Sales Cases

DE LOS REYES, ALFONSO JEZIEL M.
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G.R. No.171692 June 3, 2013
SPOUSES DELFIN O. TUMIBAY and AURORA T. TUMIBAY-deceased; GRACE

JULIE ANN TUMIBAY MANUEL, legal representative, Petitioners,
vs.
SPOUSES MELVIN A. LOPEZ and ROWENA GAY T. VISITACION
LOPEZ, Respondents.
DECISION
DEL CASTILLO, J.:
In a contract to sell, the seller retains ownership of the property until the buyer has paid
the price in full. A -buyer who covertly usurps the seller's ownership of the property prior
to the full payment of the price is in breach of the contract and the seller is entitled to
rescission because the breach is substantial and fundamental as it defeats the very object
of the parties in entering into the contract to sell.
The Petition for Review on Certiorari1 assails the May 19, 2005 Decision2 of the Court of
Appeals (CA) in CA-G.R. CV No. 79029, which reversed the January 6, 2003 Decision3 of
the Regional Trial Court (RTC) of Malaybalay City, Branch 9 in Civil Case No. 2759-98,
and the February 10, 2006 Resolution4 denying petitioner-spouses Delfin O. Tumibay and
Aurora5 T. Tumibay’s Motion for Reconsideration.6
Factual Antecedents
On March 23, 1998, petitioners filed a Complaint7 for declaration of nullity ab initio of
sale, and recovery of ownership and possession of land with the RTC of Malaybalay City.
The case was raffled to Branch 9 and docketed as Civil Case No. 2759-98.
In their Complaint, petitioners alleged that they are the owners of a parcel of land located
in Sumpong, Malaybalay, Bukidnon covered by Transfer Certificate of Title (TCT) No. T-
253348 (subject land) in the name of petitioner Aurora; that they are natural born Filipino
citizens but petitioner Delfin acquired American citizenship while his wife, petitioner
Aurora, remained a Filipino citizen; that petitioner Aurora is the sister of Reynalda
Visitacion (Reynalda);9that on July 23, 1997, Reynalda sold the subject land to her
daughter, Rowena Gay T. Visitacion Lopez (respondent Rowena), through a deed of
sale10 for an unconscionable amount of ₱95,000.00 although said property had a market
value of more than ₱2,000,000.00; that the subject sale was done without the knowledge
and consent of petitioners; and that, for these fraudulent acts, respondents should be
held liable for damages. Petitioners prayed that (1) the deed of sale dated July 23, 1997
be declared void ab initio, (2) the subject land be reconveyed to petitioners, and (3)
respondents be ordered to pay damages.
On May 19, 1998, respondents filed their Answer11 with counterclaim. Respondents
averred that on December 12, 1990, petitioners executed a special power of attorney
(SPA)12 in favor of Reynalda granting the latter the power to offer for sale the subject
land; that sometime in 1994, respondent Rowena and petitioners agreed that the former
would buy the subject land for the price of ₱800,000.00 to be paid on installment; that
on January 25, 1995, respondent Rowena paid in cash to petitioners the sum of
$1,000.00; that from 1995 to 1997, respondent Rowena paid the monthly installments
thereon as evidenced by money orders; that, in furtherance of the agreement, a deed of
sale was executed and the corresponding title was issued in favor of respondent Rowena;
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that the subject sale was done with the knowledge and consent of the petitioners as
evidenced by the receipt of payment by petitioners; and that petitioners should be held
liable for damages for filing the subject Complaint in bad faith. Respondents prayed that
the Complaint be dismissed and that petitioners be ordered to pay damages.
On May 25, 1998, petitioners filed an Answer to Counterclaim.13 Petitioners admitted the
existence of the SPA but claimed that Reynalda violated the terms thereof when she
(Reynalda) sold the subject land without seeking the approval of petitioners as to the
selling price. Petitioners also claimed that the monthly payments from 1995 to 1997 were
mere deposits as requested by respondent Rowena so that she (Rowena) would not
spend the same pending their agreement as to the purchase price; and that Reynalda,
acting with evident bad faith, executed the deed of sale in her favor but placed it in the
name of her daughter, respondent Rowena, which sale is null and void because an agent
cannot purchase for herself the property subject of the agency.
Ruling of the Regional Trial Court
On January 6, 2003, the RTC rendered a Decision in favor of petitioners, viz:
WHEREFORE, Decision is hereby rendered, as follows;
(1) Ordering the petitioners, jointly and severally, to return the said amount of
$12,000.00 at the present rate of exchange less the expenses to be incurred for
the transfer of the property in question under the name of the petitioners;
(2) Ordering the Register of Deeds of Bukidnon to cancel TCT No. T-62674 in the
name of the respondent Rowena Gay T. Visitacion-Lopez and to issue a new TCT
in the name of the petitioners;
(3) Ordering respondents, spouses Melvin and Rowena Gay Lopez, to execute a
Deed of Reconveyance in favor of the petitioners, or if said respondents should
refuse to do so or are unable to do so, the Clerk of Court of the RTC and ex-officio
Provincial Sheriff to execute such Deed of Reconveyance;
(4) No x x x damages are awarded. The respective parties must bear their own
expenses except that respondents, jointly and severally, must pay the costs of this
suit.
SO ORDERED.14
In ruling in favor of petitioners, the trial court held: (1) the SPA merely authorized
Reynalda to offer for sale the subject land for a price subject to the approval of the
petitioners; (2) Reynalda violated the terms of the SPA when she sold the subject land to
her daughter, respondent Rowena, without first seeking the approval of petitioners as to
the selling price thereof; (3) the SPA does not sufficiently confer on Reynalda the
authority to sell the subject land; (4) Reynalda, through fraud and with bad faith,
connived with her daughter, respondent Rowena, to sell the subject land to the latter;
and, (5) the sale contravenes Article 1491, paragraph 2, of the Civil Code which prohibits
the agent from acquiring the property subject of the agency unless the consent of the
principal has been given. The trial court held that Reynalda, as agent, acted outside the
scope of her authority under the SPA. Thus, the sale is null and void and the subject land
should be reconveyed to petitioners. The trial court further ruled that petitioners are not
entirely free from liability because they received from respondent Rowena deposits
totaling $12,000.00. Under the principle of unjust enrichment, petitioners should, thus,
be ordered to reimburse the same without interest.
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Petitioners filed a partial motion for reconsideration15 praying for the award of attorney’s
fees. In its January 14, 2003 Order16 denying the aforesaid motion, the trial court clarified
that the reimbursement of $12,000.00 in favor of respondents was without interest
because there was also no award of rental income in favor of petitioners. Both parties
are deemed mutually compensated and must bear their own expenses.
From this Decision, respondents appealed to the CA.
Ruling of the Court of Appeals
On May 19, 2005, the CA rendered the assailed Decision reversing the judgment of the
trial court, viz:
WHEREFORE, premises considered, the appealed Decision of the Court a quo is hereby
REVERSED and SET ASIDE. Accordingly, title to the subject property shall remain in the
name of the Appellant ROWENA GAY VISITACION-LOPEZ. The latter and her spouse
MELVIN LOPEZ are directed to pay the balance of Four Hundred Eighty Eight Thousand
Pesos (₱488,000.00) to the petitioners effective within 30 days from receipt of this
Decision and in case of delay, to pay the legal rate of interests [sic] at 12% per annum
until fully paid.
SO ORDERED.17
In reversing the trial court’s Decision, the appellate court ruled that: (1) the SPA
sufficiently conferred on Reynalda the authority to sell the subject land; (2) although
there is no direct evidence of petitioners’ approval of the selling price of the subject land,
petitioner Aurora’s acts of receiving two money orders and several dollar checks from
respondent Rowena over the span of three years amount to the ratification of any defect
in the authority of Reynalda under the SPA; (3) petitioners are estopped from repudiating
the sale after they had received the deposits totaling $12,000.00; (4) the sale is not
contrary to public policy because there is no rule or law which prohibits the sale of
property subject of the agency between the agent and his children unless it would be in
fraud of creditors which is not the case here; (5) petitioners impliedly ratified the subject
SPA and contract of sale as well as its effects; and, (6) the selling price of ₱800,000.00
for the subject land is deemed reasonable based on the testimony of respondent Rowena
as this was the selling price agreed upon by her and petitioner Delfin. Considering that
respondent Rowena proved that she remitted a total of $12,000.00 to petitioners and
pegging the exchange rate at that time at ₱26.00 per dollar, the appellate court ruled
that ₱312,000.00 of the ₱800,000.00 selling price was already received by petitioners.
Thus, respondents are only liable for the balance of ₱488,000.00.
Hence, this Petition.
Issues
Petitioners raise the following issues for our resolution:
I. Whether the CA erred in resolving the issue in the case at bar.
II. Whether under the SPA Reynalda had the power to sell the subject land.
III. Whether the actuations of petitioner Aurora in receiving money from

respondent Rowena amounted to the ratification of the breach in the exercise of
the SPA.
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IV. Whether the CA erred in not declaring the sale void on grounds of public policy.
V. Whether the CA erred in adopting the testimony of respondent Rowena as to

the ₱800,000.00 selling price of the subject land.18
Petitioners’ Arguments
Petitioners argue that the appellate court went beyond the issues of this case when it
ruled that there was a contract of sale between respondent Rowena and petitioner Aurora
because the issues before the trial court were limited to the validity of the deed of sale
dated July 23, 1997 for being executed by Reynalda beyond the scope of her authority
under the SPA. Further, the existence of the alleged contract of sale was not proven
because the parties failed to agree on the purchase price as stated by petitioner Aurora
in her testimony. The money, in cash and checks, given to petitioners from 1995 to 1997
were mere deposits until the parties could agree to the purchase price. Moreover,
Reynalda acted beyond the scope of her authority under the SPA because she was merely
authorized to look for prospective buyers of the subject land. Even assuming that she
had the power to sell the subject land under the SPA, she did not secure the approval as
to the price from petitioners before executing the subject deed of sale, hence, the sale is
null and void. Petitioners also contend that there was no ratification of the subject sale
through petitioners’ acceptance of the monthly checks from respondent Rowena because
the sale occurred subsequent to the receipt of the aforesaid checks. They further claim
that the sale was void because it was not only simulated but violates Article 1491 of the
Civil Code which prohibits the agent from acquiring the property subject of the agency.
Here, Reynalda merely used her daughter, respondent Rowena, as a dummy to acquire
the subject land. Finally, petitioners question the determination by the appellate court
that the fair market value of the subject land is ₱800,000.00 for lack of any factual and
legal basis.
Respondents’ Arguments
Respondents counter that the issue as to whether there was a perfected contract of sale
between petitioners and respondent Rowena is inextricably related to the issue of
whether the deed of sale dated July 23, 1997 is valid, hence, the appellate court properly
ruled on the former. Furthermore, they reiterate the findings of the appellate court that
the receipt of monthly installments constitutes an implied ratification of any defect in the
SPA and deed of sale dated July 23, 1997. They emphasize that petitioners received a
total of $12,000.00 as consideration for the subject land.
Our Ruling
The Petition is meritorious.
As a general rule, we do not disturb the factual findings of the appellate court. However,
this case falls under one of the recognized exceptions thereto because the factual findings
of the trial court and appellate court are conflicting.19Our review of the records leads us
to conclude that the following are the relevant factual antecedents of this case.
Petitioners were the owners of the subject land covered by TCT No. T-25334 in the name
of petitioner Aurora. On December 12, 1990, petitioners, as principals and sellers,
executed an SPA in favor of Reynalda, as agent, to, among others, offer for sale the
subject land provided that the purchase price thereof should be approved by the former.
Sometime in 1994, petitioners and respondent Rowena agreed to enter into an oral
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contract to sell over the subject land for the price of ₱800,000.00 to be paid in 10 years
through monthly installments.
On January 25, 1995, respondent Rowena paid the first monthly installment of $1,000.00
to petitioner Aurora which was followed by 22 intermittent monthly installments of
$500.00 spanning almost three years. Sometime in 1997, after having paid a total of
$10,000.00, respondent Rowena called her mother, Reynalda, claiming that she had
already bought the subject land from petitioners. Using the aforesaid SPA, Reynalda then
transferred the title to the subject land in respondent Rowena’s name through a deed of
sale dated July 23, 1997 without the knowledge and consent of petitioners. In the
aforesaid deed, Reynalda appeared and signed as attorney-in-fact of petitioner Aurora,
as seller, while respondent Rowena appeared as buyer. After which, a new title, i.e., TCT
No. 62674,20 to thesubject land was issued in the name of respondent Rowena.
We explain these factual findings and the consequences thereof below.
Petitioners and respondent
Rowena entered into a contract to sell over the subject land.
Petitioners deny that they agreed to sell the subject land to respondent Rowena for the
price of ₱800,000.00 payable in 10 years through monthly installments. They claim that
the payments received from respondent Rowena were for safekeeping purposes only
pending the final agreement as to the purchase price of the subject land.
We are inclined to give credence to the claim of the respondents for the following reasons.
First, the payment of monthly installments was duly established by the evidence on record
consisting of money orders21 and checks22 payable to petitioner Aurora. Petitioners do
not deny that they received 23 monthly installments over the span of almost three years.
As of November 30, 1997 (i.e., the date of the last monthly installment), the payments
already totaled $12,000.00, to wit:
Date Amount Paid

(in dollars)
January 25, 1995 1,000.0023
February 21, 1995 500.00
March 27, 1995 500.00
April 25, 1995 500.00
June 1, 1995 500.00
June 30, 1995 500.00
July 31, 1995 500.00
May 29, 1996 500.00
June 30, 1996 500.00
July 31, 1996 500.00
August 31, 1996 500.00

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September 30, 1996 500.00
October 29, 1996 500.00
December 31, 1996 500.00
January 31, 1997 500.00
February 28, 1997 500.00
March 31, 1997 500.00
May 31, 1997 500.00
July 19, 1997 500.00
August 31, 1997 500.00
September 30, 1997 500.00
October 31, 1997 500.00
November 30, 1997 500.00
Total 12,000.00
Second, in her testimony, petitioner Aurora claimed that the $1,000.00 in cash that she
received from respondent Rowena on January 25, 1995 was a mere deposit until the
purchase price of the subject land would have been finally agreed upon by both
parties.24 However, petitioner Aurora failed to explain why, after receiving this initial sum
of $1,000.00, she thereafter accepted from respondent Rowena 22 intermittent monthly
installments in the amount of $500.00. No attempt was made on the part of petitioners
to return these amounts and it is fair to assume that petitioners benefited therefrom.
Third, it strains credulity that respondent Rowena would make such monthly installments
for a substantial amount of money and for a long period of time had there been no
agreement between the parties as to the purchase price of the subject land.
We are, thus, inclined to rule that there was, indeed, a contractual agreement between
the parties for the purchase of the subject land and that this agreement partook of an
oral contract to sell for the sum of ₱800,000.00. A contract to sell has been defined as "a
bilateral contract whereby the prospective seller, while expressly reserving the ownership
of the subject property despite delivery thereof to the prospective buyer, binds himself
to sell the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price."25 In a contract to sell,
"ownership is retained by the seller and is not to pass until the full payment of the price
x x x."26 It is "commonly entered into so as to protect the seller against a buyer who
intends to buy the property in installments by withholding ownership over the property
until the buyer effects full payment therefor."27
In the case at bar, while there was no written agreement evincing the intention of the
parties to enter into a contract to sell, its existence and partial execution were sufficiently
established by, and may be reasonably inferred from the actuations of the parties, to wit:
(1) the title to the subject land was not immediately transferred, through a formal deed
of conveyance, in the name of respondent Rowena prior to or at the time of the first
payment of $1,000.00 by respondent Rowena to petitioner Aurora on January 25,
1995;28 (2) after this initial payment, petitioners received 22 intermittent monthly
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installments from respondent Rowena in the sum of $500.00; and, (3) in her testimony,
respondent Rowena admitted that she had the title to the subject land transferred in her
name only later on or on July 23, 1997, through a deed of sale, because she believed
that she had substantially paid the purchase price thereof,29 and that she was entitled
thereto as a form of security for the installments she had already paid.30
Respondent Rowena was in breach of the contract to sell.
Although we rule that there was a contract to sell over the subject land between
petitioners and respondent Rowena, we find that respondent Rowena was in breach
thereof because, at the time the aforesaid deed of sale was executed on July 23, 1997,
the full price of the subject land was yet to be paid. In arriving at this conclusion, we take
judicial notice31 of the prevailing exchange rates at the time, as published by the Bangko
Sentral ng Pilipinas,32 and multiply the same with the monthly installments respondent
Rowena paid to petitioners, as supported by the evidence on record, to wit:
Amount Paid Exchange Rate

