[No. 46306.
 October 27, 1939] On February 24, 1938, plaintiff filed a complaint in the Court of First Instance of
LEVY HERMANOS, INC., plaintiff and appellant, vs.LAZARO BLAS
GERVACIO, defendant and appellee.
1. 1.INSTALLMENT SALES; ARTICLE 1454-A OF THE CIVIL CODE
(ACT No. 4122).—In Macondray & Co. vs. De Santos (33 Off. Gaz.,
2170), we held that "in order to apply the provisions of article 1454-A of
the Civil Code it must appear that there was a contract for the sale of
personal property payable in installments and that there has been a failure
to pay two or more installments." The contract, in the instant case, while a
sale of personal property, is not, however, one on installments, but on
straight term, in which the balance, after payment of the initial sum,
should be paid in its totality at the time specified in the promissory note.
The transaction is not, therefore, the one contemplated in Act No. 4122
and accordingly the mortgagee is not bound by the prohibition therein
contained as to its right to the recovery of the unpaid balance.
1. 2.ID.; ID.—Undoubteclly, the law is aimed at those sales where the price is
payable in several installments, for, generally, it is in these cases that
partial payments consist in relatively small amounts, constituting thus a
great temptation for improvident purchasers to buy beyond their means.
There is no such temptation where the price is to be paid in cash, or, as in
the instant case, partly in cash and partly in one term, for, in the latter case,
the partial payments are not so small as to place purchasers off their guard
and delude them to a miscalculation of their ability to pay. Theoretically,
perhaps, there is no difference between paying the price in two
installments and paying the same partly in cash and partly in one
installment, in so far as the size of each partial payment is concerned; but
in actual practice the difference exists, for, according to the regular course
of business, in contracts providing for payment of the price in two
installments, there is generally a .provision for initial payment. But all
these considerations are immaterial, the language of the law being so clear
as to require no construction at all.
APPEAL from a judgment of the Court of First Instance of Manila. Montemayor, J.
The facts are stated in the opinion of the court.
Felipe Caniblas for appellant.
Abreu, Lichauco & Picazo for appellee.
53
VOL. 69, OCTOBER 27, 1939 53
Hermanos Inc. vs. Gervacio
MORAN, J.:
Manila, which substantially recites the following facts:
On March 15, 1937, plaintiff Levy Hermanos, Inc., sold to defendant Lazaro
Blas Gervacio, a Packard car. Defendant, after making the initial payment, executed
a promissory note for the balance of P2,400, payable on or before June 15,1937, with
interest at 12 per cent per annum, and to secure the payment of the note, he
mortgaged the car to the plaintiff. Defendant failed to pay the note at its maturity;
wherefore, plaintiff foreclosed the mortgage and the car was sold at public auction, at
which plaintiff was the highest bidder for ?800. The present action is for the
collection of the balance of P1,600 and interest.
Defendant admitted the allegations of the complaint, and with this admission, the
parties submitted the case for decision. The lower court applied the provisions of Act
No. 4122, inserted as articles 1454-A of the Civil Code, and rendered judgment in
favor of the defendant. Plaintiff appealed.
Article 1454-A of the Civil Code reads as follows:
"In a contract for the sale of personal property payable in installments, failure to pay
two or more installments shall confer upon the vendor the right to cancel the sale or
foreclose the mortgage if one has been given on the property, without reimbursement
to the purchaser of the installments already paid, if there be an agreement to this
effect.
"However, if the vendor has chosen to foreclose the mortgage he shall have no
further action against the purchaser for the recovery of any unpaid balance owing by
the same, and any agreement to the contrary shall be null and void."
In Macondray & Co. vs. De Santos (33 Off. Gaz., 2170), we held that "in order to
apply the provisions of article 1454-A of the Civil Code it must appear that there was
a contract for the sale of personal property payable in installments and that there has
been a failure to pay two or more installments." The contract, in the instant case,
54
54 PHILIPPINE REPORTS ANNOTATED
Hermanos Inc. vs. Gervacio
while a sale of personal property, is not, however, one on installments, but on
straight term, in which the balance, after payment of the initial sum, should be paid
in its totality at the time specified in the promissory note. The transaction is not,
therefore, the one contemplated in Act No. 4122 and accordingly the mortgagee is
not bound by the prohibition therein contained as to its right to the recovery of the
unpaid balance.
Undoubtedly, the law is aimed at those sales where the price is payable in several
installments, for, generally, it is in these cases that partial payments consist in
relatively small amounts, constituting thus a great temptation for improvident
purchasers to buy beyond their means, There is no such temptation where the price is
to be paid in cash, or, as in the instant case, partly in cash and partly in one term, for,
in the latter case, the partial payments are not so small as to place purchasers off their
guard and delude them to a miscalculation of their ability to pay. Theoretically,
perhaps, there is no difference between paying the price in two installments and
1
paying the same partly in cash and partly in one installment, in so far as the size of
each partial payment is concerned; but in actual practice the difference exists, for,
according to the regular course of business, in contracts providing for payment of the
price in two installments, there is generally a provision for initial payment. But all
these considerations are immaterial, the language of the law being so clear as to
require no construction at all.
The suggestion that the cash payment made in this case should be considered as
an installment in order to bring the contract sued upon under the operation of the law,
is completely untenable. A cash payment cannot be considered as a payment by
installment, and even if it can be so considered, still the law does not apply, for it
requires nonpayment of two or more installments in order that its provisions may be
invoked. Here, only one installment was unpaid.
Judgment is reversed, and defendant-appellee is hereby sentenced to pay
plaintiff-appellant the sum of P1,600 with 
55
 
VOL. 69, OCTOBER 28, 1939 55
Manila Racing Club vs. Manila Jockey Club et al.
interest at the rate of 12 per cent per annum from June 15, 1937, and the sum of
P52.08 with interest at the rate of 6 per cent from the date of the filing of the
complaint, with costs in both instances against the appellee.
Avanceña, C. J,, Villa-Real, Imperial, Diaz, and Concepcion, JJ., concur.
Judgment reversed.

_________

G.R. No. 61043. September 2, 1992.* G.R. No. 61043. September 2, 1992.*

DELTA MOTOR SALES CORPORATION, plaintiff-appellee, vs. NIU KIM
DUAN and CHAN FUE ENG, defendants-appellants.
Civil Law; Contracts; Sales on installments of personal property; Validity of
stipulation that installments paid shall not be returned to vendee.—Defendants-
appellants cannot complain that their downpayment of P774.00 and installment
payments of P5,655.92 were treated as rentals—even though the total amount of
P6,429.92 which they had paid, approximates one-third (1/3) of the cost of the three
(3) air-conditioners. A stipulation in a contract that the installments paid shall not be
returned to the vendee is valid insofar as the same may not be unconscionable under
the circumstances is sanctioned by Article 1486 of the New Civil Code. The monthly
installment payable by defendants-appellants was P774.00. The P5,655.92
installment payments correspond only to seven (7) monthly installments. Since they
admit having used the air-conditioners for twenty-two (22) months, this means that
they did not pay fifteen (15) monthly installments on the said air-conditioners and
were thus using the same FREE for said period—to the prejudice of plaintiff-
appellee. Under the circumstances, the treatment of the installment payments as
rentals cannot be said to be unconscionable.

2
_______________
*
 SECOND DIVISION.
260
260  SUPREME COURT REPORTS ANNOTATED  their due dates, the whole of the principal sum remaining unpaid shall become due,
Delta Motor Sales Corporation vs. Niu Kim Duan
Same; Same; Same; Remedies of vendor.—The vendor in a sale of personal
property payable in installments may exercise one of three remedies, namely, (1)
exact the fulfillment of the obligation, should the vendee fail to pay; (2) cancel the
sale upon the vendee’s failure to pay two or more installments; (3) foreclose the
chattel mortgage, if one has been constituted on the property sold, upon the vendee’s
failure to pay two or more installments. The third option or remedy, however, is
subject to the limitation that the vendor cannot recover any unpaid balance of the
price and any agreement to the contrary is void (Art. 1484). The three (3) remedies
are alternativeand NOT cumulative. If the creditor chooses one remedy, he cannot
avail himself of the other two.
APPEAL from the decision of the Regional Trial Court of Makati, Metro Manila, Br.
36. Medialdea, J.
The facts are stated in the opinion of the Court.
     Francisco C. Bonoan for plaintiff-appellee.
     Agapito M. Joaquin for defendants-appellants.
NOCON, J.:
Elevated to this Court by the Court of Appeals, in its Resolution of May 20, 1982, on
a pure question of law, 1 is the appeal therein by defendants-appellants, Niu Kim
Duan and Chan Fue Eng assailing the trial court’s decision promulgated on October
11, 1977, 2 which ordered them to pay plaintiff-appellee, Delta Motor Sales
Corporation, the amount of P6,188.29 with a 14% per annum interest which was due
on the three (3) "Daikin" air-conditioners defendants-appellants purchased from
plaintiff-appellee under a Deed of Conditional Sale, after the same was declared
rescinded by the trial court. They were likewise ordered to pay plaintiff-appellee
P1,000.00 for and as attorney’s fees.chanrobles virtual lawlibrary
The events which led to the filing of the case in the lower court were summarized by
the Court of Appeals, as follows:jgc:chanrobles.com.ph
"‘On July 5, 1975, the defendants purchased from the plaintiff three (3) units of
‘DAIKIN’ air-conditioner all valued at P19,350.00 as evidenced by the Deed of
Conditional Sale, Exhibit A; that the aforesaid deed of sale had the following terms
and conditions:chanrob1es virtual 1aw library
‘(a) the defendants shall pay a down payment of P774.00 and the balance of
P18,576.00 shall [be] paid by them in twenty four (24) installments; (b) the title to
the properties purchased shall remain with the plaintiff until the purchase price
thereof is fully paid; (c) if any two installments are not paid by the defendants on
with interest at the rate of 14% per annum: and (d) in case of a suit, the defendants
shall pay an amount equivalent to 25% of the remaining unpaid obligation as
damages, penalty and attorney’s fees; that to secure the payment of the balance of
P18,576.00 the defendants jointly and severally executed in favor of the plaintiff a
promissory note, Exhibit C; that the three (3) air-conditioners were delivered to and
received by the defendants as shown by the delivery receipt, Exhibit B; that after
paying the amount of P6,966.00, the defendants failed to pay at least two (2) monthly
installments; that as of January 6, 1977, the remaining unpaid obligation of the
defendants amounted to P12,920.08; that statements of accounts were sent to the
defendants and the plaintiff’s collectors personally went to the former to effect
collections but they failed to do so; that because of the unjustified refusal of the
defendants to pay their outstanding account and their wrongful detention of the
properties in question, the plaintiff tried to recover the said properties extra-judicially
but it failed to do so; that the matter was later referred by the plaintiff to its legal
counsel for legal action; that in its verified complaint dated January 28, 1977, the
plaintiff prayed for the issuance of a writ of replevin, which the Court granted in its
Order dated February 28, 1977, after the plaintiff posted the requisite bond; that on
April 11, 1977, the plaintiff, by virtue of the aforesaid writ, succeeded in retrieving
the properties in question: that as of October 3, 1977, the outstanding account of the
defendants is only in the amount of P6,188.29 as shown by the computation, Exhibit
F, after deducting the interests in arrears, cover charges, replevin bond premiums, the
value of the units repossessed and the like; and, that in view of the failure of the
defendants to pay their obligations, the amount of P6,966.00 which had been paid by
way of installments were treated as rentals for the units in question for two (2) years
pursuant to the provisions of paragraph 5 of the Deed of Conditional Sale, Exhibit
A.’ (pp. 5-7, Record; pp. 4-6, Appellant’s Brief)." chanrobles law library
As above-stated, the trial court ruled in favor of Plaintiff-Appellee.
Defendants-appellants assail the Deed of Conditional Sale under which they
purchased the three (3) Daikin air-conditioners from plaintiff-appellee as being
contrary to law, morals, good custom, public order or public policy. In particular,
they point to the contract’s paragraphs 5 and 7 as iniquitous, which paragraphs state
that:jgc:chanrobles.com.ph
"5. Should BUYER fail to pay any of the monthly installments when due, or
otherwise fail to comply with any of the terms and conditions herein stipulated, this
contract shall automatically become null and void and all sums so paid by BUYER
by reason thereof shall be considered as rental and the SELLER shall then and there
3
be free to take possession thereof without liability for trespass or responsibility for
any article left in or attached to the PROPERTY:chanrob1es virtual 1aw library
x       x       x
"7. Should SELLER rescind this contract for any of the reasons stipulated in the
preceding paragraph, the BUYER, by these presents obligates himself to peacefully
deliver the PROPERTY to the SELLER in case of rescission, and should a suit be
brought in court by the SELLER to seek judicial declaration of rescission and take
possession of the PROPERTY, the BUYER hereby obligates himself to pay all the
expenses to be incurred by reason of such suit and in addition to pay the sum
equivalent to 25% of the remaining unpaid obligation as damages, penalty and
attorney’s fees;" 3  one remedy, he cannot avail himself of the other two.chanrobles lawlibrary : rednad
Defendants-appellants claim that for the use of the plaintiff-appellee’s three air-
conditioners, from July 5, 1975 4 to April 11, 1977, 5 or for a period of about 22
months, they, in effect, paid rentals in the amount of P6,429,92, 6 or roughly one-
third (1/3) of the entire price of said air-conditioners which was P19,350.00. They
also complain that for the said period the trial court is ordering them to pay
P6,188.29 as the balance due for the three air-conditioners repossessed. Defendants-
appellants were likewise ordered to pay P1,000.00 as attorney’s fees when plaintiff-
appellee never sought for attorney’s fees in its complaint. They satirically pointed
out that by putting "a few touches here and there, the same units can be sold again to
the next imprudent customer" 7 by plaintiff-appellee. Thus, enforcement of the Deed
of Conditional Sale will unjustly enrich plaintiff-appellee at the expense of
defendants-appellants.chanrobles law library : red
I repossessed." 14 Having done so, it is barred from exacting payment from
Defendants-appellants cannot complain that their downpayment of P774.00 and
installment payments of P5,655.92 8 were treated as rentals — even though the total
amount of P6,429,92 which they had paid, approximates one-third (1/3) of the cost of
the three (3) air-conditioners. A stipulation in a contract that the installments paid
shall not be returned to the vendee is valid insofar as the same may not be
unconscionable under the circumstances is sanctioned by Article 1486 of the New
Civil Code. 9 The monthly installment payable by defendants-appellants was
P774.00. 10 The P5,655.92 installment payments correspond only to seven (7)
monthly installments. Since they admit having used the air-conditioners for twenty-
two (22) months, this means that they did not pay fifteen (15) monthly installments
on the said air-conditioners and were thus using the same FREE for said period — to
the prejudice of plaintiff-appellee. Under the circumstances, the treatment of the
installment payments as rentals cannot be said to be unconscionable.
II
The vendor in a sale of personal property payable in installments may exercise one of
three remedies, namely, (1) exact the fulfillment of the obligation, should the vendee
fail to pay; (2) cancel the sale upon the vendee’s failure to pay two or more
installments; (3) foreclose the chattel mortgage, if one has been constituted on the
property sold, upon the vendee’s failure to pay two or more installments. The third
option or remedy, however, is subject to the limitation that the vendor cannot recover
any unpaid balance of the price and any agreement to the contrary is void (Art. 1484)
11
The three (3) remedies are alternative and NOT cumulative. If the creditor chooses
It is not disputed that the plaintiff-appellee had taken possession of the three air-
conditioners, through a writ of replevin when defendants-appellants refused to extra-
judicially surrender the same. This was done pursuant to paragraphs 5 and 7 of its
Deed of Conditional Sale when defendants-appellants failed to pay at least two (2)
monthly installments, so much so that as of January 6, 1977, the total amount they
owed plaintiff-appellee, inclusive of interest, was P12,920.08. 12 The case plaintiff-
appellee filed was to seek a judicial declaration that it had validly rescinded the Deed
of Conditional Sale. 13 
Clearly, plaintiff-appellee chose the second remedy of Article 1484 in seeking
enforcement of its contract with defendants-appellants. This is shown from the fact
that its Exhibit "F" which showed the computation of the outstanding account of
defendants-appellants as of October 3, 1977 took into account "the value of the units
defendants-appellants of the balance of the price of the three air-conditioning units
which it had already repossessed. It cannot have its cake and eat it too. 15 
WHEREFORE, the judgment of the trial court in Civil Case No. 25578 is hereby
SET ASIDE and the complaint filed by plaintiff-appellee Delta Motor Sales
Corporation is hereby DISMISSED. No costs.
SO ORDERED.
4
 AMADOR TAJANLANGIT, ET AL., plaintiffs and appellants, vs. SOUTHERN
MOTORS, INC., ET AL., defendants and appellees.
SALE; PERSONAL PROPERTY SOLD ON INSTALLMENTS; WHEN
VENDOR MAY RECOVER THE UNPAID BALANCE OF THE PURCHASE
PRICE.—In a contract of sale of personal property the price of which is payable
in installments, secured by a mortgage on the goods sold, the vendor who
chooses to exact fulfillment of the obligation to pay is not limited to the proceeds
of the sale, on 
607
VOL. 101, MAY 28, 1957  607 
Tajanlangit, et al. vs. Southern Motors, Inc., et al.
execution, of the mortgaged goods. The vendor may still recover from the
purchaser the unpaid balance of the price, if any.
APPEAL from a judgment of the Court of First Instance of Iloilo. Pelayo, J.
The facts are stated in the opinion of the Court.
Almacén & Almacén for appellants.
Diosdado Garingalao for appellees.

