Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 118203 July 5, 1996

EMILIO A. SALAZAR and TERESITA DIZON, petitioners,
vs.
COURT OF APPEALS and JONETTE BORRES, respondents.

DAVIDE, JR., J.:p

Petitioners seek to set aside the decision 1 of 29 November 1994 of the Court of Appeals in CAG.R. CV No. 40197, which reversed the decision 2 of 3 September 1992 of Branch 66 of the
Regional Trial Court (RTC) of Makati, Metro Manila, in Civil Case No. 89-4468.
The primary issues presented for our resolution are whether (a) the so-called Deed of Absolute
Sale executed by petitioner Emilio A. Salazar in favor of private respondent Jonette Borres is a
perfected contract of sale or a mere contract to sell, and (b) the action for specific performance
which the latter filed will lie to compel the former to deliver the Deed of Absolute Sale, the
Transfer Certificates of Title, and other documents relative to the property in question.
The factual antecedents of this case, as summarized by the trial court, are as follows:
That defendant Dr. Salazar is the owner of the two (2) parcels of land with
improvements thereon located at 2914 Finlandia Street, Makati, Metro Manila and
covered by Transfer Certificate of Title Nos. 31038 and 31039 of the Registry of
Deeds of Makati; that Dr. Salazar offered to sell his properties to Jonette Borres
for One Million pesos (P1,000,000.00) (TSN pp. 7 and 8, November 5, 1991).
The initial proposal took place at the Dimsum Restaurant, Makati, whereby it was
proposed that the payment of the consideration was to be made within six (6)
months but was objected to by Dr. Salazar and he reduced it to a three (3) months
period (TSN Direct Examination on Jonette Borres p. 22, November 12, 1991);
that sometime on [May] 28, 1989, Jonette Borres together with a certain Emilio T.
Salazar went to see Dr. Salazar at the latter's residence in Bataan bearing a copy of
a Deed of Absolute Sale (Exhibit ("C") and Deed of Warranty (Exhibit "D") but
Dr. Salazar refused to sign because Jonette Borres did not have the money ready
then. In said occasion Dr. Salazar further reduced the period within which plaintiff
may purchase the lots, to one (1) month or up to June 30, 1989 (TSN Direct
Examination on Jonette Borres November 5, [1991], pp. 10 and 11).
Jonette Borres then met again Dr. Salazar on June 2, 1989 at the Ninoy
International Airport who was about to leave for the United States of America
where he is a resident. Jonette Borres had with her the Deed of Absolute Sale and
asked Dr. Salazar to sign said document. Dr. Salazar reluctantly agreed to sign the
document provided that Jonette Borres pays one half (1/2) of the consideration or
P500,000.00 in "cash" by June 15, 1989 and the balance was payable on June 30,
1989 (TSN Direct Examination on Emilio A. Salazar, May 21, [1991], p. 9; TSN
Cross Examination on Jonette Borres, November 12, [1991], pp. 29 and 30). It

was during this occasion that Dr. Salazar again emphasized to Jonette Borres that
he needed the money because he was then buying a property in the United States
(TSN pp. 15-20, November 5, 1991; pp. 22 and 23, May 21, 1991; and pp. 56-57,
May 21, 1991).
Plaintiff agreed to the above conditions (TSN Cross Examination on Jonette
Borres November 12, 1989, p. 32) and Dr. Salazar constituted co-defendant
Teresa Dizon as custodian at the Deed of Absolute Sale (Exhibit "C") together
with the Titles of the Land in question with the instruction to Teresa Dizon not to
surrender said documents to Jonette Borres until upon payment of the full price in
"cash" (TSN Direct Examination on Emilio A. Salazar, May 21, [1991], p. 11).
On June 14, 1989 Jonette Borres informed defendant Dizon that she will be able
to pay the full amount of P1,000,000.00 on June 15, 1989 (TSN Direct
Examination Jonette Borres, November 5, [1991], p. 25) and on the next day, she
then went to the house of Teresa Dizon to see and get the documents entrusted to
her by Dr. Salazar. The documents not being in Dizon's possession, they agreed to
meet at Metro Bank West Avenue Branch to get the documents and then to
proceed to Makati to meet the plaintiff's business partner a certain Balao who
allegedly gave plaintiff a Far East Bank and Trust Company check for the amount
of P1,500,000.00 (Exhibit "F") with which to buy the property (TSN Direct
Examination on Jonette Borres November 5, [1991], pp. 30, 32 and 33). For some
reason or another Jonette Borres and defendant Dizon failed to proceed to Makati.
In the meantime or on June 16, 1992, Dr. Salazar made an overseas call to codefendant Dizon to inquire if Jonette Borres had already paid the down payment
of P500,000.00 and Teresa Dizon replied to Dr. Salazar that Jonette Borres had
not paid the down payment. Dr. Salazar then ordered Dizon to stop the sale (TSN
Direct Examination on Emilio A. Salazar, May 21, [1991], pp. 12 and 13).
As maybe seen from the evidence presented by the plaintiff and the defendants,
the terms and conditions of the agreement for the sale of the two (2) parcels of
land owned by Dr. Salazar in favor of the plaintiff Jonette Borres, are that the
purchase price is in the amount of P1,000,000.00, fifty percent (50%) of which or
P500,000.00 was to paid on or before June 15, 1989 while the balance thereof was
to be paid on or before June 30, 1989 (TSN May 21, 1991, p. 27); that the
payment was to be made in "cash" (TSN May 21, 1991, p. 55); that the place of
payment is at defendant's bank, Metropolitan Bank Quezon City Branch (TSN
October 21, 1991, p. 23). 3
The trial court held that the Deed of Absolute Sale was in reality a contract to sell, and that since
Borres failed to pay Salazar the downpayment of P500,000.00 on the agreed date, 15 June 1989,
the complaint for specific performance cannot prosper. It then dismissed the complaint and
ordered Borres to pay the petitioners P5,000.00 each as attorney's fees and litigation expenses. 4
In ruling that the Deed of Absolute Sale was a contract to sell, the trial court considered pertinent
the circumstances attending its execution. First, that the Deed of Absolute Sale was "reluctantly
signed" by Dr. Salazar, who was then about to leave for the United States of America, in order
that if Borres would comply with the terms and conditions of their agreement, he need not come
to the Philippines just to sign it; hence, it does not bind Dr. Salazar until the suspensive
condition, i.e., the downpayment of P500,000.00 to be effected on or before 15 June 1989 and
the balance to be paid on or before 30 June 1989, is complied with. Second, Borres was not, in
fact, financially prepared to buy the parcels of land on or before 15 June 1989 considering that

[s]he was just looking for possible buyers or business partners. First, she
requested that the pertinent documents like the Deed of Sale (Exhibit "C") and the
corresponding Transfer Certificates of Titles Nos. 31038 and 31039 of the
Register of Deeds of Rizal (Exhibits "A" and "B") be entrusted to her even before
making the downpayment of P500,000.00 purposely to raise the amount needed.
When Dr. Salazar refused her request, Jonette Borres approached a certain
businessman P.D. Dionisio for loan and was turned down when Jonette Borres
cannot [sic] produce the Deed of Absolute Sale and the Titles of the parcels of
land in question (TSN November 5, 1991, pp. 20-25). Then she approached a
certain Benjamin Balao a realtor developer. Although Balao had issued to her his
check in the amount of P1,500,000.00 (Exhibit "F") he instructed his bank not to
honor his check without his presence (TSN November 14, 1991, pp. 81 to 84).
Jonette Borres admitted that she was not in a position to encash the check (Exhibit
"F") although it was payable to "cash" (TSN November 21, 1991, pp. 41 and
44). 5
Salazar's victory was short-lived. On Borre's appeal from the decision of the trial court, the Court
of Appeals, in its challenged decision of 29 November 1994, ruled that the Deed of Absolute
Sale, whose existence and due execution was undisputed, is perfected contract of sale, with a
definite object and a specific consideration which the parties had agreed upon. As proof that it is
a contract of sale and not a contract to sell, the Court of Appeals stressed the absence of
a proviso that the title to the property is reserved in the vendor until full payment of the purchase
price or that the vendor may unilaterally rescind the contract the moment the vendee fails to pay
within the fixed period. 6 Salazar's reluctance to sign it is of no moment, since there is no
allegation of fraud, forgery, or duress. And even assuming that Borres failed to pay the contract
price, such failure did not convert the contract into one without cause or consideration as to
vitiate the validity of the contract, it not being essential for the existence of cause that payment or
full payment be made at the time of the contract. Neither did such failure ipso facto resolve the
contract in question. The remedy of the vendor, Dr. Emilio A. Salazar, is to demand specific
performance or rescission, with damages in either case. On the other hand, the vendee, Jonette
Borres, may demand specific performance, i.e., compel the vendor to accept the price and deliver
the title of the land object of the contract.
The Court of Appeals disagreed with the trial court's finding that Borres was not in a position to
pay the downpayment because
[o]n June 15, 1989, plaintiff-appellant had a Far East Bank check payable to her
order, in the amount of P1,500,000.00 more than the whole agreed purchase
price of P1,000,000.00. Defendant-appellee Teresa Dizon agreed (on June 14,
1989) to meet her on June 15, 1989, at Metro Bank West and thereafter to proceed
to Makati in order to encash the Far East Bank check. Defendant-appellee Teresa
Dizon somehow managed to manipulate things by making herself unavailable so
that the payment could not be made on June 15, 1989. (TSN, Nov. 5, 1991, pp.
27-41). On the next day, June 16, 1989, defendant-appellee Teresa Dizon
informed plaintiff-appellant that defendant-appellee Dr. Emilio A. Salazar called
up in the evening of June 15, 1989 asking whether plaintiff-appellant paid on that
day and upon being answered in the negative, said vendor said that he is revoking
the contract. (TSN, Nov. 5, 1991, pp. 41-42). Defendant-appellee Teresa Dizon
having her own interested buyer, evidently acted in bad faith, tried and indeed
succeeded to frustrate the efforts of plaintiff-appellant to comply with her
reciprocal obligation to pay the agreed purchase price.
The fact that the Far East Bank check was payable to the Order of plaintiffappellant, and it covers the amount of P1,500,000.00 which is much more than
the agreed purchase price of P1,000,000.00 reveals that plaintiff-appellant was

financially prepared to comply with her reciprocal obligation. That plaintiffappellant filed the present suit for specific performance on July 6, 1989, bolsters
the fact that she is really willing and able to pay the agreed purchase price. How
and from whom she borrowed/obtained the said amount, is of no consequence. 7
Accordingly, the respondent Court reversed the decision of the trial court and handed down a
new judgment ordering Emilio A. Salazar to accept from Jonette Borres the payment
representing the purchase price in the amount of P1 million and thereafter to comply with his
reciprocal obligation to surrender the original copies of the deed of absolute sale and torrens title
covering the parcels of land subject of the contract. Finding petitioner Teresita Dizon to have
"acted in bad faith in frustrating the efforts" of Borres to comply with her obligation to pay the
purchase price, the appellate court ordered her to pay Borres the amounts of P80,000.00 as moral
damages; P50,000.00 as exemplary damages; and P100,000.00 as attorney's fees.
Unable to accept the reversal of the trial court's decision, the petitioners filed the instant petition
wherein they submit that the Court of Appeals committed grave and serious errors:
A. . . . in relying on the Deed of Absolute Sale dated May 30, 1989
notwithstanding the fact that:
1. BORRES EXECUTED A DEED OF WARRANTY (EXHS. "D" AND "2")
STATING THEREIN THAT UNTIL AND UNLESS THE AMOUNT OF
P1,000,000.00 REPRESENTING THE PURCHASE PRICE FOR THAT
PARCELS OF LAND COVERED BY TCT NOS. S-31038 AND S-31039 BE
PAID BY HER TO SALAZAR, SHE HAS NO RIGHT WHATSOEVER TO THE
ORIGINAL COPIES OF THE DEED OF ABSOLUTE SALE AND THAT SHE
HAS NO LEGAL RIGHT WHATSOEVER TO ANY AND ALL PERTINENT
RECORDS OF THE ABOVE-MENTIONED LOTS;
2. UPON HERE BEHEST, BORRES WAS GIVEN A PHOTOCOPY OF THE
DEED OF ABSOLUTE SALE BY DIZON BUT ONLY AFTER THE LATTER
ERASED THE SIGNATURE OF SALAZAR AS THE VENDEE THEREIN.
3. BORRES HAD NOT PAID ANY PORTION OF THE AGREED PURCHASE
PRICE AND THUS RENDERS THE DEED OF ABSOLUTE SALE VOID AB
INITIO.
B. . . . in concluding that the agreement between SALAZAR and BORRES is a
contract of sale and thus, perfected upon agreement on the subject matter and
consideration, notwithstanding the fact that:
1. THE AGREEMENT BETWEEN THE PARTIES IS ESSENTIALLY A
CONTRACT TO SELL SUBJECT TO A SUSPENSIVE CONDITION, THE
BIRTH OR EFFECTIVITY OF WHICH SHOULD TAKE PLACE ONLY IF
AND WHEN THE EVENT WHICH CONSTITUTES THE CONDITION
HAPPENS OR IS FULFILLED. SINCE BORRES FAILED TO COMPLY WITH
HER OBLIGATION, THE AGREEMENT TO SELL BECAME STILLBORN;
2. THERE WAS AN EXPRESS AGREEMENT BETWEEN THE PARTIES
THAT BORRES SHALL BE ENTITLED TO THE PROPERTY OR ANY
RECORDS PERTAINING THERETO OR ORIGINAL COPIES OF THE DEED
OF ABSOLUTE SALE ONLY UPON FULL PAYMENT OF THE PURCHASE
PRICE.

C. . . . in holding that DIZON acted in bad faith and succeeded to frustrate the
efforts of BORRES to comply with her reciprocal obligation to pay the purchase
price notwithstanding the fact that:
1. AT THE TIME THAT BORRES WAS OBLIGED TO PAY AT LEAST 50% OF
THE PURCHASE PRICE OR ON JUNE 15, 1989, SHE WAS NOT READY,
WILLING AND ABLE TO DO SO. EVEN ASSUMING FOR THE SAKE OF
ARGUMENT THAT THE LATTER HAD THE FINANCIAL CAPABILITY TO
MEET HER OBLIGATION, THE FACT REMAINS THAT SHE FAILED TO
PROPERLY TENDER PAYMENT OF HER OBLIGATION AND IN CASE
TENDER OF PAYMENT WAS REFUSED, TO CONSIGN THE SAME IN
COURT;
2. DIZON HAD NO REASON TO FRUSTRATE THE EFFORTS OF BORRES
TO COMPLY WITH HER OBLIGATION TO PAY THE AGREED PURCHASE
PRICE SINCE SHE WAS MERELY CONSTITUTED AS CUSTODIAN OF
THE DEED OF ABSOLUTE SALE AND TITLES OF THE PROPERTY WITH
SPECIFIC INSTRUCTIONS TO RELEASE THE SAME TO BORRES ONLY
UPON RECEIPT OF THE PURCHASE PRICE IN FULL AND IN CASH
WITHIN THE AGREED PERIOD.
D. . . . in ordering Dizon to pay Borres the amount of P80,000.00 moral damages;
P50,000.00 exemplary damages and P100,000.00 as attorney's fees by way of
damages notwithstanding the fact that the evidence adduced before the trial court
clearly shows that BORRES had no cause of action against the former. 8
We shall first the issue of whether the agreement between petitioner Salazar and private
respondent Borres is acontract of sale or a contract to sell.
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing
sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to
the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the
vendor loses ownership over the property and cannot recover it until and unless the contract is
resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until full
payment of the price. In the latter contract, payment of the price is a positive suspensive
condition, failure of which is not a breach but an event prevents the obligation of the vendor to
convey title from becoming effective. 9
If we are to consider only the Deed of Absolute Sale, 10 we can easily say that the contract
between Salazar and Borres is one of sale. However, the Deed of Warranty 11 and the oral
testimony on the circumstances surrounding the execution of the Deed of Absolute Sale, as well
as the other pieces of evidence submitted by Borres, sustain the finding and conclusion of the
trial court that the true agreement between the parties was a contract to sell in that the true intent
of Salazar was to transfer ownership of the property to Borres only after the latter pays the full
consideration.
From the beginning to the end, such intention of Salazar was unequivocal and manifest. He
rejected Borre's offer to pay the consideration within six months to give her time to secure a loan.
When Borres proposed that he lend her the certificates of title of the lots so that she could secure
a loan from the banks in Manila and be able to pay, within three months, 12 the consideration out
of the proceeds of the loan, Salazar agreed provided that she would assure him that the title
would not pass to her until he is fully paid. Borres forthwith promised to execute a warranty. She
then prepared a Deed of Absolute Sale for Salazar's signature and a Deed of Warranty for her
signature. When finally she presented to him the Deed of Absolute Sale, Salazar did not sign it
and insisted that he be paid the purchase price at the end of June 1989; he further told her that he

would not lend her the certificates of title until he is so paid. He signed it only after Borres
agreed to pay by the end of June 1989 at a bank in Makati. But he did not give the Deed of
Absolute Sale to her; instead, he told her to just meet him at the Ninoy Aquino International
Airport on 2 June 1989, when he would leave for the United States of America, so she would
know to whom he would entrust the document and other papers relative to the property. We
quote verbatim Borre's own testimony on direct examination upon these points:
Q Have you met the owner of the lot mentioned a while ago?
A Yes, your Honor, I met Dr. Salazar, the owner, sometime last
week of April, 1989 at Dimsum Restaurant.
Q You met at Dimsum, in what particular place was that?
A We met at Dimsum Restaurant in Makati after I was called by
Emilio T. Salazar to meet at Dimsum because Dr. Salazar wanted
to sell the property and he wanted to talk to you [sic].
COURT:
Talk to you?
A To discuss the matter of sale to me at Dimsum Sir
ATTY. BORRES:
Q And so you really met at Dimsum.
A Yes, Ma'am.
Q What transpired at Dimsum?
A Dr. Salazar offered me to buy the properties for a total of ONE
MILLION PESOS (P1,000,000.00) excluding all and any other
expenses that may be involved in the transfer of the properties in
case I am interested to by [sic], in case Atty. Borres wanted to buy.
Q What then was your reply?
A I am interested to buy.
Q Dr. Salazar. . . I asked . . . what did Dr. Salazar say after that?
A I answered Dr. Salazar that I could buy or able to buy the
properties within six (6) months because I have to go home to the
province to secure a loan.
Q What did Dr. Salazar say regarding your proposal?
A I told Dr. Salazar. Dr. Salazar said that he could not wait for that
six (6) months is a very long time.
Q What else did you say?
A I told Dr. Salazar that "it is possible I can pay within three (3)
months' time if your can lend me the title of your property because

banks here in Manila usually release loans in three months' time

and I will have less problem to complete the payment of ONE
MILLION PESOS (P1,000,000.00)."
Q So, what did Dr. Salazar say?
A Dr. Salazar said that "if it is the best for our transaction I can
lend you the title provided I can be assured that the title will not
pass on you until you are fully paid.
Q What was your answer then?
A I told Dr. Salazar that I can execute a warranty to the effect that
the property could not be transferred to me until I have fully paid
him.
Q What did Dr. Salazar say?
A Dr. Salazar said "I will agree to that"
COURT:
Dr. Salazar told you that he is agreeable to the proposal.
A Yes, Dr. Salazar said "you prepare a craft, the necessary
document and bring it to Bataan.
ATTY. BORRES:
Q And what was your answer to Dr. Salazar
A I answered Dr. Salazar that "I will be ever willing to go to
Bataan any time you wanted me to go.
Q And you really did go to Bataan.
A Yes, I did.
xxx xxx xxx
ATTY BORRES:
Q And what happened while there in Bataan?
xxx xxx xxx
Q And what happened while you got all seated in the sala of Dr.
Salazar.
A I showed him a document which he instructed me to prepare and
he has read it and agreed to the Deed of Absolute Sale and the
warranty I made. He gave me back the documents for signing.
Q And you did sign the document?
A Yes, I did sign it and passed it on to Dr. Salazar.

