[G.R. No. 137290. July 31, 2000] Isidro A.
Sobrecarey, petitioners vice-president and operations manager for corporate
SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner, vs. SPOUSES ALFREDO HUANG and
GRACE HUANG, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision,[1] dated April 8, 1997, of the Court of Appeals
which reversed the decision of the Regional Trial Court, Branch 153, Pasig City dismissing
the complaint brought by respondents against petitioner for enforcement of a contract
of sale.
The facts are not in dispute.
Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in
the purchase and sale of real properties. Part of its inventory are two parcels of land
totalling 1, 738 square meters at the corner of Meralco Avenue and General Capinpin
Street, Barrio Oranbo, Pasig City, which are covered by TCT Nos. PT-82395 and PT-82396
of the Register of Deeds of Pasig City.
On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The
offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as
undisclosed principals. In a letter[2] dated March 24, 1994, Atty. Dauz signified her clients
interest in purchasing the properties for the amount for which they were offered by
petitioner, under the following terms: the sum of P500,000.00 would be given as earnest
money and the balance would be paid in eight equal monthly installments from May to
December, 1994. However, petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter[3] proposing the following terms for
the purchase of the properties, viz:
This is to express our interest to buy your-above-mentioned property
with an area of 1, 738 sq. meters. For this purpose, we are enclosing
herewith the sum of P1,000,000.00 representing earnest-deposit
money, subject to the following conditions.
1. We will be given the exclusive option to purchase the property
within the 30 days from date of your acceptance of this offer.
2. During said period, we will negotiate on the terms and conditions
of the purchase; SMPPI will secure the necessary Management and
Board approvals; and we initiate the documentation if there is mutual
agreement between us.
3. In the event that we do not come to an agreement on this
transaction, the said amount of P1,000,000.00 shall be refundable to
us in full upon demand. . . .
real estate, indicated his conformity to the offer by affixing his signature to the letter and
accepted the "earnest-deposit" of P1 million. Upon request of respondent spouses,
Sobrecarey ordered the removal of the "FOR SALE" sign from the properties.
Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on
April 8, 1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the
subject properties on a 90-day term. Atty. Dauz countered with an offer of six months
within which to pay.
On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz
that petitioner had not yet acted on her counter-offer. This prompted Atty. Dauz to
propose a four-month period of amortization.
On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to
June 13, 1994 within which to exercise her option to purchase the property, adding that
within that period, "[we] hope to finalize [our] agreement on the matter."[4] Her request
was granted.
On July 7, 1994, petitioner, through its president and chief executive officer, Federico
Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on
the terms and conditions of the sale despite the extension granted by petitioner, the
latter was returning the amount of P1 million given as "earnest-deposit."[5]
On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the
execution within five days of a deed of sale covering the properties. Respondents
attempted to return the "earnest-deposit" but petitioner refused on the ground that
respondents option to purchase had already expired.
On August 16, 1994, respondent spouses filed a complaint for specific performance
against petitioner before the Regional Trial Court, Branch 133, Pasig City where it was
docketed as Civil Case No. 64660.
Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the
complaint alleging that (1) the alleged "exclusive option" of respondent spouses lacked
a consideration separate and distinct from the purchase price and was thus
unenforceable and (2) the complaint did not allege a cause of action because there
was no "meeting of the minds" between the parties and, therefore, no perfected
contract of sale. The motion was opposed by respondents.
On December 12, 1994, the trial court granted petitioners motion and dismissed the
action. Respondents filed a motion for reconsideration, but it was denied by the trial
court. They then appealed to the Court of Appeals which, on April 8, 1997, rendered a
decision[6] reversing the judgment of the trial court. The appellate court held that all the
requisites of a perfected contract of sale had been complied with as the offer made on
March 29, 1994, in connection with which the earnest money in the amount of P1 million
was tendered by respondents, had already been accepted by petitioner. The court
cited Art. 1482 of the Civil Code which provides that "[w]henever earnest money is given
in a contract of sale, it shall be considered as part of the price and as proof of the
perfection of the contract." The fact the parties had not agreed on the mode of
payment did not affect the contract as such is not an essential element for its validity. In
addition, the court found that Sobrecarey had authority to act in behalf of petitioner for
the sale of the properties.[7]
Petitioner moved for reconsideration of the trial courts decision, but its motion was
denied. Hence, this petition.
Petitioner contends that the Court of Appeals erred in finding that there was a
perfected contract of sale between the parties because the March 29, 1994 letter of
respondents, which petitioner accepted, merely resulted in an option contract, albeit it
was unenforceable for lack of a distinct consideration. Petitioner argues that the
absence of agreement as to the mode of payment was fatal to the perfection of the
contract of sale. Petitioner also disputes the appellate courts ruling that Isidro A.
Sobrecarey had authority to sell the subject real properties.[8]
Respondents were required to comment within ten (10) days from notice. However,
despite 13 extensions totalling 142 days which the Court had given to them,
respondents failed to file their comment. They were thus considered to have waived the
filing of a comment.
The petition is meritorious.
In holding that there is a perfected contract of sale, the Court of Appeals relied on the
following findings: (1) earnest money was allegedly given by respondents and
accepted by petitioner through its vice-president and operations manager, Isidro A.
Sobrecarey; and (2) the documentary evidence in the records show that there was a
perfected contract of sale.
With regard to the alleged payment and acceptance of earnest money, the Court
holds that respondents did not give the P1 million as "earnest money" as provided by Art.
1482 of the Civil Code. They presented the amount merely as a deposit of what would
eventually become the earnest money or downpayment should a contract of sale be
made by them. The amount was thus given not as a part of the purchase price and as
proof of the perfection of the contract of sale but only as a guarantee that respondents
would not back out of the sale. Respondents in fact described the amount as an
"earnest-deposit." In Spouses Doromal, Sr. v. Court of Appeals,[9] it was held:
. . . While the P5,000 might have indeed been paid to Carlos in
October, 1967, there is nothing to show that the same was in the
concept of the earnest money contemplated in Art. 1482 of the Civil
Code, invoked by petitioner, as signifying perfection of the
sale. Viewed in the backdrop of the factual milieu thereof extant in
the record, We are more inclined to believe that the said P5,000.00
were paid in the concept of earnest money as the term was
understood under the Old Civil Code, that is, as a guarantee that the
buyer would not back out, considering that it is not clear that there
was already a definite agreement as to the price then and that
petitioners were decided to buy 6/7 only of the property should
respondent Javellana refuse to agree to part with her 1/7 share.[10]
In the present case, the P1 million "earnest-deposit" could not have been given as
earnest money as contemplated in Art. 1482 because, at the time when petitioner
accepted the terms of respondents offer of March 29, 1994, their contract had not yet
been perfected. This is evident from the following conditions attached by respondents
to their letter, to wit: (1) that they be given the exclusive option to purchase the
property within 30 days from acceptance of the offer; (2) that during the option period,
the parties would negotiate the terms and conditions of the purchase; and (3) petitioner
would secure the necessary approvals while respondents would handle the
documentation.
The first condition for an option period of 30 days sufficiently shows that a sale was never
perfected. As petitioner correctly points out, acceptance of this condition did not give
rise to a perfected sale but merely to an option or an accepted unilateral promise on
the part of respondents to buy the subject properties within 30 days from the date of
acceptance of the offer. Such option giving respondents the exclusive right to buy the
properties within the period agreed upon is separate and distinct from the contract of
sale which the parties may enter.[11] All that respondents had was just the option to buy
the properties which privilege was not, however, exercised by them because there was
a failure to agree on the terms of payment. No contract of sale may thus be enforced
by respondents.
Furthermore, even the option secured by respondents from petitioner was fatally
defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to
buy or sell a determinate thing for a price certain is binding upon the promisor only if the
promise is supported by a distinct consideration. Consideration in an option contract
may be anything of value, unlike in sale where it must be the price certain in money or
its equivalent. There is no showing here of any consideration for the option. Lacking any
proof of such consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second condition
that, during the option period, the parties would negotiate the terms and conditions of
the purchase. The stages of a contract of sale are as follows: (1) negotiation, covering
the period from the time the prospective contracting parties indicate interest in the
contract to the time the contract is perfected; (2) perfection, which takes place upon
the concurrence of the essential elements of the sale which are the meeting of the
minds of the parties as to the object of the contract and upon the price; and
(3) consummation, which begins when the parties perform their respective undertakings
under the contract of sale, culminating in the extinguishment thereof.[12] In the present
case, the parties never got past the negotiation stage. The alleged "indubitable
evidence"[13] of a perfected sale cited by the appellate court was nothing more than
offers and counter-offers which did not amount to any final arrangement containing the
essential elements of a contract of sale. While the parties already agreed on the real
properties which were the objects of the sale and on the purchase price, the fact
remains that they failed to arrive at mutually acceptable terms of payment, despite the
45-day extension given by petitioner.
The appellate court opined that the failure to agree on the terms of payment was no
bar to the perfection of the sale because Art. 1475 only requires agreement by the
parties as to the price of the object. This is error. In Navarro v. Sugar Producers
Cooperative Marketing Association, Inc.,[14] we laid down the rule that the manner of
payment of the purchase price is an essential element before a valid and binding
contract of sale can exist. Although the Civil Code does not expressly state that the
minds of the parties must also meet on the terms or manner of payment of the price, the
same is needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of
Appeals,[15] agreement on the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to agree on the
price.[16] In Velasco v. Court of Appeals,[17] the parties to a proposed sale had already
agreed on the object of sale and on the purchase price. By the buyers own admission,
however, the parties still had to agree on how and when the downpayment and the
installments were to be paid. It was held:

. . . Such being the situation, it can not, therefore, be said that a

definite and firm sales agreement between the parties had been
perfected over the lot in question.Indeed, this Court has already
ruled before that a definite agreement on the manner of payment of
the purchase price is an essential element in the formation of a
binding and enforceable contract of sale. The fact, therefore, that
the petitioners delivered to the respondent the sum of P10,000 as part
of the down-payment that they had to pay cannot be considered as
sufficient proof of the perfection of any purchase and sale
agreement between the parties herein under Art. 1482 of the new
Civil Code, as the petitioners themselves admit that some essential
matter - the terms of the payment - still had to be mutually
covenanted.[18]

Thus, it is not the giving of earnest money, but the proof of the concurrence of all the
essential elements of the contract of sale which establishes the existence of a perfected
sale.

In the absence of a perfected contract of sale, it is immaterial whether Isidro A.

Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This
issue, therefore, needs no further discussion.

WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents

complaint is DISMISSED.

SO ORDERED.

Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Bellosillo, (Chairman), J., on leave.