BENGZON, J.:

The case. Appellants seek to reverse the order of Hon. Pantaleon Pelayo, Judge of
the Iloilo court of first instance refusing to interfere with the alias writ of execution
issued in Civil Case No. 2942 pending in another sala of the same court.

The facts. In April 1953 Amador Tajanlangit and his wife Angeles, residents of
Iloilo, bought, from the Southern Motors Inc. of Iloilo two tractors and a thresher. In
payment for the same, they executed the promissory note Annex A whereby they
undertook to satisfy the total purchase price of P24,755.75 in several installments
(with interest) payable on stated dates from May 18, 1953 December 10, 1955. The
note stipulated that if default be made in the payment of interest or of any
installment, then the total principal sum still unpaid with interest shall at once
become demandable etc. The spouse failed to meet any installment. Wherefore, they
were sued, in the above Civil Case No. 2942, for the amount of the promissory
note.1 The spouses defaulted, and the court, after listening to the Southern Motors'
evidence entered Judgment for it in the total sum of P24,755.75 together with interest
at 12 per cent, plus 10 per cent of the total amount due as attorney's fees and costs of
collection.

Carrying out the order of execution, the sheriff levied on the same machineries and
farm implements which had been bought by the spouses; and later sold them at
public auction to the highest bidder — which turned out to be the Southern Motors
itself — for the total sum of P10,000.
[No. L-10789. May 28, 1957]

5
As its judgment called for much more, the Southern Motors subsequently asked and
obtained, an alias writ of execution; and pursuant thereto, the provincial sheriff
levied attachment on the Tajanlangits' rights and interests in certain real properties —
with a view to another sale on execution.
To prevent such sale, the Tajanlangits instituted this action in the Iloilo court of first
instance for the purpose among others, of annulling the alias writ of execution and
all proceedings subsequent thereto. Their two main theories: (1) They had returned
the machineries and farm implements to the Southern Motors Inc., the latter accepted
them, and had thereby settled their accounts; for that reason, said spouses did not
contest the action in Civil Case No. 2942; and (2) as the Southern Motors Inc. had
repossessed the machines purchased on installment (and mortgaged) the buyers were
thereby relieved from further responsibility, in view of the Recto Law, now article
1484 of the New Civil Code.
For answer, the company denied the alleged "settlement and understanding" during
the pendency of civil case No. 2949. It also denied having repossessed the
machineries, the truth being that they were attached by the sheriff and then deposited
by the latter in its shop for safekeeping, before the sale at public auction.
The case was submitted for decision mostly upon a stipulation of facts. Additional
testimony was offered together with documentary evidence. Everything considered
the court entered judgment, saying in part;
The proceedings in Civil Case No. 2942 above referred to, were had in the
Court of First Instance (Branch 1) of the Province and of the City of Iloilo.
While this court (Branch IV) sympathizes with plaintiffs, it cannot grant, in
this action, the relief prayed for the complaint because courts of similar
jurisdiction cannot invalidate the judgments and orders of each other.
Plaintiffs have not pursued the proper remedy. This court is without
authority and jurisdiction to declare null and void the order directing the
issuance of alias writ of execution because it was made by another court of
equal rank and category (see Cabiao and Izquierdo vs. Del Rosario and Lim,
44 Phil., 82-186).
WHEREFORE, judgement is hereby rendered dismissing the complaint
with costs against plaintiffs costs against plaintiffs. Let the writ of
preliminiary injunction issued on August 26, 1954, be lifted.
The plaintiffs reasonably brought the matter to the Court of Appeals, but the latter
forwarded the expediente, being of the opinion that the appeal involved questions of
jurisdiction and/or law
Discussion. Appellants' brief elaborately explains in the nine errors assigned, their
original two theories although their "settlement" idea appears to be somewhat
modified.
"What is being sought in this present action" say appellants "is to prohibit and forbid
the appellee Sheriff of Iloilo from attaching and selling at public auction sale the real
properties of appellants because that is now forbidden by our law after the chattels
that have been purchased and duly mortgagee had already been repossessed by the
same vendor-mortgagee and later on sold at public auction sale and purchased by the
same at such meager sum of P10,000."
"Our law" provides,
ART. 1484. In a contract of sale of personal property the price of which is
payable in installments, the vendor may exercise of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void. (New Civil Code.)
Appellants would invoke the last paragraph. But there has been no foreclosure of the
chattel mortgage nor a foreclosure sale. Therefore the prohibition against further
collection does not apply.
At any rate it is the actual sale of the mortgaged chattel in accordance with
section 14 Act No. 1508 that would bar the creditor (who chooses to
foreclose) from recovering any unpaid balance. (Pacific Com. Co. vs.De la
Rama, 72 Phil. 380.) (Manila Motor Co. vs. Fernandez, 99 Phil., 782.).
It is true that there was a chattel mortgage on the goods sold. But the Southern
Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the
obligation to pay. It had a right to select among the three remedies established in
Article 1484. In choosing to sue on the note, it was not thereby limited to the
proceeds of the sale, on execution, of the mortgaged good.2
6
In Southern Motors Inc. vs. Magbanua, (100 Phil., 155) a similar situation arose in
connection with the purchase on installment of a Chevrolet truck by Magbanua.
Upon the latter's default, suit on the note was filed, and the truck levied on together
with other properties of the debtor. Contending that the seller was limited to the
truck, the debtor obtained a discharge of the other properties. This court said:
procedural aspect, inasmuch as we find that, on the merits, plaintiffs are not entitled
to the relief demanded.
Judgment. The decision dismissing the complaint, is affirmed, with costs against
appellants. So ordered.

By praying that the defendant be ordered to pay the sum of P4,690 together
with the stipulated interest at 12% per annum from 17 March 1954 until
fully paid, plus 10 per cent of the total amount due as attorney's fees and
cost of collection, the plaintiff acted to exact the fulfillment of the obligation
and not to foreclose the mortgage on the truck. . . . 

As the plaintiff has chosen to exact the fulfillment of the defendant's

obligation, the former may enforce execution of the judgement rendered in
its favor on the personal and real properties of the latter not exempt from
execution sufficient to satisfy the judgment. That part of the
judgement depriving the plaintiff of its right to enforce judgment against the
properties of the defendant except the mortgaged truck and discharging the
writ of attachment on his other properties is erroneous. (Emphasis ours.)

Concerning their second theory, — settlement or cancellation — appellants allege

that the very implements sold "were duly returned" by them, and "were duly received
and accepted by the said vendor-mortgagee". Therefore they argue, "upon the return
of the same chattels and due acceptance of the same by the vendor-mortgagee, the
conditional sale is ipso facto cancelled, with the right of the vendor-mortgagee to
appropriate whatever downpayment and posterior monthly installments made by the
purchaser as it did happen in the present case at bar."

The trouble with the argument is that it assumes that acceptance of the goods by the
Southern Motors Co, with a view to "cancellation" of the sale. The company denies
such acceptance and cancellation, asserting the goods, were deposited in its shop
when the sheriff attached them in pursuance of the execution. Its assertion is backed
up by the sheriff, of whose credibility there is no reason to doubt. Anyway this
cancellation or settlement theory may not be heeded now, because it would
contravene the decision in Civil Case No. 2942 above-mentioned — it would show
the Tajanlangits owned nothing to Southern Motors Inc. Such decision is binding
upon them, unless and until they manage to set it aside in a proper proceeding — and
this is not it.

There are other points involved in the case, such as the authority of the judge of one
branch of a court of first instance to enjoin proceedings in another branch of the
same court. As stated, Judge Pelayo refused to interfere on that ground. Appellants
insist this was error on several counts. We deem it unnecessary to deal with this

7
 256
256  SUPREME COURT REPORTS ANNOTATED 
Nonato vs. Intermediate Appellate Court
repossessed. It cannot have its cake and eat it too.

PETITION for review of the decision of the Intermediate Appellate Court.

The facts are stated in the opinion of the Court.

     Pamplona, Genito & Valdezco Law Office for petitioners.
     Dinglasan Law Office for private respondent.
No. L-67181. November 22, 1985.*
SPOUSES RESTITUTO NONATO and ESTER NONATO, petitioners, us. THE ESCOLIN, J.:
HONORABLE INTERMEDIATE APPELLATE COURT and INVESTOR'S
FINANCE CORPORATION, respondents. The issue posed in this petition for review of the decision of the respondent appellate
Civil Law; Sales; Sale of personal property in installments; Article 1484 of court is whether a vendor, or his assignee, who had cancelled the sale of a motor
the Civil Code, interpreted; Remedies of a seller where the buyer fails to pay vehicle for failure of the buyer to pay two or more of the stipulated installments, may
personal property in installments is alternative, not cumulative, that the exercise of also demand payment of the balance of the purchase price. 
one would bar the exercise of the others.—The meaning of the aforequoted provision
has been repeatedly enunciated in a long line of cases. Thus: "Should the vendee or The pertinent facts are summarized by the respondent appellate court as follows: 
purchaser of a personal property default in the payment of two or more of the agreed
installments, the vendor or seller has the option to avail of any of these three
On June 28, 1976, defendant spouses Restituto Nonato and Ester
remedies—either to exact fulfillment by the purchaser of the obligation, or to cancel
Nonato purchased one (1) unit of Volkswagen Sakbayan from the
the sale, or to foreclose the mortgage on the purchased personal property, if one was
People's Car, Inc., on installment basis. To secure complete
constituted. These remedies have been recognized as alternative, not cumulative, that
payment, the defendants executed a promissory note (Exh. A or 1)
the exercise of one would bar the exercise of the others."
and a chattel mortgage in favor of People's Car, Inc, (Exh. B or 2).
Same; Same; Cancellation of contract of sale; Possession by the assignee of a
People's Car, Inc., assigned its rights and interests over the note
car purchased in installments where the buyer defaulted in payment thereof bars it
and mortgage in favor of plaintiff Investor's Finance Corporation
from exacting from the defaulted buyer the balance of the purchase price of the
(FNCB) Finance). For failure of defendants to pay two or more
vehicle repossessed.—The receipt issued by the respondent company to the Nonatos
installments, despite demands, the car was repossessed by plaintiff
when it took possession of the vehicle states that the vehicle could be redeemed
on March 20, 1978 (Exh. E or 4). 
within fifteen [15] days. This could only mean that should petitioners fail to redeem
the car within the aforesaid period by paying the balance of the purchase price, the
company would retain permanent possession of the vehicle, as it did in fact. Despite repossession, plaintiff demanded from defendants that they
Respondent corporation further asserts that it repossessed the vehicle merely for the pay the balance of the price of the car (Exhs. F and C). Finally, on
purpose of appraising its current value. The allegation is untenable, for even after it June 9, 1978, plaintiff filed before the Court of First Instance of
had notified the Nonatos that the value of the car was not sufficient to cover the Negros Occidental the present complaint against defendants for the
balance of the purchase price, there was no attempt at all on the part of the company latter to pay the balance of the price of the car, with damages and
to return the repossessed car. Indeed, the acts performed by the corporation are attorney's fees. (Records, pp. 36-37) 
wholly consistent with the conclusion that it had opted to cancel the contract of sale
of the vehicle. It is thus barred from exacting payment from petitioners of the In their answer, the spouses Nonato alleged by way of defense that when the
balance of the price of the vehicle which it had already  company repossessed the vehicle, it had, by that act, effectively cancelled the sale of
_______________ the vehicle. It is therefore barred from exacting recovery of the unpaid balance of the
purchase price, as mandated by the provisions of Article 1484 of the Civil Code. 
*
 SECOND DIVISION.
8
After due hearing, the trial court rendered a decision in favor of the IFC and against It is not disputed that the respondent company had taken possession of the car
the Nonatos, as follows:  purchased by the Nonatos on installments. But while the Nonatos maintain that the
company had, by that act, exercised its option to cancel the contract of sale, the
PREMISES CONSIDERED, the Court hereby renders judgment company contends that the repossession of the vehicle was only for the purpose of
ordering the defendant to pay to the plaintiff the amount of P appraising its value and for storage and safekeeping pending full payment by the
17,537.60 with interest at the rate of 14% per annum from July 28, Nonatos of the purchasing price. The company thus denies having exercised its right
1976 until fully paid, 10% of the amount due as attorney's fees, to cancel the sale of the repossessed car. The records show otherwise. 
litigation expenses in the amount of P 133.05 plus the costs of this
suit. No pronouncement as to other charges and damages, the same The receipt issued by the respondent company to the Nonatos when it took
not having been proven to the satisfaction of the Court. 1 possession of the vehicle states that the vehicle could be redeemed within fifteen
[151 days. 3 This could only mean that should petitioners fail to redeem the car
On appeal, the respondent appellate court affirmed the j judgment.  within the aforesaid period by paying the balance of the purchase price, the company
would retain permanent possession of the vehicle, as it did in fact. This was
Hence, this petition for review on certiorari.  confirmed by Mr. Ernesto Carmona, the company's witness, who testified, to wit: 

The applicable law in the case at bar, involving as it does a sale of personal property ATTY. PAMPLONA: 
on installment, is Article 1484 of the Civil Code which provides: 
So that Mr. Witness, it is clear now that, per your
In a contract of sale of personal property the price of which is receipt and your answer, the company will not
payable in installments, the vendor may exercise any of the return the unit without paying a sum of money,
following remedies:  more particularly the balance of the account? 

