Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-20435 October 23, 1923

LUIS ASIAIN, plaintiff-appellant,

vs.
BENJAMIN JALANDONI, defendant-appellee.

Arroyo and Gurrea for appellant.

Francisco Soriano for appellee.

MALCOLM, J.:

Luis Asiain, the plaintiff-appellant in this case, is the owner of the hacienda known as "Maria" situated in the
municipality of La Carlota, Province of Occidental Negros, containing about 106 hectares. Benjamin Jalandoni, the
defendant-appellee, is the owner of another hacienda adjoining of Asiain.

Asiain and Jalandoni happening to meet no one of the days of May, 1920, Asiain said to Jalandoni that he was
willing to sell a portion of his hacienda for the sum of P55,000. With a wave of his hand, Asiain indicated the tract of
land in question, affirming that it contained between 25 and 30 hectares, and that the crop of sugar cane then
planted would produce not less than 2,000 piculs of sugar. But Jalandoni, remaining doubtful as to the extent of the
land and as to the amount of crop on it, Asiain wrote Jalandoni the letter which follows:

HDA. MARIA May, 26, 1920.

MR. BENJAMIN JALANDONI.

DEAR BENJAMIN: I am in receipt of your letter and with regard to your statement that parcel does not contain 21
hectares I do not believe. I bet anything that part only which is planted with cane contains more than 20 hectares, I
bet 2 against 1.

If you agree, I would be that you pay only one-half. I am not a surveyor, but these days I had the pleasure to survey
the land and I know more or less its area. 1aw ph!l.net

Here we are not to deceive each other. If you like that parcel and if you want to buy it I will give you good
propositions. I don't know where and how they learned that I was selling the hacienda and they made me a good
offer, but as we do not want to part but with that parcel, hence my propositions are the following, in view of the time
that has elapsed and the progress of the cane.

I assure (aseguro) that there are 2,000 piculs and sell on that basis, provided that the cane is milled in due time. In
case the sugar does not amount to 2,000 piculs, I will pay in sugar all such amount as will be necessary to complete
the 2,000, but if after milling the cane, as I say, there is an excess over 2,000 piculs, all the excess shall be mine. So
that if you like, I make the sale for the same price that we talked about and the same conditions, not a dime more or
less.

Since you left it did rain, so the "alociman" (Philippine herb) of Guimib must die on the field, whether of the hacienda
or of the "lagatio." You have a contract for a lump sum. Now they have begun to plow the old plantations within the
boundary some days ago and you may rest and throw one (unintelligible), answer yes or no, so that I may decide.

Your friend LUIS ASIAIN

Sometime later, in July of the same year, Asiain and Jalandoni having met at Iloilo, they prepared and signed the
memorandum-agreement which follows:

Purchase of land of Mr. Luis Asiain and his wife Maria Cadenas, by B. Jalandoni, containing 25
hectares more or less of land bounded by property of the purchaser, with its corresponding crop,
 estimated at 2,000 piculs, the total value of which is 55 thousand. The price is to be paid by paying
30 thousand at the signing of the document, and 25 thousand within one year, with interest at the
rate of 10 per cent.

Mr. Asiain is under obligation to take care of all the plantation until the planting is finished and in
case the crop exceeds 2,000 piculs, all the excess will belong to Mr. Asiain.

The adjacent landowner on the north and the west is the vendor himself, on the east, B. Jalandoni,
and on the south, B. Jalandoni and the widow of Abdon Ferrer.

The purchaser is under obligation to answer for all the rights and obligations of the land with the
central of Inchausti.

After the planting of the cane is completely finished, Mr. Asiain shall vacate the parcel sold to the
purchaser.

The expenses for taking care of said plantation until the planting is completely finished will be for the
account of the vendor Mr. Asiain.

(Sgd.) "LUIS ASIAIN

"BENJAMIN JALANDONI"

During all of the period of negotiations, Jalandoni remained a doubting Thomas and was continually suggesting that,
in his opinion, the amount of the land and of the crop was overestimated. Asiain on his part always gave assurances
in conformity with the letter which he had written intended to convince Jalandoni that the latter was in error in his
opinion. As a result, the parties executed the agreement which follows:

This document, executed in the city of Iloilo, Province of Iloilo, Philippine Islands, by and between
Messrs. Luis Asiain and Benjamin Jalandoni, of age and residents of the municipality of La Carlota,
Province of Occidental Negros, Philippine Islands.

Witnesseth:

(1) That Luis Asiain does hereby promise and bind himself to sell to Benjamin
Jalandoni a parcel of land the hacienda "Maria" of the aforesaid Luis Asiain, situated
in the municipality of La Carlota, Province of Occidental Negros, P.I.

(2) That Benjamin Jalandoni does hereby promise and bind himself to purchase the
aforesaid parcel of land in the sum P55,000 upon certain conditions specified in a
memorandum signed by the parties which is in the hands of Attorneys Padilla &
Treñas.

(3) That upon the signing of this agreement, the vendor shall have the right to collect
from the purchaser part of the price giving receipts thereof signed by said vendor.

(4) That in case the vendor should withdraw from the contract and desist from
signing the document of final sale, the purchaser shall have the right to collect from
said vendor all such amount as may have been advanced on account of this sale,
with an indemnity of P15,000 as penalty.

(5) In case it is the purchaser who should withdraw from the contract of sale, then he
will lose all such amount as may have been paid in advance on account of this
transaction.

In witness whereof, we have hereunto affixed our signatures, at Iloilo, Iloilo, this 12th day of
July, 1920.

(Sgd) "LUIS ASIAIN

"BENJAMIN JALANDONI

Signed in the presence of:

 (Sgd.) "ENGRACIO PADILLA
"P.T. TREÑAS"

Once in possession of the land, Jalandoni did two things. He had the sugar cane ground in La Carlota Sugar Central
with the result that it gave and output of P800 piculs and 23 cates of centrifugal sugar. When opportunity offered, he
secured the certificate of title of Asiain and produced a surveyor to survey the land. According to his survey, the
parcel in question contained an area of 118 hectares, 54 ares, and 22 centiares.

Of the purchase price of P55,000, Jalandoni had paid P30,000, leaving a balance unpaid of P25,000. To recover the
sum of P25,000 from Jalandoni or to obtain the certificate of title and the rent from him, action was begun by Asiain
in the Court of First Instance of Occidental Negros. To the complaint, an answer and a counter-complaint were
interposed by the defendant, by which it was asked that he be absolved from the complaint, that the contract be
annulled, both parties to return whatever they had received, and that he recover from the plaintiff the sum of P3,600
annually as damages. In a well-reasoned decision, the Honorable Eduardo Gutierrez David, Judge of First Instance,
declared null the document of purchase and its related memorandum; absolved the defendant from the payment of
P25,000; ordered the plaintiff to return to the defendant the sum of P30,000 with legal interest from July 12, 1920;
ordered the defendant to turn over to the plaintiff the tract of land and the certificate of title No. 468, and absolved
the plaintiff from the counter-complaint, — all without special finding as to the costs. It is from said judgment that the
plaintiff has appealed.

The true facts need not give us pause. They are as found by the trial judge and as pratically agreed to by the
parties. It is only necessary to keep in mind that apparently there was always a difference of opinion between Asiain
and Jalandoni as to the area of the tract and as to the crop of sugar cane; that the agreement between them
mentions land containing 25 hectares more or less, giving the boundaries, and a crop estimated and in one sense
warranted at 2,000 piculs, and that in reality the land contained only a little more than 18 hectares and produced a
crop of only about 800 piculs. The legal consequences arising from these facts are more difficult of determination.

Our Civil Code contains provisions which must be taken into consideration. Codal articles 1265, 1266, and 1269
relate to consent given by reason of error and deceit. They provide the rules which shall avoid contracts for these
and other reasons. But the provisions of the Civil Code most directly pertinent are found in articles 1469, 1470, and
1471.

The first two mentioned articles, 1469 and 1470, are not applicable because of the proviso relating to the sale being
made at a certain price for each unit of measure or number — which is not our case. The facts seem to fall within
article 1471. It first paragraph provides that in case of the sale of real estate for a lump sum and not at the rate of
specified price of each unit or measure, there shall be no increase or decrease of the price even if the area be found
to be more or less than that stated in the contract. The next paragraph provides that the same rule is applicable
when two or more estates are sold for a single price. Then comes the following: ". . . but, if in addition to a statement
of the boundaries, which is indispensable in every conveyance of real estate, the area estate should be designated
in the contract, the vendor shall be obliged to deliver all that is included within such boundaries, even should it
exceed the area specified in the contract; and, should he not be able to do so, he shall suffer a reduction of the price
in proportion to what is lacking of the area, unless the contract be annulled by reason of the vendee's refusal to
accept anything other than that which was stipulated."

A study of the Spanish commentators discloses that the meaning of article 1471 is not clear as it might be, and that
they are not unanimous in their views. Manresa gives emphasis to the intention of the parties and the option on the
part of the purchaser to rescind the contract. To quote from Manresa:

The rule in the latter case is found in the second paragraph of article 1471, with the exception of the
first clause which refers to the former hypothesis. This rule may be formulated as follows: Whether
the case is one of sale of realty for a lump sum or of two or more for a single price which is also a
lump sum and, consequently, not at the rate of specified price for each unit of measure or number,
the vendor shall be bound to deliver all that is within the boundaries stated although it may exceed
the area or number expressed in the contract; in case he cannot deliver it, the purchaser shall have
the right to reduce the price proportionately to what is lacking of the area or number, or rescind the
contract at his option.

xxx xxx xxx

The manner in which the matter covered by this article was distributed in its two paragraphs
contributes to making it difficult to understand. The rule might have been clearly stated had the first
clause of the second paragraph been included in the first paragraph, the latter to end with the words,
 "The same rule shall apply when two or more estates are sold for a single price." And if by
constituting an independent paragraph, with the rest of the second paragraph, it were made to
appear more expressly that the rule of the second paragraph thus drawn referred to all the cases of
paragraph one, as we have expounded, namely, to the case of a sale of one single estate and that
of two or more for one single price, the precept would have been clearer.

In our opinion, this would have better answered what we deem to be indubitable intention of the
legislator.

Some eminent commentators construe the last part of article 1471 in a different way. To them the
phrase "and should he not be able to do so" as applied to the vendor, does not mean as apparently
it does "should he not be able to deliver all that is included within the boundaries stated," but this
other thing, namely, that if by reason of the fact that a less area is included within the boundaries
than that expressed in the contract, it is not possible for the vendor to comply therewith according to
its literal sense, he must suffer either the effects of the nullity of the contract or a reduction of the
price proportionately to what may be lacking of the area or number. It is added as a ground for this
solution that if the vendor fulfills the obligation, as stated in the article, by delivering what is not
included within the boundaries, there can never by any case of proportionate reduction of the price
on account of shortage of an area, because he does not give less who delivers all that he bound
himself to.

According to this opinion, which we believe erroneous, if within the boundaries of the property sold,
there is included more than area than that expressed in the title deeds, nothing can be claimed by
the vendor who losses the value of that excess, but if there is less area, then he loses also, because
either the price is reduced or the contract is annulled. This theory would be anomalous in case of
sale of properties in bulk, but, above all, would do gross injustice which the legislator never intended.

There is no such thing. So long as the vendor can deliver, and for that reason, delivers all the land
included within the boundaries assigned to the property, there can be no claim whatsoever either on
his part, although the area may be found to be much greater than what was expressed, nor on the
part of the purchaser although what area may be in reality much smaller. But as he sold everything
within the boundaries and this is all the purchaser has paid, or must pay, for whether much or little, if
afterwards, it is found that he cannot deliver all, because, for instance, a part, a building, a valley,
various pieces of land, a glen etc., are not his, there is no sale of a specified thing, there is longer a
sale of the object agreed upon, and the solution given by the article is then just and logical: Either
the contract is annulled or the price is reduced proportionately." (10 Comentarious al Codigo Civil, p.
157.)

The principle is deduced from the Code, that if land shall be sold within boundaries with an expression of the area
and if the area is grossly deficient, the vendee has an option, either to have the price reduced proportionately or to
ask for the rescission of the contract. The rule of the civil law is more favorable to the purchaser than is the common
law. It gives the excess to the purchaser without compensation to the vendor, where the property is sold by a
specific description followed by the mention of the quantity or measure, but allows the purchaser either to secure a
deduction from the price in case a deficiency or to annul the contract.

The decision of this court which gave most direct consideration to article 1471 of the Civil Code, now chiefly relied
upon by the appellant, is found in Irureta Goyena vs. Tambunting ([1902], 1 Phil., 490). The rule announced in the
syllabus is this: "An agreement to purchase a certain specified lot of land at a certain price is obligatory and
enforceable regardless of the fact that its area is less than that mentioned in the contract." Taken literally, this rule
would lead to the result desired by the appellant. But the syllabus naturally must be understood in relation what is
found in the decision itself; and the fact was that the tract of land was mentioned as being located at No. 20 Calle
San Jose, Ermita, Manila. The private contract expressed a specific thing as the object of the contract and specified
a certain price. There was no statement in the document of the superficial area and no hint in the record that either
or both parties were misled. The facts, therefore, are different than those before us and the doctrine in the Irureta
Goyena vs. Tambunting case, can well be followed and distinguished.

A comparative study of the American Authorities throws considerable light on the situation. In volume 39 Cyc., page
1250, under the subject "Vendor and Purchaser," is found the following:

If, in a contract of sale the quantity of the realty to be conveyed is indicated by a unit of area, as by
the acre, a marked excess or deficiency in the quantity stipulated for is a ground for avoiding the
 contract. Since it is very difficult, if not impossible, to ascertain the quality of a tract with perfect
accuracy, a slight excess or deficiency does not affect the validity of the contract.

Where, however, the contract is not for the sale of a specific quantity of land, but for the sale of
particular tract, or designated lot or parcel, by name or description, for a sum in gross, and the
transaction is bona fide, a mutual mistake as to quantity, but not as to boundaries, will not generally
entitle the purchaser to compensation, and is not ground for rescission. But it is well settled that a
purchaser of land, when it is sold in gross, or with the description, "more or less" or "about," does not
thereby ipso facto take all risk of quantity in the tract. If the difference between the real and the
represented quantity is very great, both parties act obviously under a mistake which it is the duty of a
court of equity to correct. And relief will be granted when the mistake is so material if the truth had
been known to the parties the sale would not have been made.

Volume 27 of the Ruling Case Law, pages 354, 434, 436, states what follows:

A mutual mistake as to the quantity of the land sold may afford ground for equitable relief. As has
been said, if, through gross and palpable mistake, more or less land should be conveyed than was in
the contemplation of the seller to part with or the purchaser to receive, the injured party would be
entitled to relief in like manner as he would be for an injury produced by a similar cause in a contract
of any other species. And when it is evident that there has been a gross mistake s to quantity, and
the complaining party has not been guilty of any fraud or culpable negligence, nor has he otherwise
impaired the equity resulting from the mistake, he may be entitled to relief from the technical or legal
effect of his contract, whether it be executed or only executory. It has also been held that where
there is a very great diference between the actual and the estimated quantity of acres of land sold in
gross, relief may be granted on the ground of gross mistake. Relief, however, will not be granted as
general rule where it appears that the parties intended a contract of hazard, as where the sale is a
sale in gross and not by acreage or quantity as a basis for the price; and it has been held that a
mistake on the part of the vendor of a town lot sold by description as to number on the plat, as to its
area or dimensions, inducing a sale thereof at smaller price than he would have asked had he been
cognizant of its size, not in any way occasioned or concealed by conduct of the purchaser,
constitutes no ground for the rescission of the contract. The apparent conflict and discrepancies in
the adjudicated cases involving mistakes as to quantity arise not from a denial of or a failure to
recognize the general principle, but from the difficulty of its practical application in particular cases in
determining the questions whether the contract was done of hazard as to quantity or not and
whether the variance is unreasonable. The relative extent of the surplus or deficit cannot furnish, per
se, an infallible criterion in each case for its determination, but each case must be considered with
reference not only to that but its other peculiar circumstances. The conduct of the parties, the value,
extent, and locality of the land, the date of the contract, the price, and other nameless
circumstances, are always important, and generally decisive. In other words, each case must
depend on its own peculiar circumstances and surroundings.

The rule denying relief in case of a deficit or an excess is frequently applied in equity as well as at
law, but a court of equity will not interfere on account of either a surplus or a deficiency where it is
clear that the parties intend a contract of hazard, and it is said that although this general rule may
not carry into effect the real intention of the parties it is calculated to prevent litigation. From an early
date, courts of equity under their general jurisdiction to grant relief on the ground of mistake have in
case of mistake in the estimation of the acreage in tract sold and conveyed interposed their aid to
grant relief to the vendor where there was a large surplus over the estimated acreage, and to the
purchaser where there was large deficit. For the purpose of determining whether relief shall be
granted the courts have divided the cases into two general classes: (1) Where the sale is of a
specific quantity which is usually denominated a sale by the acre; (2) where the sale is usually called
a sale in gross. . . .

Sales in gross for the purpose of equitable relief may be divided into various subordinate
classifications: (1) Sales strictly and essentially by the tract, without reference in the negotiation or in
the consideration to any designated or estimated quantity of acres; (2) sales of the like kind, in
which, though a supposed quantity by estimation is mentioned or referred to in the contract, the
reference was made only for the purpose of description, and under such circumstances or in such a
manner as to show that the parties intended to risk the contingency of quantity, whatever it might be,
or how much so ever it might exceed or fall short of that which was mentioned in the contract; (3)
sales in which it is evident, from extraneous circumstances of locality, value, price, time, and the
conduct and conversations of the parties, that they did not contemplate or intend to risk more than
 the usual rates of excess or deficit in similar cases, or than such as might reasonably be calculated
on as within the range of ordinary contingency; (4) sales which, though technically deemed and
denominated sales in gross, are in fact sales by the acre, and so understood by the parties.
Contracts belonging to either of the two first mentioned classes, whether executed or executory,
should not be modified by the chancellor when there has been no fraud. But in sales of either the
third of fourth kind, an unreasonable surplus or deficit may entitle the injured party to equitable relief,
unless he has, by his conduct, waived or forfeited his equity. . . .

The memorandum-agreement between Asiain and Jalandoni contains the phrase or "more or less." It is the general
view that this phrase or others of like import, added to a statement of quantity, can only be considered as covering
inconsiderable or small differences one way or the other, and do not in themselves determine the character of the
sale as one in gross or by the acre. The use of this phrase in designating quantity covers only a reasonable excess
or deficiency. Such words may indeed relieve from exactness but not from gross deficiency.

The apparent conflict and discrepancies in the adjudicated cases arise not from a denial of or a failure to recognize
the general principles. These principles, as commonly agreed to, may be summarized as follows: A vendee of land
when it is sold in gross or with the description "more or less" does not thereby ipso facto take all risk of quantity in
the land. The use of "more or less" or similar words in designating quantity covers only a reasonable excess or
deficiency. Mutual mistake of the contracting parties to sale in regard to the subject-matter of the sale which is so
material as to go to the essence of the contract, is a ground for relief and rescission. It has even been held that
when the parties saw the premises and knew the boundaries it cannot prevent relief when there was mutual gross
mistake as to quantity. Innocent and mutual mistake alone are sufficient grounds for rescission. (Bigham vs.
Madison [1899], 47 L. R. A., 267) The difficulty comes from the application of the principles in particular cases.

A practical demonstration of what has just been said is disclosed by the notes in volume 27 of Ruling Case Law,
page 439. In the following cases, relief was denied: Lawson vs. Floyd, 124 U. S., 108; 8 S. Ct., 409; 31 U. S. (L.
ed.), 347 (estimated acreage about 1,000 acres; shortage 368 acres); Frederick vs. Youngblood, 19 Ala., 680; 54
Am. Dec., 209 (estimated acreage 500 acres more or less; shortage 39 acres); Jones vs. Plater, 2 Gill (Md.), 125;
41 Am. Dec., 408 (stated acreage 998 acres; shortage 55 acres); Frenche vs. State, 51 N. J. Eq., 624; 27 Atl., 140;
40 A. S. R., 548 (stated acreage 195-98/100 be the same more or less; shortage 1-37/100); Faure vs. Martin, 7 N.
Y., 210; 57 Am. Dec., 515 (stated acreage 96 acres more or less; deficit 10 acres); Smith vs. Evans, 6 Bin. (Pa.),
102; 6 Am. Dec., 436 (shortage of 88 acres in tract conveyed as containing 991 1/4 acres more or less); Jollife vs.
Hite, 1 Call (Va.), 301; 1 Am. Dec., 519 (stated acreage 578 acres more or less; shortage 66 acres); Pendleton vs.
Stewart, 5 Call (Va.), 1;2 Am. Dec., 583 (stated acreage 1,100 acres more or less; shortage 160 acres); Nelson vs.
Matthews, 2 Hen. & M. (Va.), 164; 3 Am. Dec., 620 (stated acreage 852 acres more or less; shortage of 8 acres). In
the following cases relief was granted: Harrel vs. Hill, 19 Ark., 102; 68 Am. Dec., 202 (stated acreage 180 acres
more or less; deficit 84 acres); Solinger vs. Jewett, 25 Ind., 479; 87 Am. Dec., 372 (stated acreage 121 acres more
or less; deficit 36 acres); Hays vs. Hays, 126 Ind., 92; 25 N.E., 600; 11 L. R. A., 376 (stated acreage 28.4 acres
more or less; deficit 5 acres); Baltimore, etc., Land Soc. vs. Smith, 54 Md., 187; 39 Am. Rep., 374 (stated acreage
about 65 acres; deficit 30 to 35 acres); Newton vs. Tolles, 66 N. H., 136; 19 Atl., 1092; 49 A. S. R., 593; 9 L. R. A.,
50 (stated acreage about 200 acres; deficit 65 acres); Couse vs. Boyles, 4 N. J. Eq., 212; 38 Am. Dec., 212 (stated
acreage 135 acres more or less; deficit 30 acres) Belknap vs. Sealey, 14 N. Y., 143; 67 Am. Dec., 120 (stated
acreage 8 acres more or less; deficit 4 acres); Paine vs. Upton, 87 N.Y., 327; 41 Am. Rep., 371 (stated acreage
"about 222 acres be the same more or less;" shortage 18 acres); Bigham vs. Madison, 103 Tenn., 358; 52 S. W.,
1074; 47 L. R. A., 267 (stated acreage 25 acres more or less; deficit 12 acres); Smith vs. Fly, 24 Tex., 345; 76 Am.
Dec., 109 (stated acreage 500 acres more or less; deficit 115 acres); Triplett vs. Allen, 26 Grat. (Va.), 721; 21 Am.
Dec., 320 (stated acreage 166 acres more or less; deficit 10 acres); Epes vs. Saunders, 109 Va., 99; 63 S. E., 428;
132 A. S. R., 904 (stated acreage 75 acres more or less; deficit 22 acres); McComb vs. Gilkeson, 110 Va., 406; 66
S. E., 77; 135 A. S. R., 944 (stated acreage 245 acres more or less; deficit 10 acres).

