Sales Case Set 11

[G.R. No. L-46533. October 28, 1939.
]
THE MANILA RACING CLUB v MANILA JOCKEY CLUB
SYLLABUS
1. PURCHASE AND SALE; VALIDITY OF CLAUSE REGARDING FORFEITURE OF PARTIAL PAYMENT;
PENAL CLAUSE. The clause of the contract referring to the forfeiture of the P100,000 already
paid, should the purchaser C fail to pay the subsequent installments, is valid. It is in the nature of a
penal clause which may be legally established by the parties (articles 1152 and 1255 of the Civil
Code). In its double purpose of insuring compliance with the contract and of otherwise measuring
before hand the damages which may result from non-compliance, it is not contrary to law, morals or
public order because it was voluntarily and knowingly agreed upon by the parties. Viewing
concretely the true effects thereof in the present case, the amount forfeited constitutes only eight
percent of the stipulated price, which is not excessive if considered as the profit which would have
been obtained had the contract been complied with. There is, moreover, evidence that the
defendants, because of this contract with C., had to reject other propositions to buy the same
property. At any rate, the penal clause does away with the duty to prove the existence and measure
of the damages cause a by the breach.
DECISION
AVANCEA, J.:
On September 18, 1936 Rafael J. Campos entered into a contract (Exhibit C) with the Manila Jockey
Club, an unregistered partnership, whereby he purchased from it the parcel of land described in
transfer certificate of title No. 8724 with its improvements, the good-will, and certain personal
property. The price agreed upon in this transaction is P1,200,000, payable as follows: P50,000 upon
the signing of the contract; P50,000 on or before September 28, 1936; P300,000 on or before
December 24, 1936; P200,000 on or before March 24, 1937; and P600,000 on or before September
24, 1937. It was agreed that should the purchaser fail to pay the amount corresponding to each
installment in due time, the vendor may rescind the contract and keep the amounts paid for itself.
One of the clauses of the deed also states that the purchaser may form a corporation called the
Manila Racing Club, Inc., to whom he may transfer all his rights and obligations under the contract.
The purchaser Campos made the down payment of P50,000 upon signing the contract and on
September 28, 1938 paid the second installment of P50,000.
On October 22, 1936, the Manila Racing Club, Inc., was organized and Campos transferred to it all
his rights and obligations under his contract with the Manila Jockey Club.
As the third installment of P300,000 became due on December 24, 1936, and the purchaser could
not pay it, the vendor, on January 11, 1937, declared the contract can-celled and kept the amount
of P100,000 already paid, corresponding to the first two installments. The purchaser was, however,
granted an extension until January 22, 1937, to revive the contract by paying the P300,000, but
having failed to do this, the partners of the vendor ratified on January 23, 1937, the cancellation of
the contract agreed upon by its board of directors and the forfeiture of the P100,000 paid by the
purchaser. Although the plaintiff contends that the Manila Jockey Club granted to purchaser Campos
an indefinite time to pay the P300,000, corresponding to the third installment, there is no sufficient
evidence thereof and, on the contrary, Campos admits, and defendants evidence so indicate, that
January 22, 1937, was the last extension granted to him to make this payment.
On March 23, 1937 the Manila Jockey Club, Inc., was organized and to it were transferred all the
properties, rights and actions of the Manila Jockey Club.
This action is filed by the plaintiff against the Manila Jockey Club and its partners for the recovery
from them of the forfeited amount of P100,000 and for the payment of P50,000 as damages. The
appealed judgment absolves the defendants.
Assuming these facts to be true, if the clause of the contract referring to the forfeiture of the
P100,000 already paid, should the purchaser Campos fail to pay the subsequent installments, is
valid, the case does not present any difficulty because the contract is clear on this point.
This clause regarding the forfeiture of what has been partially paid is valid. It is in the nature of a
penal clause which may be legally established by the parties (articles 1152 and 1255 of the Civil
Code). In its double purpose of insuring compliance with the contract and of otherwise measuring
beforehand the damages which may result from non-compliance, it is not contrary to law, morals or
public order because it was voluntarily and knowingly agreed upon by the parties. Viewing
concretely the true effects thereof in the present case, the amount forfeited constitutes only eight
per cent of the stipulated price, which is not excessive if considered as the profit which would have
been obtained had the contract been complied with. There is, moreover, evidence that the
defendants, because of this contract with Campos, had to reject other propositions to buy the same
property. At any rate, the penal clause does away with the duty to prove the existence and measure
of the damages caused by the breach.
On the other hand, the allegation that the defendants were responsible for the non-compliance with
the contract is in no wise justified. It is said that the majority of the members of the Manila Jockey
Club promised to subscribe to one-half of the shares of the plaintiff, and for failure to live up to this
promise, the money to pay the third installment of P300,000 could not be raised. There is, however,
no sufficient evidence of such promise which, according to Campos, was merely verbal.
Furthermore, Campos himself attributes the failure to pay the third installment to the fact that the
public, due to the state of the stock market, did not respond to the expectations of the incorporators
of the plaintiff. But it seems that even this is not the cause of the breach, for on the date the third
installment became due, the plaintiff had subscribed shares of its capital stock in the amount of
P600,000, paid in part and the remainder payable on demand. The deduction from all this is that the
breach of the contract cannot be attributed to the defendants and, much less, to the company
which, it is also alleged, the defendants brought into being to defeat the organization of the
plaintiff.
In view of the foregoing considerations, the appealed judgment is affirmed, with the costs to the
appellant. So ordered.
Villa-Real, Imperial, Diaz, Laurel, Concepcion and Moran, JJ., concur.
[G.R. No. 107508. April 25, 1996.]

PHILIPPINE NATIONAL BANK v COURT OF APPEALS
SYLLABUS
1. COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS; MATERIAL ALTERATION, DEFINED. An
alteration is said to be material if it alters the effect of the instrument. It means an unauthorized
change in an instrument that purports to modify in any respect the obligation of a party or an
unauthorized addition of words or numbers or other change to an incomplete instrument relating to
the obligation of a party. In other words, a material alteration is one which changes the items which
are required to be stated under Section 1 of the Negotiable Instruments Law.
2. ID.; ID.; IMMATERIAL ALTERATION; EFFECT ON THE INSTRUMENT. In his book entitled
"Pandect of Commercial Law and Jurisprudence," Justice Jose C. Vitug opines that "an innocent
alteration (generally, changes on items other than those required to be stated under Sec. 1, N. I. L.)
and spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may
enforce it only according to its original tenor.
3. ID.; ID.; ID.; PRESENT IN CASE AT BAR. The case at bench is unique in the sense that what
was altered is the serial number of the check in question, an item which, it can readily be observed,
is not an essential requisite for negotiability under Section 1 of the Negotiable Instrument Law. The
aforementioned alteration did not change the relations between the parties. The name of the drawer
and the drawee were not altered. The intended payee was the same. The sum of money due to the
payee remained the same. The checks serial number is not the sole indication of its origin. As
succinctly found by the Court of Appeals, the name of the government agency which issued the
subject check was prominently printed therein. The checks issuer was therefore sufficiently
identified, rendering the referral to the serial number redundant and inconsequential. Petitioner, thus
cannot refuse to accept the check in question on the ground that the serial number was altered, the
same being an immaterial or innocent one.
4. CIVIL LAW; DAMAGES; ATTORNEYS FEES;. AWARD THEREOF DEMANDS FACTUAL, LEGAL AND
EQUITABLE JUSTIFICATION. The award of attorneys fees lies within the discretion of the court
and depends upon the circumstances of each case. However, the discretion of the court to award
attorneys fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and
equitable justification, without which the award is a conclusion without a premise and improperly left
to speculation and conjecture. It becomes a violation of the proscription against the imposition of a
penalty on the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188
SCRA 170 [1990]). The reason for the award must be stated in the text of the courts decision. If it
is stated only in the dispositive portion of the decision, the same shall be disallowed. As to the
award of attorneys fees being an exception rather than the rule, it is necessary for the court to
make findings of fact and law that would bring the case within the exception and justify the grant of
the award (Refractories Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA
539).
DECISION
KAPUNAN, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision
dated April 29, 1992 of respondent Court of Appeals in CA-G.R. CV No. 24776 and its resolution
dated September 16, 1992, denying petitioner Philippine National Banks motion for reconsideration
of said decision.
The facts of the cases are as follows:
chanrob1es virtual 1aw library
A check with serial number 7-3666-223-3, dated August 7, 1981 in the amount of P97,650.00 was
issued by the Ministry of Education Culture (now Department of Education, Culture and Sports
[DECS]) payable to F. Abante Marketing. This check was drawn against Philippine National Bank
(herein petitioner).
On August 11, 1981, F. Abante Marketing, a client of Capitol City Development Bank (Capitol),
deposited the questioned check in its savings account with said bank. In turn, Capitol deposited the
same in its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the
check to petitioner for clearing.
Petitioner cleared the check as good and thereafter, PBCom credited Capitols account for the
amount stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom
and debited PBComs account for the amount covered by the check, the reason being that there was
a "material alteration" of the check number.
PBCom, as collecting agent of Capitol, then proceeded to debit the latters account for the same
amount, and subsequently, sent the check back to petitioner. Petitioner, however, returned the check
to PBCom.
On the other hand, Capitol could not in turn, debit F. Abante Marketings account since the latter had
already withdrawn the amount of the check as of October 15, 1981. Capitol sought clarification from
PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an
explanation and re-crediting from petitioner.
Since the demands of Capitol were not heeded, it filed a civil suit with the Regional trial Court of
Manila against PBCom which in turn, filed a third-party complaint against petitioner for
reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourthparty complaint against F. Abante Marketing.
On October 3, 1989; the Regional Trial Court rendered its decision the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered as follows:
1.) On plaintiffs complaint, defendant Philippine Bank of Communications is ordered to re-credit or

reimburse plaintiff Capitol City Development Bank the amount of P97,650.00, plus interest of 12
percent thereto from October 19, 1981 until the amount is fully paid;
2.) On Philippine Bank of Communications third-party complaint, third-party defendant PNB is
ordered to reimburse and indemnify Philippine Bank of Communications for whatever amount
PBCom pays to plaintiff;
3.) On Philippine National Banks fourth-party complaint, F. Abante Marketing is ordered to
reimburse and indemnify PNB for whatever amount PNB pays to PBCom;
4.) On attorneys fees, Philippine Bank of Communications is ordered to pay Capitol City
Development Bank attorneys fees in the amount of Ten Thousand (P10,000.00) Pesos; but PBCom
is entitled to reimburse/indemnify from PNB; and Philippine National Bank to be, in turn, reimbursed
or indemnified by F. Abante Marketing for the same amount;
5.) The Counterclaims of PBCom and PNB are hereby dismissed;
6.) No pronouncement as to costs.
SO ORDERED. 1
An appeal was interposed before the respondent Court of Appeals which rendered its decision on
April 29, 1992, the decretal portion of which reads:
WHEREFORE, the judgment appealed from is modified by exempting PBCom from liability to plaintiffappellee for attorneys fees and ordering PNB to honor the check for P97,650.00, with interest as
declared by the trial court, and pay plaintiff-appellee attorneys fees of P10,000.00. After the check
shall have been honored by PNB, PBCom shall re-credit plaintiff-appellees account with it the
amount. No pronouncement as to costs.
SO ORDERED. 2
A motion for reconsideration of the decision was denied by the respondent Court in its resolution
dated September 16, 1992 for lack of merit. 3

Hence, petitioner filed the instant petition which raises the following issues:
I
WHETHER OR NOT AN ALTERATION OF THE SERIAL NUMBER OF A CHECK IS A MATERIAL
ALTERATION UNDER THE NEGOTIABLE INSTRUMENTS LAW.
II
WHETHER OR NOT A CERTIFICATION HEREIN ISSUED BY THE MINISTRY OF EDUCATION CAN BE
GIVEN WEIGHT IN EVIDENCE.
III
WHETHER OR NOT A DRAWEE BANK WHO FAILED TO RETURN A CHECK WITHIN THE TWENTY FOUR
(24) HOUR CLEARING PERIOD MAY RECOVER THE VALUE OF THE CHECK FROM THE COLLECTING
BANK.
IV
WHETHER OR NOT IN THE ABSENCE OF MALICE OR ILL WILL PETITIONER PNB MAY BE HELD LIABLE
FOR ATTORNEYS FEES. 4
We find no merit in the petition.
We shall first deal with the effect of the alteration of the serial number on the negotiability of the
check in question.
Petitioner anchors its position on Section 125 of the Negotiable Instrument Law (ACT No. 2031) 5
which provides:
SECTION 125. What constitutes a material alteration. Any alteration which changes:
(a) The date;

(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relations of the parties;
(e) The medium or currency in which payment is to be made;
(f) Or which adds a place of payment where no place of payment is specified, or any other change or
addition which alters the effect of the instrument in any respect, is a material alteration.
Petitioner alleges that there is no hard and fast rule in the interpretation of the aforequoted
provision of the Negotiable Instrument Law. It maintains that under Section 125(f), any change that
alters the effect of the instrument is a material alteration. 6
We do not agree.
An alteration is said to be material if it alters the effect of the instrument. 7 It means an
unauthorized changed in an instrument that purports to modify in any respect the obligation of a
party or an unauthorized addition of words or numbers or other changed to an incomplete
instrument relating to the obligation of a party. 8 In other words, a material alteration is one which
changes the items which are required to be stated under Section 1 of the Negotiable Instrument
Law.
Section 1 of the Negotiable Instrument Law provides:
SECTION 1. Form of negotiable instruments. An instrument to be negotiable must conform to the

following requirements:
(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.
In his book entitled "Pandect of Commercial Law and Jurisprudence," Justice Jose C. Vitug opines
that "an innocent alteration (generally, changes on items other than those required to be stated
under Sec. 1, N.I.L.) and spoliation (alterations done by a stranger) will not avoid the instrument,
but the holder may enforce it only according to its original tenor." 9
Reproduced hereunder are some examples of material alterations:
A. Material Alterations:
(1) Substituting the words "or bearer" for "order."
cralaw virtua1aw library
(2) Writing "protest waived" above blank indorsements.

(3) A change in the date from which interest is to run.
(4) A check was originally drawn as follows: "Iron County Bank, Crystal Falls, Mich. Aug. 5, 1901.
Pay to G.L. or order $9 fifty cents CTR." The insertion of the figure 5 before the figure 9, the
instrument being otherwise unchanged.
(5) Adding the words "with interest" with or without a fixed rate.
(6) An alteration in the maturity of a note, whether the time for payment is thereby curtailed or
extended.
(7) An instrument was payable "First Natl Bank" the plaintiff added the word "Marion."
(8) Plaintiff, without consent of the defendant, struck out the name of the defendant as payee and
inserted the name of the maker of the original note.
(9) Striking out the name of the payee and substituting that of the person who actually discounted
the note.
(10) Substituting the address of the maker for the name of the co-maker. 10
B. Immaterial Alterations:
(1) Changing "I promise to pay" to "We promise to pay", where there are two makers.
(2) Adding the word "annual" after the interest clause.
(3) Adding the date of maturity as a marginal notation.
(4) Filing in the date of the actual delivery where the makers of a note gave it with the date in
blank, "July . . ."
(5) An alteration of the marginal figures of a note where the sum stated in words in the body
remained unchanged.
(6) The insertion of the legal rate of interest where the note had a provision for "interest at . . . per
cent."
(7) A printed form of promissory note had on the margin the printed words, "Extended to . . ." The
holder on or after maturity wrote in the blank space the words "May 1, 1913," as a reference
memorandum of a promise made by him to the principal maker at the time the words were written
to extend the time of payment.
(8) Where there was a blank for the place of payment, filing in the blank with the place desired.
(9) Adding to an indorsees name the abbreviation "Cash" when it had been agreed that the draft
should be discounted by the trust company of which the indorsee was cashier.
(10) The indorsement in the note by a stranger after its delivery to the payee at the time the note
was negotiated to the plaintiff.
(11) An extension of time given by a holder of a note to the principal maker, without the consent of
the surety co-maker. 11
The case at the bench is unique in the sense that what was altered is the serial number of the check
in question, an item which, it can readily be observed, is not an essential requisite for negotiability
under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change
the relations between the parties. The name of the drawer and the drawee were not altered. The
intended payee was the same. The sum of money due to the payee remained the same. Despite
these findings, however, petitioner insists, that:
It is an accepted concept, besides being a negotiable instruments itself, that a TCAA check by its
very nature is the medium of exchange of governments (sic) instrumentalities or agencies. And as
(a) safety measure, every government office o(r) agency (is) assigned TCAA checks bearing
different number series.
A concrete example is that of the disbursements of the Ministry of Education and Culture. It is issued
by the Bureau of Treasury sizeable bundles of checks in booklet form with serial numbers different
from other government office or agency. Now, for fictitious payee to succeed in its malicious
intentions to defraud the government, all it need do is to get hold of a TCAA Check and have the
serial numbers of portion (sic) thereof changed or altered to make it appear that the same was
issued by the MEC.
Otherwise, stated, it is through the serial numbers the (a) TCAA Check is determined to have been
issued by a particular office or agency of the government. 12
x
Petitioners arguments fail to convince. The checks serial number is not the sole indication of its
origin. As succinctly found by the Court of Appeals, the name of the government agency which
issued the subject check was prominently printed therein. The checks issuer was therefore
insufficiently identified, rendering the referral to the serial number redundant and inconsequential.
Thus, we quote with favor the findings of the respondent court:
If the purpose of the serial number is merely to identify the issuing government office or agency, its
alteration in this case had no material effect whatsoever on the integrity of the check. The identity of
the issuing government office or agency was not changed thereby and the amount of the check was
not charged against the account of the another government office or agency which had no liability
under the check. The owner issuer of the check is boldly and clearly printed on its face, second line
from the top: "MINISTRY OF EDUCATION AND CULTURE," and below the name of the payee are the
rubber-stamped words: "Ministry of Educ. & Culture." These words are not alleged to have been
falsely or fraudulently intercalated into the check. The ownership of the check is established without
the necessity of recourse to the serial number. Neither is there any proof that the amount of the
check was erroneously charged against the account of a government office or agency other than the
Ministry of Education and Culture. Hence, the alteration in the number of the check did not affect or
change the liability of the Ministry of Education and Culture under the check and, therefore, is
immaterial. The genuineness of the amount and the signatures therein of then Deputy Minister of
Education Hermenegildo C. Dumlao and of the resident Auditor, Penomio C. Alvarez are not
challenged. Neither is the authenticity of the different codes appearing therein questioned . . . 13
(Emphasis ours.)
Petitioner , thus cannot refuse to accept the check in question on the ground that the serial number
was altered, the same being an immaterial or innocent one.
We now go to the second issue. It is petitioners submission that the certification issued by Minrado
C. Batonghinog, Cashier III of the MEC clearly shows that the check was altered. Said certification
reads:
July 22, 1985