(1) Exact fulfillment of the obligation, should the vendee fail to
pay; 
(2) Cancel the sale, should the vendee's failure to pay cover two or
more installments;  had notified the Nonatos that the value of the car was not sufficient to cover the
(3) Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two or
more installments. In this case, he shall have no further action
against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.  barred from exacting payment from petitioners of the balance of the price of the
The meaning of the aforequoted provision has been repeatedly enunciated in a long
line of cases. Thus: "Should the vendee or purchaser of a personal property default in
the payment of two or more of the agreed installments, the vendor or seller has the
option to avail of any of these three remedies-either to exact fulfillment by the
purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the
purchased personal property, if one was constituted. These remedies have been
recognized as alternative, not cumulative, that the exercise of one would bar the
exercise of the others. 2
WITNESS: Yes, sir. 4
Respondent corporation further asserts that it repossessed the vehicle merely for the
purpose of appraising its current value. The allegation is untenable, for even after it
balance of the purchase price, there was no attempt at all on the part of the company
to return the repossessed car, 
Indeed, the acts performed by the corporation are wholly consistent with the
conclusion that it had opted to cancel the contract of sale of the vehicle. It is thus
vehicle which it had already repossessed. It cannot have its cake and eat it too. 
WHEREFORE, the judgment of the appellate court in CA-G.R. No. 69276-R is
hereby set aside and the complaint filed by respondent Investors Finance Corporation
against petitioner in Civil Case No. 13852 should be, as it is hereby, dismissed. No
costs. 
SO ORDERED.

9
No. L-39806. January 27, 1983.*
LUIS RIDAD and LOURDES RIDAD, plaintiffs-appellees, vs. FILIPINAS
INVESTMENT and FINANCE CORPORATION, JOSE D. SEBASTIAN and
JOSE SAN AGUSTIN, in his capacity as Sheriff, defendants appellants.
Sales; Remedy of vendor under Art. 1484 of the new Civil Code in case buyer
of personal property on installment fails to pay is mutually exclusive.—Under the
above-quoted article of the Civil Code, the vendor of personal property the purchase
price of which is payable in installments, has the right, should the vendee default in
the payment of two or more of the agreed installments, to exact fulfillment by the
purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the
purchased personal property, if one was constituted. Whichever right the vendor
elects, he cannot avail of the other, these remedies being alternative, not cumulative.
Furthermore, if the vendor avails himself of the right to foreclose his mortgage, the
law prohibits him from further bringing an action against the vendee for the purpose
of recovering whatever balance of the debt secured not satisfied by the foreclosure
sale. The precise purpose of the law is to prevent mortgagees from seizing the
mortgaged property, buying it at foreclosure sale for a low price and then bringing
suit against the mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer
would find himself without the property and still owing practically the full amount of
his original indebtedness.
Same; Mortgage; Under Art 1484 of the new Civil Code the vendor of
personal property sold on installment who chooses the remedy of foreclosure of the
chattel mortgage is limited to the foreclosure of the items sold only and not to other
items not subject of the sale although also given as additional security. The
foreclosure of the lat-
_____________
*
 SECOND DIVISION.
247
VOL. 120, JANUARY 27, 1983  247 
Ridad vs. Filipinas Investment and Finance Corp.
ter items is null and void.—Consequently, the lower court rightly declared the
nullity of the chattel mortgage in question in so far as the taxicab franchise and the
used Chevrolet car of plaintiffs are concerned, under the authority of the ruling in the
case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71 Phil. 587, the
facts of which are similar to those in the case at bar. There, we have the same
situation wherein the vendees offered as security for the payment of the purchase
price not only the motor vehicles which were bought on installment, but also a
residential lot and a house of strong materials. This Court sustained the
pronouncement made by the lower court on the nullity of the mortgage in so far as it
included the house and lot of the vendees, holding that under the law, should the
vendor choose to foreclose the mortgage, he has to content himself with the proceeds
of the sale at the public auction of the chattels which were sold on installment and
mortgaged to him, and having chosen the remedy of foreclosure, he cannot nor
should he be allowed to insist on the sale of the house and lot of the vendees, for to
do so would be equivalent to obtaining a writ of execution against them concerning
other properties which are separate and distinct from those which were sold on
installment. This would indeed be contrary to public policy and the very spirit and
purpose of the law, limiting the vendor’s right to foreclose the chattel mortgage only
on the thing sold.
Same; Same; Same.—In the case of Cruz v. Filipinas Investment & Finance
Corporation, 23 SCRA 791, this Court ruled that the vendor of personal property
sold on the installment basis is precluded, after foreclosing the chattel mortgage on
the thing sold, from having a recourse against the additional security put up by a
third party to guarantee the purchaser’s performance of his obligation on the theory
that to sustain the same would overlook the fact that if the guarantor should be
compelled to pay the balance of the purchase price, said guarantor will in turn be
entitled to recover what he has paid from the debtor-vendee, and ultimately it will be
the latter who will be made to bear the payment of the balance of the price, despite
the earlier foreclosure of the chattel mortgage given by him, thereby indirectly
subverting the protection given the latter. Consequently, the additional mortgage was
ordered cancelled. Said ruling was reiterated in the case of Pascual v. Universal
Motors Corporation, 61 SCRA 121.
APPEAL from the decision of the Court of First Instance of Rizal, Br. I.
248
248  SUPREME COURT REPORTS ANNOTATED 
Ridad vs. Filipinas Investment and Finance Corp.
The facts are stated in the opinion of the Court.
     Osmundo Victoriano for plaintiffs-appellees.
     Wilhelmina V. Joven for defendant-appellants.
DE CASTRO, J:
Appeal from the decision of the Court of First Instance of Rizal, Branch I, in Civil
Case No. 9140 for annulment of contract, originally filed with the Court of Appeals
but was subsequently certified to this Court pursuant to Section 3 of Rule 50 of the
Rules of Court, there being no issue of fact involved in this appeal. 
The materials facts of the case appearing on record may be stated as follows: On
April 14, 1964, plaintiffs purchased from the Supreme Sales arid Development
Corporation two (2) brand new Ford Consul Sedans complete with accessories, for
P26,887 payable in 24 monthly installments. To secure payment thereof, plaintiffs
executed on the same date a promissory note covering the purchase price and a deed
of chattel mortgage not only on the two vehicles purchased but also on another car
(Chevrolet) and plaintiffs' franchise or certificate of public convenience granted by
the defunct Public Service Commission for the operation of a taxi fleet. Then, with
10
the conformity of the plaintiffs, the vendor assigned its rights, title and interest to the THE LOWER COURT ERRED IN DECLARING THE
above-mentioned promissory note and chattel mortgage to defendant Filipinas CHATTEL MORTGAGE, EXHIBIT "C", NULL AND VOID. 
Investment and Finance Corporation. 
II
Due to the failure of the plaintiffs to pay their monthly installments as per
promissory note, the defendant corporation foreclosed the chattel mortgage extra- THE LOWER COURT ERRED IN HOLDING THAT THE SALE
judicially, and at the public auction sale of the two Ford Consul cars, of which the AT PUBLIC AUCTION CONDUCTED BY THE CITY SHERIFF
plaintiffs were not notified, the defendant corporation was the highest bidder and OF MANILA CONCERNING THE TAXICAB FRANCHISE IS
purchaser. Another auction sale was held on November 16, 1965, involving the OF NO LEGAL EFFECT. 
remaining properties subject of the deed of chattel mortgage since plaintiffs'
obligation was not fully satisfied by the sale of the aforesaid vehicles, and at the III
public auction sale, the franchise of plaintiffs to operate five units of taxicab service
was sold for P8,000 to the highest bidder, herein defendant corporation, which
subsequently sold and conveyed the same to herein defendant Jose D. Sebastian, who THE LOWER COURT ERRED IN SETTING ASIDE THE
then filed with the Public Service Commission an application for approval of said CERTIFICATE OF SALE ISSUED BY THE CITY SHERIFF OF
sale in his favor.  MANILA IN FAVOR OF FILIPINAS INVESTMENT AND
FINANCE CORPORATION COVERING PLAINTIFFS'
TAXICAB FRANCHISE. 
On February 21, 1966, plaintiffs filed an action for annulment of contract before the
Court of First Instance of Rizal, Branch I, with Filipinas Investment and Finance
Corporation, Jose D. Sebastian and Sheriff Jose San Agustin, as party-defendants. By IV
agreement of the parties, the case was submitted for decision in the lower court on
the basis of the documentary evidence adduced by the parties during the pre-trial THE LOWER COURT ERRED IN DECLARING VOID AND OF
conference. Thereafter, the lower court rendered judgment as follows:  NO LEGAL EFFECT THE ASSIGNMENT OF THE TAXICAB
FRANCHISE MADE BY FILIPINAS INVESTMENT AND
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court FINANCE CORPORATION IN FAVOR OF DEFENDANT. 
declares the chattel mortgage, Exhibit "C", to be null and void in
so far as the taxicab franchise and the used Chevrolet car of V
plaintiffs are concerned, and the sale at public auction conducted
by the City Sheriff of Manila concerning said taxicab franchise, to THE LOWER COURT (sic) IN NOT DECIDING THE CASE IN
be of no legal effect.1äwphï1.ñët The certificate of sale issued by FAVOR OF THE DEFENDANTS. Appellants' Brief, pp. 9 & 10) 
the City Sheriff of Manila in favor of Filipinas Investment and
Finance Corporation concerning plaintiffs' taxicab franchise for From the aforequoted assignment of errors, the decisive issue for consideration is the
P8,000 is accordingly cancelled and set aside, and the assignment validity of the chattel mortgage in so far as the franchise and the subsequent sale
thereof made by Filipinas Investment in favor of defendant Jose thereof are concerned. 
Sebastian is declared void and of no legal effect. (Record on
Appeal, p. 128). 
The resolution of said issue is unquestionably governed by the provisions of Article
1484 of the Civil Code which states: 
From the foregoing judgment, defendants appealed to the Court of Appeals which, as
earlier stated, certified the appeal to this Court, appellants imputing to the lower
Art. 1484. In a contract of sale of personal property the price of
court five alleged errors, as follows: 
which is payable in installments, the vendor may exercise y of the
following remedies: 
I 