Q After you passed it to Dr. Salazar, what happened?

A Dr. Salazar did not sign the document and told me that he is only
going to sign it if I am going to pay by the end of June and that he
could not lend me the title and he saidhe is going to sign it and not
to give me a copy until the purchase price is fully paid.
Q And what was your reaction with the statement?
A I said "what about the loan that we have a greed at Dimsum if
you will not lend me the title and the document that we have
signed new?" Dr. Salazar said "I could not lend you the title and I
care less how your are going to loan the property and raise the
money you are going to pay me, what is important to me is you
pay me the whole amount of One Million Pesos (P1,000,000.00)
not late than June 30, 1989."
Q And what did you say?
A Since I could not do anything and I really wanted to buy the
property, I agreed to Dr. Salazar's condition that I pay the property
by the end of June and I will pay only at the bank in Makati.
Q And what did Dr. Salazar say?
A Dr. Salazar said "okey I will sign this and have this notarized but
I could not lend you and never have a [copy] of the title as well as
the Deed of Sale and you just wait oat NAIA and wait if you could
have this document because I am leaving on June 2 for the US.
You meet me there".
Q And after that what did Dr. Salazar do?
A It was only when that he signed the document after I have agreed
to his proposal but he was very much stand [sic] to the payments
and he was no longer the same when I met him at Dimsum. 13
Clearly then, the original intention in the execution of the Deed of Absolute Sale was to
implement the proposal of Borres that Salazar "lend" her the transfer certificates of title so that
she could secure a loan from a bank in Manila whose proceeds would be applied to the payment
of the purchase price of the property, and the original purpose of the Deed of Warranty was to
assure Salazar that, as demanded by him, title to the lots will not pass to her until she pays the
full consideration. The lending of the certificates of title for the above purpose could have been
accomplished through a special power of attorney under which Salazar will authorize her to
obtain a loan and to mortgage the property as security therefor. But, perhaps anticipating
Salazar's departure to the United States of America where he resides, Borres, who is a lawyer,
prepared instead a Deed of Absolute Sale and Deed of Warranty. Notwithstanding Borre's
deliberate characterizations of the documents, we are convinced that they were prepared in
connection with and in the implementation of the agreement regarding the lending of the
certificates of title. They do not weaken the adamantine position of Salazar not to part with his
title to the two lots until full payment of the agreed price therefor. Borre's execution of the Deed
of Warranty was in fact a recognition of Salazar's position. Despite its careful wordings and
phraseology to make some sort of distinction between Borre's right to the ownership or title over
the lots on the one hand, and her right to possess or keep the Deed of Absolute Sale and the other

documents relative to the lots, the totality of the Deed of Warranty manifests an indubitable
recognition by Borres of the aforementioned intention of Salazar. She declares therein as follows:
1. That until and unless the amount of ONE MILLION (P1,000,000.00) PESOS
representing the purchase price for that parcels of land covered by Transfer
Certificate of Title Nos. S-31038 and S-31039 be paid by the undersigned unto
Dr. Emilio A. Salazar, the undersigned has no absolute right whatsoever to the
original copies of the Deed of Absolute Sale executed by said Dr. Emilio A.
Salazar date May ____, 1989;
2. That she has no legal right whatsoever to any and all pertinent records of the
aforementioned lots;
3. That upon payment of the aforementioned amount, Dr. Emilio A. Salazar or his
representative is obliged to surrender the original of these presents together with
all the original documents and titles covering the sale of the aforementioned lots
unto the undersigned. 14
Then, too, in her Memorandum of Agreement with Monteland Realty Corporation, 15 dated 15
June 1989, Borres explicitly mentioned only her "rights and interests" under the Deed of
Absolute Sale signed by Salazar and therein conveyed, transferred, and assigned to the said
corporation only such "rights and interest." Also worth noting is the statement in the
second whereas clause of the Memorandum of Agreement that Monteland Realty Corporation
has full knowledge of the sales [sic] and conditions of the SELLER-OWNER of
the property . . . that the buyer [Borres] has an obligation to pay DR. EMILIO
SALAZAR the amount of ONE MILLION PESOS (P1,000,000.00) and that there
is already a Deed of Absolute Deed of [sic] Sale in favor of [Borres] of which
both copies of the titles of the properties for sale and all documents including the
Deed of Absolute Sale aforementioned are including the Deed of Absolute Sale
aforementioned are under the custody of MS. TERESA DIZON who will only
release the Title and the Deed of Absolute Sale after the obligation of [Borres] is
fully
paid. 16
The withholding by Salazar through Dizon of the Deed of Absolute Sale, the certificates of title,
and all other documents relative to the lots is an additional indubitable proof that Salazar did not
transfer to Borres either by actual or constructive delivery the ownership of the two lots. While
generally the execution of a deed of absolute sale constitutes constructive delivery of ownership,
the withholding by the vendor of that deed under explicit agreement that it be delivered together
with the certificates of titles to the vendee only upon the latter's full payment of the consideration
amounts to a suspension of the effectivity of the deed of sale as a binding contract.
Undoubtedly, Salazar and Borres mutually agreed that despite the Deed of Absolute Sale title to
the two lots in question was not to pass to the latter until full payment of the consideration of P1
million. The form of the instrument cannot prevail over the true intent of the parties as
established by the evidence.
Accordingly, since Borres was unable to pay the consideration, which was a suspensive
condition, Salazar cannot be compelled to deliver to her the deed of sale, certificates of title, and
other documents concerning the two lots. In other words, no right in her favor and no
corresponding obligation on the part of Salazar were created. Article 1181 of the Civil Code
provides:

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.
Even granting for the sake of argument that, as ruled by the court of Appeals, the agreement of
Salazar and Borres as evidenced by the Deed of Absolute Sale was a perfected contract of sale,
Borre's action for specific performance must likewise fail. We are in full accord with the trial
court and, perforce, disagree with the Court of Appeals, that Borres was not ready to pay
P500,000.00 on or before 15 June 1989. That Borres had a check of P1.5 million, or of more than
the full consideration of the two lots, is of no moment. The check, 17 dated 15 June 1989, is a
crossed check payable to "Atty. Jonette Borres," or herein private respondent. The crossing is of
simple type two parallel lines at the upper left hand corner without the words "and company"
between the lines. Accordingly, it cannot be paid to anyone except Borres, or it can be deposited
with a bank where she keeps an account. 18
There is absolutely no evidence that Borres encashed the check and tendered to Salazar thru
Dizon the sum of P500,000.00 on 15 June 1989. On the contrary, the check itself
was cancelled as shown by the word cancelledhandwritten across it. Moreover, the delivery of
the check by Monteland Realty Corporation through Balao was not unconditional. Per the
receipt 19 Borres signed on 15 June 1989, encashment of the check "it subject to the verifications
as to the authenticity of documents pertaining to the subject property." Neither is there evidence
that Borres paid the downpayment on 15 June 1989 with money she got from other sources. No
payment appears to have been made thereafter or during the pendency of the case before the trial
court or the Court of Appeals. She should have consigned the payment in court pursuant to
Article 1256 of the Civil Code for her to be released from her obligation and, consequently, exact
fulfillment by Salazar of his corresponding obligation.
The challenged decision of the Court of Appeals must then be reversed. That of the trial court
must be affirmed, with the modification consisting in the deletion of the award of attorney's fees
in favor of the petitioners which we find to be without basis. The award of attorney's fees as
damages is the exception rather than the rule; it is not to be given to the defendant every time the
latter prevails. The right to litigate is so precious that a penalty should not be charged on those
who may exercise it erroneously, unless, of course such party acted in bad faith. 20
WHEREFORE, the instant petition is hereby GRANTED. The challenged decision of 29
November 1994 of the Court of Appeals in CA-G.R. CV No. 40197 is REVERSED and SET
ASIDE, and the decision of 3 September 1992 of Branch 66 of the Regional Trial Court of
Manila in Civil Case No. 89-4468 is AFFIRMED, subject to the modification that the award for
attorney's fees is deleted.
No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

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 attorneyin-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

P1,190,000.00 Balance

Down

payment

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. "F3"; 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, reraffled 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 cobuyer 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.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 119255

April 9, 2003

TOMAS K. CHUA, petitioner,

vs.
COURT OF APPEALS and ENCARNACION VALDES-CHOY, respondents.
CARPIO, J.:
The Case
This is a petition for review on certiorari seeking to reverse the decision1 of the Court of Appeals
in an action for specific performance2 filed in the Regional Trial Court3 by petitioner Tomas K.
Chua ("Chua") against respondent Encarnacion Valdes-Choy ("Valdes-Choy"). Chua sought to

compel Valdes-Choy to consummate the sale of her paraphernal house and lot in Makati City.
The Court of Appeals reversed the decision4 rendered by the trial court in favor of Chua.
The Facts
Valdes-Choy advertised for sale her paraphernal house and lot ("Property") with an area of 718
square meters located at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo Village,
Makati City. The Property is covered by Transfer Certificate of Title No. 162955 ("TCT") issued
by the Register of Deeds of Makati City in the name of Valdes-Choy. Chua responded to the
advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase price of
P10,800,000.00 payable in cash.
On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt
("Receipt") evidencing the transaction, signed by Valdes-Choy as seller, and Chua as buyer,
reads:

30 June 1989

RECEIPT
RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of
ONE HUNDRED THOUSAND PESOS ONLY (P100,000.00) as EARNEST MONEY
for the sale of the property located at 40 Tampingco cor. Hidalgo, San Lorenzo Village,
Makati, Metro Manila (Area : 718 sq. meters).
The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is
payable on or before 155 July 1989. Capital Gains Tax for the account of the
seller. Failure to pay balance on or before 15 July 1989 forfeits the earnest money. This
provided that all papers are in proper order.6

CONFORME:

ENCARNACION
Seller

TOMAS

K.
Buyer

VALDES

CHUA

x x x.7
In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce ("PBCom") a
manager's check for P480,000.00. Strangely, after securing the manager's check, Chua
immediately gave PBCom a verbal stop payment order claiming that this manager's check for
P480,000.00 "was lost and/or misplaced."8 On the same day, after receipt of Chua's verbal order,
PBCom Assistant VicePresident Julie C. Pe notified in writing 9 the PBCom Operations Group
of Chua's stop payment order.
In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels to
execute the necessary documents and arrange the payments. 10 Valdes-Choy as vendor and Chua
as vendee signed two Deeds of Absolute Sale ("Deeds of Sale"). The first Deed of Sale covered
the house and lot for the purchase price of P8,000,000.00. 11 The second Deed of Sale covered the
furnishings, fixtures and movable properties contained in the house for the purchase price of
P2,800,000.00.12 The parties also computed the capital gains tax to amount to P485,000.00.

On 14 July 1989, the parties met again at the office of Valdes-Choy's counsel. Chua handed to
Valdes-Choy the PBCom manager's check for P485,000.00 so Valdes-Choy could pay the capital
gains tax as she did not have sufficient funds to pay the tax. Valdes-Choy issued a receipt
showing that Chua had a remaining balance of P10,215,000.00 after deducting the advances
made by Chua. This receipt reads:

July 14, 1989

Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of
FOUR HUNDRED EIGHTY FIVE THOUSAND PESOS ONLY (P485,000.00) as
Partial Payment for the sale of the property located at 40 Tampingco Cor. Hidalgo St.,
San Lorenzo Village, Makati, Metro Manila (Area 718 sq. meters), covered by TCT No.
162955 of the Registry of Deeds of Makati, Metro Manila.
The total purchase price of the above-mentioned property is TEN MILLION EIGHT
HUNDRED THOUSAND PESOS only, broken down as follows:

SELLING PRICE

P10,800,000.00

EARNEST MONEY

P100,000.00

PARTIAL PAYMENT

485,000.00

585,000.00

BALANCE
DUE
TO
ENCARNACION VALDEZ-CHOY

P10,215,000.00

PLUS P80,000.00 for documentary

stamps paid in advance by seller

80,000.00

P10,295,000.00

x x x.13
On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited the P485,000.00
manager's check to her account with Traders Royal Bank. She then purchased a Traders Royal
Bank manager's check for P480,000.00 payable to the Commissioner of Internal Revenue for the
capital gains tax. Valdes-Choy and Chua returned to the office of Valdes-Choy's counsel and
handed the Traders Royal Bank check to the counsel who undertook to pay the capital gains tax.
It was then also that Chua showed to Valdes-Choy a PBCom manager's check for
P10,215,000.00 representing the balance of the purchase price. Chua, however, did not give this
PBCom manager's check to Valdes-Choy because the TCT was still registered in the name of
Valdes-Choy. Chua required that the Property be registered first in his name before he would turn
over the check to Valdes-Choy. This angered Valdes-Choy who tore up the Deeds of Sale,
claiming that what Chua required was not part of their agreement.14
On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to PBCom
an affidavit of loss15 of the PBCom Manager's Check for P480,000.00. PBCom Assistant Vice-

President Pe, however, testified that the manager's check was nevertheless honored because Chua
subsequently verbally advised the bank that he was lifting the stop-payment order due to his
"special arrangement" with the bank.16
On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-Choy
suggested to her counsel that to break the impasse Chua should deposit in escrow the
P10,215,000.00 balance.17 Upon such deposit, Valdes-Choy was willing to cause the issuance of
a new TCT in the name of Chua even without receiving the balance of the purchase price.
Valdes-Choy believed this was the only way she could protect herself if the certificate of title is
transferred in the name of the buyer before she is fully paid. Valdes-Choy's counsel promised to
relay her suggestion to Chua and his counsel, but nothing came out of it.
On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy which the
trial court dismissed on 22 November 1989. On 29 November 1989, Chua re-filed his complaint
for specific performance with damages. After trial in due course, the trial court rendered
judgment in favor of Chua, the dispositive portion of which reads:
Applying the provisions of Article 1191 of the new Civil Code, since this is an action for
specific performance where the plaintiff, as vendee, wants to pursue the sale, and in order
that the fears of the defendant may be allayed and still have the sale materialize,
judgment is hereby rendered:
I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from
finality of this decision:
a. the owner's duplicate copy of TCT No. 162955 registered in her name;
b. the covering tax declaration and the latest tax receipt evidencing payment of
real estate taxes;
c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989, duly
executed by defendant in favor of the plaintiff, whether notarized or not; and
2. Within five (5) days from compliance by the defendant of the above, ordering the
plaintiff to deliver to the Branch Clerk of Court of this Court the sum of P10,295,000.00
representing the balance of the consideration (with the sum of P80,000.00 for stamps
already included);
3. Ordering the Branch Clerk of this Court or her duly authorized representative:
a. to make representations with the BIR for the payment of capital gains tax for
the sale of the house and lot (not to include the fixtures) and to pay the same from
the funds deposited with her;
b. to present the deed of sale executed in favor of the plaintiff, together with the
owner's duplicate copy of TCT No. 162955, real estate tax receipt and proof of
payment of capital gains tax, to the Makati Register of Deeds;
c. to pay the required registration fees and stamps (if not yet advanced by the
defendant) and if needed update the real estate taxes all to be taken from the funds
deposited with her; and
d. surrender to the plaintiff the new Torrens title over the property;
4. Should the defendant fail or refuse to surrender the two deeds of sale over the property
and the fixtures that were prepared by Atty. Mark Bocobo and executed by the parties, the
Branch Clerk of Court of this Court is hereby authorized and empowered to prepare, sign
and execute the said deeds of sale for and in behalf of the defendant;
5. Ordering the defendant to pay to the plaintiff;

a. the sum of P100,000.00 representing moral and compensatory damages for the
plaintiff; and
b. the sum of P50,000.00 as reimbursement for plaintiff's attorney's fees and cost
of litigation.
6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be
taken from the funds said plaintiff has deposited with the Court, the amounts covered at
paragraph 5 above;
7. Ordering the release of the P10,295,000.00 to the defendant after deducting therefrom
the following amounts:
a. the capital gains tax paid to the BIR;
b. the expenses incurred in the registration of the sale, updating of real estate
taxes, and transfer of title; and
c. the amounts paid under this judgment to the plaintiff.
8. Ordering the defendant to surrender to the plaintiff or his representatives the premises
with the furnishings intact within seventy-two (72) hours from receipt of the proceeds of
the sale;
9. No interest is imposed on the payment to be made by the plaintiff because he had
always been ready to pay the balance and the premises had been used or occupied by the
defendant for the duration of this case.
II. In the event that specific performance cannot be done for reasons or causes not
attributable to the plaintiff, judgment is hereby rendered ordering the defendant:
1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with interest at
the legal rate from June 30, 1989 until fully paid;
2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate from
July 14, 1989 until fully paid;
3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages and the
additional sum of P300,000.00 in the concept of exemplary damages; and
4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorney's fees and
cost of litigation.
SO ORDERED.18
Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court. The
Court of Appeals handed down a new judgment, disposing as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and
another one is rendered:
(1) Dismissing Civil Case No. 89-5772;
(2) Declaring the amount of P100,000.00, representing earnest money as forfeited
in favor of defendant-appellant;
(3) Ordering defendant-appellant to return/refund the amount of P485,000.00 to
plaintiff-appellee without interest;
(4) Dismissing defendant-appellant's compulsory counter-claim; and
(5) Ordering the plaintiff-appellee to pay the costs.19

Hence, the instant petition.