TO WHOM IT MAY CONCERN:
This is to certify that according to the records of this Office, TCAA PNB Check No. SN7-3666223-3
dated August 7, 1981 drawn in favor of F. Abante Marketing in the amount of NINETY (S)EVEN
THOUSAND SIX HUNDRED FIFTY PESOS ONLY (P97,650.00) was not issued by this Office nor
released to the payee concerned. The series number of said check was not included among those
requisition by this Office from the Bureau of Treasury.
Very truly yours,
(SGD.) MINRADO C. BATONGHINOG
Cashier III. 14
Petitioner claims that even if the author of the certification issued by the Ministry of Education and
Culture (MEC) was not presented, still the best evidence of the material alteration would be the
disputed check itself and the serial number thereon. Petitioner thus assails the refusals of
respondent court to give weight to the certification because the author thereof was not presented to
identify it to be cross-examined thereon. 15
We agree with the respondent court.
The one who signed the certification was not presented before the trial court to prove that the said
document was really the document he prepared and that the signature below the said document is
his own signature. Neither did petitioner present an eyewitness to the execution of the questioned
document who could possibly identify it. 16 Absent this proof, we cannot rule on the authenticity of
the contents of the certification. Moreover, as we previously emphasized, there was no material
alteration on the check, the change of its serial number not being substantial to its negotiability.
Anent the third issue whether or not the drawee bank may still recover the value of the check
from the collecting bank even if it failed to return the check within the twenty-four (24) hour
clearing period because the check was tampered suffice it to state that since there is no material
alteration in the check, petitioner has no right to dishonor it and return it to PBCom, the same being
in all respects negotiable.
However, the amount of P10,000.00 as attorneys fees is hereby deleted. In their respective
decisions, the trial court and the Court of Appeals failed to explicitly state the rationale for the said
award. The trial court merely ruled as follows:
With respect to Capitols claim for damages consisting of alleged loss of opportunity, this Court finds
that Capitol failed to adequately substantiate its claim. What Capitol had presented was a selfserving, unsubstantiated and speculative computation of what it allegedly could have earned or
realized were it not for the debit made by PBCom which was triggered by the return and debit made
by PNB. However, this Court finds that it would be fair and reasonable to impose interest at 12% per
annum on the principal amount of the check computed from October 19, 1981 (the date PBCom
debited Capitols account) until the amount is fully paid and reasonable attorneys fees. 17
(Emphasis ours.)
And contrary to the Court of Appeals resolution, petitioner unambiguously questioned before it the
award of attorneys fees, assigning the latters as one of the errors committed by the trial court. 18
The foregoing is in conformity with the guiding principles laid down in a long line of cases and
reiterated recently in Consolidated Bank & Trust Corporation (Solidbank) v. Court of Appeals: 19
The award of attorneys fees lies within the discretion of the court and depends upon the
circumstances of each case. However, the discretion of the court to award attorneys fees under
Article 2208 of the Civil Code of the Philippines demands factual, legal and equitable justification,
without which the award is a conclusion without a premise and improperly left to speculation and
conjecture. It becomes a violation of the proscription against the imposition of a penalty on the right
to litigate (Universal Shipping Lines Inc. v. Intermediate Appellate Court, 188 SCRA 170 [1990]).
The reason for the award must be stated in text of the courts decision. If it is stated only in the
dispositive portion of the decision, the same shall be disallowed. As to the award of attorneys fees
being an exception rather than the rule, it is necessary for the court to make findings of fact and law
that would bring the case within exception and justify the grant of the award (Refractories
Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA 539[176 SCRA 539]).
WHEREFORE, premises considered, except for the deletion of the award of attorneys fees, the
decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
[G.R. No. 124045. May 21, 1998]
SPOUSES VIVENCIO BABASA and ELENA CANTOS BABASA, petitioners, vs.

COURT OF APPEALS, TABANGAO REALTY, INC., and SHELL GAS PHILIPPINES,
INC., respondents.
DECISION
BELLOSILLO, J.:
On 11 April 1981 a contract of Conditional Sale of Registered Lands was executed between the
spouses Vivencio and Elena Babasa as vendors and Tabangao Realty, Inc. (TABANGAO) as a
vendee over three (3) parcels of land, Lots Nos. 17827-A, 17827-B and 17827-C, situated in Brgy.
Libjo, Batangas City. Since the certificates of title over the lots were in the name of third persons who
had already executed deeds of reconveyance and disclaimer in favor of the BABASAS, it was
agreed that the total purchase price of P2,121,920.00 would be paid in the following manner:
P300,000.00 upon signing of the contract, and P1,821,920.00 upon presentation by the
BABASAS of transfer certificates of titles in their name, free from all liens and
encumbrances, and delivery of registerable documents of sale in favor of
TABANGAO within twenty (20) months from the signing of the contract. In the meantime,
the retained balance of the purchase price would earn interest at seventeen percent
(17%) per annum or P20,648.43 monthly payable to the BABASAS until 31 December
1982. It was expressly stipulated that TABANGAO would have the absolute and
unconditional right to take immediate possession of the lots as well as introduce any
improvements thereon.
On 18 May 1981 TABANGAO leased the lots to Shell Gas Philippines, Inc., (SHELL), which
immediately started the construction thereon of a Liquefied Petroleum Gas Terminal Project, an
approved zone export enterprise of the Export Processing Zone. TABANGAO is the real estate arm
of SHELL.
The parties substantially complied with the terms of the contract. TABANGAO paid the first
installment of P300,000.00 to the BABASAS while the latter delivered actual possession of the lots to
the former. In addition, TABANGAO paid P379,625.00 to the tenants of the lots as disturbance
compensation and as payment for existing crops as well as P334,700.00 to the owners of the house
standing thereon in addition to granting them residential lots with the total area of 2,800 square
meters. TABANGAO likewise paid the stipulated monthly interest for the 20 month period amounting
to P408,580.80. Meanwhile, the BABASAS filed Civil Case No. 519 and Petition No. 373 for the
transfer of titles of the lots in their name.
[1]
[2]
However, two (2) days prior to the expiration of the 20-month period, specifically on 31 December
1982, the BABASAS asked TABANGAO for an indefinite extension within which to deliver clean title
over the lots. They asked that TABANGAO continue paying monthly interest of P20,648.43 starting
January 1983 on the ground that Civil Case no. 519 and Petition No. 373 had not been resolved with
finality in their favor. TABANGAO refused the request. In retaliation the BABASAS executed a
notarized unilateral rescission dated 28 February 1983 to which TABANGAO responded by
reminding the BABASAS that they were the ones who did not comply with their contractual obligation
to deliver clean titles within the stipulated 20-month period, hence, had no right to rescind their
contract. The BABASAS insisted on the unilateral rescission and demanded the SHELL vacate the
lots.
On 19 July 1983 TABANGAO instituted an action for specific performance with damages in the
Regional Trial Court of Batangas City to compel the spouses to comply with their obligation to deliver
clean titles over the properties. TABANGAO alleged that the BABASAS were already in a position to
secure clean certificates of title and execute registerable document of sale since execution of
judgment pending appeal had already been granted in their favor in Civil Case No. 519, while an
[3]
order directing reconstitution of the original copies of TCT Nos. T-32565, T-32566 and T-32567
covering the lots had been issued in Petition No. 373. The BABASAS moved to dismiss the
complaint on the ground that their contract with TABANGAO became null and void with the expiration
of the 20-month period given them within which to deliver clean certificates of title. SHELL entered
the dispute as intervenor praying that its lease over the premises be respected by the BASABAS.
Despite the pendency of the case the BASABAS put up several structures within the area in litigation
to impede the movements of persons and vehicles therein, laid claim to twelve (12) heads of cattle
belonging to intervenor SHELL and threatened to collect levy from all buyers of liquefied petroleum
gas (LPG) for their alleged use of the BABASA estate in their business transactions with intervenor
SHELL. As a result, SHELL applied for and was granted on 10 April 1990 a temporary restraining
order against the Babasa spouses and anyone acting for and in their behalf upon filing of a P2million bond.
[4]
Eventually, judgment was rendered in favor of TABANGAO and SHELL. The court a quo ruled that
the 20-month period stipulated in the contract was never meant to be its term such that upon its
expiration the respective obligations of the parties would be extinguished. On the contrary, the
expiration thereof merely gave rise to the right of TABANGAO to either rescind the contract or to
demand that the BABASAS comply with their contractual obligation to deliver to it clean titles and
registerable documents of sale. The notarial rescission executed by the BABASAS was declared
void and of no legal effect
[5]
xxxx
1. The unilateral rescission of contract, dated February 28, 1983, executed by the
defendant-spouses is null and void, without any legal force and effect on the agreement
dated April 11, 1981, executed between the plaintiff and the defendant-spouses;
2. The lease contract dated, May 18, 1981, executed by the plaintiff in favor of the
intervenor is deemed legally binding on the defendant-spouses insofar as it affects the
three lots subject of this case;
3. The defendant-spouses Vivencio Babasa and Elena Cantos are hereby ordered to
deliver to the plaintiff Tabangao Realty, Inc., clean transfer certificates of title in their
name and execute all the necessary deeds and documents necessary for the Register of
Deeds of Batangas City to facilitate the issuance of Transfer Certificates of Title in the
name of plaintiff, Tabangao Realty, Inc. In the event the defendant-spouses fail to do so,
the Register of Deeds of Batangas City is hereby directed to cancel the present transfer
certificates of title over the three lots covered by the Conditional Sale of Registered Lands
executed by and between plaintiff, Tabangao Realty, Inc., and the defendant-spouses
Vivencio Babasa and Elena Cantos-Babasa on April 11, 1981, upon presentation of
credible proof that said defendant-spouses have received full payment for the lots or
payment thereof duly consigned to the Court for the amount of the defendant-spouses;
4. Plaintiff Tabangao Realty, Inc., is directed to pay the defendant-spouses Vivencio
Babasa and Elena Cantos-Babasa the remaining balance of P1,821,920.00 out of the full
purchase price for these three lots enumerated in the agreement dated April 11, 1981
plus interest thereon of 17% per annum or P 20,648.43 a month compounded annually
beginning January 1983 until fully paid;
5. The Order dated April 10, 1990 issued in favor of the intervenor enjoining and
restraining defendant-spouses Vivencio Babasa and Elena Cantos-Babasa and/or
anyone acting for and in their behalf from putting up any structure on the three lots or
interfering in any way in the activities of the intervenor, its employees and agents, is
made permanent, and the bond posted by the intervenor cancelled; and,
6. Defendant-spouses Vivencio Babasa and Elena Cantos-Babasa shall pay the costs of
this proceeding as well as the premium the intervenor may have paid in the posting of
the P2,000,000.00 bond for the issuance of the restraining order of April 10, 1990.
[6]
The BABASAS appealed to the Court of Appeals which on 29 February 1996 affirmed the decision
of the trial court court rejecting the contention of the BABASAS that the contract of 11 April 1981 was
one of lease, not of sale; and described it instead as one of absolute sale though denominated
conditional. However, compounded interest was ordered paid from 19 July 1983 only, the date of
filing of the complaint, not from January 1983 as decreed by the trial court.
[7]
[8]
The BABASAS now come to us reiterating their contention that the contract of 11 April 1981 was in
reality a contract of lease, not for sale; but even assuming that it was indeed a sale, its nature
was conditional only, the efficacy of which was extinguished upon the non-happening of the
condition, i.e., non-delivery of clean certificates of title and registerable documents of sale in favor of
TABANGAO within twenty (20) months from the signing of the contract.
We find no merit in the petition. Respondent appellate court has correctly concluded that the
allegation of petitioners that the contract of 11 April 1981 is one of lease, not of sale, is simply
incredible. First, the contract is replete with terms and stipulations clearly indicative of a contract of
sale. Thus, the opening whereas clause states that the parties desire and mutually agreed on
the sale and purchase of the x x x three parcels of land; the BABASAS were described as the
vendors while TABANGAO as the vendee from the beginning of the contract to its end; the amount
of P2,121,920.00 was stated as the purchase price of the lots; TABANGAO, as vendee, was granted
absolute and unconditional right to take immediate possession of the premises while the BABASAS,
as vendors, warranted such peaceful possession forever; TABANGAO was to shoulder the capital
gains tax, and; lastly, the BABASAS were expected to execute a Final Deed of Absolute Sale in favor
of TABANGAO necessary for the issuance of transfer certificates of title the moment they were able
to secure clean certificates of title in their name. Hence, with all the foregoing, we cannot give
credence to the claim of petitioners that subject contract was one of lease simply because the word
ownership was never mentioned therein. Besides, as correctly pointed out by respondent court, the
BABASAS did not object to the terms and stipulations employed in the contract at the time of its
execution when they could have easily done so considering that they were then ably assisted by
their counsel, Atty. Edgardo M. Carreon, whose legal training negates their pretended ignorance on
the matter. Hence, it is too late for petitioners to insist that the contract is not what they intended to
be.
But the BABASAS lament that they never intended to sell their ancestral lots but were merely forced
to do so when TABANGAO dangled the threat of expropriation by the government (through the
Export Processing Zone Authority) in the event voluntary negotiations failed. Although a cause to
commiserate with petitioners may be perceived, it is not enough to provide them with an avenue to
escape contractual obligations validly entered into. We have already held that contracts are valid
even though one of the parties entered into it against his own wish and desire, or even against his
better judgment. Besides, a threat of eminent domain proceedings by the government cannot be
legally classified as the kind of imminent, serious and wrongful injury to a contracting party as to
vitiate his consent. Private landowners ought to realize, and eventually accept, that property rights
must yield to the valid exercise by the state of its all-important power of eminent domain.
[9]
[10]
[11]
Finally, petitioners contend that ownership over the three (3) lots was never transferred to
TABANGAO and that the contract of 11 April 1981 was rendered lifeless when the 20-month period
stipulated therein expired without them being able to deliver clean certificates of title to TABANGAO
through no fault of their own. Consequently, their unilateral rescission dated 28 February 1983
should have been upheld as valid.
We disagree. Although denominated Conditional Sale of Registered Lands, we hold, as did

respondent court, that the contract of 11 April 1981 between petitioners and respondent TABANGAO
is one of absolute sale. Aside from the terms and stipulations used therein indicating such kind of
sale, there is absolutely no proviso reserving title in the BABASAS until full payment of the purchase
price, nor any stipulation giving them the right to unilaterally rescind the contract in case of nonpayment. A deed of sale is absolute in nature although denominated a conditional sale absent such
stipulations. In such cases, ownership of the thing sold passes to the vendee upon the constructive
or actual delivery thereof. In the instant case, ownership over Lots Nos. 17827-A, 17827-B, and
17827-C passed to TABANGAO both by constructive and actual delivery. Constructive delivery was
accomplished upon the execution of the contract of 11 April 1981 without any reservation of title on
the part of the BABASAS while actual delivery was made when TABANGAO took unconditional
possession of the lots and leased them to its associate company SHELL which constructed its multimillion peso LPG Project thereon.
[12]
[13]
[14]
We do not agree with petitioners that their contract with TABANGAO lost its efficacy when the 20month period stipulated therein expired without petitioners being able to deliver clean certificates of
title such that TABANGAO may no longer demand performance of their obligation. In Romero v.
Court of Appeals and Lim v. Court of Appeals the Court 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.
[15]
[16]
[17]
Here, a perfected contract of absolute sale exists between the BABASAS and TABANGAO when
they agreed on the sale of a determinate subject matter, i.e., Lots no. 17827-A, 17827-B and 17827C, and the price certain therefor without any condition or reservation of title on the part of the
BABASAS. However, the obligation of TABANGAO as vendee to pay the full amount of the purchase
price was made subject to the condition that petitioners first deliver the clean titles over the lots
within twenty (20) months from the signing of the contract.If petitioners succeed in delivering the
titles within the stipulated 20-month period, they would get P1,821,920.00 representing the entire
balance of the purchase price retained by TABANGAO. Otherwise, the deed of sale itself provides
that
x x x upon the expiration of the 20-month period from the signing of the contract the
Vendee is hereby authorized to settle out of the balance retained by the Vendee all legally
valid and existing obligations on the properties x x x and whatever balance remaining
after said settlement shall be paid to the Vendor.
Clearly then, the BABASAS act of unilaterally rescinding their contract with TABANGAO is
unwarranted. Even without the abovequoted stipulation in the deed, the failure of petitioners to
deliver clean titles within twenty (20) months from the signing of the contract merely gives
TABANGAO the option to either refuse to proceed with the sale of to waive the condition in
consonance with Art. 1545 of the New Civil Code. Besides, it would be the height of inequity to
allow the BABASAS to rescind their contract of sale with TABANGAO by invoking as a ground
therefor their own failure to deliver the titles over the lots within the stipulated period.
[18]
WHEREFORE , the petition is DENIED. The appealed decision of the Court of Appeals in CA-G.R.
CV No. 39554 affirming that of the Regional Trial Court of Batangas City, Br. 4, is AFFIRMED. No
Costs.
SO ORDERED.
[G.R. No. 83588. September 29, 1997.]

