in 1968.24

On May 5, 2003, the CA affirmed the decision of the trial court. It ruled that the contract between the petitioners’ father
and Sumilhig was one of sale. Foremost, the CA explained, the contract was denominated as a "Deed of Absolute Sale."
The stipulations in the contract likewise revealed the clear intention on the part of the vendor (Mascuñana) to alienate the
property in favor of the vendee (Sumilhig). In three various documents, the late Mascuñana even made declarations that
Sumilhig was already the owner of the disputed land. The CA added that the admission may be given in evidence against
Mascuñana and his predecessors-in-interest under Section 26, Rule 130 of the Revised Rules on Evidence. As to the
argument that the contract between Mascuñana and Sumilhig was not effective because it was subject to a suspensive
condition that did not occur, the CA ruled that the condition referred to by the petitioners refers only to the payment of the
balance of the purchase price and not to the effectivity of the contract.1avvphi1.zw+

As to the petitioners’ contention that even if the contract were one of sale, ownership cannot be transferred to Sumilhig
because Mascuñana was not yet the owner of the lot at the time of the alleged sale, the appellate court ruled that the
registration of the land to be sold is not a prerequisite to a contract of sale.

The Present Petition

Aggrieved, the petitioners filed the instant petition for review on certiorari with this Court, where the following lone legal
issue was raised:

WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUÑANA IN FAVOR OF DIOSDADO SUMILHIG A
CONTRACT TO SELL OR CONTRACT OF SALE?25

We note that the original action of the petitioners against Aquilino Barte was one for recovery of possession of Lot No.
124-B. With the intervention of the respondents Rodolfo and Corazon Layumas who claimed ownership over the property,
and the acquiescence of the parties, evidence was adduced to prove who, between the petitioners (as plaintiffs) and the
respondents (as defendants-intervenors) were the lawful owners of the subject property and entitled to its possession.

The petitioners resolutely contend that the Deed of Absolute Sale dated August 12, 1961 between their father and
Sumilhig was a mere contract to sell because at the time of the said sale, the late Mascuñana was not yet the registered
owner of Lot No. 124 or any of its portions. They assert that Sumilhig could not have acquired any rights over the lot due
to the fact that a person can only sell what he owns or is authorized to sell, and the buyer can acquire no more than what
the seller can transfer legally. Finally, the petitioners insist that the document in controversy was subject to a suspensive
condition, not a resolutory condition, which is a typical attribute of a contract of sale.

The petition is denied for lack of merit.

The issues raised by the petitioners in this case are factual, and under Rule 45 of the Rules of Court, only questions of
law may be raised in this Court, the reason being that this Court is not a trier of facts. It is not to re-examine the evidence
on record and to calibrate the same. Moreover, the findings and conclusions of the trial court as affirmed by the CA are

20
conclusive on the Court, absent of any evidence that the trial court, as well as the CA ignored, misinterpreted and
misconstrued facts and circumstances of substance which, if considered, would alter or reverse the outcome of the case.26

We have reviewed the records and find no justification for a reversal or even a modification of the assailed decision of the
CA.

Even on the merits of the petition, the Court finds that the decision of the trial court as well as the ruling of the CA are
based on the evidence on record and the applicable law.

The petitioners reiterated their pose that the deed of absolute sale over the property executed by their father, Jesus
Mascuñana, as vendor, and Diosdado Sumilhig as vendee, was a contract to sell and not a contract of sale. They assert
that on its face, the contract appears to be a contract to sell, because the payment of the ₱1,000.00 balance of the
purchase price was subject to a suspensive condition: the survey of the property, the segregation of the portion thereof
subject of the sale, and the completion of the documents necessary for the issuance of a Torrens title over the property to
and in the name of Sumilhig who was the vendee. The petitioners assert that Sumilhig never paid the aforesaid amount to
the vendor; hence, the obligation of the latter and his predecessors-in-interest (herein petitioners) to execute a final deed
of sale never arose. As such, they aver, title to the property remained reserved in the vendor and his heirs even after his
death. There was no need for the vendor to rescind the deed or collect the said amount of ₱1,000.00 under Article 1191 of
the New Civil Code because such a remedy applies only to contracts of sale. The petitioners insist that Sumilhig never
acquired title over the property; he could not have transferred any title to the respondents. Sumilhig could not have
transferred that which he did not own.

The petitioners’ contention has no factual and legal bases.

The deed of absolute sale executed by Jesus Mascuñana and Sumilhig, provides, thus:

That the VENDOR is the true and absolute owner of a parcel of land known as Lot No. 124 of the Cadastral Survey of San
Carlos, situated at Broce Street and is free from liens and encumbrances, and covered by O.C.T. No. T-299[3]7 (R-1453)
of Reg. of Deeds, Negros Occ.

That for and in consideration of the sum of FOUR THOUSAND SIX HUNDRED NINETY PESOS (₱4,690.00), Philippine
Currency, to be paid by the VENDEE in the manner hereinafter stated, the VENDOR does hereby sell, transfer, cede and
convey, a portion of the above-described property containing an area of 469 square meters, the sketch of which can be
found at the back of this document and having a frontage at Broce Street of around 14 meters, and from the Broce Street
to the interior on its Southwest side with a length of 30.9 meters, with a length of 24.8 meters on its Northeast side where
it turned to the right with a length of 2.8 meters and continuing to Northwest with a length of 6.72 meters, the backyard
dimension is 17.5 meters to the Northwest, unto the VENDEE, his heirs and assigns, by way of Absolute Sale, upon the
receipt of the down payment of THREE THOUSAND SIX HUNDRED NINETY PESOS (₱3,690.00), which is hereby
acknowledged by the VENDOR as received by him.lawphil.net

That the balance of ONE THOUSAND PESOS (₱1,000.00) shall be paid by the VENDEE unto the VENDOR as soon as
the above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers pertinent and
necessary to the issuance of a separate Certificate of Title in the name of the VENDEE shall have been prepared.

The evidence on record shows that during the lifetime of vendor Jesus Mascuñana, and even after his death, his heirs,
the petitioners herein, unequivocably declared that Diosdado Sumilhig was the owner of the property subject of this case,
and that the respondents acquired title over the property, having purchased the same via a deed of absolute sale from
Diosdado Sumilhig. Thus, on December 31, 1961, Jesus Mascuñana and Jose Estabillo executed a Deed of Exchange
and Absolute Sale of Real Estate, in which both parties declared that they were co-owners of portions of Lot No. 124
abutted by the property owned by Diosdado Sumilhig.27

In the subdivision plan of Lot No. 124, signed by Ricardo Quilop, Private Land Surveyor, following his survey of Lot No.
124 on July 9, 1962 for and in behalf of Jesus Mascuñana, et al., it appears that Lot No. 124-B with an area of 540 square
meters belonged to Diosdado Sumilhig,28 which is abutted by Lot No. 124-C, owned by Jesus Mascuñana.

On October 1, 1985, long after the death of Jesus Mascuñana, one of his heirs, petitioner Renee Tedrew, through
counsel, wrote respondent Rodolfo Layumas offering to buy the property occupied by his overseer Aquilino Barte for
US$1,000.00:

ATTY. RODOLFO S. LAYUMAS

San Carlos City
Negros Occidental

Dear Atty. Layumas:

This has reference to the lot located at Broce Street, portions of which are presently occupied by Mr. Barte.

Mrs. Renee Tedrew (nee Agapuyan), who is now in the United States, would like to offer the amount of $1,000.00 to buy
your share of the said lot.
21
If you are amenable, kindly inform the undersigned for him to communicate [with] Mrs. Tedrew in California.

Very truly yours,

(Sgd.)
SAMUEL SM LEZAMA29

It was only after the respondents rejected the proposal of petitioner Renee Tedrew that the petitioners secured title over
the property on March 17, 1986 in the name of Jesus Mascuñana (already deceased at the time), canceling TCT No. 967
issued on July 6, 1962 under the name of Jesus Mascuñana, who appears to be a co-owner of Lot No. 124 with an
undivided two-seventh (2/7) portion thereof.30

While it is true that Jesus Mascuñana executed the deed of absolute sale over the property on August 12, 1961 in favor of
Diosdado Sumilhig for ₱4,690.00, and that it was only on July 6, 1962 that TCT No. 967 was issued in his name as one of
the co-owners of Lot No. 124, Diosdado Sumilhig and the respondents nevertheless acquired ownership over the
property. The deed of sale executed by Jesus Mascuñana in favor of Diosdado Sumilhig on August 12, 1961 was a
perfected contract of sale over the property. It is settled that a perfected contract of sale cannot be challenged on the
ground of the non-transfer of ownership of the property sold at that time of the perfection of the contract, since it is
consummated upon delivery of the property to the vendee. It is through tradition or delivery that the buyer acquires
ownership of the property sold. As provided in Article 1458 of the New Civil Code, when the sale is made through a public
instrument, the execution thereof is equivalent to the delivery of the thing which is the object of the contract, unless the
contrary appears or can be inferred. The record of the sale with the Register of Deeds and the issuance of the certificate
of title in the name of the buyer over the property merely bind third parties to the sale. As between the seller and the
buyer, the transfer of ownership takes effect upon the execution of a public instrument covering the real property.31 Long
before the petitioners secured a Torrens title over the property, the respondents had been in actual possession of the
property and had designated Barte as their overseer.

Article 1458 of the New Civil Code provides:

By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of 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.

Thus, there are three essential elements of sale, to wit:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.32

In this case, there was a meeting of the minds between the vendor and the vendee, when the vendor undertook to deliver
and transfer ownership over the property covered by the deed of absolute sale to the vendee for the price of ₱4,690.00 of
which ₱3,690.00 was paid by the vendee to the vendor as down payment. The vendor undertook to have the property
sold, surveyed and segregated and a separate title therefor issued in the name of the vendee, upon which the latter would
be obliged to pay the balance of ₱1,000.00. There was no stipulation in the deed that the title to the property remained
with the vendor, or that the right to unilaterally resolve the contract upon the buyer’s failure to pay within a fixed period
was given to such vendor. Patently, the contract executed by the parties is a deed of sale and not a contract to sell. As the
Court ruled in a recent case:

In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a
sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or
constructive delivery (e.g. by the execution of a public document) of the property sold. Where the condition is imposed
upon the perfection of the contract itself, the failure of the condition would prevent such perfection. If the condition is
imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to
proceed with the sale. (Art. 1545, Civil Code)

Thus, in one case, when the sellers declared in a "Receipt of Down Payment" that they received an amount as purchase
price for a house and lot without any reservation of title until full payment of the entire purchase price, the implication was
that they sold their property. In People’s Industrial and Commercial Corporation v. Court of Appeals, it was stated:

A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property
sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay within a fixed period.

Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not
conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In
22
fact, the sale was consummated upon the delivery of the lot to respondent. Thus, Art. 1477 provides that the ownership of
the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.33

The condition in the deed that the balance of ₱1,000.00 shall be paid to the vendor by the vendee as soon as the property
sold shall have been surveyed in the name of the vendee and all papers pertinent and necessary to the issuance of a
separate certificate of title in the name of the vendee shall have been prepared is not a condition which prevented the
efficacy of the contract of sale. It merely provides the manner by which the total purchase price of the property is to be
paid. The condition did not prevent the contract from being in full force and effect:

The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years
from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely
provides the manner by which the full consideration is to be computed and the time within which the same is to be paid.
But it does not affect in any manner the effectivity of the contract. …34

In a contract to sell, ownership is retained by a seller and is not to be transferred to the vendee until full payment of the
price. Such payment is a positive suspensive condition, the failure of which is not a breach of contract but simply an event
that prevented the obligation from acquiring binding force.35

It bears stressing that in a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the
transaction that, for a time, existed and discharges the obligation created under the transaction.36 A seller cannot
unilaterally and extrajudicially rescind a contract of sale unless there is an express stipulation authorizing it. In such case,
the vendor may file an action for specific performance or judicial rescission.37

Article 1169 of the New Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon him; from the moment one of the parties
fulfills his obligation, delay by the other begins. In this case, the vendor (Jesus Mascuñana) failed to comply with his
obligation of segregating Lot No. 124-B and the issuance of a Torrens title over the property in favor of the vendee, or the
latter’s successors-in-interest, the respondents herein. Worse, petitioner Jose Mascuñana was able to secure title over
the property under the name of his deceased father.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.