Date Peso Equivalent
(in dollars) (peso per dollar)
January 25, 1995 1,000.00 24.7700 24,770.00
February 21, 1995 500.00 25.1140 12,557.00
March 27, 1995 500.00 25.9670 12,983.50
April 25, 1995 500.00 26.0270 13,013.50
June 1, 1995 500.00 25.8040 12,902.00
June 30, 1995 500.00 25.5750 12,787.50
July 31, 1995 500.00 25.5850 12,792.50
May 29, 1996 500.00 26.1880 13,094.00
June 30, 1996 500.00 26.203033 13,101.50
July 31, 1996 500.00 26.2280 13,114.00
August 31, 1996 500.00 26.202034 13,101.00
September 30, 1996 500.00 26.2570 13,128.50
October 29, 1996 500.00 26.2830 13,141.50
December 31, 1996 500.00 26.288035 13,144.00
January 31, 1997 500.00 26.3440 13,172.00
February 28, 1997 500.00 26.3330 13,166.50
March 31, 1997 500.00 26.3670 13,183.50
May 31, 1997 500.00 26.374036 13,187.00
July 19, 1997 500.00 28.574037 14,287.00
Total 260,626.50
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Thus, as of July 19, 1997 or prior to the execution of the deed of sale dated July 23,
1997, the total amount of monthly installments paid by respondent Rowena to petitioners
was only ₱260,626.50 or 32.58%38 of the ₱800,000.00 purchase price. That the full price
was yet to be paid at the time of the subject transfer of title was admitted by respondent
Rowena on cross-examination, viz:
ATTY. OKIT:
Q - Let us make this clear. You now admit that x x x you agreed to buy the lot at eight
hundred thousand, to which the Plaintiff x x x agreed. Now based on the dollar rate, your
total payment did not reach x x x eight hundred thousand pesos? Is that correct? [sic]
A - Yes.
Q - Since notwithstanding the fact this eight hundred thousand which you have agreed
is not fully paid why did your mother finalize the deed of sale?
A - My mother is equipped with the SPA to transfer the lot to me only for security purposes
but actually there is no full payment.39 (Emphasis supplied)
Respondent Rowena tried to justify the premature transfer of title by stating that she had
substantially paid the full amount of the purchase price and that this was necessary as a
security for the installments she had already paid. However, her own evidence clearly
showed that she had, by that time, paid only 32.58% thereof. Neither can we accept her
justification that the premature transfer of title was necessary as a security for the
installments she had already paid absent proof that petitioners agreed to this new
arrangement. Verily, she failed to prove that petitioners agreed to amend or novate the
contract to sell in order to allow her to acquire title over the subject land even if she had
not paid the price in full.
Significantly, the evidence on record indicates that the premature transfer of title in the
name of respondent Rowena was done without the knowledge and consent of petitioners.
In particular, respondent Rowena’s narration of the events leading to the transfer of title
showed that she and her mother, Reynalda, never sought the consent of petitioners prior
to said transfer of title, viz:
COURT:
Q- Why is this check (in the amount of $1,000.00) in your possession now?
A- This is the check I paid to her (referring to petitioner Aurora) which is in cash. [sic]
ATTY. BARROSO:
Q - Now did you continue x x x paying the $500.00 dollar to him (referring to petitioner
Delfin)?
A - Yes.
xxxx
Q - Now having stated substantially paid, what did you do with the land subject of this
case? [sic]
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A - I called my mother who has equipped with SPA to my Uncle that I have already bought
the land. [sic]
Q - And you called your mother?
A - Yes.
xxxx
Q - Then what transpired next?
A - After two years my mother called me if how much I have paid the land and being
equipped with SPA, so she transferred the land to me. [sic]40 (Emphases supplied)
Respondent Rowena’s reliance on the SPA as the authority or consent to effect the
premature transfer of title in her name is plainly misplaced. The terms of the SPA are
clear. It merely authorized Reynalda to sell the subject land at a price approved by
petitioners. The SPA could not have amended or novated the contract to sell to allow
respondent Rowena to acquire the title over the subject land despite non-payment of the
price in full for the reason that the SPA was executed four years prior to the contract to
sell. In fine, the tenor of her testimony indicates that respondent Rowena made a
unilateral determination that she had substantially paid the purchase price and that she
is entitled to the transfer of title as a form of security for the installments she had already
paid, reasons, we previously noted, as unjustified.
The contract to sell is rescissible.
Article 1191 of the Civil Code provides:
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 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. x x x
As a general rule, "rescission will not be permitted for a slight or casual breach of the
contract, but only for such breaches as are substantial and fundamental as to defeat the
object of the parties in making the agreement."41
In the case at bar, we find that respondent Rowena’s act of transferring the title to the
subject land in her name, without the knowledge and consent of petitioners and despite
non-payment of the full price thereof, constitutes a substantial and fundamental breach
of the contract to sell. As previously noted, the main object or purpose of a seller in
entering into a contract to sell is to protect himself against a buyer who intends to buy
the property in installments by withholding ownership over the property until the buyer
effects full payment therefor.42 As a result, the seller’s obligation to convey and the
buyer’s right toconveyance of the property arise only upon full payment of the price.
Thus, a buyer who willfully contravenes this fundamental object or purpose of the
contract, by covertly transferring the ownership of the property in his name at a time
when the full purchase price has yet to be paid, commits a substantial and fundamental
breach which entitles the seller to rescission of the contract.43
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Indeed, it would be highly iniquitous for us to rule that petitioners, as sellers, should
continue with the contract to sell even after the discovery of the aforesaid breach
committed by respondent Rowena, as buyer, considering that these acts betrayed in no
small measure the trust reposed by petitioners in her and her mother, Reynalda. Put
simply, respondent Rowena took advantage of the SPA, in the name of her mother and
executed four years prior to the contract to sell, to effect the transfer of title to the subject
land in her (Rowena’s) name without the knowledge and consent of petitioners and
despite non-payment of the full price.
We, thus, rule that petitioners are entitled to the rescission of the subject contract to sell.
Petitioners are entitled to moral damages and attorney’s fees while respondent Rowena
is entitled to the reimbursement of the monthly installments with legal interest.
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.
Fraud or malice (dolo) has been defined as a "conscious and intentional design to evade
the normal fulfillment of existing obligations" and is, thus, incompatible with good
faith.44 In the case at bar, we find that respondent Rowena was guilty of fraud in the
performance of her obligation under the subject contract to sell because (1) she knew
that she had not yet paid the full price (having paid only 32.58% thereof) when she had
the title to the subject land transferred to her name, and (2) she orchestrated the
aforesaid transfer of title without the knowledge and consent of petitioners. Her own
testimony and documentary evidence established this fact. Where fraud and bad faith
have been established, the award of moral damages is proper.45 Further, under Article
2208(2)46 of the Civil Code, the award of attorney’s fees is proper where the plaintiff is
compelled to litigate with third persons or incur expenses to protect his interest because
of the defendant’s act or omission. Here, respondent Rowena’s aforesaid acts caused
petitioners to incur expenses in litigating their just claims. We, thus, find respondent
Rowena liable for moral damages and attorney’s fees which we fix at ₱100,000.00 and
₱50,000.00, respectively.47
Anent the monthly installments respondent Rowena paid to petitioners, our review of the
records leads us to conclude that respondent Rowena is entitled to the reimbursement of
the same with legal interest. Although respondent Rowena was clearly unjustified in
prematurely and covertly transferring the title to the subject land in her name, we deplore
petitioners’ lack of candor in prosecuting their claims before the trial court and intent to
evade recognition of the monthly installments that they received from respondent
Rowena. The records indicate that, in their Complaint, petitioners made no mention of
the fact that they had entered into a contract to sell with respondent Rowena and that
they had received 23 monthly installments from the latter. The Complaint merely alleged
that the subject sale was done without the knowledge and consent of petitioners. It was
only later on, when respondent Rowena presented the proof of payment of the monthly
installments in her Answer to the Complaint, that this was brought to light to which
petitioners readily admitted. Further, no evidence was presented to prove that respondent
Rowena occupied the subject land or benefited from the use thereof upon
commencement of the contract to sell which would have justified the setting off of rental
income against the monthly installments paid by respondent Rowena to petitioners.
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In view of the foregoing, the sums paid by respondent Rowena as monthly installments
to petitioners should, thus, be returned to her with legal interest. The total amount to be
reimbursed by petitioners to respondent Rowena is computed as follows:
Amount Paid Exchange Rate

Date Peso Equivalent
(in dollars) (peso per dollar)
January 25, 1995 1,000.00 24.7700 24,770.00
February 21, 1995 500.00 25.1140 12,557.00
March 27, 1995 500.00 25.9670 12,983.50
April 25, 1995 500.00 26.0270 13,013.50
June 1, 1995 500.00 25.8040 12,902.00
June 30, 1995 500.00 25.5750 12,787.50
July 31, 1995 500.00 25.5850 12,792.50
May 29, 1996 500.00 26.1880 13,094.00
June 30, 1996 500.00 26.2030 13,101.50
July 31, 1996 500.00 26.2280 13,114.00
August 31, 1996 500.00 26.2020 13,101.00
September 30, 1996 500.00 26.2570 13,128.50
October 29, 1996 500.00 26.2830 13,141.50
December 31, 1996 500.00 26.2880 13,144.00
January 31, 1997 500.00 26.3440 13,172.00
February 28, 1997 500.00 26.3330 13,166.50
March 31, 1997 500.00 26.3670 13,183.50
May 31, 1997 500.00 26.3740 13,187.00
July 19, 1997 500.00 28.5740 14,287.00
August 31, 1997 500.00 30.1650 15,082.50
September 30, 1997 500.00 33.8730 16,936.50
October 31, 1997 500.00 34.9380 17,469.00
November 30, 1997 500.00 34.6550 17,327.50
Total 327,442.00
Since this amount is neither a loan nor forbearance of money, we set the interest rate at
6% per annum computed from the time of the filing of the Answer48 to the Complaint on
May 19, 199849 until finality of judgement and thereafter at 12% per annum until fully
paid in accordance with our ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals.50 Petitioners are, thus, ordered to pay respondent Rowena the sum of
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₱327,442.00 with an interest of 6% per annum computed from May 19, 1998 until finality
of judgment and thereafter of 12% per annum until fully paid.
The sale of the subject land, effected through the deed of sale dated July 23, 1997, is
void.
Having ruled that respondent Rowena was in substantial breach of the contract to sell
because she had the title to the subject land transferred in her name without the
knowledge and consent of petitioners and despite lack of full payment of the purchase
price, we now rule on the validity of the deed of sale dated July 23, 1997 which was used
to effect the aforesaid transfer of ownership.
It will be recalled that on December 12, 1990, petitioners, as principals and sellers,
executed an SPA in favor of Reynalda, as agent. The SPA stated in part:
That we spouses, AURORA TUMIBAY and DELFIN TUMIBAY, of legal age and presently
residing at 36 Armstrong Drive, Clark, New Jersey, 07066 name, constitute and appoint
REYNALDA VISITACION, widow, of legal age and residing at Don Carlos, Bukidnon,
Philippines, to be our true and lawful Attorney-in-fact, for us and in our name, place and
stead and for our use and benefit to do and perform the following acts and deed:
To administer our real property located in the Province of Bikidnon, Town of Malaybalay,
Barrio of Bantaunon, Towns of Maramag, Paradise, Maramag and Barrio of Kiburiao, Town
of Quezon.
To offer for sale said properties, the selling price of which will be subject to our approval.
xxxx
To sign all papers and documents on our behalf in a contract of sale x x x.51.
As can be seen, the SPA gave Reynalda the power and duty to, among others, (1) offer
for sale the subject land to prospective buyers, (2) seek the approval of petitioners as to
the selling price thereof, and (3) sign the contract of sale on behalf of petitioners upon
locating a buyer willing and able to purchase the subject land at the price approved by
petitioners. Although the SPA was executed four years prior to the contract to sell, there
would have been no obstacle to its use by Reynalda had the ensuing sale been
consummated according to its terms. However, as previously discussed, when Reynalda,
as attorney-in-fact of petitioner Aurora, signed the subject deed of sale dated July 23,
1997, the agreed price of ₱800,000.00 (which may be treated as the approved price) was
not yet fully paid because respondent Rowena at the time had paid only
₱260,262.50.52 Reynalda, therefore, acted beyond the scope of her authority because she
signed the subject deed of sale, on behalf of petitioners, at a price of ₱95,000.00 which
was not approved by the latter. For her part, respondent Rowena cannot deny that she
was aware of the limits of Reynalda’s power under the SPA because she (Rowena) was
the one who testified that the agreed price for the subject land was ₱800,000.00.
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with
whom the agent contracted is aware of the limits of the powers granted by the principal.
In this case, however, the agent is liable if he undertook to secure the principal’s
ratification.
LLB-II
It should be noted that, under Article 1898 of the Civil Code, the principal’s ratification of
the acts of the agent, done beyond the scope of the latter’s authority, may cure the defect
in the contract entered into between the agent and a third person. This seems to be the
line of reasoning adopted by the appellate court in upholding the validity of the subject
sale. The appellate court conceded that there was no evidence that respondents sought
the approval of petitioners for the subject sale but it, nonetheless, ruled that whatever
defect attended the sale of the subject land should be deemed impliedly ratified by
petitioners’ acceptance of the monthly installments paid by respondent Rowena. Though
not clearly stated in its Decision, the appellate court seemed to rely on the four monthly
installments (i.e., August 31, September 30, October 31, and November 30, 1997)
respondent Rowena paid to petitioners which the latter presumably received and
accepted even after the execution of the deed of sale dated July 23, 1997.
We disagree.
That petitioners continued to receive four monthly installments even after the premature
titling of the subject land in the name of respondent Rowena, through the deed of sale
dated July 23, 1997, did not, by itself, establish that petitioners ratified such sale. On the
contrary, the fact that petitioners continued to receive the aforesaid monthly installments
tended to establish that they had yet to discover the covert transfer of title in the name
of respondent Rowena. As stated earlier, the evidence on record established that the
subject sale was done without petitioners’ knowledge and consent which would explain
why receipt or acceptance by petitioners of the aforementioned four monthly installments
still occurred. Further, it runs contrary to common human experience and reason that
petitioners, as sellers, would forego the reservation or retention of the ownership over
the subject land, which was intended to guarantee the full payment of the price under
the contract to sell, especially so in this case where respondent Rowena, as buyer, had
paid only 32.58% of the purchase price. In a contract to sell, it would be unusual for the
seller to consent to the transfer of ownership of the property to the buyer prior to the full
payment of the purchase price because the reservation of the ownership in the seller is
precisely intended to protect the seller from the buyer. We, therefore, find that
petitioners’ claim that they did not ratify the subject sale, which was done without their
knowledge and consent, and that the subsequent discovery of the aforesaid fraudulent
sale led them to promptly file this case with the courts to be more credible and in accord
with the evidence on record. To rule otherwise would be to reward respondent Rowena
for the fraud that she committed on petitioners.
Based on the foregoing, we rule that (1) Reynalda, as agent, acted beyond the scope of
her authority under the SPA when she executed the deed of sale dated July 23, 1997 in
favor of respondent Rowena, as buyer, without the knowledge and consent of petitioners,
and conveyed the subject land to respondent Rowena at a price not approved by
petitioners, as principals and sellers, (2) respondent Rowena was aware of the limits of
the authority of Reynalda under the SPA, and (3) petitioners did not ratify, impliedly or
expressly, the acts of Reynalda. Under Article 1898 of the Civil Code, the sale is void and
petitioners are, thus, entitled to the reconveyance of the subject land.
WHEREFORE, the Petition is GRANTED. The May 19, 2005 Decision and February 10,
2006 Resolution of the Court of Appeals in CA-G.R. CV No. 79029 are ANNULLED and SET
ASIDE. The January 6, 2003 Decision of the Regional Trial Court of Malaybalay City,
Branch 9 in Civil Case No. 2759-98 is REINSTATED and MODIFIED to read as follows:
1. The deed of sale dated July 23, 1997 over the subject land, covered by TCT No.
T-62674, between petitioner Aurora, represented by Reynalda as her attorney-in-
fact, and respondent Rowena is declared void.
LLB-II
2. The contract to sell over the subject land, covered by TCT No. T-25334, between
petitioners, as sellers, and respondent Rowena, as buyer, is declared
rescinded.1âwphi1
3. The Register of Deeds of Malaybalay City is ordered to cancel TCT No. T-62674
in the name of respondent Rowena and to reinstate TCT No. T-25334 in the name
of petitioner Aurora.
4. Respondent Rowena is ordered to pay petitioners the sum of ₱100,000.00 as

moral damages and ₱50,000.00 as attorney’s fees.
5. Petitioners are ordered to pay respondent Rowena the sum of ₱327,442.00 with
legal interest of 6% per annum from May 19, 1998 until finality of this Decision.
In case petitioners fail to pay the amount due upon finality of this Decision, they
shall pay legal interest thereon at the rate of 12% per annum until fully paid.
No costs.
SO ORDERED.
MARIANO C. DEL CASTILLO