11
 (1) Exact fulfillment of the obligation, should the vendee fail to
pay;  himself with the proceeds of the sale at the public auction of the chattels which were
(2) Cancel the sale, should the vendee's failure to pay cover two or
more installments;  lot of the vendees, for to do so would be equivalent to obtaining a writ of execution
(3) Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two or
more installments. In this case, he shall have no further action
against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.  In the case of Cruz v. Filipinos Investment & Finance Corporation, 23 SCRA 791,
Under the above-quoted article of the Civil Code, the vendor of personal property the
purchase price of which is payable in installments, has the right, should the vendee
default in the payment of two or more of the agreed installments, to exact fulfillment
by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage
on the purchased personal property, if one was constituted. 1 Whichever right the
vendor elects, he cannot avail of the other, these remedies being alternative, not
cumulative. 2 Furthermore, if the vendor avails himself of the right to foreclose his
mortgage, the law prohibits him from further bringing an action against the vendee
for the purpose of recovering whatever balance of the debt secured not satisfied by
the foreclosure sale. 3 The precise purpose of the law is to prevent mortgagees from
seizing the mortgaged property, buying it at foreclosure sale for a low price and then
bringing suit against the mortgagor for a deficiency judgment, otherwise, the
mortgagor-buyer would find himself without the property and still owing practically
the full amount of his original indebtedness. 4
In the instant case, defendant corporation elected to foreclose its mortgage upon
default by the plaintiffs in the payment of the agreed installments. Having chosen to
foreclose the chattel mortgage, and bought the purchased vehicles at the public
auction as the highest bidder, it submitted itself to the consequences of the law as
specifically mentioned, by which it is deemed to have renounced any and all rights
which it might otherwise have under the promissory note and the chattel mortgage as
well as the payment of the unpaid balance.  subsequently attached and sold, the sales thereof does not amount to a foreclosure of
Consequently, the lower court rightly declared the nullity of the chattel mortgage in
question in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are
concerned, under the authority of the ruling in the case of Levy Hermanos, Inc. vs.
Pacific Commercial Co., et al., 71 Phil. 587, the facts of which are similar to those in
the case at bar. There, we have the same situation wherein the vendees offered as
security for the payment of the purchase price not only the motor vehicles which
were bought on installment, but also a residential lot and a house of strong materials.
This Court sustained the pronouncement made by the lower court on the nullity of
the mortgage in so far as it included the house and lot of the vendees, holding that
under the law, should the vendor choose to foreclose the mortgage, he has to content
sold on installment and mortgaged to him and having chosen the remedy of
foreclosure, he cannot nor should he be allowed to insist on the sale of the house and
against them concerning other properties which are separate and distinct from those
which were sold on installment. This would indeed be contrary to public policy and
the very spirit and purpose of the law, limiting the vendor's right to foreclose the
chattel mortgage only on the thing sold. 
this Court ruled that the vendor of personal property sold on the installment basis is
precluded, after foreclosing the chattel mortgage on the thing sold from having a
recourse against the additional security put up by a third party to guarantee the
purchaser's performance of his obligation on the theory that to sustain the same
would overlook the fact that if the guarantor should be compelled to pay the balance
of the purchase price, said guarantor will in turn be entitled to recover what he has
paid from the debtor-vendee, and ultimately it will be the latter who will be made to
bear the payment of the of the balance of the price, despite the earlier foreclosure of
the chattel mortgage given by him, thereby indirectly subverting the protection given
the latter. Consequently, the additional mortgage was ordered cancelled. Said ruling
was reiterated in the case of Pascual v. Universal Motors Corporation, 61 SCRA
121. If the vendor under such circumstance is prohibited from having a recourse
against the additional security for reasons therein stated, there is no ground why such
vendor should not likewise be precluded from further extrajudicially foreclosing the
additional security put up by the vendees themselves, as in the instant case, it being
tantamount to a further action 5 that would violate Article 1484 of the Civil Code, for
then is actually no between an additional security put up by the vendee himself and
such security put up by a third party insofar as how the burden would ultimately fall
on the vendee himself is concerned.
Reliance on the ruling in Southern Motors, inc. v. Moscoso, 2 SCRA 168, that in
sales on installments, where the action instituted is for and the mortgaged property is
the mortgage, hence, the seller creditor is entitled to a deficiency judgment, does not
for the stand of the appellants for that case is entirely different from the case at bar.
In that case, the vendor has availed of the first remedy provided by Article 1484 of
the Civil Code, i.e., to exact fulfillment of the obligation whereas in the present case,
the remedy availed of was foreclosure of the chattel mortgage. 
The foregoing disposition renders superfluous a determination of the other issue
raised by the parties as to the validity of the auction sale, in so far as the franchise of
plaintiffs is concerned, which sale had been admittedly held without any notice to the
plaintiffs. 
12
IN VIEW HEREOF, the judgment appealed from is hereby affirmed, with costs
against the appellants.  the contracts in question.
SO ORDERED.
No. L-26578. January 28, 1974.*
LEGARDA HERMANOS AND JOSE LEGARDA, petitioners, vs. FELIPE
SALDAÑA and COURT OF APPEALS (FIFTH DIVISION)** respondents.
Civil Law; Sales; Where one purchases from a subdivision owner two lots and
has paid more than the value of one lot, the former is entitled to a certificate of title
to one lot in case of default.—As already stated, the monthly payments for eight
years made by respondent were applied to his account without Specifying or
distinguishing between the two lots subject of the two agreements under petitioners’
own statement of account. Even considering respondent as having defaulted after
February, 1956, when he suspended payments after the 95th installment, he had as of
then already paid by way of principal (P1,-682.28) more than the full value of one lot
(P1,500.00). The judgment recognizing this fact and ordering the conveyance to him
of one lot of his choice while also recognizing petitioners’ right to retain the interests
of P1,889.78 paid by him for eight years on both lots, besides the cancellation of the
contract for one lot which thus reverts to petitioners, cannot be deemed to deny
substantial justice to petitioners nor to defeat their rights under the letter and spirit of
Same; Same.—The Court’s doctrine in the analogous case of J.M. Tuason &
Co., Inc. vs. Javier is fully applicable to the present case, with the respondent at bar
being granted lesser benefits, since no rescission of contract was therein permitted.
Same; Same; Substantial performance of contractual obligations in good
faith.—Under article 1234 of the Civil Code “If the obligation has been substantially
performed in good faith, the obligor may recover as though there had been a strict
and complete fulfillment, less damages suffered by the obligee.” The decision
appealed from is upheld in the interest of justice and equity. (Citing J.M. Tuason &
Co., Inc. vs. Javier, 31 SCRA 829).
PETITION for review of a decision of the Court of Appeals. The facts are stated in
the opinion of the Court.
     Manuel Y. Matias for petitioners.
     Mario E. Ongkiko for private respondent.
TEEHANKEE, J.:1äwphï1.ñët
The Court, in affirming the decision under review of the Court of Appeals,
which holds that the respondent buyer of two small residential lots on
installment contracts on a ten-year basis who has faithfully paid for eight
continuous years on the principal alone already more than the value of one lot,
besides the larger stipulated interests on both lots, is entitled to the conveyance
of one fully paid lot of his choice, rules that the judgment is fair and just and in
accordance with law and equity.
The action originated as a complaint for delivery of two parcels of land in
Sampaloc, Manila and for execution of the corresponding deed of conveyance
after payment of the balance still due on their purchase price. Private
respondent as plaintiff had entered into two written contracts with petitioner
Legarda Hermanos as defendant subdivision owner, whereby the latter agreed
to sell to him Lots Nos. 7 and 8 of block No. 5N of the subdivision with an area
of 150 square meters each, for the sum of P1,500.00 per lot, payable over the
span of ten years divided into 120 equal monthly installments of P19.83 with
10% interest per annum, to commence on May 26, 1948, date of execution of the
contracts. Subsequently, Legarda Hermanos partitioned the subdivision among
the brothers and sisters, and the two lots were among those allotted to co-
petitioner Jose Legarda who was then included as co-defendant in the action.
It is undisputed that respondent faithfully paid for eight continuous years about
95 (of the stipulated 120) monthly installments totalling P3,582.06 up to the
month of February, 1956, which as per petitioners' own statement of account,
13
Exhibit "1", was applied to respondent's account (without distinguishing the
two lots), as follows:
To interests P1,889.78
To principal 1,682.28
Total P3,582.061
It is equally undisputed that after February, 1956 up to the filing of respondent's
complaint in the Manila court of first instance in 1961, respondent did not make
further payments. The account thus shows that he owed petitioners the sum of
P1,317.72 on account of the balance of the purchase price (principal) of the two lots
(in the total sum of P3,000.00), although he had paid more than the stipulated
purchase price of P1,500.00 for one lot.
Almost five years later, on February 2, 1961 just before the filing of the action,
respondent wrote petitioners stating that his desire to build a house on the lots was
prevented by their failure to introduce improvements on the subdivision as "there is
still no road to these lots," and requesting information of the amount owing to update
his account as "I intend to continue paying the balance due on said lots."
Petitioners replied in their letter of February 11, 1961 that as respondent had failed to
complete total payment of the 120 installments by May, 1958 as stipulated in the
contracts to sell, "pursuant to the provisions of both contracts all the amounts paid in
accordance with the agreement together with the improvements on the premises have
been considered as rents paid and as payment for damages suffered by your
failure,"2 and "Said cancellation being in order, is hereby confirmed."
From the adverse decision of July 17, 1963 of the trial court sustaining petitioners'
cancellation of the contracts and dismissing respondent's complaint, respondent
appellate court on appeal rendered its judgment of July 27, 1966 reversing the lower
court's judgment and ordering petitioners "to deliver to the plaintiff possession of one
of the two lots, at the choice of defendants, and to execute the corresponding deed of
conveyance to the plaintiff for the said lot,"3 ruling as follows: —
During the hearing, plaintiff testified that he suspended payments
because the lots were not actually delivered to him, or could not
be, due to the fact that they were completely under water; and also
because the defendants-owners failed to make improvements on
the premises, such as roads, filling of the submerged areas, etc.,
despite repeated promises of their representative, the said Mr.
Cenon. As regards the supposed cancellation of the contracts,
plaintiff averred that no demand has been made upon him
regarding the unpaid installments, and for this reason he could not
be declared in default so as to entitle the defendants to cancel the
said contracts.
The issue, therefore, is: Under the above facts, may defendants be
compelled, or not, to allow plaintiff to complete payment of the
purchase price of the two lots in dispute and thereafter to execute
the final deeds of conveyance thereof in his favor?
xxx xxx xxx
Whether or not plaintiffs explanation for his failure to pay the
remaining installments is true, considering the circumstances
obtaining in this case, we elect to apply the broad principles
of equity and justice. In the case at bar, we find that the plaintiff
has paid the total sum of P3,582.06 including interests, which is
even more than the value of the two lots. And even if the sum
applied to the principal alone were to be considered, which was of
the total of P1,682.28, the same was already more than the value
of onelot, which is P1,500.00. The only balance due on both lots
was P1,317.72, which was even less than the value of one lot. We
will consider as fully paid by the plaintiff at least one of the two
lots, at the choice of the defendants. This is more in line with good
conscience than a total denial to the plaintiff of a little token of
what he has paid the defendant Legarda Hermanos.4
Hence, the present petition for review, wherein petitioners insist on their right of
cancellation under the "plainly valid written agreements which constitute the law
between the parties" as against "the broad principles of equity and justice" applied by
the appellate court. Respondent on the other hand while adhering to the validity of
the doctrine of the Caridad Estates cases 5 which recognizes the right of a vendor of
land under a contract to sell to cancel the contract upon default, with forfeiture of the
installments paid as rentals, disputes its applicability herein contending that here
petitioners-sellers were equally in default as the lots were "completely under water"
and "there is neither evidence nor a finding that the petitioners in fact cancelled the
contracts previous to receipt of respondent's letter."6
The Court finds that the appellate court's judgment finding that of the total sum of
P3,582.06 (including interests of P1,889.78) already paid by respondent (which
was more than the value of two lots), the sum applied by petitioners to the principal
alone in the amount of P1,682.28 was already more than the value of one lot
of P1,500.00 and hence one of the two lots as chosen by respondent would be
considered as fully paid, is fair and just and in accordance with law and equity.
14
As already stated, the monthly payments for eight years made by respondent were
applied to his account without specifying or distinguishing between the two lots
subject of the two agreements under petitioners' own statement of account, Exhibit
"1".7 Even considering respondent as having defaulted after February 1956, when he
suspended payments after the 95th installment, he had as of the already paid by way
of principal (P1,682.28) more than the full value of one lot (P1,500.00). The
judgment recognizing this fact and ordering the conveyance to him of one lot of his
choice while also recognizing petitioners' right to retain the interests of P1,889.78
paid by him for eight years on both lots, besides the cancellation of the contract for
one lot which thus reverts to petitioners, cannot be deemed to deny substantial
justice to petitioners nor to defeat their rights under the letter and spirit of the
contracts in question.

The Court's doctrine in the analogous case of J.M. Tuason & Co. Inc. vs. Javier8 is
fully applicable to the present case, with the respondent at bar being
granted lesser benefits, since no rescission of contract was therein permitted. There,
where the therein buyer-appellee identically situated as herein respondent buyer had
likewise defaulted in completing the payments after having religiously paid the
stipulated monthly installments for almost eight years and notwithstanding that the
seller-appellant had duly notified the buyer of the rescission of the contract to sell,
the Court upheld the lower court's judgment denying judicial confirmation of the
rescission and instead granting the buyer an additional grace period of sixty days
from notice of judgment to pay all the installment payments in arrears together with
the stipulated 10% interest per annum from the date of default, apart from reasonable
attorney's fees and costs, which payments, the Court observed, would have the
plaintiff-seller "recover everything due thereto, pursuant to its contract with the
defendant, including such damages as the former may have suffered in consequence
of the latter's default." 

In affirming, the Court held that "Regardless, however, of the propriety of applying
said Art. 1592 thereto, We find that plaintiff herein has not been denied substantial
justice, for, according to Art. 1234 of said Code: 'If the obligation has
been substantially performed in good faith, the obligor may recover as though there
had been a strict and complete fulfillment, less damages suffered by the obligee,'"
and "that in the interest of justice and equity, the decision appealed from may be
upheld upon the authority of Article 1234 of the Civil Code."9

ACCORDINGLY, the appealed judgment of the appellate court is hereby affirmed.

Without pronouncement as to costs.
G.R. No. 208185. September 6, 2017.*
PRISCILLA ZAFRA ORBE, petitioner, vs. FILINVEST LAND, INC.,
respondent.
Civil Law; Maceda Law; Realty Installment Buyer Act; Republic Act (RA)
No. 6552, the Realty Installment Buyer Act or more popularly referred to as the

15
Maceda Law, named after its author, the late Sen. Ernesto Maceda, was adopted
with the purpose of “protect[ing] buyers of real estate on installment payments
against onerous and oppressive conditions.”—Republic Act No. 6552, the Realty
Installment Buyer Act or more popularly reffered to as the Maceda Law, named after
its author, the late Sen. Ernesto Maceda, was adopted with the purpose of
“protect[ing] buyers of real estate on installment payments against onerous and
oppressive conditions.” It “delineat[es] the rights and remedies of . . . buyers and
protect[s] them from one-sided and pernicious contract stipulations”: Its declared
public policy is to protect buyers of real estate on installment basis against onerous
and oppressive conditions. The law seeks to address the acute housing shortage
problem in our country that has prompted thousands of middle and lower class
buyers of houses, lots and condominium units to enter into all sorts of contracts with
private housing developers involving installment schemes. Lot buyers, mostly low
income earners eager to acquire a lot upon which to build their homes, readily affix
their signatures on these contracts, without an opportunity to question the onerous
provisions therein as the contract is offered to them on a “take it or leave it” basis.
Most of these contracts of adhesion, drawn exclusively by the developers, entrap
innocent buyers by requiring cash deposits for reservation agreements which
oftentimes include, in fine print, onerous default clauses where all the installment
payments made will be forfeited upon failure to pay any installment due even if the
buyers had made payments for several years. Real estate developers thus enjoy an
unnecessary advantage over lot buyers who[m] they often exploit with iniquitous
results. They get to forfeit all the installment payments of defaulting buyers and
resell the same lot to another buyer with the same exigent conditions. To help
especially the low income
_______________
*  THIRD DIVISION.
 