23
 SECOND DIVISION

G.R. No. 188064               June 1, 2011

MILA A. REYES, Petitioner,
vs.
VICTORIA T. TUPARAN, Respondent.

DECISION

MENDOZA, J.:

Subject of this petition for review is the February 13, 2009 Decision1 of the Court of Appeals (CA) which affirmed with
modification the February 22, 2006 Decision2 of the Regional Trial Court, Branch 172, Valenzuela City (RTC), in Civil
Case No. 3945-V-92, an action for Rescission of Contract with Damages.

On September 10, 1992, Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against
Victoria T. Tuparan (respondent) before the RTC. In her Complaint, petitioner alleged, among others, that she was the
registered owner of a 1,274 square meter residential and commercial lot located in Karuhatan, Valenzuela City, and
covered by TCT No. V-4130; that on that property, she put up a three-storey commercial building known as RBJ Building
and a residential apartment building; that since 1990, she had been operating a drugstore and cosmetics store on the
ground floor of RBJ Building where she also had been residing while the other areas of the buildings including the
sidewalks were being leased and occupied by tenants and street vendors.

In December 1989, respondent leased from petitioner a space on the ground floor of the RBJ Building for her pawnshop
business for a monthly rental of ₱4,000.00. A close friendship developed between the two which led to the respondent
investing thousands of pesos in petitioner’s financing/lending business from February 7, 1990 to May 27, 1990, with
interest at the rate of 6% a month.

On June 20, 1988, petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc.
(FSL Bank) to secure a loan of ₱2,000,000.00 payable in installments. On November 15, 1990, petitioner’s outstanding
account on the mortgage reached ₱2,278,078.13. Petitioner then decided to sell her real properties for at least
₱6,500,000.00 so she could liquidate her bank loan and finance her businesses. As a gesture of friendship, respondent
verbally offered to conditionally buy petitioner’s real properties for ₱4,200,000.00 payable on installment basis without
interest and to assume the bank loan. To induce the petitioner to accept her offer, respondent offered the following
conditions/concessions:

1. That the conditional sale will be cancelled if the plaintiff (petitioner) can find a buyer of said properties for the
amount of ₱6,500,000.00 within the next three (3) months provided all amounts received by the plaintiff from the
defendant (respondent) including payments actually made by defendant to Farmers Savings and Loan Bank
would be refunded to the defendant with additional interest of six (6%) monthly;

2. That the plaintiff would continue using the space occupied by her and drugstore and cosmetics store without
any rentals for the duration of the installment payments;

3. That there will be a lease for fifteen (15) years in favor of the plaintiff over the space for drugstore and
cosmetics store at a monthly rental of only ₱8,000.00 after full payment of the stipulated installment payments are
made by the defendant;

4. That the defendant will undertake the renewal and payment of the fire insurance policies on the two (2) subject
buildings following the expiration of the then existing fire insurance policy of the plaintiff up to the time that plaintiff
is fully paid of the total purchase price of ₱4,200,000.00.3

After petitioner’s verbal acceptance of all the conditions/concessions, both parties worked together to obtain FSL Bank’s
approval for respondent to assume her (petitioner’s) outstanding bank account. The assumption would be part of
respondent’s purchase price for petitioner’s mortgaged real properties. FSL Bank approved their proposal on the condition
that petitioner would sign or remain as co-maker for the mortgage obligation assumed by respondent.

On November 26, 1990, the parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real
Properties with Assumption of Mortgage. Due to their close personal friendship and business relationship, both parties
chose not to reduce into writing the other terms of their agreement mentioned in paragraph 11 of the complaint. Besides,
FSL Bank did not want to incorporate in the Deed of Conditional Sale of Real Properties with Assumption of Mortgage any
other side agreement between petitioner and respondent.

Under the Deed of Conditional Sale of Real Properties with Assumption of Mortgage, respondent was bound to pay the
petitioner a lump sum of ₱1.2 million pesos without interest as part of the purchase price in three (3) fixed installments as
follows:

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 a) ₱200,000.00 – due January 31, 1991

b) ₱200,000.00 – due June 30, 1991

c) ₱800,000.00 – due December 31, 1991

Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of paying the amounts due
in lump sum on their respective maturity dates, respondent paid petitioner in small amounts from time to time. To
compensate for her delayed payments, respondent agreed to pay petitioner an interest of 6% a month. As of August 31,
1992, respondent had only paid ₱395,000.00, leaving a balance of ₱805,000.00 as principal on the unpaid installments
and ₱466,893.25 as unpaid accumulated interest.

Petitioner further averred that despite her success in finding a prospective buyer for the subject real properties within the
3-month period agreed upon, respondent reneged on her promise to allow the cancellation of their deed of conditional
sale. Instead, respondent became interested in owning the subject real properties and even wanted to convert the entire
property into a modern commercial complex. Nonetheless, she consented because respondent repeatedly professed
friendship and assured her that all their verbal side agreement would be honored as shown by the fact that since
December 1990, she (respondent) had not collected any rentals from the petitioner for the space occupied by her
drugstore and cosmetics store.

On March 19, 1992, the residential building was gutted by fire which caused the petitioner to lose rental income in the
amount of ₱8,000.00 a month since April 1992. Respondent neglected to renew the fire insurance policy on the subject
buildings.

Since December 1990, respondent had taken possession of the subject real properties and had been continuously
collecting and receiving monthly rental income from the tenants of the buildings and vendors of the sidewalk fronting the
RBJ building without sharing it with petitioner.

On September 2, 1992, respondent offered the amount of ₱751,000.00 only payable on September 7, 1992, as full
payment of the purchase price of the subject real properties and demanded the simultaneous execution of the
corresponding deed of absolute sale.

Respondent’s Answer

Respondent countered, among others, that the tripartite agreement erroneously designated by the petitioner as a Deed of
Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and absolute contract of sale with a
term period. It could not be considered a conditional sale because the acquisition of contractual rights and the
performance of the obligation therein did not depend upon a future and uncertain event. Moreover, the capital gains and
documentary stamps and other miscellaneous expenses and real estate taxes up to 1990 were supposed to be paid by
petitioner but she failed to do so.

Respondent further averred that she successfully rescued the properties from a definite foreclosure by paying the
assumed mortgage in the amount of ₱2,278,078.13 plus interest and other finance charges. Because of her payment, she
was able to obtain a deed of cancellation of mortgage and secure a release of mortgage on the subject real properties
including petitioner’s ancestral residential property in Sta. Maria, Bulacan.

Petitioner’s claim for the balance of the purchase price of the subject real properties was baseless and unwarranted
because the full amount of the purchase price had already been paid, as she did pay more than ₱4,200,000.00, the
agreed purchase price of the subject real properties, and she had even introduced improvements thereon worth more
than ₱4,800,000.00. As the parties could no longer be restored to their original positions, rescission could not be resorted
to.

Respondent added that as a result of their business relationship, petitioner was able to obtain from her a loan in the
amount of ₱400,000.00 with interest and took several pieces of jewelry worth ₱120,000.00. Petitioner also failed and
refused to pay the monthly rental of ₱20,000.00 since November 16, 1990 up to the present for the use and occupancy of
the ground floor of the building on the subject real property, thus, accumulating arrearages in the amount of ₱470,000.00
as of October 1992.

Ruling of the RTC

On February 22, 2006, the RTC handed down its decision finding that respondent failed to pay in full the ₱4.2 million total
purchase price of the subject real properties leaving a balance of ₱805,000.00. It stated that the checks and receipts
presented by respondent refer to her payments of the mortgage obligation with FSL Bank and not the payment of the
balance of ₱1,200,000.00. The RTC also considered the Deed of Conditional Sale of Real Property with Assumption of
Mortgage executed by and among the two parties and FSL Bank a contract to sell, and not a contract of sale. It was of the
opinion that although the petitioner was entitled to a rescission of the contract, it could not be permitted because her non-
payment in full of the purchase price "may not be considered as substantial and fundamental breach of the contract as to
defeat the object of the parties in entering into the contract."4 The RTC believed that the respondent’s offer stated in her
counsel’s letter dated September 2, 1992 to settle what she thought was her unpaid balance of ₱751,000.00 showed her

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sincerity and willingness to settle her obligation. Hence, it would be more equitable to give respondent a chance to pay the
balance plus interest within a given period of time.

Finally, the RTC stated that there was no factual or legal basis to award damages and attorney’s fees because there was
no proof that either party acted fraudulently or in bad faith.

Thus, the dispositive portion of the RTC Decision reads:

WHEREFORE, judgment is hereby rendered as follows:

1. Allowing the defendant to pay the plaintiff within thirty (30) days from the finality hereof the amount of
₱805,000.00, representing the unpaid purchase price of the subject property, with interest thereon at 2% a month
from January 1, 1992 until fully paid. Failure of the defendant to pay said amount within the said period shall
cause the automatic rescission of the contract (Deed of Conditional Sale of Real Property with Assumption of
Mortgage) and the plaintiff and the defendant shall be restored to their former positions relative to the subject
property with each returning to the other whatever benefits each derived from the transaction;

2. Directing the defendant to allow the plaintiff to continue using the space occupied by her for drugstore and
cosmetic store without any rental pending payment of the aforesaid balance of the purchase price.

3. Ordering the defendant, upon her full payment of the purchase price together with interest, to execute a
contract of lease for fifteen (15) years in favor of the plaintiff over the space for the drugstore and cosmetic store
at a fixed monthly rental of ₱8,000.00; and

4. Directing the plaintiff, upon full payment to her by the defendant of the purchase price together with interest, to
execute the necessary deed of sale, as well as to pay the Capital Gains Tax, documentary stamps and other
miscellaneous expenses necessary for securing the BIR Clearance, and to pay the real estate taxes due on the
subject property up to 1990, all necessary to transfer ownership of the subject property to the defendant.

No pronouncement as to damages, attorney’s fees and costs.

SO ORDERED.5

Ruling of the CA

On February 13, 2009, the CA rendered its decision affirming with modification the RTC Decision. The CA agreed with the
RTC that the contract entered into by the parties is a contract to sell but ruled that the remedy of rescission could not
apply because the respondent’s failure to pay the petitioner the balance of the purchase price in the total amount of
₱805,000.00 was not a breach of contract, but merely an event that prevented the seller (petitioner) from conveying title to
the purchaser (respondent). It reasoned that out of the total purchase price of the subject property in the amount of
₱4,200,000.00, respondent’s remaining unpaid balance was only ₱805,000.00. Since respondent had already paid a
substantial amount of the purchase price, it was but right and just to allow her to pay the unpaid balance of the purchase
price plus interest. Thus, the decretal portion of the CA Decision reads:

WHEREFORE, premises considered, the Decision dated 22 February 2006 and Order dated 22 December 2006 of the
Regional Trial Court of Valenzuela City, Branch 172 in Civil Case No. 3945-V-92 are AFFIRMED with MODIFICATION in
that defendant-appellant Victoria T. Tuparan is hereby ORDERED to pay plaintiff-appellee/appellant Mila A. Reyes, within
30 days from finality of this Decision, the amount of ₱805,000.00 representing the unpaid balance of the purchase price of
the subject property, plus interest thereon at the rate of 6% per annum from 11 September 1992 up to finality of this
Decision and, thereafter, at the rate of 12% per annum until full payment. The ruling of the trial court on the automatic
rescission of the Deed of Conditional Sale with Assumption of Mortgage is hereby DELETED. Subject to the foregoing,
the dispositive portion of the trial court’s decision is AFFIRMED in all other respects.