Associate Justice
CASE DIGEST
SPOUSES DELFIN O. TUMIBAY and AURORA T. TUMIBAY-deceased; GRACE

JULIE ANN TUMIBAY MANUEL, legal representative, Petitioners, vs.
SPOUSES MELVIN A. LOPEZ and ROWENA GAY T. VISITACION
LOPEZ, Respondents.
G.R. No.171692
June 3, 2013
FACTS:
Petitioners alleged that they are the owners of a parcel of land located in Sumpong,
Malaybalay, Bukidnon covered by TCT No. T-25334 in the name of petitioner Aurora; that
they are natural born Filipino citizens but petitioner Delfin acquired American citizenship
while his wife, petitioner Aurora, remained a Filipino citizen; that petitioner Aurora is the
sister of Reynalda Visitacion (Reynalda); that on July 23, 1997, Reynalda sold the subject
land to her daughter, Rowena Gay T. Visitacion Lopez (respondent Rowena), through a
deed of sale for an unconscionable amount of P95,000.00 although said property had a
market value of more than P2,000,000.00; that the subject sale was done without the
knowledge and consent of petitioners; and that, for these fraudulent acts, respondents
should be held liable for damages. Petitioners prayed that (1) the deed of sale dated July
23, 1997 be declared void ab initio, (2) the subject land be reconveyed to petitioners,
and (3) respondents be ordered to pay damages.
ISSUE:
Whether or not the is sale void on grounds of public policy.
RULING:
LLB-II
Yes. The Court held that (1) Reynalda, as agent, acted beyond the scope of her authority
under the SPA when she executed the deed of sale dated July 23, 1997 in favor of
respondent Rowena, as buyer, without the knowledge and consent of petitioners, and
conveyed the subject land to respondent Rowena at a price not approved by petitioners,
as principals and sellers, (2) respondent Rowena was aware of the limits of the authority
of Reynalda under the SPA, and (3) petitioners did not ratify, impliedly or expressly, the
acts of Reynalda. Under Article 1898 of the Civil Code, the sale is void and petitioners
are, thus, entitled to the reconveyance of the subject land.
[G.R. No. 179965. February 20, 2013.]
LLB-II
G.R. No. 179965 : February 20, 2013
NICOLAS P. DIEGO, Petitioner, v. RODOLFO P. DIEGO and EDUARDO P.

DIEGO, Respondent.
DECISION
DEL CASTILLO, J.:
It is settled jurisprudence, to the point of being elementary, that an agreement which

stipulates that the seller shall execute a deed of sale only upon or after tl1ll payment of
the purchase price is a contract to sell, not a contract of sale. In Reyes v.
Tuparan, 1 this Court declared in categorical terms that "[w]here the vendor
promises to execute a deed of absolute sale upon the completion by the
vendee of the payment of the price, the contract is only a contract to sell. The
aforecited stipulation shows that the vendors reserved title to the subject
property until full payment of the purchase price."
In this case, it is not disputed as in tact both parties agreed that the deed of sale shall
only be executed upon payment of the remaining balance of the purchase price. Thus,
pursuant to the above stated jurisprudence, we similarly declare that the transaction
entered into by the parties is a contract to sell.
Before us is a Petition for Review on Certiorari2 questioning the June 29, 2007
Decision3 and the October 3, 2007 Resolution4 of the Court of Appeals (CA) in CA-G.R.
CV No. 86512, which affirmed the April 19, 2005 Decision5 of the Regional Trial Court
(RTC), Branch 40, of Dagupan City in Civil Case No. 99-02971-D.
Factual Antecedents
In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein,
entered into an oral contract to sell covering Nicolass share, fixed at P500,000.00, as co-
owner of the familys Diego Building situated in Dagupan City. Rodolfo made a
downpayment of P250,000.00. It was agreed that the deed of sale shall be executed
upon payment of the remaining balance of P250,000.00. However, Rodolfo failed to pay
the remaining balance.
Meanwhile, the building was leased out to third parties, but Nicolass share in the rents
were not remitted to him by herein respondent Eduardo, another brother of Nicolas and
designated administrator of the Diego Building. Instead, Eduardo gave Nicolass monthly
share in the rents to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and
Eduardo failed to render an accounting and remit his share in the rents and fruits of the
building, and Eduardo continued to hand them over to Rodolfo.
Thus, on May 17, 1999, Nicolas filed a Complaint6 against Rodolfo and Eduardo before
the RTC of Dagupan City and docketed as Civil Case No. 99-02971-D. Nicolas prayed that
Eduardo be ordered to render an accounting of all the transactions over the Diego
Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the rents;
and that Eduardo and Rodolfo be held solidarily liable for attorneys fees and litigation
expenses.
Rodolfo and Eduardo filed their Answer with Counterclaim7 for damages and attorneys
fees. They argued that Nicolas had no more claim in the rents in the Diego Building since
he had already sold his share to Rodolfo. Rodolfo admitted having remitted
LLB-II
only P250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase
price to Nicolas only after the latter shall have executed a deed of absolute sale.
Ruling of the Regional Trial Court
After trial on the merits, or on April 19, 2005, the trial court rendered its
Decision8 dismissing Civil Case No. 99-02971-D for lack of merit and ordering Nicolas to
execute a deed of absolute sale in favor of Rodolfo upon payment by the latter of
the P250,000.00 balance of the agreed purchase price. It made the following interesting
pronouncement:cralawlibrary
It is undisputed that plaintiff (Nicolas) is one of the co-owners of the Diego Building, x x
x. As a co-owner, he is entitled to [his] share in the rentals of the said building. However,
plaintiff [had] already sold his share to defendant Rodolfo Diego in the amount
of P500,000.00 and in fact, [had] already received a partial payment in the purchase price
in the amount of P250,000.00. Defendant Eduardo Diego testified that as per
agreement, verbal, of the plaintiff and defendant Rodolfo Diego, the remaining
balance of P250,000.00 will be paid upon the execution of the Deed of
Absolute Sale. It was in the year 1997 when plaintiff was being required by defendant
Eduardo Diego to sign the Deed of Absolute Sale. Clearly, defendant Rodolfo Diego was
not yet in default as the plaintiff claims which cause [sic] him to refuse to sign [sic]
document. The contract of sale was already perfected as early as the year 1993 when
plaintiff received the partial payment, hence, he cannot unilaterally revoke or rescind the
same. From then on, plaintiff has, therefore, ceased to be a co-owner of the building and
is no longer entitled to the fruits of the Diego Building.
Equity and fairness dictate that defendant [sic] has to execute the necessary document
regarding the sale of his share to defendant Rodolfo Diego. Correspondingly, defendant
Rodolfo Diego has to perform his obligation as per their verbal agreement by paying the
remaining balance of P250,000.00.9?r?l1
To summarize, the trial court ruled that as early as 1993, Nicolas was no longer entitled
to the fruits of his aliquot share in the Diego Building because he had "ceased to be a co-
owner" thereof. The trial court held that when Nicolas received the P250,000.00
downpayment, a "contract of sale" was perfected. Consequently, Nicolas is obligated to
convey such share to Rodolfo, without right of rescission. Finally, the trial court held that
the P250,000.00 balance from Rodolfo will only be due and demandable when Nicolas
executes an absolute deed of sale.
Ruling of the Court of Appeals
Nicolas appealed to the CA which sustained the trial courts Decision in toto. The CA held
that since there was a perfected contract of sale between Nicolas and Rodolfo, the latter
may compel the former to execute the proper sale document. Besides, Nicolass insistence
that he has since rescinded their agreement in 1997 proved the existence of a perfected
sale. It added that Nicolas could not validly rescind the contract because: "1) Rodolfo
ha[d] already made a partial payment; 2) Nicolas ha[d] already partially performed his
part regarding the contract; and 3) Rodolfo opposes the rescission."10?r?l1
The CA then proceeded to rule that since no period was stipulated within which Rodolfo
shall deliver the balance of the purchase price, it was incumbent upon Nicolas to have
filed a civil case to fix the same. But because he failed to do so, Rodolfo cannot be
considered to be in delay or default.
LLB-II
Finally, the CA made another interesting pronouncement, that by virtue of the agreement
Nicolas entered into with Rodolfo, he had already transferred his ownership over the
subject property and as a consequence, Rodolfo is legally entitled to collect the fruits
thereof in the form of rentals. Nicolas remaining right is to demand payment of the
balance of the purchase price, provided that he first executes a deed of absolute sale in
favor of Rodolfo.
Nicolas moved for reconsideration but the same was denied by the CA in its Resolution
dated October 3, 2007.
Hence, this Petition.
Issues
The Petition raises the following errors that must be rectified:cralawlibrary
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THERE WAS NO
PERFECTED CONTRACT OF SALE BETWEEN PETITIONER NICOLAS DIEGO AND
RESPONDENT RODOLFO DIEGO OVER NICOLASS SHARE OF THE BUILDING BECAUSE
THE SUSPENSIVE CONDITION HAS NOT YET BEEN FULFILLED.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE CONTRACT OF

SALE BETWEEN PETITIONER AND RESPONDENT RODOLFO DIEGO REMAINS LEGALLY
BINDING AND IS NOT RESCINDED GIVING MISPLACED RELIANCE ON PETITIONER
NICOLAS STATEMENT THAT THE SALE HAS NOT YET BEEN REVOKED.
III
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER

NICOLAS DIEGO ACTED LEGALLY AND CORRECTLY WHEN HE UNILATERALLY
RESCINDED AND REVOKED HIS AGREEMENT OF SALE WITH RESPONDENT RODOLFO
DIEGO CONSIDERING RODOLFOS MATERIAL, SUBSTANTIAL BREACH OF THE
CONTRACT.
IV
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS NO

MORE RIGHTS OVER HIS SHARE IN THE BUILDING, DESPITE THE FACT THAT THERE
WAS AS YET NO PERFECTED CONTRACT OF SALE BETWEEN PETITIONER NICOLAS
DIEGO AND RODOLFO DIEGO AND THERE WAS YET NO TRANSFER OF OWNERSHIP OF
PETITIONERS SHARE TO RODOLFO DUE TO THE NON-FULFILLMENT BY RODOLFO OF
THE SUSPENSIVE CONDITION UNDER THE CONTRACT.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT

RODOLFO HAS UNJUSTLY ENRICHED HIMSELF AT THE EXPENSE OF PETITIONER
BECAUSE DESPITE NOT HAVING PAID THE BALANCE OF THE PURCHASE PRICE OF THE
SALE, THAT RODOLFO HAS NOT YET ACQUIRED OWNERSHIP OVER THE SHARE OF
PETITIONER NICOLAS, HE HAS ALREADY BEEN APPROPRIATING FOR HIMSELF AND FOR
HIS PERSONAL BENEFIT THE SHARE OF THE INCOME OF THE BUILDING AND THE
LLB-II
PORTION OF THE BUILDING ITSELF WHICH WAS DUE TO AND OWNED BY PETITIONER
NICOLAS.
VI
THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING ACTUAL DAMAGES,

ATTORNEYS FEES AND LITIGATION EXPENSES TO THE PETITIONER DESPITE THE FACT
THAT PETITIONERS RIGHTS HAD BEEN WANTONLY VIOLATED BY THE
RESPONDENTS.11?r?l1
Petitioners Arguments
In his Petition, the Supplement12 thereon, and Reply,13 Nicolas argues that, contrary to
what the CA found, there was no perfected contract of sale even though Rodolfo had
partially paid the price; that in the absence of the third element in a sale contract the
price there could be no perfected sale; that failing to pay the required price in full, Nicolas
had the right to rescind the agreement as an unpaid seller.
Nicolas likewise takes exception to the CA finding that Rodolfo was not in default or delay
in the payment of the agreed balance for his (Nicolass) failure to file a case to fix the
period within which payment of the balance should be made. He believes that Rodolfos
failure to pay within a reasonable time was a substantial and material breach of the
agreement which gave him the right to unilaterally and extrajudicially rescind the
agreement and be discharged of his obligations as seller; and that his repeated written
demands upon Rodolfo to pay the balance granted him such rights.
Nicolas further claims that based on his agreement with Rodolfo, there was to be no
transfer of title over his share in the building until Rodolfo has effected full payment of
the purchase price, thus, giving no right to the latter to collect his share in the rentals.
Finally, Nicolas bewails the CAs failure to award damages, attorneys fees and litigation
expenses for what he believes is a case of unjust enrichment at his expense.
Respondents Arguments
Apart from echoing the RTC and CA pronouncements, respondents accuse the petitioner
of "cheating" them, claiming that after the latter received the P250,000.00 downpayment,
he "vanished like thin air and hibernated in the USA, he being an American citizen,"14 only
to come back claiming that the said amount was a mere loan.
They add that the Petition is a mere rehash and reiteration of the petitioners arguments
below, which are deemed to have been sufficiently passed upon and debunked by the
appellate court.
Our Ruling
The Court finds merit in the Petition.
The contract entered into by Nicolas and Rodolfo was a contract to sell.
a) The stipulation to execute a deed of sale upon full payment of the purchase price is a
unique and distinguishing characteristic of a contract to sell. It also shows that the vendor
reserved title to the property until full payment.
LLB-II
There is no dispute that in 1993, Rodolfo agreed to buy Nicolass share in the Diego
Building for the price of P500,000.00. There is also no dispute that of the total purchase
price, Rodolfo paid, and Nicolas received, P250,000.00. Significantly, it is also not
disputed that the parties agreed that the remaining amount of P250,000.00 would be
paid after Nicolas shall have executed a deed of sale.
This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase
price, is a unique and distinguishing characteristic of a contract to sell. In Reyes v.
Tuparan,15 this Court ruled that a stipulation in the contract, "[w]here the vendor
promises to execute a deed of absolute sale upon the completion by the
vendee of the payment of the price," indicates that the parties entered into
a contract to sell. According to this Court, this particular provision is tantamount to a
reservation of ownership on the part of the vendor. Explicitly stated, the Court ruled that
the agreement to execute a deed of sale upon full payment of the purchase price "shows
that the vendors reserved title to the subject property until full payment of the
purchase price."16?r?l1
In Tan v. Benolirao,17 this Court, speaking through Justice Brion, ruled that the parties
entered into a contract to sell as revealed by the following stipulation:cralawlibrary
d) That in case, BUYER has complied with the terms and conditions of this contract, then
the SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute
Sale;18?r?l1
The Court further held that "[j]urisprudence has established that where the seller
promises to execute a deed of absolute sale upon the completion by the buyer
of the payment of the price, the contract is only a contract to sell."19?r?l1
b) The acknowledgement receipt signed by Nicolas as well as the

contemporaneous acts of the parties show that they agreed on a contract to
sell, not of sale. The absence of a formal deed of conveyance is indicative of a
contract to sell.
In San Lorenzo Development Corporation v. Court of Appeals,20 the facts show that
spouses Miguel and Pacita Lu (Lu) sold a certain parcel of land to Pablo Babasanta
(Pablo). After several payments, Pablo wrote Lu demanding "the execution of a final deed
of sale in his favor so that he could effect full payment of the purchase price."21 To prove
his allegation that there was a perfected contract of sale between him and Lu, Pablo
presented a receipt signed by Lu acknowledging receipt of P50,000.00 as partial
payment.22?r?l1
However, when the case reached this Court, it was ruled that the transaction entered into
by Pablo and Lu was only a contract to sell, not a contract of sale. The Court held
thus:cralawlibrary
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand
pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot
situated in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the
ownership of the property until full payment of the price which is a distinguishing feature
of a contract to sell, the subsequent acts of the parties convince us that the Spouses
Lu never intended to transfer ownership to Babasanta except upon full
payment of the purchase price.
LLB-II
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could
effect full payment of the price, Pacita Lu allegedly refused to do so. In effect,
Babasanta himself recognized that ownership of the property would not be
transferred to him until such time as he shall have effected full payment of the
price. Moreover, had the sellers intended to transfer title, they could have
easily executed the document of sale in its required form simultaneously with
their acceptance of the partial payment, but they did not. Doubtlessly, the
receipt signed by Pacita Lu should legally be considered as a perfected contract
to sell.23?r?l1
In the instant case, records show that Nicolas signed a mere receipt24 acknowledging
partial payment of P250,000.00 from Rodolfo. It states:cralawlibrary
July 8, 1993
Received the amount of [P250,000.00] for 1 share of Diego Building as partial payment
for Nicolas Diego.
(signed)
Nicolas Diego25?r?l1 ???ñr?bl?š ??r†??l l?? l?br?rÿ
As we ruled in San Lorenzo Development Corporation v. Court of Appeals,26 the parties