73
VOL. 839, SEPTEMBER 6, 2017
Orbe vs. Filinvest Land, Inc.
lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies
of lot buyers and protect[ing] them from one-sided and pernicious contract
stipulations.
Same; Same; Same; Sections 3 and 4 of the Maceda Law spell out the rights
of defaulting buyers on installment payments, depending on the extent of payments
made.—Sections 3 and 4 of the Maceda Law spell out the rights of defaulting buyers
on installment payments, depending on the extent of payments made. Section 3
governs situations in which a buyer “has paid at least two years of installments”:
Section 3. In all transactions or contracts involving the sale or financing of real estate
on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two
years of installments, the buyer is entitled to the following rights in case he defaults
in the payment of succeeding 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 percent of the total payments made
and, after five years of installments, an additional five percent every year but not to
exceed ninety percent of the total payments made: Provided, That the actual
cancellation of the contract shall take place 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 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 installment payments made.
Same; Same; Same; Section 4 governs situations “where less than two (2)
years of installments were paid.”—Section 4 governs situations “where less than two
years of installments were paid”: Section 4. In case where less than two years of
installments were paid, the seller shall give the buyer a grace period of not less than
 
 
74
7 SUPREME COURT REPORTS ANNOTATED
4
Orbe vs. Filinvest Land, Inc.
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.
Same; Same; Same; When Section 3 speaks of paying ‘‘at least two (2) years
of installments,” it refers to the equivalent of the totality of payments diligently or
consistently made throughout a period of two years.—When Section 3 speaks of
paying “at least two years of installments,” it refers to the equivalent of the totality of
payments diligently or consistently made throughout a period of two (2) years.
Accordingly, where installments are to be paid on a monthly basis, paying “at least
two years of installments” pertains to the aggregate value of 24 monthly installments.
As explained in Gatchalian Realty v. Angeles, 711 SCRA 163 (2013): It should be
noted that Section 3 of R.A. 6552 and paragraph six of Contract Nos. 2271 and 2272,
speak of “two years of installments.” The basis for computation of the term refers to
the installments that correspond to the number of months of payments, and not to the
number of months that the contract is in effect as well as any grace period that has
16
been given. Both the law and the contracts thus prevent any buyer who has not been
diligent in paying his monthly installments from unduly claiming the rights provided
in Section 3 of R.A. 6552. The phrase “at least two years of installments” refers to
value and time. It does not only refer to the period when the buyer has been making
payments, with total disregard for the value that the buyer has actually conveyed. It
refers to the proportionate value of the installments made, as well as payments
having been made for at least two (2) years.
Same; Same; Same; Laws should never be so interpreted as to produce
results that are absurd or unreasonable. Sustaining petitioner’s contention that she
falls within Section 3’s protection just because she has been paying for more than
two (2) years goes beyond a justified, liberal construction of the Maceda Law.—
Laws should never be so interpreted as to produce results that are absurd or
unreasonable. Sustaining petitioner’s contention that she falls within Section 3’s
protection just because she has been paying for more than two (2) years goes beyond
a justified, liberal construction of the Maceda Law. It facilitates arbitrariness, as
intermittent payments of fluctuating amounts would become permissible, so long as
they
 
75
VOL. 839, SEPTEMBER 6, 2017
Orbe vs. Filinvest Land, Inc.
stretch for two (2) years. Worse, it condones an absurdity. It sets a precedent that
would endorse minimal, token payments that extend for two (2) years. A buyer
could, then, literally pay loose change for two (2) years and still come under Section
3’s protection.
Same; Same; Same; Supreme Court (SC) reckons petitioner’s satisfaction of
the requisite two (2) years’ or twenty-four (24) months’ worth of installments using
as divisor the monthly amortizations due from petitioner.—Following Marina, this
Court reckons petitioner’s satisfaction of the requisite two (2) years’ or 24 months’
worth of installments using as divisor the monthly amortizations due from petitioner.
However, this Court notes that the monthly amortizations due from petitioner were
stipulated to escalate on a yearly basis. In keeping with the need to construe the
Maceda Law in a manner favorable to the buyer, this Court uses as basis the monthly
amortizations set for the first year, i.e., P27,936.84. With this as the divisor, it shall
appear that petitioner has only paid 21.786 months’ worth of installments. This falls
short of the requisite two (2) years’ or 24 months’ worth of installments.
Same; Same; Same; For cancellations under Section 4 to be valid, three (3)
requisites must concur. First, the buyer must have been given a sixty (60)-day grace
period but failed to utilize it. Second, the seller must have sent a notice of
cancellation or demand for rescission by notarial act. And third, the cancellation
shall take effect only after thirty (30) days of the buyer’s receipt of the notice of
cancellation.—For cancellations under Section 4 to be valid, three (3) requisites
must concur. First, the buyer must have been given a 60-day grace period but failed
to utilize it. Second, the seller must have sent a notice of cancellation or demand for
rescission by notarial act. And third, the cancellation shall take effect only after 30
days of the buyer’s receipt of the notice of cancellation: 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.
 
 
76
7 SUPREME COURT REPORTS ANNOTATED
6
Orbe vs. Filinvest Land, Inc.
Notarized Documents; In ordinary circumstances, “[n]otarization of a
private document converts the document into a public one making it admissible in
court without further proof of its authenticity.”—In ordinary circumstances,
“[n]otarization of a private document converts the document into a public one
making it admissible in court without further proof of its authenticity.” To enable this
conversion, Rule 132, Section 19 of the Revised Rules of Evidence specifically
requires that a document be “acknowledged before a notary public.”
Same; Maceda Law; Notarization under the Maceda Law extends beyond
converting private documents into public ones. Under Sections 3 and 4, notarization
enables the exercise of the statutory right of unilateral cancellation by the seller of a
perfected contract.—Notarization under the Maceda Law extends beyond converting
private documents into public ones. Under Sections 3 and 4, notarization enables the
exercise of the statutory right of unilateral cancellation by the seller of a perfected
contract. If an acknowledgment is necessary in the customary rendition of public
documents, with greater reason should an acknowledgment be imperative in notices
of cancellation or demands for rescission made under Sections 3 and 4 of the Maceda
Law.
Civil Law; Sales; In a great number of cases, the sellers of real property shall
be juridical persons acting through representatives. In these cases, it is imperative
that the officer signing for the seller indicate that he or she is duly authorized to
effect the cancellation of an otherwise perfected contract.—Through an
acknowledgment, individuals acting as representatives declare that they are
authorized to act as such representatives. This is particularly crucial with respect to
signatories to notices of cancellation or demands for rescission under Sections 3 and
4 of the Maceda Law. In a great number of cases, the sellers of real property shall be
juridical persons acting through representatives. In these cases, it is imperative that
17
the officer signing for the seller indicate that he or she is duly authorized to effect the
cancellation of an otherwise perfected contract. Not all personnel are capacitated to
effect these cancellations; individuals purporting to do so must demonstrate their
specific authority. In the case of corporations, this authority is vested through board
resolutions, or by stipulations in the articles of incorporation or bylaws.
 
 
77
VOL. 839, SEPTEMBER 6, 2017
Orbe vs. Filinvest Land, Inc.
Same; Same; Even if respondent’s notarization by jurat and not by
acknowledgment were to be condoned, respondent’s jurat was not even a valid jurat
executed according to the requirements of the 2004 Rules on Notarial Practice.—
Even if respondent’s notarization by jurat and not by acknowledgment were to be
condoned, respondent’s jurat was not even a valid jurat executed according to the
requirements of the 2004 Rules on Notarial Practice. The 2004 Rules on Notarial
Practice took effect on August 1, 2004. It governed respondent’s October 4, 2004
notice, which was notarized on October 6, 2004. As Rule II, Section 6 of these Rules
clearly states, the person signing the document must be “personally known to the
notary public or identified by the notary public through competent evidence of
identity.” Rule II, Section 12, in turn, defines “competent evidence of identity.” As
originally worded, when the 2004 Rules on Notarial Practice came into effect on
August 1, 2004, Rule II, Section 12 read: Section 12. Competent Evidence of
Identity.—The phrase “competent evidence of identity” refers to the identification of
an individual based on: (a) at least one current identification document issued by an
official agency bearing the photograph and signature of the individual; or (b) the oath
or affirmation of one credible witness not privy to the instrument, document or
transaction who is personally known to the notary public and who personally knows
the individual, or of two credible witnesses neither of whom is privy to the
instrument, document or transaction who each personally knows the individual and
shows to the notary public documentary identification.
Same; Contracts; Cancellation of Contracts; Realty Exchange Venture Corp.
v. Sendino, 233 SCRA 665 (1994), explained, “Since Republic Act (RA) No. 6552
mandates cancellation by notarial act — among other requirements — before any
cancellation of a contract may be effected, petitioners’ precipitate cancellation of its
contract with private respondent without observing the conditions imposed by the
said law was invalid and improper.”—Marina Properties v. Court of Appeals, 294
SCRA 273 (1998), was unequivocal: “[I]n order to effect the cancellation of a
contract, a notarial cancellation must first be had.” Realty Exchange Venture Corp. v.
Sendino, 233 SCRA 665 (1994), explained, “Since R.A. 6552 mandates cancellation
by notarial act — among other requirements — before any cancellation of a contract
may be effected, petitioners’ precipitate cancellation of its contract with private
respondent without observing the conditions imposed by the said law was invalid and
improper.” In Active Realty
 
 
78
7 SUPREME COURT REPORTS ANNOTATED
8
Orbe vs. Filinvest Land, Inc.
and Development v. Daroya, 382 SCRA 152 (2002), where the seller “failed
to send a notarized notice of cancellation,” this Court decried the iniquity foisted
upon a buyer. “[W]e find it illegal and iniquitous that petitioner, without complying
with the mandatory legal requirements for canceling the contract, forfeited both
respondent’s land and hard-earned money.”
Notary Public; Where notarization serves merely to convert a private
document into a public document, notaries public have been admonished about
faithfully observing the rules governing notarial acts: “Faithful observance and
utmost respect of the legal solemnity of an oath in an acknowledgment or jurat is
sacrosanct.”—In ordinary circumstances, where notarization serves merely to
convert a private document into a public document, notaries public have been
admonished about faithfully observing the rules governing notarial acts: “Faithful
observance and utmost respect of the legal solemnity of an oath in an
acknowledgment or jurat is sacrosanct.” It is with greater reason that the diligent
observance of notarial rules should be impressed in cases concerned with a seller’s
exercise of a statutory privilege through cancellations under the Maceda Law.
Respondent’s failure to diligently satisfy the imperatives of the 2004 Rules on
Notarial Practice constrains this Court to consider its notice as an invalid notarial act.
This amounts to respondent’s failure to satisfy the second requisite for valid
cancellations under Section 4, ultimately rendering its cancellation of the purchase
agreement ineffectual.
Remedial Law; Civil Procedure; Verification; The verification is only a
formal, not a jurisdictional, requirement that the Supreme Court (SC) may waive.—
Galicto v. Aquino III, 667 SCRA 150 (2012), Coca-Cola Bottlers Philippines, Inc. v.
Dela Cruz, 608 SCRA 16 (2009), Victorio-Aquino v. Pacific Plans, Inc., 744 SCRA
480 (2014), and Reyes v. Glaucoma Research Foundation, Inc., 759 SCRA 120
(2015), concerned verifications and certifications of non-forum shopping in which
jurats did not indicate the required competent evidence of identity. In these cases,
this Court overlooked the defects considering that “defective jurat in the
Verification/Certification of Non-Forum Shopping is not a fatal defect . . . The
verification is only a formal, not a jurisdictional, requirement that the Court may
waive.” Likewise, this Court considered it more appropriate to not hinder the
consideration of pleadings in order that party-litigants may exhaustively plead their
cases.
 
 
18
 79
VOL. 839, SEPTEMBER 6, 2017
Orbe vs. Filinvest Land, Inc.
Civil Law; Maceda Law; Realty Installment Buyer Act; With the Maceda
Law’s avowed purpose of extending benefits to disadvantaged buyers and liberating
them from onerous and oppressive conditions, it necessarily follows that the Maceda
Law’s permission for sellers to cancel contracts becomes available only when its
conditions are heedfully satisfied.—To be effective, sellers’ cancellations under the
Maceda Law must strictly comply with the requirements of Sections 3 and 4. This
Court clarifies here that with respect to notices of cancellation or demands for
rescission by notarial act, an acknowledgment is imperative. Moreover, when these
are made through representatives of juridical persons selling real property, the
authority of these representatives must be duly demonstrated. For corporations, the
representative’s authority must have either been granted by a board resolution or
existing in the seller’s articles of incorporation or bylaws. With the Maceda Law’s
avowed purpose of extending benefits to disadvantaged buyers and liberating them
from onerous and oppressive conditions, it necessarily follows that the Maceda
Law’s permission for sellers to cancel contracts becomes available only when its
conditions are heedfully satisfied. No liberal construction of the Maceda Law can be
made in favor of the seller and at the same time burdening the buyer.
Same; Legal Interest; In view of Nacar v. Gallery Frames, 703 SCRA 439
(2013), this amount shall be subject to legal interest at the rate of twelve percent
(12%) per annum reckoned from the filing of petitioner’s Complaint until June 30,
2013; and six percent (6%) per annum from July 1, 2013 until fully paid.—
Considering that it did not validly cancel its contract with petitioner and has also sold
the lot to another person, it is proper that respondent be ordered to refund petitioner.
This refund shall not be the full, actual value of the lot resold, as was ordered in
Active and Gatchalian, lest petitioner be unjustly enriched. Rather, it shall only be
the amount actually paid by petitioner to respondent, i.e., P608,648.20. In view of
Nacar v. Gallery Frames, 703 SCRA 439 (2013), this amount shall be subject to
legal interest at the rate of twelve percent (12%) per annum reckoned from the filing
of petitioner’s Complaint until June 30, 2013; and six percent (6%) per annum from
July 1, 2013 until fully paid.
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
 
 
80
8 SUPREME COURT REPORTS ANNOTATED
0 of Civil Procedure praying that the assailed October 11, 2012 Decision 4 and July 3,
Orbe vs. Filinvest Land, Inc.
The facts are stated in the opinion of the Court.
   Perez & Partners for respondent.
LEONEN, J.:
 
When Republic Act No. 6552 or the Maceda Law speaks of paying “at least two
years of installments” in order for the benefits under its Section 3 1 to become
available, it refers to
1  Rep. Act No. 6552, Sec. 3 provides:
Section 3. In all transactions or contracts involving the sale or financing of
real estate on installment payments, including residential condominium apartments
but excluding industrial lots, commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic
Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least
two years of installments, the buyer is entitled to the following rights in case he
defaults in the payment of succeeding 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 percent of the
total payments made and, after five years of installments, an additional five percent
every year but not to exceed ninety percent of the total payments made: Provided,
That the actual cancellation of the contract shall take place 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 and upon full payment of the cash surrender value to the
buyer.
 