SO ORDERED.6

After the denial of petitioner’s motion for reconsideration and respondent’s motion for partial reconsideration, petitioner
filed the subject petition for review praying for the reversal and setting aside of the CA Decision anchored on the following

ASSIGNMENT OF ERRORS

A. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DISALLOWING THE
OUTRIGHT RESCISSION OF THE SUBJECT DEED OF CONDITIONAL SALE OF REAL PROPERTIES WITH
ASSUMPTION OF MORTGAGE ON THE GROUND THAT RESPONDENT TUPARAN’S FAILURE TO PAY PETITIONER
REYES THE BALANCE OF THE PURCHASE PRICE OF ₱805,000.00 IS NOT A BREACH OF CONTRACT DESPITE
ITS OWN FINDINGS THAT PETITIONER STILL RETAINS OWNERSHIP AND TITLE OVER THE SUBJECT REAL
PROPERTIES DUE TO RESPONDENT’S REFUSAL TO PAY THE BALANCE OF THE TOTAL PURCHASE PRICE OF
₱805,000.00 WHICH IS EQUAL TO 20% OF THE TOTAL PURCHASE PRICE OF ₱4,200,000.00 OR 66% OF THE
STIPULATED LAST INSTALLMENT OF ₱1,200,000.00 PLUS THE INTEREST THEREON. IN EFFECT, THE COURT OF

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APPEALS AFFIRMED AND ADOPTED THE TRIAL COURT’S CONCLUSION THAT THE RESPONDENT’S NON-
PAYMENT OF THE ₱805,000.00 IS ONLY A SLIGHT OR CASUAL BREACH OF CONTRACT.

B. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DISREGARDING AS
GROUND FOR THE RESCISSION OF THE SUBJECT CONTRACT THE OTHER FRAUDULENT AND MALICIOUS
ACTS COMMITTED BY THE RESPONDENT AGAINST THE PETITIONER WHICH BY THEMSELVES SUFFICIENTLY
JUSTIFY A DENIAL OF A GRACE PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT WITHIN WHICH TO PAY
TO THE PETITIONER THE ₱805,000.00 PLUS INTEREST THEREON.

C. EVEN ASSUMING ARGUENDO THAT PETITIONER IS NOT ENTITLED TO THE RESCISSION OF THE SUBJECT
CONTRACT, THE COURT OF APPEALS STILL SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN REDUCING
THE INTEREST ON THE ₱805,000.00 TO ONLY "6% PER ANNUM STARTING FROM THE DATE OF FILING OF THE
COMPLAINT ON SEPTEMBER 11, 1992" DESPITE THE PERSONAL COMMITMENT OF THE RESPONDENT AND
AGREEMENT BETWEEN THE PARTIES THAT RESPONDENT WILL PAY INTEREST ON THE ₱805,000.00 AT THE
RATE OF 6% MONTHLY STARTING THE DATE OF DELINQUENCY ON DECEMBER 31, 1991.

D. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE APPRECIATION AND/OR
MISAPPRECIATION OF FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR
ACTUAL DAMAGES WHICH CORRESPOND TO THE MILLIONS OF PESOS OF RENTALS/FRUITS OF THE SUBJECT
REAL PROPERTIES WHICH RESPONDENT TUPARAN COLLECTED CONTINUOUSLY SINCE DECEMBER 1990,
EVEN WITH THE UNPAID BALANCE OF ₱805,000.00 AND DESPITE THE FACT THAT RESPONDENT DID NOT
CONTROVERT SUCH CLAIM OF THE PETITIONER AS CONTAINED IN HER AMENDED COMPLAINT DATED APRIL
22, 2006.

E. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN THE APPRECIATION OF
FACTS RESULTING INTO THE DENIAL OF THE CLAIM OF PETITIONER REYES FOR THE ₱29,609.00 BACK
RENTALS THAT WERE COLLECTED BY RESPONDENT TUPARAN FROM THE OLD TENANTS OF THE
PETITIONER.

F. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE PETITIONER’S
EARLIER "URGENT MOTION FOR ISSUANCE OF A PRELIMINARY MANDATORY AND PROHIBITORY INJUNCTION"
DATED JULY 7, 2008 AND THE "SUPPLEMENT" THERETO DATED AUGUST 4, 2008 THEREBY CONDONING THE
UNJUSTIFIABLE FAILURE/REFUSAL OF JUDGE FLORO ALEJO TO RESOLVE WITHIN ELEVEN (11) YEARS THE
PETITIONER’S THREE (3) SEPARATE "MOTIONS FOR PRELIMINARY INJUNCTION/ TEMPORARY RESTRAINING
ORDER, ACCOUNTING AND DEPOSIT OF RENTAL INCOME" DATED MARCH 17, 1995, AUGUST 19, 1996 AND
JANUARY 7, 2006 THEREBY PERMITTING THE RESPONDENT TO UNJUSTLY ENRICH HERSELF BY
CONTINUOUSLY COLLECTING ALL THE RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES WITHOUT ANY
ACCOUNTING AND COURT DEPOSIT OF THE COLLECTED RENTALS/FRUITS AND THE PETITIONERS "URGENT
MOTION TO DIRECT DEFENDANT VICTORIA TUPARAN TO PAY THE ACCUMULATED UNPAID REAL ESTATE
TAXES AND SEF TAXES ON THE SUBJECT REAL PROPERTIES" DATED JANUARY 13, 2007 THEREBY EXPOSING
THE SUBJECT REAL PROPERTIES TO IMMINENT AUCTION SALE BY THE CITY TREASURER OF VALENZUELA
CITY.

G. THE COURT OF APPEALS SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN DENYING THE
PETITIONER’S CLAIM FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES AGAINST THE
RESPONDENT.

In sum, the crucial issue that needs to be resolved is whether or not the CA was correct in ruling that there was no legal
basis for the rescission of the Deed of Conditional Sale with Assumption of Mortgage.

Position of the Petitioner

The petitioner basically argues that the CA should have granted the rescission of the subject Deed of Conditional Sale of
Real Properties with Assumption of Mortgage for the following reasons:

1. The subject deed of conditional sale is a reciprocal obligation whose outstanding characteristic is reciprocity
arising from identity of cause by virtue of which one obligation is correlative of the other.

2. The petitioner was rescinding – not enforcing – the subject Deed of Conditional Sale pursuant to Article 1191 of
the Civil Code because of the respondent’s failure/refusal to pay the ₱805,000.00 balance of the total purchase
price of the petitioner’s properties within the stipulated period ending December 31, 1991.

3. There was no slight or casual breach on the part of the respondent because she (respondent) deliberately
failed to comply with her contractual obligations with the petitioner by violating the terms or manner of payment of
the ₱1,200,000.00 balance and unjustly enriched herself at the expense of the petitioner by collecting all rental
payments for her personal benefit and enjoyment.

Furthermore, the petitioner claims that the respondent is liable to pay interest at the rate of 6% per month on her unpaid
installment of ₱805,000.00 from the date of the delinquency, December 31, 1991, because she obligated herself to do so.

27
Finally, the petitioner asserts that her claim for damages or lost income as well as for the back rentals in the amount of
₱29,609.00 has been fully substantiated and, therefore, should have been granted by the CA. Her claim for moral and
exemplary damages and attorney’s fees has been likewise substantiated.

Position of the Respondent

The respondent counters that the subject Deed of Conditional Sale with Assumption of Mortgage entered into between the
parties is a contract to sell and not a contract of sale because the title of the subject properties still remains with the
petitioner as she failed to pay the installment payments in accordance with their agreement.

Respondent echoes the RTC position that her inability to pay the full balance on the purchase price may not be
considered as a substantial and fundamental breach of the subject contract and it would be more equitable if she would
be allowed to pay the balance including interest within a certain period of time. She claims that as early as 1992, she has
shown her sincerity by offering to pay a certain amount which was, however, rejected by the petitioner.

Finally, respondent states that the subject deed of conditional sale explicitly provides that the installment payments shall
not bear any interest. Moreover, petitioner failed to prove that she was entitled to back rentals.

The Court’s Ruling

The petition lacks merit.

The Court agrees with the ruling of the courts below that the subject Deed of Conditional Sale with Assumption of
Mortgage entered into by and among the two parties and FSL Bank on November 26, 1990 is a contract to sell and not a
contract of sale. The subject contract was correctly classified as a contract to sell based on the following pertinent
stipulations:

8. That the title and ownership of the subject real properties shall remain with the First Party until the full payment of the
Second Party of the balance of the purchase price and liquidation of the mortgage obligation of ₱2,000,000.00. Pending
payment of the balance of the purchase price and liquidation of the mortgage obligation that was assumed by the Second
Party, the Second Party shall not sell, transfer and convey and otherwise encumber the subject real properties without the
written consent of the First and Third Party.

9. That upon full payment by the Second Party of the full balance of the purchase price and the assumed mortgage
obligation herein mentioned the Third Party shall issue the corresponding Deed of Cancellation of Mortgage and the First
Party shall execute the corresponding Deed of Absolute Sale in favor of the Second Party.7

Based on the above provisions, the title and ownership of the subject properties remains with the petitioner until the
respondent fully pays the balance of the purchase price and the assumed mortgage obligation. Thereafter, FSL Bank shall
then issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the corresponding deed of
absolute sale in favor of the respondent.

Accordingly, the petitioner’s obligation to sell the subject properties becomes demandable only upon the happening of the
positive suspensive condition, which is the respondent’s full payment of the purchase price. Without respondent’s full
payment, there can be no breach of contract to speak of because petitioner has no obligation yet to turn over the title.
Respondent’s failure to pay in full the purchase price is not the breach of contract contemplated under Article 1191 of the
New Civil Code but rather just an event that prevents the petitioner from being bound to convey title to the respondent.
The 2009 case of Nabus v. Joaquin & Julia Pacson8 is enlightening:

The Court holds that the contract entered into by the Spouses Nabus and respondents was a contract to sell, not a
contract of sale.

A contract of sale is defined in Article 1458 of the Civil Code, thus:

Art. 1458. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

xxx

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a
contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

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Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the
contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the
purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the
entire amount of the purchase price is delivered to him. In other words, the full payment of the purchase price partakes of
a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and, thus, ownership is
retained by the prospective seller without further remedies by the prospective buyer.

x x x           x x x          x x x

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective seller’s obligation to sell the subject property by entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil Code which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase
price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller
may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a
conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of
sale is completely abated. However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such
that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to him.
The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.

Further, Chua v. Court of Appeals, cited this distinction between a contract of sale and 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 an event that prevents the obligation of the vendor to convey title from becoming effective.

It is not the title of the contract, but its express terms or stipulations that determine the kind of contract entered into by the
parties. In this case, the contract entitled "Deed of Conditional Sale" is actually a contract to sell. The contract stipulated
that "as soon as the full consideration of the sale has been paid by the vendee, the corresponding transfer documents
shall be executed by the vendor to the vendee for the portion sold." Where the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to sell." The
aforecited stipulation shows that the vendors reserved title to the subject property until full payment of the purchase price.

xxx

Unfortunately for the Spouses Pacson, since the Deed of Conditional Sale executed in their favor was merely a contract to
sell, the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition. The full
payment of the purchase price is the positive suspensive condition, the failure of which is not a breach of contract, but
simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Thus, for
its non-fulfilment, there is no contract to speak of, the obligor having failed to perform the suspensive condition which
enforces a juridical relation. With this circumstance, there can be no rescission or fulfillment of an obligation that is still
non-existent, the suspensive condition not having occurred as yet. Emphasis should be made that the breach
contemplated in Article 1191 of the New Civil Code is the obligor’s failure to comply with an obligation already extant, not
a failure of a condition to render binding that obligation. [Emphases and underscoring supplied]

Consistently, the Court handed down a similar ruling in the 2010 case of Heirs of Atienza v. Espidol, 9 where it was
written:

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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 buyer’s non-
payment of the price is a negative resolutory condition; in the contract to sell, the buyer’s 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. 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.

Admittedly, Espidol was unable to pay the second installment of ₱1,750,000.00 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. x x x. [Emphases and underscoring supplied]

Thus, the Court fully agrees with the CA when it resolved: "Considering, however, that the Deed of Conditional Sale was
not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of the subject property in the amount of
₱4,200,000.00, the remaining unpaid balance of Tuparan (respondent) is only ₱805,000.00, a substantial amount of the
purchase price has already been paid. It is only right and just to allow Tuparan to pay the said unpaid balance of the
purchase price to Reyes."10

Granting that a rescission can be permitted under Article 1191, the Court still cannot allow it for the reason that,
considering the circumstances, there was only a slight or casual breach in the fulfillment of the obligation.