could have executed a document of sale upon receipt of the partial payment but they did
not. This is thus an indication that Nicolas did not intend to immediately transfer title over
his share but only upon full payment of the purchase price. Having thus reserved title
over the property, the contract entered into by Nicolas is a contract to sell. In addition,
Eduardo admitted that he and Rodolfo repeatedly asked Nicolas to sign the deed of
sale27 but the latter refused because he was not yet paid the full amount. As we have
ruled in San Lorenzo Development Corporation v. Court of Appeals,28 the fact that
Eduardo and Rodolfo asked Nicolas to execute a deed of sale is a clear recognition on
their part that the ownership over the property still remains with Nicolas. In fine, the
totality of the parties acts convinces us that Nicolas never intended to transfer the
ownership over his share in the Diego Building until the full payment of the purchase
price. Without doubt, the transaction agreed upon by the parties was a contract to sell,
not of sale.
In Chua v. Court of Appeals,29 the parties reached an impasse when the seller wanted to
be first paid the consideration before a new transfer certificate of title (TCT) is issued in
the name of the buyer. Contrarily, the buyer wanted to secure a new TCT in his name
before paying the full amount. Their agreement was embodied in a receipt containing the
following terms: "(1) the balance of P10,215,000.00 is payable on or before 15 July 1989;
(2) the capital gains tax is for the account of x x x; and (3) if [the buyer] fails to pay the
balance x x x the [seller] has the right to forfeit the earnest money x x x." 30 The case
eventually reached this Court. In resolving the impasse, the Court, speaking
through Justice Carpio, held that "[a] perusal of the Receipt shows that the true
agreement between the parties was a contract to sell."31 The Court noted that "the
agreement x x x was embodied in a receipt rather than in a deed of sale, ownership not
having passed between them."32 The Court thus concluded that "[t]he 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."33 Thus, the "true agreement between the parties was a contract to
sell."34?r?l1
LLB-II
In the instant case, the parties were similarly embroiled in an impasse. The parties
agreement was likewise embodied only in a receipt. Also, Nicolas did not want to sign the
deed of sale unless he is fully paid. On the other hand, Rodolfo did not want to pay unless
a deed of sale is duly executed in his favor. We thus say, pursuant to our ruling in Chua
v. Court of Appeals35 that the agreement between Nicolas and Rodolfo is a contract to
sell.
This Court cannot subscribe to the appellate courts view that Nicolas should first execute
a deed of absolute sale in favor of Rodolfo, before the latter can be compelled to pay the
balance of the price. This is patently ridiculous, and goes against every rule in the book.
This pronouncement virtually places the prospective seller in a contract to sell at the
mercy of the prospective buyer, and sustaining this point of view would place all contracts
to sell in jeopardy of being rendered ineffective by the act of the prospective buyers, who
naturally would demand that the deeds of absolute sale be first executed before they pay
the balance of the price. Surely, no prospective seller would accommodate.
In fine, "the need to execute a deed of absolute sale upon completion of

payment of the price generally indicates that it is a contract to sell, as it implies
the reservation of title in the vendor until the vendee has completed the
payment of the price."36 In addition, "[a] stipulation reserving ownership in the vendor
until full payment of the price is x x x typical in a contract to sell."37Thus, contrary to the
pronouncements of the trial and appellate courts, the parties to this case only entered
into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full
payment of the agreed purchase price.
c) Nicolas did not surrender or deliver title or possession to Rodolfo.
Moreover, there could not even be a surrender or delivery of title or possession to the
prospective buyer Rodolfo. This was made clear by the nature of the agreement, by
Nicolass repeated demands for the return of all rents unlawfully and unjustly remitted to
Rodolfo by Eduardo, and by Rodolfo and Eduardos repeated demands for Nicolas to
execute a deed of sale which, as we said before, is a recognition on their part that
ownership over the subject property still remains with Nicolas.
Significantly, when Eduardo testified, he claimed to be knowledgeable about the terms

and conditions of the transaction between Nicolas and Rodolfo. However, aside from
stating that out of the total consideration of P500,000.00, the amount of P250,000.00
had already been paid while the remaining P250,000.00 would be paid after the execution
of the Deed of Sale, he never testified that there was a stipulation as regards delivery of
title or possession.38?r?l1
It is also quite understandable why Nicolas belatedly demanded the payment of the
rentals. Records show that the structural integrity of the Diego Building was severely
compromised when an earthquake struck Dagupan City in 1990.39 In order to rehabilitate
the building, the co-owners obtained a loan from a bank.40 Starting May 1994, the
property was leased to third parties and the rentals received were used to pay off the
loan.41 It was only in 1996, or after payment of the loan that the co-owners started
receiving their share in the rentals.42 During this time, Nicolas was in the USA but
immediately upon his return, he demanded for the payment of his share in the rentals
which Eduardo remitted to Rodolfo. Failing which, he filed the instant Complaint. To us,
this bolsters our findings that Nicolas did not intend to immediately transfer title over the
property.
LLB-II
It must be stressed that it is anathema in a contract to sell that the prospective seller
should deliver title to the property to the prospective buyer pending the latters payment
of the price in full. It certainly is absurd to assume that in the absence of stipulation, a
buyer under a contract to sell is granted ownership of the property even when he has not
paid the seller in full. If this were the case, then prospective sellers in a contract to sell
would in all likelihood not be paid the balance of the price.
This ponente has had occasion to rule that "[a] contract to sell is one where the
prospective seller reserves the transfer of title to the prospective buyer until the
happening of an event, such as full payment of the purchase price. What the seller obliges
himself to do is to sell the subject property only when the entire amount of the purchase
price has already been delivered to him. In other words, the full payment of the purchase
price partakes of a suspensive condition, the nonfulfillment of which prevents the
obligation to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer. It does not, by itself, transfer
ownership to the buyer."43?r?l1
The contract to sell is terminated or cancelled.
Having established that the transaction was a contract to sell, what happens now to the
parties agreement?
The remedy of rescission is not available in contracts to sell.44 As explained in Spouses

Santos v. Court of Appeals:45?r?l1
In view of our finding in the present case that the agreement between the parties is a
contract to sell, it follows that the appellate court erred when it decreed that a judicial
rescission of said agreement was necessary. This is because there was no rescission to
speak of in the first place. As we earlier pointed out, in a contract to sell, title remains
with the vendor and does not pass on to the vendee until the purchase price is paid in
full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive
condition. Failure to pay the price agreed upon is not a mere breach, casual or serious,
but a situation that prevents the obligation of the vendor to convey title from acquiring
an obligatory force. This is entirely different from the situation in a contract of sale, where
non-payment of the price is a negative resolutory condition. The effects in law are not
identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot
recover it, unless the contract of sale is rescinded and set aside. In a contract to sell,
however, the vendor remains the owner for as long as the vendee has not complied fully
with the condition of paying the purchase price. If the vendor should eject the vendee
for failure to meet the condition precedent, he is enforcing the contract and not rescinding
it. When the petitioners in the instant case repossessed the disputed house and lot for
failure of private respondents to pay the purchase price in full, they were merely enforcing
the contract and not rescinding it. As petitioners correctly point out, the Court of Appeals
erred when it ruled that petitioners should have judicially rescinded the contract pursuant
to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the
purchase price as a resolutory condition. It does not apply to a contract to sell. As to
Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of
immovable property. Neither provision is applicable in the present case.46?r?l1
Similarly, we held in Chua v. Court of Appeals47 that "Article 1592 of the Civil Code permits
the buyer to pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by notarial act.
However, Article 1592 does not apply to a contract to sell where the seller reserves the
ownership until full payment of the price,"48 as in this case.
LLB-II
Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the
purchase price, the contract to sell was deemed terminated or cancelled. 49 As we have
held in Chua v. Court of Appeals,50 "[s]ince the agreement x x x is a mere contract to
sell, the full payment of the purchase price partakes of a suspensive condition. The non-
fulfillment of the condition prevents the obligation to sell from arising and
ownership is retained by the seller without further remedies by the buyer."
Similarly, we held in Reyes v. Tuparan51 that "petitioners obligation to sell the subject
properties becomes demandable only upon the happening of the positive suspensive
condition, which is the respondents full payment of the purchase price. Without
respondents full payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title. Respondents
failure to pay in full the purchase price in full is not the breach of contract contemplated
under Article 1191 of the New Civil Code but rather just an event that prevents the
petitioner from being bound to convey title to respondent." Otherwise stated, Rodolfo
has no right to compel Nicolas to transfer ownership to him because he failed to pay in
full the purchase price. Correlatively, Nicolas has no obligation to transfer his ownership
over his share in the Diego Building to Rodolfo.52?r?l1
Thus, it was erroneous for the CA to rule that Nicolas should have filed a case to fix the
period for Rodolfos payment of the balance of the purchase price. It was not Nicolass
obligation to compel Rodolfo to pay the balance; it was Rodolfos duty to remit it.
It would appear that after Nicolas refused to sign the deed as there was yet no full
payment, Rodolfo and Eduardo hired the services of the Daroya Accounting Office "for
the purpose of estimating the amount to which [Nicolas] still owes [Rodolfo] as a
consequence of the unconsummated verbal agreement regarding the formers share in
the co-ownership of [Diego Building] in favor of the latter."53 According to the
accountants report, after Nicolas revoked his agreement with Rodolfo due to non-
payment, the downpayment of P250,000.00 was considered a loan of Nicolas from
Rodolfo.54 The accountant opined that the P250,000.00 should earn interest at
18%.55 Nicolas however objected as regards the imposition of interest as it was not
previously agreed upon. Notably, the contents of the accountants report were not
disputed or rebutted by the respondents. In fact, it was stated therein that "[a]ll the
bases and assumptions made particularly in the fixing of the applicable rate of interest
have been discussed with [Eduardo]."56?r?l1
We find it irrelevant and immaterial that Nicolas described the termination or cancellation
of his agreement with Rodolfo as one of rescission. Being a layman, he is understandably
not adept in legal terms and their implications. Besides, this Court should not be held
captive or bound by the conclusion reached by the parties. The proper characterization
of an action should be based on what the law says it to be, not by what a party believed
it to be. "A contract is what the law defines it to be x x x and not what the contracting
parties call it."57?r?l1
On the other hand, the respondents additional submission that Nicolas cheated them by
"vanishing and hibernating" in the USA after receiving Rodolfos P250,000.00
downpayment, only to come back later and claim that the amount he received was a
mere loan cannot be believed. How the respondents could have been cheated or
disadvantaged by Nicolass leaving is beyond comprehension. If there was anybody who
benefited from Nicolass perceived "hibernation", it was the respondents, for they certainly
had free rein over Nicolass interest in the Diego Building. Rodolfo put off payment of the
balance of the price, yet, with the aid of Eduardo, collected and appropriated for himself
the rents which belonged to Nicolas.
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Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the
rents.
For his complicity, bad faith and abuse of authority as the Diego Building administrator,
Eduardo must be held solidarily liable with Rodolfo for all that Nicolas should be entitled
to from 1993 up to the present, or in respect of actual damages suffered in relation to
his interest in the Diego Building. Eduardo was the primary cause of Nicolass loss, being
directly responsible for making and causing the wrongful payments to Rodolfo, who
received them under obligation to return them to Nicolas, the true recipient. As such,
Eduardo should be principally responsible to Nicolas as well. Suffice it to state that 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; and every person
who, contrary to law, wilfully or negligently causes damage to another, shall indemnify
the latter for the same.58?r?l1
Attorneys fees and other costs.
"Although attorneys fees are not allowed in the absence of stipulation, the court can
award the same when the defendants act or omission has compelled the plaintiff to incur
expenses to protect his interest or where the defendant acted in gross and evident bad
faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim."59 In the
instant case, it is beyond cavil that petitioner was constrained to file the instant case to
protect his interest because of respondents unreasonable and unjustified refusal to render
an accounting and to remit to the petitioner his rightful share in rents and fruits in the
Diego Building. Thus, we deem it proper to award to petitioner attorneys fees in the
amount of P50,000.00,60 as well as litigation expenses in the amount of P20,000.00 and
the sum of P1,000.00 for each court appearance by his lawyer or lawyers, as prayed for.
WHEREFORE, premises considered, the Petition is GRANTED. The June 29, 2007
Decision and October 3, 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 86512,
and the April 19, 2005 Decision of the Dagupan City Regional Trial Court, Branch 40 in
Civil Case No. 99-02971-D, are hereby ANNULLED and SET ASIDE.
The Court further decrees the following:cralawlibrary
1. The oral contract to sell between petitioner Nicolas P. Diego and respondent Rodolfo
P. Diego is DECLARED terminated/cancelled;
2. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to surrender

possession and control, as the case may be, of Nicolas P. Diegos share in the Diego
Building. Respondents are further commanded to return or surrender to the petitioner
the documents of title, receipts, papers, contracts, and all other documents in any form
or manner pertaining to the latters share in the building, which are deemed to be in their
unauthorized and illegal possession;
3. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to immediately

render an accounting of all the transactions, from the period beginning 1993 up to the
present, pertaining to Nicolas P. Diegos share in the Diego Building, and thereafter
commanded to jointly and severally remit to the petitioner all rents, monies, payments
and benefits of whatever kind or nature pertaining thereto, which are hereby deemed
received by them during the said period, and made to them or are due, demandable and
forthcoming during the said period and from the date of this Decision, with legal interest
from the filing of the Complaint;
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4. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED, immediately and
without further delay upon receipt of this Decision, to solidarily pay the petitioner
attorneys fees in the amount of P50,000.00; litigation expenses in the amount
of P20,000.00 and the sum of P1,000.00 per counsel for each court appearance by his
lawyer or lawyers;
5. The payment of P250,000.00 made by respondent Rodolfo P. Diego, with legal interest
from the filing of the Complaint, shall be APPLIED, by way of compensation, to his
liabilities to the petitioner and to answer for all damages and other awards and interests
which are owing to the latter under this Decision; and
6. Respondents counterclaim is DISMISSED. ???ñr?bl?š ??r†??l l?? l?br?rÿ
SO ORDERED.
CASE DIGEST
NICOLAS P. DIEGO, petitioner, vs. RODOLFO P. DIEGO and EDUARDO P.