 
81
VOL. 839, SEPTEMBER 6, 2017
Orbe vs. Filinvest Land, Inc.
the buyer’s payment of two (2) years’ worth of the stipulated fractional, periodic
payments due to the seller. When the buyer’s payments fall short of the equivalent of
two (2) years’ worth of installments, the benefits that the buyer may avail of are
limited to those under Section 4. 2 Should the buyer still fail to make payments within
Section 4’s grace period, the seller may cancel the contract. Any such cancellation is
ineffectual, however, unless it is made through a valid notarial act.
This resolves a Petition for Review on Certiorari3 under Rule 45 of the 1997 Rules
2013 Resolution5 of the Court of Appeals in C.A.-G.R. S.P. No. 118285 be reversed
and set aside.
19
The assailed Court of Appeals’ October 11, 2012 Decision reversed the prior rulings 8  Id., at p. 210.
of the Office of the President, the Board of Commissioners of the Housing and Land 9  Id., at p. 212; see footnote 14.
Use Regu-  
_______________  
Down payments, deposits or options on the contract shall be included in the 83
computation of the total number of installment payments made.
2  Rep. Act No. 6552, Sec. 4 provides: VOL. 839, SEPTEMBER 6, 2017
Section 4. In case where less than two years of installments were paid, the Orbe vs. Filinvest Land, Inc.
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 checks, for which Filinvest issued official receipts. 10 Check payments were made as
expiration of the grace period, the seller may cancel the contract after thirty days follows:
from receipt by the buyer of the notice of cancellation or the demand for rescission METROBANK CHECK NO. DATE AMOUNT
of the contract by a notarial act. Metro Bank Check No. 0306533 June 17, 2001 [P]20,000
3  Rollo, pp. 11-29. Metro Bank Check No. 0306544 July 29, 2001 [P]54,818
4  Id., at pp. 209-227. The Decision was penned by Associate Justice Eduardo B. Metro Bank Check No. 0306545 Aug. 29, 2001 [P]54,818
Peralta, Jr., and concurred in by Associate Justices Vicente S. E. Veloso and Jane Metro Bank Check No. 0306546 Sept. 29, 2001 [P]54,818
Aurora C. Lantion of the Twelfth Division, Court of Appeals, Manila. Metro Bank Check No. 0320243 May 8, 2002 [P]100,00
5  Id., at p. 245. The resolution was penned by Associate Justice Eduardo B. Metro Bank Check No. 0320244 May 22, 2002 [P]100,00
Peralta, Jr., and concurred in by Associate Justices Vicente S. E. Veloso and Jane Metro Bank Check No. 0370882 March 26, 2003 [P]80,000
Aurora C. Lantion of the Twelfth Division, Court of Appeals, Manila. Metro Bank Check No. 0370883 April 26, 2003 [P]75,789
  Metro Bank Check No. 0401000 Feb. 12, 2004 [P]37,811
  Metro Bank Check No. 0531301 July 14, 2004 [P]30,000
82  
Orbe was unable to make further payments allegedly on account of financial
8 SUPREME COURT REPORTS ANNOTATED difficulties.12
2 On October 4, 2004, Filinvest sent a notice of cancellation, 13 which was received by
Orbe vs. Filinvest Land, Inc. Orbe on October 18, 2004.14 The notice and its accompanying jurat read:
_______________
latory Board (HLURB Board of Commissioners), and of Housing and Land Use 10  Id., at pp. 64-65.
Arbiter Leonard Jacinto A. Soriano (Arbiter Soriano) of the Expanded National
Capital Region Field Office of the Housing and Land Use Regulatory Board
(HLURB Field Office). It held that petitioner Priscilla Zafra Orbe (Orbe) is entitled
to the benefits of Section 3 of Republic Act No. 6552.6 The assailed Court of
Appeals’ July 3, 2013 Resolution denied Orbe’s Motion for Reconsideration.7
Sometime in June 2001, Orbe entered into a purchase agreement with respondent
Filinvest Land, Inc. (Filinvest) over a 385-square-meter lot identified as Lot 1, Block
10, Phase 1, Highlands Pointe, Taytay, Rizal. The total contract price was
P2,566,795.00, payable on installment basis8 under the following terms:

 
From June 17, 2001 to July 14, 2004, Orbe paid a total of P608,648.20. These were
mainly through several Metrobank
_______________
6  Id., at pp. 59 and 66.
7  Id., at pp. 228-232.

20
 11  Id.  
12  Id., at p. 210.  
13  Id., at p. 100. 85
14  Id., at p. 212.
  VOL. 839, SEPTEMBER 6, 2017
  Orbe vs. Filinvest Land, Inc.
84
Noting that “efforts . . . to seek for a reconsideration of said cancellation . . . proved
8 SUPREME COURT REPORTS ANNOTATED futile,” and that the parcel had since been sold by Filinvest to a certain Ruel Ymana
4 “in evident bad faith,”16 Orbe filed against Filinvest a Complaint for refund with
Orbe vs. Filinvest Land, Inc. damages dated November 13, 2007 before the HLURB Field Office. 17 Orbe
emphasized that she had made payments “beginning June, 2001 up to October,
October 4, 2004 2004.”18 She further asserted that the October 4, 2004 Notice did not amount to an
PRISCILLA Z. ORBE “effective cancellation by notarial act.”19
#107 Morena St. Villaverde Homes In its Answer with Counterclaim, Filinvest asserted that Orbe failed to make 24
Novaliches, Q.C. monthly amortization payments on her account, and thus, could not benefit from
Re: Account No.        6181426 Section 3 of Republic Act No. 6552. According to Filinvest, the P608,648.20 paid by
Project               HIGH Orbe from June 17, 2001 to July 14, 2004 covered only the reservation fee, down
Phase                 1 payment, and late payment charges, exclusive of the monthly amortization payments
Block                  10 stipulated in the Purchase Agreement.20
Lot                      1 In his July 25, 2008 Decision, 21 Arbiter Soriano of the HLURB Field Office ruled in
Gentlemen (sic): favor of Orbe. He held that since Orbe made payments “from 17 June 2001 to 14
Our records show that your account remains unpaid despite our written request for July 2004, or a period of more than two years,” 22 all of which should be credited to
your payment. We have in fact given you sixty (60) days to update but you failed to the principal,23 she was entitled to a refund of the cash sur-
settle your account. Accordingly, please be informed that we are now hereby _______________
canceling your account effective thirty (30) days from receipt hereof. 16  Id., at p. 68.
Very truly yours, 17  Id., at pp. 67-68.
COLLECTION DEPARTMENT 18  Id., at p. 67.
By: 19  Id., at p. 68.
_________________(sgd.)_________________ 20  Id., at pp. 212-213.
MA. LOUELLA D. SENIA 21  Id., at pp. 64-66.
Republic of the Philippines ) 22  Id., at pp. 65-66.
Makati City ) S.S. 23  Id., at p. 66. He explained that, “There is nothing on record to show that
SUBSCRIBED AND SWORN to before me this OCT 06 2004, affiant exhibiting to payments had been made to cover charges for overdue payments, nor was she
me Community Tax Certificate No. 05465460 issued on February 09, 2004 at charged penalties for late payments. No demand has been made for delinquency
Manila. charges, hence the payments ha[ve] been made on the principal.”
(sgd.)  
AVELIO L. SALCEDO  
NOTARY PUBLIC 86
UNTIL DECEMBER 31, 2004
PTR NO. 3703389 3/01/04 SAN JUAN 8 SUPREME COURT REPORTS ANNOTATED
IBP NO. 609984 2/04/04 PASIG CITY 6
Doc. No. 314Page No. 64Book No. XVIIISeries of 200415 Orbe vs. Filinvest Land, Inc.
_______________
15  Id., at p. 100. render value equivalent to 50% of the total payments she had made, pursuant to

21
Section 3 of Republic Act No. 6552.24
Filinvest appealed to the HLURB Board of Commissioners.25
In its April 15, 2009 Decision, 26 the HLURB Board of Commissioners affirmed
Arbiter Soriano’s Decision.27 It disagreed with Arbiter Soriano’s conclusion that
Orbe had paid two (2) years’ installments. It specifically noted rather, that the
buyer’s payments fell two (2) months short of the equivalent of two years of
installments.28 It added, however, that “[e]quity . . . should come in especially where,
as here, the payment period is relatively short and the monthly installment is
relatively of substantial amounts.”29 Thus, it concluded that Orbe was still entitled to
a 50% refund.30
Filinvest then appealed to the Office of the President.31
In its February 4, 2011 Decision,32 the Office of the President sustained the
conclusion that Orbe was entitled to a 50% refund. It disagreed with the HLURB
Board of Commissioners’ finding that Section 3’s benefits were available to Orbe
purely as a matter of equity. It agreed instead with Arbiter Soriano’s reliance on how
Orbe “ha[d] made installment payments for more than two (2) years.”33
Filinvest made another appeal to the Court of Appeals,34 arguing that:
_______________
24  Id.
25  Id., at p. 60.
26  Id., at pp. 60-63.
27  Id., at p. 63.
28  Id., at p. 62.
29  Id., at p. 63.
30  Id.
31  Id., at p. 214.
32  Id., at pp. 54-59.
33  Id., at p. 58.
34  Id., at pp. 209-210.
 
 
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[W]hat [Republic Act No. 6552] requires for refund of the cash surrender value is
not the length of time of at least two years from the first payment to the last payment,
but the number of installments paid, that is, at least two years of installments or
twenty[-]four (24) monthly installments paid.35
 
Thus, Section 3, which requires the refund of the cash surrender value, will only
apply when the buyer has made at least 24 installment payments.36
In its assailed October 11, 2012 Decision, 37 the Court of Appeals reversed the prior
rulings of the Office of the President, of the HLURB Board of Commissioners, and
of Arbiter Soriano; and dismissed Orbe’s Complaint.38
The Court of Appeals reasoned that the phrase “two years of installments” under
Section 3 means that total payments made should at least be equivalent to two years’
worth of installments.39 Considering that Orbe’s total payment of P608,648.20 was
short of the required two (2) years’ worth of installments, she could not avail of the
benefits of Section 3.40 What applied instead was Section 4, enabling a grace period
of 60 days from the day the installment became due and further enabling the seller to
cancel or rescind the contract through a notarial act, should the buyer still fail to pay
within the grace period.41 It found Filinvest to have sent Orbe a valid, notarized
notice of cancellation thereby precluding any further relief.42
_______________
35  Id., at p. 218.
36  Id.
37  Id., at pp. 209-227.
38  Id., at p. 226.
39  Id., at p. 223.
40  Id., at pp. 222-226.
41  Id., at pp. 225-226.
42  Id., at p. 226.
 
 
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8
Orbe vs. Filinvest Land, Inc.
In its assailed July 3, 2013 Resolution, 43 the Court of Appeals denied Orbe’s Motion
for Reconsideration.
Hence, the present petition was filed.44
For resolution is the issue of whether or not petitioner Priscilla Zafra Orbe is entitled
to a refund or to any other benefit under Republic Act No. 6552.
The Court of Appeals correctly held that petitioner was not entitled to benefits under
Section 3 of Republic Act No. 6552 as she had failed to pay two (2) years’ worth of
installments pursuant to the terms of her original agreement with respondent. It also
correctly held that with the shortage in petitioner’s payment, what applies is Section
4, instead of Section 3. This means that respondent could cancel the contract since
petitioner failed to pay within the 60-day grace period.
The Court of Appeals, however, failed to realize that the notice of cancellation made
by respondent was an invalid notarial act. Failing to satisfy all of Section 4’s
requisites for a valid cancellation, respondent’s cancellation was ineffectual. The
contract between petitioner and respondent should then be deemed valid and
subsisting.45 Considering however, that respondent has since sold the lot to another
person, an equitable ruling is proper. Therefore, this Court rules in a manner
consistent with how it resolved Olympia Housing v. Panasiatic Travel,46 Pagtalunan
22
v. Vda. de Manzano,47 Active Realty and Development v. Daroya,48 Associated
Marine Officers and
_______________
43  Id., at p. 245.
44  Id., at pp. 11-29.
45  Gatchalian Realty, Inc. v. Angeles, 722 Phil. 407, 425; 711 SCRA 163, 181
(2013) [Per J. Carpio, Second Division].
46  443 Phil. 385; 395 SCRA 298 (2003) [Per J. Vitug, First Division].
47  559 Phil. 658; 533 SCRA 242 (2007) [Per J. Azcuna, First Division].
48  431 Phil. 753; 382 SCRA 152 (2002) [Per J. Puno, First Division].
 
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Orbe vs. Filinvest Land, Inc.
Seamen’s Union of the Philippines PTGWO-ITF v. Decena,49 and Gatchalian Realty
v. Angeles.50
 
I recognizes to be disadvantageous and onerous conditions, the Maceda Law’s
 
Republic Act No. 6552, the Realty Installment Buyer Act or more popularly
referred to as the Maceda Law, named after its author, the late Sen. Ernesto Maceda,
was adopted with the purpose of “protect[ing] buyers of real estate on installment
payments against onerous and oppressive conditions.”51 It “delineat[es] the rights and
remedies of . . . buyers and protect[s] them from one-sided and pernicious contract
stipulations”:52
Its declared public policy is to protect buyers of real estate on installment basis
against onerous and oppressive conditions. The law seeks to address the acute
housing shortage problem in our country that has prompted thousands of middle and
lower class buyers of houses, lots and condominium units to enter into all sorts of
contracts with private housing developers involving installment schemes. Lot buyers,
mostly low income earners eager to acquire a lot upon which to build their homes,
readily affix their signatures on these contracts, without an opportunity to question
the onerous provisions therein as the contract is offered to them on a “take it or leave
it” basis. Most of these contracts of adhesion, drawn exclusively by the developers,
entrap innocent buyers by requiring cash deposits for reservation agreements which
oftentimes include, in fine print, onerous default clauses where all the installment
payments made will be forfeited upon failure to pay any installment due even if the
buyers had made
_______________
49  696 Phil. 188; 682 SCRA 308 (2012) [Per J. Perlas-Bernabe, Second
Division].
50  Supra note 45.
51  Rep. Act No. 6552, Sec. 2.
52  Active Realty & Development Corporation v. Daroya, supra note 48 at p.
761; p. 158.
 
 
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0
Orbe vs. Filinvest Land, Inc.
payments for several years. Real estate developers thus enjoy an unnecessary
advantage over lot buyers who[m] they often exploit with iniquitous results. They get
to forfeit all the installment payments of defaulting buyers and resell the same lot to
another buyer with the same exigent conditions. To help especially the low income
lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies
of lot buyers and protect[ing] them from one-sided and pernicious contract
stipulations.53
 
Having been adopted with the explicit objective of protecting buyers against what it
provisions must be liberally construed in favor of buyers. Within the bounds of
reason, fairness, and justice, doubts in its interpretation must be resolved in a manner
that will afford buyers the fullest extent of its benefits.
 
II
 
Sections 3 and 4 of the Maceda Law spell out the rights of defaulting buyers on
installment payments, depending on the extent of payments made.
Section 3 governs situations in which a buyer “has paid at least two years of
installments”:
Section 3. In all transactions or contracts involving the sale or financing of real
estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered
_______________
53  Id., at pp. 760-761; p. 158, citing Rep. Act No. 6552, Sec. 3, Angeles v.
Calasanz, 220 Phil. 10; 135 SCRA 323 (1985) [Per J. Gutierrez, En Banc];
and Realty Exchange Venture Corporation v. Sendino, 304 Phil. 65; 233 SCRA 665
(1994) [Per J. Kapunan, First Division].
 
 
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Orbe vs. Filinvest Land, Inc.
Sixty-three hundred eighty-nine, where the buyer has paid at least two years of
installments, the buyer is entitled to the following rights in case he defaults in the
payment of succeeding 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 percent of the total
payments made and, after five years of installments, an additional five percent every
year but not to exceed ninety percent of the total payments made: Provided, That the
actual cancellation of the contract shall take place 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 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 installment payments made.
 