A case often cited and which on examination is found to contain a most exhaustive review of the decisions, is that of
Belknap vs. Sealey ([1856], 14 N.Y. 143; 67 Am. Dec.,, 120) The facts were: "Upon the merits of the controversy the
case is quite simple in its facts. The land in question is situated in the city of Brooklyn; and being valuable only for
division and sale as city lots, its valuable only for division and sale as city lots, its value is precisely in proportion to
the quantity. In consideration of the gross sum of fourteen thousand dollars, of which one thousand dollars was paid
down, the defendant agreed to convey the land to the plaintiff, describing it as "the premises conveyed to him by
Samuel T. Roberts," by deed dated about nine months previous. The deed of Roberts contained a definite
description by meters and bounds, and stated the quantity to be "about nine acres, more or less," excepting a
certain parcel of one acre and six perches. The quantity in fact is only about half as much as the deed asserted. The
plaintiff, in agreeing to purchase the tract at the sum named, acted under a mistake which affected the price nearly
one half, and the judge has found that the seller was mistaken also. . . . The Judge has found that the actual
quantity was substantially and essentially less than the plaintiff supposed he was purchasing; and although the
finding does not so state in terms, there can be no difficulty, I think, in affirming that if the true quantity had been
known, the contract would not have been made. The agreement has never been consummated by a conveyance.
These are the only essential facts in the case." The learned Judge remarked: "The counsel for the defendant is
obliged to contend, and he does not contend, that mere mistake as to the quantity of land affords no ground of relief
against a contract in the terms of the present one, however serious such mistake may be, and although we can
readily see the contract would never have been made if the quantity had been made known. The convenience of
such a rule has been insisted on, and in the denial of justice it certainly has the merit of simplicity. If the doctrine is
true as broadly as stated, then there is one class of contracts to which the settled maxim that equity will relieve
against mistake can have no application. Upon a careful examination of the cases cited, as well as upon principle,
my conclusion is, that agreements of this description are not necessarily proof against the maxims which apply to all
others." Then follows a review of the cases not alone of the state of New York and other states in the America Union
but of England as well. The rule was announced that equity will rescind a contract for the sale of land for mutual
mistake as to the quantity of land which the boundaries given in the contract contained, where the deficiency is
material. "More or less," used in the contract in connection with the statement of the quantity, will not prevent the
granting of such relief.

Coordinating more closely the law and the facts in the instant case, we reach the following conclusions: This was
not a contract of hazard. It was a sale in gross in which there was a mutual mistake as to the quantity of land sold
and as to the amount of the standing crop. The mistake of fact as disclosed not alone by the terms of the contract
but by the attendant circumstances, which it is proper to consider in order to throw light upon the intention of the
parties, is, as it is sometimes expressed, the efficient cause of the concoction. The mistake with reference to the
subject-matter of the contract is such that, at the option of the purchaser, it is rescindable. Without such mistake the
agreement would not have been made and since this is true, the agreement is inoperative and void. It is not exactly
a case of over reaching on the plaintiff's part, or of misrepresentation and deception, or of fraud, but is more nearly
akin to a bilateral mistake for which relief should be granted. Specific performance of the contract can therefore not
be allowed at the instance of the vendor.

The ultimate result is to put the parties back in exactly their respective positions before they became involved in the
negotiations and before accomplishment of the agreement. This was the decision of the trial judge and we think that
decision conforms to the facts, the law, and the principles of equity.

Judgment is affirmed, without prejudice to the right of the plaintiff to establish in this action in the lower court the
amount of the rent of the land pursuant to the terms of the complaint during the time the land was in the possession
of the defendant, and to obtain judgment against the defendant for that amount, with costs against the appellant. So
ordered.

Johnson, Avanceña, Villamor and Romualdez, JJ., concur.

Johns, J., concurs in the result.
Street, J., dissents.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 103577 October 7, 1996

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for

herself and on behalf of Florida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A.
ALMONTE, and CATALINA BALAIS MABANAG, petitioners,
vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by
GLORIA F. NOEL as attorney-in-fact, respondents.

MELO, J.:p

The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the
last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located
along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of
P1,240,000.00.

The undisputed facts of the case were summarized by respondent court in this wise:

On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to

as Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of
plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced
hereunder:

RECEIPT OF DOWN PAYMENT

P1,240,000.00 — Total amount

50,000 — Down payment

———————————
P1,190,000.00 — Balance

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627
of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.

We bind ourselves to effect the transfer in our names from our deceased father, Constancio
P. Coronel, the transfer certificate of title immediately upon receipt of the down payment
above-stated.

On our presentation of the TCT already in or name, We will immediately execute the deed of
absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the
balance of the P1,190,000.00.

Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution
of the document aforestated;

2. The Coronels will cause the transfer in their names of the title of the property registered in
the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos
down payment;
 3. Upon the transfer in their names of the subject property, the Coronels will execute the
deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance
of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos.

On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter
referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand
(P50,000.00) Pesos (Exh. "B", Exh. "2").

On February 6, 1985, the property originally registered in the name of the Coronels' father
was transferred in their names under TCT
No. 327043 (Exh. "D"; Exh. "4")

On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to
intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million
Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three
Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C")

For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by
depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia
Alcaraz.

On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against
the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No.
327403 (Exh. "E"; Exh. "5").

On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the
same property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6").

On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property
in favor of Catalina (Exh. "G"; Exh. "7").

On June 5, 1985, a new title over the subject property was issued in the name of Catalina
under TCT No. 351582 (Exh. "H"; Exh. "8").

(Rollo, pp. 134-136)

In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit
the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents)
proffered their documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of their
corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners)
accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of their corresponding
submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously
submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment
or reply thereof, after which, the case would be deemed submitted for resolution.

On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily
detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by
Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:

WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to

execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in
and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the
Registry of Deeds for Quezon City, together with all the improvements existing thereon free
from all liens and encumbrances, and once accomplished, to immediately deliver the said
document of sale to plaintiffs and upon receipt thereof, the said document of sale to plaintiffs
and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of
the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No.
331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby
canceled and declared to be without force and effect. Defendants and intervenor and all
other persons claiming under them are hereby ordered to vacate the subject property and
deliver possession thereof to plaintiffs. Plaintiffs' claim for damages and attorney's fees, as
well as the counterclaims of defendants and intervenors are hereby dismissed.
 No pronouncement as to costs.

So Ordered.

Macabebe, Pampanga for Quezon City, March 1, 1989.

(Rollo, p. 106)

A motion for reconsideration was filed by petitioner before the new presiding judge of the Quezon City RTC but the
same was denied by Judge Estrella T. Estrada, thusly:

The prayer contained in the instant motion, i.e., to annul the decision and to render anew
decision by the undersigned Presiding Judge should be denied for the following reasons: (1)
The instant case became submitted for decision as of April 14, 1988 when the parties
terminated the presentation of their respective documentary evidence and when the
Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to
file memoranda at some future date did not change the fact that the hearing of the case was
terminated before Judge Roura and therefore the same should be submitted to him for
decision; (2) When the defendants and intervenor did not object to the authority of Judge
Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for
the first time before the undersigned Presiding Judge at the hearing of a pending incident in
Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced
thereto and they are now estopped from questioning said authority of Judge Roura after they
received the decision in question which happens to be adverse to them; (3) While it is true
that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was
in all respects the Presiding Judge with full authority to act on any pending incident submitted
before this Court during his incumbency. When he returned to his Official Station at
Macabebe, Pampanga, he did not lose his authority to decide or resolve such cases
submitted to him for decision or resolution because he continued as Judge of the Regional
Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule
and supported by jurisprudence is that a Judge to whom a case is submitted for decision has
the authority to decide the case notwithstanding his transfer to another branch or region of
the same court (Sec. 9, Rule 135, Rule of Court).

Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989
rendered in the instant case, resolution of which now pertains to the undersigned Presiding
Judge, after a meticulous examination of the documentary evidence presented by the
parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and,
therefore, should not be disturbed.

IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision
and Render Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is
hereby DENIED.

SO ORDERED.

Quezon City, Philippines, July 12, 1989.

(Rollo, pp. 108-109)

Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-
Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court.

Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply
Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on
August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned.

While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance
of the trial court's decision, we definitely find the instant petition bereft of merit.

The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the
precise determination of the legal significance of the document entitled "Receipt of Down Payment" which was
offered in evidence by both parties. There is no dispute as to the fact that said document embodied the binding
contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other,
pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of
the Philippines which reads as follows:

Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself,
with respect to the other, to give something or to render some service.

While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of
sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part
insist that what the document signified was a mere executory contract to sell, subject to certain suspensive
conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said
contract could not possibly ripen into a contract absolute sale.

Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms
and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence
may be available on record, this, Court, as were the courts below, is now called upon to adjudge what the real intent
of the parties was at the time the said document was executed.

The Civil Code defines a contract of sale, thus:

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

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

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

b) Determinate subject matter; and

c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential
element is lacking. In a contract to sell, the prospective seller explicity reserves the transfer of title to the prospective
buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property
subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full
payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill is promise to sell the
subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of
the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell
from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective
buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:

Hence, We hold that the contract between the petitioner and the respondent was a contract
to sell where the ownership or title is retained by the seller and is not to pass until the full
payment of the price, such payment being a positive suspensive condition and failure of
which is not a breach, casual or serious, but simply an event that prevented the obligation of
the vendor to convey title from acquiring binding force.

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

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

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the
price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to
sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the
seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition,
because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated (cf. Homesite and housing Corp. vs. Court of Appeals, 133
SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such
that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.

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

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case
at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property
despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance,
cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the
property. There is no double sale in such case. Title to the property will transfer to the buyer after registration
because there is no defect in the owner-seller's title per se, but the latter, of course, may be used for damages by
the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes
absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the
subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the
seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such
second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title,
or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.

With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract
entered into by petitioners and private respondents.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when
petitioners declared in the said "Receipt of Down Payment" that they —

Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty
Thousand Pesos purchase price of our inherited house and lot, covered by TCT No.
1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.

without any reservation of title until full payment of the entire purchase price, the natural and ordinary
idea conveyed is that they sold their property.

When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear
intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the
name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to
immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from
private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of
their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed
of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price.

The agreement could not have been a contract to sell because the sellers herein made no express reservation of
ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from
entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their
names) and not the full payment of the purchase price. Under the established facts and circumstances of the case,
the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time,
there would have been no reason why an absolute contract of sale could not have been executed and
consummated right there and then.

Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the properly to
private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell
the subject property, they undertook to have the certificate of title changed to their names and immediately
thereafter, to execute the written deed of absolute sale.

Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with
certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective
undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they
inherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if the
documents were then in order. It just happened, however, that the transfer certificate of title was then still in the
name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their
names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names
upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in
their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the
obligation of the buyer to pay the remainder of the purchase price arise.

There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller
against a buyer who intends to buy the property in installment by withholding ownership over the property until the
buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the one who were
unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was
still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented,
so to speak, the execution of an contract of absolute sale.

What is clearly established by the plain language of the subject document is that when the said "Receipt of Down
Payment" was prepared and signed by petitioners Romeo A. Coronel, et al., the parties had agreed to a conditional
contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the
name of petitioners' father, Constancio P. Coronel, to their names.

The Court significantly notes this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4").
Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz
became obligatory, the only act required for the consummation thereof being the delivery of the property by means
of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed
themselves to do as evidenced by the "Receipt of Down Payment."

Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price.

From the moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.

Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or
loss of those already acquired, shall depend upon the happening of the event which
constitutes the condition.

Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names
was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became
mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in
their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute
sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to
P1,190,000.00.

It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted
that:
 3. The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from
our deceased father Constancio P. Coronel, the transfer certificate of title immediately upon
receipt of the downpayment above-stated". The sale was still subject to this suspensive
condition. (Emphasis supplied.)

(Rollo, p. 16)

Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only,
they contend, continuing in the same paragraph, that:

. . . Had petitioners-sellers not complied with this condition of first transferring the title to the
property under their names, there could be no perfected contract of sale. (Emphasis
supplied.)

(Ibid.)

not aware that they set their own trap for themselves, for Article 1186 of the Civil Code expressly
provides that:

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

Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical
arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985,
when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").

The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of
Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensive
condition that the sellers shall effect the issuance of new certificate title from that of their father's name to their
names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").

We, therefore, hold that, in accordance with Article 1187 which pertinently provides —

Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled,
shall retroact to the day of the constitution of the obligation . . .

In obligation to do or not to do, the courts shall determine, in each case, the retroactive effect
of the condition that has been complied with.

the rights and obligations of the parties with respect to the perfected contract of sale became
mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition
on February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose.

Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet
the absolute owners of the inherited property.

We cannot sustain this argument.

Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:

Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and
obligations to be extent and value of the inheritance of a person are transmitted through his
death to another or others by his will or by operation of law.

Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P.
Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point
their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is
concerned, such that any rights or obligations pertaining thereto became binding and enforceable
upon them. It is expressly provided that rights to the succession are transmitted from the moment of
death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is
rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedent's
name to their names on February 6, 1985.

Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at
that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into
the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:

Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon.

Having represented themselves as the true owners of the subject property at the time of sale,
petitioners cannot claim now that they were not yet the absolute owners thereof at that time.

Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P.
Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by
going to the United States of America, without leaving her address, telephone number, and Special Power of
Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p.
43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding rescinding the contract of
sale.

We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note
that these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive
pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs
(Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to
substantiate petitioners' allegations. We have stressed time and again that allegations must be proven by sufficient
evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation
is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).

Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we
cannot justify petitioner-sellers' act of unilaterally and extradicially rescinding the contract of sale, there being no
express stipulation authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA, 158
SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])

Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the
evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been
dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also
in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check
(Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever
questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal check.
Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as
petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of
sale.

Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full
purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of
Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new
transfer certificate of title in their names and signified their willingness and readiness to execute the deed of
absolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of the
purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she
cannot be deemed to have been in default.

Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered
in default, to wit:

Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

xxx xxx xxx

 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 fulfill his obligation, delay by the other begins. (Emphasis supplied.)

There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.

With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double
sale where Article 1544 of the Civil Code will apply, to wit:

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 if be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in 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 record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of
sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title
in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.

The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions
being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be
no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property
ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to
him to the prejudice of the first buyer.

In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the
Court, Justice Jose C. Vitug, explains:

The governing principle is prius tempore, potior jure (first in time, stronger in right).
Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights except
when the second buyer first registers in good faith the second sale (Olivares vs. Gonzales,
159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats
his rights even if he is first to register, since knowledge taints his registration with bad faith
(see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it has held that it is essential, to
merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in
good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99,
Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).

Petitioner point out that the notice of lis pendens in the case at bar was annoted on the title of the subject property
only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was
supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner
Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or
previous sale, for which reason she is buyer in good faith.

We are not persuaded by such argument.

In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in
good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge
of any defect in the title of the property sold.

As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the
sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been
annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the
said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same
property had already been previously sold to private respondents, or, at least, she was charged with knowledge that
a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in
petitioners' title to the property at the time of the registration of the property.

This Court had occasions to rule that:

If a vendee in a double sale registers that sale after he has acquired knowledge that there
was a previous sale of the same property to a third party or that another person claims said
property in a pervious sale, the registration will constitute a registration in bad faith and will
not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs.
Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader,
43 Phil. 581.)

Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6,
1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both
the courts below.

Although there may be ample indications that there was in fact an agency between Ramona as principal and
Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not
Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such
assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the
lower courts' ruling on this point.

WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment
AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.

Panganiban, J., took no part.

 FIRST DIVISION

G. R. No. 158149 February 9, 2006

BOSTON BANK OF THE PHILIPPINES, (formerly BANK OF COMMERCE), Petitioner,

vs.
PERLA P. MANALO and CARLOS MANALO, JR., Respondents.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
47458 affirming, on appeal, the Decision2 of the Regional Trial Court (RTC) of Quezon City, Branch 98, in Civil Case
No. Q-89-3905.

The Antecedents

The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the Xavierville Estate
Subdivision, with an area of 42 hectares. XEI caused the subdivision of the property into residential lots, which was
then offered for sale to individual lot buyers.3

On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The Overseas Bank of
Manila (OBM), as vendee, executed a "Deed of Sale of Real Estate" over some residential lots in the subdivision,
including Lot 1, Block 2, with an area of 907.5 square meters, and Lot 2, Block 2, with an area of 832.80 square
meters. The transaction was subject to the approval of the Board of Directors of OBM, and was covered by real
estate mortgages in favor of the Philippine National Bank as security for its account amounting to ₱5,187,000.00,
and the Central Bank of the Philippines as security for advances amounting to ₱22,185,193.74.4 Nevertheless, XEI
continued selling the residential lots in the subdivision as agent of OBM.5

Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos Manalo, Jr. who
was in business of drilling deep water wells and installing pumps under the business name Hurricane Commercial,
Inc. For ₱34,887.66, Manalo, Jr. installed a water pump at Ramos’ residence at the corner of Aurora Boulevard and
Katipunan Avenue, Quezon City. Manalo, Jr. then proposed to XEI, through Ramos, to purchase a lot in the
Xavierville subdivision, and offered as part of the downpayment the ₱34,887.66 Ramos owed him. XEI, through
Ramos, agreed. In a letter dated February 8, 1972, Ramos requested Manalo, Jr. to choose which lots he wanted to
buy so that the price of the lots and the terms of payment could be fixed and incorporated in the conditional sale.6
Manalo, Jr. met with Ramos and informed him that he and his wife Perla had chosen Lots 1 and 2 of Block 2 with a
total area of 1,740.3 square meters.

In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots. He also pegged the
price of the lots at ₱200.00 per square meter, or a total of ₱348,060.00, with a 20% down payment of the purchase
price amounting to ₱69,612.00 less the ₱34,887.66 owing from Ramos, payable on or before December 31, 1972;
the corresponding Contract of Conditional Sale would then be signed on or before the same date, but if the selling
operations of XEI resumed after December 31, 1972, the balance of the downpayment would fall due then, and the
spouses would sign the aforesaid contract within five (5) days from receipt of the notice of resumption of such selling
operations. It was also stated in the letter that, in the meantime, the spouses may introduce improvements thereon
subject to the rules and regulations imposed by XEI in the subdivision. Perla Manalo conformed to the letter
agreement.7

The spouses Manalo took possession of the property on September 2, 1972, constructed a house thereon, and
installed a fence around the perimeter of the lots.
In the meantime, many of the lot buyers refused to pay their monthly installments until they were assured that they
would be issued Torrens titles over the lots they had purchased.8 The spouses Manalo were notified of the
resumption of the selling operations of XEI.9 However, they did not pay the balance of the downpayment on the lots
because Ramos failed to prepare a contract of conditional sale and transmit the same to Manalo for their signature.
On August 14, 1973, Perla Manalo went to the XEI office and requested that the payment of the amount
representing the balance of the downpayment be deferred, which, however, XEI rejected. On August 10, 1973, XEI
furnished her with a statement of their account as of July 31, 1973, showing that they had a balance of ₱34,724.34
on the downpayment of the two lots after deducting the account of Ramos, plus ₱3,819.6810 interest thereon from
September 1, 1972 to July 31, 1973, and that the interests on the unpaid balance of the purchase price of
₱278,448.00 from September 1, 1972 to July 31, 1973 amounted to ₱30,629.28.11 The spouses were informed that
they were being billed for said unpaid interests.12

On January 25, 1974, the spouses Manalo received another statement of account from XEI, inclusive of interests on
the purchase price of the lots.13 In a letter dated April 6, 1974 to XEI, Manalo, Jr. stated they had not yet received
the notice of resumption of Lei’s selling operations, and that there had been no arrangement on the payment of
interests; hence, they should not be charged with interest on the balance of the downpayment on the property.14
Further, they demanded that a deed of conditional sale over the two lots be transmitted to them for their signatures.
However, XEI ignored the demands. Consequently, the spouses refused to pay the balance of the downpayment of
the purchase price.15

Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his house. In a letter dated
June 17, 1976, XEI informed Manalo, Jr. that business signs were not allowed along the sidewalk. It demanded that
he remove the same, on the ground, among others, that the sidewalk was not part of the land which he had
purchased on installment basis from XEI.16 Manalo, Jr. did not respond. XEI reiterated its demand on September 15,
1977.17

Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots already contracted
and those yet to be sold.18 On December 8, 1977, OBM warned Manalo, Jr., that "putting up of a business sign is
specifically prohibited by their contract of conditional sale" and that his failure to comply with its demand would impel
it to avail of the remedies as provided in their contract of conditional sale.19

Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of Title (TCT) No. T-265822
over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor of the OBM.20 The lien in favor of the
Central Bank of the Philippines was annotated at the dorsal portion of said title, which was later cancelled on August
4, 1980.21

Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM. CBM wrote
Edilberto Ng, the president of Xavierville Homeowners Association that, as of January 31, 1983, Manalo, Jr. was
one of the lot buyers in the subdivision.22 CBM reiterated in its letter to Ng that, as of January 24, 1984, Manalo was
a homeowner in the subdivision.23

In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going construction on the property
since it (CBM) was the owner of the lot and she had no permission for such construction.24 She agreed to have a
conference meeting with CBM officers where she informed them that her husband had a contract with OBM, through
XEI, to purchase the property. When asked to prove her claim, she promised to send the documents to CBM.
However, she failed to do so.25 On September 5, 1986, CBM reiterated its demand that it be furnished with the
documents promised,26 but Perla Manalo did not respond.

On July 27, 1987, CBM filed a complaint27 for unlawful detainer against the spouses with the Metropolitan Trial Court
of Quezon City. The case was docketed as Civil Case No. 51618. CBM claimed that the spouses had been
unlawfully occupying the property without its consent and that despite its demands, they refused to vacate the
property. The latter alleged that they, as vendors, and XEI, as vendee, had a contract of sale over the lots which had
not yet been rescinded.28

While the case was pending, the spouses Manalo wrote CBM to offer an amicable settlement, promising to abide by
the purchase price of the property (₱313,172.34), per agreement with XEI, through Ramos. However, on July 28,
1988, CBM wrote the spouses, through counsel, proposing that the price of ₱1,500.00 per square meter of the
property was a reasonable starting point for negotiation of the settlement.29 The spouses rejected the counter
proposal,30 emphasizing that they would abide by their original agreement with XEI. CBM moved to withdraw its
complaint31 because of the issues raised.32
In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM filed its complaint against
the spouses Manalo, the latter filed a complaint for specific performance and damages against the bank before the
Regional Trial Court (RTC) of Quezon City on October 31, 1989.

The plaintiffs alleged therein that they had always been ready, able and willing to pay the installments on the lots
sold to them by the defendant’s remote predecessor-in-interest, as might be or stipulated in the contract of sale, but
no contract was forthcoming; they constructed their house worth ₱2,000,000.00 on the property in good faith;
Manalo, Jr., informed the defendant, through its counsel, on October 15, 1988 that he would abide by the terms and
conditions of his original agreement with the defendant’s predecessor-in-interest; during the hearing of the ejectment
case on October 16, 1988, they offered to pay ₱313,172.34 representing the balance on the purchase price of said
lots; such tender of payment was rejected, so that the subject lots could be sold at considerably higher prices to
third parties.