The Trial Court's Ruling
The trial court found that the transaction reached an impasse when Valdes-Choy wanted to be
first paid the full consideration before a new TCT covering the Property is issued in the name of
Chua. On the other hand, Chua did not want to pay the consideration in full unless a new TCT is
first issued in his name. The trial court faulted Valdes-Choy for this impasse.
The trial court held that the parties entered into a contract to sell on 30 June 1989, as evidenced
by the Receipt for the P100,000.00 earnest money. The trial court pointed out that the contract to
sell was subject to the following conditions: (1) the balance of P10,700,000.00 was payable not
later than 15 July 1989; (2) Valdes-Choy may stay in the Property until 13 August 1989; and (3)
all papers must be "in proper order" before full payment is made.
The trial court held that Chua complied with the terms of the contract to sell. Chua showed that
he was prepared to pay Valdes-Choy the consideration in full on 13 July 1989, two days before
the deadline of 15 July 1989. Chua even added P80,000.00 for the documentary stamp tax. He
purchased from PBCom two manager's checks both payable to Valdes-Choy. The first check for
P485,000.00 was to pay the capital gains tax. The second check for P10,215,000.00 was to pay
the balance of the purchase price. The trial court was convinced that Chua demonstrated his
capacity and readiness to pay the balance on 13 July 1989 with the production of the PBCom
manager's check for P10,215,000.00.
On the other hand, the trial court found that Valdes-Choy did not perform her correlative
obligation under the contract to sell to put all the papers in order. The trial court noted that as of
14 July 1989, the capital gains tax had not been paid because Valdes-Choy's counsel who was
suppose to pay the tax did not do so. The trial court declared that Valdes-Choy was in a position
to deliver only the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax
declarations, and the latest realty tax receipt. The trial court concluded that these documents were
all useless without the Bureau of Internal Revenue receipt evidencing full payment of the capital
gains tax which is a pre-requisite to the issuance of a new certificate of title in Chua's name.
The trial court held that Chua's non-payment of the balance of P10,215,000.00 on the agreed date
was due to Valdes-Choy's fault.
The Court of Appeals' Ruling
In reversing the trial court, the Court of Appeals ruled that Chua's stance to pay the full
consideration only after the Property is registered in his name was not the agreement of the
parties. The Court of Appeals noted that there is a whale of difference between the phrases "all
papers are in proper order" as written on the Receipt, and "transfer of title" as demanded by
Chua.
Contrary to the findings of the trial court, the Court of Appeals found that all the papers were in
order and that Chua had no valid reason not to pay on the agreed date. Valdes-Choy was in a
position to deliver the owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax
declarations, and the latest realty tax receipt. The Property was also free from all liens and
encumbrances.
The Court of Appeals declared that the trial court erred in considering Chua's showing to ValdesChoy of the PBCom manager's check for P10,215,000.00 as compliance with Chua's obligation
to pay on or before 15 July 1989. The Court of Appeals pointed out that Chua did not want to
give up the check unless "the property was already in his name." 20 Although Chua demonstrated
his capacity to pay, this could not be equated with actual payment which he refused to do.
The Court of Appeals did not consider the non-payment of the capital gains tax as failure by
Valdes-Choy to put the papers "in proper order." The Court of Appeals explained that the
payment of the capital gains tax has no bearing on the validity of the Deeds of Sale. It is only
after the deeds are signed and notarized can the final computation and payment of the capital
gains tax be made.

The Issues
In his Memorandum, Chua raises the following issues:
1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE
PROPERTY;
2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN
CONTROVERSY WITHOUT OBSERVING THE PROVISIONS OF ARTICLE 1592
OF THE NEW CIVIL CODE;
3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE
PURCHASE PRICE ON THE PART OF CHUA (AS VENDEE) WAS JUSTIFIED BY
THE CIRCUMSTANCES OBTAINING AND MAY NOT BE RAISED AS GROUND
FOR THE AUTOMATIC RESCISSION OF THE CONTRACT OF SALE;
4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF
APPEALS TO DECLARE THE "EARNEST MONEY" IN THE AMOUNT OF
P100,000.00 AS FORFEITED IN FAVOR OF VALDES-CHOY;
5. WHETHER THE TRIAL COURT'S JUDGMENT IS IN ACCORD WITH LAW,
REASON AND EQUITY DESERVING OF BEING REINSTATED AND AFFIRMED.21
The issues for our resolution are: (a) whether the transaction between Chua and Valdes-Choy is a
perfected contract of sale or a mere contract to sell, and (b) whether Chua can compel ValdesChoy to cause the issuance of a new TCT in Chua's name even before payment of the full
purchase price.
The Court's Ruling
The petition is bereft of merit.
There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in
her name under TCT No.162955, free from all liens and encumbrances. She was ready, able and
willing to deliver to Chua the owner's duplicate copy of the TCT, the signed Deeds of Sale, the
tax declarations, and the latest realty tax receipt. There is also no dispute that on 13 July 1989,
Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as earnest money from Chua.
Likewise, there is no controversy that the Receipt for the P100,000.00 earnest money embodied
the terms of the binding contract between Valdes-Choy and Chua.
Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua agreed
on the following terms: (1) the balance of P10,215,000.00 is payable on or before 15 July 1989;
(2) the capital gains tax is for the account of Valdes-Choy; and (3) if Chua fails to pay the
balance of P10,215,000.00 on or before 15 July 1989, Valdes-Choy has the right to forfeit the
earnest money, provided that "all papers are in proper order." On 13 July 1989, Chua gave
Valdes-Choy the PBCom manager's check for P485,000.00 to pay the capital gains tax.
Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually
paid to Valdes-Choy on the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the
PBCom manager's check for P10,215,000.00, with Valdes-Choy as payee. However,
Chua refused to give this check to Valdes-Choy until a new TCT covering the Property is
registered in Chua's name. Or, as the trial court put it, until there is proof of payment of the
capital gains tax which is a pre-requisite to the issuance of a new certificate of title.
First and Second Issues: Contract of Sale or Contract to Sell?
Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the
Receipt, as a contract to sell and not a contract of sale. This has been Chua's persistent contention
in his pleadings before the trial and appellate courts.
Chua now pleads for the first time that there is a perfected contract of sale rather than a contract
to sell. He contends that there was no reservation in the contract of sale that Valdes-Choy shall

retain title to the Property until after the sale. There was no agreement for an automatic rescission
of the contract in case of Chua's default. He argues for the first time that his payment of earnest
money and its acceptance by Valdes-Choy precludes the latter from rejecting the binding effect
of the contract of sale. Thus, Chua claims that Valdes-Choy may not validly rescind the contract
of sale without following Article 159222 of the Civil Code which requires demand, either
judicially or by notarial act, before rescission may take place.
Chua's new theory is not well taken in light of well-settled jurisprudence. An issue not raised in
the court below cannot be raised for the first time on appeal, as this is offensive to the basic rules
of fair play, justice and due process.23 In addition, when a party deliberately adopts a certain
theory, and the case is tried and decided on that theory in the court below, the party will not be
permitted to change his theory on appeal. To permit him to change his theory will be unfair to the
adverse party.24
Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement between
Chua and Valdes-Choy, as evidenced by the Receipt, is a contract to sell and not a contract of
sale. The distinction between a contract of sale and contract to sell is well-settled:
In a contract of sale, the title to the property passes to the vendee upon the delivery of the
thing sold; in a contract to sell, ownership is, by agreement, reserved in the vendor and is
not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a
contract of sale, the vendor loses ownership over the property and cannot recover it until
and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is
retained by the vendor until full payment of the price. In the latter contract, payment of
the price is a positive suspensive condition, failure of which is not a breach but an event
that prevents the obligation of the vendor to convey title from becoming effective.25
A perusal of the Receipt shows that the true agreement between the parties was a contract to sell.
Ownership over the Property was retained by Valdes-Choy and was not to pass to Chua until full
payment of the purchase price.
First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails to pay
the balance of the purchase price on or before 15 July 1989. In such event, Valdes-Choy can sell
the Property to other interested parties. There is in effect a right reserved in favor of Valdes-Choy
not to push through with the sale upon Chua's failure to remit the balance of the purchase price
before the deadline. This is in the nature of a stipulation reserving ownership in the seller until
full payment of the purchase price. This is also similar to giving the seller the right to rescind
unilaterally the contract the moment the buyer fails to pay within a fixed period.26
Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather than in
a deed of sale, ownership not having passed between them. The signing of the Deeds of Sale
came later when Valdes-Choy was under the impression that Chua was about to pay the balance
of the purchase price. The absence of a formal deed of conveyance is a strong indication that the
parties did not intend immediate transfer of ownership, but only a transfer after full payment of
the purchase price.27
Third, Valdes-Choy retained possession of the certificate of title and all other documents relative
to the sale. When Chua refused to pay Valdes-Choy the balance of the purchase price, ValdesChoy also refused to turn-over to Chua these documents.28 These are additional proof that the
agreement did not transfer to Chua, either by actual or constructive delivery, ownership of the
Property.29
It is true that Article 1482 of the Civil Code provides that "[W]henever 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." However, this article speaks of earnest money given in a contract of sale. In this case,
the earnest money was given in a contract to sell. The Receipt evidencing the contract to sell
stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is not
consummated should Chua fail to pay the balance of the purchase price. The earnest money
forms part of the consideration only if the sale is consummated upon full payment of the
purchase price. If there is a contract of sale, Valdes-Choy should have the right to compel Chua
to pay the balance of the purchase price. Chua, however, has the right to walk away from the
transaction, with no obligation to pay the balance, although he will forfeit the earnest money.

Clearly, there is no contract of sale. The earnest money was given in a contract to sell, and thus
Article 1482, which speaks of a contract of sale, is not applicable.
Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full payment
of the purchase price partakes of a suspensive condition. The non-fulfillment of the condition
prevents the obligation to sell from arising and ownership is retained by the seller without further
remedies by the buyer.30 Article 1592 of the Civil Code permits the buyer to pay, even after the
expiration of the period, as long as no demand for rescission of the contract has been made upon
him either judicially or by notarial act. However, Article 1592 does not apply to a contract to sell
where the seller reserves the ownership until full payment of the price.31
Third
and
Fourth
Issues:
Withholding
of
Balance of the Purchase Price and Forfeiture of the Earnest Money

Payment

of

the

Chua insists that he was ready to pay the balance of the purchase price but withheld payment
because Valdes-Choy did not fulfill her contractual obligation to put all the papers in "proper
order." Specifically, Chua claims that Valdes-Choy failed to show that the capital gains tax had
been paid after he had advanced the money for its payment. For the same reason, he contends
that Valdes-Choy may not forfeit the earnest money even if he did not pay on time.
There is a variance of interpretation on the phrase "all papers are in proper order" as written in
the Receipt. There is no dispute though, that as long as the papers are "in proper order," ValdesChoy has the right to forfeit the earnest money if Chua fails to pay the balance before the
deadline.
The trial court interpreted the phrase to include payment of the capital gains tax, with the Bureau
of Internal Revenue receipt as proof of payment. The Court of Appeals held otherwise. We quote
verbatim the ruling of the Court of Appeals on this matter:
The trial court made much fuss in connection with the payment of the capital gains tax, of
which Section 33 of the National Internal Revenue Code of 1977, is the governing
provision insofar as its computation is concerned. The trial court failed to consider
Section 34-(a) of the said Code, the last sentence of which provides, that "[t]he amount
realized from the sale or other disposition of property shall be the sum of money
received plus the fair market value of the property (other than money) received;" and that
the computation of the capital gains tax can only be finally assessed by the Commission
on Internal Revenue upon the presentation of the Deeds of Absolute Sale themselves,
without which any premature computation of the capital gains tax becomes of no
moment. At any rate, the computation and payment of the capital gains tax has no bearing
insofar as the validity and effectiveness of the deeds of sale in question are concerned,
because it is only after the contracts of sale are finally executed in due form and have
been duly notarized that the final computation of the capital gains tax can follow as a
matter of course. Indeed, exhibit D, the PBC Check No. 325851, dated July 13, 1989, in
the amount of P485,000.00, which is considered as part of the consideration of the sale,
was deposited in the name of appellant, from which she in turn, purchased the
corresponding check in the amount representing the sum to be paid for capital gains tax
and drawn in the name of the Commissioner of Internal Revenue, which then allayed any
fear or doubt that that amount would not be paid to the Government after all.32
We see no reason to disturb the ruling of the Court of Appeals.
In a contract to sell, the obligation of the seller to sell becomes demandable only upon the
happening of the suspensive condition. In this case, the suspensive condition is the full payment
of the purchase price by Chua. Such full payment gives rise to Chua's right to demand the
execution of the contract of sale.
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. Article 1458 of the Civil Code defines a contract of
sale as follows:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownershipof and to deliver a determinate thing, and the other to pay therefor
a price certain in money or its equivalent.
x x x. (Emphasis supplied)
Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership to
the buyer, even if there is a contract to sell between them. It is also upon the existence of the
contract of sale that the buyer is obligated to pay the purchase price to the seller. Since the
transfer of ownership is in exchange for the purchase price, these obligations must be
simultaneously fulfilled at the time of the execution of the contract of sale, in the absence of a
contrary stipulation.
In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code,
as follows:
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale. (Emphasis supplied)
The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of
real property, the seller is not obligated to transfer in the name of the buyer a new certificate of
title, but rather to transfer ownership of the real property. There is a difference between transfer
of the certificate of title in the name of the buyer, and transfer of ownership to the buyer. The
buyer may become the owner of the real property even if the certificate of title is still registered
in the name of the seller. As between the seller and buyer, ownership is transferred not by the
issuance of a new certificate of title in the name of the buyer but by the execution of the
instrument of sale in a public document.
In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted civil
law commentator Arturo M. Tolentino explains it, Delivery is not only a necessary condition for the enjoyment of the thing, but is a mode of
acquiring dominion and determines the transmission of ownership, the birth of the real
right. The delivery, therefore, made in any of the forms provided in articles 1497 to 1505
signifies that the transmission of ownership from vendor to vendee has taken place. The
delivery of the thing constitutes an indispensable requisite for the purpose of acquiring
ownership. Our law does not admit the doctrine of transfer of property by mere consent;
the ownership, the property right, is derived only from delivery of the thing. x x
x.33 (Emphasis supplied)
In a contract of sale of real property, delivery is effected when the instrument of sale is executed
in a public document. When the deed of absolute sale is signed by the parties and notarized, then
delivery of the real property is deemed made by the seller to the buyer. Article 1498 of the Civil
Code provides that
Art. 1498. When the sale is made through a public instrument, the execution thereof shall
be equivalent to the delivery of the thing which is the object of the contract, if from the
deed the contrary does not appear or cannot clearly be inferred.
x x x.
Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign the
deed of absolute sale before a notary public, the seller is in a position to transfer ownership of the
real property to the buyer. At this point, the seller complies with his undertaking to sell the real
property in accordance with the contract to sell, and to assume all the obligations of a vendor
under a contract of sale pursuant to the relevant articles of the Civil Code. In a contract to sell,
the seller is not obligated to transfer ownership to the buyer. Neither is the seller obligated to
cause the issuance of a new certificate of title in the name of the buyer. However, the seller must
put all his papers in proper order to the point that he is in a position to transfer ownership of the
real property to the buyer upon the signing of the contract of sale.