Unless the parties stipulated it, rescission is allowed only when the breach of the contract is substantial and fundamental
to the fulfillment of the obligation. Whether the breach is slight or substantial is largely determined by the attendant
circumstances.11 In the case at bench, the subject contract stipulated the following important provisions:

2. That the purchase price of ₱4,200,000.00 shall be paid as follows:

a) ₱278,078.13 received in cash by the First Party but directly paid to the Third Party as partial payment of the
mortgage obligation of the First Party in order to reduce the amount to ₱2,000,000.00 only as of November 15,
1990;

b) ₱721,921.87 received in cash by the First Party as additional payment of the Second Party;

c) ₱1,200,000.00 to be paid in installments as follows:

1. ₱200,000.00 payable on or before January 31, 1991;

2. ₱200,000.00 payable on or before June 30, 1991;

3. ₱800,000.00 payable on or before December 31, 1991;

Note: All the installments shall not bear any interest.

d) ₱2,000,000.00 outstanding balance of the mortgage obligation as of November 15, 1990 which is hereby
assumed by the Second Party.

xxx

3. That the Third Party hereby acknowledges receipts from the Second Party ₱278,078.13 as partial payment of the loan
obligation of First Party in order to reduce the account to only ₱2,000,000.00 as of November 15, 1990 to be assumed by
the Second Party effective November 15, 1990.12

From the records, it cannot be denied that respondent paid to FSL Bank petitioner’s mortgage obligation in the amount of
₱2,278,078.13, which formed part of the purchase price of the subject property. Likewise, it is not disputed that
respondent paid directly to petitioner the amount of ₱721,921.87 representing the additional payment for the purchase of
the subject property. Clearly, out of the total price of ₱4,200,000.00, respondent was able to pay the total amount of
₱3,000,000.00, leaving a balance of ₱1,200,000.00 payable in three (3) installments.

Out of the ₱1,200,000.00 remaining balance, respondent paid on several dates the first and second installments of
₱200,000.00 each. She, however, failed to pay the third and last installment of ₱800,000.00 due on December 31, 1991.
Nevertheless, on August 31, 1992, respondent, through counsel, offered to pay the amount of ₱751,000.00, which was
rejected by petitioner for the reason that the actual balance was ₱805,000.00 excluding the interest charges.

30
Considering that out of the total purchase price of ₱4,200,000.00, respondent has already paid the substantial amount of
₱3,400,000.00, more or less, leaving an unpaid balance of only ₱805,000.00, it is right and just to allow her to settle,
within a reasonable period of time, the balance of the unpaid purchase price. The Court agrees with the courts below that
the respondent showed her sincerity and willingness to comply with her obligation when she offered to pay the petitioner
the amount of ₱751,000.00.

On the issue of interest, petitioner failed to substantiate her claim that respondent made a personal commitment to pay a
6% monthly interest on the ₱805,000.00 from the date of delinquency, December 31, 1991. As can be gleaned from the
contract, there was a stipulation stating that: "All the installments shall not bear interest." The CA was, however, correct in
imposing interest at the rate of 6% per annum starting from the filing of the complaint on September 11, 1992.1avvphi1

Finally, the Court upholds the ruling of the courts below regarding the non-imposition of damages and attorney’s fees.
Aside from petitioner’s self-serving statements, there is not enough evidence on record to prove that respondent acted
fraudulently and maliciously against the petitioner. In the case of Heirs of Atienza v. Espidol,13 it was stated:

Respondents are not entitled to moral damages because contracts are not referred to in Article 2219 of the Civil Code,
which enumerates the cases when moral damages may be recovered. Article 2220 of the Civil Code allows the recovery
of moral damages in breaches of contract where the defendant acted fraudulently or in bad faith. However, this case
involves a contract to sell, wherein full payment of the purchase price is a positive suspensive condition, the non-
fulfillment of which is not a breach of contract, but merely an event that prevents the seller from conveying title to the
purchaser. Since there is no breach of contract in this case, respondents are not entitled to moral damages.

In the absence of moral, temperate, liquidated or compensatory damages, exemplary damages cannot be granted for they
are allowed only in addition to any of the four kinds of damages mentioned.

WHEREFORE, the petition is DENIED.

SO ORDERED.

31
 SECOND DIVISION

G.R. No. 179965               February 20, 2013

NICOLAS P. DIEGO, Petitioner,
vs.
RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.

DECISION

DEL CASTILLO, J.:

It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates that the seller shall
execute a deed of sale only upon or after tl1ll payment of the purchase price is a contract to sell, not a contract of sale.
In Reyes v. Tuparan, 1 this Court declared in categorical terms that "[w]here the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to
sell. The aforecited stipulation shows that the vendors reserved title to the subject property until full payment of
the purchase price."

In this case, it is not disputed as in tact both parties agreed that the deed of sale shall only be executed upon payment of
the remaining balance of the purchase price. Thus, pursuant to the above stated jurisprudence, we similarly declare that
the transaction entered into by the parties is a contract to sell.

Before us is a Petition for Review on Certiorari2 questioning the June 29, 2007 Decision3 and the October 3, 2007
Resolution4 of the Court of Appeals (CA) in CA-G.R. CV No. 86512, which affirmed the April 19, 2005 Decision5 of the
Regional Trial Court (RTC), Branch 40, of Dagupan City in Civil Case No. 99-02971-D.

Factual Antecedents

In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein, entered into an oral contract to
sell covering Nicolas’s share, fixed at ₱500,000.00, as co-owner of the family’s Diego Building situated in Dagupan City.
Rodolfo made a downpayment of ₱250,000.00. It was agreed that the deed of sale shall be executed upon payment of the
remaining balance of ₱250,000.00. However, Rodolfo failed to pay the remaining balance.

Meanwhile, the building was leased out to third parties, but Nicolas’s share in the rents were not remitted to him by herein
respondent Eduardo, another brother of Nicolas and designated administrator of the Diego Building. Instead, Eduardo
gave Nicolas’s monthly share in the rents to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and
Eduardo failed to render an accounting and remit his share in the rents and fruits of the building, and Eduardo continued
to hand them over to Rodolfo.

Thus, on May 17, 1999, Nicolas filed a Complaint6 against Rodolfo and Eduardo before the RTC of Dagupan City and
docketed as Civil Case No. 99-02971-D. Nicolas prayed that Eduardo be ordered to render an accounting of all the
transactions over the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the rents; and
that Eduardo and Rodolfo be held solidarily liable for attorney’s fees and litigation expenses.

Rodolfo and Eduardo filed their Answer with Counterclaim7 for damages and attorney’s fees. They argued that Nicolas
had no more claim in the rents in the Diego Building since he had already sold his share to Rodolfo. Rodolfo admitted
having remitted only ₱250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase price to Nicolas
only after the latter shall have executed a deed of absolute sale.

Ruling of the Regional Trial Court

After trial on the merits, or on April 19, 2005, the trial court rendered its Decision8 dismissing Civil Case No. 99-02971-D
for lack of merit and ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment by the latter of
the ₱250,000.00 balance of the agreed purchase price. It made the following interesting pronouncement:

It is undisputed that plaintiff (Nicolas) is one of the co-owners of the Diego Building, x x x. As a co-owner, he is entitled to
[his] share in the rentals of the said building. However, plaintiff [had] already sold his share to defendant Rodolfo Diego in
the amount of ₱500,000.00 and in fact, [had] already received a partial payment in the purchase price in the amount of
₱250,000.00. Defendant Eduardo Diego testified that as per agreement, verbal, of the plaintiff and defendant
Rodolfo Diego, the remaining balance of ₱250,000.00 will be paid upon the execution of the Deed of Absolute
Sale. It was in the year 1997 when plaintiff was being required by defendant Eduardo Diego to sign the Deed of Absolute
Sale. Clearly, defendant Rodolfo Diego was not yet in default as the plaintiff claims which cause [sic] him to refuse to sign
[sic] document. The contract of sale was already perfected as early as the year 1993 when plaintiff received the partial
payment, hence, he cannot unilaterally revoke or rescind the same. From then on, plaintiff has, therefore, ceased to be a
co-owner of the building and is no longer entitled to the fruits of the Diego Building.

32
Equity and fairness dictate that defendant [sic] has to execute the necessary document regarding the sale of his share to
defendant Rodolfo Diego. Correspondingly, defendant Rodolfo Diego has to perform his obligation as per their verbal
agreement by paying the remaining balance of ₱250,000.00.9

To summarize, the trial court ruled that as early as 1993, Nicolas was no longer entitled to the fruits of his aliquot share in
the Diego Building because he had "ceased to be a co-owner" thereof. The trial court held that when Nicolas received the
₱250,000.00 downpayment, a "contract of sale" was perfected. Consequently, Nicolas is obligated to convey such share
to Rodolfo, without right of rescission. Finally, the trial court held that the ₱250,000.00 balance from Rodolfo will only be
due and demandable when Nicolas executes an absolute deed of sale.

Ruling of the Court of Appeals

Nicolas appealed to the CA which sustained the trial court’s Decision in toto. The CA held that since there was a perfected
contract of sale between Nicolas and Rodolfo, the latter may compel the former to execute the proper sale document.
Besides, Nicolas’s insistence that he has since rescinded their agreement in 1997 proved the existence of a perfected
sale. It added that Nicolas could not validly rescind the contract because: "1) Rodolfo ha[d] already made a partial
payment; 2) Nicolas ha[d] already partially performed his part regarding the contract; and 3) Rodolfo opposes the
rescission."10

The CA then proceeded to rule that since no period was stipulated within which Rodolfo shall deliver the balance of the
purchase price, it was incumbent upon Nicolas to have filed a civil case to fix the same. But because he failed to do so,
Rodolfo cannot be considered to be in delay or default.

Finally, the CA made another interesting pronouncement, that by virtue of the agreement Nicolas entered into with
Rodolfo, he had already transferred his ownership over the subject property and as a consequence, Rodolfo is legally
entitled to collect the fruits thereof in the form of rentals. Nicolas’ remaining right is to demand payment of the balance of
the purchase price, provided that he first executes a deed of absolute sale in favor of Rodolfo.

Nicolas moved for reconsideration but the same was denied by the CA in its Resolution dated October 3, 2007.

Hence, this Petition.

Issues

The Petition raises the following errors that must be rectified:

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THERE WAS NO PERFECTED
CONTRACT OF SALE BETWEEN PETITIONER NICOLAS DIEGO AND RESPONDENT RODOLFO DIEGO OVER
NICOLAS’S SHARE OF THE BUILDING BECAUSE THE SUSPENSIVE CONDITION HAS NOT YET BEEN FULFILLED.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE CONTRACT OF SALE BETWEEN
PETITIONER AND RESPONDENT RODOLFO DIEGO REMAINS LEGALLY BINDING AND IS NOT RESCINDED
GIVING MISPLACED RELIANCE ON PETITIONER NICOLAS’ STATEMENT THAT THE SALE HAS NOT YET BEEN
REVOKED.

III

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER NICOLAS DIEGO ACTED
LEGALLY AND CORRECTLY WHEN HE UNILATERALLY RESCINDED AND REVOKED HIS AGREEMENT OF SALE
WITH RESPONDENT RODOLFO DIEGO CONSIDERING RODOLFO’S MATERIAL, SUBSTANTIAL BREACH OF THE
CONTRACT.

IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS NO MORE RIGHTS OVER
HIS SHARE IN THE BUILDING, DESPITE THE FACT THAT THERE WAS AS YET NO PERFECTED CONTRACT OF
SALE BETWEEN PETITIONER NICOLAS DIEGO AND RODOLFO DIEGO AND THERE WAS YET NO TRANSFER OF
OWNERSHIP OF PETITIONER’S SHARE TO RODOLFO DUE TO THE NON-FULFILLMENT BY RODOLFO OF THE
SUSPENSIVE CONDITION UNDER THE CONTRACT.