Spouses ADORACION C. PANGILINAN v COURT OF APPEALS
This petition for review seeks to set aside the January 14, 1988 decision 1 and May 31, 1988
resolution of the Court of Appeals in CA-GR CV No. 09175 which reversed the December 12, 1985
decision of the Regional Trial Court, Third Judicial Region, Branch XLVIII, San Fernando, Pampanga.
On May 18, 1968, petitioners Pangilinan (husband and wife), and the private respondents Jose R.
Canlas and Luis R. Canlas entered into a Contract to Buy and to Sell a subdivision lot at Sto. Nio
Village, San Fernando, Pampanga, particularly Lot No. 1, Block 3; with an area of 577 square meters
at P30.00 per square meter, for a total contract price of P17,310.00, payable on installment basis at
P189.02 a month for 120 months. 2 The sum of P1,731 representing 10% of the total price of the lot
was paid by the petitioners to the private respondents and thereafter monthly installments which
amounted to about 85% of the total price were effected as of January, 1974; the last payment
thereof was made on May 14, 1975 (Exh. C-54). 3 Paragraph 5 of the contract provided for
automatic extrajudicial rescission upon default in payment of three (3) consecutive monthly
installments or to comply with any of the terms and conditions, with forfeitures of installments as
rents and as payment for damages. The said contract to buy and to sell as well as the receipts of
various payments made by petitioners in favor of private respondents were given by the former to
Mr. Arcadio S. Mallari. Mr. Mallari equipped with a Special Power of Attorney dated May 15, 1983
from the spouses Adoracion C. Pangilinan and George Pangilinan went personally to the private
respondents and requested them to release the title of the lot as he would pay in full the alleged
remaining balance of P1,875.00. The private respondents told him to return after two weeks as they
would confer with each other. When he returned, the private respondent Jose R. Canlas told him that
they were not in a position to release the title to said lot because the same had already been
disposed of. Mr. Mallari discovered that the lot was mortgaged to the Rural Bank of Sta. Rita. On July
25, 1983, after the lapse of eight years from the last date of payment, he instituted a complaint for
Specific Performance and Damages docketed as Civil Case No. 6843 entitled "Spouses Adoracion G.
Pangilinan, et. al. v. Jose R. Canlas, et. al." before the Regional Trial Court, Branch XLVIII, San
Fernando, Pampanga. On December 12, 1985, the trial court rendered its decision, the decretal part
of which provides:
chanrobles virtuallawlibrary
"In view of all the foregoing, judgment is hereby rendered against the defendants Jose R. Canlas
and Luis R. Canlas ordering them the following:
1) to accept the final payment or balance of the consideration of the lot in the amount of P2,277.82;
2) to execute the final deed of sale of the lot in question in favor of herein plaintiffs;
3) to pay the mortgage loan to the defendant Rural bank for the purpose of releasing the said lot
embraced in Transfer Certificate of Title No. 89745-R, Registry of Deeds for the Province of
Pampanga in order to free the said lot from encumbrances;
4) to pay plaintiff the amount of P5,000.00 for attorneys fees; P2,000.00 for litigation expenses;
5) to pay plaintiff the amount of P10,000.00 for exemplary damages as a corrective measure due to
malevolent act of defendants Canlases;
6) to pay the costs of the suit.
The counterclaim interposed by the defendant Jose R. Canlas and Luis R. Canlas are hereby
dismissed for lack of evidence.
The defendant Rural Bank of Sta. Rita Incorporated is hereby absolved of any liability but its
counterclaim is hereby dismissed for lack of evidence.
SO ORDERED. 4
Private respondents appealed the abovementioned decision to the Court of Appeals which on
January 14, 1988, promulgated its judgment which reversed and set aside the decision of the trial
court, to wit:
jgc:chanroble s.com.ph
"WHEREFORE, the decision appealed from is hereby SET ASIDE. Another judgment is hereby entered
DISMISSING Civil Case No. 6843 before the court below. The counter-claim of defendants-appellants
is hereby DISMISSED.
SO ORDERED." 5
Petitioners filed a motion for reconsideration but it was denied for lack of merit by the Court of
Appeals in its resolution of May 31, 1988. Hence, petitioners instituted the instant petition for review
raising two (2) assignment of errors, viz.:
1) THE COURT OF APPEALS ERRED THAT A CREDITOR CAN UNILATERALLY AND SUMMARILY
RESCIND A CONTRACT TO SELL A SUBDIVISION LOT;
2) THE COURT OF APPEALS ERRED IN RULING THAT HEREIN PETITIONERS ARE GUILTY OF LACHES.
Petitioners vigorously argue that automatic rescission of a contract extrajudicially undertaken by a
creditor may be effected only if the defaulter was duly informed of the intention of the creditor to
rescind the contact. If the defaulter will not object, then the creditor may proceed to extrajudicially
rescind or cancel the contract, however, if the defaulter will manifest his objection, then the matter
of rescission will be subjected to judicial determination. They further alleged that even if there is a
waiver stipulated in the contract of adhesion, regarding rescission, such waiver will not apply
because the waiver must be unequivocal and intelligently made. Moreover, granting that petitioners
have committed a breach of contract for their failure to pay the balance of the consideration, yet this
breach is slight, considering that 85% of the total consideration for the lot has been paid.
The Court is not persuaded.
The fifth paragraph of the Contract to Buy and to Sell pertinently reads:
jgc:chanrobles.com .ph
"This contract shall be considered automatically rescinded and canceled and of no further force or
effect, upon failure of the VENDEE to pay when due, three (3) consecutive monthly installments or
to comply with any of the terms and conditions hereof, in which case the VENDORS shall have the
right to resell said parcel of land to any person or purchaser, as if this contract has never been
entered into. In such case of cancellation of this contract, all amounts paid in accordance with the
agreement together with all the improvements made on the premises shall be considered as rents
paid for the use and occupation of the above-mentioned premises and as payment for the damages
suffered for the failure of the VENDEE to fulfill his part of this agreement; and for the VENDEE
hereby renounces his right to demand or reclaim the return of the same obliges himself to peacefully
vacate the premises and deliver the same to the VENDORS." 6
Article 1592 7 of the New Civil Code, requiring demand by suit or by notarial act in case the vendor
of realty wants to rescind does not apply to a contract to sell but only to contract of sale. In
contracts to sell, where ownership is retained by the seller and is not to pass until the full payment,
such payment, as we said, is a positive suspensive condition, the failure of which is not a breach,
casual or serious, but simply an event that prevented the obligation of the vendor to convey title
from acquiring binding force. To argue that there was only a casual breach is to proceed from the
assumption that the contract is one of absolute sale; where non-payment is a resolutory condition,
which is not the case. 8
The applicable provision of law in instant case is Article 1191 of the New Civil Code which provides
as follows:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the
payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.
This is understood to be without prejudice to the rights of third persons who have acquired the
thing, in accordance with articles 1385 and 1388 and the Mortgage Law. (1124)
Pursuant to the above, the law makes it available to the injured party alternative remedies such as
the power to rescind or enforce fulfillment of the contract, with damages in either case if the obligor
does not comply with what is incumbent upon him. There is nothing in this law which prohibits the
parties from entering into an agreement that a violation of the terms of the contract would cause its
cancellation even without court intervention. The rationale for the foregoing is that in contracts
providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a
judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement
providing for rescission even without judicial intervention, but in order to determine whether or not
the rescission was proper. Where such propriety is sustained, the decision of the court will be merely
declaratory of the revocation, but it is not in itself the revocatory act. 9 Moreover, the vendors right
in contracts to sell with reserved title to extrajudicially cancel the sale upon failure of the vendee to
pay the stipulated installments and retain the sums and installments already received has long been
recognized by the well-established doctrine of 39 years standing. 10 The validity of the stipulation in
the contract providing for automatic rescission upon non-payment cannot be doubted. It is in the
nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach
without need of going to court. Thus, rescission under Article 1191 was inevitable due to petitioners
failure to pay the stipulated price within the original period fixed in the agreement.
On the second assigned error, petitioners aver that the doctrine of laches is not applicable in this
particular case because (1) petitioners failure to pay in full the balance of 15% of the total price of
the lot was due to the reneged obligation of the private respondent to improve the subdivision and
install facilities; and, (2) the mortgage of the lot to the Rural Bank of Sta. Rita was done without
their consent and knowledge.
The same has no merit. It must be noted that upon a careful examination of the records of this
case, it appears that the contention of the petitioners that their failure to pay the balance of 15% of
the total contract price of the lot was due to the inability of the private respondent to improve the
subdivision and install facilities which was raised only for the first time on appeal. They did not raise
this issue before the lower courts. It is settled that an issue which was neither averred in the
complaint nor raised during the trial in the court below cannot be raised for the first time on appeal.
11 Issues of fact and arguments not adequately brought to the attention of the trial court need not
be and ordinarily will not be considered by a reviewing court as they cannot be raised for the first
time on appeal. 12 Assuming arguendo that it was raised before the trial court, the same would be
without merit because the failure of the private respondents to install facilities would not deter them
from asking for the rescission of the agreement if petitioners failed to comply with their obligation to
pay the monthly installments when they become due, otherwise, the right of rescission would be
rendered inutile. In the same vein, petitioners by virtue of their contract with private respondents
should have complied in good faith with its terms and conditions being the law between them. 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 consequences which, according to their nature, may be in
keeping with good faith, usage and law. 13 The Contract to Buy and to Sell, specifically paragraph 5
thereof, not being contrary to law, morals, good customs, public order or public policy, is valid and
binding between the parties thereto.
As stated by the appellate court, thus:
"The peculiar fact that militates against the cause of the appellees is that the appellees spouses
Pangilinan did not directly and personally prosecute the present proceedings. As shown from the
records, Mr. Mallari had equipped himself with the special power of attorney in his favor by the
appellees executed only on May 15, 1983 or about six (should be eight) years from the date of last
payment, made on May 14, 1975 for the January, 1974 installment, during which time, the actual
buyers, the Pangilinans had not by themselves personally shown interest in compelling the
appellants to accept the remaining balance of the purchase price of the said subdivision lot, to
execute in their favor the Deed of Absolute Sale and deliver to them the Transfer Certificate of Title
over the said property. The aforesaid circumstances constitute laches. There was failure or neglect
on the part of the Pangilinan spouses for an unreasonable and unexplained length of time to do that
which by exercising due diligence or could have been done earlier, such failure or negligence
warrants a presumption that they had abandoned or declined to assert such right (Tejado v.
Zamacoma, 138 SCRA 78)."
Further, the Court of Appeals, stated:
"The disturbing fact in the case at bar is that the spouses Pangilinan who bought the subject lot from
the appellant seller did not directly and personally prosecute the present case from May, 1975 (date
of last payment for January, 1974 installment). Mr. Arcadio S. Mallari, the alleged attorney-in-fact of
the said spouses, represented them in the instant case which was filed only on July 25, 1983. He
has an alleged special power of attorney in his favor by the appellees which appears to have been
executed on May 15, 1983 or about eight (8) years from the date of last payment on May 14, 1975
by the buyer spouses for the January, 1974 installment. Mr. Mallari was the only witness for the
prosecution. He alone identified the said power of attorney executed in his favor and testified on its
due execution. The notary public who appears to have notarized the said document was not
presented neither did the Pangilinan spouses appear in the lower court. There was no mention in his
(Mallari) testimony of the whereabouts of the said Pangilinan spouses nor why the instant case had
to be filed by him for them. The Court has doubts whether or not the said Pangilinan spouses are
really interested in the prosecution of this case. And more than this, in the mind of the Court, the
genuineness of the said special power of attorney has not been satisfactorily proved.
It also bears emphasis that from the said last payment on May 14, 1975, for the January, 1974
installment up to the execution of the alleged special power of attorney (assuming the same to be
true) in favor of Mr. Mallari, on May 15, 1983, and the filing of Mallari of the instant case (which
covers a period of eight (8) years)* the actual buyers, the Pangilinan spouses had not by
themselves personally shown interest in compelling the appellants to accept the remaining balance
of the purchase price of the subdivision lot, to execute in their favor the Deed of Absolute Sale and
deliver to them the Transfer Certificate of Title over the said lot. Such failure/neglect on their part
constitutes laches because for an unreasonable and unexplained length of time [eight (8) years],
they failed/neglected to do that which by exercising due diligence could or should have been done
earlier, and as stated in the decision rendered in the present appeal, such failure or negligence
warrants a presumption that they had abandoned or declined to assert such right."
Explicitly, spouses Pangilinan instead of being vigilant and diligent in asserting their rights over the
subject property had failed to assert their rights when the law requires them to act. Laches or "stale
demands" is based upon grounds of public policy which requires, for the peace of society, the
discouragement of stale claims and unlike the statute of limitations, is not a mere question of time
but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced
or asserted. 14
The legal adage finds application in the case at bar. Tempus enim modus tollendi obligationes et
actiones, quia tempus currit contra desides et sui juris contemptores For time is a means of
dissipating obligations and actions, because time runs against the slothful and careless of their own
rights.
chanroble s virtual lawlibrary
IN VIEW WHEREOF, the petition is hereby DENIED and the decision of respondent court AFFIRMED in
toto.
[G.R. No. 125347. June 19, 1997.]

EMILIANO RILLO v COURT OF APPEALS
SYLLABUS
1. CIVIL LAW; CONTRACT; SALE; RESCISSION OF AN OBLIGATION; NOT APPLICABLE IN CONTRACT
TO SELL. The contract between the parties is not an absolute conveyance of real property but a
contract to sell. In a contract to sell real property on installments, the full payment of the purchase
price is a positive suspensive condition, the failure of which is not considered a breach, casual or
serious, but simply an event which prevented the obligation of the vendor to convey title from
acquiring any obligatory force. (Roque v. Lapuz, 96 SCRA 741 (1980); Bricktown Development
Corporation v. Amor Tierra Development Corp 239 SCRA 126 (1994). The transfer of ownership and
title would occur after full payment of the purchase price. We held in Luzon Brokerage Co., Inc. v.
Maritime Building Co., Inc., 46 SCRA 381, 388 (1972), that there can be no rescission of an
obligation that is still nonexistent, the suspensive condition not having happened.
2. ID.; ID.; ID.; R.A. No. 6552 (MACEDA LAW); NATURE THEREOF. Known as the Maceda Law,
R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-payment of an installment by the
buyer, which is simply an event that prevents the obligation of the vendor to convey title from
acquiring binding force. [Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc. 86 SCRA 305
(1978] It also provides the right of the buyer on installments in case he defaults in the payment of
succeeding installments, viz: (1) Where he has paid at least two years of installments," (a) To pay,
without additional interest, the unpaid installments due within the total grace period earned by him,
which is hereby fixed at the rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the buyer only once in every five
years of the life of the contract and its extensions, if any. (b) If the contract is cancelled, the seller
shall refund to the buyer the cash surrender value of the payments on the property equivalent to
fifty per cent of the total payments made and, after five years of installments, an additional five per
cent every year but not to exceed ninety per cent of the total payments made: Provided, That the
actual cancellation of the contract shall take place after cancellation or the demand for rescission of
the contract by a notarial act and upon full payment of the cash surrender value to the buyer. Down
payments, deposits or options on the contract shall be included in the computation of the total
number of installments made." (2) Where he has paid less than two years in installments, "Sec. 4 *
* * the seller shall give the buyer a grace period of not less than sixty days from the date the
installment became due. If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act."
3. ID.; ID.; NOVATION; TAKES PLACE ONLY WHEN THE OLD AND THE NEW OBLIGATIONS ARE
INCOMPATIBLE; NOT PRESENT IN CASE AT BAR. Article 1292 of the Civil Code provides that "In
order that an obligation may be extinguished by another which substitutes the same, it is imperative
that it be so declared in unequivocal terms, or that the old and the new obligations be on every
point incompatible with each other." Novation is never presumed. Parties to a contract must
expressly agree that they are abrogating their old contract in favor of a new one. In the absence of
an express agreement, novation takes place only when the old and the new obligations are
incompatible on every point. In the case at bar, the parties executed their May 12, 1989
"compromise agreement" precisely to give life to their "Contract to Sell." It merely clarified the total
sum owed by petitioner RILLO to private respondent CORB REALTY with the view that the former
would find it easier to comply with his obligations under the Contract to Sell. In fine, the
"compromise agreement" can stand together with the Contract to Sell.
DECISION
PUNO, J.:
This is an appeal under Rule 45 of the Rules of Court to set aside the decision 1 of the Court of
Appeals in CA G.R. CV No. 39108 cancelling the "Contract to Sell" between petitioner Emiliano Rillo
and private respondent Corb Realty Investment Corporation. It also ordered Rillo to vacate the
premises subject of the contract and Corb Realty to return 50% of P158,184.00 or P79,092.00 to
Rillo.
The facts of the case are the following:
On June 18, 1985, petitioner Rillo signed a "Contract To Sell of Condominium Unit" with private
respondent Corb Realty Investment Corporation. Under the contract, CORB REALTY agreed to sell to
RILLO a 61.5 square meter condominium unit located in Mandaluyong, Metro Manila. The contract
price was P150,000.00, one half of which was paid upon its execution, while the balance of
P75,000.00 was to be paid in twelve (12) equal monthly installments of P7,092.00 beginning July
18, 1985. It was also stipulated that all outstanding balance would bear an interest of 24% per
annum; the installment in arrears would be subject to liquidated penalty of 1.5% for every month of
default from due date. It was further agreed that should petitioner default in the payment of three
(3) or four (4) monthly installments, forfeiture proceedings would be governed by existing laws,
particularly the Condominium Act. 2
On July 18, 1985, RILLO failed to pay the initial monthly amortization. On August 18, 1985, he again
defaulted in his payment. On September 20, 1985, he paid the first monthly installment of
P7,092.00. On October 2, 1985, he paid the second monthly installment of P7,092.00. His third
payment was on February 2, 1986 but he paid only P5,000.00 instead of the stipulated P7,092.00.
3
On July 20, 1987 or seventeen (17) months after RILLOs last payment, CORB REALTY informed him
by letter that it is cancelling their contract due to his failure to settle his accounts on time. CORB
REALTY also expressed its willingness to refund RILLOs money. 4
CORB REALTY, however, did not cancel the contract for on September 28, 1987, it received
P60,000.00 from petitioner. 5
RILLO defaulted again in his monthly installment payment. Consequently, CORB REALTY informed
RILLO through letter that it was proceeding to rescind their contract. 6 In a letter dated August 29,
1988, it requested RILLO to come to its office and withdraw P102,459.35 less the rentals of the unit
from July 1, 1985 to February 28, 1989. 7 Again the threatened rescission did not materialize. A
"compromise" was entered into by the parties on March 12, 1989, which stipulated the following:
"1. Restructure Outstanding Balance Down to P50,000.00