In the instant case, Valdes-Choy was in a position to comply with all her obligations as a seller
under the contract to sell. First, she already signed the Deeds of Sale in the office of her counsel
in the presence of the buyer. Second, she was prepared to turn-over the owner's duplicate of the
TCT to the buyer, along with the tax declarations and latest realty tax receipt. Clearly, at this
point Valdes-Choy was ready, able and willing to transfer ownership of the Property to the buyer
as required by the contract to sell, and by Articles 1458 and 1495 of the Civil Code to
consummate the contract of sale.
Chua, however, refused to give to Valdes-Choy the PBCom manager's check for the balance of
the purchase price. Chua imposed the condition that a new TCT should first be issued in his
name, a condition that is found neither in the law nor in the contract to sell as evidenced by the
Receipt. Thus, at this point Chua was not ready, able and willing to pay the full purchase price
which is his obligation under the contract to sell. Chua was also not in a position to assume the
principal obligation of a vendee in a contract of sale, which is also to pay the full purchase price
at the agreed time. Article 1582 of the Civil Code provides that
Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold
at the time and place stipulated in the contract.
x x x. (Emphasis supplied)
In this case, the contract to sell stipulated that Chua should pay the balance of the purchase price
"on or before 15 July 1989." The signed Deeds of Sale also stipulated that the buyer shall pay the
balance of the purchase price upon signing of the deeds. Thus, the Deeds of Sale, both signed by
Chua, state as follows:
Deed of Absolute Sale covering the lot:
xxx
For and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00),
Philippine Currency,receipt of which in full is hereby acknowledged by the VENDOR
from the VENDEE, the VENDOR sells, transfers and conveys unto the VENDEE, his
heirs, successors and assigns, the said parcel of land, together with the improvements
existing thereon, free from all liens and encumbrances.34 (Emphasis supplied)
Deed of Absolute Sale covering the furnishings:
xxx
For and in consideration of the sum of TWO MILLION EIGHT HUNDRED
THOUSAND PESOS (P2,800,000.00), Philippine Currency, receipt of which in full is
hereby acknowledged by the VENDOR from the VENDEE, the VENDOR sells, transfers
and conveys unto the VENDEE, his heirs, successors and assigns, the said furnitures,
fixtures and other movable properties thereon, free from all liens and
encumbrances.35 (Emphasis supplied)
However, on the agreed date, Chua refused to pay the balance of the purchase price as required
by the contract to sell, the signed Deeds of Sale, and Article 1582 of the Civil Code. Chua was
therefore in default and has only himself to blame for the rescission by Valdes-Choy of the
contract to sell.
Even if measured under existing usage or custom, Valdes-Choy had all her papers "in proper
order." Article 1376 of the Civil Code provides that:
Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of
the ambiguities of a contract, and shall fill the omission of stipulations which are
ordinarily established.
Customarily, in the absence of a contrary agreement, the submission by an individual seller to the
buyer of the following papers would complete a sale of real estate: (1) owner's duplicate copy of
the Torrens title;36 (2) signed deed of absolute sale; (3) tax declaration; and (3) latest realty tax

receipt. The buyer can retain the amount for the capital gains tax and pay it upon authority of the
seller, or the seller can pay the tax, depending on the agreement of the parties.
The buyer has more interest in having the capital gains tax paid immediately since this is a prerequisite to the issuance of a new Torrens title in his name. Nevertheless, as far as the
government is concerned, the capital gains tax remains a liability of the seller since it is a tax on
the seller's gain from the sale of the real estate.Payment of the capital gains tax, however, is not a
pre-requisite to the transfer of ownership to the buyer. The transfer of ownership takes effect
upon the signing and notarization of the deed of absolute sale.
The recording of the sale with the proper Registry of Deeds 37 and the transfer of the certificate of
title in the name of the buyer are necessary only to bind third parties to the transfer of
ownership.38 As between the seller and the buyer, the transfer of ownership takes effect upon the
execution of a public instrument conveying the real estate. 39 Registration of the sale with the
Registry of Deeds, or the issuance of a new certificate of title, does not confer ownership on the
buyer. Such registration or issuance of a new certificate of title is not one of the modes of
acquiring ownership.40
In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that
customarily would complete the sale, and to pay as well the capital gains tax. On the other hand,
Chua's condition that a new TCT be first issued in his name before he pays the balance of
P10,215,000.00, representing 94.58% of the purchase price, is not customary in a sale of real
estate. Such a condition, not specified in the contract to sell as evidenced by the Receipt, cannot
be considered part of the "omissions of stipulations which are ordinarily established" by usage or
custom.41 What is increasingly becoming customary is to deposit in escrow the balance of the
purchase price pending the issuance of a new certificate of title in the name of the buyer. ValdesChoy suggested this solution but unfortunately, it drew no response from Chua.
Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him the
owner's duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest
realty tax receipt. There was no hindrance to paying the capital gains tax as Chua himself had
advanced the money to pay the same and Valdes-Choy had procured a manager's check payable
to the Bureau of Internal Revenue covering the amount. It was only a matter of time before the
capital gains tax would be paid. Chua acted precipitately in filing the action for specific
performance a mere two days after the deadline of 15 July 1989 when there was an impasse.
While this case was dismissed on 22 November 1989, he did not waste any time in re-filing the
same on 29 November 1989.
Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is a
suspensive condition, Chua cannot compel Valdes-Choy to consummate the sale of the Property.
Article 1181 of the Civil Code provides that 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.
Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him
because the suspensive condition - the full payment of the purchase price - did not happen. There
is no correlative obligation on the part of Valdes-Choy to transfer ownership of the Property to
Chua. There is also no obligation on the part of Valdes-Choy to cause the issuance of a new TCT
in the name of Chua since unless expressly stipulated, this is not one of the obligations of a
vendor.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23
February 1995 is AFFIRMED in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 112127 July 17, 1995

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

BELLOSILLO, J.:
CENTRAL PHILIPPINE UNIVERSITY filed this petition for review on certiorari of the
decision of the Court of Appeals which reversed that of the Regional Trial Court of Iloilo City
directing petitioner to reconvey to private respondents the property donated to it by their
predecessor-in-interest.
Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the Board of
Trustees of the Central Philippine College (now Central Philippine University [CPU]), executed
a deed of donation in favor of the latter of a parcel of land identified as Lot No. 3174-B-1 of the
subdivision plan Psd-1144, then a portion of Lot No. 3174-B, for which Transfer Certificate of
Title No. T-3910-A was issued in the name of the donee CPU with the following annotations
copied from the deed of donation
1. The land described shall be utilized by the CPU exclusively for the
establishment and use of a medical college with all its buildings as part of the
curriculum;
2. The said college shall not sell, transfer or convey to any third party nor in any
way encumber said land;
3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said
college shall be under obligation to erect a cornerstone bearing that name. Any net
income from the land or any of its parks shall be put in a fund to be known as the
"RAMON LOPEZ CAMPUS FUND" to be used for improvements of said
campus and erection of a building thereon. 1
On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez, Sr., filed an
action for annulment of donation, reconveyance and damages against CPU alleging that since
1939 up to the time the action was filed the latter had not complied with the conditions of the
donation. Private respondents also argued that petitioner had in fact negotiated with the National
Housing Authority (NHA) to exchange the donated property with another land owned by the
latter.
In its answer petitioner alleged that the right of private respondents to file the action had
prescribed; that it did not violate any of the conditions in the deed of donation because it never
used the donated property for any other purpose than that for which it was intended; and, that it
did not sell, transfer or convey it to any third party.

On 31 May 1991, the trial court held that petitioner failed to comply with the conditions of the
donation and declared it null and void. The court a quo further directed petitioner to execute a
deed of the reconveyance of the property in favor of the heirs of the donor, namely, private
respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the annotations at
the back of petitioner's certificate of title were resolutory conditions breach of which should
terminate the rights of the donee thus making the donation revocable.
The appellate court also found that while the first condition mandated petitioner to utilize the
donated property for the establishment of a medical school, the donor did not fix a period within
which the condition must be fulfilled, hence, until a period was fixed for the fulfillment of the
condition, petitioner could not be considered as having failed to comply with its part of the
bargain. Thus, the appellate court rendered its decision reversing the appealed decision and
remanding the case to the court of origin for the determination of the time within which
petitioner should comply with the first condition annotated in the certificate of title.
Petitioner now alleges that the Court of Appeals erred: (a) in holding that the quoted annotations
in the certificate of title of petitioner are onerous obligations and resolutory conditions of the
donation which must be fulfilled non-compliance of which would render the donation revocable;
(b) in holding that the issue of prescription does not deserve "disquisition;" and, (c) in remanding
the case to the trial court for the fixing of the period within which petitioner would establish a
medical college. 2
We find it difficult to sustain the petition. A clear perusal of the conditions set forth in the deed of
donation executed by Don Ramon Lopez, Sr., gives us no alternative but to conclude that his
donation was onerous, one executed for a valuable consideration which is considered the
equivalent of the donation itself, e.g., when a donation imposes a burden equivalent to the value
of the donation. A gift of land to the City of Manila requiring the latter to erect schools, construct
a children's playground and open streets on the land was considered an onerous
donation. 3 Similarly, where Don Ramon Lopez donated the subject parcel of land to petitioner
but imposed an obligation upon the latter to establish a medical college thereon, the donation
must be for an onerous consideration.
Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon the happening of the
event which constitutes the condition. Thus, when a person donates land to another on the
condition that the latter would build upon the land a school, the condition imposed was not a
condition precedent or a suspensive condition but a resolutory one. 4 It is not correct to say that
the schoolhouse had to be constructed before the donation became effective, that is, before the
donee could become the owner of the land, otherwise, it would be invading the property rights of
the donor. The donation had to be valid before the fulfillment of the condition. 5 If there was no
fulfillment or compliance with the condition, such as what obtains in the instant case, the
donation may now be revoked and all rights which the donee may have acquired under it shall be
deemed lost and extinguished.
The claim of petitioner that prescription bars the instant action of private respondents is
unavailing.
The condition imposed by the donor, i.e., the building of a medical school upon the land
donated, depended upon the exclusive will of the donee as to when this condition shall be
fulfilled. When petitioner accepted the donation, it bound itself to comply with the
condition thereof. Since the time within which the condition should be fulfilled depended
upon the exclusive will of the petitioner, it has been held that its absolute acceptance and
the acknowledgment of its obligation provided in the deed of donation were sufficient to

prevent the statute of limitations from barring the action of private respondents upon the
original contract which was the deed of donation. 6
Moreover, the time from which the cause of action accrued for the revocation of the donation and
recovery of the property donated cannot be specifically determined in the instant case. A cause of
action arises when that which should have been done is not done, or that which should not have
been done is done. 7 In cases where there is no special provision for such computation, recourse
must be had to the rule that the period must be counted from the day on which the corresponding
action could have been instituted. It is the legal possibility of bringing the action which
determines the starting point for the computation of the period. In this case, the starting point
begins with the expiration of a reasonable period and opportunity for petitioner to fulfill what has
been charged upon it by the donor.
The period of time for the establishment of a medical college and the necessary buildings and
improvements on the property cannot be quantified in a specific number of years because of the
presence of several factors and circumstances involved in the erection of an educational
institution, such as government laws and regulations pertaining to education, building
requirements and property restrictions which are beyond the control of the donee.
Thus, when the obligation does not fix a period but from its nature and circumstances it can be
inferred that a period was intended, the general rule provided in Art. 1197 of the Civil Code
applies, which provides that the courts may fix the duration thereof because the fulfillment of the
obligation itself cannot be demanded until after the court has fixed the period for compliance
therewith and such period has arrived. 8
This general rule however cannot be applied considering the different set of circumstances
existing in the instant case. More than a reasonable period of fifty (50) years has already been
allowed petitioner to avail of the opportunity to comply with the condition even if it be
burdensome, to make the donation in its favor forever valid. But, unfortunately, it failed to do so.
Hence, there is no more need to fix the duration of a term of the obligation when such procedure
would be a mere technicality and formality and would serve no purpose than to delay or lead to
an unnecessary and expensive multiplication of suits. 9 Moreover, under Art. 1191 of the Civil
Code, when one of the obligors cannot comply with what is incumbent upon him, the obligee
may seek rescission and the court shall decree the same unless there is just cause authorizing the
fixing of a period. In the absence of any just cause for the court to determine the period of the
compliance, there is no more obstacle for the court to decree the rescission claimed.
Finally, since the questioned deed of donation herein is basically a gratuitous one, doubts
referring to incidental circumstances of a gratuitous contract should be resolved in favor of the
least transmission of rights and interests. 10 Records are clear and facts are undisputed that since
the execution of the deed of donation up to the time of filing of the instant action, petitioner has
failed to comply with its obligation as donee. Petitioner has slept on its obligation for an
unreasonable length of time. Hence, it is only just and equitable now to declare the subject
donation already ineffective and, for all purposes, revoked so that petitioner as donee should now
return the donated property to the heirs of the donor, private respondents herein, by means of
reconveyance.
WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May 1991 is
REINSTATED and AFFIRMED, and the decision of the Court of Appeals of 18 June 1993 is
accordingly MODIFIED. Consequently, petitioner is directed to reconvey to private respondents
Lot No. 3174-B-1 of the subdivision plan Psd-1144 covered by Transfer Certificate of Title No.
T-3910-A within thirty (30) days from the finality of this judgment.
Costs against petitioner.

SO ORDERED.
Quiason and Kapunan, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-5003

June 27, 1953

NAZARIO TRILLANA, administrator-appellee,

vs.
QUEZON COLLEGE, INC., claimant-appellant.
Singson, Barnes, Yap and Blanco for appellant.
Delgado, Flores & Macapagal for appellee.
PARAS, J.:
Damasa Crisostomo sent the following letter to the Board of Trustees of the Quezon College:

June 1, 1948

The BOARD OF TRUSTEES

Quezon College
Manila
Gentlemen:
Please enter my subscription to dalawang daan (200) shares of your capital stock with a
par value of P100 each. Enclosed you will find (Babayaran kong lahat pagkatapos na ako
ay makapag-pahuli ng isda) pesos as my initial payment and the balance payable in
accordance with law and the rules and regulations of the Quezon College. I hereby agree
to shoulder the expenses connected with said shares of stock. I further submit myself to
all lawful demands, decisions or directives of the Board of Trustees of the Quezon
College and all its duly constituted officers or authorities (ang nasa itaas ay binasa at
ipinaliwanag sa akin sa wikang tagalog na aking nalalaman).

Very respectfully,
(Sgd.)
DAMASA
CRISOSTOMO
Signature of subscriber

Nilagdaan sa aming harapan:

JOSE
EDUARDO CRISOSTOMO

CRISOSTOMO

Damasa Crisostomo died on October 26, 1948. As no payment appears to have been made on the
subscription mentioned in the foregoing letter, the Quezon College, Inc. presented a claim before
the Court of First Instance of Bulacan in her testate proceeding, for the collection of the sum of
P20,000, representing the value of the subscription to the capital stock of the Quezon College,
Inc. This claim was opposed by the administrator of the estate, and the Court of First Instance of
Bulacan, after hearing issued an order dismissing the claim of the Quezon College, Inc. on the
ground that the subscription in question was neither registered in nor authorized by the Securities
and Exchange Commission. From this order the Quezon College, Inc. has appealed.
It is not necessary for us to discuss at length appellant's various assignments of error relating to
the propriety of the ground relief upon by the trial court, since, as pointed out in the brief for the
administrator and appellee, there are other decisive considerations which, though not touched by
the lower court, amply sustained the appealed order.
It appears that the application sent by Damasa Crisostomo to the Quezon College, Inc. was
written on a general form indicating that an applicant will enclose an amount as initial payment
and will pay the balance in accordance with law and the regulations of the College. On the other
hand, in the letter actually sent by Damasa Crisostomo, the latter (who requested that her
subscription for 200 shares be entered) not only did not enclose any initial payment but stated
that "babayaran kong lahat pagkatapos na ako ay makapagpahuli ng isda." There is nothing in the
record to show that the Quezon College, Inc. accepted the term of payment suggested by Damasa
Crisostomo, or that if there was any acceptance the same came to her knowledge during her
lifetime. As the application of Damasa Crisostomo is obviously at variance with the terms
evidenced in the form letter issued by the Quezon College, Inc., there was absolute necessity on
the part of the College to express its agreement to Damasa's offer in order to bind the latter.
Conversely, said acceptance was essential, because it would be unfair to immediately obligate the
Quezon College, Inc. under Damasa's promise to pay the price of the subscription after she had
caused fish to be caught. In other words, the relation between Damasa Crisostomo and the
Quezon College, Inc. had only thus reached the preliminary stage whereby the latter offered its
stock for subscription on the terms stated in the form letter, and Damasa applied for subscription
fixing her own plan of payment, a relation, in the absence as in the present case of acceptance
by the Quezon College, Inc. of the counter offer of Damasa Crisostomo, that had not ripened into
an enforceable contract.
Indeed, the need for express acceptance on the part of the Quezon College, Inc. becomes the
more imperative, in view of the proposal of Damasa Crisostomo to pay the value of the
subscription after she has harvested fish, a condition obviously dependent upon her sole will and,
therefore, facultative in nature, rendering the obligation void, under article 1115 of the old Civil
Code which provides as follows: "If the fulfillment of the condition should depend upon the
exclusive will of the debtor, the conditional obligation shall be void. If it should depend upon
chance, or upon the will of a third person, the obligation shall produce all its effects in
accordance with the provisions of this code." It cannot be argued that the condition solely is void,
because it would have served to create the obligation to pay, unlike a case, exemplified
by Osmea vs. Rama (14 Phil., 99), wherein only the potestative condition was held void
because it referred merely to the fulfillment of an already existing indebtedness.
In the case of Taylor vs. Uy Tieng Piao, et al. (43 Phil., 873, 879), this Court already held that "a
condition, facultative as to the debtor, is obnoxious to the first sentence contained in article 1115
and renders the whole obligation void."
Wherefore, the appealed order is affirmed, and it is so ordered with costs against appellant.
Tuason, Padilla and Reyes, JJ., concur in the result.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 117009 October 11, 1995

SECURITY BANK & TRUST COMPANY and ROSITO C. MANHIT, petitioners,
vs.
COURT OF APPEALS and YSMAEL C. FERRER, respondents.