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT RODOLFO HAS
UNJUSTLY ENRICHED HIMSELF AT THE EXPENSE OF PETITIONER BECAUSE DESPITE NOT HAVING PAID THE

33
BALANCE OF THE PURCHASE PRICE OF THE SALE, THAT RODOLFO HAS NOT YET ACQUIRED OWNERSHIP
OVER THE SHARE OF PETITIONER NICOLAS, HE HAS ALREADY BEEN APPROPRIATING FOR HIMSELF AND FOR
HIS PERSONAL BENEFIT THE SHARE OF THE INCOME OF THE BUILDING AND THE PORTION OF THE BUILDING
ITSELF WHICH WAS DUE TO AND OWNED BY PETITIONER NICOLAS.

VI

THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING ACTUAL DAMAGES, ATTORNEY’S FEES AND
LITIGATION EXPENSES TO THE PETITIONER DESPITE THE FACT THAT PETITIONER’S RIGHTS HAD BEEN
WANTONLY VIOLATED BY THE RESPONDENTS.11

Petitioner’s Arguments

In his Petition, the Supplement12 thereon, and Reply,13 Nicolas argues that, contrary to what the CA found, there was no
perfected contract of sale even though Rodolfo had partially paid the price; that in the absence of the third element in a
sale contract – the price – there could be no perfected sale; that failing to pay the required price in full, Nicolas had the
right to rescind the agreement as an unpaid seller.

Nicolas likewise takes exception to the CA finding that Rodolfo was not in default or delay in the payment of the agreed
balance for his (Nicolas’s) failure to file a case to fix the period within which payment of the balance should be made. He
believes that Rodolfo’s failure to pay within a reasonable time was a substantial and material breach of the agreement
which gave him the right to unilaterally and extrajudicially rescind the agreement and be discharged of his obligations as
seller; and that his repeated written demands upon Rodolfo to pay the balance granted him such rights.

Nicolas further claims that based on his agreement with Rodolfo, there was to be no transfer of title over his share in the
building until Rodolfo has effected full payment of the purchase price, thus, giving no right to the latter to collect his share
in the rentals.

Finally, Nicolas bewails the CA’s failure to award damages, attorney’s fees and litigation expenses for what he believes is
a case of unjust enrichment at his expense.

Respondents’ Arguments

Apart from echoing the RTC and CA pronouncements, respondents accuse the petitioner of "cheating" them, claiming that
after the latter received the ₱250,000.00 downpayment, he "vanished like thin air and hibernated in the USA, he being an
American citizen,"14 only to come back claiming that the said amount was a mere loan.

They add that the Petition is a mere rehash and reiteration of the petitioner’s arguments below, which are deemed to have
been sufficiently passed upon and debunked by the appellate court.

Our Ruling

The Court finds merit in the Petition.

The contract entered into by Nicolas and Rodolfo was a contract to sell.

a) The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and
distinguishing characteristic of a contract to sell. It also shows that the vendor reserved title to the property until
full payment.

There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in the Diego Building for the price of ₱500,000.00.
There is also no dispute that of the total purchase price, Rodolfo paid, and Nicolas received, ₱250,000.00. Significantly, it
is also not disputed that the parties agreed that the remaining amount of ₱250,000.00 would be paid after Nicolas shall
have executed a deed of sale.

This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a unique and
distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this Court ruled that a stipulation in the
contract, "[w]here the vendor promises to execute a deed of absolute sale upon the completion by the vendee of
the payment of the price," indicates that the parties entered into a contract to sell. According to this Court, this
particular provision is tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court ruled
that the agreement to execute a deed of sale upon full payment of the purchase price "shows that the vendors reserved
title to the subject property until full payment of the purchase price." 16

In Tan v. Benolirao,17 this Court, speaking through Justice Brion, ruled that the parties entered into a contract to sell as
revealed by the following stipulation:

d) 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;18

34
The Court further held that "[j]urisprudence has established that 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."19

b) The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the parties show that
they agreed on a contract to sell, not of sale. The absence of a formal deed of conveyance is indicative of a
contract to sell.

In San Lorenzo Development Corporation v. Court of Appeals,20 the facts show that spouses Miguel and Pacita Lu (Lu)
sold a certain parcel of land to Pablo Babasanta (Pablo). After several payments, Pablo wrote Lu demanding "the
execution of a final deed of sale in his favor so that he could effect full payment of the purchase price."21 To prove his
allegation that there was a perfected contract of sale between him and Lu, Pablo presented a receipt signed by Lu
acknowledging receipt of ₱50,000.00 as partial payment.22

However, when the case reached this Court, it was ruled that the transaction entered into by Pablo and Lu was only
a contract to sell, not a contract of sale. The Court held thus:

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (₱50,000.00) from
Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that
the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a
contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase price.

Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the
execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused
to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him
until such time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer
title, they could have easily executed the document of sale in its required form simultaneously with their
acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally
be considered as a perfected contract to sell.23

In the instant case, records show that Nicolas signed a mere receipt24 acknowledging partial payment of ₱250,000.00 from
Rodolfo. It states:

July 8, 1993

Received the amount of [₱250,000.00] for 1 share of Diego Building as partial payment for Nicolas Diego.

(signed)
Nicolas Diego25

As we ruled in San Lorenzo Development Corporation v. Court of Appeals,26 the parties could have executed a document
of sale upon receipt of the partial payment but they did not. This is thus an indication that Nicolas did not intend to
immediately transfer title over his share but only upon full payment of the purchase price. Having thus reserved title over
the property, the contract entered into by Nicolas is a contract to sell. In addition, Eduardo admitted that he and Rodolfo
repeatedly asked Nicolas to sign the deed of sale27 but the latter refused because he was not yet paid the full amount. As
we have ruled in San Lorenzo Development Corporation v. Court of Appeals, 28 the fact that Eduardo and Rodolfo asked
Nicolas to execute a deed of sale is a clear recognition on their part that the ownership over the property still remains with
Nicolas. In fine, the totality of the parties’ acts convinces us that Nicolas never intended to transfer the ownership over his
share in the Diego Building until the full payment of the purchase price. Without doubt, the transaction agreed upon by the
parties was a contract to sell, not of sale.

In Chua v. Court of Appeals,29 the parties reached an impasse when the seller wanted to be first paid the consideration
before a new transfer certificate of title (TCT) is issued in the name of the buyer. Contrarily, the buyer wanted to secure a
new TCT in his name before paying the full amount. Their agreement was embodied in a receipt containing the following
terms: "(1) the balance of ₱10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the account
of x x x; and (3) if [the buyer] fails to pay the balance x x x the [seller] has the right to forfeit the earnest money x x
x."30 The case eventually reached this Court. In resolving the impasse, the Court, speaking through Justice Carpio, held
that "[a] perusal of the Receipt shows that the true agreement between the parties was a contract to sell."31 The Court
noted that "the agreement x x x was embodied in a receipt rather than in a deed of sale, ownership not having passed
between them."32 The Court thus concluded that "[t]he absence of a formal deed of conveyance is a strong indication
that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the
purchase price."33 Thus, the "true agreement between the parties was a contract to sell."34

In the instant case, the parties were similarly embroiled in an impasse. The parties’ agreement was likewise embodied
only in a receipt. Also, Nicolas did not want to sign the deed of sale unless he is fully paid. On the other hand, Rodolfo did
not want to pay unless a deed of sale is duly executed in his favor. We thus say, pursuant to our ruling in Chua v. Court of
Appeals35 that the agreement between Nicolas and Rodolfo is a contract to sell.

35
This Court cannot subscribe to the appellate court’s view that Nicolas should first execute a deed of absolute sale in favor
of Rodolfo, before the latter can be compelled to pay the balance of the price. This is patently ridiculous, and goes against
every rule in the book. This pronouncement virtually places the prospective seller in a contract to sell at the mercy of the
prospective buyer, and sustaining this point of view would place all contracts to sell in jeopardy of being rendered
ineffective by the act of the prospective buyers, who naturally would demand that the deeds of absolute sale be first
executed before they pay the balance of the price. Surely, no prospective seller would accommodate.

In fine, "the need to execute a deed of absolute sale upon completion of payment of the price generally indicates
that it is a contract to sell, as it implies the reservation of title in the vendor until the vendee has completed the
payment of the price."36 In addition, "[a] stipulation reserving ownership in the vendor until full payment of the price is x x
x typical in a contract to sell."37 Thus, contrary to the pronouncements of the trial and appellate courts, the parties to this
case only entered into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full payment of the
agreed purchase price.

c) Nicolas did not surrender or deliver title or possession to Rodolfo.

Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer Rodolfo. This
was made clear by the nature of the agreement, by Nicolas’s repeated demands for the return of all rents unlawfully and
unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo’s repeated demands for Nicolas to execute a deed
of sale which, as we said before, is a recognition on their part that ownership over the subject property still remains with
Nicolas.

Significantly, when Eduardo testified, he claimed to be knowledgeable about the terms and conditions of the transaction
between Nicolas and Rodolfo. However, aside from stating that out of the total consideration of ₱500,000.00, the amount
of ₱250,000.00 had already been paid while the remaining ₱250,000.00 would be paid after the execution of the Deed of
Sale, he never testified that there was a stipulation as regards delivery of title or possession.38

It is also quite understandable why Nicolas belatedly demanded the payment of the rentals. Records show that the
structural integrity of the Diego Building was severely compromised when an earthquake struck Dagupan City in 1990.39 In
order to rehabilitate the building, the co-owners obtained a loan from a bank.40 Starting May 1994, the property was leased
to third parties and the rentals received were used to pay off the loan.41 It was only in 1996, or after payment of the loan
that the co-owners started receiving their share in the rentals.42 During this time, Nicolas was in the USA but immediately
upon his return, he demanded for the payment of his share in the rentals which Eduardo remitted to Rodolfo. Failing
which, he filed the instant Complaint. To us, this bolsters our findings that Nicolas did not intend to immediately transfer
title over the property.

It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title to the property to
the prospective buyer pending the latter’s payment of the price in full. It certainly is absurd to assume that in the absence
of stipulation, a buyer under a contract to sell is granted ownership of the property even when he has not paid the seller in
full. If this were the case, then prospective sellers in a contract to sell would in all likelihood not be paid the balance of the
price.

This ponente has had occasion to rule that "[a] contract to sell is one where the prospective seller reserves the transfer of
title to the prospective buyer until the happening of an event, such as full payment of the purchase price. What the seller
obliges himself to do is to sell the subject property only when the entire amount of the purchase price has already been
delivered to him. ‘In other words, the full payment of the purchase price partakes of a suspensive condition, the
nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.’ It does not, by itself, transfer ownership to the buyer."43

The contract to sell is terminated or cancelled.

Having established that the transaction was a contract to sell, what happens now to the parties’ agreement?

The remedy of rescission is not available in contracts to sell.44 As explained in Spouses Santos v. Court of Appeals:45

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. 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.
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
36
does not apply to a contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to
sales of immovable property. Neither provision is applicable in the present case.46

Similarly, we held in Chua v. Court of Appeals47 that "Article 1592 of the Civil Code permits the buyer to pay, even after
the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially
or by notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until
full payment of the price,"48 as in this case.1âwphi1

Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase price, the contract to sell
was deemed terminated or cancelled.49 As we have held in Chua v. Court of Appeals,50 "[s]ince the agreement x x x is a
mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of
the condition prevents the obligation to sell from arising and ownership is retained by the seller without further
remedies by the buyer." Similarly, we held in Reyes v. Tuparan51 that "petitioner’s obligation to sell the subject properties
becomes demandable only upon the happening of the positive suspensive condition, which is the respondent’s full
payment of the purchase price. Without respondent’s full payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title. Respondent’s failure to pay in full the purchase price in
full is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that
prevents the petitioner from being bound to convey title to respondent." Otherwise stated, Rodolfo has no right to compel
Nicolas to transfer ownership to him because he failed to pay in full the purchase price. Correlatively, Nicolas has no
obligation to transfer his ownership over his share in the Diego Building to Rodolfo.52

Thus, it was erroneous for the CA to rule that Nicolas should have filed a case to fix the period for Rodolfo’s payment of
the balance of the purchase price. It was not Nicolas’s obligation to compel Rodolfo to pay the balance; it was Rodolfo’s
duty to remit it.