DIEGO, respondents.
FACTS:
In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein,
entered into an oral contract to sell covering Nicolas's share, as co-owner of the family's
Diego Building situated in Dagupan City. Rodolfo made a downpayment. It was agreed
that the deed of sale shall be executed upon payment of the remaining balance. However,
Rodolfo failed to pay the remaining balance. Meanwhile, the building was leased out to
third parties, but Nicolas's share in the rents were not remitted to him by herein
respondent Eduardo, another brother of Nicolas and designated administrator of the
Diego Building. Instead, Eduardo gave Nicolas's monthly share in the rents to Despite
demands and protestations by Nicolas, Rodolfo and Eduardo failed to render an
accounting and remit his share in the rents and fruits of the building, and Eduardo
continued to hand them over to Rodolfo. Thus, Nicolas filed a Complaint against Rodolfo
and Eduardo before the RTC of Dagupan City. Nicolas prayed that Eduardo be ordered to
render an accounting of all the transactions over the Diego Building; that Eduardo and
Rodolfo be ordered to deliver to Nicolas his share in the rents. Rodolfo and Eduardo filed
their Answer with Counterclaim for damages and attorney's fees. They argued that
Nicolas had no more claim in the rents in the Diego Building since he had already sold his
share to Rodolfo. RTC dismissed the case for lack of merit and ordering Nicolas to execute
a deed of absolute sale in favor of Rodolfo upon payment by the latter of the balance of
the agreed purchase price. The trial court held that when Nicolas received the
downpayment, a "contract of sale" was perfected. Finally, the trial court held that the
balance from Rodolfo will only be due and demandable when Nicolas executes an absolute
deed of sale. Nicolas appealed to the CA which sustained the trial court's Decision in toto.
The CA held that since there was a perfected contract of sale between Nicolas and
Rodolfo, the latter may compel the former to execute the proper sale document. Besides,
Nicolas's insistence that he has since rescinded their agreement in 1997 proved the
existence of a perfected sale. It added that Nicolas could not validly rescind the contract
because: "1) Rodolfo had already made a partial payment; 2) Nicolas had already partially
performed his part regarding the contract; and 3) Rodolfo opposes the rescission." The
CA then proceeded to rule that since no period was stipulated within which Rodolfo shall
deliver the balance of the purchase price, it was incumbent upon Nicolas to have filed a
civil case to fix the same.
LLB-II
ISSUE: WHETHER OR NOT THE REMEDY OF RESCISSION IS AVAILABLE IN
CONTRACTS TO SELL.
The contract to sell is terminated or cancelled. The remedy of rescission is not available
in contracts to sell. As explained in Spouses Santos v. Court of Appeals: In view of our
finding in the present case that the agreement between the parties is a contract to sell,
it follows that the appellate court erred when it decreed that a judicial rescission of said
agreement was necessary. This is because there was no rescission to speak of in the first
place. As we earlier pointed out, in a contract to sell, title remains with the vendor and
does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract
to sell, the payment of the purchase price is a positive suspensive condition. Failure to
pay the price agreed upon is not a mere breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring an obligatory force.
This is entirely different from the situation in a contract of sale, where non-payment of
the price is a negative resolutory condition. The effects in law are not identical. In a
contract of sale, the vendor has lost ownership of the thing sold and cannot recover it,
unless the contract of sale is rescinded and set aside. In a contract to sell, however, the
vendor remains the owner for as long as the vendee has not complied fully with the
condition of paying the purchase price. If the vendor should eject the vendee for failure
to meet the condition precedent, he is enforcing the contract and not rescinding it. When
the petitioners in the instant case repossessed the disputed house and lot for failure of
private respondents to pay the purchase price in full, they were merely enforcing the
contract and not rescinding it. As petitioners correctly point out, the Court of Appeals
erred when it ruled that petitioners should have judicially rescinded the contract pursuant
to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the
purchase price as a resolutory condition. It does not apply to a contract to sell. As to
Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of
immovable property. Neither provision is applicable in the present case.
Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the
purchase price, the contract to sell was deemed terminated or cancelled. As we have held
in Chua v. Court of Appeals, "[s]ince the agreement . . . is a mere contract to sell, the
full payment of the purchase price partakes of a suspensive condition. The non-fulfillment
of the condition prevents the obligation to sell from arising and ownership is retained by
the seller without further remedies by the buyer." Similarly, we held in Reyes v. Tuparan
that "petitioner's obligation to sell the subject properties becomes demandable only upon
the happening of the positive suspensive condition, which is the respondent's full payment
of the purchase price. Without respondent's full payment, there can be no breach of
contract to speak of because petitioner has no obligation yet to turn over the title.
Respondent's failure to pay in full * the purchase price in full is not the breach of contract
contemplated under Article 1191 of the New Civil Code but rather just an event that
prevents the petitioner from being bound to convey title to respondent." Otherwise
stated, Rodolfo has no right to compel Nicolas to transfer ownership to him because he
failed to pay in full the purchase price. Correlatively, Nicolas has no obligation to transfer
his ownership over his share in the Diego Building to Rodolfo.
Thus, it was erroneous for the CA to rule that Nicolas should have filed a case to fix the
period for Rodolfo's payment of the balance of the purchase price. It was not Nicolas's
obligation to compel Rodolfo to pay the balance; it was Rodolfo's duty to remit it.
WHEREFORE, premises considered, the Petition is GRANTED. The June 29, 2007 Decision
and October 3, 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 86512, and
the April 19, 2005 Decision of the Dagupan City Regional Trial Court, Branch 40 in Civil
Case No. 99-02971-D, are hereby ANNULLED and SET ASIDE.
LLB-II
ALI AKANG, Petitioner, v. MUNICIPALITY OF ISULAN, SULTAN KUDARAT
PROVINCE, REPRESENTED BY ITS MUNICIPAL MAYOR AND MUNICIPAL VICE
MAYOR AND MUNICIPAL COUNCILORS/KAGAWADS, Respondent.
DECISION
REYES, J.:
This case was originally filed as a petition for certiorari under Rule 65 of the Rules of
Court. In the Court’s Resolution dated March 9, 2009, however, the petition was treated
as one for review under Rule 45.1 Assailed is the Decision2 dated April 25, 2008 and
Resolution3 dated October 29, 2008 of the Court of Appeals Mindanao Station (CA) in CA-
G.R. CV No. 00156, which reversed the Judgment4 dated January 14, 2004 of the
Regional Trial Court (RTC) of Isulan, Sultan Kudarat, Branch 19 in Civil Case No. 1007 for
Recovery of Possession of Subject Property and/or Quieting of Title thereon and
Damages.
The Facts
Ali Akang (petitioner) is a member of the national and cultural community belonging to
the Maguindanaon tribe of Isulan, Province of Sultan Kudarat and the registered owner
of Lot 5-B-2-B-14-F (LRC) Psd 1100183 located at Kalawag III, Isulan, Sultan Kudarat,
covered by Transfer Certificate of Title (TCT) No. T-3653,5 with an area of 20,030 square
meters.6
Sometime in 1962, a two-hectare portion of the property was sold by the petitioner to
the Municipality of Isulan, Province of Sultan Kudarat (respondent) through then Isulan
Mayor Datu Ampatuan under a Deed of Sale executed on July 18, 1962, which
states:cralavvonlinelawlibrary
“That for and in consideration of the sum of THREE THOUSAND PESOS ([P]3,000.00),
Philippine Currency, value to be paid and deliver to me, and of which receipt of which
shall be acknowledged by me to my full satisfaction by the MUNICIPAL GOVERNMENT OF
ISULAN, represented by the Municipal Mayor, Datu Sama Ampatuan, hereinafter referred
to as the VENDEE, I hereby sell, transfer, cede, convey and assign as by these presents
do have sold, transferred, ceded, conveyed and assigned, an area of TWO (2) hectares,
more or less, to and in favor of the MUNICIPAL GOVERNMENT OF ISULAN, her (sic) heirs,
assigns and administrators to have and to hold forevery (sic) and definitely, which portion
shall be utilized purposely and exclusively as a GOVERNMENT CENTER SITE x x x[.]”7
The respondent immediately took possession of the property and began construction of
the municipal building.8
Thirty-nine (39) years later or on October 26, 2001, the petitioner, together with his wife,
Patao Talipasan, filed a civil action for Recovery of Possession of Subject Property and/or
Quieting of Title thereon and Damages against the respondent, represented by its
Municipal Mayor, et al.9 In his complaint, the petitioner alleged, among others, that the
agreement was one to sell, which was not consummated as the purchase price was not
paid.10
In its answer, the respondent denied the petitioner’s allegations, claiming, among others:
that the petitioner’s cause of action was already barred by laches; that the Deed of Sale
was valid; and that it has been in open, continuous and exclusive possession of the
property for forty (40) years.11
After trial, the RTC rendered judgment in favor of the petitioner. The RTC construed the
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Deed of Sale as a contract to sell, based on the wording of the contract, which allegedly
showed that the consideration was still to be paid and delivered on some future date – a
characteristic of a contract to sell.12 In addition, the RTC observed that the Deed of Sale
was not determinate as to its object since it merely indicated two (2) hectares of the
97,163 sq m lot, which is an undivided portion of the entire property owned by the
petitioner. The RTC found that segregation must first be made to identify the parcel of
land indicated in the Deed of Sale and it is only then that the petitioner could execute a
final deed of absolute sale in favor of the respondent.13
As regards the payment of the purchase price, the RTC found the same to have not been
made by the respondent. According to the RTC, the Municipal Voucher is not a competent
documentary proof of payment but is merely evidence of admission by the respondent
that on the date of the execution of the Deed of Sale, the consideration stipulated therein
had not yet been paid. The RTC also ruled that the Municipal Voucher’s validity and
evidentiary value is in question as it suffers infirmities, that is, it was neither duly
recorded, numbered, signed by the Municipal Treasurer nor was it pre-audited.14
The RTC also ruled that the Deed of Sale was not approved pursuant to Section 145 of
the Administrative Code for Mindanao and Sulu or Section 120 of the Public Land Act
(PLA), as amended. Resolution No. 70,15 which was issued by the respondent,
appropriating the amount of P3,000.00 as payment for the property, and Resolution No.
644 of the Provincial Board of Cotabato, which approved Resolution No. 70, cannot be
considered proof of the sale as said Deed of Sale was not presented for examination and
approval of the Provincial Board.16 Further, since the respondent’s possession of the
property was not in the concept of an owner, laches cannot be a valid defense for claiming
ownership of the property, which has been registered in the petitioner’s name under the
Torrens System.17
The dispositive portion of the RTC Decision18 dated January 14, 2004
reads:cralavvonlinelawlibrary
WHEREFORE, upon all the foregoing considerations, judgment is hereby

rendered:cralavvonlinelawlibrary
a. Declaring the contract entered into between the plaintiffs and the defendant,
Municipal Government of Isulan, Cotabato (now Sultan Kudarat), represented by
its former Mayor, Datu Suma Ampatuan, dated July 18, 1962, as a contract to sell,
without its stipulated consideration having been paid; and for having been entered
into between plaintiff Ali Akang, an illiterate non-Christian, and the defendant,
Municipal Government of Isulan, in violation of Section 120 of C.A. No. 141, said
contract/agreement is hereby declared null and void;chanroblesvirtualawlibrary
b. Declaring the Deed of Sale (Exh. “1”-“E”) dated July 18, 1962, null and void [ab]
initio, for having been executed in violation of Section 145 of the Administrative
Code of Mindanao and Sulu, and of Section 120 of the Public Land Law, as
amended by R.A. No. 3872;chanroblesvirtualawlibrary
c. Ordering the defendants to pay plaintiffs, the value of the lot in question, Lot No.
5-B-2-B-14-F (LRC) Psd 110183, containing an area of 20,030 Square Meters, at
the prevailing market value, as may [be] reflected in its Tax Declaration, or in the
alternative, to agree on the payment of monthly back rentals, retroactive to 1996,
until defendants should decide to buy and pay the value of said lot as aforestated,
with legal interest in both cases;chanroblesvirtualawlibrary
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d. Ordering the defendant, Municipal Government of Isulan, Sultan Kudarat, to pay
plaintiffs, by way of attorney’s fee, the equivalent of 30% of the value that
defendants would pay the plaintiffs for the lot in question; and to pay plaintiffs the
further sum of [P]100,000.00, by way of moral and exemplary
damages;chanroblesvirtualawlibrary
e. Ordering the defendants, members of the Sangguniang Bayan of Isulan, Sultan

Kudarat, to pass a resolution/ordinance for the appropriation of funds for the
payment of the value of plaintiffs’ Lot 5-B-2-B-14-F (LRC) Psd-110183, and of the
damages herein awarded to the plaintiffs; and
f. Ordering the defendants to pay the costs of suit.
For lack of merit, the counterclaims of the defendants should be, as it is hereby,
dismissed.
IT IS SO ORDERED.19
By virtue of said RTC decision, proceedings for the Cancellation of Certificate of Title No.
T-49349 registered under the name of the respondent was instituted by the petitioner
under Miscellaneous Case No. 866 and as a result, the respondent’s title over the property
was cancelled and a new one issued in the name of the petitioner.
The respondent appealed the RTC Decision dated January 14, 2004 and in the
Decision20 dated April 25, 2008, the CA reversed the ruling of the RTC and upheld the
validity of the sale. The dispositive portion of the CA Decision
provides:cralavvonlinelawlibrary
WHEREFORE, the assailed decision dated January 14, 2004 is hereby REVERSED and a
new one entered, upholding the contract of sale executed on July 18, 1962 between the
parties.
SO ORDERED.21
The CA sustained the respondent’s arguments and ruled that the petitioner is not entitled
to recover ownership and possession of the property as the Deed of Sale already
transferred ownership thereof to the respondent. The CA held that the doctrines of
estoppel and laches must apply against the petitioner for the reasons that: (1) the
petitioner adopted inconsistent positions when, on one hand, he invoked the
interpretation of the Deed of Sale as a contract to sell but still demanded payment, and
called for the application of Sections 145 and 146 of the Administrative Code for Mindanao
and Sulu, on the other; and (2) the petitioner did not raise at the earliest opportunity the
nullity of the sale and remained passive for 39 years, as it was raised only in 2001. 22
The CA also ruled that the Deed of Sale is not a mere contract to sell but a perfected
contract of sale. There was no express reservation of ownership of title by the petitioner
and the fact that there was yet no payment at the time of the sale does not affect the
validity or prevent the perfection of the sale.23
As regards the issue of whether payment of the price was made, the CA ruled that there
was actual payment, as evidenced by the Municipal Voucher, which the petitioner himself
prepared and signed despite the lack of approval of the Municipal Treasurer. Even if he
was not paid the consideration, it does not affect the validity of the contract of sale for it
is not the fact of payment of the price that determines its validity.24
In addition, the CA noted that there was an erroneous cancellation of the certificate of
title in the name of the respondent and the registration of the same property in the name
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of the petitioner in Miscellaneous Case No. 866. According to the CA, this does not affect
in any way the ownership of the respondent over the subject property because
registration or issuance of a certificate of title is not one of the modes of acquiring
ownership.25
The petitioner sought reconsideration of the CA Decision, which was denied by the CA in
its Resolution26dated October 29, 2008.
Hence, this petition.
Issue
WHETHER THE PETITIONER IS ENTITLED TO RECOVER OWNERSHIP AND POSSESSION
OF THE PROPERTY IN DISPUTE.
Resolution of the above follows determination of these questions: (1) whether the Deed
of Sale dated July 18, 1962 is a valid and perfected contract of sale; (2) whether there
was payment of consideration by the respondent; and (3) whether the petitioner’s claim
is barred by laches.
The petitioner claims that the acquisition of the respondent was null and void because:
(1) he is an illiterate non-Christian who only knows how to sign his name in Arabic and
knows how to read the Quran but can neither read nor write in both Arabic and English;
(2) the respondent has not paid the price for the property; (3) the Municipal Voucher is
not admissible in evidence as proof of payment; (4) the Deed of Sale was not duly
approved in accordance with Sections 145 and 146 of the Administrative Code of
Mindanao and Sulu, and Section 120 of the PLA, as amended; and (4) the property is a
registered land covered by a TCT and cannot be acquired by prescription or adverse
possession.27 The petitioner also explained that the delayed filing of the civil action with
the RTC was due to Martial Law and the Ilaga-Blackshirt Troubles in the then Province of
Cotabato.28
The respondent, however, counters that: (1) the petitioner is not an illiterate non-
Christian and he, in fact, was able to execute, sign in Arabic, and understand the terms
and conditions of the Special Power of Attorney dated July 23, 1996 issued in favor of
Baikong Akang (Baikong); (2) the Deed of Sale is valid as its terms and conditions were
reviewed by the Municipal Council of Isulan and the Provincial Board of Cotabato; and (3)
the Deed of Sale is a contract of sale and not a contract to sell.29
Ruling of the Court
The Court finds the petition devoid of merit.
Issue Raised for the First Time on Appeal is Barred by Estoppel
The petitioner asserts that the Deed of Sale was notarized by Atty. Gualberto B. Baclig
who was not authorized to administer the same, hence, null and void. This argument
must be rejected as it is being raised for the first time only in this petition. In his
arguments before the RTC and the CA, the petitioner focused mainly on the validity and
the nature of the Deed of Sale, and whether there was payment of the purchase
price. The rule is settled that issues raised for the first time on appeal and not raised in
the proceedings in the lower court are barred by estoppel. To consider the alleged facts
and arguments raised belatedly would amount to trampling on the basic principles of fair
play, justice, and due process.30 Accordingly, the petitioner’s attack on the validity of the
Deed of Sale vis-à-vis its compliance with the 2004 New Notarial Law must be
disregarded.31
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The Deed of Sale is a Valid Contract of Sale
The petitioner alleges that the Deed of Sale is merely an agreement to sell, which was
not perfected due to non-payment of the stipulated consideration.32 The respondent,
meanwhile, claims that the Deed of Sale is a valid and perfected contract of absolute
sale.33
A contract of sale is defined under Article 1458 of the Civil Code:cralavvonlinelawlibrary