"2. Payment @ P2,000.00/Month @ 18% (Eighteen Percent) -Monthly- To Compute No. of
Installments
"3. To Pay Titling Plus Any Real Estate Tax Due
"4. Installments to start April 15, 1989." 8
Rillo once more failed to honor their agreement. RILLO was able to pay P2,000.00 on April 25, 1989
and P2,000.00 on May 15, 1989. 9
On April 3, 1990, CORB REALTY sent RILLO a statement of accounts which fixed his total arrears,
including interests and penalties, to P155,129.00. When RILLO failed to pay this amount, CORB
REALTY filed a complaint 10 for cancellation of the contract to sell with the Regional Trial Court of
Pasig.
In his answer to the complaint, RILLO averred, among others, that while he had already paid a total
of P149,000.00, CORB REALTY could not deliver to him his individual title to the subject property;
that CORB REALTY could not claim any right under their previous agreement as the same was
already novated by their new agreement for him to pay P50,000.00 representing interest charges
and other penalties spread through twenty-five (25) months beginning April 1989; and that CORB
REALTYs claim of P155,129.99 over and above the amount he already paid has no legal basis. 11
chanroblesvirtuallawlibrary:re d
At the pre-trial, the parties stipulated that RILLOs principal outstanding obligation as of March 12,
1989 was P50,000.00 and he has paid only P4,000.00 thereof and that the monthly amortization of
P2,000.00 was to bear 18% interest per annum based on the unpaid balance. The issues were
defined as: (1) whether or not CORB REALTY was entitled to a rescission of the contract; and (2) if
not, whether or not RILLOs current obligation to CORB REALTY amounts to P62,000.00 only
inclusive of accrued interests. 12
The Regional Trial Court held that CORB REALTY cannot rescind the "Contract to Sell" because
petitioner did not commit a substantial breach of its terms. It found that RILLO substantially
complied with the "Contract to Sell" by paying a total of P154,184.00. It ruled that the remedy of
CORB REALTY is to file a case for specific performance to collect the outstanding balance of the
purchase price.
CORB REALTY appealed the aforesaid decision to public respondent Court of Appeals assigning the
following errors, to wit:
"THE TRIAL COURT ERRED IN DISREGARDING OTHER FACTS OF THE CASE, INCLUDING THE FACT
THAT THE CONTRACT TO SELL, AS NOVATED, CREATED RECIPROCAL OBLIGATIONS ON BOTH
PARTIES;
"THE TRIAL COURT ERRED IN DISREGARDING ARTICLE 1191 OF THE CIVIL CODE;
"THE TRIAL COURT ERRED IN RENDERING JUDGMENT BY SIMPLY DISREGARDING THE CASE OF
ROQUE V. LAPUZ, 96 SCRA 744, AND WITHOUT INDICATING THE APPLICABLE LAW ON THE CASE.
"THE TRIAL COURT ERRED IN RENDERING A DECISION WHICH DID NOT COMPLETELY DISPOSE OF
THE CASE."
The respondent Court of Appeals reversed the decision. It ruled: (1) that rescission does not apply
as the contract between the parties is not an absolute conveyance of real property but is a contract
to sell; (2) that the Condominium Act (Republic Act No. 4726, as amended by R.A. 7899) does not
provide anything on forfeiture proceedings in cases involving installment sales of condominium
units, hence, it is Presidential Decree No. 957 (Subdivision and Condominium Buyers Protective
Decree) which should be applied to the case at bar. Under Presidential Decree No. 957, the rights of
a buyer in the event of failure to pay installment due, other than the failure of the owner or
developer to develop the project, shall be governed by Republic Act No. 6552 or the REALTY
INSTALLMENT BUYER PROTECTION ACT also known as the Maceda Law (enacted on September 14,
1972). The dispositive portion of its Decision states:
"WHEREFORE, the decision appealed from is hereby SET ASIDE. The Contract to Sell is hereby
declared cancelled and rendered ineffective. Plaintiff-Appellant is hereby ordered to return 50% of
P158,184.00 or P79,092.00 to appellee who is hereby ordered to vacate the subject premises.
"SO ORDERED." 13
Hence, this appeal with the following assignment of errors:
"THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN HOLDING AND
DECIDING THAT RESCISSION IS THE PROPER REMEDY ON A PERFECTED AND CONSUMMATED
CONTRACT;
"THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN NOT HOLDING AND
DECIDING THAT THE OLD CONSUMMATED CONTRACT HAS BEEN SUPERSEDED BY A NEW,
SEPARATE, INDEPENDENT AND SUBSEQUENT CONTRACT BY NOVATION."
The petition is without merit.

The respondent court did not err when it did not apply Articles 1191 and 1592 of the Civil Code on
rescission to the case at bar. The contract between the parties is not an absolute conveyance of real
property but a contract to sell. In a contract to sell real property on installments, the full payment of
the purchase price is a positive suspensive condition, the failure of which is not considered a breach,
casual or serious, but simply an event which prevented the obligation of the vendor to convey title
from acquiring any obligatory force." 14 The transfer of ownership and title would occur after full
payment of the purchase price. We held in Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc.
15 that there can be no rescission of an obligation that is still non-existent, the suspensive condition
not having happened.
Given the nature of the contract of the parties, the respondent court correctly applied Republic Act
No. 6552. Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of
real estate (industrial, commercial, residential) the right of the seller to cancel the contract upon
non-payment of an installment by the buyer, which is simply an event that prevents the obligation of
the vendor to convey title from acquiring binding force. 16 It also provides the right of the buyer on
installments in case he defaults in the payment of succeeding installments, viz:
(1) Where he has paid at least two years of installments,

"(a) To pay, without additional interest, the unpaid installments due within the total grace period
earned by him, which is hereby fixed at the rate of one month grace period for every one year of
installment payments made: Provided, That this right shall be exercised by the buyer only once in
every five years of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent of the total payments made and, after five
years of installments, an additional five per cent every year but not to exceed ninety per cent of the
total payments made: Provided, That the actual cancellation of the contract shall take place after
cancellation or the demand for rescission of the contract by a notarial act and upon full payment of
the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total
number of installments made."
(2) Where he has paid less than two years in installments,

"Sec. 4. . . . the seller shall give the buyer a grace period of not less than sixty days from the date
the installment became due. If the buyer fails to pay the installments due at the expiration of the
grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a notarial act."
Petitioner RILLO paid less than two years in installment payments, hence, he is only entitled to a
grace period of not less than sixty (60) days from the due date within which to make his installment
payment. CORB REALTY, on the other hand, has the right to cancel the contract after thirty (30)
days from receipt by RILLO of the notice of cancellation. Hence, the respondent court did not err
when it upheld CORB REALTYs right to cancel the subject contract upon repeated defaults in
payment by RILLO.
Petitioner further contends that the contract to sell has been novated by the parties agreement of
March 12, 1989. The contention cannot be sustained. Article 1292 of the Civil Code provides that "In
order that an obligation may be extinguished by another which substitutes the same, it is imperative
that it be so declared in unequivocal terms, or that the old and the new obligations be on every
point incompatible with each other." Novation is never presumed. 17 Parties to a contract must
expressly agree that they are abrogating their old contract in favor of a new one. 18 In the absence
of an express agreement, novation takes place only when the old and the new obligations are
incompatible on every point. 19 In the case at bar, the parties executed their May 12, 1989
"compromise agreement" precisely to give life to their "Contract to Sell." It merely clarified the total
sum owed by petitioner RILLO to private respondent CORB REALTY with the view that the former
would find it easier to comply with his obligations under the Contract to Sell. In fine, the
"compromise agreement" can stand together with the Contract to Sell.
Nevertheless, we do not agree with the respondent Court so far as it ordered private respondent
CORB REALTY to refund 50% of P158,184.00 or P79,092.00 to petitioner RILLO. Under Republic Act
No. 6552, the right of the buyer to a refund accrues only when he has paid at least two (2) years of
installments. In the case at bar, RILLO has paid less than two (2) years in installments, hence, he is
not entitled to a refund.

IN VIEW WHEREOF, the decision appealed from is AFFIRMED with the MODIFICATION that the
refund of 50% P158,184.00 or P79,092.00 made in favor of petitioner Emiliano Rillo is deleted. No
costs.
SO ORDERED.
[G.R. No. 107992. October 8, 1997.]

ODYSSEY PARK, INC v COURT OF APPEALS
Assailed in the instant petition for review on certiorari is the decision, dated 07 September 1992, of
the Court of Appeals affirming that of the Regional Trial Court, Branch 152 of Pasig, Metro Manila,
which has adjudged the contract to sell entered into between petitioner and private respondent as
having been validly rescinded.
The Court adopts the factual findings, hereunder narrated, of the appellate court:
"1. On November 4, 1981, Bancom Development Corporation and plaintiff-appellant Odyssey Park,
Inc., entered into a Contract to Sell (Exhibit B-1), whereby the former agreed to sell to the latter the
parcel of land with an area of 8,499 square meters situated in Baguio City and the structure
constructed thereon identified as the Europa Clubhouse.
"2. Subsequently on February 11, 1982, in a document entitled Separate Deed of Conveyance
(Annex F of the Affidavit of Carmelito A. Montano, pages 152-154 of the Record), Bancom confirmed
and acknowledged that it has ceded, transferred and conveyed in favor of defendant-appellee Union
Bank all the rights, title and interest it has over the property.
"3. The purchase price of P3,500,000.00 was, per Section 2 of the Contract to Sell, agreed to be
paid as follows:
"a) SEVEN HUNDRED THOUSAND PESOS (P700,000.00) as down payment, to be paid by Odyssey
as follows:
(i) ONE HUNDRED THOUSAND (P100,000.00) PESOS upon signing of this Contract;
(ii) TWO HUNDRED THOUSAND PESOS (P200,000.00), sixty (60) days from and after the date of
this Contract. The said amount shall be covered by a check postdated sixty (60) days after the date
of this Contract issued and delivered by Odyssey to Bancom upon the signing of this Contract; and
(iii) FOUR HUNDRED THOUSAND PESOS (P400,000.00), ninety (90) days from and after the date of
this Contract. The said amount shall be covered by a check postdated ninety (90) days after the
date of this Contract issued and delivered by Odyssey to Bancom upon signing of this Contract.
b) The balance of TWO MILLION EIGHT HUNDRED THOUSAND PESOS (P2,800,000.00) shall be paid
by Odyssey to Bancom within a period of three (3) years by twelve (12) equal quarterly
amortizations of P298,346.08 each, inclusive of the interest and service charge set forth in Section 3
hereof, the first amortization to become due and payable four (4) months and fifteen (15) days after
the date of this Contract, and the succeeding amortizations at the end of each quarter thereafter
until the balance of the purchase price of the Property is paid in full.
"4. It was also agreed in Section 5 of the Contract to Sell that:
"Section 5: In the event Odyssey fails to pay any portion of the purchase price of the Property or
the interest and service charge thereon as and when it falls due, or otherwise fails to comply with or
violate any of the provisions of this Contract, Bancom may at its absolute discretion cancel and
rescind this Contract and declare the same as null, void and no further force and effect by serving
on Odyssey a written notice of cancellation and rescission thirty (30) days in advance.
chanroblesvirtual|awlibrary
In the event this Contract is cancelled and rescinded as provided in this Section, all the amounts
which the Odyssey may have paid to Bancom pursuant to and in accordance with this Contract shall
be forfeited in favor of Bancom as rentals for the use and occupancy of the Property and as penalty
for the breach and violation of this Contract. Furthermore, all the improvements which Odyssey may
have introduced on the Property shall form part thereof and belong to Bancom without right of
reimbursements to Odyssey; Provided, that Bancom may at its absolute discretion instead require
Odyssey to remove such improvements from the Property at expense of Odyssey.
"5. On November 26, 1981, twenty-two (22) days after the execution of the contract plaintiffappellant paid the amount of P100,000.00. Other payments, also beyond the stipulated period, (see
Odyssey Park, Inc., Statement of Application of Payment, Annex A of the Supportive Affidavit of
Nicefero S. Agaton, p. 309 of the record) in the total sum of P110,000.00 were made as follows:
September 22, 1982 P20,000.00

April 13, 1983 10,000.00
April 30, 1983 10,000.00
July 20, 1983 50,000.00
September 19, 1983 20,000.00
"6. On December 23, 1981, Mr. Vicente A. Araneta, President of Europa Condominium Villas, Inc.,
wrote defendant-appellee Union Bank, a letter, Exhibit E, stating that the Europa Center was
reported to prospective buyers as well as government authorities as part of common areas and
amenities under the condominium concept of selling to the public and for that reason wants to make
it of record that Europa Condominium Villas, Inc., questions the propriety of the contract to sell.
"7. On January 4, 1982, plaintiff-appellant Odyssey Park, Inc., through its Chairman of the Board,
Mr. Carmelito A. Montano, wrote Bancom Development Corp. a letter, Exhibit F, stating that it
acknowledges receipt of a copy of the letter-protest from the Europa Condominium Villas, Inc., and
that in the meantime that there is a question on the propriety of the sale, it is stopping/withholding
payments of the amortization.
"8. On the same date, January 4, 1982, Bancom, through its Senior Vice-President, wrote Europa
Condominium Villas, Inc. a letter, Exhibit H, explaining that the Europa Center and the parcel of land
on which it is built are not part of the Europa Condominium Villas, Inc.
"9. On March 29, 1983, defendant-appellee Union Bank wrote plaintiff-appellant Odyssey Park, Inc.,
a letter (Annexes F, F-1 of the Supportive Affidavit of Nicefero S. Agaton, pp. 317-318 of the record)
demanding payment of the overdue account of P2,193,720.91, inclusive of interest and service
charges, otherwise the contract to sell would be cancelled and rescinded;
"10. On April 12, 1983, plaintiff-appellant Odyssey wrote defendant-appellee Union Bank a letter
(Annex F-2 of the Supportive Affidavit of Nicefero S. Agaton, pp. 319-320 of the record) proposing a
manner of settlement which defendant-appellee Union Bank answered (Annex F-3, p. 321 of the
record) asking for more details of the proposal. The series of communications led to the drafting of a
Memorandum of Agreement (Exhibit N) which was not, however, signed by the parties.
"11. On January 6, 1984, defendant-appellee Union Bank, through counsel, wrote plaintiff-appellant
Odyssey Park, Inc., a letter (Exhibit O) formally rescinding and/or cancelling the contract to sell and
demanding that plaintiff-appellant vacate and peaceably surrender possession of the premises.
"12. On or about August 20, 1984, for failure of plaintiff-appellant to vacate, defendant-appellee
filed a case for illegal detainer and damages (Exhibit P).
"13. On July 5, 1988, plaintiff-appellant filed this case for Declaration of the Nullity of the Rescission
of the Contract to Sell With Damages." 1 (Emphasis ours.)
After the trial, the lower court rendered judgment in favor of private respondent, declaring the
Contract to Sell of 04 November 1981 to have been properly rescinded; dismissing the complaint for
being frivolous and unfounded; and ordering the plaintiff to pay the defendant P300,000.00 by way
of attorneys fees and litigation expenses. The judgment, as so heretofore stated, was affirmed by
respondent appellate court.
Its motion for reconsideration having been denied on 22 November 1992, petitioner corporation
seasonably filed the present petition questioning the decision of the appellate court.
The Court rules for affirmance of the appealed decision.
The issues raised by petitioner which generally are factual in nature and previously taken up by the
appellate court cannot in this instance be freely examined all over again. It is not the function of the
Supreme Court to analyze and to weigh anew the evidence already passed upon by the Court of
Appeals. The authority of this Court is confined to correcting errors of law, if any, that might have
been committed below. 2 Absent the recognized exceptions, which are not here extant, factual
findings of the Court of Appeals are conclusive.
Hardly, in this case, can it be said that there was no basis at all for debunking the contention of
petitioner to the effect that because Europa Condominium Villas, Inc., had questioned the right of
Bancom to sell the property, petitioner thereby was enfranchised to suspend or withhold payment to
Bancom. Respondent appellate court, seconding the findings of the trial court, quoted the latter;
thus:
"First, the title of Union Bank over the property (TCT No. T-33725) is clear without any encumbrance
or adverse claim. Second, Europa Condominium Villas, Inc. has not earnestly questioned Bancoms
right to sell. If Europa is in earnest, it should have filed the necessary action in Court to protect its
right to a valuable property. Third, Europa would not have offered to buy the property from Bancom
for P6 Million if it was claiming ownership over it. Fourth, the letters which plaintiff claim to be proof
of Europas persistence in questioning Bancoms right to sell the property do not really question
Bancoms right to do so but are actually money claims of Europa Condominium Villas, Inc. against
Odyssey for unpaid water bills and other services rendered by Europa." 3
The only real legal issue, it appears to the Court, is whether or not the rescission of the contract to
sell by private respondent accords with the requirements of Republic Act ("R.A.") No. 6552, also
known as "An Act to Protect Buyers of Real Estate on Installment Payments" which, petitioner
insists, requires a cancellation or rescission of the contract by means of a notarial act. A mere letter
(dated 06 January 1984), or short of such a notarial act, according to petitioner, would be utterly
deficient.
Unfortunately for petitioner, the invocation of Republic Act No. 6552 is misplaced. This law, which
normally applies to the sale or financing of real estate on installment payments, excludes "industrial
lots, commercial buildings, and sales to tenants under R.A. No. 3844." The appellate court has thus
aptly said:
"While the law applies to all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments, excluded are industrial lots,
commercial buildings and sales to tenants under R.A. 3844 as amended. The property subject of the
contract to sell is not a residential condominium apartment. Even on the basis of the letter of Mr.
Vicente A. Araneta, Exhibit E, the building is merely part of common areas and amenities under the
Condominium concept of selling to the public. The property subject of the contract to sell is more of
a commercial building." 4
chanroble svirtuallawlibrary:red
Neither would Article 1191 of the Civil Code govern. Article 1191, in full, provides:
"Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
"The injured party may choose between the fulfillment and the rescission of the obligation, with the
"The Court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.
"This is understood to be without prejudice to the rights of third persons who have acquired the
thing, in accordance with articles 1385 and 1388 and the Mortgage Law."
In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure
of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor
to convey title from acquiring an obligatory force. 5 The breach contemplated in Article 1191 of the
Code is the obligors failure to comply with an obligation already extant, not a failure of a condition
to render binding that obligation. In any event, the failure of petitioner to even complete the
downpayment stipulated in the contract to sell puts petitioner corporation far from good stead in
urging that there has been substantial compliance with the contract to sell within the meaning of
Article 1191 of the Code.
So, too, must Article 1592 of the Civil Code be held inapplicable. This law states:
"Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take
place, the vendee may pay; even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term."
It is clear that the above provisions contemplate neither a conditional sale nor a contract to sell but
an absolute sale. 6
What must instead be held to rule in the case at bar is the agreement of the parties themselves.
Section 5 of their contract to sell reads:
"Section 5: In the event Odyssey fails to pay any portion of the purchase price of the Property or the
interest and service charge thereon as and when it falls due, or otherwise fails to comply with or
violate any of the provisions of this Contract, Bancom may at its absolute discretion cancel and
rescind this Contract and declare the same as null, void and no further force and effect by serving
on Odyssey a written notice of cancellation and rescission thirty (30) days in advance.
"In the event this Contract is cancelled and rescinded as provided in this Section, all the amounts
which the Odyssey may have paid to Bancom pursuant to and in accordance with this Contract shall
be forfeited in favor of Bancom as rentals for the use and occupancy of the Property and as penalty
for the breach and violation of this Contract. Furthermore, all the improvements which Odyssey may
have introduced on the Property shall form part thereof and belong to Bancom without right of
reimbursements to Odyssey; Provided, that Bancom may at its absolute discretion instead require
Odyssey to remove such improvements from the Property at expense of Odyssey." 7
It is a familiar doctrine in the law on contracts that the parties are bound by the stipulations,
clauses, terms and conditions they have agreed to, 8 the only limitation being that these
stipulations, clauses, terms and conditions are not contrary to law, morals, public order or public
policy. 9 Not being repugnant to any legal proscription, the agreement entered into by the parties
herein involved must be respected and held to be the law between them.
WHEREFORE, the decision appealed from is AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
[G.R. No. L-32811. March 31, 1980.]