Section 4 governs situations “where less than two years of installments were paid”:
Section 4. In case where less than two years of installments were paid, 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.
 
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9 SUPREME COURT REPORTS ANNOTATED
2 disregard for the value that the buyer has actually conveyed. 57 It refers to the
Orbe vs. Filinvest Land, Inc.
In both Sections 3 and 4, defaulting buyers are afforded grace periods in which they
may pay the installments due. Should they fail to make payment within the
applicable period, cancellation of their agreement with the seller may ensue.
 
III
 
Contrary to petitioner’s allegations, she did not pay “at least two years of
installments” as to fall within the protection of Section 3.
In a sale by installment, a buyer defers full payment of the purchase price and
ratably apportions payment across a period. It is typified by regular, fractional
payments. It is these regular, fractional payments that are referred to as
“installments.”54
Thus, when Section 3 speaks of paying “at least two years of installments,” it
refers to the equivalent of the totality of payments diligently or consistently made
throughout a period of two (2) years. Accordingly, where installments are to be paid
on a monthly basis, paying “at least two years of installments” pertains to the
aggregate value of 24 monthly installments. As explained in Gatchalian Realty v.
Angeles:55
It should be noted that Section 3 of R.A. 6552 and paragraph six of Contract Nos.
2271 and 2272, speak of “two years of installments.” The basis for computation of
the term refers to the installments that correspond to the number of months of
payments, and not to the number of months that the contract is in effect as well as
any grace period that has been given. Both the law and the contracts thus prevent any
buyer who has not been diligent in paying his monthly installments from unduly
claiming
_______________
54  See also Levy Hermanos, Inc. v. Gervacio, 69 Phil. 52 (1939) [Per J. Moran,
En Banc], where this Court distinguished between a sale on installment and a sale on
straight term. There, this Court described installment payments as “partial payments
consist[ing] in relatively small amounts.”
55  Supra note 45.
 
 
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Orbe vs. Filinvest Land, Inc.
the rights provided in Section 3 of R.A. 6552.56 (Emphasis supplied)
 
The phrase “at least two years of installments” refers to value and time. It does not
only refer to the period when the buyer has been making payments, with total
proportionate value of the installments made, as well as payments having been made
for at least two (2) years.
Laws should never be so interpreted as to produce results that are absurd or
unreasonable.58 Sustaining petitioner’s contention that she falls within Section 3’s
protection just because she has been paying for more than two (2) years goes beyond
a justified, liberal construction of the Maceda Law. It facilitates arbitrariness, as
intermittent payments of fluctuating amounts would become permissible, so long as
they stretch for two (2) years. Worse, it condones an absurdity. It sets a precedent
that would endorse minimal, token payments that extend for two (2) years. A buyer
could, then, literally pay loose change for two (2) years and still come under Section
24
3’s protection.
Reckoning payment of “at least two years of installments” on the basis of the regular,
factional payments due from the buyer was demonstrated in Marina Properties
Corp. v. Court of Appeals.59 There, the monthly amortization of P67,024.22 was
considered in determining the validity of the cancellation of the contract by the
seller:
_______________
56  Id., at p. 419; p. 175.
57  Id., where the phrase “at least two years of installments” was clarified to not
only refer to “the number of months that the contract is in effect.”
58  See Ang Giok Chip v. Springfield Fire and Marine Insurance Co., 56 Phil.
375 (1931) [Per J. Malcolm, En Banc].
59  355 Phil. 705; 294 SCRA 273 (1998) [Per J. Davide, Jr., First Division].
 
 
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9 SUPREME COURT REPORTS ANNOTATED
4 As respondent failed to pay at least two years of installments, he is not, under above
Orbe vs. Filinvest Land, Inc.
We likewise uphold the finding that MARINA’s cancellation of the Contract To Buy
and To Sell was clearly illegal. Prior to MARINA’s unilateral act of rescission, H.L.
CARLOS had already paid P1,810,330.70, or more than 50% of the contract price of
P3,614,000.00. Moreover, the sum H.L. CARLOS had disbursed amounted to more
than the total of 24 installments, i.e., two years’ worth of installments computed at a
monthly installment rate of P67,024.22, inclusive of the down payment.60
 
In Jestra Development and Management Corporation v. Pacifico,61 where down
payment was itself payable in portions, this Court reckoned the monthly installment
payment for the down payment amounting to P121,666.66, rather than the monthly
amortization. This Court justified this by referencing Section 3’s injunction that
“[d]own payments, deposits or options on the contract shall be included in the
computation of the total number of installment payments made”:
The total purchase price of the property is P2,500,000. As provided in the
Reservation Application, the 30% down payment on the purchase price or P750,000
was to be paid in six monthly installments of P121,666.66. Under the Contract to
Sell, the 70% balance of P1,750,000.00 on the purchase price was to be paid in 10
years through monthly installments of P34,983, which was later increased to P39,468
in accordance with the agreement to restructure the same.
While, under the above quoted Section 3 of R.A. No. 6552, the down payment is
included in computing the total number of installment payments made, the proper
divisor is neither P34,983 nor P39,468, but P121,666.66, the monthly installment on
the down payment.
_______________
60  Id., at p. 719; p. 287. See also Rillo v. Court of Appeals, 340 Phil. 570; 274
SCRA 461 (1997) [Per J. Puno, Second Division], where compliance was reckoned
in relation to the monthly amortization of P7,092.00.
61  542 Phil. 400; 513 SCRA 413 (2007) [Per J. Carpio-Morales, Second
Division].
 
 
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Orbe vs. Filinvest Land, Inc.
The P750,000 down payment was to be paid in six monthly installments. If the down
payment of P750,000 is to be deducted from the total payment of P846,600, the
remainder is only P96,600. Since respondent was able to pay the down payment in
full eleven (11) months after the last monthly installment was due, and the sum of
P76,600 representing penalty for delay of payment is deducted from the remaining
P96,600, only a balance of P20,000 remains.
quoted Section 3 of R.A. No. 6552, entitled to a refund of the cash surrender value of
his payments.62
 
Jestra was wrong to use the installment payments on the down payment as
divisor. It is an error to reckon the payment of two (2) years’ worth of installments
on the apportionment of the down payment because, even in cases where the down
payment is broken down into smaller, more affordable portions, payments for it still
do not embody the ratable apportionment of the contract price throughout the entire
duration of the contract term. Rather than the partial payments for the down
payment, it is the partition of the contract price into monthly amortizations that
manifests the ratable apportionment across a complete contract term that is the
essence of sales on installment. The correct standard is that which was used in
Marina, not in Jestra.
Marina also correctly demonstrated how Section 3’s injunction that “[d]own
payments, deposits or options on the contract shall be included in the computation of
the total number of installment payments made” should operate. In Marina, the total
amount of P1,810,330.70 paid by the buyer was inclusive of payments for down
payment worth P1,034,200.00 and cash deposit worth P50,000.00. In concluding that
the buyer in Marina had paid more than two (2) years’ or 24
_______________
62  Id., at pp. 408-409; pp. 421-422.
 
 
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9 SUPREME COURT REPORTS ANNOTATED
25

6
Orbe vs. Filinvest Land, Inc.
months’ worth of installments, what this Court considered was the total amount of
P1,810,330.70 and not merely the payments on amortizations.
Following Marina, this Court reckons petitioner’s satisfaction of the requisite two (2)
years’ or 24 months’ worth of installments using as divisor the monthly
amortizations due from petitioner. However, this Court notes that the monthly
amortizations due from petitioner were stipulated to escalate on a yearly basis. In
keeping with the need to construe the Maceda Law in a manner favorable to the
buyer, this Court uses as basis the monthly amortizations set for the first year, i.e.,
P27,936.84. With this as the divisor, it shall appear that petitioner has only paid
21.786 months’ worth of installments. This falls short of the requisite two (2) years’
or 24 months’ worth of installments.
IV
 
Failing to satisfy Section 3’s threshold, petitioner’s case is governed by Section
4 of the Maceda Law.
Thus, she was “entitled to a grace period of not less than sixty (60) days from
the due date within which to make [her] installment payment. [Respondent], on the
other hand, ha[d] the right to cancel the contract after thirty (30) days from receipt by
[petitioner] of the notice of cancellation.”63
For cancellations under Section 4 to be valid, three (3) requisites must concur,
First, the buyer must have been given a 60-day grace period but failed to utilize it.
Second, the seller must have sent a notice of cancellation or demand for rescission by
notarial act. And third, the cancellation shall take effect only after 30 days of the
buyer’s receipt of the notice of cancellation:
_______________
63  Rillo v. Court of Appeals, supra note 60 at p. 578; pp. 468-469.
 
 
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Orbe vs. Filinvest Land, Inc.
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.64 (Emphasis in the original)
 
Respondent’s October 4, 2004 notice indicates that petitioner failed to utilize the 60-
day grace period. It also indicates that cancellation was to take effect “thirty (30)
days from [its] receipt”:
Our records show that your account remains unpaid despite our written request for
your payment. We have in fact given you sixty (60) days to update but you failed to
settle your account. Accordingly, please be informed that we are now hereby
canceling your account effective thirty (30) days from receipt hereof.65
 
The notice of cancellation was also accompanied by a jurat; thereby making it
appear to have been a valid notarial act:
SUBSCRIBED AND SWORN to before me this OCT 06 2004, affiant exhibiting to
me Community Tax Certificate No. 05465460 issued on February 09, 2004 at
Manila.66 (Emphasis supplied)
This is not, however, the valid notarial act contemplated by the Maceda Law.
_______________
64  Optimum Development Bank v. Jovellanos, 722 Phil. 772, 785; 711 SCRA
548, 561 (2013) [Per J. Perlas-Bernabe, Second Division].
65  Rollo, p. 100.
66  Id.
 
 
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8
Orbe vs. Filinvest Land, Inc.
In ordinary circumstances, “[n]otarization of a private document converts the
document into a public one making it admissible in court without further proof of its
authenticity.”67 To enable this conversion, Rule 132, Section 19 of the Revised Rules
of Evidence specifically requires that a document be “acknowledged before a notary
public.”68
Rule II, Section 1 of A.M. No. 02-8-13-SC, the 2004 Rules on Notarial Practice,
defines an acknowledgment, as follows:
SECTION 1. Acknowledgment—“Acknowledgment” refers to an act in which an
individual on a single occasion:
(a) appears in person before the notary public and presents an integrally complete
instrument or document;
(b) is attested to be personally known to the notary public or identified by the notary
public through competent evidence of identity as defined by these Rules; and
(c) represents to the notary public that the signature on the instrument or document
was voluntarily affixed by him for the purposes stated in the instrument or document,
26
declares that he
67  Maligsa v. Cabanting, 338 Phil. 912, 917; 272 SCRA 408, 413 (1997) [Per
Curiam, En Banc].
68  Rules of Court, Rule 132, Sec. 19 provides:
Section 19. Classes of Documents.—For the purpose of their presentation in
evidence, documents are either public or private.
Public documents are:
(a) The written official acts, or records of the official acts of the sovereign
authority, official bodies and tribunals, and public officers, whether of the
Philippines, or of a foreign country;
(b) Documents acknowledged before a notary public except last wills and
testaments; and
(c) Public records, kept in the Philippines, of private documents required by law
to be entered therein.
All other writings are private.
 
 
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Orbe vs. Filinvest Land, Inc.
has executed the instrument or document as his free and voluntary act and deed, and,
if he acts in a particular representative capacity, that he has the authority to sign in
that capacity.
 
Notarization under the Maceda Law extends beyond converting private documents
into public ones. Under Sections 3 and 4, notarization enables the exercise of the
statutory right of unilateral cancellation by the seller of a perfected contract. If an
acknowledgment is necessary in the customary rendition of public documents, with
greater reason should an acknowledgment be imperative in notices of cancellation or
demands for rescission made under Sections 3 and 4 of the Maceda Law.
Through an acknowledgment, individuals acting as representatives declare that they
are authorized to act as such representatives. This is particularly crucial with respect
to signatories to notices of cancellation or demands for rescission under Sections 3
and 4 of the Maceda Law. In a great number of cases, the sellers of real property
shall be juridical persons acting through representatives. In these cases, it is
imperative that the officer signing for the seller indicate that he or she is duly
authorized to effect the cancellation of an otherwise perfected contract. Not all
personnel are capacitated to effect these cancellations; individuals purporting to do
so must demonstrate their specific authority. In the case of corporations, this
authority is vested through board resolutions, or by stipulations in the articles of
incorporation or bylaws.
Respondent’s notice of cancellation here was executed by an individual identified
only as belonging to respondent’s Collection Department. It was also accompanied
not by an acknowledgment, but by a jurat.
A jurat is a distinct notarial act, which makes no averment concerning the authority
of a representative. It is defined by Rule II, Section 6 of the 2004 Rules on Notarial
Practice, as follows:
 
 
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100 SUPREME COURT REPORTS ANNOTATED
Orbe vs. Filinvest Land, Inc.
SECTION 6. Jurat.—“Jurat” refers to an act in which an individual on a single
occasion:
(a) appears in person before the notary public and presents an instrument or
document;
(b) is personally known to the notary public or identified by the notary public
through competent evidence of identity as defined by these Rules;
(c) signs the instrument or document in the presence of the notary; and
(d) takes an oath or affirmation before the notary public as to such instrument or
document.
 
Even if respondent’s notarization by jurat and not by acknowledgment were to be
condoned, respondent’s jurat was not even a valid jurat executed according to the
requirements of the 2004 Rules on Notarial Practice.
The 2004 Rules on Notarial Practice took effect on August 1, 2004. 69 It governed
respondent’s October 4, 2004 notice, which was notarized on October 6, 2004. As
Rule II, Section 6 of these Rules clearly states, the person signing the document must
be “personally known to the notary public or identified by the notary public through
competent evidence of identity.”
Rule II, Section 12, in turn, defines “competent evidence of identity.” As originally
worded, when the 2004 Rules on Notarial Practice came into effect on August 1,
2004, Rule II, Section 12 read:
Section 12. Competent Evidence of Identity.—The phrase “competent evidence of
identity” refers to the identification of an individual based on:
_______________
69  Rule XIII, Sec. 2 provides:
Section 2. Effective Date.—These Rules shall take effect on the first day of
August 2004, and shall be published in a newspaper of general circulation in the
Philippine which provides sufficiently wide circulation.
 
 
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Orbe vs. Filinvest Land, Inc.
27

(a) at least one current identification document issued by an official agency bearing
the photograph and signature of the individual; or
(b) the oath or affirmation of one credible witness not privy to the instrument,
document or transaction who is personally known to the notary public and who
personally knows the individual, or of two credible witnesses neither of whom is
privy to the instrument, document or transaction who each personally knows the
individual and shows to the notary public documentary identification.
 