By the contract of sale, one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other to pay therefore a price
certain in money or its equivalent.
The elements of a contract of sale are: (a) consent or meeting of the minds, that is,
consent to transfer ownership in exchange for the price; (b) determinate subject matter;
and (c) price certain in money or its equivalent.34
A contract to sell, on the other hand, is defined by Article 1479 of the Civil
Code:cralavvonlinelawlibrary
[A] bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the prospective buyer upon fulfillment of
the condition agreed upon, that is, full payment of the purchase price.
In a contract of sale, the title to the property passes to the buyer upon the delivery of
the thing sold, whereas in a contract to sell, the ownership is, by agreement, retained by
the seller and is not to pass to the vendee until full payment of the purchase price.35
The Deed of Sale executed by the petitioner and the respondent is a perfected contract
of sale, all its elements being present. There was mutual agreement between them to
enter into the sale, as shown by their free and voluntary signing of the contract. There
was also an absolute transfer of ownership of the property by the petitioner to the
respondent as shown in the stipulation: “x x x I [petitioner] hereby sell, transfer, cede,
convey and assign as by these presents do have sold, transferred, ceded, conveyed and
assigned, x x x.”36 There was also a determinate subject matter, that is, the two-hectare
parcel of land as described in the Deed of Sale. Lastly, the price or consideration is at
Three Thousand Pesos (P3,000.00), which was to be paid after the execution of the
contract. The fact that no express reservation of ownership or title to the property can
be found in the Deed of Sale bolsters the absence of such intent, and the contract,
therefore, could not be one to sell. Had the intention of the petitioner been otherwise,
he could have: (1) immediately sought judicial recourse to prevent further construction
of the municipal building; or (2) taken legal action to contest the agreement.37 The
petitioner did not opt to undertake any of such recourses.
Payment of consideration or purchase price
The petitioner’s allegation of non-payment is of no consequence taking into account the

Municipal Voucher presented before the RTC, which proves payment by the respondent
of Three Thousand Pesos (P3,000.00). The petitioner, notwithstanding the lack of the
Municipal Treasurer’s approval, admitted that the signature appearing on the Municipal
Voucher was his and he is now estopped from disclaiming payment.
Even assuming, arguendo, that the petitioner was not paid, such non payment is
immaterial and has no effect on the validity of the contract of sale. A contract of sale is
a consensual contract and what is required is the meeting of the minds on the object and
the price for its perfection and validity.38 In this case, the contract was perfected the
moment the petitioner and the respondent agreed on the object of the sale – the two-
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hectare parcel of land, and the price – Three Thousand Pesos (P3,000.00). Non-payment
of the purchase price merely gave rise to a right in favor of the petitioner to either demand
specific performance or rescission of the contract of sale.39
Sections 145 and 146 of the Administrative Code of Mindanao and Sulu, and Section 120
of the PLA, as amended, are not applicable
The petitioner relies on the foregoing laws in assailing the validity of the Deed of Sale,
claiming that the contract lacks executive approval and that he is an illiterate non-
Christian to whom the benefits of Sections 145 and 146 of the Administrative Code of
Mindanao and Sulu should apply.
Section 145 of the Administrative Code of Mindanao and Sulu essentially provides for the
requisites of the contracts entered into by a person with any Moro or other non-Christian
inhabitants.40 Section 146,41meanwhile, provides that contracts entered into in violation
of Section 145 are void. These provisions aim to safeguard the patrimony of the less
developed ethnic groups in the Philippines by shielding them against imposition and fraud
when they enter into agreements dealing with realty.42
Section 120 of the PLA (Commonwealth Act No. 141) affords the same protection.43 R.A.
No. No. 387244likewise provides that conveyances and encumbrances made by illiterate
non-Christian or literate non-Christians where the instrument of conveyance or
encumbrance is in a language not understood by said literate non-Christians shall not be
valid unless duly approved by the Chairman of the Commission on National Integration.
In Jandoc-Gatdula v. Dimalanta,45 however, the Court categorically stated that while the
purpose of Sections 145 and 146 of the Administrative Code of Mindanao and Sulu in
requiring executive approval of contracts entered into by cultural minorities is indeed to
protect them, the Court cannot blindly apply that law without considering how the parties
exercised their rights and obligations. In this case, Municipality Resolution No. 70, which
approved the appropriation of P3,000.00, was, in fact, accepted by the Provincial Board
of Cotabato. In approving the appropriation of P3,000.00, the Municipal Council of Isulan
and the Provincial Board of Cotabato, necessarily, scrutinized the Deed of Sale containing
the terms and conditions of the sale. Moreover, there is nothing on record that proves
that the petitioner was duped into signing the contract, that he was taken advantage of
by the respondent and that his rights were not protected.
The court’s duty to protect the native vendor, however, should not be carried out to such
an extent as to deny justice to the vendee when truth and justice happen to be on the
latter’s side. The law cannot be used to shield the enrichment of one at the expense of
another. More important, the law will not be applied so stringently as to render ineffective
a contract that is otherwise valid, except for want of approval by the CNI. This principle
holds, especially when the evils sought to be avoided are not obtaining.46
The Court must also reject the petitioner’s claim that he did not understand the import
of the agreement. He alleged that he signed in Arabic the Deed of Sale, the Joint Affidavit
and the Municipal Voucher, which were all in English, and that he was not able to
comprehend its contents. Records show the contrary. The petitioner, in fact, was able
to execute in favor of Baikong a Special Power of Attorney (SPA) dated July 23, 1996,
which was written in English albeit signed by the petitioner in Arabic. Said SPA authorized
Baikong, the petitioner’s sister, to follow-up the payment of the purchase price. This
raises doubt on the veracity of the petitioner’s allegation that he does not understand the
language as he would not have been able to execute the SPA or he would have prevented
its enforcement.
The Petitioner’s Claim for Recovery of Possession and Ownership is Barred by Laches
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Laches has been defined as the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence could or should have been
done earlier.47 It should be stressed that laches is not concerned only with the mere
lapse of time.48
As a general rule, an action to recover registered land covered by the Torrens System
may not be barred by laches.49 Neither can laches be set up to resist the enforcement
of an imprescriptible legal right.50 In exceptional cases, however, the Court allowed
laches as a bar to recover a titled property. Thus, in Romero v. Natividad,51 the Court
ruled that laches will bar recovery of the property even if the mode of transfer was
invalid. Likewise, in Vda. de Cabrera v. CA,52 the Court ruled:cralavvonlinelawlibrary
In our jurisdiction, it is an enshrined rule that even a registered owners of property may
be barred from recovering possession of property by virtue of laches. Under the Land
Registration Act (now the Property Registration Decree), no title to registered land in
derogation to that of the registered owner shall be acquired by prescription or adverse
possession. The same is not true with regard to laches. x x x.53 (Citation omitted and
emphasis supplied)
More particularly, laches will bar recovery of a property, even if the mode of transfer used
by an alleged member of a cultural minority lacks executive approval.54 Thus, in Heirs of
Dicman v. Cariño,55 the Court upheld the Deed of Conveyance of Part Rights and Interests
in Agricultural Land executed by Ting-el Dicman in favor of Sioco Cariño despite lack of
executive approval. The Court stated that “despite the judicial pronouncement that the
sale of real property by illiterate ethnic minorities is null and void for lack of approval of
competent authorities, the right to recover possession has nonetheless been barred
through the operation of the equitable doctrine of laches.”56 Similarly in this case, while
the respondent may not be considered as having acquired ownership by virtue of its long
and continued possession, nevertheless, the petitioner’s right to recover has been
converted into a stale demand due to the respondent’s long period of possession and by
the petitioner’s own inaction and neglect.57 The Court cannot accept the petitioner’s
explanation that his delayed filing and assertion of rights was due to Martial Law and the
Cotabato Ilaga-Black Shirt Troubles. The Martial Law regime was from 1972 to 1986,
while the Ilaga-Black Shirt Troubles were from the 1970s to the 1980s. The petitioner
could have sought judicial relief, or at the very least made his demands to the respondent,
as early as the third quarter of 1962 after the execution of the Deed of Sale and before
the advent of these events. Moreover, even if, as the petitioner claims, access to courts
were restricted during these times, he could have immediately filed his claim after Martial
Law and after the Cotabato conflict has ended. The petitioner’s reliance on the Court’s
treatment of Martial Law as force majeure that suspended the running of prescription in
Development Bank of the Philippines v. Pundogar58 is inapplicable because the Court’s
ruling therein pertained to prescription and not laches. Consequently, the petitioner’s
lengthy inaction sufficiently warrants the conclusion that he acquiesced or conformed to
the sale.
Vigilantibus sed non dormientibus jura subverniunt. The law aids the vigilant, not those
who sleep on their rights. This legal percept finds application in the petitioner’s case.
WHEREFORE, the appeal is DENIED. The Decision dated April 25, 2008 and Resolution
dated October 29, 2008 of the Court of Appeals Mindanao Station in CA-G.R. CV No.
00156 are AFFIRMED.
SO ORDERED.
Sereno, C.J. (Chairperson), Leonardo-De Castro, Bersamin, and Villarama, Jr. JJ., concur.
LLB-II
CASE DIGEST
ALI AKANG vs. MUNICIPALITY OF ISULAN, SULTAN KUDARAT PROVINCE

G.R. No. 186014 June 26, 2013
FACTS:
Ali Akang (petitioner) is a member of the national and cultural community

belonging to the Maguindanaon tribe of Isulan, Province of Sultan Kudarat and the
registered owner of parcel of land located at Isulan, Sultan Kudarat, with an area of
20,030 square meters.
Sometime in 1962, a two-hectare portion of the property was sold by the petitioner
to the Municipality of Isulan, Province of Sultan Kudarat (respondent) through then Isulan
Mayor Datu Ampatuan under a Deed of Sale executed on July 18, 1962 for P3,000 to be
used purposely and exclusively as a Government Center site. The respondent immediately
took possession of the property and began construction of the municipal building.
Thirty-nine (39) years later or on October 26, 2001, the petitioner, together with
his wife, Patao Talipasan, filed a civil action for Recovery of Possession of Subject Property
and/or Quieting of Title thereon and Damages against the respondent, represented by its
Municipal Mayor, et al.
In his complaint, the petitioner alleged, among others, that the agreement was
one to sell, which was not consummated as the purchase price was not paid.
In its answer, the respondent denied the petitioner’s allegations, claiming, among
others: that the petitioner’s cause of action was already barred by laches; that the Deed
of Sale was valid; and that it has been in open, continuous and exclusive possession of
the property for forty (40) years.
ISSUE:
1. Whether the Deed of Sale dated July 18, 1962 is a valid and perfected contract of
sale;
2. Whether there was payment of consideration by the respondent;
3. Whether the petitioner’s claim is barred by laches
4. Whether the petitioner is entitled to recover ownership and possession of the
property in dispute.
HELD:
The Deed of Sale is a Valid Contract of Sale.
By the contract of sale, one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other to pay therefore a
price certain in money or its equivalent.The elements of a contract of sale are: (a) consent
or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
(b) determinate subject matter; and (c) price certain in money or its equivalent.
A contract to sell, on the other hand, is a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
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thereof to the prospective buyer, binds himself to sell the said property exclusively to the
prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of
the purchase price.
In a contract of sale, the title to the property passes to the buyer upon the delivery
of the thing sold, whereas in a contract to sell, the ownership is, by agreement, retained
by the seller and is not to pass to the vendee until full payment of the purchase price.
The Deed of Sale executed by the petitioner and the respondent is a perfected
contract of sale, all its elements being present. There was mutual agreement between
them to enter into the sale, as shown by their free and voluntary signing of the contract.
There was also an absolute transfer of ownership of the property by the petitioner to the
respondent as shown in the stipulation: "x x x I petitioner hereby sell, transfer, cede,
convey and assign as by these presents do have sold, transferred, ceded, conveyed and
assigned, x x x." There was also a determine subject matter, that is, the two-hectare
parcel of land as described in the Deed of Sale. Lastly, the price or consideration is at
Three Thousand Pesos (P3,000.00), which was to be paid after the execution of the
contract. The fact that no express reservation of ownership or title to the property can
be found in the Deed of Sale bolsters the absence of such intent, and the contract,
therefore, could not be one to sell. Had the intention of the petitioner been otherwise, he
could have: (1) immediately sought judicial recourse to prevent further construction of
the municipal building; or (2) taken legal action to contest the agreement. The petitioner
did not opt to undertake any of such recourses.
The petitioner’s allegation of non-payment is of no consequence taking into

account the Municipal Voucher presented before the RTC, which proves payment by the
respondent of Three Thousand Pesos (P3,000.00). The petitioner, notwithstanding the
lack of the Municipal Treasurer’s approval, admitted that the signature appearing on the
Municipal Voucher was his and he is now estopped from disclaiming payment.
Even assuming, arguendo, that the petitioner was not paid, such non payment is
immaterial and has no effect on the validity of the contract of sale. A contract of sale is
a consensual contract and what is required is the meeting of the minds on the object and
the price for its perfection and validity. In this case, the contract was perfected the
moment the petitioner and the respondent agreed on the object of the sale – the two-
hectare parcel of land, and the price – Three Thousand Pesos (P3,000.00). Non-payment
of the purchase price merely gave rise to a right in favor of the petitioner to either demand
specific performance or rescission of the contract of sale.
The Petitioner’s Claim for Recovery of Possession and Ownership is Barred by

Laches. Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence could or should
have been done earlier. It should be stressed that laches is not concerned only with the
mere lapse of time.
As a general rule, an action to recover registered land covered by the Torrens

System may not be barred by laches.Neither can laches be set up to resist the
enforcement of an imprescriptible legal right. In exceptional cases, however, the Court
allowed laches as a bar to recover a titled property. Thus, in Romero v. Natividad, the
Court ruled that laches will bar recovery of the property even if the mode of transfer was
invalid.
More particularly, laches will bar recovery of a property, even if the mode of
transfer used by an alleged member of a cultural minority lacks executive approval. Thus,
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in Heirs of Dicman v. Cariño, the Court upheld the Deed of Conveyance of Part Rights
and Interests in Agricultural Land executed by Ting-el Dicman in favor of Sioco Cariño
despite lack of executive approval. The Court stated that "despite the judicial
pronouncement that the sale of real property by illiterate ethnic minorities is null and void
for lack of approval of competent authorities, the right to recover possession has
nonetheless been barred through the operation of the equitable doctrine of laches."
Similarly in this case, while the respondent may not be considered as having acquired
ownership by virtue of its long and continued possession, nevertheless, the petitioner’s
right to recover has been converted into a stale demand due to the respondent’s long
period of possession and by the petitioner’s own inaction and neglect. The Court cannot
accept the petitioner’s explanation that his delayed filing and assertion of rights was due
to Martial Law and the Cotabato Ilaga-Black Shirt Troubles. The Martial Law regime was
from 1972 to 1986, while the Ilaga-Black Shirt Troubles were from the 1970s to the
1980s. The petitioner could have sought judicial relief, or at the very least made his
demands to the respondent, as early as the third quarter of 1962 after the execution of
the Deed of Sale and before the advent of these events. Moreover, even if, as the
petitioner claims, access to courts were restricted during these times, he could have
immediately filed his claim after Martial Law and after the Cotabato conflict has ended.
The petitioner's reliance on the Court's treatment of Martial Law as force majeure that
suspended the running of prescription in Development Bank of the Philippines v.
Pundogar is inapplicable because the Court's ruling therein pertained to prescription and
not laches. Consequently, the petitioner's lengthy inaction sufficiently warrants the
conclusion that he acquiesced or conformed to the sale.
Vigilantibus sed non dormientibus jura subverniunt. The law aids the vigilant, not those
who sleep on their rights. This legal percept finds application in the petitioner's case.
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G.R. No. 189145 December 4, 2013
OPTIMUM DEVELOPMENT BANK, Petitioner,

vs.
SPOUSES BENIGNO V. JOVELLANOS and LOURDES R.
JOVELLANOS, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated May 29, 2009
and Resolution 3 dated August 10, 2009 of the Court of Appeals (CA) in CA-G.R. SP No.
104487 which reversed the Decision4 dated December 27, 2007 of the Regional Trial
Court of Caloocan City, Branch 128 (RTC) in Civil Case No. C-21867 that, in turn, affirmed
the Decision5 dated June 8, 2007 of the Metropolitan Trial Court, Branch 53 of that same
city (MeTC) in Civil Case No. 06-28830 ordering respondents-spouses Benigno and
Lourdes Jovellanos (Sps. Jovellanos) to, inter alia, vacate the premises of the property
subject of this case.
The Facts
On April 26, 2005, Sps. Jovellanos entered into a Contract to Sell 6 with Palmera Homes,
Inc. (Palmera Homes) for the purchase of a residential house and lot situated in Block 3,
Lot 14, Villa Alegria Subdivision, Caloocan City (subject property) for a total consideration
of ₱1,015,000.00. Pursuant to the contract, Sps. Jovellanos took possession of the subject
property upon a down payment of ₱91,500.00, undertaking to pay the remaining balance
of the contract price in equal monthly installments of ₱13,107.00 for a period of 10 years
starting June 12, 2005.7
On August 22, 2006, Palmera Homes assigned all its rights, title and interest in the
Contract to Sell in favor of petitioner Optimum Development Bank (Optimum) through a
Deed of Assignment of even date.8
On April 10, 2006, Optimum issued a Notice of Delinquency and Cancellation of Contract
to Sell9 for Sps. Jovellanos’s failure to pay their monthly installments despite several
written and verbal notices.10
In a final Demand Letter dated May 25, 2006,11 Optimum required Sps. Jovellanos to
vacate and deliver possession of the subject property within seven (7) days which,
however, remained unheeded. Hence, Optimum filed, on November 3, 2006, a complaint
for unlawful detainer12 before the MeTC, docketed as Civil Case No. 06-28830. Despite
having been served with summons, together with a copy of the complaint,13 Sps.
Jovellanos failed to file their answer within the prescribed reglementary period, thus
prompting Optimum to move for the rendition of judgment.14
Thereafter, Sps. Jovellanos filed their opposition with motion to admit answer,
questioning the jurisdiction of the court, among others. Further, they filed a Motion to
Reopen and Set the Case for Preliminary Conference, which the MeTC denied.
The MeTC Ruling