Plaintiffs further alleged that upon payment of the ₱313,172.34, they were entitled to the execution and delivery of a
Deed of Absolute Sale covering the subject lots, sufficient in form and substance to transfer title thereto free and
clear of any and all liens and encumbrances of whatever kind and nature.33 The plaintiffs prayed that, after due
hearing, judgment be rendered in their favor, to wit:

WHEREFORE, it is respectfully prayed that after due hearing:

(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale over subject
lots in favor of the plaintiffs after payment of the sum of ₱313,172.34, sufficient in form and
substance to transfer to them titles thereto free and clear of any and all liens and encumbrances of
whatever kind or nature;

(b) The defendant should be held liable for moral and exemplary damages in the amounts of
₱300,000.00 and ₱30,000.00, respectively, for not promptly executing and delivering to plaintiff the
necessary Contract of Sale, notwithstanding repeated demands therefor and for having been
constrained to engage the services of undersigned counsel for which they agreed to pay attorney’s
fees in the sum of ₱50,000.00 to enforce their rights in the premises and appearance fee of
₱500.00;

(c) And for such other and further relief as may be just and equitable in the premises.34

In its Answer to the complaint, the defendant interposed the following affirmative defenses: (a) plaintiffs had no
cause of action against it because the August 22, 1972 letter agreement between XEI and the plaintiffs was not
binding on it; and (b) "it had no record of any contract to sell executed by it or its predecessor, or of any statement of
accounts from its predecessors, or records of payments of the plaintiffs or of any documents which entitled them to
the possession of the lots."35 The defendant, likewise, interposed counterclaims for damages and attorney’s fees
and prayed for the eviction of the plaintiffs from the property.36

Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an amicable settlement of the
case by paying ₱942,648.70, representing the balance of the purchase price of the two lots based on the current
market value.37 However, the defendant rejected the same and insisted that for the smaller lot, they pay
₱4,500,000.00, the current market value of the property.38 The defendant insisted that it owned the property since
there was no contract or agreement between it and the plaintiffs’ relative thereto.

During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional Sale executed between XEI
and Alberto Soller;39 Alfredo Aguila,40 and Dra. Elena Santos-Roque41 to prove that XEI continued selling residential
lots in the subdivision as agent of OBM after the latter had acquired the said lots.

For its part, defendant presented in evidence the letter dated August 22, 1972, where XEI proposed to sell the two
lots subject to two suspensive conditions: the payment of the balance of the downpayment of the property, and the
execution of the corresponding contract of conditional sale. Since plaintiffs failed to pay, OBM consequently refused
to execute the corresponding contract of conditional sale and forfeited the ₱34,877.66 downpayment for the two
lots, but did not notify them of said forfeiture.42 It alleged that OBM considered the lots unsold because the titles
thereto bore no annotation that they had been sold under a contract of conditional sale, and the plaintiffs were not
notified of XEI’s resumption of its selling operations.

On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the defendant. The fallo of the
decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant –

(a) Ordering the latter to execute and deliver a Deed of Absolute Sale over Lot 1 and 2, Block 2 of
the Xavierville Estate Subdivision after payment of the sum of ₱942,978.70 sufficient in form and
substance to transfer to them titles thereto free from any and all liens and encumbrances of
whatever kind and nature.

(b) Ordering the defendant to pay moral and exemplary damages in the amount of ₱150,000.00; and

(c) To pay attorney’s fees in the sum of ₱50,000.00 and to pay the costs.

SO ORDERED.43

The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs, the parties had a
"complete contract to sell" over the lots, and that they had already partially consummated the same. It declared that
the failure of the defendant to notify the plaintiffs of the resumption of its selling operations and to execute a deed of
conditional sale did not prevent the defendant’s obligation to convey titles to the lots from acquiring binding effect.
Consequently, the plaintiffs had a cause of action to compel the defendant to execute a deed of sale over the lots in
their favor.

Boston Bank appealed the decision to the CA, alleging that the lower court erred in (a) not concluding that the letter
of XEI to the spouses Manalo, was at most a mere contract to sell subject to suspensive conditions, i.e., the
payment of the balance of the downpayment on the property and the execution of a deed of conditional sale (which
were not complied with); and (b) in awarding moral and exemplary damages to the spouses Manalo despite the
absence of testimony providing facts to justify such awards.44

On September 30, 2002, the CA rendered a decision affirming that of the RTC with modification. The fallo reads:

WHEREFORE, the appealed decision is AFFIRMED with MODIFICATIONS that (a) the figure "₱942,978.70"
appearing [in] par. (a) of the dispositive portion thereof is changed to "₱313,172.34 plus interest thereon at the rate
of 12% per annum from September 1, 1972 until fully paid" and (b) the award of moral and exemplary damages and
attorney’s fees in favor of plaintiffs-appellees is DELETED.

SO ORDERED.45

The appellate court sustained the ruling of the RTC that the appellant and the appellees had executed a Contract to
Sell over the two lots but declared that the balance of the purchase price of the property amounting to ₱278,448.00
was payable in fixed amounts, inclusive of pre-computed interests, from delivery of the possession of the property to
the appellees on a monthly basis for 120 months, based on the deeds of conditional sale executed by XEI in favor of
other lot buyers.46 The CA also declared that, while XEI must have resumed its selling operations before the end of
1972 and the downpayment on the property remained unpaid as of December 31, 1972, absent a written notice of
cancellation of the contract to sell from the bank or notarial demand therefor as required by Republic Act No. 6552,
the spouses had, at the very least, a 60-day grace period from January 1, 1973 within which to pay the same.

Boston Bank filed a motion for the reconsideration of the decision alleging that there was no perfected contract to
sell the two lots, as there was no agreement between XEI and the respondents on the manner of payment as well
as the other terms and conditions of the sale. It further averred that its claim for recovery of possession of the
aforesaid lots in its Memorandum dated February 28, 1994 filed before the trial court constituted a judicial demand
for rescission that satisfied the requirements of the New Civil Code. However, the appellate court denied the motion.

Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the CA rulings. It maintains
that, as held by the CA, the records do not reflect any schedule of payment of the 80% balance of the purchase
price, or ₱278,448.00. Petitioner insists that unless the parties had agreed on the manner of payment of the
principal amount, including the other terms and conditions of the contract, there would be no existing contract of sale
or contract to sell.47 Petitioner avers that the letter agreement to respondent spouses dated August 22, 1972 merely
confirmed their reservation for the purchase of Lot Nos. 1 and 2, consisting of 1,740.3 square meters, more or less,
at the price of ₱200.00 per square meter (or ₱348,060.00), the amount of the downpayment thereon and the
application of the ₱34,887.00 due from Ramos as part of such downpayment.

Petitioner asserts that there is no factual basis for the CA ruling that the terms and conditions relating to the
payment of the balance of the purchase price of the property (as agreed upon by XEI and other lot buyers in the
same subdivision) were also applicable to the contract entered into between the petitioner and the Respondents. It
insists that such a ruling is contrary to law, as it is tantamount to compelling the parties to agree to something that
was not even discussed, thus, violating their freedom to contract. Besides, the situation of the respondents cannot
be equated with those of the other lot buyers, as, for one thing, the respondents made a partial payment on the
downpayment for the two lots even before the execution of any contract of conditional sale.

Petitioner posits that, even on the assumption that there was a perfected contract to sell between the parties,
nevertheless, it cannot be compelled to convey the property to the respondents because the latter failed to pay the
balance of the downpayment of the property, as well as the balance of 80% of the purchase price, thus resulting in
the extinction of its obligation to convey title to the lots to the Respondents.

Another egregious error of the CA, petitioner avers, is the application of Republic Act No. 6552. It insists that such
law applies only to a perfected agreement or perfected contract to sell, not in this case where the downpayment on
the purchase price of the property was not completely paid, and no installment payments were made by the buyers.

Petitioner also faults the CA for declaring that petitioner failed to serve a notice on the respondents of cancellation or
rescission of the contract to sell, or notarial demand therefor. Petitioner insists that its August 5, 1986 letter requiring
respondents to vacate the property and its complaint for ejectment in Civil Case No. 51618 filed in the Metropolitan
Trial Court amounted to the requisite demand for a rescission of the contract to sell. Moreover, the action of the
respondents below was barred by laches because despite demands, they failed to pay the balance of the purchase
price of the lots (let alone the downpayment) for a considerable number of years.

For their part, respondents assert that as long as there is a meeting of the minds of the parties to a contract of sale
as to the price, the contract is valid despite the parties’ failure to agree on the manner of payment. In such a
situation, the balance of the purchase price would be payable on demand, conformably to Article 1169 of the New
Civil Code. They insist that the law does not require a party to agree on the manner of payment of the purchase
price as a prerequisite to a valid contract to sell. The respondents cite the ruling of this Court in Buenaventura v.
Court of Appeals48 to support their submission.

They argue that even if the manner and timeline for the payment of the balance of the purchase price of the property
is an essential requisite of a contract to sell, nevertheless, as shown by their letter agreement of August 22, 1972
with the OBM, through XEI and the other letters to them, an agreement was reached as to the manner of payment of
the balance of the purchase price. They point out that such letters referred to the terms of the terms of the deeds of
conditional sale executed by XEI in favor of the other lot buyers in the subdivision, which contained uniform terms of
120 equal monthly installments (excluding the downpayment, but inclusive of pre-computed interests). The
respondents assert that XEI was a real estate broker and knew that the contracts involving residential lots in the
subdivision contained uniform terms as to the manner and timeline of the payment of the purchase price of said lots.

Respondents further posit that the terms and conditions to be incorporated in the "corresponding contract of
conditional sale" to be executed by the parties would be the same as those contained in the contracts of conditional
sale executed by lot buyers in the subdivision. After all, they maintain, the contents of the corresponding contract of
conditional sale referred to in the August 22, 1972 letter agreement envisaged those contained in the contracts of
conditional sale that XEI and other lot buyers executed. Respondents cite the ruling of this Court in Mitsui Bussan
Kaisha v. Manila E.R.R. & L. Co.49

The respondents aver that the issues raised by the petitioner are factual, inappropriate in a petition for review on
certiorari under Rule 45 of the Rules of Court. They assert that petitioner adopted a theory in litigating the case in
the trial court, but changed the same on appeal before the CA, and again in this Court. They argue that the
petitioner is estopped from adopting a new theory contrary to those it had adopted in the trial and appellate courts.
Moreover, the existence of a contract of conditional sale was admitted in the letters of XEI and OBM. They aver that
they became owners of the lots upon delivery to them by XEI.

The issues for resolution are the following: (1) whether the factual issues raised by the petitioner are proper; (2)
whether petitioner or its predecessors-in-interest, the XEI or the OBM, as seller, and the respondents, as buyers,
forged a perfect contract to sell over the property; (3) whether petitioner is estopped from contending that no such
contract was forged by the parties; and (4) whether respondents has a cause of action against the petitioner for
specific performance.

The rule is that before this Court, only legal issues may be raised in a petition for review on certiorari. The reason is
that this Court is not a trier of facts, and is not to review and calibrate the evidence on record. Moreover, the findings
of facts of the trial court, as affirmed on appeal by the Court of Appeals, are conclusive on this Court unless the case
falls under any of the following exceptions:
(1) when the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when
the Court of Appeals, in making its findings went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial court; (8) when the
findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioners’ main and reply briefs are not disputed by the respondents; and (10)
when the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record.50

We have reviewed the records and we find that, indeed, the ruling of the appellate court dismissing petitioner’s
appeal is contrary to law and is not supported by evidence. A careful examination of the factual backdrop of the
case, as well as the antecedental proceedings constrains us to hold that petitioner is not barred from asserting that
XEI or OBM, on one hand, and the respondents, on the other, failed to forge a perfected contract to sell the subject
lots.

It must be stressed that the Court may consider an issue not raised during the trial when there is plain error.51
Although a factual issue was not raised in the trial court, such issue may still be considered and resolved by the
Court in the interest of substantial justice, if it finds that to do so is necessary to arrive at a just decision,52 or when
an issue is closely related to an issue raised in the trial court and the Court of Appeals and is necessary for a just
and complete resolution of the case.53 When the trial court decides a case in favor of a party on certain grounds, the
Court may base its decision upon some other points, which the trial court or appellate court ignored or erroneously
decided in favor of a party.54

In this case, the issue of whether XEI had agreed to allow the respondents to pay the purchase price of the property
was raised by the parties. The trial court ruled that the parties had perfected a contract to sell, as against petitioner’s
claim that no such contract existed. However, in resolving the issue of whether the petitioner was obliged to sell the
property to the respondents, while the CA declared that XEI or OBM and the respondents failed to agree on the
schedule of payment of the balance of the purchase price of the property, it ruled that XEI and the respondents had
forged a contract to sell; hence, petitioner is entitled to ventilate the issue before this Court.

We agree with petitioner’s contention that, for a perfected contract of sale or contract to sell to exist in law, there
must be an agreement of the parties, not only on the price of the property sold, but also on the manner the price is
to be paid by the vendee.

Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of the
contracting parties obliges himself to transfer the ownership of and deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent. A contract of sale is perfected at the moment there is a meeting of
the minds upon the thing which is the object of the contract and the price. From the averment of perfection, the
parties are bound, not only to the 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.55 On the other hand, when the
contract of sale or to sell is not perfected, it cannot, as an independent source of obligation, serve as a binding
juridical relation between the parties.56

A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property
because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of
a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the
contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a
perfected sale.57

It is not enough for the parties to agree on the price of the property. The parties must also agree on the manner of
payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to sell. This
is so because the agreement as to 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.58

In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the
amount of downpayment. The parties must, likewise, agree on the manner of payment of the balance of the
purchase price and on the other terms and conditions relative to the sale. Even if the buyer makes a downpayment
or portion thereof, such payment cannot be considered as sufficient proof of the perfection of any purchase and sale
between the parties. Indeed, this Court ruled in Velasco v. Court of Appeals59 that:
It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that they and the
respondent still had to meet and agree on how and when the down-payment and the installment payments were to
be paid. Such being the situation, it cannot, 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
₱10,000.00 as part of the downpayment 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 article 1482 of the New Civil Code,
as the petitioners themselves admit that some essential matter – the terms of payment – still had to be mutually
covenanted.60

We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the records, of the
schedule of payment of the balance of the purchase price on the property amounting to ₱278,448.00. We have
meticulously reviewed the records, including Ramos’ February 8, 1972 and August 22, 1972 letters to
respondents,61 and find that said parties confined themselves to agreeing on the price of the property (₱348,060.00),
the 20% downpayment of the purchase price (₱69,612.00), and credited respondents for the ₱34,887.00 owing from
Ramos as part of the 20% downpayment. The timeline for the payment of the balance of the downpayment
(₱34,724.34) was also agreed upon, that is, on or before XEI resumed its selling operations, on or before December
31, 1972, or within five (5) days from written notice of such resumption of selling operations. The parties had also
agreed to incorporate all the terms and conditions relating to the sale, inclusive of the terms of payment of the
balance of the purchase price and the other substantial terms and conditions in the "corresponding contract of
conditional sale," to be later signed by the parties, simultaneously with respondents’ settlement of the balance of the
downpayment.

The February 8, 1972 letter of XEI reads:

Mr. Carlos T. Manalo, Jr.

Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City

Dear Mr. Manalo:

We agree with your verbal offer to exchange the proceeds of your contract with us to form as a down payment for a
lot in our Xavierville Estate Subdivision.

Please let us know your choice lot so that we can fix the price and terms of payment in our conditional sale.

Sincerely yours,

XAVIERVILLE ESTATE, INC.

(Signed)
EMERITO B. RAMOS, JR.
President

CONFORME:

(Signed)
CARLOS T. MANALO, JR.
Hurricane Rotary Well Drilling62

The August 22, 1972 letter agreement of XEI and the respondents reads:

Mrs. Perla P. Manalo

1548 Rizal Avenue Extensionbr>Caloocan City

Dear Mrs. Manalo:

This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidation-subdivision plan as amended,
consisting of 1,740.3 square meters more or less, at the price of ₱200.00 per square meter or a total price of
₱348,060.00.
It is agreed that as soon as we resume selling operations, you must pay a down payment of 20% of the purchase
price of the said lots and sign the corresponding Contract of Conditional Sale, on or before December 31, 1972,
provided, however, that if we resume selling after December 31, 1972, then you must pay the aforementioned down
payment and sign the aforesaid contract within five (5) days from your receipt of our notice of resumption of selling
operations.

In the meanwhile, you may introduce such improvements on the said lots as you may desire, subject to the rules
and regulations of the subdivision.

If the above terms and conditions are acceptable to you, please signify your conformity by signing on the space
herein below provided.

Thank you.

Very truly yours,

XAVIERVILLE ESTATE, INC. CONFORME:

By:

(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO

President Buyer63

Based on these two letters, the determination of the terms of payment of the ₱278,448.00 had yet to be agreed
upon on or before December 31, 1972, or even afterwards, when the parties sign the corresponding contract of
conditional sale.

Jurisprudence is that if a material element of a contemplated contract is left for future negotiations, the same is too
indefinite to be enforceable.64 And when an essential element of a contract is reserved for future agreement of the
parties, no legal obligation arises until such future agreement is concluded.65

So long as an essential element entering into the proposed obligation of either of the parties remains to be
determined by an agreement which they are to make, the contract is incomplete and unenforceable.66 The reason is
that such a contract is lacking in the necessary qualities of definiteness, certainty and mutuality.67

There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after December 31,
1972, on the terms of payment of the balance of the purchase price of the property and the other substantial terms
and conditions relative to the sale. Indeed, the parties are in agreement that there had been no contract of
conditional sale ever executed by XEI, OBM or petitioner, as vendor, and the respondents, as vendees.68

The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because the issue of the
manner of payment of the purchase price of the property was not raised therein.

We reject the submission of respondents that they and Ramos had intended to incorporate the terms of payment
contained in the three contracts of conditional sale executed by XEI and other lot buyers in the "corresponding
contract of conditional sale," which would later be signed by them.69 We have meticulously reviewed the
respondents’ complaint and find no such allegation therein.70 Indeed, respondents merely alleged in their complaint
that they were bound to pay the balance of the purchase price of the property "in installments." When respondent
Manalo, Jr. testified, he was never asked, on direct examination or even on cross-examination, whether the terms of
payment of the balance of the purchase price of the lots under the contracts of conditional sale executed by XEI and
other lot buyers would form part of the "corresponding contract of conditional sale" to be signed by them
simultaneously with the payment of the balance of the downpayment on the purchase price.

We note that, in its letter to the respondents dated June 17, 1976, or almost three years from the execution by the
parties of their August 22, 1972 letter agreement, XEI stated, in part, that respondents had purchased the property
"on installment basis."71 However, in the said letter, XEI failed to state a specific amount for each installment, and
whether such payments were to be made monthly, semi-annually, or annually. Also, respondents, as plaintiffs
below, failed to adduce a shred of evidence to prove that they were obliged to pay the ₱278,448.00 monthly, semi-
annually or annually. The allegation that the payment of the ₱278,448.00 was to be paid in installments is, thus,
vague and indefinite. Case law is that, for a contract to be enforceable, its terms must be certain and explicit, not
vague or indefinite.72

There is no factual and legal basis for the CA ruling that, based on the terms of payment of the balance of the
purchase price of the lots under the contracts of conditional sale executed by XEI and the other lot buyers,
respondents were obliged to pay the ₱278,448.00 with pre-computed interest of 12% per annum in 120-month
installments. As gleaned from the ruling of the appellate court, it failed to justify its use of the terms of payment
under the three "contracts of conditional sale" as basis for such ruling, to wit:

On the other hand, the records do not disclose the schedule of payment of the purchase price, net of the
downpayment. Considering, however, the Contracts of Conditional Sale (Exhs. "N," "O" and "P") entered into by XEI
with other lot buyers, it would appear that the subdivision lots sold by XEI, under contracts to sell, were payable in
120 equal monthly installments (exclusive of the downpayment but including pre-computed interests) commencing
on delivery of the lot to the buyer.73

By its ruling, the CA unilaterally supplied an essential element to the letter agreement of XEI and the Respondents.
Courts should not undertake to make a contract for the parties, nor can it enforce one, the terms of which are in
doubt.74 Indeed, the Court emphasized in Chua v. Court of Appeals75 that it is not the province of a court to alter a
contract by construction or to make a new contract for the parties; its duty is confined to the interpretation of the one
which they have made for themselves, without regard to its wisdom or folly, as the court cannot supply material
stipulations or read into contract words which it does not contain.

Respondents, as plaintiffs below, failed to allege in their complaint that the terms of payment of the ₱278,448.00 to
be incorporated in the "corresponding contract of conditional sale" were those contained in the contracts of
conditional sale executed by XEI and Soller, Aguila and Roque.76 They likewise failed to prove such allegation in this
Court.

The bare fact that other lot buyers were allowed to pay the balance of the purchase price of lots purchased by them
in 120 or 180 monthly installments does not constitute evidence that XEI also agreed to give the respondents the
same mode and timeline of payment of the ₱278,448.00.

Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain thing at one time is not
admissible to prove that he did the same or similar thing at another time, although such evidence may be received
to prove habit, usage, pattern of conduct or the intent of the parties.

Similar acts as evidence. – Evidence that one did or did not do a certain thing at one time is not admissible to prove
that he did or did not do the same or a similar thing at another time; but it may be received to prove a specific intent
or knowledge, identity, plan, system, scheme, habit, custom or usage, and the like.

However, respondents failed to allege and prove, in the trial court, that, as a matter of business usage, habit or
pattern of conduct, XEI granted all lot buyers the right to pay the balance of the purchase price in installments of 120
months of fixed amounts with pre-computed interests, and that XEI and the respondents had intended to adopt such
terms of payment relative to the sale of the two lots in question. Indeed, respondents adduced in evidence the three
contracts of conditional sale executed by XEI and other lot buyers merely to prove that XEI continued to sell lots in
the subdivision as sales agent of OBM after it acquired said lots, not to prove usage, habit or pattern of conduct on
the part of XEI to require all lot buyers in the subdivision to pay the balance of the purchase price of said lots in 120
months. It further failed to prive that the trial court admitted the said deeds77 as part of the testimony of respondent
Manalo, Jr.78

Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must contend with the caveat
that, before they admit evidence of usage, of habit or pattern of conduct, the offering party must establish the degree
of specificity and frequency of uniform response that ensures more than a mere tendency to act in a given manner
but rather, conduct that is semi-automatic in nature. The offering party must allege and prove specific, repetitive
conduct that might constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of
evidence must be numerous enough to base on inference of systematic conduct. Mere similarity of contracts does
not present the kind of sufficiently similar circumstances to outweigh the danger of prejudice and confusion.