 [G.R. No. 120820. August 1, 2000]
SPS. FORTUNATO SANTOS and ROSALINDA R. SANTOS, petitioners, vs. COURT OF APPEALS,
SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the decision of the Court of Appeals, dated March 28,
1995, in CA-G.R. CV No. 30955, which reversed and set aside the judgment of the
Regional Trial Court of Makati, Branch 133, in Civil Case No. 89-4759. Petitioners (the
Santoses) were the owners of a house and lot informally sold, with conditions, to herein
private respondents (the Casedas). In the trial court, the Casedas had complained that
the Santoses refused to deliver said house and lot despite repeated demands. The trial
court dismissed the complaint for specific performance and damages, but in the Court
of Appeals, the dismissal was reversed, as follows:
WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED
and SET ASIDE and a new one entered:
1. GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the
finality of judgment within which to pay the balance of the obligation in accordance
with their agreement;
2. Ordering appellees to restore possession of the subject house and lot to the
appellants upon receipt of the full amount of the balance due on the purchase price;
and
3. No pronouncement as to costs.
SO ORDERED.[1]
The undisputed facts of this case are as follows:
The spouses Fortunato and Rosalinda Santos owned the house and lot consisting of
350 square meters located at Lot 7, Block 8, Better Living Subdivision, Paranaque, Metro
Manila, as evidenced by TCT (S-11029) 28005 of the Register of Deeds of Paranaque. The
land together with the house, was mortgaged with the Rural Bank of Salinas, Inc., to
secure a loan of P150,000.00 maturing on June 16, 1987.
Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor
of hers in Pasay City and soon became very good friends with her. The duo even
became kumadres when Carmen stood as a wedding sponsor of Rosalinda's nephew.
On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of
P16,915.84 in unpaid interest and other charges. Since the Santos couple had no funds,
Rosalinda offered to sell the house and lot to Carmen. After inspecting the real property,
Carmen and her husband agreed.
Sometime that month of June, Carmen and Rosalinda signed a document, which
reads:
Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to the
(total) amount of 350,000.00 (house and lot) that is own (sic) by Mrs. Rosalinda R. Santos.
(Mrs.) (Sgd.) Carmen Caseda
direct buyer
Mrs. Carmen Caseda
(Sgd.) Rosalinda Del R. Santos
Owner
Mrs. Rosalinda R. Santos
House and Lot
Better Living Subd. Paraaque, Metro Manila
Section V Don Bosco St."[2]
The other terms and conditions that the parties agreed upon were for the Caseda
spouses to pay: (1) the balance of the mortgage loan with the Rural bank amounting to
P135,385.18; (2) the real estate taxes; (3) the electric and water bills; and (4) the balance
of the cash price to be paid not later than June 16, 1987, which was the maturity date of
the loan.[3]
The Casedas gave an initial payment of P54,100.00 and immediately took
possession of the property, which they then leased out. They also paid in installments,
P81,696.84 of the mortgage loan. The Casedas, however, in 1987. Notwithstanding the
state of their finances, Carmen nonetheless paid in March 1990, the real estate taxes on
the property for 1981-1984. She also settled the electric bills from December 12, 1988 to
July 12, 1989. All these payments were made in the name of Rosalinda Santos.
In January 1989, the Santoses, seeing that the Casedas lacked the means to pay
the remaining installments and/or amortization of the loan, repossessed the property. The
Santoses then collected the rentals from the tenants.
In February 1989, Carmen Caseda sold her fishpond in Batangas. She then
approached petitioners and offered to pay the balance of the purchase price for the
house and lot.The parties, however, could not agree, and the deal could not push
through because the Santoses wanted a higher price. For understandably, the real estate
boom in Metro Manila at this time, had considerably jacked up realty values.
On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of Makati,
to have the Santoses execute the final deed of conveyance over the property, or in
default thereof, to reimburse the amount of P180,000.00 paid in cash and P249,900.00
paid to the rural bank, plus interest; as well as rentals for eight months amounting to
P32,000.00, plus damages and costs of suit.
After trial on the merits, the lower court disposed of the case as follows:
WHEREFORE, judgment is hereby ordered:
(a) dismissing plaintiff's (Casedas') complaint; and
(b) declaring the agreement marked as Annex "C" of the complaint
rescinded. Costs against plaintiffs.
SO ORDERED.[4]
 Said judgment of dismissal is mainly based on the trial court's finding that:
Admittedly, the purchase price of the house and lot was P485,385.18, i.e. P350,000.00 as
cash payment and P135,385.18, assumption of mortgage. Of it plaintiffs [Casedas] paid
the following: (1) P54,100.00 down payment; and (2) P81,694.64 installment payments to
the bank on the loan (Exhs. E to E-19) or a total of P135,794.64. Thus, plaintiffs were short
of the purchase price. They cannot, therefore, demand specific performance.[5]
The trial court further held that the Casedas were not entitled to reimbursement of
payments already made, reasoning that:
As, earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the
purchase price of P485,385.18. The property was in plaintiffs' possession from June 1984
to January 1989 or a period of fifty-five months. During that time, plaintiffs leased the
property. Carmen said the property was rented for P25.00 a day or P750.00 a month at
the start and in 1987 it was increased to P2,000.00 and P4,000.00 a month. But the
evidence is not precise when the different amounts of rental took place. Be that as it
may, fairness demands that plaintiffs must pay defendants for their exercise of dominical
rights over the property by renting it to others. The amount of P2,000.00 a month would
be reasonable based on the average of P750.00, P2,000.00, P4,000.00 lease-rentals
charged. Multiply P2,000.00 by 55 months, the plaintiffs must pay defendants
P110,000.00 for the use of the property. Deducting this amount from the P135,794.64
payment of the plaintiffs on the property, the difference is P25,794.64. Should the
plaintiffs be entitled to a reimbursement of this amount? The answer is in the
negative. Because of failure of plaintiffs to liquidated the mortgage loan on time, it had
ballooned from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of
December 31, 1988. Defendants [Santoses] had to pay the last amount to the bank to
save the property from foreclosure. Logically, plaintiffs must share in the burden arising
from their failure to liquidate the loan per their contractual commitment. Hence, the
amount of P25,794.64 as their share in the defendants' damages in the form of
increased loan-amount, is reasonable.[6]
On appeal, the appellate court, as earlier noted, reversed the lower court. The
appellate court held that rescission was not justified under the circumstances and
allowed the Caseda spouses a period of ninety days within which to pay the balance of
the agreed purchase price.
Hence, this instant petition for review on certiorari filed by the Santoses.
Petitioners now submit the following issues for our consideration:
WHETHER OR NOT THE COURT OF APPEALS HAS JURISDICTION TO DECIDE PRIVATE
RESPONDENT'S APPEAL INTERPOSING PURELY QUESTIONS OF LAW.
WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE BUT A
MERE ORAL CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND FOR RESCISSION
(ART. 1592,[7] CIVIL CODE) IS NOT APPLICABLE.
ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED,
WHETHER PETITIONERS' DEMAND AND PRAYER FOR RESCISSION CONTAINED IN THEIR
ANSWER FILED BEFORE THE TRIAL SATISFIED THE SAID REQUIREMENT.
WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE PURCHASE
PRICE INCLUDING THE NON-COMPLIANCE WITH THE STIPULATION TO LIQUIDATE THE
MORTGAGE LOAN ON TIME WHICH CAUSED GRAVE DAMAGE AND PREJUDICE TO
PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO JUSTIFY RESCISSION OF A CONTRACT
TO SELL UNDER ARTICLE 1191[8] (CIVIL CODE).
On the first issue, petitioners argue that, since both the parties and the appellate
court adopted the findings of trial court,[9] no questions of fact were raised before the
Court of Appeals. According to petitioners, CA-G.R. CV No. 30955, involved only pure
questions of law. They aver that the court a quo had no jurisdiction to hear, much less
decide, CA-G.R. CV No. 30955, without running afoul of Supreme Court Circular No. 2-90
(4) [c].[10]
There is a question of law in a given case when the doubt or difference arises as to
what the law is on a certain set of facts, and there is a question of fact when the doubt
or difference arises as to the truth or falsehood of the alleged facts.[11] But we note that
the first assignment of error submitted by respondents for consideration by the appellate
court dealt with the trial court's finding that herein petitioners got back the property in
question because respondents did not have the means to pay the installments and/or
amortization of the loan.[12] The resolution of this question involved an evaluation of proof,
and not only a consideration of the applicable statutory and case laws. Clearly, CA-G.R.
CV No. 30955 did not involve pure questions of law, hence the Court of Appeals had
jurisdiction and there was no violation of our Circular No. 2-90.
Moreover, we find that petitioners took an active part in the proceedings before
the Court of Appeals, yet they did not raise there the issue of jurisdiction. They should have
raised this issue at the earliest opportunity before the Court of Appeals. A party taking
part in the proceedings before the appellate court and submitting his case for as decision
ought not to later on attack the court's decision for want of jurisdiction because the
decision turns out to be adverse to him.[13]
The second and third issues deal with the question: Did the Court of Appeals err in
holding that a judicial rescission of the agreement was necessary? In resolving both issues,
we must first make a preliminary determination of the nature of the contract in
question: Was it a contract of sale, as insisted by respondents or a mere contract to sell,
as contended by petitioners?
Petitioners argue that the transaction between them and respondents was a mere
contract to sell, and not a contract of sale, since the sole documentary evidence (Exh.
D, receipt) referring to their agreement clearly showed that they did not transfer
ownership of the property in question simultaneous with its delivery and hence remained
its owners, pending fulfillment of the other suspensive conditions, i.e., full payment of the
balance of the purchase price and the loan amortizations. Petitioners point to Manuel v.
Rodriguez, 109 Phil. 1 (1960) and Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc.,
43 SCRA 93 (1972), where we held that Article 1592 of the Civil Code is inapplicable to a
contract to sell. They charge the court a quo with reversible error in holding that
petitioners should have judicially rescinded the agreement with respondents when the
latter failed to pay the amortizations on the bank loan.
Respondents insist that there was a perfected contract of sale, since upon their
partial payment of the purchase price, they immediately took possession of the property
as vendees, and subsequently leased it, thus exercising all the rights of ownership over the
property. This showed that transfer of ownership was simultaneous with the delivery of the
realty sold, according to respondents.
It must be emphasized from the outset that a contract is what the law defines it to
be, taking into consideration its essential elements, and not what the contracting parties
call it.[14] Article 1458[15] of the Civil Code defines a contract of sale. Note that the said
article expressly obliges the vendor to transfer ownership of the thing sold as an essential Regional Trial Court of Makati, Branch 133, with respect to the DISMISSAL of the complaint
element of a contract of sale. This is because the transfer of ownership in exchange for a in Civil Case No. 89-4759, is hereby REINSTATED. No pronouncement as to costs.
price paid or promised is the very essence of a contract of sale.[16] We have carefully
examined the contents of the unofficial receipt, Exh. D, with the terms and conditions SO ORDERED.
informally agreed upon by the parties, as well as the proofs submitted to support their
respective contentions. We are far from persuaded that there was a transfer of ownership
simultaneously with the delivery of the property purportedly sold. The records clearly show
that, notwithstanding the fact that the Casedas first took then lost possession of the
disputed house and lot, the title to the property, TCT No. 28005 (S-11029) issued by the
Register of Deeds of Paraaque, has remained always in the name of Rosalinda
Santos.[17] Note further that although the parties had agreed that the Casedas would
assume the mortgage, all amortization payments made by Carmen Caseda to the bank
were in the name of Rosalinda Santos.[18] We likewise find that the bank's cancellation
and discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda
Santos.[19] The foregoing circumstances categorically and clearly show that no valid
transfer of ownership was made by the Santoses to the Casedas. Absent this essential
element, their agreement cannot be deemed a contract of sale. We agree
with petitioners' averment that the agreement between Rosalinda Santos and Carmen
Caseda is a contract to sell. In contracts to sell, ownership is reserved by the vendor and
is not to pass until full payment of the purchase price. This we find fully applicable and
understandable in this case, given that the property involved is a titled realty under
mortgage to a bank and would require notarial and other formalities of law before
transfer thereof could be validly effected.

In view of our finding in the present case that the agreement between the parties is
a contract to sell, it follows that the appellate court erred when it decreed that a judicial
rescission of said agreement was necessary. This is because there was no rescission to
speak of in the first place. As we earlier pointed out, in a contract to sell, title remains with
the vendor and does not pass on to the vendee until the purchase price is paid in
full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive
condition. Failure to pay the price agreed upon is not a mere breach, casual or serious,
but a situation that prevents the obligation of the vendor to convey title from acquiring
an obligatory force.[20] This is entirely different from the situation in a contract of sale,
where non-payment of the price is a negative resolutory condition. The effects in law are
not identical. In a contract of sale, the vendor has lost ownership of the thing sold and
cannot recover it, unless the contract of sale is rescinded and set aside.[21] In a contract
to sell, however, the vendor remains the owner for as long as the vendee has not
complied fully with the condition of paying the purchase price. If the vendor should eject
the vendee for failure to meet the condition precedent, he is enforcing the contract and
not rescinding it. When the petitioners in the instant case repossessed the disputed house
and lot for failure of private respondents to pay the purchase price in full, they were
merely enforcing the contract and not rescinding it. As petitioners correctly point out, the
Court of Appeals erred when it ruled that petitioners should have judicially rescinded the
contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-
payment of the purchase price as a resolutory condition. It does not apply to a contract
to sell.[22] As to Article 1191, it is subordinated to the provisions of Article 1592 when applied
to sales of immovable property.[23] Neither provision is applicable in the present case.

As to the last issue, we need not tarry to make a determination of whether the
breach of contract by private respondents is so substantial as to defeat the purpose of
the parties in entering into the agreement and thus entitle petitioners to rescission. Having
ruled that there is no rescission to speak of in this case, the question is moot.

WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court
of Appeals in CA-G.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of the
G.R. No. 107207 November 23, 1995
VIRGILIO R. ROMERO, petitioner,
vs.
HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG, respondents.
VITUG, J.:
The parties pose this question: May the vendor demand the rescission of a contract for
the sale of a parcel of land for a cause traceable to his own failure to have the
squatters on the subject property evicted within the contractually-stipulated period?
Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of
production, manufacture and exportation of perlite filter aids, permalite insulation and
processed perlite ore. In 1988, petitioner and his foreign partners decided to put up a
central warehouse in Metro Manila on a land area of approximately 2,000 square
meters. The project was made known to several freelance real estate brokers.
A day or so after the announcement, Alfonso Flores and his wife, accompanied by a
broker, offered a parcel of land measuring 1,952 square meters. Located in Barangay
San Dionisio, Paraaque, Metro Manila, the lot was covered by TCT No. 361402 in the
name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the
property and, except for the presence of squatters in the area, he found the place
suitable for a central warehouse.
Later, the Flores spouses called on petitioner with a proposal that should he advance
the amount of P50,000.00 which could be used in taking up an ejectment case against
the squatters, private respondent would agree to sell the property for only P800.00 per
square meter. Petitioner expressed his concurrence. On 09 June 1988, a contract,
denominated "Deed of Conditional Sale," was executed between petitioner and
private respondent. The simply-drawn contract read:
DEED OF CONDITIONAL SALE
KNOW ALL MEN BY THESE PRESENTS:
This Contract, made and executed in the Municipality of Makati,
Philippines this 9th day of June, 1988 by and between:
ENRIQUETA CHUA VDA. DE ONGSIONG, of legal
age, widow, Filipino and residing at 105 Simoun St.,
Quezon City, Metro Manila, hereinafter referred to
as the VENDOR;
-and-
VIRGILIO R. ROMERO, married to Severina L. Lat, of
Legal age, Filipino, and residing at 110 San Miguel
St., Plainview Subd., Mandaluyong Metro Manila,
hereinafter referred to as the VENDEE:
W I T N E S S E T H : That
WHEREAS, the VENDOR is the owner of One (1) parcel of land with a
total area of ONE THOUSAND NINE HUNDRED FIFTY TWO (1,952)
SQUARE METERS, more or less, located in Barrio San Dionisio,
Municipality of Paraaque, Province of Rizal, covered by TCT No.
361402 issued by the Registry of Deeds of Pasig and more particularly
described as follows:
xxx xxx xxx
WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land
and the VENDOR has accepted the offer, subject to the terms and
conditions hereinafter stipulated:
NOW, THEREFORE, for and in consideration of the sum of ONE MILLION
FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS
(P1,561,600.00) ONLY, Philippine Currency, payable by VENDEE to in
to (sic) manner set forth, the VENDOR agrees to sell to the VENDEE,
their heirs, successors, administrators, executors, assign, all her rights,
titles and interest in and to the property mentioned in the FIRST
WHEREAS CLAUSE, subject to the following terms and conditions:
1. That the sum of FIFTY THOUSAND PESOS
(P50,000.00) ONLY Philippine Currency, is to be
paid upon signing and execution of this instrument.
2. The balance of the purchase price in the
amount of ONE MILLION FIVE HUNDRED ELEVEN
THOUSAND SIX HUNDRED PESOS (P1,511,600.00)
ONLY shall be paid 45 days after the removal of all
squatters from the above described property.
3. Upon full payment of the overall purchase price
as aforesaid, VENDOR without necessity of
demand shall immediately sign, execute,
acknowledged (sic) and deliver the corresponding
deed of absolute sale in favor of the VENDEE free
from all liens and encumbrances and all Real
Estate taxes are all paid and updated.
It is hereby agreed, covenanted and stipulated by and between the
parties hereto that if after 60 days from the date of the signing of this
contract the VENDOR shall not be able to remove the squatters from
the property being purchased, the downpayment made by the
buyer shall be returned/reimbursed by the VENDOR to the VENDEE.
 That in the event that the VENDEE shall not be able to pay the
VENDOR the balance of the purchase price of ONE MILLION FIVE
HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00)
ONLY after 45 days from written notification to the VENDEE of the
removal of the squatters from the property being purchased, the
FIFTY THOUSAND PESOS (P50,000.00) previously paid as downpayment
shall be forfeited in favor of the VENDOR.
Expenses for the registration such as registration fees, documentary
stamp, transfer fee, assurances and such other fees and expenses as
may be necessary to transfer the title to the name of the VENDEE
shall be for the account of the VENDEE while capital gains tax shall
be paid by the VENDOR.
IN WITNESS WHEREOF, the parties hereunto signed those (sic) presents
in the City of Makati MM, Philippines on this 9th day of June, 1988.
(Sgd.) (Sgd.)
VIRGILIO R. ROMERO ENRIQUETA CHUA VDA.
DE ONGSIONG
Vendee Vendor
SIGNED IN THE PRESENCE OF:
(Sgd.) (Sgd.)
Rowena C. Ongsiong Jack M. Cruz1
Alfonso Flores, in behalf of private respondent, forthwith received and
acknowledged a check for P50,000.002from petitioner.3
Pursuant to the agreement, private respondent filed a complaint for ejectment (Civil
Case No. 7579) against Melchor Musa and 29 other squatter families with the
Metropolitan Trial Court of Paraaque. A few months later, or on 21 February 1989,
judgment was rendered ordering the defendants to vacate the premises. The decision
was handed down beyond the 60-day period (expiring 09 August 1988) stipulated in the
contract. The writ of execution of the judgment was issued, still later, on 30 March 1989.
In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she
received from petitioner since, she said, she could not "get rid of the squatters" on the
lot. Atty. Sergio A.F. Apostol, counsel for petitioner, in his reply of 17 April 1989, refused
the tender and stated:.
Our client believes that with the exercise of reasonable diligence
considering the favorable decision rendered by the Court and the
writ of execution issued pursuant thereto, it is now possible to eject
the squatters from the premises of the subject property, for which
reason, he proposes that he shall take it upon himself to eject the
squatters, provided, that expenses which shall be incurred by reason
thereof shall be chargeable to the purchase price of the land.4
Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"), through its
Regional Director for Luzon, Farley O. Viloria, asked the Metropolitan Trial Court of
Paraaque for a grace period of 45 days from 21 April 1989 within which to relocate
and transfer the squatter families. Acting favorably on the request, the court suspended
the enforcement of the writ of execution accordingly.
On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of the 45-day
grace period and his client's willingness to "underwrite the expenses for the execution of
the judgment and ejectment of the occupants."5
In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private respondent,
advised Atty. Apostol that the Deed of Conditional Sale had been
rendered null and void by virtue of his client's failure to evict the squatters from the
premises within the agreed 60-day period. He added that private respondent had
"decided to retain the property."6
On 23 June 1989, Atty. Apostol wrote back to explain:
The contract of sale between the parties was perfected from the
very moment that there was a meeting of the minds of the parties
upon the subject lot and the price in the amount of P1,561,600.00.
Moreover, the contract had already been partially fulfilled and
executed upon receipt of the downpayment of your client. Ms.
Ongsiong is precluded from rejecting its binding effects relying upon
her inability to eject the squatters from the premises of subject
property during the agreed period. Suffice it to state that, the
provision of the Deed of Conditional Sale do not grant her the option
or prerogative to rescind the contract and to retain the property
should she fail to comply with the obligation she has assumed under
the contract. In fact, a perusal of the terms and conditions of the
contract clearly shows that the right to rescind the contract and to
demand the return/reimbursement of the downpayment is granted
to our client for his protection.
Instead, however, of availing himself of the power to rescind the
contract and demand the return, reimbursement of the
downpayment, our client had opted to take it upon himself to eject
the squatters from the premises. Precisely, we refer you to our letters
addressed to your client dated April 17, 1989 and June 8, 1989.
Moreover, it is basic under the law on contracts that the power to
rescind is given to the injured party. Undoubtedly, under the
circumstances, our client is the injured party.
Furthermore, your client has not complied with her obligation under
their contract in good faith. It is undeniable that Ms. Ongsiong
 deliberately refused to exert efforts to eject the squatters from the
premises of the subject property and her decision to retain the
property was brought about by the sudden increase in the value of
realties in the surrounding areas.
Please consider this letter as a tender of payment to your client and a
demand to execute the absolute Deed of Sale.7
A few days later (or on 27 June 1989), private respondent, prompted by petitioner's
continued refusal to accept the return of the P50,000.00 advance payment, filed with
the Regional Trial Court of Makati, Branch 133, Civil Case No. 89-4394 for rescission of the
deed of "conditional" sale, plus damages, and for the consignation of P50,000.00 cash.
Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias writ of
execution in Civil Case No. 7579 on motion of private respondent but the squatters
apparently still stayed on.
Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of
Makati8 rendered decision holding that private respondent had no right to rescind the
contract since it was she who "violated her obligation to eject the squatters from the
subject property" and that petitioner, being the injured party, was the party who could,
under Article 1191 of the Civil Code, rescind the agreement. The court ruled that the
provisions in the contract relating to (a) the return/reimbursement of the P50,000.00 if the
vendor were to fail in her obligation to free the property from squatters within the
stipulated period or (b), upon the other hand, the sum's forfeiture by the vendor if the
vendee were to fail in paying the agreed purchase price, amounted to "penalty
clauses". The court added:
This Court is not convinced of the ground relied upon by the plaintiff
in seeking the rescission, namely: (1) he (sic) is afraid of the squatters;
and (2) she has spent so much to eject them from the premises (p. 6,
tsn, ses. Jan. 3, 1990). Militating against her profession of good faith is
plaintiffs conduct which is not in accord with the rules of fair play and
justice. Notably, she caused the issuance of an alias writ of execution
on August 25, 1989 (Exh. 6) in the ejectment suit which was almost
two months after she filed the complaint before this Court on June 27,
1989. If she were really afraid of the squatters, then she should not
have pursued the issuance of an alias writ of execution. Besides, she
did not even report to the police the alleged phone threats from the
squatters. To the mind of the Court, the so-called squatter factor is
simply factuitous (sic).9
The lower court, accordingly, dismissed the complaint and ordered, instead,
private respondent to eject or cause the ejectment of the squatters from the
property and to execute the absolute deed of conveyance upon payment of
the full purchase price by petitioner.
Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate
court rendered its decision. 10It opined that the contract entered into by the parties was
subject to a resolutory condition, i.e., the ejectment of the squatters from the land, the
non-occurrence of which resulted in the failure of the object of the contract; that
private respondent substantially complied with her obligation to evict the squatters; that
it was petitioner who was not ready to pay the purchase price and fulfill his part of the
contract, and that the provision requiring a mandatory return/reimbursement of the
P50,000.00 in case private respondent would fail to eject the squatters within the 60-day
period was not a penal clause. Thus, it concluded.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE,
and a new one entered declaring the contract of conditional sale
dated June 9, 1988 cancelled and ordering the defendant-appellee
to accept the return of the downpayment in the amount of
P50,000.00 which was deposited in the court below. No
pronouncement as to costs.11
Failing to obtain a reconsideration, petitioner filed this petition for review
on certiorari raising issues that, in fine, center on the nature of the contract adverted to
and the P50,000.00 remittance made by petitioner.
A perfected contract of sale may either be absolute or conditional12 depending on
whether the agreement is devoid of, or subject to, any condition imposed on
the passing of title of the thing to be conveyed or on the obligation of a party thereto.
When ownership is retained until the fulfillment of a positive condition the breach of the
condition will simply prevent the duty to convey title from acquiring an obligatory force.
If the condition is imposed on an obligationof a party which is not complied with,
the other party may either refuse to proceed or waive said condition (Art. 1545, Civil
Code). Where, of course, the condition is imposed upon the perfection of the contract
itself, the failure of such condition would prevent the juridical relation itself from coming
into existence.13
In determining the real character of the contract, the title given to it by the parties is not
as much significant as its substance. For example, a deed of sale, although
denominated as a deed of conditional sale, may be treated as absolute in nature, if
title to the property sold is not reserved in the vendor or if the vendor is not granted the
right to unilaterally rescind the contract predicated
on the fulfillment or non-fulfillment, as the case may be, of the prescribed condition.14
The term "condition" in the context of a perfected contract of sale pertains, in reality, to
the compliance by one party of an undertaking the fulfillment of which would beckon,
in turn, the demandability of the reciprocal prestation of the other party. The reciprocal
obligations referred to would normally be, in the case of vendee, the payment of the
agreed purchase price and, in the case of the vendor, the fulfillment of certain express
warranties (which, in the case at bench is the timely eviction of the squatters on the
property).
It would be futile to challenge the agreement here in question as not being a duly
perfected contract. A sale is at once perfected when a person (the seller) obligates
himself, for a price certain, to deliver and to transfer ownership of a specified thing or
right to another (the buyer) over which the latter agrees.15
The object of the sale, in the case before us, was specifically identified to be a 1,952-
square meter lot in San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of Title
No. 361402 of the Registry of Deeds for Pasig and therein technically described. The
purchase price was fixed at P1,561,600.00, of which P50,000.00 was to be paid upon the
execution of the document of sale and the balance of P1,511,600.00 payable "45 days balance of the purchase price and the latter to execute the deed of absolute sale in
after the removal of all squatters from the above described property." favor of petitioner. No costs.

From the moment the contract is perfected, the parties are bound not only to the SO ORDERED.
fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. Under the
Feliciano, Romero, Melo and Panganiban, JJ., concur.
agreement, private respondent is obligated to evict the squatters on the property. The
ejectment of the squatters is a condition the operative act of which sets into motion the
period of compliance by petitioner of his own obligation, i.e., to pay the balance of the
purchase price. Private respondent's failure "to remove the squatters from the property"
within the stipulated period gives petitioner the right to either refuse to proceed with the
agreement or waive that condition in consonance with Article 1545 of the Civil
Code.16 This option clearly belongs to petitioner and not to private respondent.

We share the opinion of the appellate court that the undertaking required of private
respondent does not constitute a "potestative condition dependent solely on his will"
that might, otherwise, be void in accordance with Article 1182 of the Civil Code 17 but a
"mixed" condition "dependent not on the will of the vendor alone but also of third
persons like the squatters and government agencies and personnel concerned."18 We
must hasten to add, however, that where the so-called "potestative condition" is
imposed not on the birth of the obligation but on its fulfillment, only the obligation is
avoided, leaving unaffected the obligation itself.19

In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows
the obligee to choose between proceeding with the agreement or waiving the
performance of the condition. It is this provision which is the pertinent rule in the case at
bench. Here, evidently, petitioner has waived the performance of the condition
imposed on private respondent to free the property from squatters.20

In any case, private respondent's action for rescission is not warranted. She is not the
injured party.21 The right of resolution of a party to an obligation under Article 1191 of the
Civil Code is predicated on a breach of faith by the other party that violates the
reciprocity between them.22 It is private respondent who has failed in her obligation
under the contract. Petitioner did not breach the agreement. He has agreed, in fact, to
shoulder the expenses of the execution of the judgment in the ejectment case and to
make arrangements with the sheriff to effect such execution. In his letter of 23 June
1989, counsel for petitioner has tendered payment and demanded forthwith the
execution of the deed of absolute sale. Parenthetically, this offer to pay, having been
made prior to the demand for rescission, assuming for the sake of argument that such a
demand is proper under Article 159223 of the Civil Code, would likewise suffice to defeat
private respondent's prerogative to rescind thereunder.

There is no need to still belabor the question of whether the P50,000.00 advance
payment is reimbursable to petitioner or forfeitable by private respondent, since, on the
basis of our foregoing conclusions, the matter has ceased to be an issue. Suffice it to say
that petitioner having opted to proceed with the sale, neither may petitioner demand
its reimbursement from private respondent nor may private respondent subject it to
forfeiture.

WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED AND
SET ASIDE, and another is entered ordering petitioner to pay private respondent the
 [G.R. No. 111743. October 8, 1999]
VISITACION GABELO, ERLINDA ABELLA, PETRA PEREZ, ERLINDA TRAQUENA, BEN CARDINAL,
EDUARDO TRAQUENA, LEOPOLDO TRAQUENA, MARIFE TUBALAS, ULYSIS MATEO,
JOCELYN FERNANDEZ, ALFONSO PLACIDO, LEONARDO TRAQUENA, SUSAN
RENDON AND MATEO TRINIDAD, petitioners, vs. COURT OF APPEALS, URSULA
MAGLENTE, CONSOLACION BERJA, MERCEDITA FERRER, THELMA ABELLA,
ANTONIO NGO, and PHILIPPINE REALTY CORPORATION, respondents.
DECISION
PURISIMA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court,
of the decision of the Court of Appeals, dated April 29, 1993, in CA-G.R. CV No. 33178,
affirming the decision of the Regional Trial Court of Manila, Branch 38, in Civil Case No.
89-48057, entitled Philippine Realty Corporation vs. Ursula Maglente, et al., declaring the
defendants (herein respondents) as the rightful party to purchase the land under
controversy, and ordering the plaintiff, Philippine Realty Corporation (PRC, for brevity), to
execute the corresponding Contract of Sale/Contract to Sell in favor of the defendants
aforenamed.
The antecedent facts culminating in the filing of the present petition are as follows:
On January 15, 1986, Philippine Realty Corporation, owner of a parcel of land at 400
Solana Street, Intramuros, Manila, with an area of 675.80 square meters, and covered by
Transfer Certificate of Title No. 43989, entered into a Contract of Lease thereover with the
herein private respondent, Ursula Maglente. The lease was for a period of three (3) years
at a monthly rental of P3,000.00 during the first year, P3,189.78 per month in the second
year and P3,374.00 monthly for the third year. The lease contract stipulated:
12. That the LESSOR shall have the right to sell any part of the entire leased land for any
amount or consideration it deems convenient, subject to the condition, however, that
the LESSEE shall be notified about it sixty (60) days in advance; that the LESSEE shall be
given the first priority to buy it; and in the event that the LESSEE cannot afford to buy, the
final buyer shall respect this lease for the duration of the same, except in cases of
exproriation.
It also prohibited the lessee to cede, transfer, mortgage, sublease or in any manner
encumber the whole or part of the leased land and its improvements or its rights as LESSEE
of the leased land, without the previous consent in writing of the LESSOR contained in a
public instrument.
However, after the execution of the lease agreement, respondent Maglente started
leasing portions of the leased area to the herein petitioners, Visitacion Gabelo, Erlinda
Abella, Petra Perez, Erlinda Traquena, Ben Cardinal, Eduardo Traquena, Leopoldo
Traquena, Marife Tubalas, Ulysis Mateo, Jocelyn Fernandez, Alfonso Placido, Leonardo
Traquena, Susan Rendon and Mateo Trinidad, who erected their respective houses
thereon.
On March 9, 1987, when the lease contract was about to expire, the Philippine
Realty Corporation, through its Junior Trust and Property Officers, Mr. Leandro Buguis and
Mr. Florentino B. Rosario, sent a written offer to sell subject properties to respondent Ursula
Maglente. The said letter stated:
We wish to inform you that the Archdiocese of Manila has now decided to open for sale
the properties it own (sic) in the District of Intramuros, Manila. However, before we
acccept offers from other parties we are of course giving the first priority to our tenants
or lessees of Intramuros lots.
Responding to such written offer, Maglente wrote a letter, dated February 2, 1988,
to the Roman Catholic Archbishop of Manila manifesting an intention to exercise her right
of first priority to purchase the property as stipulated in the lease contract.
On February 15, 1988, a Memorandum on the offer of Maglente to purchase the
property was prepared and presented to Msgr. Domingo Cirilos, president of Philippine
Realty Corporation, at the offered price of P1,800.00 per square meter or for a total
amount of P1,216,440.00, with a downpayment of P100,000.00; the balance of the
purchase price payable within ten (10) years with interest at the rate of eighteen (18%)
percent per annum. Msgr. Cirilos found the offer acceptable and approved the same.
On May 11, 1988, Maglente gave a partial downpayment of P25,000.00 and
additional P25,000.00 on May 20, 1988. In a letter, dated January 28, 1989, Maglente
informed the said corporation that there were other persons who were her co-buyers,
actually occupying the premises, namely: Consolacion Berja, Mercedita Ferrer, Thelma
Abella and Antonio Ngo within their respective areas of 100, 50, 60 and 400 square meters.
On January 30, 1989 Maglente paid her back rentals of P60,642.16 and P50,000.00
more, to complete her downpayment of P100,000.00.
On February 1989, Philippine Realty Corporation (PRC) received copy of a letter sent
by the herein petitioners to the Archbishop of Manila, Jaime Cardinal Sin, expressing their
desire to purchase the portions of subject property on which they have been staying for
a long time. And so, PRC met with the petitioners who apprised the corporation of their
being actual occupants of the leased premises and of the impending demolition of their
houses which Maglente threatened to cause. Petitioners then asked PRC to prevent the
demolition of their houses which might result in trouble and violence.
On February 23, 1989, in order to resolve which group has the right to purchase
subject property as between the petitioners/sublessees of Maglente, and respondent
Maglente, and her co-buyers, PRC brought a Complaint in Interpleader against the
herein petitioners and private respondents, docketed as Civil Case No. 89-48057 before
Branch 38 of the Regional Trial Court of Manila.
On March 11, 1991, after trial on the merits, the lower court of origin rendered
judgment in favor of respondent Maglente and her group, disposing thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring the defendants Ursula Maglente, Consolacion Berja, Mercedita
Ferrer, Thelma Abella and Antonio Ngo as the rightful party to purchase
the land in controversy; and
2. Ordering plaintiff Philippine Realty Corporation to execute the
corresponding contract of sale/contract to sell in favor of the defendants
aforementioned in accordance with this Decision within thirty (30) days
from notice thereof.
 Dissatisfied with the aforesaid decision below, the Gabelo group (petitioners here) SO ORDERED.
appealed to the Court of Appeals, which affirmed the disposition of the trial court
appealed from. Melo, Acting C.J., (Chairman), Vitug, Panganiban, and Gonzaga-Reyes,
JJ., concur.
Undaunted, petitioners found their way to this Court via the present petition,
assigning as sole error the ruling of the Court of Appeals upholding the right of the private
respondents, Consolacion Berja and Antonio Ngo, to purchase subject property.

