SPOUSES NESTOR CASTILLO and ROSIE REYES-CASTILLO,

petitioners,
vs .
SPOUSES RUDY REYES and CONSOLACION REYES,
respondents.

[G.R. No. 170917. November 28, 2007.]

J. Nachura

Digest Author: Jude Fanila

Topic: Definitions – Contract to Sell

Case Summary: Respondents, Sps. Reyes signed an agreement for the purchase of a house and lot from
one Emmaliza Bohler. However, they tendered initial partial payment via check which Bohler denied on
the grounds that she needed cash to redeem the property from the bank. Sps. Reyes failed to pay.

Bohler subsequently sold the house and lot to the petitioners, Sps. Castillo. Sps. Reyes subsequently filed
a case before the RTC for annulment of sale, specific performance, and damages. RTC denied ruling that
it was a contract to sell, but CA reversed ruling that it was a contract of sale. Led to current appeal.

SC affirmed that it was a contract of sale, all elements of it being present. Thus, specific performance
proper.

Petitioners: Nestor Castillo & Rosie Reyes-Castillo (Spouses)

Respondents: Rudy Reyes and Consolacion Reyes (Spouses)

Doctrines Involved: A contract to sell is a contract whereby the vendor retains ownership of the subject
matter until full payment; Payment is a positive suspensive condition failure of which prevents the
obligation of the vendor to convey the title from being effective. NOT a mere breach of contract.

In comparison, a contract of sale the title to the property passes to the vendee upon the delivery of the
thing sold; The vendor loses ownership over the property and cannot recover it unless the contract is
resolved or rescinded.

FACTS:
1. Nov. 7 1997 – Respondents, with one Emmaliza Bohler negotiated for the sale of Bohler’s house
to the Sps. Reyes – located at Poblacion, new Washington, Aklan. Agreement was signed the
following day, Nov. 8 with the following terms:
a. Total Payment – P165,000 – to be paid in full before Dec. 15 1997
b. Partial Payment:
 i. P130,000 – to be paid on the day (Nov. 8)
ii. P35,000 – remaining balance shall be paid in accordance to terms (Before Dec.
15)
c. Tenants (Sps. Vicente – I think Bohler was renting it out) to vacate on or before April
1998
d. That the seller Bohler) shall vacate the house and lot on or before Jan 31, 1998
2. Upon signing the contract, respondents handed P20k in cash and allegedly P110k via check to
Bohler.
3. Bohler contested, arguing that the entire partial payment should be in cash as she needed the cash
to redeem the subject property from the bank.
a. Demanded that payment be made up to midnight of the same day otherwise, she would
cancel the sale.
4. Respondents failed to make payment – Bohler subsequently sold the property to the petitioners,
Sps. Castillo on March 2 1998.
a. Upon learning of the subsequent sale, respondents tendered the check, asking the bank
for certification that it was funded. – Sent a notice of lis pendens to the Register of deeds
and the Provincial Assessor.
5. Respondents then filed a case before the RTC of Kalibo, Aklan against Bohler and the petitioners
on the grounds of – annulment of sale, specific performance, and damages.
a. Feb 21 2003 – RTC ruled that the November 8 contract was a contract to sell therefore
no actual sale happened between the parties – thus, subsequent sale to petitioners was
proper.
6. Dec. 6 2005 – On appeal, the CA reversed the RTC ruling. Finding that it was a contract of sale,
thus annulling the sale between the petitioners and Bohler.
a. Basis being the wordings of the agreement and the conduct of the parties suggest that
they intended to enter into a contract of sale – because ownership was not reserved by the
vendor and non-payment of the purchase price was not a condition for the effectivity of
the contract.
7. Leading to current appeal.

ARGUMENTS BEFORE THE SUPREME COURT:

 Petitioner’s Argument related to Doctrine: (1) that the Nov. 8 agreement was a contract to sell,
not a contract of sale; (2) That CA erred in declaring petitioners in bad faith when they bought the
house and lot from Bohler.

ISSUES + HELD:
1. W/N the Nov. 8 agreement is a contract to sell? - NO
a. SC – a sale is a consensual contract and is perfected by mere consent, manifested by a
meeting of the minds as to the offer and acceptance thereof as regards to the subject
matter, price, and terms of payment of the price. As applied to the current case:
i. Subject Matter – YES – House and Lot.
ii. Price – YES – P165,000
iii. Terms of Payment- YES – P130k in partial payment on date of execution, rest to
be paid on or before Dec. 15 1997
 b. At the precise moment, the respondent and Bohler agreed over these, the contract of sale
was perfected.
c. A contract to sell in comparison, provides that payment serves as a positive suspensive
condition for the validity of the contract. As applied to the above contract, there was no
express reservation of ownership or title over the lot.
i. There being no reservation and all the requisites of a contract of sale being
present, the Nov. 8 agreement is a clear contract of sale.

RULING:

WHEREFORE, premises considered, the petition for review on certiorari is

DENIED DUE COURSE.

SO ORDERED.