In determining whether the examples are numerous enough, and sufficiently regular, the key criteria are adequacy
of sampling and uniformity of response. After all, habit means a course of behavior of a person regularly
represented in like circumstances.79 It is only when examples offered to establish pattern of conduct or habit are
numerous enough to lose an inference of systematic conduct that examples are admissible. The key criteria are
adequacy of sampling and uniformity of response or ratio of reaction to situations.80
There are cases where the course of dealings to be followed is defined by the usage of a particular trade or market
or profession. As expostulated by Justice Benjamin Cardozo of the United States Supreme Court: "Life casts the
moulds of conduct, which will someday become fixed as law. Law preserves the moulds which have taken form and
shape from life."81 Usage furnishes a standard for the measurement of many of the rights and acts of men.82 It is
also well-settled that parties who contract on a subject matter concerning which known usage prevail, incorporate
such usage by implication into their agreement, if nothing is said to be contrary.83

However, the respondents inexplicably failed to adduce sufficient competent evidence to prove usage, habit or
pattern of conduct of XEI to justify the use of the terms of payment in the contracts of the other lot buyers, and thus
grant respondents the right to pay the ₱278,448.00 in 120 months, presumably because of respondents’ belief that
the manner of payment of the said amount is not an essential element of a contract to sell. There is no evidence that
XEI or OBM and all the lot buyers in the subdivision, including lot buyers who pay part of the downpayment of the
property purchased by them in the form of service, had executed contracts of conditional sale containing uniform
terms and conditions. Moreover, under the terms of the contracts of conditional sale executed by XEI and three lot
buyers in the subdivision, XEI agreed to grant 120 months within which to pay the balance of the purchase price to
two of them, but granted one 180 months to do so.84 There is no evidence on record that XEI granted the same right
to buyers of two or more lots.

Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be considered certain if it
be so with reference to another thing certain. It is sufficient if it can be determined by the stipulations of the contract
made by the parties thereto85 or by reference to an agreement incorporated in the contract of sale or contract to sell
or if it is capable of being ascertained with certainty in said contract;86 or if the contract contains express or implied
provisions by which it may be rendered certain;87 or if it provides some method or criterion by which it can be
definitely ascertained.88 As this Court held in Villaraza v. Court of Appeals,89 the price is considered certain if, by its
terms, the contract furnishes a basis or measure for ascertaining the amount agreed upon.

We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no direct or implied
reference to the manner and schedule of payment of the balance of the purchase price of the lots covered by the
deeds of conditional sale executed by XEI and that of the other lot buyers90 as basis for or mode of determination of
the schedule of the payment by the respondents of the ₱278,448.00.

The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light Company91 is not applicable in
this case because the basic price fixed in the contract was ₱9.45 per long ton, but it was stipulated that the price
was subject to modification "in proportion to variations in calories and ash content, and not otherwise." In this case,
the parties did not fix in their letters-agreement, any method or mode of determining the terms of payment of the
balance of the purchase price of the property amounting to ₱278,448.00.

It bears stressing that the respondents failed and refused to pay the balance of the downpayment and of the
purchase price of the property amounting to ₱278,448.00 despite notice to them of the resumption by XEI of its
selling operations. The respondents enjoyed possession of the property without paying a centavo. On the other
hand, XEI and OBM failed and refused to transmit a contract of conditional sale to the Respondents. The
respondents could have at least consigned the balance of the downpayment after notice of the resumption of the
selling operations of XEI and filed an action to compel XEI or OBM to transmit to them the said contract; however,
they failed to do so.

As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected contract to sell the two
lots; hence, respondents have no cause of action for specific performance against petitioner. Republic Act No. 6552
applies only to a perfected contract to sell and not to a contract with no binding and enforceable effect.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R.
CV No. 47458 is REVERSED and SET ASIDE. The Regional Trial Court of Quezon City, Branch 98 is ordered to
dismiss the complaint. Costs against the Respondents.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 157374 August 27, 2009

HEIRS OF CAYETANO PANGAN and CONSUELO PANGAN,* Petitioners,

vs.
SPOUSES ROGELIO PERRERAS and PRISCILLA PERRERAS, Respondents.

DECISION

BRION, J.:

The heirs1 of spouses Cayetano and Consuelo Pangan (petitioners-heirs) seek the reversal of the Court of Appeals’
(CA) decision2 of June 26, 2002, as well its resolution of February 20, 2003, in CA-G.R. CV Case No. 56590 through
the present petition for review on certiorari.3 The CA decision affirmed the Regional Trial Court’s (RTC) ruling4 which
granted the complaint for specific performance filed by spouses Rogelio and Priscilla Perreras (respondents) against
the petitioners-heirs, and dismissed the complaint for consignation instituted by Consuelo Pangan (Consuelo)
against the respondents.

THE FACTUAL ANTECEDENTS

The spouses Pangan were the owners of the lot and two-door apartment (subject properties) located at 1142
Casañas St., Sampaloc, Manila.5 On June 2, 1989, Consuelo agreed to sell to the respondents the subject
properties for the price of ₱540,000.00. On the same day, Consuelo received ₱20,000.00 from the respondents as
earnest money, evidenced by a receipt (June 2, 1989 receipt)6 that also included the terms of the parties’
agreement.

Three days later, or on June 5, 1989, the parties agreed to increase the purchase price from ₱540,000.00 to
₱580,000.00.

In compliance with the agreement, the respondents issued two Far East Bank and Trust Company checks payable
to Consuelo in the amounts of ₱200,000.00 and ₱250,000.00 on June 15, 1989. Consuelo, however, refused to
accept the checks. She justified her refusal by saying that her children (the petitioners-heirs) – co-owners of the
subject properties – did not want to sell the subject properties. For the same reason, Consuelo offered to return the
₱20,000.00 earnest money she received from the respondents, but the latter rejected it. Thus, Consuelo filed a
complaint for consignation against the respondents on September 5, 1989, docketed as Civil Case No. 89-50258,
before the RTC of Manila, Branch 28.

The respondents, who insisted on enforcing the agreement, in turn instituted an action for specific performance
against Consuelo before the same court on September 26, 1989. This case was docketed as Civil Case No. 89-
50259. They sought to compel Consuelo and the petitioners-heirs (who were subsequently impleaded as co-
defendants) to execute a Deed of Absolute Sale over the subject properties.

In her Answer, Consuelo claimed that she was justified in backing out from the agreement on the ground that the
sale was subject to the consent of the petitioners-heirs who became co-owners of the property upon the death of her
husband, Cayetano. Since the petitioners-heirs disapproved of the sale, Consuelo claimed that the contract became
ineffective for lack of the requisite consent. She nevertheless expressed her willingness to return the ₱20,000.00
earnest money she received from the respondents.

The RTC ruled in the respondents’ favor; it upheld the existence of a perfected contract of sale, at least insofar as
the sale involved Consuelo’s conjugal and hereditary shares in the subject properties. The trial court found that
Consuelo’s receipt of the ₱20,000.00 earnest money was an "eloquent manifestation of the perfection of the
contract." Moreover, nothing in the June 2, 1989 receipt showed that the agreement was conditioned on the consent
of the petitioners-heirs. Even so, the RTC declared that the sale is valid and can be enforced against Consuelo; as a
co-owner, she had full-ownership of the part pertaining to her share which she can alienate, assign, or mortgage.
The petitioners-heirs, however, could not be compelled to transfer and deliver their shares in the subject properties,
as they were not parties to the agreement between Consuelo and the respondents. Thus, the trial court ordered
Consuelo to convey one-half (representing Consuelo’s conjugal share) plus one-sixth (representing Consuelo’s
hereditary share) of the subject properties, and to pay ₱10,000.00 as attorney’s fees to the respondents. Corollarily,
it dismissed Consuelo’s consignation complaint.

Consuelo and the petitioners-heirs appealed the RTC decision to the CA claiming that the trial court erred in not
finding that the agreement was subject to a suspensive condition – the consent of the petitioners-heirs to the
agreement. The CA, however, resolved to dismiss the appeal and, therefore, affirmed the RTC decision. As the RTC
did, the CA found that the payment and receipt of earnest money was the operative act that gave rise to a perfected
contract, and that there was nothing in the parties’ agreement that would indicate that it was subject to a suspensive
condition. It declared:

Nowhere in the agreement of the parties, as contained in the June 2, 1989 receipt issued by [Consuelo] xxx,
indicates that [Consuelo] reserved titled on [sic] the property, nor does it contain any provision subjecting the sale to
a positive suspensive condition.

Unconvinced by the correctness of both the RTC and the CA rulings, the petitioners-heirs filed the present appeal by
certiorari alleging reversible errors committed by the appellate court.

THE PETITION

The petitioners-heirs primarily contest the finding that there was a perfected contract executed by the parties. They
allege that other than the finding that Consuelo received ₱20,000.00 from the respondents as earnest money, no
other evidence supported the conclusion that there was a perfected contract between the parties; they insist that
Consuelo specifically informed the respondents that the sale still required the petitioners-heirs’ consent as co-
owners. The refusal of the petitioners-heirs to sell the subject properties purportedly amounted to the absence of the
requisite element of consent.

Even assuming that the agreement amounted to a perfected contract, the petitioners-heirs posed the question of the
agreement’s proper characterization – whether it is a contract of sale or a contract to sell. The petitioners-heirs posit
that the agreement involves a contract to sell, and the respondents’ belated payment of part of the purchase price,
i.e., one day after the June 14, 1989 due date, amounted to the non-fulfillment of a positive suspensive condition
that prevented the contract from acquiring obligatory force. In support of this contention, the petitioners-heirs cite the
Court’s ruling in the case of Adelfa Rivera, et al. v. Fidela del Rosario, et al.: 7

In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; while in a
contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full
payment of the purchase price. In a contract to sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents
the obligation of the vendor to convey title from acquiring an obligatory force.

[Rivera], however, failed to complete payment of the second installment. The non-fulfillment of the condition
rendered the contract to sell ineffective and without force and effect. [Emphasis in the original.]

From these contentions, we simplify the basic issues for resolution to three questions:

1. Was there a perfected contract between the parties?

2. What is the nature of the contract between them? and

3. What is the effect of the respondents’ belated payment on their contract?

THE COURT’S RULING

There was a perfected contract between the parties since all the essential requisites of a contract were
present

Article 1318 of the Civil Code declares that no contract exists unless the following requisites concur: (1) consent of
the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation
established. Since the object of the parties’ agreement involves properties co-owned by Consuelo and her children,
the petitioners-heirs insist that their approval of the sale initiated by their mother, Consuelo, was essential to its
perfection. Accordingly, their refusal amounted to the absence of the required element of consent.
That a thing is sold without the consent of all the co-owners does not invalidate the sale or render it void. Article 493
of the Civil Code8 recognizes the absolute right of a co-owner to freely dispose of his pro indiviso share as well as
the fruits and other benefits arising from that share, independently of the other co-owners. Thus, when Consuelo
agreed to sell to the respondents the subject properties, what she in fact sold was her undivided interest that, as
quantified by the RTC, consisted of one-half interest, representing her conjugal share, and one-sixth interest,
representing her hereditary share.

The petitioners-heirs nevertheless argue that Consuelo’s consent was predicated on their consent to the sale, and
that their disapproval resulted in the withdrawal of Consuelo’s consent. Yet, we find nothing in the parties’
agreement or even conduct – save Consuelo’s self-serving testimony – that would indicate or from which we can
infer that Consuelo’s consent depended on her children’s approval of the sale. The explicit terms of the June 8,
1989 receipt9 provide no occasion for any reading that the agreement is subject to the petitioners-heirs’ favorable
consent to the sale.

The presence of Consuelo’s consent and, corollarily, the existence of a perfected contract between the parties are
further evidenced by the payment and receipt of ₱20,000.00, an earnest money by the contracting parties’ common
usage. The law on sales, specifically Article 1482 of the Civil Code, provides that whenever earnest money is
given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the
contract. Although the presumption is not conclusive, as the parties may treat the earnest money differently, there
is nothing alleged in the present case that would give rise to a contrary presumption. In cases where the Court
reached a conclusion contrary to the presumption declared in Article 1482, we found that the money initially paid
was given to guarantee that the buyer would not back out from the sale, considering that the parties to the sale have
yet to arrive at a definite agreement as to its terms – that is, a situation where the contract has not yet been
perfected.10 These situations do not obtain in the present case, as neither of the parties claimed that the ₱20,000.00
was given merely as guarantee by the respondents, as vendees, that they would not back out from the sale. As we
have pointed out, the terms of the parties’ agreement are clear and explicit; indeed, all the essential elements of a
perfected contract are present in this case. While the respondents required that the occupants vacate the subject
properties prior to the payment of the second installment, the stipulation does not affect the perfection of the
contract, but only its execution.

In sum, the case contains no element, factual or legal, that negates the existence of a perfected contract between
the parties.

The characterization of the contract can be considered irrelevant in this case in light of Article 1592 and the
Maceda Law, and the petitioners-heirs’ payment

The petitioners-heirs posit that the proper characterization of the contract entered into by the parties is significant in
order to determine the effect of the respondents’ breach of the contract (which purportedly consisted of a one-day
delay in the payment of part of the purchase price) and the remedies to which they, as the non-defaulting party, are
entitled.

The question of characterization of the contract involved here would necessarily call for a thorough analysis of the
parties’ agreement as embodied in the June 2, 1989 receipt, their contemporaneous acts, and the circumstances
surrounding the contract’s perfection and execution. Unfortunately, the lower courts’ factual findings provide
insufficient detail for the purpose. A stipulation reserving ownership in the vendor until full payment of the price is,
under case law, typical in a contract to sell.11 In this case, the vendor made no reservation on the ownership of the
subject properties. From this perspective, the parties’ agreement may be considered a contract of sale. On the other
hand, jurisprudence has similarly established that the need to execute a deed of absolute sale upon completion of
payment of the price generally indicates that it is a contract to sell, as it implies the reservation of title in the vendor
until the vendee has completed the payment of the price. When the respondents instituted the action for specific
performance before the RTC, they prayed that Consuelo be ordered to execute a Deed of Absolute Sale; this act
may be taken to conclude that the parties only entered into a contract to sell.

Admittedly, the given facts, as found by the lower courts, and in the absence of additional details, can be interpreted
to support two conflicting conclusions. The failure of the lower courts to pry into these matters may understandably
be explained by the issues raised before them, which did not require the additional details. Thus, they found the
question of the contract’s characterization immaterial in their discussion of the facts and the law of the case.
Besides, the petitioners-heirs raised the question of the contract’s characterization and the effect of the breach for
the first time through the present Rule 45 petition.
Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and
ordinarily will not be, considered by the reviewing court, as they cannot be raised for the first time at the appellate
review stage. Basic considerations of fairness and due process require this rule.12

At any rate, we do not find the question of characterization significant to fully pass upon the question of default due
to the respondents’ breach; ultimately, the breach was cured and the contract revived by the respondents’ payment
a day after the due date.1avv phi1

In cases of breach due to nonpayment, the vendor may avail of the remedy of rescission in a contract of sale.
Nevertheless, the defaulting vendee may defeat the vendor’s right to rescind the contract of sale if he pays the
amount due before he receives a demand for rescission, either judicially or by a notarial act, from the vendor. This
right is provided under Article 1592 of the Civil Code:

Article 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the
price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after
the expiration of the period, as long as no demand for rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court may not grant him a new term. [Emphasis supplied.]

Nonpayment of the purchase price in contracts to sell, however, does not constitute a breach; rather, nonpayment is
a condition that prevents the obligation from acquiring obligatory force and results in its cancellation. We stated in
Ong v. CA13 that:

In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not
a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring
obligatory force. The non-fulfillment of the condition of full payment rendered the contract to sell ineffective and
without force and effect. [Emphasis supplied.]

As in the rescission of a contract of sale for nonpayment of the price, the defaulting vendee in a contract to sell may
defeat the vendor’s right to cancel by invoking the rights granted to him under Republic Act No. 6552 or the Realty
Installment Buyer Protection Act (also known as the Maceda Law); this law provides for a 60-day grace period within
which the defaulting vendee (who has paid less than two years of installments) may still pay the installments due.
Only after the lapse of the grace period with continued nonpayment of the amounts due can the actual cancellation
of the contract take place. The pertinent provisions of the Maceda Law provide:

xxxx

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against
onerous and oppressive conditions.

Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment payments,
including residential condominium apartments but excluding industrial lots, commercial buildings and sales to
tenants under Republic Act Numbered Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixty-
three hundred eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the
following rights in case he defaults in the payment of succeeding installments:

xxxx

Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period
of not less than 60 days from the date the installment became due. If the buyer fails to pay the installments due at
the expiration of the grace period, the seller may cancel the contract after thirty days from the receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract by notarial act. [Emphasis supplied.]

Significantly, the Court has consistently held that the Maceda Law covers not only sales on installments of real
estate, but also financing of such acquisition; its Section 3 is comprehensive enough to include both contracts of
sale and contracts to sell, provided that the terms on payment of the price require at least two installments. The
contract entered into by the parties herein can very well fall under the Maceda Law.

Based on the above discussion, we conclude that the respondents’ payment on June 15, 1989 of the installment
due on June 14, 1989 effectively defeated the petitioners-heirs’ right to have the contract rescinded or cancelled.
Whether the parties’ agreement is characterized as one of sale or to sell is not relevant in light of the respondents’
payment within the grace period provided under Article 1592 of the Civil Code and Section 4 of the Maceda Law.
The petitioners-heirs’ obligation to accept the payment of the price and to convey Consuelo’s conjugal and
hereditary shares in the subject properties subsists.

WHEREFORE, we DENY the petitioners-heirs’ petition for review on certiorari, and AFFIRM the decision of the
Court of Appeals dated June 24, 2002 and its resolution dated February 20, 2003 in CA-G.R. CV Case No. 56590.
Costs against the petitioners-heirs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Baguio City

SECOND DIVISION

G.R. No. 193787 April 7, 2014

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with deceased Jose C. Roque represented
by his substitute heir JOVETTE ROQUE-LIBREA, Petitioners,
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE
PHILIPPINES (NCCP), represented by its Secretary General SHARON ROSE JOY RUIZ-DUREMDES, LAND
BANK OF THE PHILIPPINES (LBP), represented by Branch Manager EVELYN M. MONTERO, ATTY. MARIO
S.P. DIAZ, in his Official Capacity as Register of Deeds for Rizal, Morong Branch, and CECILIO U. PULAN, in
his Official Capacity as Sheriff, Office of the Clerk of Court, Regional Trial Court, Binangonan, Rizal,
Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated May 12, 2010 and the Resolution3 dated
September 15, 2010 of the Court of Appeals (CA) in CA G.R. CV No. 92113 which affirmed the Decision4 dated July
8, 2008 of the Regional Trial Court of Binangonan, Rizal, Branch 69 (RTC) that dismissed Civil Case Nos. 03-022
and 05-003 for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure and certificate of sale,
and damages.

The Facts

The property subject of this case is a parcel of land with an area of 20,862 square meters (sq. m.), located in Sitio
Tagpos, Barangay Tayuman, Binangonan, Rizal, known as Lot 18089.5

On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque) and the original
owners of the then unregistered Lot 18089 – namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela
Gonzales, Herminia R. Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R. Topacio, and Augusto Rivero (Rivero,
et al.) – executed a Deed of Conditional Sale of Real Property6 (1977 Deed of Conditional Sale) over a 1,231-sq. m.
portion of Lot 18089 (subject portion) for a consideration of ₱30,775.00. The parties agreed that Sps. Roque shall
make an initial payment of ₱15,387.50 upon signing, while the remaining balance of the purchase price shall be
payable upon the registration of Lot 18089, as well as the segregation and the concomitant issuance of a separate
title over the subject portion in their names. After the deed’s execution, Sps. Roque took possession and introduced
improvements on the subject portion which they utilized as a balut factory.7

On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National Council of Churches in the
Philippines (NCCP), applied for a free patent over the entire Lot 18089 and was eventually issued Original
Certificate of Title (OCT) No. M-59558 in his name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero,
in her personal capacity and in representation of Rivero, et al., executed a Joint Affidavit9 (1993 Joint Affidavit),
acknowledging that the subject portion belongs to Sps. Roque and expressed their willingness to segregate the
same from the entire area of Lot 18089.

On December 8, 1999, however, Sabug, Jr., through a Deed of Absolute Sale10 (1999 Deed of Absolute Sale), sold
Lot 18089 to one Ma. Pamela P. Aguado (Aguado) for ₱2,500,000.00, who, in turn, caused the cancellation of OCT
No. M-5955 and the issuance of Transfer Certificate of Title (TCT) No. M-96692 dated December 17, 199911 in her
name.

Thereafter, Aguado obtained an ₱8,000,000.00 loan from the Land Bank of the Philippines (Land Bank) secured by
a mortgage over Lot 18089.12 When she failed to pay her loan obligation, Land Bank commenced extra-judicial
foreclosure proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado’s failure to
redeem the subject property, Land Bank consolidated its ownership, and TCT No. M-11589513 was issued in its
name on July 21, 2003.14
On June 16, 2003, Sps. Roque filed a complaint15 for reconveyance, annulment of sale, deed of real estate
mortgage, foreclosure, and certificate of sale, and damages before the RTC, docketed as Civil Case No. 03-022,
against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal, and Sheriff Cecilio U.
Pulan, seeking to be declared as the true owners of the subject portion which had been erroneously included in the
sale between Aguado and Sabug, Jr., and, subsequently, the mortgage to Land Bank, both covering Lot 18089 in its
entirety.

In defense, NCCP and Sabug, Jr. denied any knowledge of the 1977 Deed of Conditional Sale through which the
subject portion had been purportedly conveyed to Sps. Roque.16

For her part, Aguado raised the defense of an innocent purchaser for value as she allegedly derived her title
(through the 1999 Deed of Absolute Sale) from Sabug, Jr., the registered owner in OCT No. M-5955, covering Lot
18089, which certificate of title at the time of sale was free from any lien and/or encumbrances. She also claimed
that Sps. Roque’s cause of action had already prescribed because their adverse claim was made only on April 21,
2003, or four (4) years from the date OCT No. M-5955 was issued in Sabug, Jr.’s name on December 17, 1999.17

On the other hand, Land Bank averred that it had no knowledge of Sps. Roque’s claim relative to the subject
portion, considering that at the time the loan was taken out, Lot 18089 in its entirety was registered in Aguado’s
name and no lien and/or encumbrance was annotated on her certificate of title.18

Meanwhile, on January 18, 2005, NCCP filed a separate complaint19 also for declaration of nullity of documents and
certificates of title and damages, docketed as Civil Case No. 05-003. It claimed to be the real owner of Lot 18089
which it supposedly acquired from Sabug, Jr. through an oral contract of sale20 in the early part of 1998, followed by
the execution of a Deed of Absolute Sale on December 2, 1998 (1998 Deed of Absolute Sale).21 NCCP also alleged
that in October of the same year, it entered into a Joint Venture Agreement (JVA) with Pilipinas Norin Construction
Development Corporation (PNCDC), a company owned by Aguado’s parents, for the development of its real
properties, including Lot 18089, into a subdivision project, and as such, turned over its copy of OCT No. M-5955 to
PNCDC.22 Upon knowledge of the purported sale of Lot 18089 to Aguado, Sabug, Jr. denied the transaction and
alleged forgery. Claiming that the Aguados23 and PNCDC conspired to defraud NCCP, it prayed that PNCDC’s
corporate veil be pierced and that the Aguados be ordered to pay the amount of ₱38,092,002.00 representing the
unrealized profit from the JVA.24 Moreover, NCCP averred that Land Bank failed to exercise the diligence required to
ascertain the true owners of Lot 18089. Hence, it further prayed that: (a) all acts of ownership and dominion over Lot
18089 that the bank might have done or caused to be done be declared null and void; (b) it be declared the true and
real owners of Lot 18089; and (c) the Register of Deeds of Morong, Rizal be ordered to cancel any and all
certificates of title covering the lot, and a new one be issued in its name.25 In its answer, Land Bank reiterated its
stance that Lot 18089 was used as collateral for the ₱8,000,000.00 loan obtained by the Countryside Rural Bank,
Aguado, and one Bella Palasaga. There being no lien and/ or encumbrance annotated on its certificate of title, i.e.,
TCT No. M-115895, it cannot be held liable for NCCP’s claims. Thus, it prayed for the dismissal of NCCP’s
complaint.26

On September 7, 2005, Civil Case Nos. 02-022 and 05-003 were ordered consolidated.27

The RTC Ruling

After due proceedings, the RTC rendered a Decision28 dated July 8, 2008, dismissing the complaints of Sps. Roque
and NCCP.