Petitioners theorize that they are tenants of Ursula Maglente on the land in dispute,
which they are occupying, and as such actual occupants they have the preferential right
to purchase the portions of land respectively occupied by them; that the private
respondents, Thelma Abella and Antonio Ngo, have never been occupants of the
contested lot, and that, as defined in the Pre-trial Order[1] issued below, the issue for
resolution should have been limited to whether or not Berja and Ngo actually occupied
the premises in question because occupation thereon is the basis of the right to purchase
subject area.

Petitioners contention is untenable. There is no legal basis for the assertion by

petitioners that as actual occupants of the said property, they have the right of first priority
to purchase the same.

As regards the freedom of contract, it signifies or implies the right to choose with
whom to contract. PRC is thus free to offer its subject property for sale to any interested
person. It is not duty bound to sell the same to the petitioners simply because the latter
were in actual occupation of the property absent any prior agreement vesting in them
as occupants the right of first priority to buy, as in the case of respondent Maglente. As a
matter of fact, because it (PRC) contracted only with respondent Maglente, it could even
evict the petitioners from the premises occupied by them considering that the sublease
contract between petitioners and Maglente was inked without the prior consent in writing
of PRC, as required under the lease contract. Thus, although the other private
respondents were not parties to the lease contract between PRC and Maglente, the
former could freely enter into a contract with them.

So also, the contract of sale having been perfected, the parties thereto are already
bound thereby and petitioners can no longer assert their right to buy. It is well-settled that
a contract of sale is perfected the moment there is a meeting of the minds of the
contracting parties upon the thing which is the object of the contract and upon the
price.[2] From the time a party accepts the other partys offer to sell within the stipulated
period without qualification, a contract of sale is deemed perfected.[3]

In the case under consideration, the contract of sale was already perfected - PRC
offered the subject lot for sale to respondent Maglente and her group through its Junior
Trust and Property Officers. Respondent Maglente and her group accepted such offer
through a letter addressed to the Roman Catholic Archbishop of Manila, dated February
2, 1988, manifesting their intention to purchase the property as provided for under the
lease contract. Thus, there was already an offer and acceptance giving rise to a valid
contract. As a matter of fact, respondents have already completed payment of their
downpayment of P100,000.00. Therefore, as borne by evidence on record, the requisites
under Article 1318 of the Civil Code[4] for a perfected contract have been met.

Anent petitioners submission that the sale has not been perfected because the
parties have not affixed their signatures thereto, suffice it to state that under the law, the
meeting of the minds between the parties gives rise to a binding contract although they
have not affixed their signatures to its written form.[5]

WHEREFORE, the petition is hereby DENIED for lack of merit and the decision of the
Court of Appeals in CA-G.R. CV No. 33178 AFFIRMED. No pronouncement as to costs.
 FIRST DIVISION Petitioner, however, denied writing the receipt dated February 18, 2002,[15] and receiving the
demand letter dated July 29, 2002.[16] Petitioner claimed that there was no contract of
ELENA JANE DUARTE, G.R. No. 173038 sale.[17] Petitioner said that Dy offered to sell respondents laptop but because petitioner was not
interested in buying it, Dy asked if petitioner could instead lend respondent the amount
Petitioner, of P5,000.00.[18] Petitioner agreed and in turn, Dy left the laptop with petitioner.[19] On February 18,
2002, Dy came to get the laptop but petitioner refused to give it back because the loan was not
yet paid.[20] Dy then asked petitioner to lend an additional amount of P3,000.00 to respondent who
Present: allegedly was in dire need of money.[21] Petitioner gave the money under agreement that the
amounts she lent to respondent would be considered as partial payments for the laptop in case
she decides to buy it.[22] Sometime in the first week of March 2002, petitioner informed respondent
CORONA, C.J., Chairperson, that she has finally decided not to buy the laptop.[23] Respondent, however, refused to pay and
insisted that petitioner purchase the laptop instead.[24]
- versus - LEONARDO-DE CASTRO,
Ruling of the Municipal Trial Court in Cities
BERSAMIN,

DEL CASTILLO, and On June 2, 2003, the MTCC rendered a Decision[25] in favor of respondent. It found the
receipt dated February 18, 2002 and the testimonies of respondent and his witness, Dy, sufficient to
VILLARAMA, JR., JJ. prove that there was a contract of sale between the parties.[26] Thus:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff

MIGUEL SAMUEL A.E. DURAN, Promulgated: and against the defendant ordering the latter to pay plaintiff the following
measure of damages:
Respondent. September 14, 2011 (a) Actual damages in the amount of
x-------------------------------------------------------------------x Seven Thousand (P7,000.00) Pesos with interest
thereon at 12% per annum from July 29, 2002
DECISION until fully paid;

DEL CASTILLO, J.: (b) Attorneys fees in the amount of Five

Thousand (P5,000.00) Pesos; and
Preponderance of evidence only requires that evidence be greater or more convincing
than the opposing evidence.[1] (c) Litigation expenses in the amount of
Assailed in this Petition for Review on Certiorari[2] under Rule 45 of the Rules of Court are Three Thousand (P3,000.00) Pesos.
the October 26, 2005 Decision[3] and May 22, 2006 Resolution[4] of the Court of Appeals (CA) in CA-
G.R. SP No. 84461. SO ORDERED.[27]
Ruling of the Regional Trial Court
Factual Antecedents On appeal,[28] the Regional Trial Court (RTC) of Cebu, Branch 12, reversed the MTCC Decision.
Pertinent portions of the Decision,[29] including the dispositive portion, read:
This petition arose from a suit[5] for collection of sum of money filed by respondent Miguel xxxx
Samuel A.E. Duran[6] against petitioner Elena Jane Duarte with
Branch 5 of the Municipal Trial Court in Cities (MTCC), Cebu. As shown in the records of the case, this Court finds the alleged
receipt issued by the witness Josephine Dy [in] her own handwriting a mere
According to respondent, on February 14, 2002, he offered to sell a laptop computer for product of machination, trickery and self-serving. It shows no proof of
the sum of P15,000.00 to petitioner thru the help of a common friend, Josephine Dy (Dy).[7] Since conformity or acknowledgment on the part of the defendant that indeed she
petitioner was undecided, respondent left the laptop with petitioner for two days.[8] On February 16, agreed on the stipulations. Thus, it cannot be given any credence and
2002, petitioner told respondent that she was willing to buy the laptop on installment.[9] Respondent ultimately, did not bind her.
agreed; thus, petitioner gave P5,000.00 as initial payment and promised to pay P3,000.00 on
February 18, 2002 and P7,000.00 on March 15, 2002.[10] On February 18, 2002, petitioner gave her xxxx
second installment of P3,000.00 to Dy, who signed the handwritten receipt[11] allegedly made by
petitioner as proof of payment.[12] But when Dy returned to get the remaining balance on March WHEREFORE, the assailed Decision is REVERSED and SET ASIDE. The
15, 2002, petitioner offered to pay only P2,000.00 claiming that the laptop was only defendant Elena Jane Duarte is hereby directed to return the computer
worth P10,000.00.[13] Due to the refusal of petitioner to pay the remaining balance, respondent thru laptop to plaintiff Miguel Samuel A.E. Duran and plaintiff is directed to return
counsel sent petitioner a demand letter dated July 29, 2002.[14] the money borrowed from defendant.

SO ORDERED.[30]
Respondent moved for reconsideration but the same was denied by the RTC in an Order[31] dated
May 13, 2004.
Ruling of the Court of Appeals
On June 1, 2004, respondent filed a Petition for Review[32] with the CA. Finding the petition
meritorious, the CA reversed the RTC Decision and reinstated the Decision of the MTCC. The CA said
that the RTC erred in not giving weight and credence to the demand letter dated July 29, 2002 and
the receipt dated February 18, 2002.[33] The CA pointed out that petitioner failed to overturn the
presumption that the demand letter dated July 29, 2002 sent by respondents counsel by registered
mail was received by her.[34] Neither was she able to deny under oath the genuineness and due
execution of the receipt dated February 18, 2002.[35] Thus, the fallo of the Decision[36] reads:
WHEREFORE, premises considered, the petition for review is
hereby GRANTED. The decision of the Regional Trial Court, Branch
12, Cebu City is REVERSED and the judgment of Municipal Trial Court in Cities
Branch 5, Cebu City is REINSTATED. No pronouncement as to costs.
SO ORDERED.[37]
Petitioner filed a Motion for Reconsideration[38] which the CA denied in a
Resolution[39] dated May 22, 2006.
Issues
Hence, the present recourse by petitioner raising five issues, to wit:
I. Whether x x x the [CA] committed grave error in not resolving
the issue as to whether or not the petition for review that respondent
filed in the said court was filed out of time.
II. Whether x x x the [CA] committed grave error when it reinstated
the judgment of the [MTCC], Branch 5, Cebu City which awarded
excessive attorneys fees and litigation expenses without factual and
legal justification since the awards were merely stated in the dispositive
portion of the decision and the factual and legal bases thereof were
not discussed in the text thereof.
III. Whether x x x the [CA] committed grave error in holding that the
denial by the petitioner of a receipt of the demand letter, sent through
registered mail has not overturned the principal presumption of
regularity in the performance of duty.
IV. Whether x x x the [CA] committed grave error in holding that a
receipt which does not contain the signature of the petitioner is an
actionable document.
V. Whether x x x the [CA] committed grave error in holding that the
evidence available confirm the existence of a contract of sale.[40]
Summed up, the issues boil down to: (1) the timeliness of the filing of the Petition for Review with the
CA; (2) the existence of a contract of sale; and (3) respondents entitlement to attorneys fees and
litigation expenses.
Petitioners Arguments
Petitioner contends that the filing of the Petition for Review with the CA on June 1, 2004 was beyond
the reglementary period.[41] Records show that respondent received a copy of the RTC Decision on
March 25, 2004, filed a Motion for Reconsideration on April 12, 2004 since April 9 and 10 were holidays
and April 11, 2004 was a Sunday, and received a copy of the RTC Order denying his Motion for
Reconsideration on May 27, 2004.[42] Thus, he only had one day left from May 27, 2004 within which
to file a Petition for Review with the CA.[43]
Petitioner likewise denies the existence of a contract of sale, insisting that the laptop was not sold to
her but was given as a security for respondents debt. To prove that there was no contract of sale,
petitioner calls attention to respondents failure to present a written contract of sale.[44] She claims
that under the Statute of Frauds, a contract of sale to be enforceable must be in writing.[45] She also
imputes error on the part of the CA in giving weight and credence to the receipt dated February
18, 2002 and the demand letter dated July 29, 2002.[46] She claims that the receipt dated February
18, 2002, which she denies having written, is not an actionable document; thus, there was no need
for her to deny under oath its genuineness and due execution.[47] Furthermore, she claims that her
denial of the receipt of the demand letter dated July 29, 2002 shifted the burden upon respondent
to prove that the letter was indeed received by her.[48] As to the attorneys fees and litigation
expenses, petitioner contends that these were not discussed in the MTCC Decision but were only
stated in the dispositive portion and that the amount of P5,000.00 is excessive considering that it is
70% of the principal amount claimed by respondent.[49]
Respondents Arguments
Respondent, on the other hand, argues that his Petition for Review was timely filed with the CA
because he has 15 days from receipt of the RTC Order dated May 13, 2004 within which to file a
Petition for Review with the CA under Section 1[50] of Rule 42 of the Rules of Court.[51] Respondent
defends the ruling of the CA by arguing that the receipt dated February 18, 2002 is an actionable
document, and thus, petitioners failure to deny under oath its genuineness and due execution
constitutes an admission thereof.[52] In addition, petitioners denial of the receipt of the demand letter
dated July 29, 2002 cannot overcome the presumption that the said letter was received in the
regular course of mail.[53]Respondent likewise points out that the Statute of Frauds does not apply in
the instant case.[54] Finally, respondent claims that the award of attorneys fees and litigation
expenses are not excessive and that the factual and legal bases of the award were stated in the
body of MTCC Decision.[55]
Our Ruling
The Petition lacks merit.
The Petition for Review was timely
filed with the CA
To standardize the appeal periods and afford litigants fair opportunity to appeal their cases, we
ruled in Neypes v. Court of Appeals[56] that litigants must be given a fresh period of 15 days within
which to appeal, counted from receipt of the order dismissing a motion for a new trial or motion for
reconsideration under Rules 40, 41, 42, 43 and 45 of the Rules of Court.[57] This ruling, as we have said
in Fil-Estate Properties, Inc. v. Homena-Valencia,[58] retroactively applies even to cases pending prior
to the promulgation of Neypes on September 14, 2005, there being no vested rights in the rules of
procedure.[59]
Since the instant case was pending in the CA at the time Neypes was promulgated, respondent is
entitled to a fresh period of 15 days, counted from May 27, 2004, the date respondent received the
RTC Order dated May 13, 2004 denying his motion for reconsideration of the RTC Decision dated omission has compelled the plaintiff to incur expenses to protect his interest.[66] The reason for the
March 19, 2004 or until June 11, 2004, within which to file his Petition for Review with the CA. Thus, we award of attorneys fees and litigation expenses, however, must be set forth in the decision of the
find that when he filed the Petition for Review with the CA on June 1, 2004, his period to appeal had court and not in the dispositive portion only.[67] In this case, the factual and legal bases for the award
not yet lapsed. were set forth in the body of the MTCC Decision dated June 2, 2003, to wit:

x x x As the defendant refused to satisfy plaintiffs just and valid claim, the latter
There was a contract of sale was compelled to litigate and engage the services of counsel to protect his
between the parties interest and in the process, incurred litigation expenses.[68]

