PNB VS CA

Petitioner: PHILIPPINE NATIONAL BANK

Respondents: COURT OF APPEALS and LAPAZ KAW NGO,
FACTS:
 The Philippine National Bank owns a parcel of land located in Sta. Cruz, Manila. A portion
of that land is reserved for road widening while the remaining portion was intended to be
purchased by one Lapaz Ngo.
 Ngo made an offer to PNB and the latter accepted the offer but imposed certain
conditions before the sale could take place, among of which are that Lapaz should take
responsibility for ejecting the squatters occupying the land at her own expense, and upon
her failure to pay as deposit 20% of the purchase price (978,000 php ---20% of 5.3 M), her
100,000 php deposit shall be forfeited.
 Lapaz undertook the ejectment of the squatters but failed to pay the additional deposit of
20%, hence, the sale never materialized.
 However, when Lapaz requested for the revival of the same contract, the bank granted it
subject to almost the same conditions with the exception that the purchase price, and
consequently, the additional deposit required have been reduced and with the inclusion
that upon her failure to pay the additional deposit, the bank may sell the property to other
interested parties and that the previous deposit of 100,000php shall not be considered as
part of the purchase price for the reason that Lapaz failed to consummate the previously
approved sale.
 Lapaz then deposited 200,000php as down payment. The condition that Lapaz should
eject the unwanted occupants was again imposed by PNB but this time, Lapaz refused and
requested that this condition be stricken out in the contract since under the first contract,
she already took the liberty of ejecting squatters.
 She also held that she would only pay the additional deposit of 20% if PNB would get rid of
the occupants of the land, despite repeated demands from the bank for her to pay the
additional deposit.
 Instead of heeding to Lapaz’s request, the bank rescinded the contract and decided to sell
the property through a sealed bidding.
 Lapaz filed an action for specific performance with damages against PNB.

ISSUES: WON there was entered between the Philippine National Bank and Lapaz Kaw Ngo a
perfected contract of sale of prime real property located in the heart of downtown Manila

HELD: No. What was entered into between Mrs. Ngo and the bank is not one of a contract of
sale but that of a contract to sell. In a contract to sell, ownership is retained by the seller and is
not to pass to the buyer until full payment of the price or fulfillment of some other conditions. In
this case, although the buyer had fulfilled some of the conditions required, she failed to comply
with the other conditions. The court also finds that the letter-agreements between the parties
reveal their intention of making the sale dependent on Lapaz Ngo’s compliance with certain other
conditions. Moreover, no less revealing is the fact that the letter-agreements are not deeds of
sale, there under no title having been passed from the bank to Mrs. Ngo.
 It is clear that Mrs. Ngo and the bank were negotiating for terms mutually acceptable to
them. Unfortunately, a mutually acceptable set of terms was not reached between them and the
bank exercised its right under the second letter-agreement to cancel or rescind the agreement
entered into between them.

Petitioners invoke Article 1544 of the Civil Code which reads:

Article 1544. If the same things should have been sold to different vendees,
the ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in possession; and in the absence thereof, to the person
who presents the oldest title, provided there is good faith. (Emphasis ours)
The above provision does not apply to the instant case considering that the transaction
between petitioners and spouses Belmes is a mere contract to sell, not a contract of sale.
Along the same vein, in Sps. Serrano v. Caguiat, G.R. No. 139173, February 26, 2007, there
was a contract where a partial payment was made. The balance was to be paid on an agreed date
and after payment, the owners will execute the final deed of sale.
The SC held it be a contract to sell.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force
of the vendor’s obligation to transfer title is subordinate to the happening of a future and
uncertain event, so that if the suspensive condition does take place, the parties would stand as if
the conditional obligation had never existed. The suspensive condition is commonly the full
payment of the purchase price. (Philippine National Bank v. Court of Appeals and Lapaz Kaw Ngo,
G.R. No. 119580, September 26, 1996, citing Rose Packing Co., Inc. v. Court of Appeals, 167 SCRA
309, 318 (1988) and Lim v. Court of Appeals, 182 SCRA 564, 670 (1990)).
The differences between a contract to sell and a contract of sale are well-settled in
jurisprudence. As early as 1951, in Sing Yee v. Santos, 47 O.G. 6372 (1951), it was held:
“x x x [a] distinction must be made between a contract of sale in which title
passes to the buyer upon delivery of the thing sold and a contract to sell x x x
where by agreement the ownership is reserved in the seller and is not to pass until
the full payment, of the purchase price is made. In the first case, non-payment of
the price is a positive suspensive condition. Being contraries, their effect in law
cannot be identical. In the first case, the vendor has lost and cannot recover the
ownership of the land sold until and unless the contract of sale itself is resolved
and set aside. In the second case, however, the title remains in the vendor if the
vendee does not comply with the condition precedent of making payment at the
time specified in the contract.
In other words, in a contract to sell, ownership is retained by the seller and is not to pass
to the buyer until full payment of the price.(Jacinto v. Kaparaz, 209 SCRA 246 (1992).
In this case, the “Receipt for Partial Payment” shows that the true agreement between the
parties is a contract to sell.
 First, ownership over the property was retained by sellers and was not to pass to buyer
until full payment of the purchase price. Thus, owners need not push through with the sale
should buyer fail to remit the balance of the purchase price before the deadline on March 23,
1990. In effect, petitioners have the right to rescind unilaterally the contract the moment
respondent fails to pay within the fixed period. (Chua v. CA, G.R. No. 119255, April 9, 2003, 401
SCRA 54).
Second, the agreement between the parties was not embodied in a deed of sale. The
absence of a formal deed of conveyance is a strong indication that the parties did not intend
immediate transfer of ownership, but only a transfer after full payment of the purchase price.
Third, seller/owners retained possession of the certificate of title of the lot. This is an
additional indication that the agreement did not transfer to the buyer, either by actual or
constructive delivery, ownership of the property.
It is true that Article 1482 of the Civil Code provides that “Whenever earnest money is
given in a contract of sale, it shall be considered as part of the price and proof of the perfection of
the contract.” However, this article speaks of earnest money given in a contract of sale. In this
case, the earnest money was given in a contract to sell. The earnest money forms part of the
consideration only if the sale is consummated upon full payment of the purchase price. Now,
since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of
sale, does not apply.