With respect to Sps. Roque’s complaint, the RTC found that the latter failed to establish their ownership over the
subject portion, considering the following: (a) the supposed owners-vendors, i.e., Rivero, et al., who executed the
1977 Deed of Conditional Sale, had no proof of their title over Lot 18089; (b) the 1977 Deed of Conditional Sale was
not registered with the Office of the Register of Deeds;29 (c) the 1977 Deed of Conditional Sale is neither a deed of
conveyance nor a transfer document, as it only gives the holder the right to compel the supposed vendors to
execute a deed of absolute sale upon full payment of the consideration; (d) neither Sps. Roque nor the alleged
owners-vendors, i.e., Rivero, et al., have paid real property taxes in relation to Lot 18089; and (e) Sps. Roque’s
occupation of the subject portion did not ripen into ownership that can be considered superior to the ownership of
Land Bank.30 Moreover, the RTC ruled that Sps. Roque’s action for reconveyance had already prescribed, having
been filed ten (10) years after the issuance of OCT No. M-5955.31

On the other hand, regarding NCCP’s complaint, the RTC observed that while it anchored its claim of ownership
over Lot 18089 on the 1998 Deed of Absolute Sale, the said deed was not annotated on OCT No. M-5955. Neither
was any certificate of title issued in its name nor did it take possession of Lot 18089 or paid the real property taxes
therefor. Hence, NCCP’s claim cannot prevail against Land Bank’s title, which was adjudged by the RTC as an
innocent purchaser for value. Also, the RTC disregarded NCCP’s allegation that the signature of Sabug, Jr. on the
1999 Deed of Absolute Sale in favor of Aguado was forged because his signatures on both instruments bear
semblances of similarity and appear genuine. Besides, the examiner from the National Bureau of Investigation, who
purportedly found that Sabug, Jr.’s signature thereon was spurious leading to the dismissal of a criminal case
against him, was not presented as a witness in the civil action.32

Finally, the RTC denied the parties’ respective claims for damages.33

The CA Ruling

On appeal, the Court of Appeals (CA) affirmed the foregoing RTC findings in a Decision34 dated May 12, 2010. While
Land Bank was not regarded as a mortgagee/purchaser in good faith with respect to the subject portion considering
Sps. Roque’s possession thereof,35 the CA did not order its reconveyance or segregation in the latter’s favor
because of Sps. Roque’s failure to pay the remaining balance of the purchase price. Hence, it only directed Land
Bank to respect Sps. Roque’s possession with the option to appropriate the improvements introduced thereon upon
payment of compensation.36

As regards NCCP, the CA found that it failed to establish its right over Lot 18089 for the following reasons: (a) the
sale to it of the lot by Sabug, Jr. was never registered; and (b) there is no showing that it was in possession of Lot
18089 or any portion thereof from 1998. Thus, as far as NCCP is concerned, Land Bank is a mortgagee/purchaser
in good faith.37

Aggrieved, both Sps. Roque38 and NCCP39 moved for reconsideration but were denied by the CA in a Resolution40
dated September 15, 2010, prompting them to seek further recourse before the Court.

The Issue Before the Court

The central issue in this case is whether or not the CA erred in not ordering the reconveyance of the subject portion
in Sps. Roque’s favor.

Sps. Roque maintain that the CA erred in not declaring them as the lawful owners of the subject portion despite
having possessed the same since the execution of the 1977 Deed of Conditional Sale, sufficient for acquisitive
prescription to set in in their favor.41 To bolster their claim, they also point to the 1993 Joint Affidavit whereby Sabug,
Jr. and Rivero acknowledged their ownership thereof.42 Being the first purchasers and in actual possession of the
disputed portion, they assert that they have a better right over the 1,231- sq. m. portion of Lot 18089 and, hence,
cannot be ousted therefrom by Land Bank, which was adjudged as a ortgagee/purchaser in bad faith, pursuant to
Article 1544 of the Civil Code.43

In opposition, Land Bank espouses that the instant petition should be dismissed for raising questions of fact, in
violation of the proscription under Rule 45 of the Rules of Court which allows only pure questions of law to be
raised.44 Moreover, it denied that ownership over the subject portion had been acquired by Sps. Roque who
admittedly failed to pay the remaining balance of the purchase price.45 Besides, Land Bank points out that Sps.
Roque’s action for reconveyance had already prescribed.46

Instead of traversing the arguments of Sps. Roque, NCCP, in its Comment47 dated December 19, 2011, advanced
its own case, arguing that the CA erred in holding that it failed to establish its claimed ownership over Lot 18089 in
its entirety. Incidentally, NCCP’s appeal from the CA Decision dated May 12, 2010 was already denied by the
Court,48 and hence, will no longer be dealt with in this case.

The Court’s Ruling

The petition lacks merit.

The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or
erroneously registered in another person’s name to its rightful owner or to one with a better right.49 Thus, it is
incumbent upon the aggrieved party to show that he has a legal claim on the property superior to that of the
registered owner and that the property has not yet passed to the hands of an innocent purchaser for value.50

Sps. Roque claim that the subject portion covered by the 1977 Deed of Conditional Sale between them and Rivero,
et al. was wrongfully included in the certificates of title covering Lot 18089, and, hence, must be segregated
therefrom and their ownership thereof be confirmed. The salient portions of the said deed state:
DEED OF CONDITIONAL SALE OF REAL PROPERTY

KNOW ALL MEN BY THESE PRESENTS:

xxxx

That for and in consideration of the sum of THIRTY THOUSAND SEVEN HUNDRED SEVENTY FIVE PESOS
(₱30,775.00), Philippine Currency, payable in the manner hereinbelow specified, the VENDORS do hereby sell,
transfer and convey unto the VENDEE, or their heirs, executors, administrators, or assignors, that unsegregated
portion of the above lot, x x x.

That the aforesaid amount shall be paid in two installments, the first installment which is in the amount of
__________ (₱15,387.50) and the balance in the amount of __________ (₱15,387.50), shall be paid as soon as the
described portion of the property shall have been registered under the Land Registration Act and a Certificate of
Title issued accordingly;

That as soon as the total amount of the property has been paid and the Certificate of Title has been issued, an
absolute deed of sale shall be executed accordingly;

x x x x51

Examining its provisions, the Court finds that the stipulation above-highlighted shows that the 1977 Deed of
Conditional Sale is actually in the nature of a contract to sell and not one of sale contrary to Sps. Roque’s belief.52 In
this relation, it has been consistently ruled that where the seller promises to execute a deed of absolute sale upon
the completion by the buyer of the payment of the purchase price, the contract is only a contract to sell even if their
agreement is denominated as a Deed of Conditional Sale,53 as in this case. This treatment stems from the legal
characterization of a contract to sell, that is, a bilateral contract whereby the prospective seller, while expressly
reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to
sell the subject property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such as,
the full payment of the purchase price.54 Elsewise stated, in a contract to sell, ownership is retained by the vendor
and is not to pass to the vendee until full payment of the purchase price.55 Explaining the subject matter further, the
Court, in Ursal v. CA,56 held that:

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

Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price.57 As such, the
condition which would have triggered the parties’ obligation to enter into and thereby perfect a contract of sale in
order to effectively transfer the ownership of the subject portion from the sellers (i.e., Rivero et al.) to the buyers
(Sps. Roque) cannot be deemed to have been fulfilled. Consequently, the latter cannot validly claim ownership over
the subject portion even if they had made an initial payment and even took possession of the same.58

The Court further notes that Sps. Roque did not even take any active steps to protect their claim over the disputed
portion. This remains evident from the following circumstances appearing on record: (a) the 1977 Deed of
Conditional Sale was never registered; (b) they did not seek the actual/physical segregation of the disputed portion
despite their knowledge of the fact that, as early as 1993, the entire Lot 18089 was registered in Sabug, Jr.’s name
under OCT No. M-5955; and (c) while they signified their willingness to pay the balance of the purchase price,59 Sps.
Roque neither compelled Rivero et al., and/or Sabug, Jr. to accept the same nor did they consign any amount to the
court, the proper application of which would have effectively fulfilled their obligation to pay the purchase price.60
Instead, Sps. Roque waited 26 years, reckoned from the execution of the 1977 Deed of Conditional Sale, to institute
an action for reconveyance (in 2003), and only after Lot 18089 was sold to Land Bank in the foreclosure sale and
title thereto was consolidated in its name. Thus, in view of the foregoing, Sabug, Jr. – as the registered owner of Lot
18089 borne by the grant of his free patent application – could validly convey said property in its entirety to Aguado
who, in turn, mortgaged the same to Land Bank. Besides, as aptly observed by the RTC, Sps. Roque failed to
establish that the parties who sold the property to them, i.e., Rivero, et al., were indeed its true and lawful owners.61
In fine, Sps. Roque failed to establish any superior right over the subject portion as against the registered owner of
Lot 18089, i.e., Land Bank, thereby warranting the dismissal of their reconveyance action, without prejudice to their
right to seek damages against the vendors, i.e., Rivero et al.62 As applied in the case of Coronel v. CA:63
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the
subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case
at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property
despite the fulfilment of the suspensive condition such as the full payment of the purchase price, for instance,
cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the
property.

There is no double sale in such case. Title to the property will transfer to the buyer after registration because there
1âw phi 1

is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for damages by the intending
buyer. (Emphasis supplied)

On the matter of double sales, suffice it to state that Sps. Roque’s reliance64 on Article 154465 of the Civil Code has
been misplaced since the contract they base their claim of ownership on is, as earlier stated, a contract to sell, and
not one of sale. In Cheng v. Genato,66 the Court stated the circumstances which must concur in order to determine
the applicability of Article 1544, none of which are obtaining in this case, viz.:

(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must
be valid sales transactions;

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent
conflicting interests; and

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have
bought from the same seller.

Finally, regarding Sps. Roque’s claims of acquisitive prescription and reimbursement for the value of the
improvements they have introduced on the subject property,67 it is keenly observed that none of the arguments
therefor were raised before the trial court or the CA.68 Accordingly, the Court applies the well-settled rule that litigants
cannot raise an issue for the first time on appeal as this would contravene the basic rules of fair play and justice. In
any event, such claims appear to involve questions of fact which are generally prohibited under a Rule 45 petition.69

With the conclusions herein reached, the Court need not belabor on the other points raised by the parties, and
ultimately finds it proper to proceed with the denial of the petition.

WHEREFORE, the petition is DENIED. The Decision dated May 12, 2010 and the Resolution dated September 15,
2010 of the Court of Appeals in CAG.R. CV No. 92113 are hereby AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 97347 July 6, 1999

JAIME G. ONG, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, SPOUSES MIGUEL K. ROBLES and ALEJANDRO M. ROBLES,
respondents.

YNARES-SANTIAGO, J.:

Before us is a petition for review on certiorari from the judgment rendered by the Court of Appeals which, except as
to the award of exemplary damages, affirmed the decision of the Regional Trial Court of Lucena City, Branch 60,
setting aside the "Agreement of Purchase and Sale" entered into by herein petitioner and private respondent
spouses in Civil Case No. 85-85. 1âwphi1.nêt

On May 10, 1983, petitioner Jaime Ong, on the one hand, and respondent spouses Miguel K. Robles and Alejandra
Robles, on the other hand, executed an "Agreement of Purchase and Sale" respecting two parcels of land situated
at Barrio Puri, San Antonio, Quezon. The terms and conditions of the contract read:"

1. That for and in consideration of the agreed purchase price of TWO MILLION PESOS
(P2,000,000.00), Philippine currency, the mode and manner of payment is as follows:

A. The initial payment of SIX HUNDRED THOUSAND PESOS (P600,000.00) as

verbally agreed by the parties, shall be broken down as follows:

1. P103,499.91 shall be paid, and as already paid by the BUYER to

the SELLERS on March 22, 1983, as stipulated under the
Certification of undertaking dated March 22, 1983 and covered by a
check of even date.

2. That the sum of P496,500.09 shall be paid directly by the BUYER

to the Bank of Philippine Islands to answer for the loan of the
SELLERS which as of March 15, 1983 amounted to P537,310.10,
and for the interest that may accrued (sic) from March 15, 1983, up to
the time said obligation of the SELLERS with the said bank has been
settled, provided however that the amount in excess of P496,500.09,
shall be chargeable from the time deposit of the SELLERS with the
aforesaid bank.

B. That the balance of ONE MILLION FOUR HUNDRED THOUSAND

(P1,400,000.00) PESOS shall be paid by the BUYER to the SELLERS in four (4)
equal quarterly installments of THREE HUNDRED FIFTY THOUSAND PESOS
(P350,000.00), the first to be due and payable on June 15, 1983, and every quarter
thereafter, until the whole amount is fully paid, by these presents promise to sell to
said BUYER the two (2) parcels of agricultural land including the rice mill and the
piggery which are the most notable improvements thereon, situated at Barangay
Puri, San Antonio Quezon, . . .

2. That upon the payment of the total purchase price by the BUYER the SELLERS bind themselves
to deliver to the former a good and sufficient deed of sale and conveyance for the described two (2)
parcels of land, free and clear from all liens and encumbrances.
 3. That immediately upon the execution of this document, the SELLERS shall deliver, surrender and
transfer possession of the said parcels of land including all the improvements that may be found
thereon, to the BUYER, and the latter shall take over from the SELLER the possession, operation,
control and management of the RICEMILL and PIGGERY found on the aforesaid parcels of land.

4. That all payments due and payable under this contract shall be effected in the residence of the
SELLERS located at Barangay Puri, San Antonio, Quezon unless another place shall have been
subsequently designated by both parties in writing.

xxx xxx xxx 1

On May 15, 1983, petitioner Ong took possession of the subject parcels of land together with the piggery, building,
ricemill, residential house and other improvements thereon.

Pursuant to the contract they executed, petitioner paid respondent spouses the sum of P103,499.91 2 by depositing
it with the United Coconut Planters Bank. Subsequently, petitioner deposited sums of money with the Bank of
Philippine Islands (BPI), 3 in accordance with their stipulation that petitioner pay the loan of respondents with BPI.

To answer for his balance of P1,400,000.00 petitioner issued four (4) post-dated Metro Bank checks payable to
respondent spouses in the amount of P350,0000.00 each, namely: Check No. 157708 dated June 15, 1983, 4 Check
No. 157709 dated September 15, 1983, 5 Check No. 157710 dated December 15, 1983 6 and Check No. 157711
dated March 15, 1984. 7 When presented for payment, however, the checks were dishonored due to insufficient
funds. Petitioner promised to replace the checks but failed to do so. To make matters worse, out of the P496,500.00
loan of respondent spouses with the Bank of the Philippine Islands, which petitioner, as per agreement, should have
paid, petitioner only managed to dole out no more than P393,679.60. When the bank threatened to foreclose the
respondent spouses' mortgage, they sold three transformers of the rice mill worth P51,411.00 to pay off their
outstanding obligation with said bank, with the knowledge and conformity of petitioner. 8 Petitioner, in return,
voluntarily gave the spouses authority to operate the rice mill. 9 He, however, continued to be in possession of the
two parcels of land while private respondents were forced to use the rice mill for residential purposes.

On August 2, 1985, respondent spouses, through counsel, sent petitioner a demand letter asking for the return of
the properties. Their demand was left unheeded, so, on September 2, 1985, they filed with the Regional Trial Court
of Lucena City, Branch 60, a complaint for rescission of contract and recovery of properties with damages. Later,
while the case was still pending with the trial court, petitioner introduced major improvements on the subject
properties by constructing a complete fence made of hollow blocks and expanding the piggery. These prompted the
respondent spouses to ask for a writ of preliminary injunction. 10 The trial court granted the application and enjoined
petitioner from introducing improvements on the properties except for repairs. 11

On June 1, 1989 the trial court rendered a decision, the dispositive portion of which reads as follows:

IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a) Ordering that the contract entered into by plaintiff spouses Miguel K. Robles and Alejandra M.
Robles and the defendant, Jaime Ong captioned "Agreement of Purchase and Sale," marked as
Exhibit "A" set aside;

b) Ordering defendant, Jaime Ong to deliver the two (2) parcels of land which are the subject matter
of Exhibit "A" together with the improvements thereon to the spouses Miguel K. Robles and
Alejandro M. Robles;

c) Ordering plaintiff spouses, Miguel Robles and Alejandra Robles to return to Jaime Ong the sum of
P497,179.51;

d) Ordering defendant Jaime Ong to pay the plaintiffs the sum of P100,000.00 as exemplary
damages; and

e) Ordering defendant Jaime Ong to pay the plaintiffs spouses Miguel K. Robles and Alejandra
Robles the sum of P20,000.00 as attorney's fees and litigation expenses.

The motion of the plaintiff spouses Miguel K. Roles and Alejandra Robles for the appointment of
receivership is rendered moot and academic.
 SO ORDERED. 12

From this decision, petitioner appealed to the Court of Appeals, which affirmed the decision of the Regional Trial
Court but deleted the award of exemplary damages. In affirming the decision of the trial court, the Court of Appeals
noted that the failure of petitioner to completely pay the purchase price is a substantial breach of his obligation
which entitles the private respondents to rescind their contract under Article 1191 of the New Civil Code. Hence, the
instant petition.

At the outset, it must be stated that the issues raised by the petitioner are generally factual in nature and were
already passed upon by the Court of Appeals and the trial court. Time and again, we have stated that it is not the
function of the Supreme Court to assess and evaluate all over again the evidence, testimonial and documentary,
adduced by the parties to an appeal, particularly where, such as in the case at bench, the findings of both the trial
court and the appellate court on the matter coincide. There is no cogent reason shown that would justify the court to
discard the factual findings of the two courts below and to superimpose its own. 13

The only pertinent legal issues raised which are worthy of discussion are (1) whether the contract entered into by
the parties may be validly rescinded under Article 1191 of the New Civil Code; and (2) whether the parties had
novated their original contract as to the time and manner of payment.

Petitioner contends that Article 1191 of the New Civil Code is not applicable since he has already paid respondent
spouses a considerable sum and has therefore substantially complied with his obligation. He cites Article 1383
instead, to the effect that where specific performance is available as a remedy, rescission may not be resorted to.

A discussion of the aforesaid articles is in order.

Rescission, as contemplated in Articles 1380, et seq., of the New Civil Code, is a remedy granted by law to the
contracting parties and even to third persons, to secure the reparation of damages caused to them by a contract,
even if this should be valid, by restoration of things to their condition at the moment prior to the celebration of the
contract. 14 It implies a contract, which even if initially valid, produces a lesion or a pecuniary damage to someone. 15

On the other hand, Article 1191 of the New Civil Code refers to rescission applicable to reciprocal obligations.
Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a
creditor of the other, such that the obligation of one is dependent upon the obligation of the other. 16 They are to be
performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the
other. Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be distinguished from
rescission of contracts under Article 1383. Although both presuppose contracts validly entered into and subsisting
and both require mutual restitution when proper, they are not entirely identical.

While Article 1191 uses the term "rescission," the original term which was used in the old Civil Code, from which the
article was based, was "resolution. 17" Resolution is a principal action which is based on breach of a party, while
rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the
New Civil Code, which expressly enumerates the following rescissible contracts:

1. Those which are entered into by guardians whenever the wards whom they
represent suffer lesion by more than one fourth of the value of the things which are
the object thereof;

2. Those agreed upon in representation of absentees, if the latter suffer the lesion
stated in the preceding number;

3. Those undertaken in fraud of creditors when the latter cannot in any manner
collect the claims due them;

4. Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority;

5. All other contracts specially declared by law to be subject to rescission.

Obviously, the contract entered into by the parties in the case at bar does not fall under any of those
mentioned by Article 1381. Consequently, Article 1383 is inapplicable.
May the contract entered into between the parties, however, be rescinded based on Article 1191?

A careful reading of the parties' "Agreement of Purchase and Sale" shows that it is in the nature of a
contract to sell, as distinguished from a contract of sale. In a contract of sale, the title to the property
passes to the vendee upon the delivery of the thing sold; while in a contract to sell, ownership is, by
agreement, reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. 18 In a contract to sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force. 19

Respondents in the case at bar bound themselves to deliver a deed of absolute sale and clean title
covering the two parcels of land upon full payment by the buyer of the purchase price of
P2,000,000.00. This promise to sell was subject to the fulfillment of the suspensive condition of full
payment of the purchase price by the petitioner. Petitioner, however, failed to complete payment of
the purchase price. The non-fulfillment of the condition of full payment rendered the contract to sell
ineffective and without force and effect. It must be stressed that the breach contemplated in Article
1191 of the New Civil Code is the obligor's failure to comply with an obligation. 20 Failure to pay, in
this instance, is not even a breach but merely an event which prevents the vendor's obligation to
convey title from acquiring binding force. 21 Hence, the agreement of the parties in the case at bench
may be set aside, but not because of a breach on the part of petitioner for failure to complete
payment of the purchase price. Rather, his failure to do so brought about a situation which prevented
the obligation of respondent spouses to convey title from acquiring an obligatory force.

Petitioner insists, however, that the contract was novated as to the manner and time of payment.

We are not persuaded. Article 1292 of the New Civil Code states that, "In order that an obligation
may be extinguished by another which substitutes the same, it is imperative that it be so declared in
unequivocal terms, or that the old and the new obligations be on every point incompatible with each
other."

Novation is never presumed, it must be proven as a fact either by express stipulation of the parties
or by implication derived from an irreconcilable incompatibility between the old and the new
obligation. 22 Petitioner cites the following instances as proof that the contract was novated: the
retrieval of the transformers from petitioner's custody and their sale by the respondents to
MERALCO on the condition that the proceeds thereof be accounted for by the respondents and
deducted from the price of the contract; the take-over by the respondents of the custody and
operation of the rice mill; and the continuous and regular withdrawals by respondent Miguel Robles
of installment sums per vouchers (Exhs. "8" to "47") on the condition that these installments be
credited to petitioner's account and deducted from the balance of the purchase price.

Contrary to petitioner's claim, records show that the parties never even intended to novate their
previous agreement. It is true that petitioner paid respondents small sums of money amounting to
P48,680.00, in contravention of the manner of payment stipulated in their contract. These
installments were, however, objected to by respondent spouses, and petitioner replied that these
represented the interest of the principal amount which he owed them. 23 Records further show that
petitioner agreed to the sale of MERALCO transformers by private respondents to pay for the
balance of their subsisting loan with the Bank of Philippine Islands. Petitioner's letter of authorization
reads:

xxx xxx xxx

Under this authority, it is mutually understood that whatever payment received from MERALCO as
payment to the transfromers will be considered as partial payment of the undersigned's obligation to
Mr. and Mrs. Miguel K. Robles.

