contracts to sell are not governed by our law on sales but by the Civil Code provisions on

conditional obligations. Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal
obligations does not apply to contracts to sell. As this court explained in Ong v. Court of Appeals, 301
SCRA 387 (1999), failure to fully pay the purchase price in contracts to sell is not the breach of contract
under Article 1191. Failure to fully pay the purchase price is “merely an event which prevents the
[seller’s] obligation to convey title from acquiring binding force.” This is because “there can be no
rescission of an obligation that is still nonexistent, the suspensive condition not having [happened].”

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.

Hence, We hold that the 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.

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 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.

Well settled is the rule, as held in previous jurisprudence [Torralba v. De los Angeles, 96 SCRA 69, Luzon
Brokerage Co., Inc. v. Maritime Building Co., 43 SCRA 93 and 86 SCRA 305; Lopez v. Commissioner of
Customs, 37 SCRA 327; U.P. v. De los Angeles, 35 SCRA 102; Ponce Enrile v. CA, 29 SCRA 504; Froilan v.
Pan Oriental Shipping Co., 12 SCRA 276; Taylor v. Uy Tieng Piao, 43 Phil. 873], that judicial action for the
rescission of a contract is not necessary where the contract provides that it may be cancelled for
violation of any of its terms and conditions. However, even in the cited cases, there was at least a
written notice sent to the defaulter informing him of the rescission. As stressed in University of the
Philippines v. Walfrido de los Angeles [35 SCRA 102] the act of a party in treating a contract as cancelled
should be made known to the other. . . . .

Consequently, when petitioner failed to abide by its obligation to pay the installments in
accordance with the contracts to sell, provision No. 9 automatically took effect. That private respondent
failed to observe Section 4 of Republic Act No. 6552, the “Realty Installment Buyer Protection Act,” is of
no moment. That section provides that “(I)f 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.” Private
respondent’s cancellation of the agreements without a duly notarized demand for rescission did not
mean that it violated said provision of law. Republic Act No. 6552 was approved on August 26, 1972,
long after provision No. 9 of the contracts to sell had become automatically operational. As with P.D.
Nos. 957 and 1344, Republic Act No. 6552 does not expressly provide for its retroactive application and,
therefore, it could not have encompassed the cancellation of the contracts to sell in this case.

At this juncture, it is apropos to stress that the 1961 agreements are contracts to sell and
notcontracts of sale. The distinction between these contracts is graphically depicted in Adelfa Properties,
Inc. v. Court of Appeals,as follows: “x x x. The distinction between the two is important for in a contract
of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell,
by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the
price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the
contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until the
full payment of the price, such payment being a positive suspensive condition and failure of which is not
a breach but an event that prevents the obligation of the vendor to convey title from becoming
effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the
deed that title to the property sold is reserved in the seller until the full payment of the price, nor one
giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within
a fixed period.”