PADILLA, J.:
In this petition for review under Rule 45 of the Rules of Court, petitioners seek a review and
reversal of the decision * of respondent Court of Appeals in CA-G.R. CV No. 40450, entitled
"Ysmael C. Ferrer v. Security Bank and Trust Company, et. al." dated 31 August 1994, which
affirmed the decision ** of the Regional Trial Court, Branch 63, Makati in Civil Case No. 42712,
a complaint for breach of contract with damages.
Private respondent Ysmael C. Ferrer was contracted by herein petitioners Security Bank and
Trust Company (SBTC) and Rosito C. Manhit to construct the building of SBTC in Davao City
for the price of P1,760,000.00. The contract dated 4 February 1980 provided that Ferrer would
finish the construction in two hundred (200) working days. Respondent Ferrer was able to
complete the construction of the building on 15 August 1980 (within the contracted period) but
he was compelled by a drastic increase in the cost of construction materials to incur expenses of
about P300,000.00 on top of the original cost. The additional expenses were made known to
petitioner SBTC thru its Vice-President Fely Sebastian and Supervising Architect Rudy de la
Rama as early as March 1980. Respondent Ferrer made timely demands for payment of the
increased cost. Said demands were supported by receipts, invoices, payrolls and other documents
proving the additional expenses.
In March 1981, SBTC thru Assistant Vice-President Susan Guanio and a representative of an
architectural firm consulted by SBTC, verified Ferrer's claims for additional cost. A
recommendation was then made to settle Ferrer's claim but only for P200,000.00. SBTC, instead
of paying the recommended additional amount, denied ever authorizing payment of any amount
beyond the original contract price. SBTC likewise denied any liability for the additional cost
based on Article IX of the building contract which states:
If at any time prior to the completion of the work to be performed hereunder,
increase in prices of construction materials and/or labor shall supervene through
no fault on the part of the contractor whatsoever or any act of the government and
its instrumentalities which directly or indirectly affects the increase of the cost of
the project, OWNER shall equitably make the appropriate adjustment on mutual
agreement of both parties.
Ysmael C. Ferrer then filed a complaint for breach of contract with damages. The trial court
ruled for Ferrer and ordered defendants SBTC and Rosito C. Manhit to pay:
a) P259,417.23 for the increase in price of labor and materials plus 12% interest
thereon per annumfrom 15 August 1980 until fully paid;
b) P24,000.00 as actual damages;
c) P20,000.00 as moral damages;

d) P20,000.00 as exemplary damages;

e) attorney's fees equivalent to 25% of the principal amount due; and
f) costs of suit.
On appeal, the Court of Appeals affirmed the trial court decision.
In the present petition for review, petitioners assign the following errors to the appellate court:
. . . IN HOLDING THAT PLAINTIFF-APPELLEE HAS, BY
PREPONDERANCE OF EVIDENCE SUFFICIENTLY PROVEN HIS CLAIM
AGAINST THE DEFENDANTS-APPELLANTS.
. . . IN INTERPRETING AN OTHERWISE CLEAR AND UNAMBIGUOUS
PROVISION OF THE CONSTRUCTION CONTRACT.
. . . IN DISREGARDING THE EXPRESS PROVISION OF THE
CONSTRUCTION CONTRACT, THE LOWER COURT VIOLATED
DEFENDANTS-APPELLANTS' CONSTITUTIONAL GUARANTY OF NON
IMPAIRMENT OF THE OBLIGATION OF CONTRACT. 1
Petitioners argue that under the aforequoted Article IX of the building contract, any increase in
the price of labor and/or materials resulting in an increase in construction cost above the
stipulated contract price will not automatically make petitioners liable to pay for such increased
cost, as any payment above the stipulated contract price has been made subject to the condition
that the "appropriate adjustment" will be made "upon mutual agreement of both parties". It is
contended that since there was no mutual agreement between the parties, petitioners' obligation
to pay amounts above the original contract price never materialized.
Respondent Ysmael C. Ferrer, through counsel, on the other hand, opposed the arguments raised
by petitioners. It is of note however that the pleadings filed with this Court by counsel for Ferrer
hardly refute the arguments raised by petitioners, as the contents of said pleadings are mostly
quoted portions of the decision of the Court of Appeals, devoid of adequate discussion of the
merits of respondent's case. The Court, to be sure, expects more diligence and legal know-how
from lawyers than what has been exhibited by counsel for respondent in the present case. Under
these circumstances, the Court had to review the entire records of this case to evaluate the merits
of the issues raised by the contending parties.
Article 22 of the Civil Code which embodies the maxim, Nemo ex alterius incommodo debet
lecupletari (no man ought to be made rich out of another's injury) states:
Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human Relations, the
provisions of which were formulated as "basic principles to be observed for the rightful
relationship between human beings and for the stability of the social order, . . . designed to
indicate certain norms that spring from the fountain of good conscience, . . . guides for human
conduct [that] should run as golden threads through society to the end that law may approach its
supreme ideal which is the sway and dominance of justice." 2
In the present case, petitioners' arguments to support absence of liability for the cost of
construction beyond the original contract price are not persuasive.

Under the previously quoted Article IX of the construction contract, petitioners would make the
appropriate adjustment to the contract price in case the cost of the project increases through no
fault of the contractor (private respondent). Private respondent informed petitioners of the drastic
increase in construction cost as early as March 1980.
Petitioners in turn had the increased cost evaluated and audited. When private respondent
demanded payment of P259,417.23, petitioner bank's Vice-President Rosito C. Manhit and the
bank's architectural consultant were directed by the bank to verify and compute private
respondent's claims of increased cost. A recommendation was then made to settle private
respondent's claim for P200,000.00. Despite this recommendation and several demands from
private respondent, SBTC failed to make payment. It denied authorizing anyone to make a
settlement of private respondent's claim and likewise denied any liability, contending that the
absence of a mutual agreement made private respondent's demand premature and baseless.
Petitioners' arguments are specious.
It is not denied that private respondent incurred additional expenses in constructing petitioner
bank's building due to a drastic and unexpected increase in construction cost. In fact, petitioner
bank admitted liability for increased cost when a recommendation was made to settle private
respondent's claim for P200,000.00. Private respondent's claim for the increased amount was
adequately proven during the trial by receipts, invoices and other supporting documents.
Under Article 1182 of the Civil Code, a conditional obligation shall be void if its fulfillment
depends upon the sole will of the debtor. In the present case, the mutual agreement, the absence
of which petitioner bank relies upon to support its non-liability for the increased construction
cost, is in effect a condition dependent on petitioner bank's sole will, since private respondent
would naturally and logically give consent to such an agreement which would allow him
recovery of the increased cost.
Further, it cannot be denied that petitioner bank derived benefits when private respondent
completed the construction even at an increased cost.
Hence, to allow petitioner bank to acquire the constructed building at a price far below its actual
construction cost would undoubtedly constitute unjust enrichment for the bank to the prejudice
of private respondent. Such unjust enrichment, as previously discussed, is not allowed by law.
Finally, with respect to the award of attorney's fees to respondent, the Court has previously held
that, "even with the presence of an agreement between the parties, the court may nevertheless
reduce attorney's fees though fixed in the contract when the amount thereof appears to be
unconscionable or unreasonable." 3 As previously noted, the diligence and legal know-how
exhibited by counsel for private respondent hardly justify an award of 25% of the principal
amount due, which would be at least P60,000.00. Besides, the issues in this case are far from
complex and intricate. The award of attorney's fees is thus reduced to P10,000.00.
WHEREFORE, with the above modification in respect of the amount of attorney's fees, the
appealed decision of the Court of Appeals in CA G.R. CV No. 40450 is AFFIRMED.
SO ORDERED.
Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 107207 November 23, 1995

VIRGILIO R. ROMERO, petitioner,
vs.
HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE
ONGSIONG, respondents.

VITUG, J.:
The parties pose this question: May the vendor demand the rescission of a contract for the sale of
a parcel of land for a cause traceable to his own failure to have the squatters on the subject
property evicted within the contractually-stipulated period?
Petitioner Virgilio R. Romero, a civil engineer, was engaged in the business of production,
manufacture and exportation of perlite filter aids, permalite insulation and processed perlite ore.
In 1988, petitioner and his foreign partners decided to put up a central warehouse in Metro
Manila on a land area of approximately 2,000 square meters. The project was made known to
several freelance real estate brokers.
A day or so after the announcement, Alfonso Flores and his wife, accompanied by a broker,
offered a parcel of land measuring 1,952 square meters. Located in Barangay San Dionisio,
Paraaque, Metro Manila, the lot was covered by TCT No. 361402 in the name of private
respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the property and, except for the
presence of squatters in the area, he found the place suitable for a central warehouse.
Later, the Flores spouses called on petitioner with a proposal that should he advance the amount
of P50,000.00 which could be used in taking up an ejectment case against the squatters, private
respondent would agree to sell the property for only P800.00 per square meter. Petitioner
expressed his concurrence. On 09 June 1988, a contract, denominated "Deed of Conditional
Sale," was executed between petitioner and private respondent. The simply-drawn contract read:
DEED OF CONDITIONAL SALE
KNOW ALL MEN BY THESE PRESENTS:
This Contract, made and executed in the Municipality of Makati, Philippines this
9th day of June, 1988 by and between:
ENRIQUETA CHUA VDA. DE ONGSIONG, of legal age, widow,
Filipino and residing at 105 Simoun St., Quezon City, Metro
Manila, hereinafter referred to as the VENDOR;
-andVIRGILIO R. ROMERO, married to Severina L. Lat, of Legal age,
Filipino, and residing at 110 San Miguel St., Plainview Subd.,
Mandaluyong Metro Manila, hereinafter referred to as the
VENDEE:
W I T N E S S E T H : That

WHEREAS, the VENDOR is the owner of One (1) parcel of land with a total area
of ONE THOUSAND NINE HUNDRED FIFTY TWO (1,952) SQUARE
METERS, more or less, located in Barrio San Dionisio, Municipality of
Paraaque, Province of Rizal, covered by TCT No. 361402 issued by the Registry
of Deeds of Pasig and more particularly described as follows:
xxx xxx xxx
WHEREAS, the VENDEE, for (sic) has offered to buy a parcel of land and the
VENDOR has accepted the offer, subject to the terms and conditions hereinafter
stipulated:
NOW, THEREFORE, for and in consideration of the sum of ONE MILLION
FIVE HUNDRED SIXTY ONE THOUSAND SIX HUNDRED PESOS
(P1,561,600.00) ONLY, Philippine Currency, payable by VENDEE to in to (sic)
manner set forth, the VENDOR agrees to sell to the VENDEE, their heirs,
successors, administrators, executors, assign, all her rights, titles and interest in
and to the property mentioned in the FIRST WHEREAS CLAUSE, subject to the
following terms and conditions:
1. That the sum of FIFTY THOUSAND PESOS (P50,000.00)
ONLY Philippine Currency, is to be paid upon signing and
execution of this instrument.
2. The balance of the purchase price in the amount of ONE
MILLION FIVE HUNDRED ELEVEN THOUSAND SIX
HUNDRED PESOS (P1,511,600.00) ONLY shall be paid 45 days
after the removal of all squatters from the above described
property.
3. Upon full payment of the overall purchase price as aforesaid,
VENDOR without necessity of demand shall immediately sign,
execute, acknowledged (sic) and deliver the corresponding deed of
absolute sale in favor of the VENDEE free from all liens and
encumbrances and all Real Estate taxes are all paid and updated.
It is hereby agreed, covenanted and stipulated by and between the parties hereto
that if after 60 days from the date of the signing of this contract the VENDOR
shall not be able to remove the squatters from the property being purchased, the
downpayment made by the buyer shall be returned/reimbursed by the VENDOR
to the VENDEE.
That in the event that the VENDEE shall not be able to pay the VENDOR the
balance of the purchase price of ONE MILLION FIVE HUNDRED ELEVEN
THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY after 45 days from
written notification to the VENDEE of the removal of the squatters from the
property being purchased, the FIFTY THOUSAND PESOS (P50,000.00)
previously paid as downpayment shall be forfeited in favor of the VENDOR.
Expenses for the registration such as registration fees, documentary stamp,
transfer fee, assurances and such other fees and expenses as may be necessary to
transfer the title to the name of the VENDEE shall be for the account of the
VENDEE while capital gains tax shall be paid by the VENDOR.

IN WITNESS WHEREOF, the parties hereunto signed those (sic) presents in the
City of Makati MM, Philippines on this 9th day of June, 1988.
(Sgd.) (Sgd.)
VIRGILIO R. ROMERO ENRIQUETA CHUA VDA.
DE ONGSIONG
Vendee Vendor
SIGNED IN THE PRESENCE OF:
(Sgd.) (Sgd.)
Rowena C. Ongsiong Jack M. Cruz 1
Alfonso Flores, in behalf of private respondent, forthwith received and acknowledged a
check for P50,000.00 2 from petitioner. 3
Pursuant to the agreement, private respondent filed a complaint for ejectment (Civil Case No.
7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of
Paraaque. A few months later, or on 21 February 1989, judgment was rendered ordering the
defendants to vacate the premises. The decision was handed down beyond the 60-day period
(expiring 09 August 1988) stipulated in the contract. The writ of execution of the judgment was
issued, still later, on 30 March 1989.
In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received
from petitioner since, she said, she could not "get rid of the squatters" on the lot. Atty. Sergio
A.F. Apostol, counsel for petitioner, in his reply of 17 April 1989, refused the tender and stated:.
Our client believes that with the exercise of reasonable diligence considering the
favorable decision rendered by the Court and the writ of execution issued
pursuant thereto, it is now possible to eject the squatters from the premises of the
subject property, for which reason, he proposes that he shall take it upon himself
to eject the squatters, provided, that expenses which shall be incurred by reason
thereof shall be chargeable to the purchase price of the land. 4
Meanwhile, the Presidential Commission for the Urban Poor ("PCUD"), through its Regional
Director for Luzon, Farley O. Viloria, asked the Metropolitan Trial Court of Paraaque for a
grace period of 45 days from 21 April 1989 within which to relocate and transfer the squatter
families. Acting favorably on the request, the court suspended the enforcement of the writ of
execution accordingly.
On 08 June 1989, Atty. Apostol reminded private respondent on the expiry of the 45-day grace
period and his client's willingness to "underwrite the expenses for the execution of the judgment
and ejectment of the occupants." 5
In his letter of 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for private respondent, advised
Atty. Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his
client's failure to evict the squatters from the premises within the agreed 60-day period. He added
that private respondent had "decided to retain the property." 6
On 23 June 1989, Atty. Apostol wrote back to explain:

The contract of sale between the parties was perfected from the very moment that
there was a meeting of the minds of the parties upon the subject lot and the price
in the amount of P1,561,600.00. Moreover, the contract had already been partially
fulfilled and executed upon receipt of the downpayment of your client. Ms.
Ongsiong is precluded from rejecting its binding effects relying upon her inability
to eject the squatters from the premises of subject property during the agreed
period. Suffice it to state that, the provision of the Deed of Conditional Sale do
not grant her the option or prerogative to rescind the contract and to retain the
property should she fail to comply with the obligation she has assumed under the
contract. In fact, a perusal of the terms and conditions of the contract clearly
shows that the right to rescind the contract and to demand the
return/reimbursement of the downpayment is granted to our client for his
protection.
Instead, however, of availing himself of the power to rescind the contract and
demand the return, reimbursement of the downpayment, our client had opted to
take it upon himself to eject the squatters from the premises. Precisely, we refer
you to our letters addressed to your client dated April 17, 1989 and June 8, 1989.
Moreover, it is basic under the law on contracts that the power to rescind is given
to the injured party. Undoubtedly, under the circumstances, our client is the
injured party.
Furthermore, your client has not complied with her obligation under their contract
in good faith. It is undeniable that Ms. Ongsiong deliberately refused to exert
efforts to eject the squatters from the premises of the subject property and her
decision to retain the property was brought about by the sudden increase in the
value of realties in the surrounding areas.
Please consider this letter as a tender of payment to your client and a demand to
execute the absolute Deed of Sale. 7
A few days later (or on 27 June 1989), private respondent, prompted by petitioner's continued
refusal to accept the return of the P50,000.00 advance payment, filed with the Regional Trial
Court of Makati, Branch 133, Civil Case No. 89-4394 for rescission of the deed of "conditional"
sale, plus damages, and for the consignation of P50,000.00 cash.
Meanwhile, on 25 August 1989, the Metropolitan Trial Court issued an alias writ of execution in
Civil Case No. 7579 on motion of private respondent but the squatters apparently still stayed on.
Back to Civil Case No. 89-4394, on 26 June 1990, the Regional Trial Court of Makati 8 rendered
decision holding that private respondent had no right to rescind the contract since it was she who
"violated her obligation to eject the squatters from the subject property" and that petitioner, being
the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the
agreement. The court ruled that the provisions in the contract relating to (a) the
return/reimbursement of the P50,000.00 if the vendor were to fail in her obligation to free the
property from squatters within the stipulated period or (b), upon the other hand, the sum's
forfeiture by the vendor if the vendee were to fail in paying the agreed purchase price, amounted
to "penalty clauses". The court added:
This Court is not convinced of the ground relied upon by the plaintiff in seeking
the rescission, namely: (1) he (sic) is afraid of the squatters; and (2) she has spent
so much to eject them from the premises (p. 6, tsn, ses. Jan. 3, 1990). Militating
against her profession of good faith is plaintiffs conduct which is not in accord
with the rules of fair play and justice. Notably, she caused the issuance of

an alias writ of execution on August 25, 1989 (Exh. 6) in the ejectment suit which
was almost two months after she filed the complaint before this Court on June 27,
1989. If she were really afraid of the squatters, then she should not have pursued
the issuance of an alias writ of execution. Besides, she did not even report to the
police the alleged phone threats from the squatters. To the mind of the Court, the
so-called squatter factor is simply factuitous (sic). 9
The lower court, accordingly, dismissed the complaint and ordered, instead, private
respondent to eject or cause the ejectment of the squatters from the property and to
execute the absolute deed of conveyance upon payment of the full purchase price by
petitioner.
Private respondent appealed to the Court of Appeals. On 29 May 1992, the appellate court
rendered its decision.10 It opined that the contract entered into by the parties was subject to a
resolutory condition, i.e., the ejectment of the squatters from the land, the non-occurrence of
which resulted in the failure of the object of the contract; that private respondent substantially
complied with her obligation to evict the squatters; that it was petitioner who was not ready to
pay the purchase price and fulfill his part of the contract, and that the provision requiring a
mandatory return/reimbursement of the P50,000.00 in case private respondent would fail to eject
the squatters within the 60-day period was not a penal clause. Thus, it concluded.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE, and
a new one entered declaring the contract of conditional sale dated June 9, 1988
cancelled and ordering the defendant-appellee to accept the return of the
downpayment in the amount of P50,000.00 which was deposited in the court
below. No pronouncement as to costs. 11
Failing to obtain a reconsideration, petitioner filed this petition for review on certiorari raising
issues that, in fine, center on the nature of the contract adverted to and the P50,000.00 remittance
made by petitioner.
A perfected contract of sale may either be absolute or conditional 12 depending on whether the
agreement is devoid of, or subject to, any condition imposed on the passing of title of the thing to
be conveyed or on the obligation of a party thereto. When ownership is retained until the
fulfillment of a positive condition the breach of the condition will simply prevent the duty to
convey title from acquiring an obligatory force. If the condition is imposed on an obligation of a
party which is not complied with, the other party may either refuse to proceed or waive said
condition (Art. 1545, Civil Code). Where, of course, the condition is imposed upon
the perfection of the contract itself, the failure of such condition would prevent the juridical
relation itself from coming into existence. 13
In determining the real character of the contract, the title given to it by the parties is not as much
significant as its substance. For example, a deed of sale, although denominated as a deed of
conditional sale, may be treated as absolute in nature, if title to the property sold is not reserved
in the vendor or if the vendor is not granted the right to unilaterally rescind the contract
predicated
on the fulfillment or non-fulfillment, as the case may be, of the prescribed condition. 14
The term "condition" in the context of a perfected contract of sale pertains, in reality, to the
compliance by one party of an undertaking the fulfillment of which would beckon, in turn, the
demandability of the reciprocal prestation of the other party. The reciprocal obligations referred
to would normally be, in the case of vendee, the payment of the agreed purchase price and, in the
case of the vendor, the fulfillment of certain express warranties (which, in the case at bench is the
timely eviction of the squatters on the property).