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In a Decision15 dated June 8, 2007, the MeTC ordered Sps. Jovellanos to vacate the
subject property and pay Optimum reasonable compensation in the amount of ₱5,000.00
for its use and occupation until possession has been surrendered. It held that Sps.
Jovellanos’s possession of the said property was by virtue of a Contract to Sell which had
already been cancelled for non-payment of the stipulated monthly installment payments.
As such, their "rights of possession over the subject property necessarily terminated or
expired and hence, their continued possession thereof constitute[d] unlawful detainer."16
Dissatisfied, Sps. Jovellanos appealed to the RTC, claiming that Optimum counsel made
them believe that a compromise agreement was being prepared, thus their decision not
to engage the services of counsel and their concomitant failure to file an answer.17
They also assailed the jurisdiction of the MeTC, claiming that the case did not merely
involve the issue of physical possession but rather, questions arising from their rights
under a contract to sell which is a matter that is incapable of pecuniary estimation and,
therefore, within the jurisdiction of the RTC.18
The RTC Ruling
In a Decision19 dated December 27, 2007, the RTC affirmed the MeTC’s judgment, holding
that the latter did not err in refusing to admit Sps. Jovellanos’ s belatedly filed answer
considering the mandatory period for its filing. It also affirmed the MeTC’s finding that
the action does not involve the rights of the respective parties under the contract but
merely the recovery of possession by Optimum of the subject property after the spouses’
default.20
Aggrieved, Sps. Jovellanos moved for reconsideration which was, however, denied in a
Resolution21 dated June 27, 2008. Hence, the petition before the CA reiterating that the
RTC erred in affirming the decision of the MeTC with respect to:
(a) the non-admission of their answer to the complaint; and
(b) the jurisdiction of the MeTC over the complaint for unlawful detainer.22
The CA Ruling
In an Amended Decision23 dated May 29, 2009, the CA reversed and set aside the RTC’s
decision, ruling to dismiss the complaint for lack of jurisdiction. It found that the
controversy does not only involve the issue of possession but also the validity of the
cancellation of the Contract to Sell and the determination of the rights of the parties
thereunder as well as the governing law, among others, Republic Act No. (RA) 6552.24
Accordingly, it concluded that the subject matter is one which is incapable of pecuniary
estimation and thus, within the jurisdiction of the RTC.25
Undaunted, Optimum moved for reconsideration which was denied in a

Resolution26 dated August 10, 2009. Hence, the instant petition, submitting that the case
is one for unlawful detainer, which falls within the exclusive original jurisdiction of the
municipal trial courts, and not a case incapable of pecuniary estimation cognizable solely
by the regional trial courts.
The Court’s Ruling

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The petition is meritorious. What is determinative of the nature of the action and the
court with jurisdiction over it are the allegations in the complaint and the character of the
relief sought, not the defenses set up in an answer.27
A complaint sufficiently alleges a cause of action for unlawful detainer if it recites that:
(a) initially, possession of the property by the defendant was by contract with or
by tolerance of the plaintiff;
(b) eventually, such possession became illegal upon notice by plaintiff to defendant
of the termination of the latter's right of possession;
(c) thereafter, defendant remained in possession of the property and deprived

plaintiff of the enjoyment thereof; and
(d) within one year from the last demand on defendant to vacate the property,
plaintiff instituted the complaint for ejectment.28
Corollarily, the only issue to be resolved in an unlawful detainer case is physical or

material possession of the property involved, independent of any claim of ownership by
any of the parties involved.29
In its complaint, Optimum alleged that it was by virtue of the April 26, 2005 Contract to
Sell that Sps. Jovellanos were allowed to take possession of the subject property.
However, since the latter failed to pay the stipulated monthly installments,
notwithstanding several written and verbal notices made upon them, it cancelled the said
contract as per the Notice of Delinquency and Cancellation dated April 10, 2006. When
Sps. Jovellanos refused to vacate the subject property despite repeated demands,
Optimum instituted the present action for unlawful detainer on November 3, 2006, or
within one year from the final demand made on May 25, 2006.
While the RTC upheld the MeTC’s ruling in favor of Optimum, the CA, on the other hand,
declared that the MeTC had no jurisdiction over the complaint for unlawful detainer,
reasoning that the case involves a matter which is incapable of pecuniary estimation –
i.e., the validity of the cancellation of the Contract to Sell and the determination of the
rights of the parties under the contract and law – and hence, within the jurisdiction of
the RTC. The Court disagrees. Metropolitan Trial Courts are conditionally vested with
authority to resolve the question of ownership raised as an incident in an ejectment case
where the determination is essential to a complete adjudication of the issue of
possession.30 Concomitant to the ejectment court’s authority to look into the claim of
ownership for purposes of resolving the issue of possession is its authority to interpret
the contract or agreement upon which the claim is premised. Thus, in the case of Oronce
v. CA,31 wherein the litigants’ opposing claims for possession was hinged on whether their
written agreement reflected the intention to enter into a sale or merely an equitable
mortgage, the Court affirmed the propriety of the ejectment court’s examination of the
terms of the agreement in question by holding that, "because metropolitan trial courts
are authorized to look into the ownership of the property in controversy in ejectment
cases, it behooved MTC Branch 41 to examine the bases for petitioners’ claim of
ownership that entailed interpretation of the Deed of Sale with Assumption of
Mortgage."32 Also, in Union Bank of the Philippines v. Maunlad Homes, Inc.33 (Union
Bank), citing Sps. Refugia v. CA,34 the Court declared that MeTCs have authority to
interpret contracts in unlawful detainer cases, viz.:35
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The authority granted to the MeTC to preliminarily resolve the issue of ownership to
determine the issue of possession ultimately allows it to interpret and enforce the contract
or agreement between the plaintiff and the defendant. To deny the MeTC jurisdiction
over a complaint merely because the issue of possession requires the interpretation of a
contract will effectively rule out unlawful detainer as a remedy. As stated, in an action for
unlawful detainer, the defendant’s right to possess the property may be by virtue of a
contract, express or implied;
corollarily, the termination of the defendant’s right to possess would be governed by the
terms of the same contract.
Interpretation of the contract between the plaintiff and the defendant is inevitable
because it is the contract that initially granted the defendant the right to possess the
property; it is this same contract that the plaintiff subsequently claims was violated or
extinguished, terminating the defendant’s right to possess. We ruled in Sps. Refugia v.
CA that – where the resolution of the issue of possession hinges on a determination of
the validity and interpretation of the document of title or any other contract on which the
claim of possession is premised, the inferior court may likewise pass upon these issues.
The MeTC’s ruling on the rights of the parties based on its interpretation of their contract
is, of course, not conclusive, but is merely provisional and is binding only with respect to
the issue of possession. (Emphases supplied; citations omitted)
In the case at bar, the unlawful detainer suit filed by Optimum against Sps. Jovellanos
for illegally withholding possession of the subject property is similarly premised upon the
cancellation or termination of the Contract to Sell between them. Indeed, it was well
within the jurisdiction of the MeTC to consider the terms of the parties’ agreement in
order to ultimately determine the factual bases of Optimum’s possessory claims over the
subject property. Proceeding accordingly, the MeTC held that Sps. Jovellanos’s non-
payment of the installments due had rendered the Contract to Sell without force and
effect, thus depriving the latter of their right to possess the property subject of said
contract.36 The foregoing disposition aptly squares with existing jurisprudence. As the
Court similarly held in the Union Bank case, the seller’s cancellation of the contract to sell
necessarily extinguished the buyer’s right of possession over the property that was the
subject of the terminated agreement.37
Verily, in a contract to sell, the prospective seller binds himself to sell the property subject
of the agreement exclusively to the prospective buyer upon fulfillment of the condition
agreed upon which is the full payment of the purchase price but reserving to himself the
ownership of the subject property despite delivery thereof to the prospective buyer.38
The full payment of the purchase price in a contract to sell is a suspensive condition, the
non-fulfillment of which prevents the prospective seller’s obligation to convey title from
becoming effective,39 as in this case. Further, it is significant to note that given that the
Contract to Sell in this case is one which has for its object real property to be sold on an
installment basis, the said contract is especially governed by – and thus, must be
examined under the provisions of – RA 6552, or the "Realty Installment Buyer Protection
Act", which provides for the rights of the buyer in case of his default in the payment of
succeeding installments. Breaking down the provisions of the law, the Court, in the case
of Rillo v. CA,40 explained the mechanics of cancellation under RA 6552 which are based
mainly on the amount of installments already paid by the buyer under the subject
contract, to wit:41
LLB-II
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. 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. x x x 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.
(Emphasis and underscoring supplied)
Pertinently, since Sps. Jovellanos failed to pay their stipulated monthly installments as
found by the MeTC, the Court examines Optimum’s compliance with Section 4 of RA 6552,
as above-quoted and highlighted, which is the provision applicable to buyers who have
paid less than two (2) years-worth of installments. Essentially, the said provision provides
for three (3) requisites before the seller may actually cancel the subject contract: first, the
seller shall give the buyer a 60-day grace period to be reckoned from the date the
installment became due; second, the seller must give the buyer a notice of
cancellation/demand for rescission by notarial act if the buyer fails to pay the
installments due at the expiration of the said grace period; and third, the seller may
actually cancel the contract only after thirty (30) days from the buyer’s receipt of the said
notice of cancellation/demand for rescission by notarial act. In the present case, the 60-
day grace period automatically operated42 in favor of the buyers, Sps. Jovellanos, and
took effect from the time that the maturity dates of the installment payments lapsed.
With the said grace period having expired bereft of any installment payment on the part
of Sps. Jovellanos,43 Optimum then issued a notarized Notice of Delinquency and
Cancellation of Contract on April 10, 2006. Finally, in proceeding with the actual
cancellation of the contract to sell, Optimum gave Sps. Jovellanos an additional thirty
(30) days within which to settle their arrears and reinstate the contract, or sell or assign
their rights to another.44
LLB-II
It was only after the expiration of the thirty day (30) period did Optimum treat the
contract to sell as effectively cancelled – making as it did a final demand upon Sps.
Jovellanos to vacate the subject property only on May 25, 2006. Thus, based on the
foregoing, the Court finds that there was a valid and effective cancellation of the Contract
to Sell in accordance with Section 4 of RA 6552 and since Sps. Jovellanos had already
lost their right to retain possession of the subject property as a consequence of such
cancellation, their refusal to vacate and turn over possession to Optimum makes out a
valid case for unlawful detainer as properly adjudged by the MeTC.
WHEREFORE, the petition is GRANTED. The Decision dated May 29, 2009 and Resolution
dated August 10, 2009 of the Court of Appeals in CA-G.R. SP No. 104487 are SET ASIDE.
The Decision dated June 8, 2007 of Metropolitan Trial Court, Branch 53, Caloocan City in
Civil Case No. 06-28830 is hereby REINSTATED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:
CASE DIGEST
OPTIMUM DEVELOPMENT BANK vs. SPOUSES JOVELLANOS

G.R. No. 189145, December 4, 2013, 711 SCRA 548
FACTS: Spouses Jovellanos entered into a Contract to Sell with Palmera Homes for the
purchase of a residential house and lot payable for a period of 10 years.
Later, Palmera Homes assigned all its rights, title and interest in the Contract to Sell in
favor of Optimum.
A year later, Optimum issued a Notice of Delinquency and Cancellation of Contract to Sell
to Spouses Jovellanos for their failure to pay their monthly installments despite several
written and verbal demands.
A month later, a final Demand Letter by Optimum required Spouses Jovellanos to vacate
and deliver possession of the subject property within seven (7) days, which however
remained unheeded.
Optimum instituted the action for unlawful detainer within one year from the final demand
to vacate.
ISSUE: Whether the validity of the cancellation of the Contract to Sell under RA 6552
lies within the competence or jurisdiction of the Metropolitan Trial Court (MeTC).
HELD: YES. Under RA 6552, the mechanics of cancellation of Contract to Sell is based
on the amount of installments already paid by the buyer under the said contract.
Since Jovellanos had paid less than two years in installments, Section 4 of RA 6552
provides for three (3) requisites before the seller may actually cancel the subject contract:
first, the buyer shall give the buyer a 60-day grace period to be reckoned from the date
the installment became due; second, the seller must give the buyer a notice of
cancellation/demand for rescission by notarial act if the buyer fails to pay the installments
due at the expiration of the said grace period; and
third, the seller may actually cancel the contract only after 30 days from the buyer’s
receipt of the said notice of cancellation/demand for rescission by notarial act.
There was a valid and effective cancellation of the Contract to Sell in accordance with
Section 4 of RA 6552 and since Spouses Jovellanos had already lost their right to retain
possession of the subject property as a consequence of such cancellation, their refusal to
vacate and turn over possession to Optimum makes out a valid case for unlawful detainer.
LLB-II
LLB-II
G.R. No. 200602 December 11, 2013
ACE FOODS, INC., Petitioner,