It would appear that after Nicolas refused to sign the deed as there was yet no full payment, Rodolfo and Eduardo hired
the services of the Daroya Accounting Office "for the purpose of estimating the amount to which [Nicolas] still owes
[Rodolfo] as a consequence of the unconsummated verbal agreement regarding the former’s share in the co-ownership of
[Diego Building] in favor of the latter."53 According to the accountant’s report, after Nicolas revoked his agreement with
Rodolfo due to non-payment, the downpayment of ₱250,000.00 was considered a loan of Nicolas from Rodolfo.54 The
accountant opined that the ₱250,000.00 should earn interest at 18%.55 Nicolas however objected as regards the
imposition of interest as it was not previously agreed upon. Notably, the contents of the accountant’s report were not
disputed or rebutted by the respondents. In fact, it was stated therein that "[a]ll the bases and assumptions made
particularly in the fixing of the applicable rate of interest have been discussed with [Eduardo]."56

We find it irrelevant and immaterial that Nicolas described the termination or cancellation of his agreement with Rodolfo as
one of rescission. Being a layman, he is understandably not adept in legal terms and their implications. Besides, this
Court should not be held captive or bound by the conclusion reached by the parties. The proper characterization of an
action should be based on what the law says it to be, not by what a party believed it to be. "A contract is what the law
defines it to be x x x and not what the contracting parties call it."57

On the other hand, the respondents’ additional submission – that Nicolas cheated them by "vanishing and hibernating" in
the USA after receiving Rodolfo’s ₱250,000.00 downpayment, only to come back later and claim that the amount he
received was a mere loan – cannot be believed. How the respondents could have been cheated or disadvantaged by
Nicolas’s leaving is beyond comprehension. If there was anybody who benefited from Nicolas’s perceived "hibernation", it
was the respondents, for they certainly had free rein over Nicolas’s interest in the Diego Building. Rodolfo put off payment
of the balance of the price, yet, with the aid of Eduardo, collected and appropriated for himself the rents which belonged to
Nicolas.

Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the rents.

For his complicity, bad faith and abuse of authority as the Diego Building administrator, Eduardo must be held solidarily
liable with Rodolfo for all that Nicolas should be entitled to from 1993 up to the present, or in respect of actual damages
suffered in relation to his interest in the Diego Building. Eduardo was the primary cause of Nicolas’s loss, being directly
responsible for making and causing the wrongful payments to Rodolfo, who received them under obligation to return them
to Nicolas, the true recipient.1âwphi1 As such, Eduardo should be principally responsible to Nicolas as well. Suffice it to
state that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith; and every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same.58

Attorney’s fees and other costs.

"Although attorney’s fees are not allowed in the absence of stipulation, the court can award the same when the
defendant’s act or omission has compelled the plaintiff to incur expenses to protect his interest or where the defendant
acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim."59 In the
instant case, it is beyond cavil that petitioner was constrained to file the instant case to protect his interest because of
respondents’ unreasonable and unjustified refusal to render an accounting and to remit to the petitioner his rightful share
in rents and fruits in the Diego Building. Thus, we deem it proper to award to petitioner attorney’s fees in the amount of
₱50,000.00,60 as well as litigation expenses in the amount of ₱20,000.00 and the sum of ₱1,000.00 for each court
appearance by his lawyer or lawyers, as prayed for.

37
WHEREFORE, premises considered, the Petition is GRANTED. The June 29, 2007 Decision and October 3, 2007
Resolution of the Court of Appeals in CA-G.R. CV No. 86512, and the April 19, 2005 Decision of the Dagupan City
Regional Trial Court, Branch 40 in Civil Case No. 99-02971-D, are hereby ANNULLED and SET ASIDE.

The Court further decrees the following:

1. The oral contract to sell between petitioner Nicolas P. Diego and respondent Rodolfo P. Diego
is DECLARED terminated/cancelled;

2. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to surrender possession and control, as
the case may be, of Nicolas P. Diego’s share in the Diego Building. Respondents are further commanded to
return or surrender to the petitioner the documents of title, receipts, papers, contracts, and all other documents in
any form or manner pertaining to the latter’s share in the building, which are deemed to be in their unauthorized
and illegal possession;

3. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to immediately render an accounting of
all the transactions, from the period beginning 1993 up to the present, pertaining to Nicolas P. Diego’s share in
the Diego Building, and thereafter commanded to jointly and severally remit to the petitioner all rents, monies,
payments and benefits of whatever kind or nature pertaining thereto, which are hereby deemed received by them
during the said period, and made to them or are due, demandable and forthcoming during the said period and
from the date of this Decision, with legal interest from the filing of the Complaint;

4. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED, immediately and without further delay
upon receipt of this Decision, to solidarily pay the petitioner attorney’s fees in the amount of ₱50,000.00; litigation
expenses in the amount of ₱20,000.00 and the sum of ₱1,000.00 per counsel for each court appearance by his
lawyer or lawyers;

5. The payment of ₱250,000.00 made by respondent Rodolfo P. Diego, with legal interest from the filing of the
Complaint, shall be APPLIED, by way of compensation, to his liabilities to the petitioner and to answer for all
damages and other awards and interests which are owing to the latter under this Decision; and

6. Respondents’ counterclaim is DISMISSED.

SO ORDERED.

38
 FIRST DIVISION

G.R. No. 59550 January 11, 1995

EDILBERTO NOEL (now PINITO W. MERCADO) as ADMINISTRATOR OF THE INTESTATE ESTATE OF GREGORIO
NANAMAN and HILARIA TABUCLIN, petitioner,
vs.
COURT OF APPEALS and JOSE C. DELESTE, respondents.

G.R. No. 60636 January 11, 1995

PINITO W. MERCADO, as SPECIAL ADMINISTRATOR OF THE INTESTATE ESTATE OF GREGORIO NANAMAN

and HILARIA TABUCLIN, petitioner,
vs.
HONORABLE COURT OF APPEALS and JOSE C. DELESTE, respondents.

QUIASON, J.:

The consolidated cases, G.R. Nos. 59550 and 60636, are petitions for review on certiorari under Rule 45 of the Revised
Rules of court of the Amended Decision dated May 14, 1981 of the Court of Appeals in CA-G.R. No. 56303-R, which
affirmed in toto the decision of the Court of First Instance, Branch II, Lanao del Norte in Special Proceedings No. 596 (II-
94) in favor of Jose C. Deleste, private respondent herein.

Gregorio Nanaman and Hilaria Tabuclin (Nanaman spouses) were a childless, legally-married couple. Gregorio, however,
had a child named Virgilio Nanaman by another woman. Since he was two years old, Virgilio was reared by Gregorio and
Hilaria. He was sent to school by the couple until he reached third year of the law course.

During their marriage, Gregorio and Hilaria acquired certain property including a 34.7-hectare land in Tambo, Iligan City
on which they planted sugarcane, corn and bananas. They also lived there with Virgilio and fifteen tenants.

On October 2, 1945, Gregorio died. Hilaria then administered the property with the help of Virgilio enjoyed the procedure
of the land to the exclusion of Juan Nanaman, the brother of Gregorio, and Esperanza and Caridad Nanaman, Gregorio's
daughters by still another woman. In 1953, Virgilio declared the property in his name for taxation purposes under Tax
Declaration No. 5534 (Exhs. 13 & 13-A). On November 1, 1952, Hilaria and Virgilio, mortgaged the 34.7-hectare land in
favor of private respondent, in consideration of the amount of P4,800.00 (Exh. 5).

On February 16, 1954, Hilaria and Virgilio executed a deed of sale over the same tract of land also in favor of private
respondent in consideration of the sum of P16,000.00 (Exh. 7). Witnesses to the sale were the wife of Virgilio, Rosita S.
Nanaman, Rufo C. Salas, the driver of private respondent, and Remedios Pilotan. The document was notarized on
February 17, 1954 and was registered with the Register of Deeds of Iligan city on March 2, 1954. The tax declaration in
the name of Virgilio was cancelled and a new tax declaration was issued in the name of private respondent. Having
discovered that the property was in arrears in the payment of taxes from 1952, private respondent paid the taxes for 1952,
1953 and 1954 (Exhs. 13-B, 13-C & 14-B). From then on, private respondent has paid the taxes on the property.

On May 15, 1954, Hilaria died. On October 27, 1954, Esperanza and Caridad Nanaman filed intestate estate proceedings
concerning the estate of their father, Gregorio. Included in the list of property of the estate was the 34.7-hectare land.
Inasmuch as only Esperanza, Caridad and Virgilio Nanaman were named as heirs of Gregorio in the petition, Juan
Nanaman, Gregorio's brother, opposed it. On November 26, 1954, the petition was amended to include the estate of
Hilaria with Alejo Tabuclin, Hilaria's brother, and Julio Tabuclin, a son of Hilaria's deceased brother, Jose, as additional
petitioners.

Having been appointed special administrator of the estate of the Nanaman couple, Juan Nanaman included the 34.7-
hectare land in the list of the assets of the estate.

Juan also reported that Virgilio took the amount of P350.00 from the procedure of the estate without prior permission and
that five tenants in contempt of court. Accordingly, in its Order of January 30, 1956, the probate court required private
respondent and said tenants to appear before it and "show cause why they should not be cited for contempt for illegally
interfering in the land" under special administration.

On June 16, 1956, when Edilberto Noel took over as regular administrator of the estate, he was not able to take
possession of the land in question because it was in the possession of private respondent and some heirs of Hilaria.

39
On July 18, 1957, private respondent and the heirs of the Nanaman spouses executed an amicable settlement of the
Nanaman estate. In the document, private respondent agreed "to relinquish his rights to one-half (1/2) of the entire parcel
of land in Tambo, Iligan City, indicated in item 1 under the Estate, sold to him by Hilaria Tabuclin, in favor of all the heirs of
the abovementioned intestate [estate] for the reason that not all of the heirs of Gregorio Nanaman have signed and
agreed" (G.R. No. 60636, Rollo, p. 67). The court approved the amicable settlement but when it was questioned by some
heirs, the court set aside its approval and declared it null and void (Exh. H-1).

The court thereafter ordered Noel, as regular administrator, to file an action to recover the 34.7-hectare land from private
respondent. Consequently, on April 30, 1963, Noel filed an action against private respondent for the version of title over
the 34.7-hectare land to the Nanaman estate and to order private respondent to pay the rentals and attorney's fees to the
estate.

On December 14, 1973, the trial court rendered a decision, holding that the action for annulment of the deed of sale had
prescribed in 1958 inasmuch as the sale was registered in 1954 and that Gregorio's heirs had slept on their rights by
allowing Hilaria to exercise rights of ownership over Gregorio's share of the conjugal property after his death in 1945. On
the issue that Hilaria had no authority to dispose of one-half of the property pertaining to her husband, the trial court ruled:
(1) that Hilaria in effect acted as administratrix over the estate of Gregorio; (2) that she sold the 34.7- hectare land in order
to pay the debts of the conjugal partnership; and (3) that out of the purchase price of P16,000.00, P4,000.00 was in
payment to private respondent (who was a doctor of medicine) for medical services rendered and medicine administered
during Gregorio's ailment and P800.00 was used to pay taxes in arrears.

Noel appealed to the Court of Appeals. In its Decision of February 18, 1980, the appellate court ruled that the transaction
between Hilaria and Virgilio on one hand and private respondent on the other, was indeed a sale. It found that no fraud,
mistake or misrepresentation attended in the execution of the deed of sale and that no proof was shown that the contract
was merely a mortgage.

The appellate court, however, agreed with Noel that Hilaria could not validly sell the 37.7-hectare land because it was
conjugal property, and Hilaria could sell only her one-half share thereof.

On the issue of prescription, the appellate court ruled that since no fraud, mistake or misrepresentation attended the
execution of the deed of sale, the prescriptive period of ten years had not yet elapsed when the action to recover the
property was filed in 1963. Moreover, the appellate court held that in the absence of proof of adverse possession by
Hilaria, she should be considered as holding the property pursuant to her usufructuary rights over the same under the
provisions of the Spanish Civil Code of 1889, the law in force at the time of the death of Gregorio.