The same will be utilized as partial payment to existing loan with the Bank of Philippine Islands.

It is also mutually understood that this payment to the Bank of Philippine Islands will be reimbursed
to Mr. and Mrs. Miguel K. Robles by the undersigned. [Emphasis supplied] 24

It should be noted that while it was. agreed that part of the purchase price in the sum of P496,500.00
would be directly deposited by petitioner to the Bank of Philippine Islands to answer for the loan of
 respondent spouses, petitioner only managed to deposit P393,679.60. When the bank threatened to
foreclose the properties, petitioner apparently could not even raise the sum needed to forestall any
action on the part of the bank. Consequently, he authorized respondent spouses to sell the three (3)
transformers. However, although the parties agreed to credit the proceeds from the sale of the
transformers to petitioner's obligation, he was supposed to reimburse the same later to respondent
spouses. This can only mean that there was never an intention on the part of either of the parties to
novate petitioner's manner of payment.

Petitioner contends that the parties verbally agreed to novate the manner of payment when
respondent spouses proposed to operate the rice mill on the condition that they will account for its
earnings. We find that this is unsubstantiated by the evidenced on the record. The tenor of his letter
dated August 12, 1984 to respondent spouses, in fact, shows that petitioner had a "little
misunderstanding" with respondent spouses whom he was evidently trying to appease by
authorizing them to continue temporarily with the operation of the rice mill. Clearly, while petitioner
might have wanted to novate the original agreement as to his manner of payment, the records are
bereft of evidence that respondent spouses willingly agreed to modify their previous arrangement.

In order for novation to take place, the concurrence of the following requisites is indispensable: (1)
there must be a previous valid obligation; (2) there must be an agreement of the parties concerned
to a new contract; (3) there must be the extinguishment of the old contract; and (4) there must be the
validity of the new contract. 25 The aforesaid requisites are not found in the case at bench. The
subsequent acts of the parties hardly demonstrate their intent to dissolve the old obligation as a
consideration for the emergence of the new one. We repeat to the point of triteness, novation is
never presumed, there must be an express intention to novate.

As regards the improvements introduced by petitioner to the premises and for which he claims
reimbursement, we see no reason to depart from the ruling of the trial court and the appellate court
that petitioner is a builder in bad faith. He introduced the improvements on the premises knowing
fully well that he has not paid the consideration of the contract in full and over the vigorous
objections of respondent spouses. Moreover, petitioner introduced major improvements on the
premises even while the case against him was pending before the trial court.

The award of exemplary damages was correctly deleted by the Court of Appeals in as much as no
moral, temperate, liquidated or compensatory damages in addition to exemplary damages were
awarded.

WHEREFORE, the decision rendered by the Court of Appeals is hereby AFFIRMED with the
MODIFICATION that respondent spouses are ordered to return to petitioner the sum of P48,680.00
in addition to the amounts already awarded. Costs against petitioner. 1âwphi1.nêt

SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.

 Republic of the Philippines
SUPREME COURT

FIRST DIVISION

G.R. No. 165889 September 20, 2005

SACOBIA HILLS DEVELOPMENT CORPORATION and JAIME C. KOA, Petitioners,

vs.
ALLAN U. TY, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari1 assails the August 19, 2004 decision of the Court of Appeals in CA-G.R. CV
No. 76987,2 which reversed and set aside the November 29, 2002 decision3 of the Regional Trial Court of Manila,
Branch 46, and its October 28, 2004 resolution4 denying reconsideration thereof.

The antecedent facts show that petitioner Sacobia Hills Development Corporation (Sacobia) is the developer of True
North Golf and Country Club (True North) located inside the Clark Special Economic Zone in Pampanga which
boasts of amenities that include a golf course, clubhouse, sports complex and several vacation villas.

On February 12, 1997, respondent Allan U. Ty wrote to Sacobia a letter expressing his intention to acquire one (1)
Class A share of True North and accordingly paid the reservation fee of P180,000.00 as evidenced by PCI Bank
Check No. 0038053.5

Through letters dated May 28, 1997 and July 4, 1997, Sacobia assured its shareholders that the development of
True North was proceeding on schedule; that the golf course would be playable by October 1999; that the
Environmental Clearance Certificate (ECC) by the Department of Environment and Natural Resources (DENR) as
well as the Permit to Sell from the Securities and Exchange Commission (SEC) should have been released by
October 1997; and that their registration deposits remained intact in an escrow account.6

On September 1, 1997, Sacobia approved the purchase application and membership of respondent for
P600,000.00, subject to certain terms and conditions. The notice of approval provided, inter alia:7

Terms and Conditions

1. Approval of an application to purchase golf/country club shares is subjected to the full payment of the total
purchase price. Should the buyer opt for the deferred payment scheme, approval is subject to our receipt of a down
payment of at least 30% and the balance payable in installments over a maximum of eleven (11) months from the
date of application, and covered by postdated cheques.

2. Your reserved share shall be considered withdrawn and may be deemed cancelled should you fail to settle your
obligation within fifteen (15) days from due date, or failure to cover the value of the postdated cheques upon their
maturity, or your failure to issue the required postdated cheques. In which case, we shall reserve the right to offer
the said shares to other interested parties. This also means forfeiture of 50% of the total amount you have already
paid.

3. We will undertake to execute the corresponding sales documents/ Deed of Absolute Sale covering the reserved
shares upon full payment of the total purchase price. The Certificate of Membership shall be issued thereafter.

...

However, on January 12, 1998, respondent notified Sacobia that he is rescinding the contract and sought refund of
the payments already made due to the latter’s failure to complete the project on time as represented.

In an effort to assure the respondent that the project would soon be operational, Sacobia wrote him a letter dated
March 10, 1998, stating that the DENR had issued the required ECC only on March 5, 1998, and that the golf
course would be ready for use by end of 1998.8
On April 3, 1998, Sacobia again wrote the respondent advising him that the 18-hole golf course would be fully
operational by summer of 1999. Sacobia also sought to collect from respondent the latter’s outstanding balance of
P190,909.08 which was covered by five (5) post dated checks.

Notwithstanding, respondent notified Sacobia on April 17, 1998 that he had stopped payment on the five (5) post
dated checks and reiterated his demand for the refund of his payments which amounted to P409,090.92.

On June 16, 1999, respondent sent Sacobia a letter formally rescinding the contract and demanding for the refund
of the P409,090.92 thus far paid by him.

By way of reply, Sacobia informed respondent that it had a no-refund policy, and that it had endorsed respondent to
Century Properties, Inc. for assistance on the resale of his share to third persons.

Thus, on July 21, 1999, respondent filed a complaint for rescission and damages before the SEC but the case was
eventually transferred to the Regional Trial Court of Manila, Branch 46, pursuant to Administrative Circular AM No.
00-11-03.9

On April 13, 2002, the trial court personnel conducted an on-site ocular inspection and in their report, they made the
following observations:

... We went up and down the hills on board the golf cart, and have seen the entire golf course. The 9 holes area are
already operational and playable, we have seen the tee bank (mount soil) color coded flags, blue for regular golfers,
white for senior golfers and red for ladies golfers. We have seen all their playing areas which all appeared in order
except the main clubhouse which is undergoing finishing touches. Likewise the road leading to the clubhouse area
is undergoing pavement works and concreting.

We learned from our tour guide Mr. Gerry Zoleta, Site Supervisor, that the timetable in finishing all remaining things
(eg. Clubhouse and the road leading to it) to be done, are influenced or rather, hampered by the prevailing weather
condition. Such that when it rain, (which often happens in the area during afternoon or early morning) they cannot
really push thru with the construction due to the soil condition (easily eroded) and sloping terrain of the place.
Except, the clubhouse, all seem prim and proper for golf playing. In fact, according to Mr. Zoleta, the site has been
operational since January 2002. The first tournament was conducted on October 2000 and there were three
tournaments already took place in the area.

...

In summary, we found nothing amiss for one not to be able to play and enjoy golf to the fullest, except as earlier said
the clubhouse.10

On November 29, 2002, the trial court rendered judgment in favor of petitioners, the decretal portion of which reads:

WHEREFORE, the complaint is hereby dismissed without pronouncement as to costs.

If the plaintiff desires to continue with the acquisition of the share, he may do so by paying the balance of the
acquisition price of One Hundred Ninety Thousand Ninety Pesos and Ten Centavos (P190,090.10) without interest
within thirty (30) days from the finality of this decision, otherwise, he forfeits his payments.

IT IS SO ORDERED.11

The trial court found that the contract between the parties did not warrant that the golf course and clubhouse would
be completed within a certain period of time to entitle respondent to rescind. It also noted that the completion of the
project was subject to the issuance of an ECC and the approval by the SEC of the registration of non-proprietary
golf club shares, which is beyond Sacobia’s control.

The appellate court, in its decision dated August 19, 2004, disposed of the appeal as follows:

WHEREFORE, the appealed November 29, 2002 decision of the Regional Trial Court of Manila, Branch 46, is
hereby REVERSED and SET ASIDE, and a new one is hereby entered with this Court hereby CONFIRMING the
RESCISSION of the contract of purchase of one (1) Class A proprietary share of True North Golf and Country Club
as elected choice by plaintiff-appellant Ty, the aggrieved party, and hereby DIRECTING defendant-appellee
SACOBIA to:
1) Refund to the plaintiff-appellant Allan U. Ty the amount of P409,090.20 and all payments made by him thus far on
the TRUE NORTH share, with legal interest of 12% per annum from July 21, 1999, the date of the filing of the
complaint with the SEC, until fully paid;

2) Return the five post-dated checks of the plaintiff-appellant amounting to P190,908.08;

3) Pay costs of the suit.

SO ORDERED.12

The Court of Appeals agreed with the trial court that Sacobia was in delay in the performance of its obligation to
respondent. As such, Ty could properly rescind the contract, or demand specific performance with damages, or
demand for damages alone. It held though that the failure of the DENR to issue the ECC on time is a valid ground to
reduce the damages claimed by Ty. It also ruled that Sacobia is estopped from asserting that there was no
completion date for the project as no less than its chairman announced the projected completion dates.

Petitioners’ motion for reconsideration was denied, hence the instant petition for review on certiorari which raises the
issue of whether the contract entered into by the parties may be validly rescinded under Article 1191 of the Civil
Code.

Sacobia contends that it was not in breach of the contract as the Intent to Purchase, the Contract of Purchase, and
the Notice of Approval to Purchase Shares of True North, do not contain any specific date as to when the golf
course and country club would be completed. It argues that respondent should have known the risks involved in this
kind of project; the construction being contingent on the issuance of the ECC by the DENR and the payment of the
buyers of their share.

On the other hand, respondent claims that Sacobia’s arguments raise new matters which would warrant the reversal
of the decision rendered by the Court of Appeals. He insists that Sacobia failed to complete the project on time
which entitles him to rescind the contract in accordance with Article 1191 of the Civil Code. He further argues that
the delay in the completion of the project is clearly established by the fact that there have been no substantial work
done on the site, particularly on the clubhouse, despite the lapse of nearly 4-years from the issuance of the ECC on
March 5, 1998.

The petition is meritorious.

In resolving the present controversy, the lower courts merely assumed that the delay in the completion of the golf
course was the decisive factor in determining the propriety or impropriety of rescinding the contract. Yet, confusion
could have been avoided had there been a more thorough scrutiny of the nature of the contract entered into by the
contending parties.

In the notice of approval, which embodies the terms and conditions of the agreement, Sacobia signified its intent to
retain the ownership of the property until such time that the respondent has fully paid the purchase price. This
condition precedent is characteristic of a contract to sell. The intention of the contracting parties is inferable from the
following provisions, to wit:

TERMS AND CONDITIONS

1. Approval of an application to purchase golf/country club shares is subjected to the full payment of the
total purchase price. Should the buyer opt for the deferred payment scheme, approval is subject to our receipt of a
down payment of at least 30% and the balance payable in installments over a maximum of eleven (11) months from
the date of application, and covered by postdated cheques.

2. Your reserved share shall be considered withdrawn and may be deemed cancelled should you fail to
settle your obligation within fifteen (15) days from due date, or failure to cover the value of the postdated
cheques upon their maturity, or your failure to issue the required postdated cheques. In which case, we shall
reserve the right to offer the said shares to other interested parties. This also means forfeiture of 50% of the total
amount you have already paid.

3. We shall undertake to execute the corresponding sales documents/Deed of Absolute Sale covering the
reserved shares upon full payment of the total purchase price. The Certificate of Membership shall be
issued thereafter.
Clearly, the approval of the application hinged on the full payment of the total purchase price. In fact, Sacobia
explicitly reserved the right to retain title over the share pending full satisfaction of the purchase price.

The notice of approval likewise stipulated that the reservation shall be deemed withdrawn or cancelled in case
respondent fails to settle his obligation within 15 days from the due date or cover the value of the checks upon their
maturity. Thus, Sacobia reserved the right to unilaterally rescind the contract in the event the respondent fails to
comply with his obligation of remitting the full purchase price within the deadline. In fact, Sacobia, after having
cancelled the agreement, can offer the share to other interested parties.

In addition, the execution of the deed of absolute sale and other pertinent documents shall be made only upon full
payment of the purchase price. The terms of the agreement between Sacobia and Ty can be deduced, not on a
formal document like a deed of sale, but from a series of correspondence and acts signifying the parties’ intention to
enter into a contract. The absence of a formal deed of conveyance is a strong indication that Sacobia did not intend
to transfer title until respondent shall have completely complied with his correlative obligation of paying the contact
price.

Since the agreement between Sacobia and Ty is a contract to sell, the full payment of the purchase price partakes
of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and ownership is
retained by the seller without further remedies by the buyer. In Cheng v. Genato,13 we explained the nature of a
contract to sell and its legal implications in this wise:

In a Contract to Sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not
a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring
an obligatory force. It is one where the happening of the event gives rise to an obligation. Thus, for its non-fulfillment
there will be no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a
juridical relation. In fact with this circumstance, there can be no rescission of an obligation that is still non-existent,
the suspensive condition not having occurred as yet. Emphasis should be made that the breach contemplated in
Article 1191 of the New Civil Code is the obligor’s failure to comply with an obligation already extant, not a failure of
a condition to render binding that obligation.

In a contract to sell, the prospective seller does not consent to transfer ownership of the property to the buyer until
the happening of an event, which for present purposes, is the full payment of the purchase price. What the seller
agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the
purchase price is delivered to him. Upon the fulfillment of the suspensive condition, ownership will not automatically
transfer to the buyer although the property may have been previously delivered to him. The prospective seller still
has to convey title to the prospective buyer by entering into a contract of absolute sale.14

According to True North Payment Schedule,15 respondent’s checks dated from October 12, 1997 until January 12,
1998 were marked as stale. His failure to cover the value of the checks and by issuing a stop payment order
effectively abated the perfection of the contract. For it is understood that when a sale is made subject to a
suspensive condition, perfection is had only from the moment the condition is fulfilled.16

As shown, Ty did not pay the full purchase price which is his obligation under the contract to sell, therefore, it cannot
be said that Sacobia breached its obligation. No obligations arose on its part because respondent’s non-fulfillment of
the suspensive condition rendered the contract to sell ineffective and unperfected. Indeed, there can be no
rescission under Article 119117 of the Civil Code because until the happening of the condition, i.e. full payment of the
contract price, Sacobia’s obligation to deliver the title and object of the sale is not yet extant. A non-existent
obligation cannot be subject of rescission. Article 1191 speaks of obligations already existing, which may be
rescinded in case one of the obligors fails to comply with what is incumbent upon him.

As earlier discussed, the payment by Ty of the reservation fee as well as the issuance of the postdated checks is
subject to the condition that Sacobia was reserving title until full payment, which is the essence of a contract to sell.
The perfection of this kind of contract would give rise to two distinct obligations, namely, 1) the buyer’s obligation to
fulfill the suspensive condition, i.e. the full payment of the contract price as in the instant case, and, 2) the correlative
obligation of the seller to convey ownership upon compliance of the suspensive condition.

In the present case, respondent’s failure to fulfill this suspensive condition prevented the perfection of the contract to
sell. With an ineffective contract, Ty had not acquired the status of a shareholder but remained, at most, a
prospective investor. In the absence of a juridical tie between the parties, Ty cannot claim the rights and privileges
accorded to Sacobia’s full-fledged members and shareowners, including the full enjoyment of the amenities being
offered. Unfortunately for Ty, he cannot avail of rescission as envisioned by Article 1191 of the Civil Code. However,
he can withdraw his investment subject to the restrictions under the terms and conditions pertinent to a reneging
investor.

Even assuming arguendo that the delay in the completion of the golf course and clubhouse was attributable to
Sacobia, respondent had not refuted to this Court’s satisfaction the trial court’s denial of such claim upon its finding
that, among other things, the parties did not warrant the completion of the project within a certain period of time.

As early as January 12, 1998, respondent had notified Sacobia of his intention to rescind the contract on the ground
that there was unreasonable delay in the completion of the golf course and clubhouse. Yet, evidence shows that
even prior thereto, or on May 28, 1997, Sacobia already informed its investors, including the respondent, that the full
completion of the project was expected by mid-1999. Patently, respondent’s claim is premature by one year and a
half, if reckoned from the expected time of completion as foreseen by Sacobia. Moreover, respondent was well
aware of the risk of delay in the completion of the project considering that he was apprised beforehand of such delay
due to the belated issuance of the proper documents.

It appears, however, that Sacobia is not really intent on cancelling Ty’s reservation. Even after it was notified by Ty
that he was intending to rescind the contract, and had in fact issued a stop-payment order, Sacobia merely deferred
the deposit of Ty’s checks in an effort to resolve the issue, instead of cancelling the reservation in accordance with
the terms of the notice of approval. Subsequently, it sought to collect from Ty his remaining obligations. It also
referred Ty to its marketing arm if Ty is so minded to sell his rights to third parties. To this extent, the trial court
correctly ordered Ty to pay the remaining balance if he so desires, otherwise, he forfeits half of his payments,
pursuant to the terms of the notice of approval.

WHEREFORE, the petition is GRANTED. The decision dated August 19, 2004 of the Court of Appeals in CA-G.R.
CV No. 76987 and its resolution dated October 28, 2004, are REVERSED and SET ASIDE. Respondent’s
complaint for rescission of contract and damages in Civil Case No. 01-99696 is DISMISSED. He is ORDERED to
PAY to Sacobia Hills Development Corporation the amount of Pesos: One Hundred Ninety Thousand Nine Hundred
Nine and Eight Centavos (P190,909.08) without interest within thirty (30) days from finality of this decision;
otherwise, fifty percent (50%) of his total payments shall be forfeited.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-32811 March 31, 1980

FELIPE C. ROQUE, petitioner,

vs.
NICANOR LAPUZ and THE COURT OF APPEALS, respondents.

Tañada, Sanchez, Tañada, Tañada for petitioner.

N.M. Lapuz for respondent.

GUERRERO, J.:

Appeal by certiorari from the Resolution of the respondent court 1 dated October 12, 1970 in CA-G.R. No. L-33998-R
entitled "Felipe C. Roque, plaintiff-appellee, versus Nicanor Lapuz, defendant-appellant" amending its original
decision of April 23, 1970 which affirmed the decision of the Court of First Instance of Rizal (Quezon City Branch) in
Civil Case No. Q-4922 in favor of petitioner, and the Resolution of the respondent court denying petitioner's motion
for reconsideration.

The facts of this case are as recited in the decision of the Trial Court which was adopted and affirmed by the Court
of Appeals:

Sometime in 1964, prior to the approval by the National Planning Commission of the
consolidation and subdivision plan of plaintiff's property known as the Rockville Subdivision,
situated in Balintawak, Quezon City, plaintiff and defendant entered into an agreement of
sale covering Lots 1, 2 and 9, Block 1, of said property, with an aggregate area of 1,200
square meters, payable in 120 equal monthly installments at the rate of P16.00, P15.00 per
square meter, respectively. In accordance with said agreement, defendant paid to plaintiff
the sum of P150.00 as deposit and the further sum of P740.56 to complete the payment of
four monthly installments covering the months of July, August, September, and October,
1954. (Exhs. A and B). When the document Exhibit "A" was executed on June 25, 1954, the
plan covering plaintiff's property was merely tentative, and the plaintiff referred to the
proposed lots appearing in the tentative plan.

After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955,
defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and 9,
the subject matter of their previous agreement, with Lots 4 and 12, Block 2 of the approved
subdivision plan, of the Rockville Subdivision, with a total area of 725 square meters, which
are corner lots, to which request plaintiff graciously acceded.

The evidence discloses that defendant proposed to plaintiff modification of their previous
contract to sell because he found it quite difficult to pay the monthly installments on the three
lots, and besides the two lots he had chosen were better lots, being corner lots. In addition, it
was agreed that the purchase price of these two lots would be at the uniform rate of P17.00
per square (meter) payable in 120 equal monthly installments, with interest at 8% annually
on the balance unpaid. Pursuant to this new agreement, defendant occupied and possessed
Lots 4 and 12, Block 2 of the approved subdivision plan, and enclosed them, including the
portion where his house now stands, with barbed wires and adobe walls.

However, aside from the deposit of P150.00 and the amount of P740.56 which were paid
under their previous agreement, defendant failed to make any further payment on account of
the agreed monthly installments for the two lots in dispute, under the new contract to sell.
Plaintiff demanded upon defendant not only to pay the stipulated monthly installments in
arrears, but also to make up-to-date his payments, but defendant, instead of complying with
the demands, kept on asking for extensions, promising at first that he would pay not only the
 installments in arrears but also make up-to-date his payment, but later on refused altogether
to comply with plaintiff's demands.

Defendant was likewise requested by the plaintiff to sign the corresponding contract to sell in
accordance with his previous commitment. Again, defendant promised that he would sign the
required contract to sell when he shall have made up-to-date the stipulated monthly
installments on the lots in question, but subsequently backed out of his promise and refused
to sign any contract in noncompliance with what he had represented on several occasions.
And plaintiff relied on the good faith of defendant to make good his promise because
defendant is a professional and had been rather good to him (plaintiff).

On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant to

vacate the lots in question and to pay the reasonable rentals thereon at the rate of P60.00
per month from August, 1955. (Exh. "B"). Notwithstanding the receipt of said letter,
defendant did not deem it wise nor proper to answer the same.

In reference to the mode of payment, the Honorable Court of Appeals found —

Both parties are agreed that the period within which to pay the lots in question is ten years.
They however, disagree on the mode of payment. While the appellant claims that he could
pay the purchase price at any time within a period of ten years with a gradual proportionate
discount on the price, the appellee maintains that the appellant was bound to pay monthly
installments.

On this point, the trial court correctly held that —

It is further argued by defendant that under the agreement to sell in question, he has the right
or option to pay the purchase price at anytime within a period of ten years from 1954, he
being entitled, at the same time, to a graduated reduction of the price. The Court is
constrained to reject this version not only because it is contradicted by the weight of
evidence but also because it is not consistent with what is reasonable, plausible and
credible. It is highly improbable to expect plaintiff, or any real estate subdivision owner for
that matter, to agree to a sale of his land which would be payable anytime in ten years at the
exclusive option of the purchaser. There is no showing that defendant is a friend, a relative,
or someone to whom plaintiff had to be grateful, as would justify an assumption that he
would have agreed to extend to defendant such an extra- ordinary concession. Furthermore,
the context of the document, Exhibit "B", not to mention the other evidences on records is
indicative that the real intention of the parties is for the payment of the purchase price of the
lot in question on an equal monthly installment basis for a period of ten years (Exhibits "A",
"II", "J" and "K").