FELIPE C. ROQUE v NICANOR LAPUZ
Appeal by certiorari from the Resolution of the respondent court 1 dated October 12, 1970 in CAG.R. No. L-33998-R entitled "Felipe C. Roque, plaintiff-appellee, versus Nicanor Lapuz, DefendantAppellant" amending its original decision of April 23, 1970 which affirmed the decision of the Court
of First Instance of Rizal (Quezon City Branch) in Civil Case No. Q-4922 in favor of petitioner, and
the Resolution of the respondent court denying petitioners motion for reconsideration.
The facts of this case are as recited in the decision of the Trial Court which was adopted and
affirmed by the Court of Appeals:
"Sometime in 1954, prior to the approval by the National Planning Commission of the consolidation
and subdivision plan of plaintiffs property known as the Rockville Subdivision, situated in
Balintawak, Quezon City, plaintiff and defendant entered into an agreement of sale covering Lots 1,
2 and 9, Block 1, of said property, with an aggregate area of 1,200 square meters, payable in 120
equal monthly installments at the rate of P16.00, P15.00 per square meter, respectively. In
accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit and the
further sum of P740.56 to complete the payment of four monthly installments covering the months
of July, August, September, and October, 1954. (Exhibits A and B). When the document Exhibit "A"
was executed on June 25, 1954, the plan covering plaintiffs property was merely tentative, and the
plaintiff referred to the proposed lots appearing in the tentative plan.
After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955, defendant
requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and 9, the subject matter
of their previous agreement, with Lots 4 and 12, Block 2 of the approved subdivision plan, of the
Rockville Subdivision, with a total area of 725 square meters, which are corner lots, to which
request plaintiff graciously acceded.
chanrobles virtualawlibrary chanroble s.com :chanrobles.com .ph
The evidence discloses that defendant proposed to plaintiff modification of their previous contract to
sell because he found it quite difficult to pay the monthly installments on the three lots, and besides
the two lots he had chosen were better lots, being corner lots. In addition, it was agreed that the
purchase price of these two lots would be at the uniform rate of P17.00 per square (meter) payable
in 120 equal monthly installments, with interest at 8% annually on the balance unpaid. Pursuant to
this new agreement, defendant occupied and possessed Lots 4 and 12, Block 2 of the approved
subdivision plan, and enclosed them, including the portion where his house now stands, with barbed
wires and adobe walls.
However, aside from the deposit of P150.00 and the amount of P740.56 which were paid under their
previous agreement, defendant failed to make any further payment on account of the agreed
monthly installments for the two lots in dispute, under the new contract to sell. Plaintiff demanded
upon defendant not only to pay the stipulated monthly installments in arrears, but also to make upto-date his payments, but defendant, instead of complying with the demands, kept on asking for
extensions, promising at first that he would pay not only the installments in arrears but also make
up-to-date his payment, but later on refused altogether to comply with plaintiffs demands.
Defendant was likewise requested by the plaintiff to sign the corresponding contract to sell in
accordance with his previous commitment. Again, defendant promised that he would sign the
required contract to sell when he shall have made up-to-date the stipulated monthly installments on
the lots in question, but subsequently backed out of his promise and refused to sign any contract in
non-compliance with what he had represented on several occasions. And plaintiff relied on the good
faith of defendant to make good his promise because defendant is a professional and had been
rather good to him (plaintiff).
On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant to vacate the
lots in question and to pay the reasonable rentals thereon at the rate of P60.00 per month from
August, 1955. (Exhibit "B"). Notwithstanding the receipt of said letter, defendant did not deem it
wise nor proper to answer the same."
In reference to the mode of payment, the Honorable Court of Appeals found

"Both parties are agreed that the period within which to pay the lots in question is ten years. They
however, disagree on the mode of payment. While the appellant claims that he could pay the
purchase price at any time within a period of ten years with a gradual proportionate discount on the
price, the appellee maintains that the appellant was bound to pay monthly installments.
On this point, the trial court correctly held that
It is further argued by defendant that under the agreement to sell in question, he has the right or
option to pay the purchase price at anytime within a period of ten years from 1954, he being
entitled, at the same time, to a graduated reduction of the price. The Court is constrained to reject
this version not only because it is contradicted by the weight of evidence but also because it is not
consistent with what is reasonable, plausible and credible. It is highly improbable to expect plaintiff,
or any real estate subdivision owner for that matter, to agree to a sale of his land which would be
payable anytime in ten years at the exclusive option of the purchaser. There is no showing that
defendant is a friend, a relative, or someone to whom plaintiff had to be grateful, as would justify an
assumption that he would have agreed to extend to defendant such an extra-ordinary concession.
Furthermore, the context of the document, Exhibit "B", not to mention the other evidences on
records is indicative that the real intention of the parties is for the payment of the purchase price of
the lot in question on an equal monthly installment basis for a period of ten years. (Exhibits "A",
"II", "J" and "K")."
On January 22, 1960, petitioner Felipe C. Roque (plaintiff below) filed the complaint against
defendant Nicanor Lapuz (private respondent herein) with the Court of First Instance of Rizal,
Quezon City Branch, for rescission and cancellation of the agreement of sale between them involving
the two lots in question and prayed that judgment be rendered ordering the rescission and
cancellation of the agreement of sale, the defendant to vacate the two parcels of land and remove
his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a
month from August 1955 until such time as he shall have vacated the premises, and to pay the sum
of P2,000.00 as attorneys fees, costs of the suit and award such other relief or remedy as may be
deemed just and equitable in the premises.
Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action,
which motion was denied by the court. Thereafter, defendant filed his Answer alleging that he
bought three lots from the plaintiff containing an aggregate area of 1,200 sq. meters and previously
known as Lots 1, 2 and 9 of Block 1 of Rockville Subdivision at P16.00, P15.00 and P15.00,
respectively, payable at any time within ten years. Defendant admits having occupied the lots in
question.
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As affirmative and special defenses, defendant alleges that the complaint states no cause of action;
that the present action for rescission has prescribed; that no demand for payment of the balance
was ever made; and that the action being based on reciprocal obligations, before one party may
compel performance, he must first comply what is incumbent upon him.
As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots
containing an area of 800 sq. meters and as a consequence, he suffered moral damages in the
amount of P200.000.00; that due to the filing of the present action, he suffered moral damages
amounting to P100,000.00 and incurred expenses for attorneys fees in the sum of P5,000.00.
Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof.
After due hearing, the trial court rendered judgment, the dispositive portion of which reads:
"WHEREFORE, the Court renders judgment in favor of plaintiff and against the defendant, as
follows:
"(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question
(Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded,
resolved and cancelled;
"(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay
plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he
shall have actually vacated the premises; and
"(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorneys fees, as well as the
costs of the suit." (Record on Appeal, p. 118)
"(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question
(Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded,
resolved and cancelled;
"(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay
plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he
shall have actually vacated premises; and
"(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorneys fees, as well as the
costs of the suit." (Record on Appeal, p. 118)
Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The
latter court, finding the judgment appealed from being in accordance with law and evidence,
affirmed the same.
In its decision, the appellate court, after holding that the findings of fact of the trial court are fully
supported by the evidence, found and held that the real intention of the parties is for the payment of
the purchase price of the lots in question on an equal monthly installment basis for the period of ten
years; that there was modification of the original agreement when defendant actually occupied Lots
Nos. 4 and 12 of Block 2 which were corner lots that commanded a better price instead of the
original Lots Nos. 1, 2 and 9, Block 1 of the Rockville Subdivision; that appellants bare assertion
that the agreement is not rescindable because the appellee did not comply with his obligation to put
up the requisite facilities in the subdivision was insufficient to overcome the presumption that the
law has been obeyed by the appellee; that the present action has not prescribed since Article 1191
of the New Civil Code authorizing rescission in reciprocal obligations upon non-compliance by one of
the obligors is the applicable provision in relation to Article 1149 of the New Civil Code; and that the
present action was filed within five years from the time the right of action accrued.
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Defendant filed a Motion for Reconsideration of the appellate courts decision on the following
grounds:
"First Neither the pleadings nor the evidence, testimonial, documentary or circumstantial, justify
the conclusion as to the existence of an alleged subsequent agreement novatory of the original
contract admittedly entered into between the parties;
"Second There is nothing so unusual or extraordinary as would render improbable the fixing of
ten years as the period within which payment of the stipulated price was to be payable by appellant;
"Third Appellee has no right, under the circumstances of the case at bar, to demand and be
entitled to the rescission of the contract had with appellant;
"Fourth Assuming that any action for rescission is available to appellee, the same, contrary to the
findings of the decision herein, has prescribed;
"Fifth Assuming further that appellees action for rescission, if any, has not yet prescribed, the
same is at least barred by laches;
"Sixth Assuming furthermore that a cause of action for rescission exists, appellant should
nevertheless be entitled to the fixing of a period within which to comply with his obligation; and
"Seventh At all events, the affirmance of the judgment for the payment of rentals on the
premises from August, 1955 and the taxing of attorneys fees against appellant are not warranted by
the circumstances at bar." (Rollo, pp. 87-88)
Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by
the appellant, that assuming that a cause of action for rescission exists, he should nevertheless be
entitled to the fixing of a period within which to comply with his obligation. The Court of Appeals,
therefore, amended its original decision in the following wise and manner:
"WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that the defendant
Nicanor Lapuz is hereby granted a period of ninety (90) days from entry hereof within which to pay
the balance of the purchase price in the amount of P11,434,44 with interest thereon at the rate of
8% per annum from August 17, 1955 until fully paid. In the event that the defendant fails to comply
with his obligation as above stated within the period fixed herein, our original judgment stands."
Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals
denied it. He now comes and appeals to this Court on a writ of certiorari.
The respondent Court of Appeals rationalizes its amending decision by considering that the house
presently erected on the land subject of the contract is worth P45,000.00, which improvements
introduced by defendant on the lots subject of the contract are very substantial, and thus being the
case, "as a matter of justice and equity, considering that the removal of defendants house would
amount to a virtual forfeiture of the value of the house, the defendant should be granted a period
within which to fulfill his obligations under the agreement." Cited as authorities are the cases of
Kapisanan Banahaw v. Dejarme and Alvero, 55 Phil. 338, 344, where it is held that the discretionary
power of the court to allow a period within which a person in default may be permitted to perform
the stipulation upon which the claim for resolution of the contract is based should be exercised
without hesitation in a case where a virtual forfeiture of valuable rights is sought to be enforced as
an act of mere reprisal for a refusal of the debtor to submit to a usurious charge, and the case of
Puerto v. Go Ye Pin, 47 O.G. 264, holding that to oust the defendant from the lots without giving him
a chance to recover what his father and he himself had spent may amount to a virtual forfeiture of
valuable rights.
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As further reasons for allowing a period within which defendant could fulfill his obligation, the
respondent court held that there exists good reasons therefor, having in mind that which affords
greater reciprocity of rights (Ramos v. Blas, 51 O.G. 1920); that after appellant had testified that
plaintiff failed to comply with his part of the contract to put up the requisite facilities in the
subdivision, plaintiff did not introduce any evidence to rebut defendants testimony but simply relied
upon the presumption that the law has been obeyed, thus said presumption had been successfully
rebutted as Exhibit "5-D" shows that the road therein shown is not paved. The Court, however,
concedes that plaintiffs failure to comply with his obligation to put up the necessary facilities in the
subdivision will not deter him from asking for the rescission of the agreement since this obligation is
not correlative with defendants obligation to buy the property.
Petitioner assails the decision of the Court of Appeals for the following alleged errors:
I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the Civil Code
which refers to reciprocal obligations in general and, pursuant thereto, in granting respondent Lapuz
a period of ninety (90) days from entry of judgment within which to pay the balance of the purchase
price.
II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same Code, which
specifically covers sales of immovable property and which constitutes an exception to the third
paragraph of Article 1191 of said Code, is applicable to the present case.
III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot avail of the
provisions of Article 1191, paragraph 3 of the Civil Code aforesaid because he did not raise in his
answer or in any of the pleadings he filed in the trial court the question of whether or not he is
entitled, by reason of a just cause, to a fixing of a new period.
IV. Assuming arguendo that the agreement entered into by and between petitioner and respondent
Lapuz was a mere promise to sell or contract to sell, under which title to the lots in question did not
pass from petitioner to respondent, still the Honorable Court of Appeals erred in not holding that
aforesaid respondent is not entitled to a new period within which to pay petitioner the balance of
P11,434.44 with interest due on the purchase price of P12,325.00 of the lots.
V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable and may be
availed of by respondent, the Honorable Court of Appeals nonetheless erred in not declaring that
said respondent has not shown the existence of a just cause which would authorize said Court to fix
a new period within which to pay the balance aforesaid.
VI. The Honorable Court of Appeals erred in reconsidering its original decision promulgated on April
23, 1970 which affirmed the decision of the trial court.
The above errors may, however, be synthesized into one issue and that is, whether private
respondent is entitled to the benefits of the third paragraph of Article 1191, New Civil Code, for the
fixing of a period within which he should comply with what is incumbent upon him, and that is to pay
the balance of P11,434.44 with interest thereon at the rate of 8% per annum from August 17, 1955
until fully paid since private respondent had paid only P150.00 as deposit and 4 months installments
amounting to P740.46, or a total of P890.46, the total price of the two lots agreed upon being
P12,325.00.
For his part, petitioner maintains that respondent is not entitled to the benefits of paragraph 3,
Article 1191, N.C.C. and that instead, Article 1592 of the New Civil Code which specifically covers
sales of immovable property and which constitutes an exception to the third paragraph of Art. 1191
of said Code, is the applicable law to the case at bar.
In resolving petitioners assignment of errors, it is well that We lay down the codal provisions and
pertinent rulings of the Supreme Court bearing on the crucial issue of whether Art. 1191, paragraph
3 of the New Civil Code applies to the case at bar as held by the appellate court and supported by
the private respondent, or Art. 1592 of the same Code which petitioner strongly urges in view of the
peculiar facts and circumstances attending this case. Article 1191, New Civil Code, provides:
"Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
The injured party may choose between the fulfillment and the rescission of the obligation, with the
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period.
This is understood to be without prejudice to the rights of third persons who have acquired the
thing, in accordance with articles 1385 and 1388 and the Mortgage Law."
Article 1592 also provides:
"Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take
place, the vendee may pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by a notarial act. After the
demand, the court may not grant him a new term."
The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc. and Myers Building Co., G.R. No. L-25885, January
31, 1972, 43 SCRA 93, originally decided in 1972, reiterated in the Resolution on Motion to
Reconsider dated August 18, 1972, 46 SCRA 381 and emphatically repeated in the Resolution on
Second Motion for Reconsideration promulgated November 16, 1978, 86 SCRA 309, which once
more denied Maritimes Second Motion for Reconsideration of October 7, 1972. In the original
decision, the Supreme Court speaking thru Justice J.B.L. Reyes said:
"Under the circumstances, the action of Maritime in suspending payments to Myers Corporation was
a breach of contract tainted with fraud or malice (dolo), as distinguished from mere negligence
(culpa), "dolo" being succinctly defined as a "conscious and intentional design to evade the normal
fulfillment of existing obligations" (Capistrano, Civil Code of the Philippines, Vol. 3, page 38), and
therefore incompatible with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo,
Teoria de Obligaciones, Vol. 1, page 116).
Maritime having acted in bad faith, it was not entitled to ask the court to give it further time to make
payment and thereby erase the default or breach that it had deliberately incurred. Thus the lower
court committed no error in refusing to extend the periods for payment. To do otherwise would be to
sanction a deliberate and reiterated infringement of the contractual obligations incurred by Maritime,
an attitude repugnant to the stability and obligatory force of contracts."
The decision reiterated the rule pointed out by the Supreme Court in Manuel v. Rodriguez, 109 Phil.
1, p. 10, that:
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"In contracts to sell, where ownership is retained by the seller and is not to pass until the full
payment of the price, such payment, as we said is a positive suspensive condition, the failure of
which is not a breach, casual or serious, but simply an event that prevented the obligation of the
vendor to convey title from acquiring binding force, in accordance with Article 1117 of the Old Civil
Code. To argue that there was only a casual breach is to proceed from the assumption that the
contract is one of absolute sale, where non-payment is a resolutory condition, which is not the
case."
Continuing, the Supreme Court declared:
". . . appellant overlooks that its contract with appellee Myers is not the ordinary sale envisaged by
Article 1592, transferring ownership simultaneously with the delivery of the real property sold, but
one in which the vendor retained ownership of the immovable object of the sale, merely undertaking
to convey it provided the buyer strictly complied with the terms of the contract (see paragraph [d],
ante, page 5). In suing to recover possession of the building from Maritime, appellee Myers is not
after the resolution or setting aside of the contract and the restoration of the parties to the status
quo ante, as contemplated by Article 1592, but precisely enforcing the provisions of the agreement
that it is no longer obligated to part with the ownership or possession of the property because
Maritime failed to comply with the specific condition precedent, which is to pay the installments as
they fell due.
The distinction between contracts of sale and contracts to sell with reserved title has been
recognized by this Court in repeated decisions upholding the power of promisors under contracts to
sell in case of failure of the other party to complete payment, to extrajudicially terminate the
operation of the contract, refuse conveyance and retain the sums or installments already received,
where such rights are expressly provided for, as in the case at bar."
In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again
speaking thru Justice J.B.L. Reyes, reiterated the rule that in a contract to sell, the full payment of
the price through the punctual performance of the monthly payments is a condition precedent to the
execution of the final sale and to the transfer of the property from the owner to the proposed buyer;
so that there will be no actual sale until and unless full payment is made.
The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon,
Myers was not rescinding (or more properly, resolving) the contract but precisely enforcing it
according to its expressed terms. In its suit, Myers was not seeking restitution to it of the ownership
of the thing sold (since it was never disposed of), such restoration being the logical consequence of
the fulfillment of a resolutory condition, expressed or implied (Art. 1190); neither was it seeking a
declaration that its obligation to sell was extinguished. What is sought was a judicial declaration that
because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to
sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to
repossess the property object of the contract, possession being a mere incident to its right of
ownership.
The decision also stressed that there can be no rescission or resolution of an obligation as yet nonexistent, because the suspensive condition did not happen. Article 1592 of the New Civil Code (Art.
1504 of Old Civil Code) requiring demand by suit or notarial act in case the vendor of realty wants to
rescind does not apply to a contract to sell or promise to sell, where title remains with the vendor
until fulfillment to a positive condition, such as full payment of the price." (Manuel v. Rodriguez, 109
Phil. 9)
Maritimes Second Motion for Reconsideration was denied in the Resolution of the Court dated
November 16, 1978, 86 SCRA 305, where the governing law and precedents were briefly
summarized in the strong and emphatic language of Justice Teehankee, thus:
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"(a) The contract between the parties was a contract to sell or conditional sale with title expressly
reserved in the vendor Myers Building Co., Inc. (Myers) until the suspensive condition of full and
punctual payment of the full price shall have been met on pain of automatic cancellation of the
contract upon failure to pay any of the monthly installments when due and retention of the sums
theretofore paid as rentals. When the vendee, appellant Maritime, willfully and in bad faith failed
since March, 1961 to pay the P5,000. monthly installments notwithstanding that it was punctually
collecting P10,000. monthly rentals from the lessee Luzon Brokerage Co., Myers was entitled, as it
did in law and fact, to enforce the terms of the contract to sell and to declare the same terminated
and cancelled.
(b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such contracts to
sell or conditional sales and no error was committed by the trial court in refusing to extend the
periods for payment.
(c) As stressed in the Courts decision, "it is irrelevant whether appellant Maritimes infringement of
its contract was casual or serious" for as pointed out in Manuel v. Rodriguez, (I)n contracts to sell,
whether ownership is retained by the seller and is not to pass until the full payment of the price,
such payment, as we said, is a positive suspensive condition, the failure of which is not a breach,
casual or serious, but simply an event that prevented the obligation of the vendor to convey title
from acquiring binding force . . .
(d) It should be noted, however, that Maritimes breach was far from casual but a most serious
breach of contract . . .
(e) Even if the contract were considered an unconditional sale so that Article 1592 of the Civil Code
could be deemed applicable, Myers answer to the complaint for interpleader in the court below
constituted a judicial demand for rescission of the contract and by the very provision of the cited
codal article, after the demand, the court may not grant him a new term for payment; and
(f) Assuming further that Article 1191 of the new Civil Code governing rescission of reciprocal
obligations could be applied (although Article 1592 of the same Code is controlling since it deals
specifically with sales of real property), said article provides that (T)he court shall decree the
rescission claimed, unless there be just cause authorizing the fixing of a period and there exists to
just cause as shown above for the fixing of a further period. . . ."
Under the first and second assignments of error which petitioner error jointly discusses, he argues
that the agreement entered into between him and the respondent is a perfected contract of
purchase and sale within the meaning of Article 1475 of the New Civil Code which provides that "the
contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contract."
Petitioner contends that" (n)othing in the decision of the courts below would show that ownership of
the property remained with plaintiff for so long as the installments have not been fully paid. Which
yields the conclusion that, by the delivery of the lots to defendant, ownership likewise was
transferred to the latter." (Brief for the Petitioner, p. 15) And he concludes that the sale was
consummated by the delivery of the two lots, the subject thereof, by him to the Respondent.
Under the findings of facts by the appellate court, it appears that the two lots subject of the
agreement between the parties herein were delivered by the petitioner to the private respondent
who took possession thereof and occupied the same and thereafter built his house thereon,
enclosing the lots with adobe stone walls and barbed wires. But the property being registered under
the Land Registration Act, it is the act of registration of the Deed of Sale which could legally effect
the transfer of title of ownership to the transferee, pursuant to Section 50 of Act 496. (Manuel v.
Rodriguez, Et Al., 109 Phil. 1; Buzon v. Lichauco, 13 Phil. 354; Tuazon v. Raymundo, 28 Phil. 635;
Worcestor v. Ocampo, 34 Phil. 646). Hence, We hold that the contract between the petitioner and
the respondent was a contract to sell where the ownership or title is retained by the seller and is not
to pass until the full payment of the price, such payment being a positive suspensive condition and
failure of which is not a breach, casual or serious, but simply an event that prevented the obligation
of the vendor to convey title from acquiring binding force.
In the case at bar, there is no writing or document evidencing the agreement originally entered into
between petitioner and private respondent except the receipt showing the initial deposit of P150.00
as shown in Exhibit "A" and the payment of the 4-months installment made by respondent
corresponding to July, 1954 to October, 1954 in the sum of P740.56 as shown in Exhibit "B." Neither
is there any writing or document evidencing the modified agreement when the 3 lots were changed
to Lots 4 and 12 with a reduced area of 725 sq. meters, which are corner lots. This absence of a
formal deed of conveyance is a very strong indication that the parties did not intend immediate
transfer of ownership and title, but only a transfer after full payment of the price. Parenthetically, We
must say that the standard printed contracts for the sale of the lots in the Rockville Subdivision on a
monthly installment basis showing the terms and conditions thereof are immaterial to the case at
bar since they have not been signed by either of the parties to this case.
Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or
agreement between petitioner and respondent which We affirm and sustain to be a contract to sell,
the following resolutions of petitioners assignment of errors necessarily arise, and so We hold that:
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1. The first and second assignments of errors are without merit.