Finding that Noel's claim for rentals of P5,000.00 per annum from 1957 was uncontroverted, the appellate court ruled that
one-half thereof belonged to the estate of Gregorio. The dispositive portion of the decision states:

WHEREFORE, the judgment appealed from is set aside and another is hereby entered declaring the
intestate estate of Gregorio Nanaman and the defendant-appellee co-owners of the land in question in the
proportion of one-half (1/2) interest each; ordering defendant-appellee Jose C. Deleste to return to
plaintiff-appellant, as administrator of Gregorio Nanaman's estate the land in question, and to pay plaintiff
as such administrator the sum of P2,500.00 as rental of the 1/2 interest of the estate from the year 1957
until the land is returned to the estate with legal interest from the filing of plaintiff's complaint; and, to, pay
the expenses of litigation and attorney's fees to plaintiff in the sum of P3,000.00. Costs against the
appellee, Jose C. Deleste (G.R. No. 60636, Rollo, p. 42).

Private respondent filed a motion for the reconsideration of said decision praying for the total affirmance of the decision of
the trial court. Noel also filed a motion for reconsideration praying for the return of ownership and possession of the entire
tract of land to the estate of the 34.7-hectare land.

The appellate court took into account that since Gregorio's death, Hilaria and Virgilio took physical possession of the
property and enjoyed its fruits which were delivered to them by the tenants; that Virgilio instituted said tenants; and that he
declared the property in his own name for tax purposes. The court also ruled that the non-payment of the real estate taxes
by Juan constituted abandonment of the property and his non-filing of an action to recover the same from the time that
private respondent "usurped" the property until the filing of the complaint in 1963 by Noel amounted to laches (G.R. No.
60636, Rollo, p. 50).

Hence, the appellate court tacked "the physical possession of Hilaria and Virgilio to the possession of the defendant for
another nine (9) years up to the time the complaint was filed." It considered the "change of conditions or relations" which
had transpired in the case such as private respondent's registration of his muniment of title over the property; the
cancellation of Virgilio's tax declaration and the issuance of another tax declaration in the name of private respondent;
private respondent's payment of taxes from 1952 "up to the present;" the execution of a new tenancy agreement between
private respondent and the tenants; and private respondent's purchase of plows, a carabao and insecticides for use in the
ricefield.

Stating that it was "proscribed from taking away property from the alert and the industrious and dumping it into the hands
and possession of one has previously slept on his rights," the appellate court in its amended decision decreed:

40
 WHEREFORE, Our decision of February 18, 1980 is hereby affirmed and reiterated insofar as it upheld
the regularity and due execution of the deed of sale (Exh. A or 7) and the transaction affecting the
undivided one-half portion of the property described in par. 3 of the complaint appertaining to the share of
Hilaria Tabuclin, as evidenced by said Exh. A or 7, and is reconsidered and set aside and another one
entered affirming the decision of the lower court in all its parts, including the award of damages and the
costs of suit. No costs in this instance (G.R. No. 60636, Rollo, p. 52).

II

Pinito W. Mercado, as new administrator of the estate, appealed to this Court, questioning the court of Appeals' Amended
Decision applying the doctrine of laches and equating the said doctrine with acquisitive prescription (G.R. No. 59550).

Subsequently, another petition for certiorari to declare the sale to private respondent as an equitable mortgage, was filed
by Atty. Bonifacio Legaspi (G.R. No. 60636). Said counsel explained that he represented the heirs of Hilaria while the
counsel in G.R. No. 59550 represented the heirs of Gregorio (G.R. No. 60636, Rollo, pp. 104-107). These two cases,
arising as they do from the same decision of the Court of Appeals, were consolidated in the resolution of September 2,
1991 and are herein jointly considered.

III

There are no cogent reasons to deviate from the ruling of the Court of Appeals that the contract involving the 34.7-hectare
property was one of sale and not of mortgage in the absence of a showing that the findings complained of are totally
devoid of support in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion (Andres
v. Manufacturers Hanover & Trust Corporation, 177 SCRA 618 [1989]). It should be noted that two contracts had been
executed involving said property (the November 1, 1952 mortgage and the February 16, 1954 sale). In the absence of
proof of gross inadequacy of the price, that the sale was made with what might appear as an inadequate consideration
does not make the contract one of mortgage (Askay v. Cosalan, 46 Phil. 179 [1924]).

We find, however, that the resolution of these petitions hinges on whether Hilaria and Virgilio could dispose of the entire
property sold to private respondent and assuming that they did not have full ownership thereof, whether the right of action
to recover the share of the collateral heirs of Gregorio had prescribed or been lost through laches.

Gregorio died in 1945 long before the effectivity of the Civil Code of the Philippines on August 30, 1950. Under Article
2263 of the said Code, "rights to the inheritance of a person who died, with or without a will, before the effectivity of this
Code, shall be governed by the Civil Code of 1889, by other previous laws, and by the rules of Court."

Thus, succession to the estate of Gregorio was governed primarily by the provisions of the Spanish Civil Code of 1889.
Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or sisters or children of brothers or sisters of
the decedent, as is obtaining in this case, was entitled to receive in usufruct the part of the inheritance pertaining to said
heirs. Hilaria, however, had full ownership, not merely usufruct, over the undivided half of the estate (Spanish Civil Code
of 1889, Art. 493). It is only this undivided half-interest that she could validly alienate.

On the other hand, Virgilio was not an heir of Gregorio under the Spanish Civil Code of 1889. Although he was treated as
a child by the Nanaman spouses, illegitimate children who were not natural were disqualified to inherit under the said
Code (Cid v. Burnaman, 24 SCRA 434 [1968]). Article 998 of the Civil Code of the Philippines, which gave an illegitimate
child certain hereditary rights, could not benefit Virgilio because the right of ownership of the collateral heirs of Gregorio
had become vested upon his death (Civil Code of the Philippines, Art. 2253; Uson v. Del Rosario, 92 Phil. 530 [1953]).
Therefore, Virgilio had no right at all to transfer ownership over which he did not own.

In a contract of sale, it is essential that the seller is the owner of the property he is selling. The principal obligation of a
seller is "to transfer the ownership of" the property sold (Civil Code of the Philippines, Art. 1458). This law stems from the
principle that nobody can dispose of that which does not belong to him (Azcona v. Reyes, 59 Phil. 446 [1934]; Coronel v.
Ona, 33 Phil. 456 [1916). NEMO DAT QUAD NON HABET .

While it cannot be said that fraud attended the sale to private respondent, clearly there was a mistake on the part of
Hilaria and Virgilio in selling an undivided interest in the property which belonged to the collateral heirs of Gregorio.

The sale, having been made in 1954, was governed by the Civil Code of the Philippines. Under Article 1456 of said Code,
an implied trust was created on the one-half undivided interest over the 34.7-hectare land in favor of the real owners.

Said Article provides:

If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a
trustee of an implied trust for the benefit of the person from whom the property comes.

In Diaz v. Gorricho, 103 Phil. 261 (1958), the Court said that Article 1456 merely expresses a rule recognized
in Gayondato v. Insular Treasurer, 49 Phil. 244 (1926). Applying said rule, the Gayondato court held that the buyer of a
parcel of land at a public auction to satisfy a judgment against a widow acquired only one-half interest the land

41
corresponding to the share of the window and the other half belonging to the heirs of her husband became impressed with
a constructive trust in behalf of said heirs.

On the issue of prescription, we hold that the action for recovery of title or possession over the 34.7-hectare land had not
yet prescribed when the complaint was filed on April 30, 1963.

In its Amended Decision, the Court of Appeals reckoned the prescriptive period from the death of Gregorio on October 2,
1945.

Under the law in force in 1945, the surviving spouse was given the management of the conjugal property until the affairs
of the conjugal partnership were terminated. The surviving spouse became the owner of one-half interest of the conjugal
estate in his own right. he also became a trustee with respect to the other half for the benefit of whoever may be legally
entitled to inherit the said portion. "He could therefore no more acquire a title by prescription against those for whom he
was administering the conjugal estate than could a guardian his ward or a judicial administrator against the heirs of an
estate. . . . The surviving husband as the administrator and liquidator of the conjugal estate occupies the position of a
trustee of the highest order and is not permitted by the law to hold that estate or any portion thereof adversely to those for
whose benefit the law imposes upon him duty of administration and liquidation" (Pamittan v. Lasam, 60 Phil. 908 [1934]).

The possession of Virgilio, his registration of the land in his name for tax purposes, his hiring of tenants to till the land, and
his enjoyment of the produce of the tenants, appear more as acts done to help Hilaria in managing the conjugal property.
There is no evidence to prove indubitably that Virgilio asserted a claim of ownership over the property in his own right and
adverse to all including Hilaria.

In the same manner, the doctrine of laches does not apply. Upon orders of the court in the intestate proceedings, Noel,
the administrator of the estate of the Nanaman spouses, immediately filed an action to recover possession and ownership
of the property. There is no evidence showing any failure or neglect on his part, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should have been done earlier (Cristobal v. Melchor,
78 SCRA 175 [1977]). The doctrine of stale demands would apply only where by reason of the lapse of time, "[i]t would be
inequitable to allow a party to enforce his legal rights" (Z.E. Lotho, Inc. v. Ice and cold Storage Industries of the
Philippines, Inc., 3 SCRA 744 [1961]). Moreover, this Court, except for every strong reasons, is not disposed to sanction
the application of the doctrine of laches to prejudice or defeat the right of an owner or original transferee (Raneses v.
Intermediate Appellate Court, 187 SCRA 397 [1990]).

The action to recover the undivided half-interest of the collateral heirs of Gregorio prescribes in ten years. The cause of
action is based on Article 1456 of the Civil Code of the Philippines, which made private respondent a trustee of an implied
trust in favor of the said heirs. Under Article 1144 of the Civil Code of the Philippines, actions based upon an obligation
created by law, can be brought within ten years from the time the right of action accrues (Rosario v. Auditor General, 103
Phil. 1132 [1958]).

The ten-year prescriptive period within which the collateral heirs of Gregorio could file an action to recover their share in
the property sold to private respondent ( prescripcion extintiva) accrued only on march 2, 1954, when the deed of sale
was registered with the Register of Deeds (Cf. Arradaza v. Court of Appeals, 170 SCRA 12 [1987]). From march 2, 1954
to April 30, 1963, when the complaint for the recovery of the property was filed, less than ten years had elapsed.
Therefore, the action had not been barred by prescription.

The ten-year prescriptive period before title to real estate shall vest by adverse possession ( prescripcion adquisitiva) is
also reckoned in the case of private respondent from March 2, 1954 (Corporacion de PP. Agustinos Recoletos v.
Crisostomo, 32 Phil. 427 [1915]).

WHEREFORE, the Amended Decision dated May 14, 1981 of the Court of Appeals is REVERSED and SET ASIDE and
the Decision dated February 18, 1980 is REINSTATED and AFFIRMED in toto.

SO ORDERED.

42
 ECOND DIVISION

G.R. No. 171571               March 24, 2008

REPUBLIC OF THE PHILIPPINES, Represented by MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY

(MCIAA), Petitioner,
vs.
HEIRS OF FRANCISCA DIGNOS-SORONO, namely: TEODORO SORONO, LUCIO SORONO, JR., ARSENIO T.
SORONO, RODULFO S. OLIVAR, ALFONSA T. SORONO, CONSTANCIO S. LUMONGSOD, EULALIA S.
LIMPANGOG, and FLORENCIA S. BAGUIO; HEIRS OF JUAN L. AMISTOSO, 1 namely: MARIO L. AMISTOSO, LYN-
LYN AMISTOSO, ALLAN L. AMISTOSO, RAQUEL S. AMISTOSO, EUFRONIO S. AMISTOSO, JR., and ROGELIO S.
AMISTOSO; HEIRS OF BRIGILDA D. AMISTOSO, namely: VICTOR A. YAGONG, HEDELIZA A. YAGONG, and
CIRIACA A. YAGONG; HEIRS OF PASTOR DIGNOS; HEIRS OF ISABEL DIGNOS, namely: DR. NAPOLEON A.
AMORES, VICENTE A. BASMAYOR, DOMINGO A. BASMAYOR, and LYDIA A. BASMAYOR; HEIRS OF DONATA
DIGNOS, namely: TRINIDAD D. FUENTES, NICASIA D. FUENTES, and IRINEO D. FUENTES; HEIRS OF SEGUNDA
DIGNOS, namely: HONORATA D. CORTES and BENIGNO D. CORTES; HEIRS OF GREGORIA DIGNOS, namely:
RITA D. FUENTES and JOSE D. FUENTES; HEIRS OF DOMINGO FUENTES, namely: CIRILA P. DIGNOS and
BASILIO P. DIGNOS; and HEIR OF ISABELO DIGNOS, namely: TERESITA R. DIGNOS, 2 Respondents.