It would be futile to challenge the agreement here in question as not being a duly perfected
contract. A sale is at once perfected when a person (the seller) obligates himself, for a price
certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer)
over which the latter agrees. 15
The object of the sale, in the case before us, was specifically identified to be a 1,952-square
meter lot in San Dionisio, Paraaque, Rizal, covered by Transfer Certificate of Title No. 361402
of the Registry of Deeds for Pasig and therein technically described. The purchase price was
fixed at P1,561,600.00, of which P50,000.00 was to be paid upon the execution of the document
of sale and the balance of P1,511,600.00 payable "45 days after the removal of all squatters from
the above described property."
From the moment the contract is perfected, 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. Under the agreement, private
respondent is obligated to evict the squatters on the property. The ejectment of the squatters is
a condition the operative act of which sets into motion the period of compliance by petitioner of
his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to
remove the squatters from the property" within the stipulated period gives petitioner the right to
either refuse to proceed with the agreement or waive that condition in consonance with Article
1545 of the Civil Code. 16This option clearly belongs to petitioner and not to private respondent.
We share the opinion of the appellate court that the undertaking required of private respondent
does not constitute a "potestative condition dependent solely on his will" that might, otherwise,
be void in accordance with Article 1182 of the Civil Code 17 but a "mixed" condition "dependent
not on the will of the vendor alone but also of third persons like the squatters and government
agencies and personnel concerned." 18 We must hasten to add, however, that where the so-called
"potestative condition" is imposed not on the birth of the obligation but on its fulfillment, only
the obligation is avoided, leaving unaffected the obligation itself. 19
In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the
obligee to choose between proceeding with the agreement or waiving the performance of the
condition. It is this provision which is the pertinent rule in the case at bench. Here, evidently,
petitioner has waived the performance of the condition imposed on private respondent to free the
property from squatters. 20
In any case, private respondent's action for rescission is not warranted. She is not the injured
party. 21 The right of resolution of a party to an obligation under Article 1191 of the Civil Code is
predicated on a breach of faith by the other party that violates the reciprocity between them. 22 It
is private respondent who has failed in her obligation under the contract. Petitioner did not
breach the agreement. He has agreed, in fact, to shoulder the expenses of the execution of the
judgment in the ejectment case and to make arrangements with the sheriff to effect such
execution. In his letter of 23 June 1989, counsel for petitioner has tendered payment and
demanded forthwith the execution of the deed of absolute sale. Parenthetically, this offer to pay,
having been made prior to the demand for rescission, assuming for the sake of argument that
such a demand is proper under Article 1592 23 of the Civil Code, would likewise suffice to defeat
private respondent's prerogative to rescind thereunder.
There is no need to still belabor the question of whether the P50,000.00 advance payment is
reimbursable to petitioner or forfeitable by private respondent, since, on the basis of our
foregoing conclusions, the matter has ceased to be an issue. Suffice it to say that petitioner
having opted to proceed with the sale, neither may petitioner demand its reimbursement from
private respondent nor may private respondent subject it to forfeiture.

WHEREFORE, the questioned decision of the Court of Appeals is hereby REVERSED AND
SET ASIDE, and another is entered ordering petitioner to pay private respondent the balance of
the purchase price and the latter to execute the deed of absolute sale in favor of petitioner. No
costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 112329

January 28, 2000

VIRGINIA A. PEREZ, petitioner,

vs.
COURT OF APPEALS and BF LIFEMAN INSURANCE CORPORATION, respondents.
YNARES-SANTIAGO, J.:
A contract of insurance, like all other contracts, must be assented to by both parties, either in
person or through their agents and so long as an application for insurance has not been either
accepted or rejected, it is merely a proposal or an offer to make a contract.
Petitioner Virginia A. Perez assails the decision of respondent Court of Appeals dated July 9,
1993 in CA-G.R. CV 35529 entitled, "BF Lifeman Insurance Corporations; Plaintiff-Appellant
versus Virginia A. Perez. Defendant-Appellee," which declared Insurance Policy 056300 for
P50,000.00 issued by private respondent corporation in favor of the deceased Primitivo B. Perez,
null and void and rescinded, thereby reversing the decision rendered by the Regional Trial Court
of Manila, Branch XVI.
The facts of the case as summarized by respondent Court of Appeals are not in dispute.
Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for
P20,000.00. Sometime in October 1987, an agent of the insurance corporation, Rodolfo Lalog,
visited Perez in Guinayangan, Quezon and convinced him to apply for additional insurance
coverage of P50,000.00, to avail of the ongoing promotional discount of P400.00 if the premium
were paid annually.1wphi1.nt
On October 20, 1987, Primitivo B. Perez accomplished an application form for the additional
insurance coverage of P50,000.00. On the same day, petitioner Virginia A. Perez, Primitivo's
wife, paid P2,075.00 to Lalog. The receipt issued by Lalog indicated the amount received was a
"deposit."1 Unfortunately, Lalog lost the application form accomplished by Perez and so on
October 28, 1987, he asked the latter to fill up another application form. 2On November 1, 1987,
Perez was made to undergo the required medical examination, which he passed.3
Pursuant to the established procedure of the company, Lalog forwarded the application for
additional insurance of Perez, together with all its supporting papers, to the office of BF Lifeman
Insurance Corporation at Gumaca, Quezon which office was supposed to forward the papers to
the Manila office.
On November 25, 1987, Perez died in an accident. He was riding in a banca which capsized
during a storm. At the time of his death, his application papers for the additional insurance of
P50,000.00 were still with the Gumaca office. Lalog testified that when he went to follow up the
papers, he found them still in the Gumaca office and so he personally brought the papers to the

Manila office of BF Lifeman Insurance Corporation. It was only on November 27, 1987 that said
papers were received in Manila.
Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance Corporation
approved the application and issued the corresponding policy for the P50,000.00 on December 2,
1987.4
Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies of the
deceased. She was paid P40,000.00 under the first insurance policy for P20,000.00 (double
indemnity in case of accident) but the insurance company refused to pay the claim under the
additional policy coverage of P50,000.00, the proceeds of which amount to P150,000.00 in view
of a triple indemnity rider on the insurance policy. In its letter' of January 29, 1988 to Virginia A.
Perez, the insurance company maintained that the insurance for P50,000.00 had not been
perfected at the time of the death of Primitivo Perez. Consequently, the insurance company
refunded the amount of P2,075.00 which Virginia Perez had paid.
On September 21, 1990, private respondent BF Lifeman Insurance Corporation filed a complaint
against Virginia A. Perez seeking the rescission and declaration of nullity of the insurance
contract in question.
Petitioner Virginia A. Perez, on the other hand, averred that the deceased had fulfilled all his
prestations under the contract and all the elements of a valid contract are present. She then filed a
counterclaim against private respondent for the collection of P150,000.00 as actual damages,
P100,000.00 as exemplary damages, P30,000.00 as attorney's fees and P10,000.00 as expenses
for litigation.
On October 25, 1991, the trial court rendered a decision in favor of petitioner, the dispositive
portion of which reads as follows:
WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of
defendant Virginia A. Perez, ordering the plaintiff BF Lifeman Insurance Corporation to
pay to her the face value of BF Lifeman Insurance Policy No. 056300, plus double
indemnity under the SARDI or in the total amount of P150,000.00 (any refund made
and/or premium deficiency to be deducted therefrom).
SO ORDERED.5
The trial court, in ruling for petitioner, held that the premium for the additional insurance of
P50,000.00 had been fully paid and even if the sum of P2,075.00 were to be considered merely
as partial payment, the same does not affect the validity of the policy. The trial court further
stated that the deceased had fully complied with the requirements of the insurance company. He
paid, signed the application form and passed the medical examination. He should not be made to
suffer the subsequent delay in the transmittal of his application form to private respondent's head
office since these were no longer within his control.
The Court of Appeals, however, reversed the decision of the trial court saying that the insurance
contract for P50,000.00 could not have been perfected since at the time that the policy was
issued, Primitivo was already dead.6 Citing the provision in the application form signed by
Primitivo which states that:
. . . there shall be no contract of insurance unless and until a policy is issued on this
application and that the policy shall not take effect until the first premium has been paid
and the policy has been delivered to and accepted by me/us in person while I/we, am/are
in good health

the Court of Appeals held that the contract of insurance had to be assented to by both parties and
so long as the application for insurance has not been either accepted or rejected, it is merely an
offer or proposal to make a contract.
Petitioner's motion for reconsideration having been denied by respondent court, the instant
petition for certiorariwas filed on the ground that there was a consummated contract of insurance
between the deceased and BF Lifeman Insurance Corporation and that the condition that the
policy issued by the corporation be delivered and received by the applicant in good health, is
potestative, being dependent upon the will of the insurance company, and is therefore null and
void.
The petition is bereft of merit.
Insurance is a contract whereby, for a stipulated consideration, one party undertakes to
compensate the other for loss on a specified subject by specified perils. 7 A contract, on the other
hand, is a meeting of the minds between two persons whereby one binds himself, with respect to
the other to give something or to render some service. 8Under Article 1318 of the Civil Code,
there is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Consent must be manifested by the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The offer must be certain and the acceptance
absolute.
When Primitivo filed an application for insurance, paid P2,075.00 and submitted the results of
his medical examination, his application was subject to the acceptance of private respondent BF
Lifeman Insurance Corporation. The perfection of the contract of insurance between the
deceased and respondent corporation was further conditioned upon compliance with the
following requisites stated in the application form:
there shall be no contract of insurance unless and until a policy is issued on this
application and that the said policy shall not take effect until the premium has been paid
and the policy delivered to and accepted by me/us in person while I/We, am/are in good
health.9
The assent of private respondent BF Lifeman Insurance Corporation therefore was not given
when it merely received the application form and all the requisite supporting papers of the
applicant. Its assent was given when it issues a corresponding policy to the applicant. Under the
abovementioned provision, it is only when the applicant pays the premium and receives and
accepts the policy while he is in good health that the contract of insurance is deemed to have
been perfected.
It is not disputed, however, that when Primitivo died on November 25, 1987, his application
papers for additional insurance coverage were still with the branch office of respondent
corporation in Gumaca and it was only two days later, or on November 27, 1987, when Lalog
personally delivered the application papers to the head office in Manila. Consequently, there was
absolutely no way the acceptance of the application could have been communicated to the
applicant for the latter to accept inasmuch as the applicant at the time was already dead. In the
case of Enriquez vs. Sun Life Assurance Co. of Canada,10 recovery on the life insurance of the
deceased was disallowed on the ground that the contract for annuity was not perfected since it

had not been proved satisfactorily that the acceptance of the application ever reached the
knowledge of the applicant.
Petitioner insists that the condition imposed by respondent corporation that a policy must have
been delivered to and accepted by the proposed insured in good health is potestative being
dependent upon the will of the corporation and is therefore null and void.
We do not agree.
A potestative condition depends upon the exclusive will of one of the parties. For this reason, it
is considered void. Article 1182 of the New Civil Code states: When the fulfillment of the
condition depends upon the sole will the debtor, the conditional obligation shall be void.
In the case at bar, the following conditions were imposed by the respondent company for the
perfection of the contract of insurance:
(a) a policy must have been issued;
(b) the premiums paid; and
(c) the policy must have been delivered to and accepted by the applicant while he is in
good health.
The condition imposed by the corporation that the policy must have been delivered to and
accepted by the applicant while he is in good health can hardly be considered as a potestative or
facultative condition. On the contrary, the health of the applicant at the time of the delivery of the
policy is beyond the control or will of the insurance company. Rather, the condition is a
suspensive one whereby the acquisition of rights depends upon the happening of an event which
constitutes the condition. In this case, the suspensive condition was the policy must have been
delivered and accepted by the applicant while he is in good health. There was non-fulfillment of
the condition, however, inasmuch as the applicant was already dead at the time the policy was
issued. Hence, the non-fulfillment of the condition resulted in the non-perfection of the contract.
As stated above, a contract of insurance, like other contracts, must be assented to by both parties
either in person or by their agents. So long as an application for insurance has not been either
accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be
binding from the date of application, must have been a completed contract, one that leaves
nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it
shall take effect. There can be no contract of insurance unless the minds of the parties have met
in agreement.11
Prescinding from the foregoing, respondent corporation cannot be held liable for gross
negligence. It should be noted that an application is a mere offer which requires the overt act of
the insurer for it to ripen into a contract. Delay in acting on the application does not constitute
acceptance even though the insured has forwarded his first premium with his application. The
corporation may not be penalized for the delay in the processing of the application papers.
Moreover, while it may have taken some time for the application papers to reach the main office,
in the case at bar, the same was acted upon less than a week after it was received. The processing
of applications by respondent corporation normally takes two to three weeks, the longest being a
month.12 In this case, however, the requisite medical examination was undergone by the deceased
on November 1, 1987; the application papers were forwarded to the head office on November 27,
1987; and the policy was issued on December 2, 1987. Under these circumstances, we hold that
the delay could not be deemed unreasonable so as to constitute gross negligence.

A final note. It has not escaped our notice that the Court of Appeals declared Insurance Policy
056300 for P50,000.00 null and void and rescinded. The Court of Appeals corrected this in its
Resolution of the motion for reconsideration filed by petitioner, thus:
Anent the appearance of the word "rescinded" in the dispositive portion of the decision,
to which defendant-appellee attaches undue significance and makes capital of, it is clear
that the use of the words "and rescinded" is, as it is hereby declared, a superfluity. It is
apparent from the context of the decision that the insurance policy in question was found
null and void, and did not have to be "rescinded".13
True, rescission presupposes the existence of a valid contract. A contract which is null and void
is no contract at all and hence could not be the subject of rescission.
WHEREFORE, the decision rendered by the Court of Appeals in CA-G.R. CV No. 35529 is
AFFIRMED insofar as it declared Insurance Policy No. 056300 for P50,000.00 issued by BF
Lifeman Insurance Corporation of no force and effect and hence null and void. No
costs.1wphi1.nt
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 146839

March 23, 2011

ROLANDO T. CATUNGAL, JOSE T. CATUNGAL, JR., CAROLYN T. CATUNGAL and

ERLINDA CATUNGAL-WESSEL, Petitioners,
vs.
ANGEL S. RODRIGUEZ, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a Petition for Review on Certiorari, assailing the following issuances of the
Court of Appeals in CA-G.R. CV No. 40627 consolidated with CA-G.R. SP No. 27565: (a) the
August 8, 2000 Decision,1 which affirmed the Decision2 dated May 30, 1992 of the Regional
Trial Court (RTC), Branch 27 of Lapu-lapu City, Cebu in Civil Case No. 2365-L, and (b) the
January 30, 2001 Resolution,3 denying herein petitioners motion for reconsideration of the
August 8, 2000 Decision.
The relevant factual and procedural antecedents of this case are as follows:
This controversy arose from a Complaint for Damages and Injunction with Preliminary
Injunction/Restraining Order4 filed on December 10, 1990 by herein respondent Angel S.
Rodriguez (Rodriguez), with the RTC, Branch 27, Lapu-lapu City, Cebu, docketed as Civil Case
No. 2365-L against the spouses Agapita and Jose Catungal (the spouses Catungal), the parents of
petitioners.
In the said Complaint, it was alleged that Agapita T. Catungal (Agapita) owned a parcel of land
(Lot 10963) with an area of 65,246 square meters, covered by Original Certificate of Title (OCT)
No. 1055 in her name situated in the Barrio of Talamban, Cebu City. The said property was
allegedly the exclusive paraphernal property of Agapita.