The overwhelming weight of authority culminating in the Luzon Brokerage v. Maritime cases has laid
down the rule that Article 1592 of the New Civil Code does not apply to a contract to sell where title
remains with the vendor until full payment of the price as in the case at bar. This is the ruling in
Caridad Estates v. Santero, 71 Phil. 120; Aldea v. Inquimboy, 86 Phil. 1601; Jocson v. Capitol
Subdivision, Inc., L-6573, Feb. 28, 1955; Miranda v. Caridad Estates, L-2077 and Aspuria v. Caridad
Estates, L-2121, Oct. 3, 1950, all reiterated in Manuel v. Rodriguez, Et Al., 109 Phil. 1, L-13435, July
27, 1960.
We agree with the respondent Court of Appeals that Art. 1191 of the New Civil Code is the applicable
provision where the obligee, like petitioner herein, elects to rescind or cancel his obligation to deliver
the ownership of the two lots in question for failure of the respondent to pay in full the purchase
price on the basis of 120 monthly equal installments, promptly and punctually for a period of 10
years.
2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191,
N.C.C. Having been in default, he is not entitled to the new period of 90 days from entry of
judgment within which to pay petitioner the balance of P11,434.44 with interest due on the
purchase price of P12,325.00 for the two lots.
Respondent actually paid P150.00 as deposit under Exhibit "A" and P740.56 for the 4-months
installments corresponding to the months of July to October, 1954. The judgment of the lower court
and the Court of Appeals held that respondent was under the obligation to pay the purchase price of
the lots in question on an equal monthly installment basis for a period of ten years, or 120 equal
monthly installments. Beginning November, 1954, respondent began to default in complying with his
obligation and continued to do so for the remaining 116 monthly installments. His refusal to pay
further installments on the purchase price, his insistence that he had the option to pay the purchase
price any time in ten years inspite of the clearness and certainty of his agreement with the petitioner
as evidenced further by the receipt, Exhibit "B", his dilatory tactic of refusing to sign the necessary
contract of sale on the pretext that he will sign later when he shall have updated his monthly
payments in arrears but which he never attempted to update, and his failure to deposit or make
available any amount since the execution of Exhibit "B" on June 28, 1954 up to the present or a
period of 26 years, are all unreasonable and unjustified which altogether manifest clear bad faith
and malice on the part of respondent Lapuz, making inapplicable and unwarranted the benefits of
paragraph 3, Art. 1191, N.C.C. To allow and grant respondent an additional period for him to pay the
balance of the purchase price, which balance is about 92% of the agreed price, would be
tantamount to excusing his bad faith and sanctioning the deliberate infringement of a contractual
obligation that is repugnant and contrary to the stability, security and obligatory force of contracts.
Moreover, respondents failure to pay the succeeding 116 monthly installments after paying only 4
monthly installments is a substantial and material breach on his part, not merely casual, which takes
the case out of the application of the benefits of paragraph 3, Art. 1191, N.C.C.
At any rate, the fact that respondent failed to comply with the suspensive condition which is the full
payment of the price through the punctual performance of the monthly payments rendered
petitioners obligation to sell ineffective and, therefore, petitioner was entitled to repossess the
property object of the contract, possession being a mere incident to his right of ownership (Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc. Et. Al., 46 SCRA 381).
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3. We further rule that there exists no just cause authorizing the fixing of a new period within which
private respondent may pay the balance of the purchase price. The equitable grounds or
considerations which are the basis of the respondent court in the fixing of an additional period
because respondent had constructed valuable improvements on the land, that he has built his house
on the property worth P45,000.00 and placed adobe stone walls with barbed wires around, do not
warrant the fixing of an additional period. We cannot sanction this claim for equity of the respondent
for to grant the same would place the vendor at the mercy of the vendee who can easily construct
substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he
elects to rescind the contract by reason of the vendees default or deliberate refusal to pay or
continue paying the purchase price of the land. Under this design, strategem or scheme, the vendee
can cleverly and easily "improve out" the vendor of his land.
More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it
would not be fair and reasonable to the petitioner to apply a solution that affords greater reciprocity
of rights which the appealed decision tried to effect between the parties. As matters stand,
respondent has been enjoying the possession and occupancy of the land without paying the other
116 monthly installments as they fall due. The scales of justice are already tipped in respondents
favor under the amended decision of the respondent court. It is only right that We strive and search
for the application of the law whereby every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and good
faith (Art. 19, New Civil Code)
In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has
twisted the clear import of his agreement with the petitioner in order to suit his ends and delay the
fulfillment of his obligation to pay the land he had enjoyed for the last 26 years, more than twice the
period of ten years that he obliged himself to complete payment of the price.
4. Respondents contention that petitioner has not complied with his obligation to put up the
necessary facilities in the Rockville Subdivision is not sufficient nor does it constitute good reason to
justify the grant of an additional period of 90 days from entry of Judgment within which respondent
may pay the balance of the purchase price agreed upon. The judgment of the appellate court
concedes that petitioners failure to comply with his obligation to put up the necessary facilities in
the subdivision will not deter him from asking for the rescission of the agreement since his
obligation is not correlative with respondents obligation to buy the property. Since this is so
conceded, then the right of the petitioner to rescind the agreement upon the happening or in the
event that respondent fails or defaults in any of the monthly installments would be rendered
nugatory and ineffective. The right of rescission would then depend upon an extraneous
consideration which the law does not contemplate.
Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at
the uniform price of P17.00 per sq. meter, making a total price of P12,325.00, it is highly doubtful if
not improbable that aside from his obligation to deliver title and transfer ownership to the
respondent as a reciprocal obligation to that of the respondent in paying the price in full and
promptly as the installments fall due, petitioner would have assumed the additional obligation to
provide the subdivision with streets . . . provide said streets with street pavements, concrete curbs
and gutters, fillings as required by regulations, adequate drainage facilities, tree plantings, adequate
water facilities" as required under Ordinance No. 2969 of Quezon City approved on May 11, 1956
(Answer of Defendant, Record on Appeal, pp. 35-36) which was two years after the agreement in
question was entered into in June, 1954.
The fact remains, however, that respondent has not protested to the petitioner nor to the authorities
concerned the alleged failure of petitioner to put up and provide such facilities in the subdivision
because he knew too well that he has paid only the aggregate sum of P890.56 which represents
more or less 7% of the agreed price of P12,325.00 and that he has not paid the real estate taxes
assessed by the government on his house erected on the property under litigation. Neither has
respondent made any allegation in his Answer and in all his pleadings before the court up to the
promulgation of the Resolution dated October 12, 1970 by the Court of Appeals, to the effect that he
was entitled to a new period within which to comply with his obligation, hence the Court could not
proceed to do so unless the Answer is first amended. (Gregorio Araneta, Inc. v. Philippine Sugar
Estates Development Co., Ltd., G.R. No. L-22558, May 31, 1967, 20 SCRA 330, 335). It is quite
clear that it is already too late in the day for respondent to claim an additional period within which to
comply with his obligation.
Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real
property additional period within which to complete payment of the purchase price on grounds of
equity and justice as in (1) J.M. Tuazon Co., Inc. v. Javier, 31 SCRA 829 where the vendee religiously
satisfied the monthly installments for eight years and paid a total of P4,134.08 including interests on
the principal obligation of only P3,691.20, the price of the land; after default, the vendee was willing
to pay all arrears, in fact offered the same to the vendor; the court granted an additional period of
60 days from receipt of judgment for the vendee to make all installment payments in arrears plus
interest; (2) in Legarda Hermanos v. Saldaa, 55 SCRA 324, the Court ruled that where one
purchase from a subdivision owner two lots and has paid more than the value of one lot, the former
is entitled to a certificate of title to one lot in case of default.
On the other hand, there are also cases where rescission was not granted and no new or additional
period was authorized. Thus, in Caridad Estates v. Santero, 71 Phil. 114, the vendee paid, totalling
P7,590.00 or about 25% of the purchase price of P30,000.00 for the three lots involved and when
the vendor demanded revocation upon the vendees default two years after, the vendee offered to
pay the arears in check which the vendor refused; and the Court sustained the revocation and
ordered the vendee ousted from the possession of the land. In Ayala y Cia v. Arcache, 98 Phil. 273,
the total price of the land was P457,404.00 payable in installments; the buyer initially paid
P100,000.00 or about 25% of the agreed price; the Court ordered rescission in view of the
substantial breach and granted no extension to the vendee to comply with his obligation.
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The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must
be so substantial and fundamental to defeat the object of the parties" (Gregorio Araneta, Inc. v.
Tuazon de Paterno, L-2886, August 22, 1962; Villanueva v. Yulo, L-12985, Dec. 29, 1959); that
"where time is not of the essence of the agreement, a slight delay on the part of one party in the
performance of his obligation is not a sufficient ground for the rescission of the agreement" (Biando
v. Embestro, L-11919, July 27, 1959; cases cited in Notes appended to Universal Foods Corporation
v. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar where the
breach, delay or default was committed as early as in the payment of the fifth monthly installment
for November, 1954, that such failure continued and persisted the next month and every month
thereafter in 1955, 1956, 1957 and year after year to the end of the ten-year period in 1964 (10)
years is respondents contention) and even to this time, now more than twice as long a time as the
original period without respondent adding, or even offering to add a single centavo to the sum he
had originally paid in 1954 which represents a mere 7% of the total price agreed upon, equity and
justice may not be invoked and applied. One who seeks equity and justice must come to court with
clean hands, which can hardly be said of the private Respondent.
One final point, on the supposed substantial improvements erected on the land, respondents house.
To grant the period to the respondent because of the substantial value of his house is to make the
land an accessory to the house. This is unjust and unconscionable since it is a rule in Our Law that
buildings and constructions are regarded as mere accessories to the land which is the principal,
following the Roman maxim "omne quod solo inadeficatur solo cedit" (Everything that is built on the
soil yields to the soil).
Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages
which the trial court and the appellate court, in the latters original decision granted in the form of
rental at the rate of P60.00 per month from August, 1955 until respondent shall have actually
vacated the premises, plus P2,000.00 as attorneys fees. We affirm the same to be fair and
reasonable. We also sustain the right of the petitioner to the possession of the land, ordering
thereby respondent to vacate the same and remove his house therefrom.
WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12, 1970 is
hereby REVERSED. The decision of the respondent court dated April 23, 1970 is hereby REINSTATED
and AFFIRMED, with costs against private Respondent.
SO ORDERED.
[G.R. No. L-42283. March 18, 1985.]