DECISION

CARPIO MORALES, J.:

Assailed via petition for review on certiorari is the April 23, 2005 decision of the Court of Appeals3 affirming that of the
Regional Trial Court (RTC) of Lapu-lapu City, Branch 54.4

Lot Nos. 2296 and 2316 of the Cadastral Survey of Opon, Lapu-lapu City were adjudicated on December 7, 1929 by the
then Court of First Instance of Cebu in favor of the following in four equal shares:

a) Francisca Dignos, married to Blas Sorono – ¼ share in the two lots;
b) Tito Dignos, married to Candida Torrebillas – ¼ share in the two lots;
c) Isabel Dignos, married to Fabiano Amores;
Donata Dignos, married to Estanislao Fuentes;
Segunda Dignos, married to Demetrio Cortes;
Gregoria Dignos, married to Severo Fuentes;
Domingo Dignos, married to Venturada Potot; and
Isabelo Dignos, married to Petronilla Gamallo – ¼ share in the two lots; and
d) Silveria Amistuoso, married to Melecio Tumulak;
Mario Amistuoso, married to Rufina Tampus;
Juan Amistuoso, married to Narcisa Cosef;
Brigilda Amistuoso, married to Casimiro Yagong; and
Pastor Amistuoso, widower – ¼ share in the two lots.5

It appears that the two lots were not partitioned by the adjudicatees.

It appears further that the heirs of Tito Dignos, who, as reflected above, was awarded ¼ share in the two lots, sold for
₱2,565.59 the entire two lots to the then Civil Aeronautics Administration (CAA) via a public instrument entitled
"Extrajudicial Settlement and Sale" executed on October 11, 1957, without the knowledge of respondents whose
predecessors-in-interest were the adjudicatees of the rest of the ¾ portion of the two lots.6

In 1996, CAA’s successor-in-interest, the Mactan Cebu International Airport Authority (MCIAA), erected a security fence
traversing Lot No. 2316 and relocated a number of families, who had built their dwellings within the airport perimeter, to a
portion of said lot to enhance airport security in line with the standards set by the International Civil Aviation Organization
and the Federal Aviation Authority.

MCIAA later caused the issuance in its name of Tax Declaration No. 00548 covering Lot No. 2296 and Tax Declaration
No. 00568 covering Lot No. 2316.

Respondents soon asked the agents of MCIAA to cease giving third persons permission to occupy the lots but the same
was ignored.1avvphi1

43
Respondents thereupon filed on January 8, 1996 a Complaint for Quieting of Title, Legal Redemption with Prayer for a
Writ of Preliminary Injunction against MCIAA before the RTC of Lapu-lapu City,7 alleging that the existence of the tax
declarations "would cast a cloud on their valid and existing titles" to the lots. They alleged that "corresponding original
certificates of title in favor of the decreed owners were . . . issued but the same could no longer be found and located, and
in all probability, were lost during the Second World War."8 (This claim was not specifically denied by petitioner in its
Answer with Counterclaim.)9

Respondents further alleged that neither they nor their predecessors-in-interests sold, alienated or disposed of their
shares in the lots of which they have been in continuous peaceful possession.

Respondents furthermore alleged that neither petitioner nor its predecessor-in-interest had given them any written notice
of its acquisition of the ¼ share of Tito Dignos.

Respondents thus prayed as follows:

1) Upon the filing of this complaint, that a restraining order be issued enjoining the defendant and any of its
officers, agents, employees, and any third person acting on their behest, to desist from occupying their portions of
Lots 2296 and 2316, Opon Cadastre, and upon due notice and hearing, to issue the corresponding writ of
preliminary injunction for the same purpose;

2) To declare the tax declarations of the defendant or any of its predecessors-in-interests covering Lots 2296 and
2316, Opon Cadastre, to be null and void:

3) To grant unto the plaintiffs the right of preemption in the sale of the one-fourth share of Tito Dignos in the
above-mentioned parcels of land under the provisions of Articles 1620 and 1623 of the Civil Code;

4) To order the defendant to reimburse plaintiffs the sum of ₱10,000.00 acceptance fee, the sums of ₱1,000.00
per appearance fee, the sum of ₱10,000.00 for costs of litigation;

5) To order the defendant to pay the plaintiffs the sum of P100,000.00 for moral damages.

Plaintiffs further pray for such orders as may be just and equitable under the premises.10 (Underscoring supplied)

Republic of the Philippines, represented by the MCIAA (hereafter petitioner), in its Answer with Counterclaim,11 maintained
that from the time the lots were sold to its predecessor-in-interest CAA, it has been in open, continuous, exclusive, and
notorious possession thereof; through acquisitive prescription, it had acquired valid title to the lots since it was a
purchaser in good faith and for value; and assuming arguendo that it did not have just title, it had, by possession for over
30 years, acquired ownership thereof by extraordinary prescription.

At all events, petitioner contended that respondents’ action was barred by estoppel and laches.

The trial court found for respondents. It held that respondents and their predecessors-in-interest were in peaceful and
continuous possession of their shares in the lots, and were disturbed of such possession only in 1996 when petitioner put
up the security fence that traversed Lot No. 2316 and relocated families that had built their houses within the airport
perimeter to a portion of said lot.

On petitioner’s claim that it had acquired ownership by extraordinary prescription, the trial court brushed it aside on the
ground that registered lands cannot be the subject of acquisitive prescription.

Neither, held the trial court, had respondents’ action prescribed, as actions for quieting of title cannot prescribe if the
plaintiffs are in possession of the property in question, as in the case of herein respondents.

On petitioner’s defense of laches, the trial court also brushed the same aside in light of its finding that respondents, who
have long been in possession of the lots, came to know of the sale only in 1996. The trial court added that respondents
could not be charged with constructive notice of the 1957 Extrajudicial Settlement and Sale of the lots to CAA as it was
erroneously registered under Act No. 3344,12 the law governing recording of instruments or deeds relating to real estate
which are not registered under the Torrens system. The subject lots being registered, the trial court found, the registration
of the deed should have been made under Act No. 496,13 the applicable law in 1957. In fine, the trial court held that the
registration of the deed under Act No. 3344 did not operate as constructive notice to the whole world.14

Concluding, the trial court held that the questioned sale was valid only with respect to Tito Dignos’ ¼ share of the lots, and
that the sale thereof was subject to the right of legal redemption by respondents following Article 1088 of the Civil Code,
reading:

Should any of the heirs sell his hereditary rights to a stranger before partition, any or all of the co-heirs may be subrogated
to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one
month from the time they were notified in writing of the sale by the vendor.

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In light of its finding that the heirs of Tito Dignos did not give notice of the sale to respondents, the trial court held that the
period for legal redemption had not yet lapsed; and the redemption price should be ¼ of the purchase price paid by the
CAA for the two lots.

The trial court thus disposed:

WHEREFORE, all premises considered, the Court rules in favor of plaintiffs and hence renders judgment:

a) Declaring Tax Declarations Nos. 00915 and 00935, as well as all other tax declarations covering Lot 2296 and
Lot 2316 under the names of the Civil Aeronautics Administration, the Bureau of Air Transportation and the
defendant Mactan Cebu International Airport Authority, as null and void and directing the City Assessor of Lapu-
Lapu City to cancel them;

b) Declaring the Extrajudicial Settlement and Sale affecting Lot 2296 and Lot 2316 (Exhibit "H" for plaintiffs) as
void and ineffective as regards the three-fourth[s] (3/4) shares of plaintiffs in both lots and declaring the herein
plaintiffs as owners of such three fourth[s] shares and;

c) Ordering the defendant to resell to plaintiffs for a total price of Six Hundred forty Pesos (P640.00) the one-
fourth (1/4) shares in Lot 2296 and Lot 2316 it had purchased from the heirs of the late Tito Dignos in 1957;

No pronouncement as to costs.

SO ORDERED. 15

As priorly stated, the Court of Appeals affirmed the trial court’s decision.

Hence, the present petition for review on certiorari which proffers the following

GROUNDS FOR ALLOWANCE OF THE PETITION

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURT’S DECISION WHEN
RESPONDENTS NO LONGER HAVE ANY RIGHT TO RECOVER LOTS 2296 AND 2316 DUE TO THE PRIOR SALE
THEREOF TO THE REPUBLIC AND UPON THE EQUITABLE GROUNDS OF ESTOPPEL AND LACHES.16

The petition fails.

Article 493 of the Civil Code provides:

Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal
rights are involved. But the effect of the alienation of the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination of the co-ownership.

Apropos is the following pertinent portion of this Court’s decision in Bailon-Casilao v. CA:

As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect only his
own share but not those of the other co-owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320
(1923)]. This is because under the aforementioned codal provision, the sale or other disposition affects only his undivided
share and the transferee gets only what would correspond to his grantor in the partition of the thing owned in common.
[Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia and Gaudencio Bailon
which are valid with respect to their proportionate shares, and the subsequent transfers which culminated in the sale to
private respondent Celestino Afable, the said Afable thereby became a co-owner of the disputed parcel of land as
correctly held by the lower court since the sales produced the effect of substituting the buyers in the enjoyment thereof
[Mainit v. Bandoy, 14 Phil. 730 (1910)].

From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire
property by one co-owner without the consent of the other co-owners is not null and void. However, only the rights of the
co-owner-seller are transferred, thereby making the buyer a co-owner of the property.17 (Emphasis and underscoring
supplied)

Petitioner’s predecessor-in-interest CAA thus acquired only the rights pertaining to the sellers-heirs of Tito Dignos, which
is only ¼ undivided share of the two lots.

Petitioner’s insistence that it acquired the property through acquisitive prescription, if not ordinary, then extraordinary,
does not lie. The trial court’s discrediting thereof is well taken. It bears emphasis at this juncture that in the Extrajudicial
Settlement and Sale forged by CAA and Tito Dignos’ heirs in 1957, the following material portions thereof validate the
claim of respondents that the two lots were registered:

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 xxxx

4. That since the Original Transfer Certificate of Title of the above-mentioned property/ies has/have been lost and/or
destroyed, or since the said lot/s is/are covered by Cadastral Case No. 19, and a decree issued on March 19, 1930,
bearing Decree No./s 474824 & 474825, and the VENDEE hereby binds itself to reconstitute said title/s at its own
expense and that the HEIRS-VENDORS, their heirs, successors and assigns bind themselves to help in the reconstitution
of title so that the said lot/s may be registered in the name of the VENDEE in accordance with law[.]18

xxxx

The trial court’s discrediting of petitioner’s invocation of laches and prescription of action is well-taken too.

As for petitioner’s argument that the redemption price should be ¼ of the prevailing market value, not of the actual
purchase price, since, so it claims, "(1) they received just compensation for the property at the time it was purchased by
the Government; and, (2) the property, due to improvements introduced by petitioner in its vicinity, is now worth several
hundreds of millions of pesos,"19 the law is not on its side. Thus, Article 1088 of the Civil Code provides:

Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be
subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the
period of one month from the time they were notified in writing of the sale by the vendor. (Emphasis and underscoring
supplied)

The Court may take judicial notice of the increase in value of the lots. As mentioned earlier, however, the heirs of Tito
Dignos did not notify respondents about the sale. At any rate, since the Extrajudicial Settlement and Sale stipulates, thus:

That the HEIRS-VENDORS, their heirs, assigns and successors, undertake and agree to warrant and defend the
possession and ownership of the property/ies herein sold against any and all just claims of all persons whomsoever and
should the VENDEE be disturbed in its possession, to prosecute and defend the same in the Courts of
Justice20 (Emphasis and underscoring supplied),

petitioner is not without any remedy. This decision is, therefore, without prejudice to petitioner’s right to seek redress
against the vendors-heirs of Tito Dignos and their successors-in-interest.

WHEREFORE, the petition is, in light of the foregoing disquisition, DENIED.

SO ORDERED.

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