As to whether there was a contract of sale between the parties, we hold that there was,
and the absence of a written contract of sale does not mean otherwise. A contract of sale is
perfected the moment the parties agree upon the object of the sale, the price, and the terms of
payment.[60] Once perfected, the parties are bound by it whether the contract is verbal or in writing
because no form is required.[61] Contrary to the view of petitioner, the Statute of Frauds does not
apply in the present case as this provision applies only to executory, and not to completed,
executed or partially executed contracts.[62] In this case, the contract of sale had been partially
executed because the possession of the laptop was already transferred to petitioner and the partial
payments had been made by her. Thus, the absence of a written contract is not fatal to
respondents case. Respondent only needed to show by a preponderance of evidence that there
was an oral contract of sale, which he did by submitting in evidence his own affidavit, the affidavit
of his witness Dy, the receipt dated February 18, 2002 and the demand letter dated July 29, 2002.
The award of attorneys fees in the amount of P5,000.00 is also reasonable and not
excessive considering that this case, a simple collection of a measly sum of P7,000.00, has dragged
for almost a decade and even had to reach this Court only because petitioner refused to pay. The
fact that it is 70% of the principal amount claimed is of no moment as the amount of attorneys fees
is discretionary upon the court as long as it is reasonable.[69]
Finally, although not raised as an issue, we find it necessary to modify the legal interest
rate imposed on the principal amount claimed. Since the claim involves an obligation arising from
a contract of sale and not a loan or forbearance of money, the interest rate should be six percent
(6%) per annum of the amount claimed from July 29, 2002.[70] The interest rate of twelve percent
(12%) per annum, however, shall apply from the finality of judgment until the total amount awarded
is fully paid.[71]

As regards the receipt dated February 18, 2002, we agree with petitioner that it is not an WHEREFORE, the petition is hereby DENIED. The assailed October 26, 2005 Decision and
actionable document. Hence, there was no need for her to deny its genuineness and due May 22, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 84461 are hereby AFFIRMED with
execution under oath. Nonetheless, we find no error on the part of the CA in giving full weight and MODIFICATION as to the legal interest imposed on the principal amount claimed. The legal interest
credence to it since it corroborates the testimonies of respondent and his witness Dy that there was shall be at the rate of six percent (6%) per annum from July 29, 2002 and at the rate of twelve
an oral contract of sale between the parties. percent (12%) per annum from the time the judgment of this Court becomes final and executory
until the obligation is fully satisfied.
With regard to petitioners denial of the receipt of the demand letter dated July 29, 2002,
we believe that this did not overturn the presumption of regularity that the letter was delivered and SO ORDERED.
received by the addressee in the regular course of the mail considering that respondent was able
to present the postmasters certification[63] stating that the letter was indeed sent to the address of
petitioner. Bare denial of receipt of a mail cannot prevail over the certification of the postmaster,
whose official duty is to send notices of registered mail.[64]

As we see it then, the evidence submitted by respondent weigh more than petitioners
bare denials. Other than her denials, no other evidence was submitted by petitioner to prove that
the laptop was not sold but was only given as security for respondents loan. What adds doubt to
her story is the fact that from the first week of March 2002, the time she allegedly decided not to buy
the laptop, up to the time the instant case was filed against her, she did not exert any effort to
recover from respondent the payment of the alleged loan.Her inaction leads us to conclude that
the alleged loan was a mere afterthought.

All told, no error can be attributed to the CA in finding that there was a contract of sale
between the parties

The award for attorneys fees and

litigation expenses was proper

Neither do we find any error in the award of attorneys fees and litigation expenses.

Article 2208[65] of the Civil Code enumerates the legal grounds which justify or warrant the
grant of attorneys fees and expenses of litigation, among which is when the defendants act or
G.R. No. 126083 July 12, 2006
ANTONIO R. CORTES (in his capacity as Administrator of the estate of Claro S.
Cortes), petitioner,
vs.
HON. COURT OF APPEALS and VILLA ESPERANZA DEVELOPMENT
CORPORATION, respondents.
DECISION
YNARES-SANTIAGO, J.:
The instant petition for review seeks the reversal of the June 13, 1996 Decision 1 of the
Court of Appeals in CA-G.R. CV No. 47856, setting aside the June 24, 1993 Decision2 of
the Regional Trial Court of Makati, Branch 138, which rescinded the contract of sale
entered into by petitioner Antonio Cortes (Cortes) and private respondent Villa
Esperanza Development Corporation (Corporation).
The antecedents show that for the purchase price of P3,700,000.00, the Corporation as
buyer, and Cortes as seller, entered into a contract of sale over the lots covered by
Transfer Certificate of Title (TCT) No. 31113-A, TCT No. 31913-A and TCT No. 32013-A,
located at Baclaran, Paraaque, Metro Manila. On various dates in 1983, the
Corporation advanced to Cortes the total sum of P1,213,000.00. Sometime in September
1983, the parties executed a deed of absolute sale containing the following terms:3
1. Upon execution of this instrument, the Vendee shall pay unto the Vendor
sum of TWO MILLION AND TWO HUNDRED THOUSAND (P2,200,000.00) PESOS,
Philippine Currency, less all advances paid by the Vendee to the Vendor in
connection with the sale;
2. The balance of ONE MILLION AND FIVE HUNDRED THOUSAND [P1,500,000.00]
PESOS, Phil. Currency shall be payable within ONE (1) YEAR from date of
execution of this instrument, payment of which shall be secured by an
irrevocable standby letter of credit to be issued by any reputable local
banking institution acceptable to the Vendor.
xxxx
4. All expense for the registration of this document with the Register of Deeds
concerned, including the transfer tax, shall be divided equally between the
Vendor and the Vendee. Payment of the capital gains shall be exclusively for
the account of the Vendor; 5% commission of Marcosa Sanchez to be
deducted upon signing of sale.4
Said Deed was retained by Cortes for notarization.
On January 14, 1985, the Corporation filed the instant case5 for specific performance
seeking to compel Cortes to deliver the TCTs and the original copy of the Deed of
Absolute Sale. According to the Corporation, despite its readiness and ability to pay the
purchase price, Cortes refused delivery of the sought documents. It thus prayed for the
award of damages, attorney's fees and litigation expenses arising from Cortes' refusal to
deliver the same documents.
In his Answer with counterclaim,6 Cortes claimed that the owner's duplicate copy of the
three TCTs were surrendered to the Corporation and it is the latter which refused to pay
in full the agreed down payment. He added that portion of the subject property is
occupied by his lessee who agreed to vacate the premises upon payment of
disturbance fee. However, due to the Corporation's failure to pay in full the sum of
P2,200,000.00, he in turn failed to fully pay the disturbance fee of the lessee who now
refused to pay monthly rentals. He thus prayed that the Corporation be ordered to pay
the outstanding balance plus interest and in the alternative, to cancel the sale and
forfeit the P1,213,000.00 partial down payment, with damages in either case.
On June 24, 1993, the trial court rendered a decision rescinding the sale and directed
Cortes to return to the Corporation the amount of P1,213,000.00, plus interest. It ruled
that pursuant to the contract of the parties, the Corporation should have fully paid the
amount of P2,200,000.00 upon the execution of the contract. It stressed that such is the
law between the parties because the Corporation failed to present evidence that there
was another agreement that modified the terms of payment as stated in the contract.
And, having failed to pay in full the amount of P2,200,000.00 despite Cortes' delivery of
the Deed of Absolute Sale and the TCTs, rescission of the contract is proper.
In its motion for reconsideration, the Corporation contended that the trial court failed to
consider their agreement that it would pay the balance of the down payment when
Cortes delivers the TCTs. The motion was, however, denied by the trial court holding that
the rescission should stand because the Corporation did not act on the offer of Cortes'
counsel to deliver the TCTs upon payment of the balance of the down payment. Thus:
The Court finds no merit in the [Corporation's] Motion for Reconsideration. As
stated in the decision sought to be reconsidered, [Cortes'] counsel at the pre-
trial of this case, proposed that if [the Corporation] completes the down
payment agreed upon and make arrangement for the payment of the
balances of the purchase price, [Cortes] would sign the Deed of Sale and turn
over the certificate of title to the [Corporation]. [The Corporation] did nothing
to comply with its undertaking under the agreement between the parties.
WHEREFORE, in view of the foregoing considerations, the Motion for
Reconsideration is hereby DENIED.
SO ORDERED.7
On appeal, the Court of Appeals reversed the decision of the trial court and directed
Cortes to execute a Deed of Absolute Sale conveying the properties and to deliver the
same to the Corporation together with the TCTs, simultaneous with the Corporation's
payment of the balance of the purchase price of P2,487,000.00. It found that the parties
agreed that the Corporation will fully pay the balance of the down payment upon
Cortes' delivery of the three TCTs to the Corporation. The records show that no such
delivery was made, hence, the Corporation was not remiss in the performance of its
obligation and therefore justified in not paying the balance. The decretal portion
thereof, provides:
 WHEREFORE, premises considered, [the Corporation's] appeal is GRANTED. The The issue therefore is whether there is delay in the performance of the parties' obligation
decision appealed from is hereby REVERSED and SET ASIDE and a new that would justify the rescission of the contract of sale. To resolve this issue, we must first
judgment rendered ordering [Cortes] to execute a deed of absolute sale determine the true agreement of the parties.
conveying to [the Corporation] the parcels of land subject of and described in
the deed of absolute sale, Exhibit D. Simultaneously with the execution of the
The settled rule is that the decisive factor in evaluating an agreement is the intention of
deed of absolute sale and the delivery of the corresponding owner's duplicate
the parties, as shown not necessarily by the terminology used in the contract but by
copies of TCT Nos. 31113-A, 31931-A and 32013-A of the Registry of Deeds for
their conduct, words, actions and deeds prior to, during and immediately after
the Province of Rizal, Metro Manila, District IV, [the Corporation] shall pay
executing the agreement. As such, therefore, documentary and parol evidence may
[Cortes] the balance of the purchase price of P2,487,000.00. As agreed upon
be submitted and admitted to prove such intention.10
in paragraph 4 of the Deed of Absolute Sale, Exhibit D, under terms and
conditions, "All expenses for the registration of this document (the deed of
sale) with the Register of Deeds concerned, including the transfer tax, shall be In the case at bar, the stipulation in the Deed of Absolute Sale was that the Corporation
divided equally between [Cortes and the Corporation]. Payment of the shall pay in full the P2,200,000.00 down payment upon execution of the contract.
capital gains shall be exclusively for the account of the Vendor; 5% However, as correctly noted by the Court of Appeals, the transcript of stenographic
commission of Marcosa Sanchez to be deducted upon signing of sale." There is notes reveal Cortes' admission that he agreed that the Corporation's full payment of the
no pronouncement as to costs. sum of P2,200,000.00 would depend upon his delivery of the TCTs of the three lots. In
fact, his main defense in the Answer is that, he performed what is incumbent upon him
by delivering to the Corporation the TCTs and the carbon duplicate of the Deed of
SO ORDERED.8
Absolute Sale, but the latter refused to pay in full the down payment.11 Pertinent portion
of the transcript, reads:
Cortes filed the instant petition praying that the decision of the trial court rescinding the
sale be reinstated.
[Q] Now, why did you deliver these three titles to the plaintiff despite the fact
that it has not been paid in full the agreed down payment?
There is no doubt that the contract of sale in question gave rise to a reciprocal
obligation of the parties. Reciprocal obligations are those which arise from the same
A Well, the broker told me that the down payment will be given if I surrender
cause, and which each party is a debtor and a creditor of the other, such that the
the titles.
obligation of one is dependent upon the obligation of the other. They are to be
performed simultaneously, so that the performance of one is conditioned upon the
simultaneous fulfillment of the other.9 Q Do you mean to say that the plaintiff agreed to pay in full the down
payment of P2,200,000.00 provided you surrender or entrust to the plaintiff the
titles?
Article 1191 of the Civil Code, states:

A Yes, sir.12
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.
What further confirmed the agreement to deliver the TCTs is the testimony of Cortes that
the title of the lots will be transferred in the name of the Corporation upon full payment
xxxx
of the P2,200,000.00 down payment. Thus

As to when said failure or delay in performance arise, Article 1169 of the same Code
ATTY. ANTARAN
provides that

Q Of course, you have it transferred in the name of the plaintiff, the title?
ART. 1169

A Upon full payment.

xxxx

xxxx
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 ATTY. SARTE
the other begins. (Emphasis supplied)
Q When you said upon full payment, are you referring to the agreed down
payment of P2,200,000.00?
 A Yes, sir.13 x x x x.16

By agreeing to transfer title upon full payment of P2,200,000.00, Cortes' impliedly agreed ATTY. ANTARAN
to deliver the TCTs to the Corporation in order to effect said transfer. Hence, the phrase
"execution of this instrument" 14 as appearing in the Deed of Absolute Sale, and which
Q Are you really sure that the title is in the hands of the plaintiff?
event would give rise to the Corporation's obligation to pay in full the amount of
P2,200,000.00, can not be construed as referring solely to the signing of the deed. The
meaning of "execution" in the instant case is not limited to the signing of a contract but xxxx
includes as well the performance or implementation or accomplishment of the parties'
agreement.15 With the transfer of titles as the corresponding reciprocal obligation of Q It is in the hands of the broker but there is no showing that it is in the hands of
payment, Cortes' obligation is not only to affix his signature in the Deed, but to set into the plaintiff?
motion the process that would facilitate the transfer of title of the lots, i.e., to have the
Deed notarized and to surrender the original copy thereof to the Corporation together
with the TCTs. A Yes, sir.