BUENAVENTURA ANGELES v URSULA TORRES CALASANZ
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; RECIPROCAL OBLIGATIONS; RIGHT TO RESCIND;
MAY BE EXERCISED EXTRA-JUDICIALLY. Article 1191 is explicit. In reciprocal obligations, either
party has the right to rescind the contract upon the failure of the other to perform the obligation
assumed thereunder. Moreover, there is nothing in the law that prohibits the parties from entering
into an agreement that violation of the terms of the contract would cause its cancellation even
without court intervention (Froilan v. Pan Oriental Shipping, Co., Et Al., 12 SCRA 276) "Well
settled is, however, the rule that a judicial action for the rescission of a contract is not necessary
where the contract provides that it may be revoked and cancelled for violation of any of its terms
and conditions (Lopez v. Commissioner of Customs, 37 SCRA 327, 334, and cases cited therein) . . .
.
2. ID.; ID.; ID.; ID.; ID.; NOTICE, INDISPENSABLE. The rule that it is not always necessary for
the injured party to resort to court for rescission of the contract when the contract itself provides
that it may be rescinded for violation of its terms and conditions, was qualified by this Court in
University of the Philippines v. De los Angeles, (35 SCRA 102) where we explained that: "Of course,
it must be understood that the act of a party in treating a contract as cancelled or resolved on
account of infractions by the other contracting party must be made known to the other and is always
provisional, being ever subject to scrutiny and review by the proper court. If the other party denies
that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter
to court. Then, should the court, after due hearing, decide that the resolution of the contract was
not warranted, the responsible party will be sentenced to damages; in the contrary case, the
resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced. . . .
3. ID.; ID.; ID.; ID.; NOT ABSOLUTE. The right to rescind the contract for non-performance of
one of its stipulations, therefore, is not absolute. In Universal Food Corp. v. Court of Appeals (33
SCRA 1) the Court stated that "The general rule is that rescission of a contract will not be
permitted for a slight or casual breach, but only for such substantial and fundamental breach as
would defeat the very object of the parties in making the agreement. (Song Fo & Co. v. HawaiianPhilippine Co., 47 Phil. 821, 827) The question of whether a breach of a contract is substantial
depends upon the attendant circumstances. (Corpus v. Hon. Alikpala, Et Al., L-23707 & L-23720,
Jan. 17, 1968).." . . .
4. ID.; ID.; ID.; RESCISSION NOT PROPER WHERE THERE IS SUBSTANTIAL PERFORMANCE OF
OBLIGATION. The breach of the contract adverted to by the defendants-appellants is so slight and
casual when we consider that apart from the initial downpayment of P392.00 the plaintiffs-appellees
had already paid the monthly installments for a period of almost nine (9) years. In other words, in
only a short time, the entire obligation would have been paid. Furthermore, although the principal
obligation was only P3,920.00 excluding the 7 percent interests, the plaintiffs-appellees had already
paid an aggregate amount of P4,533.38. To sanction the rescission made by the defendantsappellants will work injustice to the plaintiffs-appellees. (See J.M. Tuazon and Co., Inc. v. Javier, 31
SCRA 829) It would unjustly enrich the defendants-appellants. Article 1234 of the Civil Code which
provides that: "If the obligation has been substantially performed in good faith, the obligor may
recover as though there had been a strict and complete fulfillment, less damages suffered by the
obligee."
5. ID.; ID.; ID.; RIGHT OF RESCISSION; ACCEPTANCE OF DELAYED PAYMENTS OF INSTALLMENTS

CONSTITUTES WAIVER AND ESTOPPEL. The defendants-appellants contention is without merit.
We agree with the plaintiffs-appellees that when the defendants-appellants, instead of availing of
their alleged right to rescind, have accepted and received delayed payments of installments, though
the plaintiffs-appellees have been in arrears beyond the grace period mentioned in paragraph 6 of
the contract, the defendants-appellants have waived and are now estopped from exercising their
alleged right of rescission.
6. ID.; ID.; CONTRACT TO SELL FALLS INTO THE CATEGORY OF A CONTRACT OF ADHESION. The
contract to sell entered into by the parties has some characteristics of a contract of adhesion. The
defendants-appellants drafted and prepared the contract. The plaintiffs-appellees, eager to acquire a
lot upon which they could build a home, affixed their signatures and assented to the terms and
conditions of the contract. They had no opportunity to question nor change any of the terms of the
agreement. It was offered to them on a "take it or leave it" basis. In Sweet Lines, Inc. v. Teves (83
SCRA 361).
7. ID.; ID.; ID.; CONSTRUED AGAINST ONE WHO CAUSED IT. The contract to sell, being a
contract of adhesion, must be construed against the party causing it. We agree with the observation
of the plaintiffs-appellees to the effect that "the terms of a contract must be interpreted against the
party who drafted the same, especially where such interpretation will help effect justice to buyers
who, after having invested a big amount of money, are now sought to be deprived of the same thru
the prayed application of a contract clever in its phraseology, condemnable in its lopsidedness and
injurious in its effect which, in essence, and in its entirety is most unfair to the buyers."
DECISION
GUTIERREZ, JR., J.:
This is an appeal from the decision of the Court of First Instance of Rizal, Seventh Judicial District,
Branch X, declaring the contract to sell as not having been validly cancelled and ordering the
defendants-appellants to execute a final deed of sale in favor of the plaintiffs-appellees, to pay
P500.00 attorneys fees and costs.
chanrobles virtual lawlibrary
The facts being undisputed, the Court of Appeals certified the case to us since only pure questions of
law have been raised for appellate review.
On December 19, 1957, defendants-appellants Ursula Torres Calasanz and Tomas Calasanz and
plaintiffs-appellees Buenaventura Angeles and Teofila Juani entered into a contract to sell a piece of
land located in Cainta, Rizal for the amount of P3,920.00 plus 7% interest per annum.
The plaintiffs-appellees made a downpayment of P392.00 upon the execution of the contract. They
promised to pay the balance in monthly installments of P41.20 until fully paid, the installments
being due and payable on the 19th day of each month. The plaintiffs-appellees paid the monthly
installments until July 1966, when their aggregate payment already amounted to P4,533.38. On
numerous occasions, the defendants-appellants accepted and received delayed installment
payments from the Plaintiffs-Appellees.
On December 7, 1966, the defendants-appellants wrote the plaintiffs-appellees a letter requesting
the remittance of past due accounts.
On January 28, 1967, the defendants-appellants cancelled the said contract because the plaintiffsappellees failed to meet subsequent payments. The plaintiffs letter with their plea for
reconsideration of the said cancellation was denied by the defendants-appellants.
The plaintiffs-appellees filed Civil Case No. 8943 with the Court of First Instance of Rizal, Seventh
Judicial District, Branch X to compel the defendants-appellants to execute in their favor the final
deed of sale alleging inter alia that after computing all subsequent payments for the land in
question, they found out that they have already paid the total amount of P4,533.38 including
interests, realty taxes and incidental expenses for the registration and transfer of the land.
The defendants-appellants alleged in their answer that the complaint states no cause of action and
that the plaintiffs-appellees violated paragraph six (6) of the contract to sell when they failed and
refused to pay and/or offer to pay the monthly installments corresponding to the month of August,
1966 for more than five (5) months, thereby constraining the defendants-appellants to cancel the
said contract.
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The lower court rendered judgment in favor of the plaintiffs-appellees. The dispositive portion of the
decision reads:
"WHEREFORE, based on the foregoing considerations, the Court hereby renders judgment in favor of
the plaintiffs and against the defendants declaring that the contract subject matter of the instant
case was NOT VALIDLY cancelled by the defendants. Consequently, the defendants are ordered to
execute a final Deed of Sale in favor of the plaintiffs and to pay the sum of P500.00 by way of
attorneys fees. Costs against the defendants."
A motion for reconsideration filed by the defendants-appellants was denied.

As earlier stated, the then Court of Appeals certified the case to us considering that the appeal
involves pure questions of law.
The defendants-appellants assigned the following alleged errors of the lower court:
First Assignment of Error

THE LOWER COURT ERRED IN NOT HOLDING THE CONTRACT TO SELL (ANNEX "A" OF COMPLIANCE)
AS HAVING BEEN LEGALLY AND VALIDLY CANCELLED.
Second Assignment of Error
EVEN ASSUMING ARGUENDO THAT THE SAID CONTRACT TO SELL HAS NOT BEEN LEGALLY AND
VALIDLY CANCELLED, THE LOWER COURT ERRED IN ORDERING DEFENDANTS TO EXECUTE A FINAL
DEED OF SALE IN FAVOR OF THE PLAINTIFF.
Third Assignment of Error
THE LOWER COURT ERRED IN ORDERING DEFENDANTS TO PAY PLAINTIFFS THE SUM OF P500.00
AS ATTORNEYS FEES.
The main issue to be resolved is whether or not the contract to sell has been automatically and
validly cancelled by the defendants-appellants.
The defendants-appellants submit that the contract was validly cancelled pursuant to paragraph six
of the contract which provides:
"SIXTH. In case the party of the SECOND PART fails to satisfy any monthly installments, or any
other payments herein agreed upon, he is granted a month of grace within which to make the
retarded payment, together with the one corresponding to the said month of grace; it is understood,
however, that should the month of grace herein granted to the party of the SECOND PART expired;
without the payments corresponding to both months having been satisfied, an interest of 10% per
annum will be charged on the amounts he should have paid; it is understood further, that should a
period of 90 days elapse, to begin from the expiration of the month of grace herein mentioned, and
the party of SECOND PART has not paid all the amounts he should have paid with the corresponding
interest up to that date, the party of the FIRST PART has the right to declare this contract cancelled
and of no effect, and as consequence thereof, the party of the FIRST PART may dispose of the parcel
of land covered by this contract in favor of other persons, as if this contract had never been entered
into. In case of such cancellation of the contract, all the amounts paid in accordance with this
agreement together with all the improvements made on the premises, shall be considered as rents
paid for the use and occupation of the above mentioned premises, and as payment for the damages
suffered by failure of the party of the SECOND PART to fulfill his part of the agreement, and the
party of the SECOND PART hereby renounces all his right to demand or reclaim the return of the
same and obliges himself to peacefully vacate the premises and deliver the same to the party of the
FIRST PART." (Italics supplied by appellant)
x
The defendants-appellants argue that the plaintiffs-appellees failed to pay the August, 1966
installment despite demands for more than four (4) months. The defendants-appellants point to
Jocson v. Capitol Subdivision (G.R. No. L-6573, February 28, 1955) where this Court upheld the right
of the subdivision owner to automatically cancel a contract to sell on the strength of a provision or
stipulation similar to paragraph 6 of the contract in this case. The defendants-appellants also argue
that even in the absence of the aforequoted provision, they had the right to cancel the contract to
sell under Article 1191 of the Civil Code of the Philippines.
The plaintiffs-appellees on the other hand contend that the Jocson ruling does not apply. They state
that paragraph 6 of the contract to sell is contrary to law insofar as it provides that in case of
specified breaches of its terms, the sellers have the right to declare the contract cancelled and of no
effect, because it granted the sellers an absolute and automatic right of rescission.
Article 1191 of the Civil Code on the rescission of reciprocal obligations provides:
"The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him.
"The injured party may choose between the fulfillment and the rescission of the obligation, with the
fulfillment, if the later should become impossible."
Article 1191 is explicit. In reciprocal obligations, either party has the right to rescind the contract
upon the failure of the other to perform the obligation assumed thereunder. Moreover, there is
nothing in the law that prohibits the parties from entering into an agreement that violation of the
terms of the contract would cause its cancellation even without court intervention (Froilan v. Pan
Oriental Shipping, Co., Et Al., 12 SCRA 276)
"Well settled is, however, the rule that a judicial action for the rescission of a contract is not
necessary where the contract provides that it may be revoked and cancelled for violation of any of
its terms and conditions (Lopez v. Commissioner of Customs, 37 SCRA 327, 334, and cases cited
therein).
"Resort to judicial action for rescission is obviously not contemplated . . . The validity of the
stipulation can not be seriously disputed. It is in the nature of a facultative resolutory condition
which in many cases has been upheld by this Court. (Ponce Enrile v. Court of Appeals, 29 SCRA
504)."
The rule that it is not always necessary for the injured party to resort to court for rescission of the
contract when the contract itself provides that it may be rescinded for violation of its terms and
conditions, was qualified by this Court in University of the Philippines v. De los Angeles, (35 SCRA
102) where we explained that:
"Of course, it must be understood that the act of a party in treating a contract as cancelled or
resolved on account of infractions by the other contracting party must be made known to the other
and is always provisional, being ever subject to scrutiny and review by the proper court. If the other
party denies that rescission is justified, it is free to resort to judicial action in its own behalf, and
bring the matter to court. Then, should the court, after due hearing, decide that the resolution of
the contract was not warranted, the responsible party will be sentenced to damages; in the contrary
case, the resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced.
"In other words, the party who deems the contract violated many consider it resolved or rescinded,
and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the
final judgment of the corresponding court that will conclusively and finally settle whether the action
taken was or was not correct in law . . .
"We see no conflict between this ruling and the previous jurisprudence of this Court invoked by
respondent declaring that judicial action is necessary for the resolution of a reciprocal obligation;
(Ocejo, Perez & Co. v. International Banking Corp., 37 Phil. 631; Republic v. Hospital de San Juan de
Dios, Et Al., 84 Phil. 820) since in every case where the extrajudicial resolution is contested only the
final award of the court of competent jurisdiction can conclusively settle whether the resolution was
proper or not. It is in this sense that judicial action will be necessary, as without it, the extrajudicial
resolution will remain contestable and subject to judicial invalidation, unless attack thereon should
become barred by acquiescence, estoppel or prescription."
The right to rescind the contract for non-performance of one of its stipulations, therefore, is not
absolute. In Universal Food Corp. v. Court of Appeals (33 SCRA 1) the Court stated that
"The general rule is that rescission of a contract will not be permitted for a slight or casual breach,
but only for such substantial and fundamental breach as would defeat the very object of the parties
in making the agreement. (Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821, 827) The question
of whether a breach of a contract is substantial depends upon the attendant circumstances. (Corpus
v. Hon. Alikpala, Et Al., L-23707 & L-23720, Jan. 17, 1968).." . .
The defendants-appellants state that the plaintiffs-appellees violated Section two of the contract to
sell which provides:
"SECOND. That in consideration of the agreement of sale of the above described property, the
party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum of
THREE THOUSAND NINE HUNDRED TWENTY ONLY (P3,920.00), Philippine Currency, plus interest at
the rate of 7% per annum, as follows:
"(a) The amount of THREE HUNDRED NINETY TWO only (P392.00) when this contract is signed; and
"(b) The sum of FORTY ONE AND 20/100 ONLY (P41.20) on or before the 19th day of each month,
from this date until the total payment of the price above stipulated, including interest."
because they failed to pay the August installment, despite demand, for more than four (4) months.
The breach of the contract adverted to by the defendants-appellants is so slight and casual when we
consider that apart from the initial downpayment of P392.00 the plaintiffs-appellees had already
paid the monthly installments for a period of almost nine (9) years. In other words, in only a short
time, the entire obligation would have been paid. Furthermore, although the principal obligation was
only P3,920.00 excluding the 7 percent interests, the plaintiffs-appellees had already paid an
aggregate amount of P4,533.38. To sanction the rescission made by the defendants-appellants will
work injustice to the plaintiffs-appellees. (See J.M. Tuazon and Co., Inc. v. Javier, 31 SCRA 829) It
would unjustly enrich the defendants-appellants.
Article 1234 of the Civil Code which provides that:
"If the obligation has been substantially performed in good faith, the obligor may recover as though
there had been a strict and complete fulfillment, less damages suffered by the obligee."
also militates against the unilateral act of the defendants-appellants in cancelling the contract.
We agree with the observation of the lower court to the effect that:
"Although the primary object of selling subdivided lots is business, yet, it cannot be denied that this
subdivision is likewise purposely done to afford those landless, low income group people of realizing
their dream of a little parcel of land which they can really call their own."
The defendants-appellants cannot rely on paragraph 9 of the contract which provides:
"NINTH. That whatever consideration of the party of the FIRST PART may concede to the party of
the SECOND PART, as not exacting a strict compliance with the conditions of paragraph 6 of this
contract, as well as any other condonation that the party of the FIRST PART may give to the party of
the SECOND PART with regards to the obligations of the latter, should not be interpreted as a
renunciation on the part of the party of the FIRST PART of any right granted it by this contract, in
case of default or non-compliance by the party of the SECOND PART."
The defendants-appellants argue that paragraph nine clearly allows the seller to waive the
observance of paragraph 6 not merely once, but for as many times as he wishes.
The defendants-appellants contention is without merit. We agree with the plaintiffs-appellees that
when the defendants-appellants, instead of availing of their alleged right to rescind, have accepted
and received delayed payments of installments, though the plaintiffs-appellees have been in arrears
beyond the grace period mentioned in paragraph 6 of the contract, the defendants-appellants have
waived and are now estopped from exercising their alleged right of rescission. In De Guzman v.
Guieb (48 SCRA 68), we held that:
"But defendants do not deny that in spite of the long arrearages, neither they nor their predecessor,
Teodoro de Guzman, even took steps to cancel the option or to eject the appellees from the homelot in question. On the contrary, it is admitted that the delayed payments were received without
protest or qualification. . . . Under these circumstances, We cannot but agree with the lower court
that at the time appellees exercised their option, appellants had already forfeited their right to
invoke the above-quoted provision regarding the nullifying effect of the non-payment of six months
rentals by appellees by their having accepted without qualification on July 21, 1964 the full payment
by appellees of all their arrearages."
The defendants-appellants contend in the second assignment of error that the ledger of payments
show a balance of P671.67 due from the plaintiffs-appellees. They submit that while it is true that
the total monthly installments paid by the plaintiffs-appellees may have exceeded P3,920.00, a
substantial portion of the said payments were applied to the interests since the contract specifically
provides for a 7% interest per annum on the remaining balance. The defendants-appellants rely on
paragraph 2 of the contract which provides:
"SECOND. That in consideration of the agreement of sale of the above described property, the
party of the SECOND PART obligates himself to pay to the party of the FIRST PART the Sum of
THREE THOUSAND NINE HUNDRED TWENTY ONLY (P3,920.00), Philippine Currency, plus interest at
the rate of 7% per annum . . . ." (Emphasis supplied)
The plaintiffs-appellees on the other hand are firm in their submission that since they have already
paid the defendants-appellants a total sum of P4,533.38, the defendants-appellants must now be
compelled to execute the final deed of sale pursuant to paragraph 12 of the contract which
provides:
"TWELFTH. That once the payment of the sum of P3,920.00, the total price of the sale is
completed, the party to the FIRST PART will execute in favor of the party of the SECOND PART, the
necessary deed or deeds to transfer to the latter the title of the parcel of land sold, free from all
liens and encumbrances other than those expressly provided in this contract; it is understood,
however, that all the expenses which may be incurred in the said transfer of title shall be paid by the
party of the SECOND PART, as above stated."
Closely related to the second assignment of error is the submission of the plaintiffs-appellees that
the contract herein is a contract of adhesion.
We agree with the plaintiffs-appellees. The contract to sell entered into by the parties has some
characteristics of a contract of adhesion. The defendants-appellants drafted and prepared the
contract. The plaintiffs-appellees, eager to acquire a lot upon which they could build a home, affixed
their signatures and assented to the terms and conditions of the contract. They had no opportunity
to question nor change any of the terms of the agreement. It was offered to them on a "take it or
leave it" basis. In Sweet Lines, Inc. v. Teves (83 SCRA 361), we held that:
". . . (W)hile generally, stipulations in a contract come about after deliberate drafting by the parties
thereto, .. there are certain contracts almost all the provisions of which have been drafted only by
one party, usually a corporation. Such contracts are called contracts of adhesion, because the only
participation of the party is the signing of his signature or his `adhesion thereto. Insurance
contracts, bills of lading, contracts of sale of lots on the installment plan fall into this category.
(Paras, Civil Code of the Philippines, Seventh ed., Vol. I, p. 80.)" (Emphasis supplied)
While it is true that paragraph 2 of the contract obligated the plaintiffs-appellees to pay the
defendants-appellants the sum of P3,920.00 plus 7% interest per annum, it is likewise true that
under paragraph 12 the seller is obligated to transfer the title to the buyer upon payment of the
P3,920.00 price sale.
The contract to sell, being a contract of adhesion, must be construed against the party causing it.
We agree with the observation of the plaintiffs-appellees to the effect that "the terms of a contract
must be interpreted against the party who drafted the same, especially where such interpretation
will help effect justice to buyers who, after having invested a big amount of money, are now sought
to be deprived of the same thru the prayed application of a contract clever in its phraseology,
condemnable in its lopsidedness and injurious in its effect which, in essence, and in its entirety is
most unfair to the buyers."
Thus, since the principal obligation under the contract is only P3,920.00 and the plaintiffs-appellees
have already paid an aggregate amount of P4,533.38, the courts should only order the payment of
the few remaining installments but not uphold the cancellation of the contract. Upon payment of the
balance of P671.67 without any interest thereon, the defendants-appellants must immediately
execute the final deed of sale in favor of the plaintiffs-appellees and execute the necessary transfer
documents as provided in paragraph 12 of the contract. The attorneys fees are justified.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision appealed from is
AFFIRMED with the modification that the plaintiffs-appellees should pay the balance of SIX
HUNDRED SEVENTY ONE PESOS AND SIXTY-SEVEN CENTAVOS (671.67) without any interests.
Costs against the defendants-appellants.
SO ORDERED.
[G.R. No. L-59266. February 29, 1988.]