On January 22, 1960, petitioner Felipe C, Roque (plaintiff below) filed the complaint against defendant Nicanor
Lapuz (private respondent herein) with the Court of First Instance of Rizal, Quezon City Branch, for rescission and
cancellation of the agreement of sale between them involving the two lots in question and prayed that judgment be
rendered ordering the rescission and cancellation of the agreement of sale, the defendant to vacate the two parcels
of land and remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00
a month from August 1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00
as attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and equitable in
the premises.

Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action, which motion was
denied by the court. Thereafter, defendant filed his Answer alleging that he bought three lots from the plaintiff
containing an aggregate area of 1,200 sq. meters and previously known as Lots 1, 2 and 9 of Block 1 of Rockville
Subdivision at P16.00, P15.00 and P15.00, respectively, payable at any time within ten years. Defendant admits
having occupied the lots in question.

As affirmative and special defenses, defendant alleges that the complaint states no cause of action; that the present
action for rescission has prescribed; that no demand for payment of the balance was ever made; and that the action
being based on reciprocal obligations, before one party may compel performance, he must first comply what is
incumbent upon him.
As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots containing an area of 800
sq. meters and as a consequence, he suffered moral damages in the amount of P200.000.00; that due to the filing
of the present action, he suffered moral damages amounting to P100,000.00 and incurred expenses for attorney's
fees in the sum of P5,000.00.

Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof.

After due hearing, the trial court rendered judgment, the dispositive portion of which reads:

WHEREFORE, the Court renders judgment in favor of plain. plaintiff and against the
defendant, as follows:

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in
question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville
Subdivision) rescinded, resolved and cancelled;

(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to
pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955
until he shall have actually vacated the premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as
the costs of the suit. (Record on Appeal, p. 118)

(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in
question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville
Subdivision) rescinded, resolved and cancelled;

(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to
pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955
until he shall have actually vacated premises; and

(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as
the costs of the suit. (Record on Appeal. p. 118)

Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The latter court, finding
the judgment appealed from being in accordance with law and evidence, affirmed the same.

In its decision, the appellate court, after holding that the findings of fact of the trial court are fully supported by the
evidence, found and held that the real intention of the parties is for the payment of the purchase price of the lots in
question on an equal monthly installment basis for the period of ten years; that there was modification of the original
agreement when defendant actually occupied Lots Nos. 4 and 12 of Block 2 which were corner lots that commanded
a better price instead of the original Lots Nos. 1, 2 and 9, Block I of the Rockville Subdivision; that appellant's bare
assertion that the agreement is not rescindable because the appellee did not comply with his obligation to put up the
requisite facilities in the subdivision was insufficient to overcome the presumption that the law has been obeyed by
the appellee; that the present action has not prescribed since Article 1191 of the New Civil Code authorizing
rescission in reciprocal obligations upon noncompliance by one of the obligors is the applicable provision in relation
to Article 1149 of the New Civil Code; and that the present action was filed within five years from the time the right of
action accrued.

Defendant filed a Motion for Reconsideration of the appellate court's decision on the following grounds:

First — Neither the pleadings nor the evidence, testimonial, documentary or circumstantial,
justify the conclusion as to the existence of an alleged subsequent agreement novatory of
the original contract admittedly entered into between the parties:

Second — There is nothing so unusual or extraordinary, as would render improbable the

fixing of ten ears as the period within which payment of the stipulated price was to be
payable by appellant;

Third — Appellee has no right, under the circumstances on the case at bar, to demand and
be entitled to the rescission of the contract had with appellant;
 Fourth — Assuming that any action for rescission is availability to appellee, the same,
contrary to the findings of the decision herein, has prescribed;

Fifth — Assumming further that appellee's action for rescission, if any, has not yet
prescribed, the same is at least barred by laches;

Sixth — Assuming furthermore that a cause of action for rescission exists, appellant should
nevertheless be entitled to tile fixing of a period within which to comply with his obligation;
and

Seventh — At all events, the affirmance of the judgment for the payment of rentals on the
premises from August, 1955 and he taxing of attorney's fees against appellant are not
warranted b the circumstances at bar. (Rollo, pp. 87-88)

Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by the appellant,
that assuming that a cause of action for rescission exists, he should nevertheless be entitled to the fixing of a period
within which to comply with his obligation. The Court of Appeals, therefore, amended its original decision in the
following wise and manner:

WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that the
defendant Nicanor Lapuz is hereby granted a period of ninety (90) days from entry hereof
within which to pay the balance of the purchase price in the amount of P11,434,44 with
interest thereon at the rate of 8% per annum from August 17, 1955 until fully paid. In the
event that the defendant fails to comply with his obligation as above stated within the period
fixed herein, our original judgment stands.

Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals denied it. He
now comes and appeals to this Court on a writ of certiorari.

The respondent Court of Appeals rationalizes its amending decision by considering that the house presently erected
on the land subject of the contract is worth P45,000.00, which improvements introduced by defendant on the lots
subject of the contract are very substantial, and thus being the case, "as a matter of justice and equity, considering
that the removal of defendant's house would amount to a virtual forfeiture of the value of the house, the defendant
should be granted a period within which to fulfill his obligations under the agreement." Cited as authorities are the
cases of Kapisanan Banahaw vs. Dejarme and Alvero, 55 Phil. 338, 344, where it is held that the discretionary
power of the court to allow a period within which a person in default may be permitted to perform the stipulation
upon which the claim for resolution of the contract is based should be exercised without hesitation in a case where a
virtual forfeiture of valuable rights is sought to be enforced as an act of mere reprisal for a refusal of the debtor to
submit to a usurious charge, and the case of Puerto vs. Go Ye Pin, 47 O.G. 264, holding that to oust the defendant
from the lots without giving him a chance to recover what his father and he himself had spent may amount to a
virtual forfeiture of valuable rights.

As further reasons for allowing a period within which defendant could fulfill his obligation, the respondent court held
that there exists good reasons therefor, having in mind that which affords greater reciprocity of rights (Ramos vs.
Blas, 51 O.G. 1920); that after appellant had testified that plaintiff failed to comply with his part of the contract to put
up the requisite facilities in the subdivision, plaintiff did not introduce any evidence to rebut defendant's testimony
but simply relied. upon the presumption that the law has been obeyed, thus said presumption had been successfully
rebutted as Exhibit "5-D" shows that the road therein shown is not paved The Court, however, concedes that
plaintiff's failure to comply with his obligation to put up the necessary facilities in the subdivision will not deter him
from asking f•r the rescission of the agreement since this obligation is not correlative with defendant's obligation to
buy the property.

Petitioner assails the decision of the Court of Appeals for the following alleged errors:

I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the Civil
Code which refers to reciprocal obligations in general and, pursuant thereto, in granting
respondent Lapuz a period of ninety (90) days from entry of judgment within which to pay the
balance of the purchase price.

II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same Code,
which specifically covers sales of immovable property and which constitutes an exception to
the third paragraph of Article 1191 of said Code, is applicable to the present case.
 III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot avail
of the provisions of Article 1191, paragraph 3 of the Civil Code aforesaid because he did not
raise in his answer or in any of the pleadings he filed in the trial court the question of whether
or not he is entitled, by reason of a just cause, to a fixing of a new period.

IV. Assuming arguendo that the agreement entered into by and between petitioner and
respondent Lapuz was a mere promise to sell or contract to sell, under which title to the lots
in question did not pass from petitioner to respondent, still the Honorable Court of Appeals
erred in not holding that aforesaid respondent is not entitled to a new period within which to
pay petitioner the balance of P11,434.44 interest due on the purchase price of P12.325.00 of
the lots.

V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable and may
be availed of by respondent, the Honorable Court of Appeals nonetheless erred in not
declaring that aid respondent has not shown the existence of a just cause which would
authorize said Court to fix a new period within which to pay the balance aforesaid.

VI. The Honorable Court of Appeals erred in reconsidering its original decision promulgated
on April 23, 1970 which affirmed the decision of the trial court.

The above errors may, however, be synthesized into one issue and that is, whether private respondent is entitled to
the Benefits of the third paragraph of Article 1191, New Civil Code, for the fixing of period within which he should
comply with what is incumbent upon him, and that is to pay the balance of P11,434,44 with interest thereon at the
rate of 8% 1et annum from August 17, 1955 until fully paid since private respondent had paid only P150.00 as
deposit and 4 months intallments amounting to P740.46, or a total of P890.46, the total price of the two lots agreed
upon being P12,325.00.

For his part, petitioner maintains that respondent is not entitled to the Benefits of paragraph 3, Article 1191, NCC
and that instead, Article 1592 of the New Civil Code which specifically covers sales of immovable property and
which constitute an exception to the third paragraph of Art. 1191 of aid Code, is the applicable law to the case at
bar.

In resolving petitioner's assignment of errors, it is well that We lay clown the oda provisions and pertinent rulings of
the Supreme Court bearing on the crucial issue of whether Art. 1191, paragraph 3 of the New Civil Code applies to
the case at Bar as held by the appellate court and supported by the private respondent, or Art. 1592 of the same
Code which petitioner strongly argues in view of the peculiar facts and circumstances attending this case. Article
1191, New Civil Code, provides:

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

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

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

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

Article 1592 also provides:

Art. 1592. In the sale of immovable property, even though it may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission of the contract shall of
right take place, the vendee may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either judicially or by a
notarial act. After the demand, the court may not grant him a new term.

The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon Brokerage Co.,
Inc. vs. Maritime Building Co., Inc. and Myers Building Co., G.R. No. L-25885, January 31, 1972, 43 SCRA 93,
originally decided in 1972, reiterated in the Resolution on Motion to Reconsider dated August 18, 1972, 46 SCRA
381 and emphatically repeated in the Resolution on Second Motion for Reconsideration promulgated November 16,
1978, 86 SCRA 309, which once more denied Maritimes Second Motion for Reconsideration of October 7, 1972. In
the original decision, the Supreme Court speaking thru Justice J.B.L. Reyes said:

Under the circumstances, the action of Maritime in suspending payments to Myers

Corporation was a breach of contract tainted with fraud or malice (dolo), as distinguished
from mere negligence (culpa), "dolo" being succinctly defined as a "conscious and intention
design to evade the normal fulfillment of existing obligations" (Capistrano, Civil Code of the
Philippines, Vol. 3, page 38), and therefore incompatible with good faith (Castan, Derecho
Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo, Teoria de Obligaciones, Vol. 1, page 116).

Maritime having acted in bad faith, it was not entitled to ask the court to give it further time to
make payment and thereby erase the default or breach that it had deliberately incurred. Thus
the lower court committed no error in refusing to extend the periods for payment. To do
otherwise would be to sanction a deliberate and reiterated infringement of the contractual
obligations incurred by Maritime, an attitude repugnant to the stability and obligatory force of
contracts.

The decision reiterated the rule pointed out by the Supreme Court in Manuel vs. Rodriguez, 109 Phil. 1, p. 10, that:

In contracts to sell, where ownership is retained by the seller and is not to pass until the fun
payment of the price, such payment, as we said is a positive suspensive condition, the failure
of which is not a breach, casual or serious, but simply an event that prevented the obligation
of the vendor to convey title from acquiring binding i force in accordance with Article 1117 of
the Old Civil Code. To argue that there was only a casual breach is to proceed from the
assumption that the contract is one of absolute sale, where non-payment is a resolutory
condition, which is not the case." Continuing, the Supreme Court declared:

... appellant overlooks that its contract with appellee Myers s not the ordinary sale envisaged
by Article 1592, transferring ownership simultaneously with the delivery of the real property
sold, but one in which the vendor retained ownership of the immovable object of the sale,
merely undertaking to convey it provided the buyer strictly complied with the terms of the
contract (see paragraph [d], ante page 5). In suing to recover possession of the building from
Maritime appellee Myers is not after the resolution or setting aside of the contract and the
restoration of the parties to the status quo ante as contemplated by Article 1592, but
precisely enforcing the Provisions of the agreement that it is no longer obligated to part with
the ownership or possession of the property because Maritime failed to comply with the
specific condition precedent, which is to pay the installments as they fell due.

The distinction between contracts of sale and contracts to sell with reserved title has been
recognized by this Court in repeated decisions upholding the power of promisors under
contracts to sell in case of failure of the other party to complete payment, to extrajudicially
terminate the operation of the contract, refuse conveyance and retain the sums or
installments already received, where such rights are expressly provided for, as in the case at
bar.

In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again speaking thru Justice
J.B.L. Reyes, reiterated the rule that in a contract to sell, the full payment of the price through the punctual
performance of the monthly payments is a condition precedent to the execution of the final sale 4nd to the transfer
of the property from the owner to the proposed buyer; so that there will be no actual sale until and unless full
payment is made.

The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon, Myers was not
rescinding (or more properly, resolving) the contract but precisely enforcing it according to its expressed terms. In its
suit, Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such
restoration being the logical consequence of the fulfillment of a resolutory condition, expressed or implied (Art.
1190); neither was it seeking a declaration that its obligation to sell was extinguished. What is sought was a judicial
declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to
sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the
property object of the contract, possession being a mere incident to its right of ownership.
The decision also stressed that "there can be no rescission or resolution of an obligation as yet non-existent,
because the suspensive condition did not happen. Article 1592 of the New Civil Code (Art. 1504 of Old Civil Code)
requiring demand by suit or notarial act in case the vendor of realty wants to rescind does not apply to a contract to
sell or promise to sell, where title remains with the vendor until fulfillment to a positive condition, such as full
payment of the price." (Manuel vs, Rodriguez, 109 Phil. 9)

Maritime's Second Motion for Reconsideration was denied in the Resolution of the Court dated November 16, 1978,
86 SCRA 305, where the governing law and precedents were briefly summarized in the strong and emphatic
language of Justice Teehankee, thus:

(a) The contract between the parties was a contract to sell or conditional sale with title
expressly reserved in the vendor Myers Building Co., Inc. Myers until the suspensive
condition of full and punctual payment of the full price shall have been met on pain of
automatic cancellation of the contract upon failure to pay any of the monthly installments
when due and retention of the sums theretofore paid as rentals. When the vendee, appellant
Maritime, willfully and in bad faith failed since March, 1961 to pay the P5,000. — monthly
installments notwithstanding that it was punctually collecting P10,000. — monthly rentals
from the lessee Luzon Brokerage Co., Myers was entitled, as it did in law and fact, to enforce
the terms of the contract to sell and to declare the same terminated and cancelled.

(b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such
contracts to self or conditional sales and no error was committed by the trial court in refusing
to extend the periods for payment.

(c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's
infringement of its contract was casual or serious" for as pointed out in Manuel vs.
Rodriguez, '(I)n contracts to self. whether ownership is retained by the seller and is not to
pass until the full payment of the price, such payment, as we said, is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force ...

(d) It should be noted, however, that Maritimes breach was far from casual but a most
serious breach of contract ...

(e) Even if the contract were considered an unconditional sale so that Article 1592 of the Civil
Code could be deemed applicable, Myers' answer to the complaint for interpleaded in the
court below constituted a judicial demand for rescission of the contract and by the very
provision of the cited codal article, 'after the demand, the court may not grant him a new term
for payment; and

(f) Assumming further that Article 1191 of the new Civil Code governing rescission of
reciprocal obligations could be applied (although Article 1592 of the same Code is controlling
since it deals specifically with sales of real property), said article provides that '(T)he court
shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period' and there exists to "just cause" as shown above for the fixing of a further period. ...

Under the first and second assignments of error which petitioner jointly discusses, he argues that the agreement
entered into between him and the respondent is a perfected contract of purchase and sale within the meaning of
Article 1475 of the New Civil Code which provides that "the contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the
parties may reciprocally demand performance, subject to the provisions of the law governing the form of contract."

Petitioner contends that "(n)othing in the decision of the courts below would show that ownership of the property
remained with plaintiff for so long as the installments have not been fully paid. Which yields the conclusion that, by
the delivery of the lots to defendant, ownership likewise was transferred to the latter." (Brief for the Petitioner, p. 15)
And he concludes that the sale was consummated by the delivery of the two lots, the subject thereof, by him to the
respondent.

Under the findings of facts by the appellate court, it appears that the two lots subject of the agreement between the
parties herein were delivered by the petitioner to the private respondent who took possession thereof and occupied
the same and thereafter built his house thereon, enclosing the lots with adobe stone walls and barbed wires. But the
property being registered under the Land Registration Act, it is the act of registration of the Deed of Sale which
could legally effect the transfer of title of ownership to the transferee, pursuant to Section 50 of Act 496. (Manuel vs.
Rodriguez, et al., 109 Phil. 1; Buzon vs. Lichauco, 13 Phil. 354; Tuazon vs. Raymundo, 28 Phil. 635: Worcestor vs.
Ocampo, 34 Phil. 646). Hence, We hold that the contract between the petitioner and the respondent was a contract
to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an
event that prevented the obligation of the vendor to convey title from acquiring binding force.

In the case at bar, there is no writing or document evidencing the agreement originally entered into between
petitioner and private respondent except the receipt showing the initial deposit of P150.00 as shown in Exh. "A" and
the payment of the 4- months installment made by respondent corresponding to July, 1954 to October, 1954 in the
sum of P740.56 as shown in Exh. "B". Neither is there any writing or document evidencing the modified agreement
when the 3 lots were changed to Lots 4 and 12 with a reduced area of 725 sq. meters, which are corner lots. This
absence of a formal deed of conveyance is a very strong indication that the parties did not intend immediate transfer
of ownership and title, but only a transfer after full payment of the price. Parenthetically, We must say that the
standard printed contracts for the sale of the lots in the Rockville Subdivision on a monthly installment basis showing
the terms and conditions thereof are immaterial to the case at bar since they have not been signed by either of the
parties to this case.

Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or agreement
between petitioner and respondent which We affirm and sustain to be a contract to sell, the following resolutions of
petitioner's assignment of errors necessarily arise, and so We hold that:

1. The first and second assignments of errors are without merit.

The overwhelming weight of authority culminating in the Luzon Brokerage vs. Maritime cases has laid down the rule
that Article 1592 of the New Civil Code does not apply to a contract to sell where title remains with the vendor until
full payment of the price as in the case at bar. This is the ruling in Caridad Estates vs. Santero, 71 Phil. 120; Aldea
vs. Inquimboy 86 Phil. 1601; Jocon vs. Capitol Subdivision, Inc., L-6573, Feb. 28, 1955; Miranda vs. Caridad
Estates, L-2077 and Aspuria vs. Caridad Estates, L-2121 Oct. 3, 1950, all reiterated in Manuel vs. Rodriguez, et al.
109 Phil. 1, L-13435, July 27, 1960. We agree with the respondent Court of Appeals that Art, 1191 of the New Civil
Code is the applicable provision where the obligee, like petitioner herein, elects to rescind or cancel his obligation to
deliver the ownership of the two lots in question for failure of the respondent to pay in fun the purchase price on the
basis of 120 monthly equal installments, promptly and punctually for a period of 10 years.

2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been in
default, he is not entitled to the new period of 90 days from entry of judgment within which to pay petitioner the
balance of P11,434.44 with interest due on the purchase price of P12,325.00 for the two lots.

Respondent a paid P150.00 as deposit under Exh. "A" and P740.56 for the 4-months installments corresponding to
the months of July to October, 1954. The judgment of the lower court and the Court of Appeals held that respondent
was under the obligation to pay the purchase price of the lots m question on an equal monthly installment basis for a
period of ten years, or 120 equal monthly installments. Beginning November, 1954, respondent began to default in
complying with his obligation and continued to do so for the remaining 116 monthly interest. His refusal to pay
further installments on the purchase price, his insistence that he had the option to pay the purchase price any time
in ten years inspire of the clearness and certainty of his agreement with the petitioner as evidenced further by the
receipt, Exh. "B", his dilatory tactic of refusing to sign the necessary contract of sale on the pretext that he will sign
later when he shall have updated his monthly payments in arrears but which he never attempted to update, and his
failure to deposit or make available any amount since the execution of Exh "B" on June 28, 1954 up to the present
or a period of 26 years, are all unreasonable and unjustified which altogether manifest clear bad faith and malice on
the part of respondent puzzle making inapplicable and unwarranted the benefits of paragraph 3, Art. 1191, N.C.C.
To allow and grant respondent an additional period for him to pay the balance of the purchase price, which balance
is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the deliberate
infringement of a contractual obligation that is repugnant and contrary to the stability, security and obligatory force of
contracts. Moreover, respondent's failure to pay the succeeding 116 monthly installments after paying only 4
monthly installments is a substantial and material breach on his part, not merely casual, which takes the case out of
the application of the benefits of pa paragraph 3, Art. 1191, N.C.C.

At any rate, the fact that respondent failed to comply with the suspensive condition which is the full payment of the
price through the punctual performance of the monthly payments rendered petitioner's obligation to sell ineffective
and, therefore, petitioner was entitled to repossess the property object of the contract, possession being a mere
incident to his right of ownership (Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., et al. 46 SCRA 381).
3. We further rule that there exists no just cause authorizing the fixing of a new period within which private
respondent may pay the balance of the purchase price. The equitable grounds or considerations which are the basis
of the respondent court in the fixing of an additional period because respondent had constructed valuable
improvements on the land, that he has built his house on the property worth P45,000.00 and placed adobe stone
walls with barbed wires around, do not warrant the fixing of an additional period. We cannot sanction this claim for
equity of the respondent for to grant the same would place the vendor at the mercy of the vendee who can easily
construct substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he elects
to rescind the contract by reason of the vendee's default or deliberate refusal to pay or continue paying the
purchase price of the land. Under this design, strategem or scheme, the vendee can cleverly and easily "improve
out" the vendor of his land.

More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it would not be fair
and reasonable to the petitioner to apply a solution that affords greater reciprocity of rights which the appealed
decision tried to effect between the parties. As matters stand, respondent has been enjoying the possession and
occupancy of the land without paying the other 116 monthly installments as they fall due. The scales of justice are
already tipped in respondent,s favor under the amended decision of the respondent court. It is only right that We
strive and search for the application of the law whereby every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, New
Civil Code)

In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has twisted the clear
import of his agreement with the petitioner in order to suit his ends and delay the fulfillment of his obligation to pay
the land he had enjoyed for the last 26 years, more than twice the period of ten years that he obliged himself to
complete payment of the price.

4. Respondent's contention that petitioner has not complied with his obligation to put up the necessary facilities in
the Rockville Subdivision is not sufficient nor does it constitute good reason to justify the grant of an additional
period of 90 days from entry of judgment within which respondent may pay the balance of the purchase price agreed
upon. The Judgment of the appellate court concedes that petitioner's failure to comply with his obligation to put up
the necessary facilities in the subdivision will not deter him from asking for the rescission of the agreement since his
obligation is not correlative with respondent's obligation to buy the property. Since this is so conceded, then the right
of the petitioner to rescind the agreement upon the happening or in the event that respondent fails or defaults in any
of the monthly installments would be rendered nugatory and ineffective. The right of rescission would then depend
upon an extraneous consideration which the law does not contemplate.

Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at the uniform
price of P17.00 per sq. meter making a total price of P12,325.00, it is highly doubtful if not improbable that aside
from his obligation to deliver title and transfer ownership to the respondent as a reciprocal obligation to that of the
respondent in paying the price in full and promptly as the installments fall due, petitioner would have assumed the
additional obligation "to provide the subdivision with streets ... provide said streets with street pavements concrete
curbs and gutters, fillings as required by regulations, adequate drainage facilities, tree plantings, adequate water
facilities" as required under Ordinance No. 2969 of Quezon City approved on May 11, 1956 (Answer of Defendant,
Record on Appeal, pp. 35-36) which was two years after the agreement in question was entered into June, 1y54.

The fact remains, however, that respondent has not protested to the petitioner nor to the authorities concerned the
alleged failure of petitioner to put up and provide such facilities in the subdivision because he knew too well that he
has paid only the aggregate sum of P890.56 which represents more or less 7% of the agreed price of P12,325.00
and that he has not paid the real estate taxes assessed by the government on his house erected on the property
under litigation. Neither has respondent made any allegation in his Answer and in all his pleadings before the court
up to the promulgation of the Resolution dated October 12, 1970 by the Court of Appeals, to the effect that he was
entitled to a new period within which to comply with his obligation, hence the Court could not proceed to do so
unless the Answer is first amended. (Gregorio Araneta, Inc. vs. Philippine Sugar Estates Development Co., Ltd.,
G.R. No. L-22558, May 31, 1967, 20 SCRA 330, 335). It is quite clear that it is already too late in the day for
respondent to claim an additional period within which to comply with his obligation.

Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real property
additional period within which to complete payment of the purchase price on grounds of equity and justice as in (1)
J.M. Tuazon Co., Inc. vs. Javier, 31 SCRA 829 where the vendee religiously satisfied the monthly installments for
eight years and paid a total of P4,134.08 including interests on the principal obligation of only P3,691.20, the price of
the land; after default, the vendee was willing to pay all arrears, in fact offered the same to the vendor; the court
granted an additional period of 60 days -from receipt of judgment for the vendee to make all installment in arrears
plus interest; (2) in Legarda Hermanos vs. Saldaña, 55 SCRA 324, the Court ruled that where one purchase, from a
subdivision owner two lots and has paid more than the value of one lot, the former is entitled to a certificate of title to
one lot in case of default.

On the other hand there are also cases where rescission was not granted and no new or additional period was
authorized. Thus, in Caridad Estates vs. Santero, 71 Phil. 114, the vendee paid, totalling P7,590.00 or about 25% of
the purchase price of P30,000.00 for the three lots involved and when the vendor demanded revocation upon the
vendee's default two years after, the vendee offered to pay the arears in check which the vendor refused; and the
Court sustained the revocation and ordered the vendee ousted from the possession of the land. In Ayala y Cia vs.
Arcache, 98 Phil. 273, the total price of the land was P457,404.00 payable in installments; the buyer initially paid
P100,000.00 or about 25% of the agreed price; the Court ordered rescission in view of the substantial breach and
granted no extension to the vendee to comply with his obligation.

The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must be so
substantial and fundamental to defeat the object of the parties" (Gregorio Araneta Inc. vs. Tuazon de Paterno, L-
2886, August 22, 1962; Villanueva vs. Yulo, L-12985, Dec. 29,1959); that "where time is not of the essence of t
agreement, a slight delay on the part of one party in the performance of his obligation is not a sufficient ground for
the rescission of the agreement"( Biando vs. Embestro L-11919, July 27, 1959; cases cited in Notes appended to
Universal Foods Corporation vs. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar
where the breach, delay or default was committed as early as in the payment of the fifth monthly installment for
November, 1954, that such failure continued and persisted the next month and every month thereafter in 1955,
1956, 1957 and year after year to the end of the ten-year period in 1964 (10 years is respondent's contention) and
even to this time, now more than twice as long a time as the original period without respondent adding, or even
offering to add a single centavo to the sum he had originally paid in 1954 which represents a mere 7% of the total
price agreed upon, equity and justice may not be invoked and applied. One who seeks equity and justice must come
to court with clean hands, which can hardly be said of the private respondent.

One final point, on the supposed substantial improvements erected on the land, respondent's house. To grant the
period to the respondent because of the substantial value of his house is to make the land an accessory to the
house. This is unjust and unconscionable since it is a rule in Our Law that buildings and constructions are regarded
as mere accessories to the land which is the principal, following the Roman maxim "omne quod solo inadeficatur
solo cedit" (Everything that is built on the soil yields to the soil).

Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial
court and the appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00 per
month from August, 1955 until respondent shall have actually vacated the premises, plus P2,000.00 as attorney's
fees. We affirm the same to be fair and reasonable. We also sustain the right of the petitioner to the possession of
the land, ordering thereby respondent to vacate the same and remove his house therefrom.

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12, 1970 is hereby
REVERSED. The decision of the respondent court dated April 23, 1970 is hereby REINSTATED and AFFIRMED,
with costs against private respondent.

SO ORDERED.

Teehankee, Makasiar, Fernandez, De Castro and Melencio-Herrera, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-61623 December 26, 1984

PEOPLE'S HOMESITE & HOUSING CORPORATION, petitioner-appellant,

vs.
COURT OF APPEALS, RIZALINO L. MENDOZA and ADELAIDA R. MENDOZA, respondents-appellees.

Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M. Brillantes for petitioner PHHC.

Tolentino, Cruz, Reyes, Lava and Manuel for private respondents.

AQUINO, J.:

The question in this case is whether the People's Homesite & Housing Corporation bound itself to sell to the
Mendoza spouses Lot 4 (Road) Pcs- 4564 of the revised consolidation subdivision plan with an area of 2,6,08.7
(2,503.7) square meters located at Diliman, Quezon City.

The PHHC board of directors on February 18, 1960 passed Resolution No. 513 wherein it stated "that subject to the
approval of the Quezon City Council of the above-mentioned Consolidation Subdivision Plan, Lot 4. containing
4,182.2 square meters be, as it is hereby awarded to Spouses Rizalino Mendoza and Adelaida Mendoza, at a price
of twenty-one pesos (P21.00) per square meter" and "that this award shall be subject to the approval of the OEC
(PHHC) Valuation Committee and higher authorities".

The city council disapproved the proposed consolidation subdivision plan on August 20, 1961 (Exh. 2). The said
spouses were advised by registered mail of the disapproval of the plan (Exh. 2-PHHC). Another subdivision plan
was prepared and submitted to the city council for approval. The revised plan, which included Lot 4, with a reduced
area of 2,608.7, was approved by the city council on February 25, 1964 (Exh. H).

On April 26, 1965 the PHHC board of directors passed a resolution recalling all awards of lots to persons who failed
to pay the deposit or down payment for the lots awarded to them (Exh. 5). The Mendozas never paid the price of the
lot nor made the 20% initial deposit.

On October 18, 1965 the PHHC board of directors passed Resolution No. 218, withdrawing the tentative award of
Lot 4 to the Mendoza -spouses under Resolution No. 513 and re-awarding said lot jointly and in equal shares to
Miguela Sto. Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo and Jose Fernandez, subject to existing
PHHC rules and regulations. The prices would be the same as those of the adjoining lots. The awardees were
required to deposit an amount equivalent to 20% of the total selling price (Exh. F).

The five awardees made the initial deposit. The corresponding deeds of sale were executed in their favor. The
subdivision of Lot 4 into five lots was approved by the city council and the Bureau of Lands.

On March 16, 1966 the Mendoza spouses asked for reconsideration of the withdrawal of the previous award to them
of Lot 4 and for the cancellation of the re-award of said lot to Sto. Domingo and four others. Before the request could
be acted upon, the spouses filed the instant action for specific performance and damages.

The trial court sustained the withdrawal of the award. The Mendozas appealed. The Appellate Court reversed that
decision and declared void the re-award of Lot 4 and the deeds of sale and directed the PHHC to sell to the
Mendozas Lot 4 with an area of 2,603.7 square meters at P21 a square meter and pay to them P4,000 as attorney's
fees and litigation expenses. The PHHC appealed to this Court.

The issue is whether there was a perfected sale of Lot 4, with the reduced area, to the Mendozas which they can
enforce against the PHHC by an action for specific performance.
We hold that there was no perfected sale of Lot 4. It was conditionally or contingently awarded to the Mendozas
subject to the approval by the city council of the proposed consolidation subdivision plan and the approval of the
award by the valuation committee and higher authorities.

The city council did not approve the subdivision plan. The Mendozas were advised in 1961 of the disapproval. In
1964, when the plan with the area of Lot 4 reduced to 2,608.7 square meters was approved, the Mendozas should
have manifested in writing their acceptance of the award for the purchase of Lot 4 just to show that they were still
interested in its purchase although the area was reduced and to obviate ally doubt on the matter. They did not do
so. The PHHC board of directors acted within its rights in withdrawing the tentative award.

"The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the
law governing the form of contracts." (Art. 1475, Civil Code).

"Son, sin embargo, excepcion a esta regla los casos en que por virtud de la voluntad de las partes o de la ley, se
celebra la venta bajo una condicion suspensiva, y en los cuales no se perfecciona la venta hasta el cumplimiento de
la condicion" (4 Castan Tobenas, Derecho Civil Español 8th ed. p. 81).

"In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which constitutes the condition. (Art. 1181, Civil Code). "Se llama
suspensive la condicion de la que depende la perfeccion, o sea el principio del contrato". (9 Giorgi, Teoria de las
Obligaciones, p. 57).

Under the facts of this case, we cannot say there was a meeting of minds on the purchase of Lot 4 with an area of
2,608.7 square meters at P21 a square meter.

The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not in point because the awardee in that case applied
for the purchase of the lot, paid the 10% deposit and a conditional contract to sell was executed in his favor. The
PHHC could not re-award that lot to another person.

WHEREFORE, the decision of the Appellate Court is reversed and set aside and the judgment of the trial court is
affirmed. No costs.

SO ORDERED.
 SECOND DIVISION

[G.R. No. 55613 : December 10, 1990.]

192 SCRA 169

ERNESTO DICHOSO, Petitioner, vs. The HONORABLE COURT OF APPEALS and TEODOLFO RAMOS, Respondents.

DECISION

PARAS, J.:

This is a petition for Certiorari of the July 8, 1980 decision ** of the Court of Appeals which affirmed the November 3,
1975 decision *** of the then Court of First Instance of Camarines Sur, the dispositive portion of which reads, as follows:

"WHEREFORE, judgment is hereby rendered declaring the plaintiff owner of the land described in paragraph 2 of the
complaint; and ordering the defendants, Ernesto Dichoso and Marcelino Enciso, to restitute the possession of the land
to the plaintiff and to deliver to the plaintiff 40 cavans of palay for every year from 1964 until the land in question is
returned to the latter or their equivalent value of P15.00 per cavan of palay. With costs against the said defendants.

SO ORDERED."

(CA Decision, Rollo, p. 14).- nad

The facts of the case are as follows:

The spouses Gaspar Prila and Maria Beldad, owned a 16.8716 hectare parcel of land at Cagmanaba, Ocampo, Camarines
Sur, surveyed in the name of Gaspar Prila under Plan Psu-61453 (Exhibit "2"). Upon the death of Maria Beldad in 1925,
the eastern half thereof was given to Vivencia Prila, their only daughter, and when Gaspar Prila died in 1943, the 1/2
portion pertaining to him was divided into three: one third to Vivencia Prila, one third to Asuncion Pacamara and the
other one-third to Custodia Parcia, as reflected in the Extra-judicial Settlement of Estate executed on November 22,
1945. Under the terms of said settlement, 4/6 of the entire land or 11.2477 hectares was adjudicated to Vivencia Prila,
1/6 or 2.8119 hectares to Asuncion Pacamara and another 1/6 or 2.8119 hectares to Custodio Parcia. This stipulation
was reiterated by both Vivencia Prila and Asuncion Pacamara in an agreement dated March 29, 1947 duly registered
with the Register of Deeds on June 22, 1947 and was furthermore confirmed judicially by the Court of First Instance of
Camarines Sur, in Civil Cases Nos. 3370 and 4468.

In 1955, Vivencia Prila sold her 4/6 portion with an area of 11.2477 hectares to the petitioner Ernesto Dichoso who had
been, ever since, in actual physical possession thereof, exercising various acts of ownership thereon.

On the other hand, in a Deed of Sale dated June 17, 1948, Asuncion Pacamara sold to the wife of private respondent
Teodolfo Ramos her 1/6 share, but the deed mentions the area of the lot sold as 4.1250 hectares; obviously in excess of
Pacamara's 1/6 share in the property of 2.8119 hectares. Hence, aforesaid 4.1250 hectares which Ramos claims to have
possessed, is now the land in question.

As described in Ramos' Deed of Sale dated June 17, 1948, the land bought by his wife is as follows:

"Cogon land situated in the barrio of Cagmanaba, Municipality of Pili, Province of Camarines Sur, with an area of
approximately 4 hectares, 12 ares, and 50 centares, and is bounded on the North by a dam, limited by the same dam,
measuring 120 meters; on the East, Cagmanaba River, limited by the same river, measuring 200 meters; on the South,
heirs of Gaspar Prila and Mariano Rodriguez, limited by an irrigation ditch, measuring 200 meters; on the West, heirs of
Gaspar Prila and limited by a big stone, measuring 350 meters." (Exhibit "A", Original Records)

The said Deed of Absolute Sale was notarized and registered with the Register of Deeds of Camarines Sur on August 2,
1948. Realty taxes for the years 1956-1960 were paid on July 22, 1960 and for the years 1961-1962 on November 18,
1964 (CA Decision, Rollo, p. 15).

Herein respondent Teodolfo Ramos took possession of the contested riceland upon its purchase. It yielded an average
harvest of 20 sacks of palay per planting which was twice a year. One-third of the harvest went to Ramos and the
remaining two-thirds was the tenant's share (Rollo, pp. 15-16).
On the other hand, petitioner Ernesto Dichoso claims that the disputed land is inside his property of 11.2477 hectares
which he acquired from Vivencia Prila for P2,000.00 and evidenced by a Deed of Absolute Sale dated February 9, 1955,
which was more particularly described as follows:

"BEING the eastern portion of Plan PSU-61453 BOUNDED on the North by Joaquin Interino before, now Mariano
Rodriguez; on the East by Cagdaga Creek, on the other side of which is Mariano Rodriguez, before heirs of Mariano
Fuentebella; on the South by heirs of Mariano Fuentebella before, now Mariano Rodriguez; on the West by the rest of
Plan PSU-61453, namely Asuncion Pacamara before, now Rodolfo Ramos. CONTAINING an area exactly ELEVEN (11)
hectares, TWENTY-FOUR (24) ares, and SEVENTY-SEVEN (77) centares. DECLARED under Tax Declaration No. 1648 in the
name of Alejandro Casin and assessed at P3,450.00. All boundaries are marked and delimited by B.L. and P.L.S. concrete
cylindrical monuments. The foregoing property is not registered under Act No. 496 nor under the Spanish Mortgage
Law; wherefore, the parties herein have agreed to register this instrument under the provisions of Act No. 3344, as
amended." (Exhibit "1", Original Records).:-cralaw

Sometime in 1962, Teodolfo Ramos, in the company of a constabulary soldier and two policemen from Ocampo,
allegedly seized the produce of the land consisting of 50 cavans of palay from the tenant of herein petitioner.

In retaliation, petitioner Dichoso also brought along with him in 1963, a constabulary soldier and appropriated 6 cavans
of the produce (CA Decision, Rollo, p. 17).

On December 12, 1967, respondent Ramos filed a complaint for quieting of title over the 4.1250 hectare riceland before
the then Court of First Instance of Camarines Sur which was docketed as Civil Case No. P-20. A commissioner was
appointed by the Court on March 17, 1970 to determine the area and boundaries of the respective claims of the parties
in accordance with their monuments of title. He submitted his report on March 31, 1970 which was approved by the
Court in its Order dated April 13, 1970.

As aforestated, the trial court rendered its decision on November 3, 1975 in favor of Ramos and against Dichoso (Rollo,
pp. 14-15).

On appeal, the Court of Appeals, on July 8, 1980, affirmed the decision of the trial court (CA Decision, Rollo, p. 14).

Hence, this petition.

Petitioner assigned two (2) errors, namely:

THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT PRIVATE RESPONDENT TEODOLFO RAMOS IS THE OWNER
OF THE 4.1250 HECTARE LAND IN QUESTION.

II

THE HONORABLE COURT OF APPEALS ERRED IN REQUIRING THE PETITIONER TO DELIVER FORTY (40) CAVANS ANNUALLY
TO PRIVATE RESPONDENT DESPITE ITS FINDING THAT ONLY ONE-THIRD (1/3) OF THE PRODUCE "WENT TO" THE
PLAINTIFF (RAMOS), TWO-THIRDS (2/3) BEING FOR HIS TENANT.

The petition is impressed with merit.

It is undisputed that the land in question is part of the bigger mass of land measuring 16.8716 hectares originally owned
by the spouses Gaspar Prila and Maria Beldad, and that this mass of land was adjudicated among the heirs in the
proportion aforementioned. And that Dichoso derived his title from Vivencia Prila while Ramos acquired his title from
Asuncion Pacamara.

Dichoso contends that his claim is limited to 11.2477 hectares portion sold to him by Vivencia Prila which is exactly four-
sixth (4/6) of the 16.8716 hectares originally owned by their common predecessor-in interest. Ramos acquired his title
from Asuncion Pacamara, who inherited one-sixth (1/6) of the 16.8716 hectares mass of land. Inasmuch as the share of
Asuncion Pacamara is limited to one-sixth (1/6) of the 16.8716 hectares, or 2.8119 hectares, she cannot legally transmit
to Ramos an area in excess thereof.

Ramos, on the other hand, argues that while it is true that Asuncion Pacamara's share is one-sixth (1/6) pursuant to the
Extra-Judicial Settlement Agreement, but on a subsequent agreement (Exhibit "13"), Vivencia Prila ceded to Asuncion
Pacamara one hectare more located on the northern portion of the land covered by Original Certificate of Title No.
1176. In effect, Asuncion Pacamara owns at least six (6) hectares of land. Furthermore, the Deed of Conveyance was
registered on August 2, 1948 and the property has been declared for tax purposes in the name of Ramos' wife. Above all
these, the question raised by Dichoso is purely a question of fact.:- nad

The records show, however, that the one hectare ceded by Vivencia Prila to Asuncion Pacamara on the northern portion
of the land supposed to be covered by Original Certificate of Title No. 1176, is not the same land covered by said Original
Certificate of Title (Original Exhibits, Exhibit "3", p. 1) Therefore, while it may be true that Asuncion Pacamara may have
been adjudicated a total of six (6) hectares of land, but what is covered by Original Certificate of Title No. 1176 pursuant
to the Extra-Judicial Settlement Agreement and the agreement subsequent thereto insofar as Vivencia Prila's share is
concerned, remains to be one-sixth (1/6) or 2.8119 hectares (Original Exhibits, Exhibit "3", p. 4).

The striking similarities in the boundaries between the parcel of land in dispute and the property of Ramos' wife,
particularly the boundaries on the North, which is the dam, and on the East, which is the Cagmanaba River, and the fact
that the deed of sale in favor of Ramos' wife was executed and registered ahead of that of Dichoso's deed of sale, led
the trial court to conclude that the property in dispute tallies with the land bought by Ramos' wife. It must be pointed
out, however, that the deed of sale in favor of Ramos' wife explicitly described the property as being bounded "on the
South (by) heirs of Gaspar Prila and Mariano Rodriguez, limited by an irrigation ditch, measuring 200 meters; on the
West (by) heirs of Gaspar Prila, limited by a big stone, measuring 350 meters." The commissioner's report (Exhibit "11")
identified the land claimed by Ramos and indicated in the sketch as the portion surrounded by a red line inside Lot-3,
the portion pertaining to Dichoso. As indicated in the said sketch the land of Dichoso is labelled as Lots-1 and 3 and the
portion labelled as Lot-2 is the land of Ramos. A further scrutiny of Exhibit "11" shows that the area being claimed by
Ramos, which was enclosed by a red line, went beyond the irrigation ditch. This is contrary to the technical description in
the deed of sale in favor of Ramos' wife as to the boundary on the southern portion of the property (Original Exhibits,
Exhibit "11").

While the jurisdiction of this Court in cases brought from the Court of Appeals is limited to the review of errors of law,
said appellate court's finding of facts being conclusive, there are exceptions, among which are: (1) when the conclusion
is a finding grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly absurd,
mistaken, or impossible; (3) . . .; (4) when the judgment is premised on a misapprehension of facts; (5) . . ., (Rizal
Cement, Co., Inc. vs. Villareal, 135 SCRA 15, February 28, 1985).

This Court has held that in cases of conflict between areas and boundaries, it is the latter which should prevail. What
really defines a piece of ground is not the area, calculated with more or less certainty, mentioned in its description, but
the boundaries therein laid down, as enclosing the land and indicating its limits (Erico v. Chigas, 98 SCRA 575, July 16,
1980). In a contract of sale of land in a mass, it is well established that the specific boundaries stated in the contract
must control over any statement with respect to the area contained within its boundaries. It is not of vital consequence
that a deed or contract of sale of land should disclose the area with mathematical accuracy. It is sufficient if its extent is
objectively indicated with sufficient precision to enable one to identify it. An error as to the superficial area is
immaterial. (Loyola v. Bartolome, 39 Phil. 544, January 24, 1919 reiterated in Erico v. Chigas, supra).

With reference to the second error, petitioner alleged that since respondent's share of the harvest is only one-third
(1/3), the remaining two-thirds (2/3) representing his tenant's share, only the one-third (1/3) of the annual harvest must
be awarded to Ramos.

Ramos, on the other hand, argues that his tenant will be deprived of his share if only one-third (1/3) of the harvest will
be awarded to him.

Actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of
certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must
depend upon competent proof that they have suffered and on evidence of the actual amount thereof (Dee Hua Liong
Electrical Corporation v. Reyes, 145 SCRA 713, November 25, 1986).: nad

It is undisputed that the land in question yields an average of twenty (20) sacks of palay per planting and that it is
planted to palay twice a year. Ramos' share of the harvest is only one-third (1/3). In view of his dispossession from 1964
and the fact that his tenant has vacated the land that same year (TSN, Hearing of February 10, 1971, pp. 2-3), he cannot
allege that his tenant is entitled to his two-thirds (2/3) share.
PREMISES CONSIDERED, the decision appealed from is hereby SET ASIDE and the area of the land awarded to herein
respondent Ramos is hereby LIMITED to 2.8119 hectares in accordance with the boundaries indicated in the deed of sale
in favor of his wife, and the award of actual damages is hereby REDUCED in proportion to the area that may be awarded
to Ramos and to his one-third (1/3) participation in the harvests, from 1964 up to the time the land appurtenant thereto
is returned to the respondent.

SO ORDERED.

Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.