Having established the true agreement of the parties, the Court must now determine COURT
whether Cortes delivered the TCTs and the original Deed to the Corporation. The Court
of Appeals found that Cortes never surrendered said documents to the Corporation. Q How do you know that it was delivered to the plaintiff by the son of the
Cortes testified that he delivered the same to Manny Sanchez, the son of the broker, broker?
and that Manny told him that her mother, Marcosa Sanchez, delivered the same to the
Corporation.
A The broker told me that she delivered the title to the plaintiff.

Q Do you have any proof to show that you have indeed surrendered these
ATTY. ANTARAN
titles to the plaintiff?

Q Did she not show you any receipt that she delivered to [Mr.] Dragon17 the
A Yes, sir.
title without any receipt?

Q I am showing to you a receipt dated October 29, 1983, what relation has this
A I have not seen any receipt.
receipt with that receipt that you have mentioned?

Q So, therefore, you are not sure whether the title has been delivered to the
A That is the receipt of the real estate broker when she received the titles.
plaintiff or not. It is only upon the allegation of the broker?

Q On top of the printed name is Manny Sanchez, there is a signature, do you

A Yes, sir.18
know who is that Manny Sanchez?

However, Marcosa Sanchez's unrebutted testimony is that, she did not receive the TCTs.
A That is the son of the broker.
She also denied knowledge of delivery thereof to her son, Manny, thus:

xxxx
Q The defendant, Antonio Cortes testified during the hearing on March 11,
1986 that he allegedly gave you the title to the property in question, is it true?
Q May we know the full name of the real estate broker?
A I did not receive the title.
A Marcosa Sanchez
Q He likewise said that the title was delivered to your son, do you know about
xxxx that?

Q Do you know if the broker or Marcosa Sanchez indeed delivered the titles to A I do not know anything about that.19
the plaintiff?

A That is what [s]he told me. She gave them to the plaintiff.
What further strengthened the findings of the Court of Appeals that Cortes did not
surrender the subject documents was the offer of Cortes' counsel at the pre-trial to
deliver the TCTs and the Deed of Absolute Sale if the Corporation will pay the balance
of the down payment. Indeed, if the said documents were already in the hands of the
Corporation, there was no need for Cortes' counsel to make such offer.

Since Cortes did not perform his obligation to have the Deed notarized and to surrender
the same together with the TCTs, the trial court erred in concluding that he performed
his part in the contract of sale and that it is the Corporation alone that was remiss in the
performance of its obligation. Actually, both parties were in delay. Considering that their
obligation was reciprocal, performance thereof must be simultaneous. The mutual
inaction of Cortes and the Corporation therefore gave rise to a compensation morae or
default on the part of both parties because neither has completed their part in their
reciprocal obligation.20 Cortes is yet to deliver the original copy of the notarized Deed
and the TCTs, while the Corporation is yet to pay in full the agreed down payment of
P2,200,000.00. This mutual delay of the parties cancels out the effects of default,21 such
that it is as if no one is guilty of delay.22

We find no merit in Cortes' contention that the failure of the Corporation to act on the
proposed settlement at the pre-trial must be construed against the latter. Cortes argued
that with his counsel's offer to surrender the original Deed and the TCTs, the Corporation
should have consigned the balance of the down payment. This argument would have
been correct if Cortes actually surrendered the Deed and the TCTs to the Corporation.
With such delivery, the Corporation would have been placed in default if it chose not to
pay in full the required down payment. Under Article 1169 of the Civil Code, from the
moment one of the parties fulfills his obligation, delay by the other begins. Since Cortes
did not perform his part, the provision of the contract requiring the Corporation to pay in
full the down payment never acquired obligatory force. Moreover, the Corporation
could not be faulted for not automatically heeding to the offer of Cortes. For one, its
complaint has a prayer for damages which it may not want to waive by agreeing to the
offer of Cortes' counsel. For another, the previous representation of Cortes that the TCTs
were already delivered to the Corporation when no such delivery was in fact made, is
enough reason for the Corporation to be more cautious in dealing with him.

The Court of Appeals therefore correctly ordered the parties to perform their respective
obligation in the contract of sale, i.e., for Cortes to, among others, deliver the necessary
documents to the Corporation and for the latter to pay in full, not only the down
payment, but the entire purchase price. And since the Corporation did not question the
Court of Appeal's decision and even prayed for its affirmance, its payment should
rightfully consist not only of the amount of P987,000.00, representing the balance of the
P2,200,000.00 down payment, but the total amount of P2,487,000.00, the remaining
balance in the P3,700,000.00 purchase price.

WHEREFORE, the petition is DENIED and the June 13, 1996 Decision of the Court of
Appeals in CA-G.R. CV No. 47856, is AFFIRMED.

SO ORDERED.

Panganiban, C.J., Austria-Martinez, Callejo, Sr., Chico-Nazario, J.J., concur.

 [G.R. No. 126376. November 20, 2003]
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO
EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and
NATIVIDAD JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO
JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA
BERNARDO, SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES
ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA
and CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN,
SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN
and LEA ASIS, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June
1996 of the Court of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the
Decision[3] dated 18 February 1993 rendered by Branch 65 of the Regional Trial Court of
Makati (trial court) in Civil Case No. 89-5174. The trial court dismissed the case after it
found that the parties executed the Deeds of Sale for valid consideration and that the
plaintiffs did not have a cause of action against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of
plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas,
Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin
children are joined in this action by their respective spouses.
Sought to be declared null and void ab initio are certain deeds of sale of real property
executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of
their co-defendant children and the corresponding certificates of title issued in their
names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-
256395 executed on 11 July 1978, in favor of defendant Felicitas Joaquin,
for a consideration of P6,000.00 (Exh. C), pursuant to which TCT No.
[36113/T-172] was issued in her name (Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-
256394 executed on 7 June 1979, in favor of defendant Clarita Joaquin,
for a consideration of P1[2],000.00(Exh. D), pursuant to which TCT No. S-
109772 was issued in her name (Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-
256394 executed on 12 May 1988, in favor of defendant spouses Fidel
Joaquin and Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh.
E), pursuant to which TCT No. 155329 was issued to them (Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-
256394 executed on 12 May 1988, in favor of defendant spouses Artemio
Joaquin and Socorro Angeles, for a consideration of P[54,3]00.00 (Exh. F),
pursuant to which TCT No. 155330 was issued to them (Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC)
Psd-256395 executed on 9 September 1988, in favor of Tomas Joaquin, for
a consideration of P20,000.00 (Exh. G), pursuant to which TCT No. 157203
was issued in her name (Exh. G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-
256395 executed on 7 October 1988, in favor of Gavino Joaquin, for a
consideration of P25,000.00 (Exh. K), pursuant to which TCT No. 157779 was
issued in his name (Exh. K-1).]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of
title, plaintiffs, in their complaint, aver:
- XX-
The deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are
NULL AND VOID AB INITIO because
a) Firstly, there was no actual valid consideration for the deeds of sale xxx
over the properties in litis;
b) Secondly, assuming that there was consideration in the sums reflected in
the questioned deeds, the properties are more than three-fold times
more valuable than the measly sums appearing therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the
parties (vendors and vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a
deliberate conspiracy designed to unjustly deprive the rest of the
compulsory heirs (plaintiffs herein) of their legitime.
- XXI -
Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos.
36113/T-172, S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of
Deeds over the properties in litis xxx are NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action
against them as well as the requisite standing and interest to assail their titles over the
properties in litis; (2) that the sales were with sufficient considerations and made by
defendants parents voluntarily, in good faith, and with full knowledge of the
consequences of their deeds of sale; and (3) that the certificates of title were issued
with sufficient factual and legal basis.[4] (Emphasis in the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant
spouses Gavino Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-
defendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss.[6] In granting the
dismissal to Gavino Joaquin and Lea Asis, the trial court noted that compulsory heirs have
the right to a legitime but such right is contingent since said right commences only from
the moment of death of the decedent pursuant to Article 777 of the Civil Code of the
Philippines.[7]
After trial, the trial court ruled in favor of the defendants and dismissed the
complaint. The trial court stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will
show that the Deeds of Sale were all executed for valuable consideration. This assertion
must prevail over the negative allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action
against defendants since there can be no legitime to speak of prior to the death of their
parents. The court finds this contention tenable. In determining the legitime, the value of
the property left at the death of the testator shall be considered (Art. 908 of the New
Civil Code). Hence, the legitime of a compulsory heir is computed as of the time of the
death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime
while their parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the
counterclaim is likewise DISMISSED.
No costs.
SO ORDERED.[8]
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The appellate court
ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case,
which is, whether xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant
brothers and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and
Feliciana Landrito, who are their parents. However, their right to the properties of their
defendant parents, as compulsory heirs, is merely inchoate and vests only upon the
latters death. While still alive, defendant parents are free to dispose of their properties,
provided that such dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do
they claim to be creditors of their defendant parents. Consequently, they cannot be
considered as real parties in interest to assail the validity of said deeds either for gross
inadequacy or lack of consideration or for failure to express the true intent of the
parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al., 101
SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or
subsidiarily bound thereby; hence, they have no legal capacity to challenge their
validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by
the dispositions made by their defendant parents in favor of their defendant brothers
and sisters. But, as correctly held by the court a quo, the legitime of a compulsory heir is
computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim
an impairment of their legitime while their parents live.
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-
appellants is inconsequential.
WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against
plaintiffs-appellants.
SO ORDERED.[9]
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN
QUESTION HAD NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT
THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO
NOT EXPRESS THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE
WAS PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING
THE REST OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND
FELICIANA LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A
GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE
RESPONDENTS.[10]
 The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of
Sale before discussing the issues on the purported lack of consideration and gross
inadequacy of the prices of the Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint,
petitioners asserted that the purported sale of the properties in litis was the result of a
deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs
(plaintiffs herein) of their legitime. Petitioners strategy was to have the Deeds of Sale
declared void so that ownership of the lots would eventually revert to their respondent
parents. If their parents die still owning the lots, petitioners and their respondent siblings
will then co-own their parents estate by hereditary succession.[11]
It is evident from the records that petitioners are interested in the properties subject
of the Deeds of Sale, but they have failed to show any legal right to the properties. The
trial and appellate courts should have dismissed the action for this reason alone. An
action must be prosecuted in the name of the real party-in-interest.[12]
[T]he question as to real party-in-interest is whether he is the party who would be
benefitted or injured by the judgment, or the party entitled to the avails of the suit.
xxx
In actions for the annulment of contracts, such as this action, the real parties are those
who are parties to the agreement or are bound either principally or subsidiarily or are
prejudiced in their rights with respect to one of the contracting parties and can show
the detriment which would positively result to them from the contract even though they
did not intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx.
These are parties with a present substantial interest, as distinguished from a mere
expectancy or future, contingent, subordinate, or consequential interest. The phrase
present substantial interest more concretely is meant such interest of a party in the
subject matter of the action as will entitle him, under the substantive law, to recover if
the evidence is sufficient, or that he has the legal title to demand and the defendant
will be protected in a payment to or recovery by him.[13]
Petitioners do not have any legal interest over the properties subject of the Deeds
of Sale. As the appellate court stated, petitioners right to their parents properties is merely
inchoate and vests only upon their parents death. While still living, the parents of
petitioners are free to dispose of their properties. In their overzealousness to safeguard
their future legitime, petitioners forget that theoretically, the sale of the lots to their siblings
does not affect the value of their parents estate. While the sale of the lots reduced the
estate, cash of equivalent value replaced the lots taken from the estate.
Whether the Deeds of Sale are void
for lack of consideration
Petitioners assert that their respondent siblings did not actually pay the prices stated
in the Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare
the Deeds of Sale void.
A contract of sale is not a real contract, but a consensual contract. As a consensual
contract, a contract of sale becomes a binding and valid contract upon the meeting of
the minds as to price. If there is a meeting of the minds of the parties as to the price, the
contract of sale is valid, despite the manner of payment, or even the breach of that
manner of payment. If the real price is not stated in the contract, then the contract of
sale is valid but subject to reformation. If there is no meeting of the minds of the parties as
to the price, because the price stipulated in the contract is simulated, then the contract
is void.[14] Article 1471 of the Civil Code states that if the price in a contract of sale is
simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of
sale. Payment of the price has nothing to do with the perfection of the contract. Payment
of the price goes into the performance of the contract. Failure to pay the consideration
is different from lack of consideration. The former results in a right to demand the fulfillment
or cancellation of the obligation under an existing valid contract while the latter prevents
the existence of a valid contract.[15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely
simulated. To prove simulation, petitioners presented Emma Joaquin Valdozs testimony
stating that their father, respondent Leonardo Joaquin, told her that he would transfer a
lot to her through a deed of sale without need for her payment of the purchase
price.[16] The trial court did not find the allegation of absolute simulation of price
credible. Petitioners failure to prove absolute simulation of price is magnified by their lack
of knowledge of their respondent siblings financial capacity to buy the questioned
lots.[17] On the other hand, the Deeds of Sale which petitioners presented as evidence
plainly showed the cost of each lot sold. Not only did respondents minds meet as to the
purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of
the complaint, respondent siblings have also fully paid the price to their respondent
father.[18]
Whether the Deeds of Sale are void
for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly
inadequate as to invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been fraud, mistake or undue
influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may
indicate a defect in the consent, or that the parties really intended a donation or some
other act or contract.(Emphasis supplied)
Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470
of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there
is no requirement that the price be equal to the exact value of the subject matter of
sale. All the respondents believed that they received the commutative value of what
they gave. As we stated in Vales v. Villa:[19]

Courts cannot follow one every step of his life and extricate him from bad bargains,
protect him from unwise investments, relieve him from one-sided contracts, or annul the
effects of foolish acts.Courts cannot constitute themselves guardians of persons who are
not legally incompetent. Courts operate not because one person has been defeated or
overcome by another, but because he has been defeated or overcome illegally. Men
may do foolish things, make ridiculous contracts, use miserable judgment, and lose
money by them indeed, all they have in the world; but not for that alone can the law
intervene and restore. There must be, in addition, a violation of the law, the commission
of what the law knows as an actionable wrong, before the courts are authorized to lay
hold of the situation and remedy it. (Emphasis in the original)

Moreover, the factual findings of the appellate court are conclusive on the parties
and carry greater weight when they coincide with the factual findings of the trial
court. This Court will not weigh the evidence all over again unless there has been a
showing that the findings of the lower court are totally devoid of support or are clearly
erroneous so as to constitute serious abuse of discretion.[20] In the instant case, the trial
court found that the lots were sold for a valid consideration, and that the defendant
children actually paid the purchase price stipulated in their respective Deeds of
Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding
that is now conclusive upon us.

WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna,

JJ., concur.
 [G.R. No. 124242. January 21, 2005]
SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, PABLO S.
BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel
Lu and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land
situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both
measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos
(P15.00) per square meter. Babasanta made a downpayment of fifty thousand pesos
(P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same
date. Several other payments totaling two hundred thousand pesos (P200,000.00) were
made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the
execution of a final deed of sale in his favor so that he could effect full payment of the
purchase price. In the same letter, Babasanta notified the spouses about having received
information that the spouses sold the same property to another without his knowledge
and consent. He demanded that the second sale be cancelled and that a final deed of
sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged
having agreed to sell the property to him at fifteen pesos (P15.00) per square meter. She,
however, reminded Babasanta that when the balance of the purchase price became
due, he requested for a reduction of the price and when she refused, Babasanta backed
out of the sale. Pacita added that she returned the sum of fifty thousand pesos
(P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial
Court (RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and
Damages[1] against his co-respondents herein, the Spouses Lu. Babasanta alleged that
the lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses
at fifteen pesos (P15.00) per square meter. Despite his repeated demands for the
execution of a final deed of sale in his favor, respondents allegedly refused.
In their Answer,[2] the Spouses Lu alleged that Pacita Lu obtained loans from
Babasanta and when the total advances of Pacita reached fifty thousand pesos
(P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel Lu,
had verbally agreed to transform the transaction into a contract to sell the two parcels
of land to Babasanta with the fifty thousand pesos (P50,000.00) to be considered as the
downpayment for the property and the balance to be paid on or before 31 December
1987. Respondents Lu added that as of November 1987, total payments made by
Babasanta amounted to only two hundred thousand pesos (P200,000.00) and the latter
allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00)
despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of
the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when
the Spouses Lu refused to grant Babasantas request, the latter rescinded the contract to
sell and declared that the original loan transaction just be carried out in that the spouses
would be indebted to him in the amount of two hundred thousand pesos (P200,000.00).
Accordingly, on 6 July 1989, they purchased Interbank Managers Check No. 05020269 in
the amount of two hundred thousand pesos (P200,000.00) in the name of Babasanta to
show that she was able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990[3] wherein he
prayed for the issuance of a writ of preliminary injunction with temporary restraining order
and the inclusion of the Register of Deeds of Calamba, Laguna as party defendant. He
contended that the issuance of a preliminary injunction was necessary to restrain the
transfer or conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition[4] to the amended complaint contending that
it raised new matters which seriously affect their substantive rights under the original
complaint. However, the trial court in its Order dated 17 January 1990[5] admitted the
amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation
(SLDC) filed a Motion for Intervention[6] before the trial court. SLDC alleged that it had
legal interest in the subject matter under litigation because on 3 May 1989, the two
parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of
Absolute Sale with Mortgage.[7] It alleged that it was a buyer in good faith and for value
and therefore it had a better right over the property in litigation.
In his Opposition to SLDCs motion for intervention,[8] respondent Babasanta
demurred and argued that the latter had no legal interest in the case because the two
parcels of land involved herein had already been conveyed to him by the Spouses Lu
and hence, the vendors were without legal capacity to transfer or dispose of the two
parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to
intervene. SLDC filed its Complaint-in-Intervention on 19 April 1990.[9] Respondent
Babasantas motion for the issuance of a preliminary injunction was likewise granted by
the trial court in its Order dated 11 January 1991[10] conditioned upon his filing of a bond
in the amount of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses
Lu executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it
paid an option money in the amount of three hundred sixteen thousand one hundred
sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots of
one million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After
the Spouses Lu received a total amount of six hundred thirty-two thousand three hundred
twenty pesos (P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with
Mortgage in its favor. SLDC added that the certificates of title over the property were
delivered to it by the spouses clean and free from any adverse claims and/or notice of lis
pendens. SLDC further alleged that it only learned of the filing of the complaint sometime
in the early part of January 1990 which prompted it to file the motion to intervene without
delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation
to look beyond the titles submitted to it by the Spouses Lu particularly because
Babasantas claims were not annotated on the certificates of title at the time the lands
were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the
sale of the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two
hundred thousand pesos (P200,000.00) with legal interest plus the further sum of fifty
thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-in-intervention,
the trial court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the
notice of lis pendens annotated on the original of the TCT No. T-39022 (T-7218) and No. T-
39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both
Babasanta and SLDC did not register the respective sales in their favor, ownership of the
property should pertain to the buyer who first acquired possession of the property. The
trial court equated the execution of a public instrument in favor of SLDC as sufficient
delivery of the property to the latter. It concluded that symbolic possession could be
considered to have been first transferred to SLDC and consequently ownership of the
property pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals
alleging in the main that the trial court erred in concluding that SLDC is a purchaser in
good faith and in upholding the validity of the sale made by the Spouses Lu in favor of
SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They
contended that the trial court erred in failing to consider that the contract to sell between
them and Babasanta had been novated when the latter abandoned the verbal contract
of sale and declared that the original loan transaction just be carried out. The Spouses Lu
argued that since the properties involved were conjugal, the trial court should have
declared the verbal contract to sell between Pacita Lu and Pablo Babasanta null and
void ab initio for lack of knowledge and consent of Miguel Lu. They further averred that
the trial court erred in not dismissing the complaint filed by Babasanta; in awarding
damages in his favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision[11] which set aside
the judgment of the trial court. It declared that the sale between Babasanta and the
Spouses Lu was valid and subsisting and ordered the spouses to execute the necessary
deed of conveyance in favor of Babasanta, and the latter to pay the balance of the
purchase price in the amount of two hundred sixty thousand pesos (P260,000.00). The
appellate court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was
null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu were
further ordered to return all payments made by SLDC with legal interest and to pay
attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the
appellate court.[12] However, in a Manifestation dated 20 December 1995,[13] the Spouses
Lu informed the appellate court that they are no longer contesting the decision dated 4
October 1995.
In its Resolution dated 11 March 1996,[14] the appellate court considered as
withdrawn the motion for reconsideration filed by the Spouses Lu in view of their
manifestation of 20 December 1995. The appellate court denied SLDCs motion for
reconsideration on the ground that no new or substantial arguments were raised therein
which would warrant modification or reversal of the courts decision dated 4 October
1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN
GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE
CASH ADVANCE OF P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR
TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT
THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE
DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE
PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS
ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT
BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE
OF HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL
CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET
ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN LORENZO AS A
BUYER AND FIRST POSSESSOR IN GOOD FAITH. [15]
SLDC contended that the appellate court erred in concluding that it had prior
notice of Babasantas claim over the property merely on the basis of its having advanced
the amount of two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latters
representation that she needed the money to pay her obligation to Babasanta. It argued
that it had no reason to suspect that Pacita was not telling the truth that the money would
be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the
amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu
would be deducted from the balance of the purchase price still due from it and should
not be construed as notice of the prior sale of the land to Babasanta. It added that at no
instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it
immediately took possession of the property and asserted its rights as new owner as
opposed to Babasanta who has never exercised acts of ownership. Since the titles bore
no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it
had every reason to rely on the correctness of the certificate of title and it was not obliged
to go beyond the certificate to determine the condition of the property. Invoking the
presumption of good faith, it added that the burden rests on Babasanta to prove that it
was aware of the prior sale to him but the latter failed to do so. SLDC pointed out that the
notice of lis pendens was annotated only on 2 June 1989 long after the sale of the
property to it was consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses
Lu informed the Court that due to financial constraints they have no more interest to
pursue their rights in the instant case and submit themselves to the decision of the Court
of Appeals.[16]
On the other hand, respondent Babasanta argued that SLDC could not have
acquired ownership of the property because it failed to comply with the requirement of
registration of the sale in good faith. He emphasized that at the time SLDC registered the
sale in its favor on 30 June 1990, there was already a notice of lis pendens annotated on
the titles of the property made as early as 2 June 1989. Hence, petitioners registration of
the sale did not confer upon it any right. Babasanta further asserted that petitioners bad
faith in the acquisition of the property is evident from the fact that it failed to make
necessary inquiry regarding the purpose of the issuance of the two hundred thousand
pesos (P200,000.00) managers check in his favor.
 The core issue presented for resolution in the instant petition is who between SLDC
and Babasanta has a better right over the two parcels of land subject of the instant case
in view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a
document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos
(P50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay Pulong,
Sta. Cruz, Sta. Rosa, Laguna.[17] While the receipt signed by Pacita did not mention the
price for which the property was being sold, this deficiency was supplied by Pacita Lus
letter dated 29 May 1989[18] wherein she admitted that she agreed to sell the 3.6 hectares
of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by
the parties, irresistibly leads to the conclusion that the agreement between Babasanta
and the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,[19] which is manifested by the
meeting of the offer and the acceptance upon the thing which are to constitute the
contract. The offer must be certain and the acceptance absolute.[20] Moreover,
contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.[21]
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty
thousand pesos (P50,000.00) 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.
Babasantas 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.
The distinction between a contract to sell and a contract of sale is quite germane.
In a contract of sale, title passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, by agreement the ownership is reserved in the vendor and
is not to pass until the full payment of the price.[22] In a contract of sale, the vendor has
lost and cannot recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full payment of the
price, such payment being a positive suspensive condition and failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title from
becoming effective.[23]
The perfected contract to sell imposed upon Babasanta the obligation to pay the
balance of the purchase price. There being an obligation to pay the price, Babasanta
should have made the proper tender of payment and consignation of the price in court
as required by law. Mere sending of a letter by the vendee expressing the intention to
pay without the accompanying payment is not considered a valid tender of
payment.[24] Consignation of the amounts due in court is essential in order to extinguish
Babasantas obligation to pay the balance of the purchase price. Glaringly absent from
the records is any indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part of the sellers to convey
title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale
and not a contract to sell, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent[25] and from that
moment, the parties may reciprocally demand performance.[26] The essential elements of
a contract of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership
in exchange for the price; (2) object certain which is the subject matter of the contract;
(3) cause of the obligation which is established.[27]
The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should be noted
that sale is not a mode, but merely a title. A mode is the legal means by which dominion
or ownership is created, transferred or destroyed, but title is only the legal basis by which
to affect dominion or ownership.[28] Under Article 712 of the Civil Code, ownership and
other real rights over property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain contracts, by tradition.
Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same.[29] Therefore, sale by itself
does not transfer or affect ownership; the most that sale does is to create the obligation
to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually
transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways specified in Article 1497
to 1501.[30] The word delivered should not be taken restrictively to mean transfer of actual
physical possession of the property. The law recognizes two principal modes of delivery,
to wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the
vendee.[31] Legal or constructive delivery, on the other hand, may be had through any of
the following ways: the execution of a public instrument evidencing the
sale;[32] symbolical tradition such as the delivery of the keys of the place where the
movable sold is being kept;[33] traditio longa manu or by mere consent or agreement if
the movable sold cannot yet be transferred to the possession of the buyer at the time of
the sale;[34] traditio brevi manu if the buyer already had possession of the object even
before the sale;[35] and traditio constitutum possessorium, where the seller remains in
possession of the property in a different capacity.[36]
Following the above disquisition, respondent Babasanta did not acquire ownership
by the mere execution of the receipt by Pacita Lu acknowledging receipt of partial
payment for the property. For one, the agreement between Babasanta and the Spouses
Lu, though valid, was not embodied in a public instrument. Hence, no constructive
delivery of the lands could have been effected. For another, Babasanta had not taken
possession of the property at any time after the perfection of the sale in his favor or
exercised acts of dominion over it despite his assertions that he was the rightful owner of
the lands. Simply stated, there was no delivery to Babasanta, whether actual or
constructive, which is essential to transfer ownership of the property. Thus, even on the
assumption that the perfected contract between the parties was a sale, ownership could
not have passed to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing sold.[37]
 However, it must be stressed that the juridical relationship between the parties in a
double sale is primarily governed by Article 1544 which lays down the rules of preference
between the two purchasers of the same property. It provides:
Art. 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.
The principle of primus tempore, potior jure (first in time, stronger in right) gains
greater significance in case of double sale of immovable property. When the thing sold
twice is an immovable, the one who acquires it and first records it in the Registry of
Property, both made in good faith, shall be deemed the owner.[38] Verily, the act of
registration must be coupled with good faith that is, the registrant must have no
knowledge of the defect or lack of title of his vendor or must not have been aware of
facts which should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor.[39]
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired
knowledge of Babasantas claim. Babasanta, however, strongly argues that the
registration of the sale by SLDC was not sufficient to confer upon the latter any title to the
property since the registration was attended by bad faith. Specifically, he points out that
at the time SLDC registered the sale on 30 June 1990, there was already a notice of lis
pendens on the file with the Register of Deeds, the same having been filed one year
before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis
pendens obliterate the effects of delivery and possession in good faith which admittedly
had occurred prior to SLDCs knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed
the Option to Buy in favor of SLDC upon receiving P316,160.00 as option money from
SLDC. After SLDC had paid more than one half of the agreed purchase price
of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of
Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no
knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated, from
the time of execution of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and the subsequent annotation
of lis pendens has no effect at all on the consummated sale between SLDC and the
Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that
some other person has a right to, or 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 the claim or interest
of some other person in the property.[40] Following the foregoing definition, we rule that
SLDC qualifies as a buyer in good faith since there is no evidence extant in the records
that it had knowledge of the prior transaction in favor of Babasanta. At the time of the
sale of the property to SLDC, the vendors were still the registered owners of the property
and were in fact in possession of the lands. Time and again, this Court has ruled that a
person dealing with the owner of registered land is not bound to go beyond the
certificate of title as he is charged with notice of burdens on the property which are noted
on the face of the register or on the certificate of title.[41] In assailing knowledge of the
transaction between him and the Spouses Lu, Babasanta apparently relies on the
principle of constructive notice incorporated in Section 52 of the Property Registration
Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if
registered, filed, or entered in the office of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive notice to all persons from the time
of such registering, filing, or entering.
However, the constructive notice operates as suchby the express wording of Section
52from the time of the registration of the notice of lis pendens which in this case was
effected only on 2 June 1989, at which time the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of
Babasanta the annotation of the notice of lis pendens cannot help Babasantas position
a bit and it is irrelevant to the good or bad faith characterization of SLDC as a purchaser.
A notice of lis pendens, as the Court held in Natao v. Esteban,[42] serves as a warning to a
prospective purchaser or incumbrancer that the particular property is in litigation; and
that he should keep his hands off the same, unless he intends to gamble on the results of
the litigation. Precisely, in this case SLDC has intervened in the pending litigation to protect
its rights. Obviously, SLDCs faith in the merit of its cause has been vindicated with the
Courts present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital[43] of SLDCs averment in its Complaint-in-
Intervention[44] that at the instance of Pacita Lu it issued a check for P200,000.00 payable
to Babasanta and the confirmatory testimony of Pacita Lu herself on cross-
examination.[45] However, there is nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the Spouses Lu and Babasanta
for what they attest to is that the amount was supposed to pay off the advances made
by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu
had already executed the Deed of Absolute Sale with Mortgage in favor of SLDC and
therefore, as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted
by the prior notice of lis pendens and assuming further for the same nonce that this is a
case of double sale, still Babasantas claim could not prevail over that of SLDCs.
In Abarquez v. Court of Appeals,[46] this Court had the occasion to rule that if a vendee in
a double sale registers the sale after he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and does not confer upon him any right.
If the registration is done in bad faith, it is as if there is no registration at all, and the buyer
who has taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only
after the second vendee, Abarquez, registered their deed of sale with the Registry of
Deeds, but the Israels were first in possession. This Court awarded the property to the Israels
because registration of the property by Abarquez lacked the element of good faith. While
the facts in the instant case substantially differ from that in Abarquez, we would not
hesitate to rule in favor of SLDC on the basis of its prior possession of the property in good
faith. Be it noted that delivery of the property to SLDC was immediately effected after the
execution of the deed in its favor, at which time SLDC had no knowledge at all of the
prior transaction by the Spouses Lu in favor of Babasanta.