SILVESTRE DIGNOS v COURT OF APPEALS
SYLLABUS
1. CIVIL LAW; CONTRACTS; DEED OF SALE; ABSOLUTE IN NATURE IS NO PROVISION THAT TITLE
IS RESERVED TO THE VENDOR OR UNILATERALLY GIVING THE VENDOR THE RIGHT TO RESCIND
CONTRACT. It has been held that a deed of sale is absolute in nature although denominated as a
"Deed of Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to
the effect that title to the property sold is reserved in the vendor until full payment of the purchase
price, nor is there a stipulation giving the vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period (Taguba v. Vda. de Leon, 132 SCRA 722; Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305). A careful examination of the
contract shows that there is no such stipulation reserving the title of the property on the vendors
nor does it give them the right to unilaterally rescind the contract upon non-payment of the balance
thereof within a fixed period.
2. ID.; ID.; SALE; ELEMENTS. On the contrary, all the elements of a valid contract of sale under
Article 1458 of the Civil Code, are present, such as: (1) consent or meeting of the minds; (2)
determinate subject matter; and (3) price certain in money or its equivalent.
3. ID.; ID.; OWNERSHIP IS TRANSFERRED BY DELIVERY OF THE THING SOLD. In addition, Article
1477 of the same Code provides that "The ownership of the thing sold shall be transferred to the
vendee upon actual or constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental
Shipping Co., Et. Al. (12 SCRA 276), this Court held that in the absence of stipulation to the
contrary, the ownership of the thing sold passes to the vendee upon actual or constructive delivery
thereof.
4. ID.; ID.; ID.; ID.; ACTUAL DELIVERY IN CASE AT BAR. While it may be conceded that there
was no constructive delivery of the land sold in the case at bar, as subject Deed of Sale is a private
instrument, it is beyond question that there was actual delivery thereof. As found by the trial court,
the Dignos spouses delivered the possession of the land in question to Jabil as early as March 27,
1965 so that the latter constructed thereon Sallys Beach Resort also known as Jabils Beach Resort
in March, 1965; Mactan White Beach Resort on January 15, 1966 and Bevirlyns Beach Resort on
September 1, 1965. Such facts were admitted by petitioner spouses (Decision, Civil Case No. 23-L;
Record on Appeal, p. 108).
5. ID.; ID.; ID.; SLIGHT DELAY IN THE PERFORMANCE OF OBLIGATION, NOT SUFFICIENT GROUND
FOR RESCISSION. It has been ruled, however, that "where time is not of the essence of the
agreement, a slight delay on the part of one party in the performance of his obligation is not a
sufficient ground for the rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering
that private respondent has only a balance of P4,000.00 and was delayed in payment only for one
month, equity and justice mandate as in the aforecited case that Jabil be given an additional period
within which to complete payment of the purchase price.
DECISION
BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of the: (1) Decision** of the 9th
Division, Court of Appeals dated July 31, 1981, affirming with modification the Decision*** dated
August 25, 1972 of the Court of First Instance of Cebu in Civil Case No. 23-L entitled Atilano G. Jabil
v. Silvestre T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of
Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated December 16, 1981, denying
defendant-appellants (Petitioners) motion for reconsideration, for lack of merit.
The undisputed facts as found by the Court of Appeals are as follows:
"The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the cadastral
survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners) Dignos spouses sold the
said parcel of land to plaintiff-appellant (respondent Atilano J. Jabil) for the sum of P28,000.00,
payable in two installments, with an assumption of indebtedness with the First Insular Bank of Cebu
in the sum of P12,000.00, which was paid and acknowledged by the vendors in the deed of sale
(Exh. C) executed in favor of plaintiff-appellant, and the next installment in the sum of P4,000.00 to
be paid on or before September 15, 1965.
"On November 25, 1965, the Dignos spouses sold the same land in favor of defendants spouses,
Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of P35,000.00.
A deed of absolute sale (Exh. J, also marked Exh. 3) was executed by the Dignos spouses in favor of
the Cabigas spouses, and which was registered in the Office of the Register of Deeds pursuant to the
provisions of Act No. 3344.
"As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price
of the land, and as plaintiff- appellant discovered the second sale made by defendants-appellants to
the Cabigas spouses, plaintiff-appellant brought the present suit." (Rollo, pp. 27-28)
After due trial, the Court of First Instance of Cebu rendered its Decision on August 25, 1972, the
decretal portion of which reads:
"WHEREFORE, the Court hereby declares the deed of sale executed on November 25, 1965 by
defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United States
of America, null and void ab initio, and the deed of sale executed by defendants Silvestre T. Dignos
and Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff Atilano G. Jabil is
hereby ordered to pay the sum, of Sixteen Thousand Pesos (P16,000.00) to the defendants-spouses
upon the execution of the Deed of Absolute Sale of Lot No. 3453, Opon Cadastre and when the
decision of this case becomes final and executory.
"The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and Jovita L.
de Cabigas, through their attorney-in-fact, Panfilo Jabalde, reasonable amount corresponding to the
expenses or costs of the hollow block fence, so far constructed.
"It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela Lumungsod de Dignos
should return to defendants-spouses Luciano Cabigas and Jovita L. de Cabigas the sum of
P35,000.00, as equity demands that nobody shall enrich himself at the expense of another.
"The writ of preliminary injunction issued on September 23, 1966, automatically becomes
permanent in virtue of this decision.
"With costs against the defendants."
From the foregoing, the plaintiff (respondent herein) and defendants-spouses (petitioners herein)
appealed to the Court of Appeals, which appeal was docketed therein as CA-G.R. No. 54393-R,
"Atilano G. Jabil v. Silvestre T. Dignos, Et. Al."
On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except as to the
portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a
fence upon the land in question. The dispositive portion of said decision of the Court of Appeals
reads:
"IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of the judgment as
pertains to plaintiff-appellant above indicated, the judgment appealed from is hereby AFFIRMED in
all other respects.
"With costs against defendants-appellants.
"SO ORDERED.
"Judgment MODIFIED."
A motion for reconsideration of said decision was filed by the defendants-appellants (petitioners)
Dignos spouses, but on December 16, 1981, a resolution was issued by the Court of Appeals
denying the motion for lack of merit.
Hence, this petition.

In the resolution of February 10, 1982, the Second Division of this Court denied the petition for lack
of merit. A motion for reconsideration of said resolution was filed on March 16, 1982. In the
resolution dated April 26, 1982, respondents were required to comment thereon, which comment
was filed on May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance with the
resolution of June 16, 1982 . On August 9, 1982, acting on the motion for reconsideration and on all
subsequent pleadings filed, this Court resolved to reconsider its resolution of February 10, 1982 and
to give due course to the instant petition. On September 6, 1982, respondents filed a rejoinder to
reply of petitioners which was noted on the resolution of September 20, 1982.
Petitioners raised the following assignment of errors:
I
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY, INCORRECTLY
INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE,
EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT
AND NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN
MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS ONE
OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT
OF PROMISE TO SELL.
II
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND OR IN
MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS
CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT
BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT.
III
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE APPLICABILITY OF
ARTICLES 2208, 2217 and 2219 OF THE NEW CIVIL CODE AND ESTABLISHED JURISPRUDENCE AS
TO WARRANT THE AWARD OF DAMAGES AND ATTORNEYS FEES TO PETITIONERS.
IV
PLAINTIFFS COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE
HAVING COME TO COURT WITH UNCLEAN HANDS.
V
BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH
MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION,
MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF THE QUESTIONED CONTRACT AND
THE LAW APPLICABLE THERETO.
The foregoing assignment of errors may be synthesized into two main issues, to wit:
I. Whether or not subject contract is a deed of absolute sale or a contract to sell.
II. Whether or not there was a valid rescission thereof.
There is no merit in this petition.
It is significant to note that this petition was denied by the Second Division of this Court in its
Resolution dated February 10, 1982 for lack of merit, but on motion for reconsideration and on the
basis of all subsequent pleadings filed, the petition was given due course.
I.
The contract in question (Exhibit C) is a Deed of Sale, with the following conditions:
"1. That Atilano G. Jabil is to pay the amount of Twelve Thousand Pesos (P12,000.00) Philippine
Currency as advance payment;
"2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan from
the First Insular Bank of Cebu;
"3. That Atilano G. Jabil is to pay the said spouses the balance of Four Thousand Pesos (P4,000.00)
on or before September 15, 1965.
"4. That the said spouses agreed to defend the said Atilano G. Jabil from other claims on the said
property;
"5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the
above-mentioned property upon the payment of the balance of Four Thousand Pesos." (Original
Record, pp. 10-11)
In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale
(Exhibit "C") is a mere contract to sell and not an absolute sale; that the same is subject to two (2)
positive suspensive conditions, namely: the payment of the balance of P4,000.00 on or before
September 15, 1965 and the immediate assumption of the mortgage of P12,000.00 with the First
Insular Bank of Cebu. It is further contended that in said contract, title or ownership over the
property was expressly reserved in the vendor, the Dignos spouses, until the suspensive condition of
full and punctual payment of the balance of the purchase price shall have been met. So that there is
no actual sale until full payment is made (Rollo, pp. 51-52).
In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there
is absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer
their ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private
instrument and the absence of a formal deed of conveyance is a very strong indication that the
parties did not intend "transfer of ownership and title but only a transfer after full payment" (Rollo,
p. 52). Moreover, petitioners anchored their contention on the very terms and conditions of the
contract, more particularly paragraph four which reads, "that said spouses has agreed to sell the
herein mentioned property to Atilano G. Jabil . . ." and condition number five which reads, "that the
spouses agrees to sign a final deed of absolute sale over the mentioned property upon the payment
of the balance of four thousand pesos."
Such contention is untenable.

By and large, the issues in this case have already been settled by this Court in analogous cases.
Thus, it has been held that a deed of sale is absolute in nature although denominated as a "Deed of
Conditional Sale" where nowhere in the contract in question is a proviso or stipulation to the effect
that title to the property sold is reserved in the vendor until full payment of the purchase price, nor
is there a stipulation giving the vendor the right to unilaterally rescind the contract the moment the
vendee fails to pay within a fixed period (Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage
Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305).
A careful examination of the contract shows that there is no such stipulation reserving the title of
the property on the vendors nor does it give them the right to unilaterally rescind the contract upon
non-payment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code, are
present, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3)
price certain in money or its equivalent. In addition, Article 1477 of the same Code provides that
"The ownership of the thing sold shall be transferred to the vendee upon actual or constructive
delivery thereof. As applied in the case of Froilan v. Pan Oriental Shipping Co., Et. Al. (12 SCRA
276), this Court held that in the absence of stipulation to the contrary, the ownership of the thing
sold passes to the vendee upon actual or constructive delivery thereof.
While it may be conceded that there was no constructive delivery of the land sold in the case at bar,
as subject Deed of Sale is a private instrument, it is beyond question that there was actual delivery
thereof. As found by the trial court, the Dignos spouses delivered the possession of the land in
question to Jabil as early as March 27, 1965 so that the latter constructed thereon Sallys Beach
Resort also known as Jabils Beach Resort in March, 1965; Mactan White Beach Resort on January
15, 1966 and Bevirlyns Beach Resort on September 1, 1965. Such facts were admitted by petitioner
spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108).
Moreover, the Court of Appeals in its resolution dated December 16, 1981 found that the acts of
petitioners, contemporaneous with the contract, clearly show that an absolute deed of sale was
intended by the parties and not a contract to sell.
Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they
were no longer owners of the same and the sale is null and void.
II.
Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was
already rescinded.
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the
case at bar, the contract of sale being absolute in nature is governed by Article 1592 of the Civil
Code. It is undisputed that petitioners never notified private respondents Jabil by notarial act that
they were rescinding the contract, and neither did they file a suit in court to rescind the sale. The
most that they were able to show is a letter of Cipriano Amistad who, claiming to be an emissary of
Jabil, informed the Dignos spouses not to go to the house of Jabil because the latter had no money
and further advised petitioners to sell the land in litigation to another party (Record on Appeal, p.
23). As correctly found by the Court of Appeals, there is no showing that Amistad was properly
authorized by Jabil to make such extra judicial rescission for the latter who, on the contrary,
vigorously denied having sent Amistad to tell petitioners that he was already waiving his rights to
the land in question. Under Article 1358 of the Civil Code, it is required that acts and contracts which
have for their object the extinguishment of real rights over immovable property must appear in a
public document.
Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on the
stipulated date of payment on September 15, 1965 and was able to raise the necessary amount only
by mid-October, 1965.
It has been ruled, however, that "where time is not of the essence of the agreement, a slight delay
on the part of one party in the performance of his obligation is not a sufficient ground for the
rescission of the agreement" (Taguba v. Vda. de Leon, supra). Considering that private respondent
has only a balance of P4,000.00 and was delayed in payment only for one month, equity and justice
mandate as in the aforecited case that Jabil be given an additional period within which to complete
payment of the purchase price.
WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed decision of the
Court of Appeals is Affirmed in toto.
SO ORDERED

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[G.R. No. L-46533. October 28, 1939.

[G.R. No. 107508. April 25, 1996.]

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WHEREFORE, judgment is hereby rendered as follows:

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1.) On plaintiffs complaint, defendant Philippine Bank of Communications is ordered to re-credit or

dated September 16, 1992 for lack of merit. 3

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(a) The date;

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SECTION 1. Form of negotiable instruments. An instrument to be negotiable must conform to the

(a) It must be in writing and signed by the maker or drawer;

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(1) Substituting the words "or bearer" for "order."

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(2) Writing "protest waived" above blank indorsements.

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blank, "July . . ."

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July 22, 1985

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award. The trial court merely ruled as follows:

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[G.R. No. 124045. May 21, 1998]

SPOUSES VIVENCIO BABASA and ELENA CANTOS BABASA, petitioners, vs.

We disagree. Although denominated Conditional Sale of Registered Lands, we hold, as did

[G.R. No. 83588. September 29, 1997.]

Further, the Court of Appeals, stated:

[G.R. No. 125347. June 19, 1997.]

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"1. Restructure Outstanding Balance Down to P50,000.00

The petition is without merit.

(1) Where he has paid at least two years of installments,

(2) Where he has paid less than two years in installments,

not entitled to a refund.

[G.R. No. 107992. October 8, 1997.]

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September 22, 1982 P20,000.00

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

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

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Article 1592 also provides:

Continuing, the Supreme Court declared:

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

[G.R. No. L-42283. March 18, 1985.]

5. ID.; ID.; ID.; RIGHT OF RESCISSION; ACCEPTANCE OF DELAYED PAYMENTS OF INSTALLMENTS

A motion for reconsideration filed by the defendants-appellants was denied.

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First Assignment of Error

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The defendants-appellants cannot rely on paragraph 9 of the contract which provides:

[G.R. No. L-59266. February 29, 1988.]

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Hence, this petition.

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Such contention is untenable.

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