vs.
MICRO PACIFIC TECHNOLOGIES CO., LTD.1, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari2are the Decision3 dated October 21, 2011
and Resolution4 dated February 8, 2012 of the Court of Appeals (CA) in CA-G.R. CV No.
89426 which reversed and set aside the Decision5 dated February 28, 2007 of the
Regional Trial Court of Makati, Branch 148 (RTC) in Civil Case No. 02-1248, holding
petitioner ACE Foods, Inc. (ACE Foods) liable to respondent Micro Pacific Technologies
Co., Ltd. (MTCL) for the payment of Cisco Routers and Frame Relay Products (subject
products) amounting to ₱646,464.00 pursuant to a perfected contract of sale.
The Facts
ACE Foods is a domestic corporation engaged in the trading and distribution of consumer
goods in wholesale and retail bases,6 while MTCL is one engaged in the supply of
computer hardware and equipment.7
On September 26, 2001, MTCL sent a letter-proposal8 for the delivery and sale of the
subject products to be installed at various offices of ACE Foods. Aside from the itemization
of the products offered for sale, the said proposal further provides for the following
terms, viz.:9
TERMS : Thirty (30) days upon delivery
VALIDITY : Prices are based on current dollar rate and subject to changes without prior
notice.
DELIVERY : Immediate delivery for items on stock, otherwise thirty (30) to forty-five days
upon receipt of [Purchase Order]
WARRANTY : One (1) year on parts and services. Accessories not included in warranty.
On October 29, 2001, ACE Foods accepted MTCL’s proposal and accordingly issued
Purchase Order No. 10002310(Purchase Order) for the subject products amounting to
₱646,464.00 (purchase price). Thereafter, or on March 4, 2002, MTCL delivered the said
products to ACE Foods as reflected in Invoice No. 7733 11 (Invoice Receipt). The fine print
of the invoice states, inter alia, that "[t]itle to sold property is reserved in MICROPACIFIC
TECHNOLOGIES CO., LTD. until full compliance of the terms and conditions of above and
payment of the price"12 (title reservation stipulation). After delivery, the subject products
were then installed and configured in ACE Foods’s premises. MTCL’s demands against
ACE Foods to pay the purchase price, however, remained unheeded.13 Instead of paying
the purchase price, ACE Foods sent MTCL a Letter14 dated September 19, 2002, stating
that it "ha[s] been returning the [subject products] to [MTCL] thru [its] sales
representative Mr. Mark Anteola who has agreed to pull out the said [products] but had
failed to do so up to now."
Eventually, or on October 16, 2002, ACE Foods lodged a Complaint15 against MTCL before
the RTC, praying that the latter pull out from its premises the subject products since
LLB-II
MTCL breached its "after delivery services" obligations to it, particularly, to: ( a) install
and configure the subject products; (b) submit a cost benefit study to justify the purchase
of the subject products; and (c) train ACE Foods’s technicians on how to use and maintain
the subject products. 16 ACE Foods likewise claimed that the subject products MTCL
delivered are defective and not working.17
For its part, MTCL, in its Answer with Counterclaim,18 maintained that it had duly complied
with its obligations to ACE Foods and that the subject products were in good working
condition when they were delivered, installed and configured in ACE Foods’s premises.
Thereafter, MTCL even conducted a training course for ACE Foods’s
representatives/employees; MTCL, however, alleged that there was actually no
agreement as to the purported "after delivery services." Further, MTCL posited that ACE
Foods refused and failed to pay the purchase price for the subject products despite the
latter’s use of the same for a period of nine (9) months. As such, MTCL prayed that ACE
Foods be compelled to pay the purchase price, as well as damages related to the
transaction.19
The RTC Ruling
On February 28, 2007, the RTC rendered a Decision, 20 directing MTCL to remove the
subject products from ACE Foods’s premises and pay actual damages and attorney fees
in the amounts of ₱200,000.00 and ₱100,000.00, respectively.21
At the outset, it observed that the agreement between ACE Foods and MTCL is in the
nature of a contract to sell. Its conclusion was based on the fine print of the Invoice
Receipt which expressly indicated that "title to sold property is reserved in MICROPACIFIC
TECHNOLOGIES CO., LTD. until full compliance of the terms and conditions of above and
payment of the price," noting further that in a contract to sell, the prospective seller
explicitly reserves the transfer of title to the prospective buyer, and said transfer is
conditioned upon the full payment of the purchase price.22 Thus, notwithstanding the
execution of the Purchase Order and the delivery and installation of the subject products
at the offices of ACE Foods, by express stipulation stated in the Invoice Receipt issued by
MTCL and signed by ACE Foods, i.e., the title reservation stipulation, it is still the former
who holds title to the products until full payment of the purchase price therefor. In this
relation, it noted that the full payment of the price is a positive suspensive condition, the
non-payment of which prevents the obligation to sell on the part of the seller/vendor from
materializing at all.23 Since title remained with MTCL, the RTC therefore directed it to
withdraw the subject products from ACE Foods’s premises. Also, in view of the foregoing,
the RTC found it unnecessary to delve into the allegations of breach since the non-
happening of the aforesaid suspensive condition ipso jure prevented the obligation to sell
from arising.24
Dissatisfied, MTCL elevated the matter on appeal.25
The CA Ruling
In a Decision26 dated October 21, 2011, the CA reversed and set aside the RTC’s ruling,
ordering ACE Foods to pay MTCL the amount of ₱646,464.00, plus legal interest at the
rate of 6% per annum to be computed from April 4, 2002, and attorney’s fees amounting
to ₱50,000.00.27
It found that the agreement between the parties is in the nature of a contract of sale,
observing that the said contract had been perfected from the time ACE Foods sent the
Purchase Order to MTCL which, in turn, delivered the subject products covered by the
LLB-II
Invoice Receipt and subsequently installed and configured them in ACE Foods’s
premises.28 Thus, considering that MTCL had already complied with its obligation, ACE
Foods’s corresponding obligation arose and was then duty bound to pay the agreed
purchase price within thirty (30) days from March 5, 2002.29 In this light, the CA
concluded that it was erroneous for ACE Foods not to pay the purchase price therefor,
despite its receipt of the subject products, because its refusal to pay disregards the very
essence of reciprocity in a contract of sale.30 The CA also dismissed ACE Foods’s claim
regarding MTCL’s failure to perform its "after delivery services" obligations since the
letter-proposal, Purchase Order and Invoice Receipt do not reflect any agreement to that
effect.31
Aggrieved, ACE Foods moved for reconsideration which was, however, denied in a
Resolution 32 dated February 8, 2012, hence, this petition.
The Issue Before the Court
The essential issue in this case is whether ACE Foods should pay MTCL the purchase price
for the subject products.
The Court’s Ruling
The petition lacks merit.
A contract is what the law defines it to be, taking into consideration its essential elements,
and not what the contracting parties call it.33 The real nature of a contract may be
determined from the express terms of the written agreement and from the
contemporaneous and subsequent acts of the contracting parties. However, in the
construction or interpretation of an instrument, the intention of the parties is
primordial and is to be pursued. The denomination or title given by the parties in
their contract is not conclusive of the nature of its contents.34
The very essence of a contract of sale is the transfer of ownership in exchange for
a price paid or promised. 35This may be gleaned from Article 1458 of the Civil Code
which defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership and to deliver a determinate thing, and the other to pay therefor
a price certain in money or its equivalent.
A contract of sale may be absolute or conditional. (Emphasis supplied)
Corollary thereto, a contract of sale is classified as a consensual contract, which means

that the sale is perfected by mere consent. No particular form is required for its validity.
Upon perfection of the contract, the parties may reciprocally demand performance, i.e.,
the vendee may compel transfer of ownership of the object of the sale, and the vendor
may require the vendee to pay the thing sold.36
In contrast, a contract to sell is defined as a bilateral contract whereby the prospective

seller, while expressly reserving the ownership of the property despite delivery thereof to
the prospective buyer, binds himself to sell the property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, i.e., the full payment of the purchase
price. A contract to sell may not even be considered as a conditional contract of
sale where the seller may likewise reserve title to the property subject of the sale until
the fulfillment of a suspensive condition, because in a conditional contract of sale, the
LLB-II
first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur.37
In this case, the Court concurs with the CA that the parties have agreed to a contract of
sale and not to a contract to sell as adjudged by the RTC. Bearing in mind its consensual
nature, a contract of sale had been perfected at the precise moment ACE Foods, as
evinced by its act of sending MTCL the Purchase Order, accepted the latter’s proposal to
sell the subject products in consideration of the purchase price of ₱646,464.00. From that
point in time, the reciprocal obligations of the parties – i.e., on the one hand, of MTCL to
deliver the said products to ACE Foods, and, on the other hand, of ACE Foods to pay the
purchase price therefor within thirty (30) days from delivery – already arose and
consequently may be demanded. Article 1475 of the Civil Code makes this clear:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
At this juncture, the Court must dispel the notion that the stipulation anent MTCL’s
reservation of ownership of the subject products as reflected in the Invoice Receipt, i.e.,
the title reservation stipulation, changed the complexion of the transaction from a
contract of sale into a contract to sell. Records are bereft of any showing that the said
stipulation novated the contract of sale between the parties which, to repeat, already
existed at the precise moment ACE Foods accepted MTCL’s proposal. To be sure,
novation, in its broad concept, may either be extinctive or modificatory. It is extinctive
when an old obligation is terminated by the creation of a new obligation that takes the
place of the former; it is merely modificatory when the old obligation subsists to the
extent it remains compatible with the amendatory agreement. In either case, however,
novation is never presumed, and the animus novandi, whether totally or partially, must
appear by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken.38
In the present case, it has not been shown that the title reservation stipulation appearing
in the Invoice Receipt had been included or had subsequently modified or superseded
the original agreement of the parties. The fact that the Invoice Receipt was signed by a
representative of ACE Foods does not, by and of itself, prove animus novandi since: (a)
it was not shown that the signatory was authorized by ACE Foods (the actual party to the
transaction) to novate the original agreement; (b) the signature only proves that the
Invoice Receipt was received by a representative of ACE Foods to show the fact of
delivery; and (c) as matter of judicial notice, invoices are generally issued at the
consummation stage of the contract and not its perfection, and have been even treated
as documents which are not actionable per se, although they may prove sufficient
delivery. 39 Thus, absent any clear indication that the title reservation stipulation was
actually agreed upon, the Court must deem the same to be a mere unilateral imposition
on the part of MTCL which has no effect on the nature of the parties’ original agreement
as a contract of sale. Perforce, the obligations arising thereto, among others, ACE Foods’s
obligation to pay the purchase price as well as to accept the delivery of the
goods,40 remain enforceable and subsisting.1âwphi1
As a final point, it may not be amiss to state that the return of the subject products
pursuant to a rescissory action41is neither warranted by ACE Foods’s claims of breach –
either with respect to MTCL’s breach of its purported "after delivery services" obligations
or the defective condition of the products - since such claims were not adequately proven
LLB-II
in this case. The rule is clear: each party must prove his own affirmative allegation; one
who asserts the affirmative of the issue has the burden of presenting at the trial such
amount of evidence required by law to obtain a favorable judgment, which in civil cases,
is by preponderance of evidence. 42 This, however, ACE Foods failed to observe as
regards its allegations of breach. Hence, the same cannot be sustained.
WHEREFORE, the petition is DENIED. Accordingly, the Decision dated October 21,
2011 and Resolution dated February 8, 2012 of the Court of Appeals in CA-G.R. CV No.
89426 are hereby AFFIRMED.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ARTURO D. BRION MARIANO C. DEL CASTILLO

Associate Justice Associate Justice
MARVIC MARIO VICTOR F. LEONEN*

Associate Justice
CASE DIGEST
ACE FOODS, INC., Petitioner, vs. MICRO PACIFIC TECHNOLOGIES CO., LTD.,
Respondent.
G.R. No. 200602 December 11, 2013
FACTS:
ACE Foods is a domestic corporation engaged in the trading and distribution of consumer
goods in wholesale and retail bases, while MTCL is one engaged in the supply of computer
hardware and equipment.
MTCL sent a letter-proposal for the delivery and sale of the subject products to be
installed at various offices of ACE Foods. Aside from the itemization of the products
offered for sale.
ACE Foods accepted MTCL’s proposal and accordingly issued Purchase Order No. 100023
(Purchase Order) for the subject products amounting to P646,464.00 (purchase price).
MTCL delivered the said products to ACE Foods. The fine print of the invoice states, inter
alia, that "[t]itle to sold property is reserved in MICROPACIFIC TECHNOLOGIES CO., LTD.
until full compliance of the terms and conditions of above and payment of the price" (title
reservation stipulation).
After delivery, the subject products were then installed and configured in ACE Foods’s
premises. MTCL’s demands against ACE Foods to pay the purchase price, however,
remained unheeded. Instead of paying the purchase price, ACE Foods sent MTCL a Letter
stating that it "ha[s] been returning the [subject products] to [MTCL] thru [its] sales
representative Mr. Mark Anteola who has agreed to pull out the said [products] but had
failed to do so up to now."
ACE Foods lodged a Complaint against MTCL before the RTC, praying that the latter pull
out from its premises the subject products since MTCL breached its "after delivery
LLB-II
services" obligations to it, particularly, to: (a) install and configure the subject products;
(b) submit a cost benefit study to justify the purchase of the subject products; and ( c)
train ACE Foods’s technicians on how to use and maintain the subject products. ACE
Foods likewise claimed that the subject products MTCL delivered are defective and not
working.
RTC rendered Decision in favor of ACE Foods. CA reversed and set aside the RTC’s ruling.
ISSUE: Whether ACE Foods should pay MTCL the purchase price for the subject products.
HELD: YES.
Parties agreed to a contract of sale. A contract of sale had been perfected at the precise
moment ACE Foods accepted the latter’s proposal to sell the subject products in
consideration of the purchase price of P646,464.00. From that point in time, the reciprocal
obligations of the parties (to deliver and to pay PP respectively) already arose and
consequently may be demanded.
At this juncture, the Court must dispel the notion that the stipulation anent MTCL’s
reservation of ownership of the subject products as reflected in the Invoice Receipt, i.e.,
the title reservation stipulation, changed the complexion of the transaction from a
contract of sale into a contract to sell. Records are bereft of any showing that the said
stipulation novated the contract of sale between the parties which, to repeat, already
existed at the precise moment ACE Foods accepted MTCL’s proposal. To be sure,
novation, in its broad concept, may either be extinctive or modificatory. It is extinctive
when an old obligation is terminated by the creation of a new obligation that takes the
place of the former; it is merely modificatory when the old obligation subsists to the
extent it remains compatible with the amendatory agreement. In either case, however,
novation is never presumed, and the animus novandi, whether totally or partially, must
appear by express agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken.
In the present case, it has not been shown that the title reservation stipulation appearing
in the Invoice Receipt had been included or had subsequently modified or superseded
the original agreement of the parties. The fact that the Invoice Receipt was signed by a
representative of ACE Foods does not, by and of itself, prove animus novandi since: (a)
it was not shown that the signatory was authorized by ACE Foods (the actual party to the
transaction) to novate the original agreement; (b) the signature only proves that the
Invoice Receipt was received by a representative of ACE Foods to show the fact of
delivery; and (c) as matter of judicial notice, invoices are generally issued at the
consummation stage of the contract and not its perfection, and have been even treated
as documents which are not actionable per se, although they may prove sufficient
delivery. Thus, absent any clear indication that the title reservation stipulation was
actually agreed upon, the Court must deem the same to be a mere unilateral imposition
on the part of MTCL which has no effect on the nature of the parties’ original agreement
as a contract of sale. Perforce, the obligations arising thereto, among others, ACE Foods’s
obligation to pay the purchase price as well as to accept the delivery of the goods, remain
enforceable and subsisting.
Petition is denied. CA decision is affirmed.

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DE LOS REYES, ALFONSO JEZIEL M.

G.R. No.171692 June 3, 2013

SPOUSES DELFIN O. TUMIBAY and AURORA T. TUMIBAY-deceased; GRACE

DEL CASTILLO, J.:

Ruling of the Regional Trial Court

On January 6, 2003, the RTC rendered a Decision in favor of petitioners, viz:

WHEREFORE, Decision is hereby rendered, as follows;

From this Decision, respondents appealed to the CA.

Ruling of the Court of Appeals

Hence, this Petition.

Petitioners raise the following issues for our resolution:

I. Whether the CA erred in resolving the issue in the case at bar.

III. Whether the actuations of petitioner Aurora in receiving money from

V. Whether the CA erred in adopting the testimony of respondent Rowena as to

The Petition is meritorious.

We explain these factual findings and the consequences thereof below.

Petitioners and respondent

Rowena entered into a contract to sell over the subject land.

Date Amount Paid

February 21, 1995 500.00

March 27, 1995 500.00

April 25, 1995 500.00

June 1, 1995 500.00

June 30, 1995 500.00

July 31, 1995 500.00

May 29, 1996 500.00

June 30, 1996 500.00

July 31, 1996 500.00

August 31, 1996 500.00

September 30, 1996 500.00

October 29, 1996 500.00

December 31, 1996 500.00

January 31, 1997 500.00

February 28, 1997 500.00

March 31, 1997 500.00

May 31, 1997 500.00

July 19, 1997 500.00

August 31, 1997 500.00

September 30, 1997 500.00

October 31, 1997 500.00

November 30, 1997 500.00

Respondent Rowena was in breach of the contract to sell.

Amount Paid Exchange Rate

January 25, 1995 1,000.00 24.7700 24,770.00

February 21, 1995 500.00 25.1140 12,557.00

March 27, 1995 500.00 25.9670 12,983.50

April 25, 1995 500.00 26.0270 13,013.50

June 1, 1995 500.00 25.8040 12,902.00

June 30, 1995 500.00 25.5750 12,787.50

July 31, 1995 500.00 25.5850 12,792.50

May 29, 1996 500.00 26.1880 13,094.00

June 30, 1996 500.00 26.203033 13,101.50

July 31, 1996 500.00 26.2280 13,114.00

August 31, 1996 500.00 26.202034 13,101.00

September 30, 1996 500.00 26.2570 13,128.50

October 29, 1996 500.00 26.2830 13,141.50

December 31, 1996 500.00 26.288035 13,144.00

January 31, 1997 500.00 26.3440 13,172.00

February 28, 1997 500.00 26.3330 13,166.50

March 31, 1997 500.00 26.3670 13,183.50

May 31, 1997 500.00 26.374036 13,187.00

July 19, 1997 500.00 28.574037 14,287.00

Q - And you called your mother?