On April 23, 1990, Agapita, with the consent of her husband Jose, entered into a Contract to
Sell6 with respondent Rodriguez. Subsequently, the Contract to Sell was purportedly "upgraded"
into a Conditional Deed of Sale7 dated July 26, 1990 between the same parties. Both the Contract
to Sell and the Conditional Deed of Sale were annotated on the title.
The provisions of the Conditional Deed of Sale pertinent to the present dispute are quoted below:
1. The VENDOR for and in consideration of the sum of TWENTY[-]FIVE MILLION PESOS
(P25,000,000.00) payable as follows:
a. FIVE HUNDRED THOUSAND PESOS (P500,000.00) downpayment upon the
signing of this agreement, receipt of which sum is hereby acknowledged in full from the
VENDEE.
b. The balance of TWENTY[-]FOUR MILLION FIVE HUNDRED THOUSAND
PESOS (P24,500,000.00) shall be payable in five separate checks, made to the order of
JOSE Ch. CATUNGAL, the first check shall be for FOUR MILLION FIVE HUNDRED
THOUSAND PESOS (P4,500,000.00) and the remaining balance to be paid in four
checks in the amounts of FIVE MILLION PESOS (P5,000,000.00) each after the
VENDEE have (sic) successfully negotiated, secured and provided a Road Right of Way
consisting of 12 meters in width cutting across Lot 10884 up to the national road, either
by widening the existing Road Right of Way or by securing a new Road Right of Way of
12 meters in width. If however said Road Right of Way could not be negotiated, the
VENDEE shall give notice to the VENDOR for them to reassess and solve the problem
by taking other options and should the situation ultimately prove futile, he shall take steps
to rescind or cancel the herein Conditional Deed of Sale.
c. That the access road or Road Right of Way leading to Lot 10963 shall be the
responsibility of the VENDEE to secure and any or all cost relative to the acquisition
thereof shall be borne solely by the VENDEE. He shall, however, be accorded with
enough time necessary for the success of his endeavor, granting him a free hand in
negotiating for the passage.
BY THESE PRESENTS, the VENDOR do hereby agree to sell by way of herein
CONDITIONAL DEED OF SALE to VENDEE, his heirs, successors and assigns, the real
property described in the Original Certificate of Title No. 105 x x x.
xxxx
5. That the VENDEE has the option to rescind the sale. In the event the VENDEE exercises his
option to rescind the herein Conditional Deed of Sale, the VENDEE shall notify the VENDOR
by way of a written notice relinquishing his rights over the property. The VENDEE shall then be
reimbursed by the VENDOR the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00)
representing the downpayment, interest free, payable but contingent upon the event that the
VENDOR shall have been able to sell the property to another party.8
In accordance with the Conditional Deed of Sale, Rodriguez purportedly secured the necessary
surveys and plans and through his efforts, the property was reclassified from agricultural land
into residential land which he claimed substantially increased the propertys value. He likewise
alleged that he actively negotiated for the road right of way as stipulated in the contract.9
Rodriguez further claimed that on August 31, 1990 the spouses Catungal requested an advance
ofP5,000,000.00 on the purchase price for personal reasons. Rodriquez allegedly refused on the
ground that the amount was substantial and was not due under the terms of their agreement.

Shortly after his refusal to pay the advance, he purportedly learned that the Catungals were
offering the property for sale to third parties.10
Thereafter, Rodriguez received letters dated October 22, 1990,11 October 24, 199012 and October
29, 1990,13all signed by Jose Catungal who was a lawyer, essentially demanding that the former
make up his mind about buying the land or exercising his "option" to buy because the spouses
Catungal allegedly received other offers and they needed money to pay for personal obligations
and for investing in other properties/business ventures. Should Rodriguez fail to exercise his
option to buy the land, the Catungals warned that they would consider the contract cancelled and
that they were free to look for other buyers.
In a letter dated November 4, 1990, 14 Rodriguez registered his objections to what he termed the
Catungals unwarranted demands in view of the terms of the Conditional Deed of Sale which
allowed him sufficient time to negotiate a road right of way and granted him, the vendee, the
exclusive right to rescind the contract. Still, on November 15, 1990, Rodriguez purportedly
received a letter dated November 9, 199015 from Atty. Catungal, stating that the contract had been
cancelled and terminated.
Contending that the Catungals unilateral rescission of the Conditional Deed of Sale was
unjustified, arbitrary and unwarranted, Rodriquez prayed in his Complaint, that:
1. Upon the filing of this complaint, a restraining order be issued enjoining defendants
[the spouses Catungal], their employees, agents, representatives or other persons acting in
their behalf from offering the property subject of this case for sale to third persons; from
entertaining offers or proposals by third persons to purchase the said property; and, in
general, from performing acts in furtherance or implementation of defendants rescission
of their Conditional Deed of Sale with plaintiff [Rodriguez].
2. After hearing, a writ of preliminary injunction be issued upon such reasonable bond as
may be fixed by the court enjoining defendants and other persons acting in their behalf
from performing any of the acts mentioned in the next preceding paragraph.
3. After trial, a Decision be rendered:
a) Making the injunction permanent;
b) Condemning defendants to pay to plaintiff, jointly and solidarily:
Actual damages in the amount of P400,000.00 for their unlawful rescission of the Agreement and
their performance of acts in violation or disregard of the said Agreement;
Moral damages in the amount of P200,000.00;
Exemplary damages in the amount of P200,000.00; Expenses of litigation and attorneys fees in
the amount ofP100,000.00; and
Costs of suit.16
On December 12, 1990, the trial court issued a temporary restraining order and set the
application for a writ of preliminary injunction for hearing on December 21, 1990 with a
directive to the spouses Catungal to show cause within five days from notice why preliminary
injunction should not be granted. The trial court likewise ordered that summons be served on
them.17
Thereafter, the spouses Catungal filed their opposition 18 to the issuance of a writ of preliminary
injunction and later filed a motion to dismiss 19 on the ground of improper venue. According to

the Catungals, the subject property was located in Cebu City and thus, the complaint should have
been filed in Cebu City, not Lapu-lapu City. Rodriguez opposed the motion to dismiss on the
ground that his action was a personal action as its subject was breach of a contract, the
Conditional Deed of Sale, and not title to, or possession of real property.20
In an Order dated January 17, 1991, 21 the trial court denied the motion to dismiss and ruled that
the complaint involved a personal action, being merely for damages with a prayer for injunction.
Subsequently, on January 30, 1991, the trial court ordered the issuance of a writ of preliminary
injunction upon posting by Rodriguez of a bond in the amount of P100,000.00 to answer for
damages that the defendants may sustain by reason of the injunction.
On February 1, 1991, the spouses Catungal filed their Answer with Counterclaim 22 alleging that
they had the right to rescind the contract in view of (1) Rodriguezs failure to negotiate the road
right of way despite the lapse of several months since the signing of the contract, and (2) his
refusal to pay the additional amount ofP5,000,000.00 asked by the Catungals, which to them
indicated his lack of funds to purchase the property. The Catungals likewise contended that
Rodriguez did not have an exclusive right to rescind the contract and that the contract, being
reciprocal, meant both parties had the right to rescind.23 The spouses Catungal further claimed
that it was Rodriguez who was in breach of their agreement and guilty of bad faith which
justified their rescission of the contract. 24 By way of counterclaim, the spouses Catungal prayed
for actual and consequential damages in the form of unearned interests from the balance (of the
purchase price in the amount) of P24,500,000.00, moral and exemplary damages in the amount
of P2,000,000.00, attorneys fees in the amount of P200,000.00 and costs of suits and litigation
expenses in the amount of P10,000.00.25 The spouses Catungal prayed for the dismissal of the
complaint and the grant of their counterclaim.
The Catungals amended their Answer twice,26 retaining their basic allegations but amplifying
their charges of contractual breach and bad faith on the part of Rodriguez and adding the
argument that in view of Article 1191 of the Civil Code, the power to rescind reciprocal
obligations is granted by the law itself to both parties and does not need an express stipulation to
grant the same to the injured party. In the Second Amended Answer with Counterclaim, the
spouses Catungal added a prayer for the trial court to order the Register of Deeds to cancel the
annotations of the two contracts at the back of their OCT.27
On October 24, 1991, Rodriguez filed an Amended Complaint, 28 adding allegations to the effect
that the Catungals were guilty of several misrepresentations which purportedly induced
Rodriguez to buy the property at the price of P25,000,000.00. Among others, it was alleged that
the spouses Catungal misrepresented that their Lot 10963 includes a flat portion of land which
later turned out to be a separate lot (Lot 10986) owned by Teodora Tudtud who sold the same to
one Antonio Pablo. The Catungals also allegedly misrepresented that the road right of way will
only traverse two lots owned by Anatolia Tudtud and her daughter Sally who were their relatives
and who had already agreed to sell a portion of the said lots for the road right of way at a price
of P550.00 per square meter. However, because of the Catungals acts of offering the property to
other buyers who offered to buy the road lots for P2,500.00 per square meter, the adjacent lot
owners were no longer willing to sell the road lots to Rodriguez at P550.00 per square meter but
were asking for a price of P3,500.00 per square meter. In other words, instead of assisting
Rodriguez in his efforts to negotiate the road right of way, the spouses Catungal allegedly
intentionally and maliciously defeated Rodriguezs negotiations for a road right of way in order
to justify rescission of the said contract and enable them to offer the property to other buyers.
Despite requesting the trial court for an extension of time to file an amended Answer,29 the
Catungals did not file an amended Answer and instead filed an Urgent Motion to Dismiss 30 again
invoking the ground of improper venue. In the meantime, for failure to file an amended Answer
within the period allowed, the trial court set the case for pre-trial on December 20, 1991.

During the pre-trial held on December 20, 1991, the trial court denied in open court the
Catungals Urgent Motion to Dismiss for violation of the rules and for being repetitious and
having been previously denied.31 However, Atty. Catungal refused to enter into pre-trial which
prompted the trial court to declare the defendants in default and to set the presentation of the
plaintiffs evidence on February 14, 1992.32
On December 23, 1991, the Catungals filed a motion for reconsideration 33 of the December 20,
1991 Order denying their Urgent Motion to Dismiss but the trial court denied reconsideration in
an Order dated February 3, 1992.34 Undeterred, the Catungals subsequently filed a Motion to Lift
and to Set Aside Order of Default35 but it was likewise denied for being in violation of the rules
and for being not meritorious.36 On February 28, 1992, the Catungals filed a Petition
for Certiorari and Prohibition37 with the Court of Appeals, questioning the denial of their motion
to dismiss and the order of default. This was docketed as CA-G.R. SP No. 27565.
Meanwhile, Rodriguez proceeded to present his evidence before the trial court.
In a Decision dated May 30, 1992, the trial court ruled in favor of Rodriguez, finding that: (a)
under the contract it was complainant (Rodriguez) that had the option to rescind the sale; (b)
Rodriguezs obligation to pay the balance of the purchase price arises only upon successful
negotiation of the road right of way; (c) he proved his diligent efforts to negotiate the road right
of way; (d) the spouses Catungal were guilty of misrepresentation which defeated Rodriguezs
efforts to acquire the road right of way; and (e) the Catungals rescission of the contract had no
basis and was in bad faith. Thus, the trial court made the injunction permanent, ordered the
Catungals to reduce the purchase price by the amount of acquisition of Lot 10963 which they
misrepresented was part of the property sold but was in fact owned by a third party and ordered
them to pay P100,000.00 as damages,P30,000.00 as attorneys fees and costs.
The Catungals appealed the decision to the Court of Appeals, asserting the commission of the
following errors by the trial court in their appellants brief38 dated February 9, 1994:
I
THE COURT A QUO ERRED IN NOT DISMISSING OF (SIC) THE CASE ON THE
GROUNDS OF IMPROPER VENUE AND LACK OF JURISDICTION.
II
THE COURT A QUO ERRED IN CONSIDERING THE CASE AS A PERSONAL AND NOT A
REAL ACTION.
III
GRANTING WITHOUT ADMITTING THAT VENUE WAS PROPERLY LAID AND THE
CASE IS A PERSONAL ACTION, THE COURT A QUO ERRED IN DECLARING THE
DEFENDANTS IN DEFAULT DURING THE PRE-TRIAL WHEN AT THAT TIME THE
DEFENDANTS HAD ALREADY FILED THEIR ANSWER TO THE COMPLAINT.
IV
THE COURT A QUO ERRED IN CONSIDERING THE DEFENDANTS AS HAVING LOST
THEIR LEGAL STANDING IN COURT WHEN AT MOST THEY COULD ONLY BE
CONSIDERED AS IN DEFAULT AND STILL ENTITLED TO NOTICES OF ALL FURTHER
PROCEEDINGS ESPECIALLY AFTER THEY HAD FILED THE MOTION TO LIFT THE
ORDER OF DEFAULT.
V

THE COURT A QUO ERRED IN ISSUING THE WRIT [OF] PRELIMINARY INJUNCTION
RESTRAINING THE EXERCISE OF ACTS OF OWNERSHIP AND OTHER RIGHTS OVER
REAL PROPERTY OUTSIDE OF THE COURTS TERRITORIAL JURISDICTION AND
INCLUDING PERSONS WHO WERE NOT BROUGHT UNDER ITS JURISDICTION, THUS
THE NULLITY OF THE WRIT.
VI
THE COURT A QUO ERRED IN NOT RESTRAINING ITSELF MOTU PROP[R]IO FROM
CONTINUING WITH THE PROCEEDINGS IN THE CASE AND IN RENDERING
DECISION THEREIN IF ONLY FOR REASON OF COURTESY AND FAIRNESS BEING
MANDATED AS DISPENSER OF FAIR AND EQUAL JUSTICE TO ALL AND SUNDRY
WITHOUT FEAR OR FAVOR IT HAVING BEEN SERVED EARLIER WITH A COPY OF
THE PETITION FOR CERTIORARI QUESTIONING ITS VENUE AND JURISDICTION IN
CA-G.R. NO. SP 27565 IN FACT NOTICES FOR THE FILING OF COMMENT THERETO
HAD ALREADY BEEN SENT OUT BY THE HONORABLE COURT OF APPEALS,
SECOND DIVISION, AND THE COURT A QUO WAS FURNISHED WITH COPY OF SAID
NOTICE.
VII
THE COURT A QUO ERRED IN DECIDING THE CASE IN FAVOR OF THE PLAINTIFF
AND AGAINST THE DEFENDANTS ON THE BASIS OF EVIDENCE WHICH ARE
IMAGINARY, FABRICATED, AND DEVOID OF TRUTH, TO BE STATED IN DETAIL IN
THE DISCUSSION OF THIS PARTICULAR ERROR, AND, THEREFORE, THE DECISION
IS REVERSIBLE.39
On August 31, 1995, after being granted several extensions, Rodriguez filed his appellees
brief,40 essentially arguing the correctness of the trial courts Decision regarding the foregoing
issues raised by the Catungals. Subsequently, the Catungals filed a Reply Brief 41 dated October
16, 1995.
From the filing of the appellants brief in 1994 up to the filing of the Reply Brief, the spouses
Catungal were represented by appellant Jose Catungal himself. However, a new counsel for the
Catungals, Atty. Jesus N. Borromeo (Atty. Borromeo), entered his appearance before the Court of
Appeals on September 2, 1997.42 On the same date, Atty. Borromeo filed a Motion for Leave of
Court to File Citation of Authorities 43 and a Citation of Authorities.44 This would be followed by
Atty. Borromeos filing of an Additional Citation of Authority and Second Additional Citation of
Authority both on November 17, 1997.45
During the pendency of the case with the Court of Appeals, Agapita Catungal passed away and
thus, her husband, Jose, filed on February 17, 1999 a motion for Agapitas substitution by her
surviving children.46
On August 8, 2000, the Court of Appeals rendered a Decision in the consolidated cases CA-G.R.
CV No. 40627 and CA-G.R. SP No. 27565,47 affirming the trial courts Decision.
In a Motion for Reconsideration dated August 21, 2000, 48 counsel for the Catungals, Atty.
Borromeo, argued for the first time that paragraphs 1(b) and 549 of the Conditional Deed of Sale,
whether taken separately or jointly, violated the principle of mutuality of contracts under Article
1308 of the Civil Code and thus, said contract was void ab initio. He adverted to the cases
mentioned in his various citations of authorities to support his argument of nullity of the contract
and his position that this issue may be raised for the first time on appeal.

Meanwhile, a Second Motion for Substitution50 was filed by Atty. Borromeo in view of the death
of Jose Catungal.
In a Resolution dated January 30, 2001, the Court of Appeals allowed the substitution of the
deceased Agapita and Jose Catungal by their surviving heirs and denied the motion for
reconsideration for lack of merit
Hence, the heirs of Agapita and Jose Catungal filed on March 27, 2001 the present petition for
review,51 which essentially argued that the Court of Appeals erred in not finding that paragraphs
1(b) and/or 5 of the Conditional Deed of Sale, violated the principle of mutuality of contracts
under Article 1308 of the Civil Code. Thus, said contract was supposedly void ab initio and the
Catungals rescission thereof was superfluous.
In his Comment,52 Rodriguez highlighted that (a) petitioners were raising new matters that
cannot be passed upon on appeal; (b) the validity of the Conditional Deed of Sale was already
admitted and petitioners cannot be allowed to change theories on appeal; (c) the questioned
paragraphs of the Conditional Deed of Sale were valid; and (d) petitioners were the ones who
committed fraud and breach of contract and were not entitled to relief for not having come to
court with clean hands.
The Court gave due course to the Petition53 and the parties filed their respective Memoranda.
The issues to be resolved in the case at bar can be summed into two questions:
I. Are petitioners allowed to raise their theory of nullity of the Conditional Deed of Sale
for the first time on appeal?
II. Do paragraphs 1(b) and 5 of the Conditional Deed of Sale violate the principle of
mutuality of contracts under Article 1308 of the Civil Code?
On petitioners change of theory
Petitioners claimed that the Court of Appeals should have reversed the trial courts Decision on
the ground of the alleged nullity of paragraphs 1(b) and 5 of the Conditional Deed of Sale
notwithstanding that the same was not raised as an error in their appellants brief. Citing Catholic
Bishop of Balanga v. Court of Appeals,54 petitioners argued in the Petition that this case falls
under the following exceptions:
(3) Matters not assigned as errors on appeal but consideration of which is necessary in
arriving at a just decision and complete resolution of the case or to serve the interest of
justice or to avoid dispensing piecemeal justice;
(4) Matters not specifically assigned as errors on appeal but raised in the trial court and
are matters of record having some bearing on the issue submitted which the parties failed
to raise or which the lower court ignored;
(5) Matters not assigned as errors on appeal but closely related to an error assigned; and
(6) Matters not assigned as errors but upon which the determination of a question
properly assigned is dependent.55
We are not persuaded.
This is not an instance where a party merely failed to assign an issue as an error in the brief nor
failed to argue a material point on appeal that was raised in the trial court and supported by the
record. Neither is this a case where a party raised an error closely related to, nor dependent on