The law speaks not only of one criterion. The first criterion is priority of entry in the
registry of property; there being no priority of such entry, the second is priority of
possession; and, in the absence of the two priorities, the third priority is of the date of title,
with good faith as the common critical element. Since SLDC acquired possession of the
property in good faith in contrast to Babasanta, who neither registered nor possessed the
property at any time, SLDCs right is definitely superior to that of Babasantas.

At any rate, the above discussion on the rules on double sale would be purely
academic for as earlier stated in this decision, the contract between Babasanta and the
Spouses Lu is not a contract of sale but merely a contract to sell. In Dichoso v. Roxas,[47] we
had the occasion to rule that Article 1544 does not apply to a case where there was a
sale to one party of the land itself while the other contract was a mere promise to sell the
land or at most an actual assignment of the right to repurchase the same land.
Accordingly, there was no double sale of the same land in that case.

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of
Appeals appealed from is REVERSED and SET ASIDE and the decision of the Regional Trial
Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

 [G.R. No. 126444. December 4, 1998]
ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA, DEMETRIO QUIJADA,
ELIUTERIA QUIJADA, EULALIO QUIJADA, and WARLITO
QUIJADA, petitioners, vs. COURT OF APPEALS, REGALADO MONDEJAR, RODULFO
GOLORAN, ALBERTO ASIS, SEGUNDINO RAS, ERNESTO GOLORAN, CELSO ABISO,
FERNANDO BAUTISTA, ANTONIO MACASERO, and NESTOR
MAGUINSAY, respondents.
DECISION
MARTINEZ, J.:
Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against private
respondents for quieting of title, recovery of possession and ownership of parcels of land
with claim for attorney's fees and damages. The suit was premised on the following facts
found by the Court of Appeals, which is materially the same as that found by the trial
court:
"Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda. de
Quijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from the
latter the two-hectare parcel of land subject of the case, situated in the barrio of San
Agustin, Talacogon, Agusan del Sur. On April 5, 1956, Trinidad Quijada together with her
sisters Leonila Corvera Vda. de Sequea and Paz Corvera Cabiltes and brother
Epapiadito Corvera executed a conditional deed of donation (Exh. C) of the two-
hectare parcel of land subject of the case in favor of the Municipality of Talacogon, the
condition being that the parcel of land shall be used solely and exclusively as part of
the campus of the proposed provincial high school in Talacogon. Apparently, Trinidad
remained in possession of the parcel of land despite the donation. On July 29, 1962,
Trinidad sold one (1) hectare of the subject parcel of land to defendant-appellant
Regalado Mondejar (Exh. 1). Subsequently, Trinidad verbally sold the remaining one (1)
hectare to defendant-appellant (respondent) Regalado Mondejar without the benefit
of a written deed of sale and evidenced solely by receipts of payment. In 1980, the heirs
of Trinidad, who at that time was already dead, filed a complaint for forcible entry (Exh.
E) against defendant-appellant (respondent) Regalado Mondejar, which complaint
was, however, dismissed for failure to prosecute (Exh. F). In 1987, the proposed provincial
high school having failed to materialize, the Sangguniang Bayan of the municipality of
Talacogon enacted a resolution reverting the two (2) hectares of land donated back to
the donors (Exh. D). In the meantime, defendant-appellant (respondent) Regalado
Mondejar sold portions of the land to defendants-appellants (respondents) Fernando
Bautista (Exh. 5), Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7) and Ernesto Goloran
(Exh. 8).
"On July 5, 1988, plaintiffs-appellees (petitioners) filed this action against defendants-
appellants (respondents). In the complaint, plaintiffs-appellees (petitioners) alleged that
their deceased mother never sold, conveyed, transferred or disposed of the property in
question to any person or entity much less to Regalado Mondejar save the donation
made to the Municipality of Talacogon in 1956; that at the time of the alleged sale to
Regalado Mondejar by Trinidad Quijada, the land still belongs to the Municipality of
Talacogon, hence, the supposed sale is null and void.
"Defendants-appellants (respondents), on the other hand, in their answer claimed that
the land in dispute was sold to Regalado Mondejar, the one (1) hectare on July 29,
1962, and the remaining one (1) hectare on installment basis until fully paid. As
affirmative and/or special defense, defendants-appellants (respondents) alleged that
plaintiffs' action is barred by laches or has prescribed.
"The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstly
because 'Trinidad Quijada had no legal title or right to sell the land to defendant
Mondejar in 1962, 1966, 1967 and 1968, the same not being hers to dispose of because
ownership belongs to the Municipality of Talacogon' (Decision, p. 4; Rollo, p. 39) and,
secondly, that the deed of sale executed by Trinidad Quijada in favor of Mondejar did
not carry with it the conformity and acquiescence of her children, more so that she was
already 63 years old at the time, and a widow (Decision, p. 6;Rollo, p. 41)."[1]
The dispositive portion of the trial court's decision reads:
"WHEREFORE, viewed from the above perceptions, the scale of justice having tilted
in favor of the plaintiffs, judgment is, as it is hereby rendered:
1) ordering the Defendants to return and vacate the two (2) hectares of land
to Plaintiffs as described in Tax Declaration No. 1209 in the name of Trinidad
Quijada;
2) ordering any person acting in Defendants' behalf to vacate and restore
the peaceful possession of the land in question to Plaintiffs;
3) ordering the cancellation of the Deed of Sale executed by the late Trinidad
Quijada in favor of Defendant Regalado Mondejar as well as the Deeds
of Sale/Relinquishments executed by Mondejar in favor of the other
Defendants;
4) ordering Defendants to remove their improvements constructed on the
questioned lot;
5) ordering the Defendants to pay Plaintiffs, jointly and severally, the amount
of P10,000.00 representing attorney's fees;
6) ordering Defendants to pays the amount of P8,000.00 as expenses of
litigation; and
7) ordering Defendants to pay the sum of P30,000.00 representing moral
damages.
SO ORDERED."[2]
On appeal, the Court of Appeals reversed and set aside the judgment a
quo[3] ruling that the sale made by Trinidad Quijada to respondent Mondejar was valid as
the4 former retained an inchoate interest on the lots by virtue of the automatic reversion
clause in the deed of donation.[4] Thereafter, petitioners filed a motion for
reconsideration. When the CA denied their motion,[5] petitioners instituted a petition for
review to this Court arguing principally that the sale of the subject property made by
Trinidad Quijada to respondent Mondejar is void, considering that at that time, ownership
was already transferred to the Municipality of Talacogon. On the contrary, private
respondents contend that the sale was valid, that they are buyers in good faith, and that
petitioners' case is barred by laches.[6]
 We affirm the decision of the respondent court.
The donation made on April 5, 1956 by Trinidad Quijada and her brother and
sisters[7] was subject to the condition that the donated property shall be "used solely and
exclusively as a part of the campus of the proposed Provincial High School in
Talacogon."[8] The donation further provides that should "the proposed Provincial High
School be discontinued or if the same shall be opened but for some reason or another,
the same may in the future be closed" the donated property shall automatically revert to
the donor.[9] Such condition, not being contrary to law, morals, good customs, public
order or public policy was validly imposed in the donation.[10]
When the Municipality's acceptance of the donation was made known to the
donor, the former became the new owner of the donated property -- donation being a
mode of acquiring and transmitting ownership[11] - notwithstanding the condition
imposed by the donee. The donation is perfected once the acceptance by the donee
is made known to the donor.[12] Accordingly, ownership is immediately transferred to the
latter and that ownership will only revert to the donor if the resolutory condition is not
fulfilled.
In this case, that resolutory condition is the construction of the school. It has been
ruled that when a person donates land to another on the condition that the latter would
build upon the land a school, the condition imposed is not a condition precedent or a
suspensive condition but a resolutory one.[13] Thus, at the time of the sales made in 1962
towards 1968, the alleged seller (Trinidad) could not have sold the lots since she had
earlier transferred ownership thereof by virtue of the deed of donation. So long as the
resolutory condition subsists and is capable of fulfillment, the donation remains effective
and the donee continues to be the owner subject only to the rights of the donor or his
successors-in-interest under the deed of donation. Since no period was imposed by the
donor on when must the donee comply with the condition, the latter remains the owner
so long as he has tried to comply with the condition within a reasonable period. Such
period, however, became irrelevant herein when the donee-Municipality manifested
through a resolution that it cannot comply with the condition of building a school and the
same was made known to the donor.Only then - when the non-fulfillment of the resolutory
condition was brought to the donor's knowledge - that ownership of the donated
property reverted to the donor as provided in the automatic reversion clause of the deed
of donation.
The donor may have an inchoate interest in the donated property during the time
that ownership of the land has not reverted to her. Such inchoate interest may be the
subject of contracts including a contract of sale. In this case, however, what the donor
sold was the land itself which she no longer owns. It would have been different if the
donor-seller sold her interests over the property under the deed of donation which is
subject to the possibility of reversion of ownership arising from the non-fulfillment of the
resolutory condition.
As to laches, petitioners' action is not yet barred thereby. Laches presupposes failure
or neglect for an unreasonable and unexplained length of time, to do that which, by
exercising due diligence, could or should have been done earlier;[14] "it is negligence or
omission to assert a right within a reasonable time, thus, giving rise to a presumption that
the party entitled to assert it either has abandoned or declined to assert it."[15] Its essential
elements of:
a) Conduct on the part of the defendant, or of one under whom he claims,
giving rise to the situation complained of;
b) Delay in asserting complainant's right after he had knowledge of the
defendant's conduct and after he has an opportunity to sue;
c) Lack of knowledge or notice on the part of the defendant that the
complainant would assert the right on which he bases his suit; and,
d) Injury or prejudice to the defendant in the event relief is accorded to the
complainant."[16]
are absent in this case. Petitioners' cause of action to quiet title commenced only when
the property reverted to the donor and/or his successors-in-interest in 1987. Certainly,
when the suit was initiated the following year, it cannot be said that petitioners had slept
on their rights for a long time. The 1960's sales made by Trinidad Quijada cannot be the
reckoning point as to when petitioners' cause of action arose. They had no interest over
the property at that time except under the deed of donation to which private
respondents were not privy. Moreover, petitioners had previously filed an ejectment suit
against private respondents only that it did not prosper on a technicality.
Be that at it may, there is one thing which militates against the claim of
petitioners. Sale, being a consensual contract, is perfected by mere consent, which is
manifested the moment there is a meeting of the minds[17] as to the offer and
acceptance thereof on three (3) elements: subject matter, price and terms of payment
of the price.[18] ownership by the seller on the thing sold at the time of the perfection of
the contract of sale is not an element for its perfection. What the law requires is that the
seller has the right to transfer ownership at the time the thing sold is
delivered.[19]Perfection per se does not transfer ownership which occurs upon the actual
or constructive delivery of the thing sold.[20] A perfected contract of sale cannot be
challenged on the ground of non-ownership on the part of the seller at the time of its
perfection; hence, the sale is still valid.
The consummation, however, of the perfected contract is another matter. It occurs
upon the constructive or actual delivery of the subject matter to the buyer when the seller
or her successors-in-interest subsequently acquires ownership thereof. Such circumstance
happened in this case when petitioners -- who are Trinidad Quijada's heirs and successors-
in-interest -- became the owners of the subject property upon the reversion of the
ownership of the land to them. Consequently, ownership is transferred to respondent
Mondejar ands those who claim their right from him. Article 1434 of the New Civil Code
supports the ruling that the seller's "title passes by operation of law to the buyer." [21] This
rule applies not only when the subject matter of the contract of sale is goods,[22] but also
to other kinds of property, including real property.[23]
There is also no merit in petitioners' contention that since the lots were owned by the
municipality at the time of the sale, they were outside the commerce of men under Article
1409 (4) of the NCC;[24] thus, the contract involving the same is inexistent and void from
the beginning. However, nowhere in Article 1409 (4) is it provided that the properties of a
municipality, whether it be those for public use or its patrimonial property[25] are outside
the commerce of men. Besides, the lots in this case were conditionally owned by the
municipality. To rule that the donated properties are outside the commerce of men
would render nugatory the unchallenged reasonableness and justness of the condition
which the donor has the right to impose as owner thereof. Moreover, the objects referred
to as outsides the commerce of man are those which cannot be appropriated, such as
the open seas and the heavenly bodies.
With respect to the trial courts award of attorneys fees, litigation expenses and moral
damages, there is neither factual nor legal basis thereof. Attorneys fees and expenses of
litigation cannot, following the general rule in Article 2208 of the New Civil Code, be
recovered in this case, there being no stipulation to that effect and the case does not fall
under any of the exceptions.[26] It cannot be said that private respondents had compelled
petitioners to litigate with third persons. Neither can it be ruled that the former acted in
gross and evident bad faith in refusing to satisfy the latters claims considering that private
respondents were under an honest belief that they have a legal right over the property
by virtue of the deed of sale. Moral damages cannot likewise be justified as none of the
circumstances enumerated under Articles 2219[27] and 2220[28] of the New Civil Code
concur in this case.

WHEREFORE, by virtue of the foregoing, the assailed decision of the Court of Appeals
is AFFIRMED.

SO ORDERED.

Melo (Acting Chairman), Puno, and Mendoza, JJ., concur.