the resolution of, an error properly assigned in his brief. This is a situation where a party
completely changes his theory of the case on appeal and abandons his previous assignment of
errors in his brief, which plainly should not be allowed as anathema to due process.
Petitioners should be reminded that the object of pleadings is to draw the lines of battle between
the litigants and to indicate fairly the nature of the claims or defenses of both parties. 56 In
Philippine National Construction Corporation v. Court of Appeals, 57 we held that "[w]hen a party
adopts a certain theory in the trial court, he will not be permitted to change his theory on appeal,
for to permit him to do so would not only be unfair to the other party but it would also be
offensive to the basic rules of fair play, justice and due process."58
We have also previously ruled that "courts of justice have no jurisdiction or power to decide a
question not in issue. Thus, a judgment that goes beyond the issues and purports to adjudicate
something on which the court did not hear the parties, is not only irregular but also extrajudicial
and invalid. The rule rests on the fundamental tenets of fair play."59
During the proceedings before the trial court, the spouses Catungal never claimed that the
provisions in the Conditional Deed of Sale, stipulating that the payment of the balance of the
purchase price was contingent upon the successful negotiation of a road right of way (paragraph
1[b]) and granting Rodriguez the option to rescind (paragraph 5), were void for allegedly making
the fulfillment of the contract dependent solely on the will of Rodriguez.
On the contrary, with respect to paragraph 1(b), the Catungals did not aver in the Answer (and its
amended versions) that the payment of the purchase price was subject to the will of Rodriguez
but rather they claimed that paragraph 1(b) in relation to 1(c) only presupposed a reasonable time
be given to Rodriguez to negotiate the road right of way. However, it was petitioners theory that
more than sufficient time had already been given Rodriguez to negotiate the road right of way.
Consequently, Rodriguezs refusal/failure to pay the balance of the purchase price, upon demand,
was allegedly indicative of lack of funds and a breach of the contract on the part of Rodriguez.
Anent paragraph 5 of the Conditional Deed of Sale, regarding Rodriguezs option to rescind, it
was petitioners theory in the court a quo that notwithstanding such provision, they retained the
right to rescind the contract for Rodriguezs breach of the same under Article 1191 of the Civil
Code.
Verily, the first time petitioners raised their theory of the nullity of the Conditional Deed of Sale
in view of the questioned provisions was only in their Motion for Reconsideration of the Court of
Appeals Decision, affirming the trial courts judgment. The previous filing of various citations
of authorities by Atty. Borromeo and the Court of Appeals resolutions noting such citations were
of no moment. The citations of authorities merely listed cases and their main rulings without
even any mention of their relevance to the present case or any prayer for the Court of Appeals to
consider them.1wphi1 In sum, the Court of Appeals did not err in disregarding the citations of
authorities or in denying petitioners motion for reconsideration of the assailed August 8, 2000
Decision in view of the proscription against changing legal theories on appeal.
Ruling on the questioned provisions of the Conditional Deed of Sale
Even assuming for the sake of argument that this Court may overlook the procedural misstep of
petitioners, we still cannot uphold their belatedly proffered arguments.
At the outset, it should be noted that what the parties entered into is a Conditional Deed of Sale,
whereby the spouses Catungal agreed to sell and Rodriguez agreed to buy Lot 10963 conditioned
on the payment of a certain price but the payment of the purchase price was additionally made
contingent on the successful negotiation of a road right of way. It is elementary that "[i]n
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."60
Petitioners rely on Article 1308 of the Civil Code to support their conclusion regarding the
claimed nullity of the aforementioned provisions. Article 1308 states that "[t]he contract must
bind both contracting parties; its validity or compliance cannot be left to the will of one of them."
Article 1182 of the Civil Code, in turn, provides:
Art. 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the
conditional obligation shall be void. If it depends upon chance or upon the will of a third person,
the obligation shall take effect in conformity with the provisions of this Code.
In the past, this Court has distinguished between a condition imposed on the perfection of a
contract and a condition imposed merely on the performance of an obligation. While failure to
comply with the first condition results in the failure of a contract, failure to comply with the
second merely gives the other party the option to either refuse to proceed with the sale or to
waive the condition.61 This principle is evident in Article 1545 of the Civil Code on sales, which
provides in part:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition
which is not performed, such party may refuse to proceed with the contract or he may waive
performance of the condition x x x.
Paragraph 1(b) of the Conditional Deed of Sale, stating that respondent shall pay the balance of
the purchase price when he has successfully negotiated and secured a road right of way, is not a
condition on the perfection of the contract nor on the validity of the entire contract or its
compliance as contemplated in Article 1308. It is a condition imposed only on respondents
obligation to pay the remainder of the purchase price. In our view and applying Article 1182,
such a condition is not purely potestative as petitioners contend. It is not dependent on the sole
will of the debtor but also on the will of third persons who own the adjacent land and from whom
the road right of way shall be negotiated. In a manner of speaking, such a condition is likewise
dependent on chance as there is no guarantee that respondent and the third party-landowners
would come to an agreement regarding the road right of way. This type of mixed condition is
expressly allowed under Article 1182 of the Civil Code.
Analogous to the present case is Romero v. Court of Appeals, 62 wherein the Court interpreted the
legal effect of a condition in a deed of sale that the balance of the purchase price would be paid
by the vendee when the vendor has successfully ejected the informal settlers occupying the
property. In Romero, we found that such a condition did not affect the perfection of the contract
but only imposed a condition on the fulfillment of the obligation to pay the balance of the
purchase price, to wit:
From the moment the contract is perfected, 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. Under the agreement, private
respondent is obligated to evict the squatters on the property. The ejectment of the squatters is a
condition the operative act of which sets into motion the period of compliance by petitioner of
his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to
remove the squatters from the property" within the stipulated period gives petitioner the right to
either refuse to proceed with the agreement or waive that condition in consonance with Article
1545 of the Civil Code. This option clearly belongs to petitioner and not to private respondent.
We share the opinion of the appellate court that the undertaking required of private respondent
does not constitute a "potestative condition dependent solely on his will" that might, otherwise,

be void in accordance with Article 1182 of the Civil Code but a "mixed" condition "dependent
not on the will of the vendor alone but also of third persons like the squatters and government
agencies and personnel concerned." We must hasten to add, however, that where the so-called
"potestative condition" is imposed not on the birth of the obligation but on its fulfillment, only
the condition is avoided, leaving unaffected the obligation itself.63 (Emphases supplied.)
From the provisions of the Conditional Deed of Sale subject matter of this case, it was the
vendee (Rodriguez) that had the obligation to successfully negotiate and secure the road right of
way. However, in the decision of the trial court, which was affirmed by the Court of Appeals, it
was found that respondent Rodriguez diligently exerted efforts to secure the road right of way
but the spouses Catungal, in bad faith, contributed to the collapse of the negotiations for said
road right of way. To quote from the trial courts decision:
It is therefore apparent that the vendees obligations (sic) to pay the balance of the purchase price
arises only when the road-right-of-way to the property shall have been successfully negotiated,
secured and provided. In other words, the obligation to pay the balance is conditioned upon the
acquisition of the road-right-of-way, in accordance with paragraph 2 of Article 1181 of the New
Civil Code. Accordingly, "an obligation dependent upon a suspensive condition cannot be
demanded until after the condition takes place because it is only after the fulfillment of the
condition that the obligation arises." (Javier v[s] CA 183 SCRA) Exhibits H, D, P, R, T, FF and
JJ show that plaintiff [Rodriguez] indeed was diligent in his efforts to negotiate for a road-rightof-way to the property. The written offers, proposals and follow-up of his proposals show that
plaintiff [Rodriguez] went all out in his efforts to immediately acquire an access road to the
property, even going to the extent of offering P3,000.00 per square meter for the road lots (Exh.
Q) from the original P550.00 per sq. meter. This Court also notes that defendant (sic) [the
Catungals] made misrepresentation in the negotiation they have entered into with plaintiff
[Rodriguez]. (Exhs. F and G) The misrepresentation of defendant (sic) [the Catungals] as to the
third lot (Lot 10986) to be part and parcel of the subject property [(]Lot 10963) contributed in
defeating the plaintiffs [Rodriguezs] effort in acquiring the road-right-of-way to the property.
Defendants [the Catungals] cannot now invoke the non-fulfillment of the condition in the
contract as a ground for rescission when defendants [the Catungals] themselves are guilty of
preventing the fulfillment of such condition.
From the foregoing, this Court is of the considered view that rescission of the conditional deed of
sale by the defendants is without any legal or factual basis.64 x x x. (Emphases supplied.)
In all, we see no cogent reason to disturb the foregoing factual findings of the trial court.
Furthermore, it is evident from the language of paragraph 1(b) that the condition precedent (for
respondents obligation to pay the balance of the purchase price to arise) in itself partly involves
an obligation to do, i.e., the undertaking of respondent to negotiate and secure a road right of
way at his own expense.65 It does not escape our notice as well, that far from disclaiming
paragraph 1(b) as void, it was the Catungals contention before the trial court that said provision
should be read in relation to paragraph 1(c) which stated:
c. That the access road or Road Right of Way leading to Lot 10963 shall be the responsibility of
the VENDEE to secure and any or all cost relative to the acquisition thereof shall be borne solely
by the VENDEE. He shall, however, be accorded with enough time necessary for the success of
his endeavor, granting him a free hand in negotiating for the passage.66 (Emphasis supplied.)
The Catungals interpretation of the foregoing stipulation was that Rodriguezs obligation to
negotiate and secure a road right of way was one with a period and that period, i.e., "enough
time" to negotiate, had already lapsed by the time they demanded the payment of P5,000,000.00
from respondent. Even assuming arguendo that the Catungals were correct that the respondents
obligation to negotiate a road right of way was one with an uncertain period, their rescission of

the Conditional Deed of Sale would still be unwarranted. Based on their own theory, the
Catungals had a remedy under Article 1197 of the Civil Code, which mandates:
Art. 1197. If the obligation does not fix a period, but from its nature and the circumstances it can
be inferred that a period was intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon the will of the debtor.
In every case, the courts shall determine such period as may under the circumstances have been
probably contemplated by the parties. Once fixed by the courts, the period cannot be changed by
them.
What the Catungals should have done was to first file an action in court to fix the period within
which Rodriguez should accomplish the successful negotiation of the road right of way pursuant
to the above quoted provision. Thus, the Catungals demand for Rodriguez to make an additional
payment of P5,000,000.00 was premature and Rodriguezs failure to accede to such demand did
not justify the rescission of the contract.
With respect to petitioners argument that paragraph 5 of the Conditional Deed of Sale likewise
rendered the said contract void, we find no merit to this theory. Paragraph 5 provides:
5. That the VENDEE has the option to rescind the sale. In the event the VENDEE exercises his
option to rescind the herein Conditional Deed of Sale, the VENDEE shall notify the VENDOR
by way of a written notice relinquishing his rights over the property. The VENDEE shall then be
reimbursed by the VENDOR the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00)
representing the downpayment, interest free, payable but contingent upon the event that the
VENDOR shall have been able to sell the property to another party.67
Petitioners posited that the above stipulation was the "deadliest" provision in the Conditional
Deed of Sale for violating the principle of mutuality of contracts since it purportedly rendered
the contract subject to the will of respondent.
We do not agree.
It is petitioners strategy to insist that the Court examine the first sentence of paragraph 5 alone
and resist a correlation of such sentence with other provisions of the contract. Petitioners view,
however, ignores a basic rule in the interpretation of contracts that the contract should be taken
as a whole.
Article 1374 of the Civil Code provides that "[t]he various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all of them
taken jointly." The same Code further sets down the rule that "[i]f some stipulation of any
contract should admit of several meanings, it shall be understood as bearing that import which is
most adequate to render it effectual."68
Similarly, under the Rules of Court it is prescribed that "[i]n the construction of an instrument
where there are several provisions or particulars, such a construction is, if possible, to be adopted
as will give effect to all"69 and "for the proper construction of an instrument, the circumstances
under which it was made, including the situation of the subject thereof and of the parties to it,
may be shown, so that the judge may be placed in the position of those whose language he is to
interpret."70
Bearing in mind the aforementioned interpretative rules, we find that the first sentence of
paragraph 5 must be taken in relation with the rest of paragraph 5 and with the other provisions
of the Conditional Deed of Sale.

Reading paragraph 5 in its entirety will show that Rodriguezs option to rescind the contract is
not absolute as it is subject to the requirement that there should be written notice to the vendor
and the vendor shall only return Rodriguezs downpayment of P500,000.00, without interest,
when the vendor shall have been able to sell the property to another party. That what is stipulated
to be returned is only the downpayment of P500,000.00 in the event that Rodriguez exercises his
option to rescind is significant. To recall, paragraph 1(b) of the contract clearly states that the
installments on the balance of the purchase price shall only be paid upon successful negotiation
and procurement of a road right of way. It is clear from such provision that the existence of a
road right of way is a material consideration for Rodriguez to purchase the property. Thus, prior
to him being able to procure the road right of way, by express stipulation in the contract, he is not
bound to make additional payments to the Catungals. It was further stipulated in paragraph 1(b)
that: "[i]f however said road right of way cannot be negotiated, the VENDEE shall give notice to
the VENDOR for them to reassess and solve the problem by taking other options and should the
situation ultimately prove futile, he [Rodriguez] shall take steps to rescind or [cancel] the herein
Conditional Deed of Sale." The intention of the parties for providing subsequently in paragraph 5
that Rodriguez has the option to rescind the sale is undeniably only limited to the contingency
that Rodriguez shall not be able to secure the road right of way. Indeed, if the parties intended to
give Rodriguez the absolute option to rescind the sale at any time, the contract would have
provided for the return of all payments made by Rodriguez and not only the downpayment. To
our mind, the reason only the downpayment was stipulated to be returned is that the vendees
option to rescind can only be exercised in the event that no road right of way is secured and,
thus, the vendee has not made any additional payments, other than his downpayment.
In sum, Rodriguezs option to rescind the contract is not purely potestative but rather also subject
to the same mixed condition as his obligation to pay the balance of the purchase price i.e., the
negotiation of a road right of way. In the event the condition is fulfilled (or the negotiation is
successful), Rodriguez must pay the balance of the purchase price. In the event the condition is
not fulfilled (or the negotiation fails), Rodriguez has the choice either (a) to not proceed with the
sale and demand return of his downpayment or (b) considering that the condition was imposed
for his benefit, to waive the condition and still pay the purchase price despite the lack of road
access. This is the most just interpretation of the parties contract that gives effect to all its
provisions.
In any event, even if we assume for the sake of argument that the grant to Rodriguez of an option
to rescind, in the manner provided for in the contract, is tantamount to a potestative condition,
not being a condition affecting the perfection of the contract, only the said condition would be
considered void and the rest of the contract will remain valid. In Romero, the Court observed that
"where the so-called potestative condition is imposed not on the birth of the obligation but on
its fulfillment, only the condition is avoided, leaving unaffected the obligation itself."71
It cannot be gainsaid that "contracts have the force of law between the contracting parties and
should be complied with in good faith."72 We have also previously ruled that "[b]eing the primary
law between the parties, the contract governs the adjudication of their rights and obligations. A
court has no alternative but to enforce the contractual stipulations in the manner they have been
agreed upon and written."73 We find no merit in petitioners contention that their parents were
merely "duped" into accepting the questioned provisions in the Conditional Deed of Sale. We
note that although the contract was between Agapita Catungal and Rodriguez, Jose Catungal
nonetheless signed thereon to signify his marital consent to the same. We concur with the trial
courts finding that the spouses Catungals claim of being misled into signing the contract was
contrary to human experience and conventional wisdom since it was Jose Catungal who was a
practicing lawyer while Rodriquez was a non-lawyer.74 It can be reasonably presumed that Atty.
Catungal and his wife reviewed the provisions of the contract, understood and accepted its
provisions before they affixed their signatures thereon.

After thorough review of the records of this case, we have come to the conclusion that petitioners
failed to demonstrate that the Court of Appeals committed any reversible error in deciding the
present controversy. However, having made the observation that it was desirable for the
Catungals to file a separate action to fix the period for respondent Rodriguezs obligation to
negotiate a road right of way, the Court finds it necessary to fix said period in these proceedings.
It is but equitable for us to make a determination of the issue here to obviate further delay and in
line with the judicial policy of avoiding multiplicity of suits.
If still warranted, Rodriguez is given a period of thirty (30) days from the finality of this decision
to negotiate a road right of way. In the event no road right of way is secured by Rodriquez at the
end of said period, the parties shall reassess and discuss other options as stipulated in paragraph
1(b) of the Conditional Deed of Sale and, for this purpose, they are given a period of thirty (30)
days to agree on a course of action. Should the discussions of the parties prove futile after the
said thirty (30)-day period, immediately upon the expiration of said period for discussion,
Rodriguez may (a) exercise his option to rescind the contract, subject to the return of his
downpayment, in accordance with the provisions of paragraphs 1(b) and 5 of the Conditional
Deed of Sale or (b) waive the road right of way and pay the balance of the deducted purchase
price as determined in the RTC Decision dated May 30, 1992.
WHEREFORE, the Decision dated August 8, 2000 and the Resolution dated January 30, 2001
of the Court of Appeals in CA-G.R. CV No. 40627 consolidated with CA-G.R. SP No. 27565 are
AFFIRMED with the following modification:
If still warranted, respondent Angel S. Rodriguez is given a period of thirty (30) days from the
finality of this Decision to negotiate a road right of way. In the event no road right of way is
secured by respondent at the end of said period, the parties shall reassess and discuss other
options as stipulated in paragraph 1(b) of the Conditional Deed of Sale and, for this purpose, they
are given a period of thirty (30) days to agree on a course of action. Should the discussions of the
parties prove futile after the said thirty (30)-day period, immediately upon the expiration of said
period for discussion, Rodriguez may (a) exercise his option to rescind the contract, subject to
the return of his downpayment, in accordance with the provisions of paragraphs 1(b) and 5 of the
Conditional Deed of Sale or (b) waive the road right of way and pay the balance of the deducted
purchase price as determined in the RTC Decision dated May 30, 1992.
No pronouncement as to costs.
SO ORDERED.