The proof of identity used by the signatory to respondent’s notice of cancellation was
a community tax certificate, which no longer satisfies this requirement.
Rule II, Section 12 was eventually amended by A.M. No. 02-8-13-SC. As amended,
it specifically rebukes the validity of a community tax certificate as a competent
evidence of identity:
Section 12. Competent Evidence of Identity.—The phrase “competent evidence of
identity” refers to the identification of an individual based on:
a. at least one current identification document issued by an official agency bearing
the photograph and signature of the individual, such as but not limited to, passport,
driver’s license, Professional Regulations Commission ID, National Bureau of
Investigation clearance, police clearance, postal ID, voter’s ID, barangay
certification, Government Service and Insurance System (GSIS) e-card, Social
Security System (SSS) card, Philhealth card, senior citizen card, Overseas Workers
Welfare Administration (OWWA) ID, OFW ID, seaman’s book, alien certificate of
registration/immigrant certificate of registration, government office ID, certification
from the National Council for the Welfare of Disabled
 
 
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102 SUPREME COURT REPORTS ANNOTATED
Orbe vs. Filinvest Land, Inc.
Persons (NCWDP), Department of Social Welfare and Development (DSWD)
certification; or
b. the oath or affirmation of one credible witness not privy to the instrument,
document or transaction who is personally known to the notary public and who
personally knows the individual, or of two credible witnesses neither of whom is
privy to the instrument, document or transaction who each personally knows the
individual and shows to the notary public documentary identification.
 
Baylon v. Almo70 explained why community tax certificates were specifically
excluded as a permissible proof of identity:
As a matter of fact, recognizing the established unreliability of a community tax
certificate in proving the identity of a person who wishes to have his document
notarized, we did not include it in the list of competent evidence of identity that
notaries public should use in ascertaining the identity of persons appearing before
them to have their documents notarized.71
 
Marina Properties v. Court of Appeals 72 was unequivocal: “[I]n order to effect
the cancellation of a contract, a notarial cancellation must first be had.” 73 Realty
Exchange Venture Corp. v. Sendino74 explained, “Since R.A. 6552 mandates
cancellation by notarial act — among other requirements — before any cancellation
of a contract may be effected, petitioners’ precipitate cancellation of its contract with
private respondent without observing the conditions imposed by the said
_______________
70  578 Phil. 238; 555 SCRA 248 (2008) [Per J. Quisumbing, Second Division].
71  Id., at p. 242; p. 253.
72  Marina Properties Corporation v. Court of Appeals, supra note 59.
73  Id., at p. 720; p. 287.
74  Realty Exchange Venture Corporation v. Sendino, supra note 53.
 
 
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Orbe vs. Filinvest Land, Inc.
law was invalid and improper.” 75 In Active Realty and Development v. Daroya,76
where the seller “failed to send a notarized notice of cancellation,” 77 this Court
decried the iniquity foisted upon a buyer. “[W]e find it illegal and iniquitous that
petitioner, without complying with the mandatory legal requirements for canceling
the contract, forfeited both respondent’s land and hard-earned money.”78
In ordinary circumstances, where notarization serves merely to convert a private
document into a public document, notaries public have been admonished about
faithfully observing the rules governing notarial acts: “Faithful observance and
utmost respect of the legal solemnity of an oath in an acknowledgment or jurat is
sacrosanct.”79 It is with greater reason that the diligent observance of notarial rules
should be impressed in cases concerned with a seller’s exercise of a statutory
privilege through cancellations under the Maceda Law.
Respondent’s failure to diligently satisfy the imperatives of the 2004 Rules on
Notarial Practice constrains this Court to consider its notice as an invalid notarial act.
This amounts to respondent’s failure to satisfy the second requisite for valid
cancellations under Section 4, ultimately rendering its cancellation of the purchase
agreement ineffectual.
This Court is mindful of jurisprudence in which it has been lenient with the
requirement of presenting a competent evidence of identity before a notary public.
Galicto v. Aquino,80 Coca-Cola Bottlers Philippines, Inc. v. Dela Cruz,81
Victorio-Aquino v. Pacific Plans, Inc.,82 and Reyes
_______________
75  Id., at p. 77; p. 677.
28
 76  Active Realty & Development Corporation v. Daroya, supra note 48.
77  Id., at p. 757; pp. 154-155.
78  Id., at pp. 762-763; pp. 159-160.
79  Supra note 67.
80  683 Phil. 141; 667 SCRA 150 (2012) [Per J. Brion, En Banc].
81  622 Phil. 866; 608 SCRA 16 (2009) [Per J. Brion, Second Division].
 
 
104
104 SUPREME COURT REPORTS ANNOTATED
Orbe vs. Filinvest Land, Inc.
v. Glaucoma Research Foundation, Inc.83 concerned verifications and certifications
of non-forum shopping in which jurats did not indicate the required competent
evidence of identity. In these cases, this Court overlooked the defects considering
that “defective jurat in the Verification/Certification of Non-Forum Shopping is not
a fatal defect . . . The verification is only a formal, not a jurisdictional, requirement
that the Court may waive.” 84 Likewise, this Court considered it more appropriate to
not hinder the consideration of pleadings in order that party-litigants may
exhaustively plead their cases.85
Galicto, Coca-Cola, Victorio-Aquino, and Reyes are markedly different from
the present controversy. They merely concerned formal infractions. In contrast, this
case concerns Section 4’s definite precondition for the seller’s exercise of its option
to repudiate a contract. At stake in Galicto, Coca-Cola, Victorio-Aquino, and Reyes
was the right to be heard in judicial proceedings, a cognate of due process. What is at
stake here is different: the grant of a statutory privilege relating to a civil contract.
To be effective, sellers’ cancellations under the Maceda Law must strictly
comply with the requirements of Sections 3 and 4. This Court clarifies here that with
respect to notices of cancellation or demands for rescission by notarial act, an
acknowledgment is imperative. Moreover, when these are made through
representatives of juridical persons selling real property, the authority of these
representatives must be duly demonstrated. For corporations, the representative’s
authority must have either been granted by a board resolution or existing in the
seller’s articles of incorporation or bylaws.
_______________
82  749 Phil. 790; 744 SCRA 480 (2014) [Per J. Peralta, Third Division].
83  760 Phil. 779; 759 SCRA 120 (2015) [Per J. Peralta, Third Division].
84  Galicto v. Aquino III, supra note 80 at p. 175.
85  See Coca-Cola Bottlers Philippines, Inc. v. Dela Cruz, supra note 81;
and Victorio-Aquino v. Pacific Plans, Inc., supra.
 
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Orbe vs. Filinvest Land, Inc.
With the Maceda Law’s avowed purpose of extending benefits to disadvantaged
buyers and liberating them from onerous and oppressive conditions, it necessarily
follows that the Maceda Law’s permission for sellers to cancel contracts becomes
available only when its conditions are heedfully satisfied. No liberal construction of
the Maceda Law can be made in favor of the seller and at the same time burdening
the buyer.
 
V
There being no valid cancellation, the purchase agreement between petitioner
and respondent “remains valid and subsisting.”86 However, respondent has already
sold the lot purchased by petitioner to a certain Ruel Ymana.87
Gatchalian Realty v. Angeles88 confronted a similar predicament. In
determining the most judicious manner of disposing of the controversy, this Court
considered the analogous cases of Olympia Housing v. Panasiatic Travel,89
Pagtalunan v. Vda. de Manzano,90 Active Realty and Development v. Daroya,91 and
Associated Marine Officers and Seamen’s Union of the Philippines PTGWO-ITF v.
Decena:92
In Olympia, this Court dismissed the complaint for recovery of possession for having
been prematurely filed without complying with the mandate of R.A. 6552. We
ordered the defaulting buyer to pay the developer the balance as of the date of the
filing of the complaint plus 18% interest per annum computed from the day after the
_______________
86  Supra note 45.
87  Rollo, p. 68.
88  Supra note 45.
89  Olympia Housing, Inc. v. Panasiatic Travel Corporation, supra note 46.
90  Pagtalunan v. Dela Cruz Vda. de Manzano, supra note 47.
91  Active Realty & Development Corporation v. Daroya, supra note 48.
92  Associated Marine Officers and Seamen’s Union of the Philippines PTGWO-
ITF v. Decena, supra note 49.
 
 
106
106 SUPREME COURT REPORTS ANNOTATED
Orbe vs. Filinvest Land, Inc.
date of the filing of the complaint, but within 60 days from the receipt of a copy of
the decision. Upon payment, the developer shall issue the corresponding certificate
of title in favor of the defaulting buyer. If the defaulting buyer fails to pay the full
29
amount, then the defaulting buyer shall vacate the subject property without need of
demand and all payments will be charged as rentals to the property. There was no
award for damages and attorney’s fees, and no costs were charged to the parties.
In Pagtalunan, this Court dismissed the complaint for unlawful detainer. We also
ordered the defaulting buyer to pay the developer the balance of the purchase price
plus interest at 6% per annum from the date of filing of the complaint up to the
finality of judgment, and thereafter, at the rate of 12% per annum. Upon payment,
the developer shall issue a Deed of Absolute Sale of the subject property and deliver
the corresponding certificate of title in favor of the defaulting buyer. If the defaulting
buyer fails to pay the full amount within 60 days from finality of the decision, then
the defaulting buyer should vacate the subject property without need of demand and
all payments will be charged as rentals to the property. No costs were charged to the
parties.
In Active, this Court held that the Contract to Sell between the parties remained valid
because of the developer’s failure to send a notarized notice of cancellation and to
refund the cash surrender value. The defaulting buyer thus had the right to offer to
pay the balance of the purchase price, and the developer had no choice but to accept
payment. However, the defaulting buyer was unable to exercise this right because
the developer sold the subject lot. This Court ordered the developer to refund to the
defaulting buyer the actual value of the lot with 12% interest per annum computed
from the date of the filing of the complaint until fully paid, or to deliver a substitute
lot at the option of the defaulting buyer.
In Associated, this Court dismissed the complaint for unlawful detainer. We held that
the Contract to Sell between the parties remained valid because the developer failed
to send to the defaulting buyer a notarized no-
 
 
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VOL. 839, SEPTEMBER 6, 2017
Orbe vs. Filinvest Land, Inc.
tice of cancellation and to refund the cash surrender value. We ordered the MeTC to
conduct a hearing within 30 days from receipt of the decision to determine the
unpaid balance of the full value of the subject properties as well as the current
reasonable amount of rent for the subject properties. We ordered the defaulting buyer
to pay, within 60 days from the trial court’s determination of the amounts, the unpaid
balance of the full value of the subject properties with interest at 6% per annum
computed from the date of sending of the notice of final demand up to the date of
actual payment. Upon payment, we ordered the developer to execute a Deed of
Absolute Sale over the subject properties and deliver the transfer certificate of title to
the defaulting buyer. In case of failure to pay within the mandated 60-day period, we
ordered the defaulting buyer to immediately vacate the premises without need for
further demand. The developer should also pay the defaulting buyer the cash
surrender value, and the contract should be deemed cancelled 30 days after the
defaulting buyer’s receipt of the full payment of the cash surrender value. If the
defaulting buyer failed to vacate the premises, he should be charged reasonable
rental in the amount determined by the trial court.93 (Emphasis supplied)
 
Gatchalian proceeded to, first, assert the propriety of equitably resolving the
controversy, and second, consider the options available to the buyer. It specifically
noted that in the event that its subject properties were no longer available, only two
(2) options remained: a refund or an offer of substitute properties. It was exclusively
for the buyer to choose between these options:
We observe that this case has, from the institution of the complaint, been pending
with the courts for 10 years. As both parties prayed for the issuance of reliefs that are
just and equitable under the premises, and in the exercise of our discretion, we
resolve to dispose of this
_______________
93  Supra note 45 at pp. 426-427; pp. 182-183.
 
 
108
108 SUPREME COURT REPORTS ANNOTATED
Orbe vs. Filinvest Land, Inc.
case in an equitable manner. Considering that GRI did not validly rescind Contracts
to Sell Nos. 2271 and 2272, Angeles has two options:
1. The option to pay, within 60 days from the MeTC’s determination of the proper
amounts, the unpaid balance of the full value of the purchase price of the subject
properties plus interest at 6% per annum from 11 November 2003, the date of filing
of the complaint, up to the finality of this Decision, and thereafter, at the rate of 6%
per annum. Upon payment of the full amount, GRI shall immediately execute Deeds
of Absolute Sale over the subject properties and deliver the corresponding transfer
certificate of title to Angeles.
In the event that the subject properties are no longer available, GRI should
offer substitute properties of equal value. Acceptance the suitability of the substitute
properties is Angeles’ sole prerogative. Should Angeles refuse the substitute
properties, GRI shall refund to Angeles the actual value of the subject properties
with 6% interest per annum computed from 11 November 2003, the date of the filing
of the complaint, until fully paid; and
2. The option to accept from GRI P574,148.40, the cash surrender value of the
subject properties, with interest at 6% per annum, computed from 11 November
2003, the date of the filing of the complaint, until fully paid. Contracts to Sell Nos.
2271 and 2272 shall be deemed cancelled 30 days after Angeles’ receipt of GRI’s
full payment of the cash surrender value. No rent is further charged upon Angeles as
GRI already had possession of the subject properties on 10 October 2006. 94
(Emphasis supplied)
_______________
30
 94  Id., at pp. 427-428; pp. 183-185. The dispositive portion read:
WHEREFORE, we DENY the petition. The Decision of the Court of Appeals in
C.A.-G.R. S.P. No. 105964 promulgated on 11 November 2011 and the Resolution
promulgated on 19 June 2012 are AFFIRMED with MODIFICATIONS.
1. The Metropolitan Trial Court of Las Piñas City is directed to conduct a
hearing within a maximum period of 30 days
 
 
108
108 SUPREME COURT REPORTS ANNOTATED
Orbe vs. Filinvest Land, Inc.
from finality of this Decision to (1) determine Evelyn M. Angeles’ unpaid balance on
Contracts to Sell Nos. 2271 and 2272; and (2) the actual value of the subject
properties as of 11 November 2003.
2. Evelyn M. Angeles shall notify the Metropolitan Trial Court of Las Piñas City and
Gatchalian Realty, Inc. within a maximum period of 60 days from the Metropolitan
Trial Court of Las Piñas City’s determination of the unpaid balance whether she will
pay the unpaid balance or accept the cash surrender value.
Should Evelyn M. Angeles choose to pay the unpaid balance, she shall pay, within
60 days from the MeTC’s determination of the proper amounts, the unpaid balance
of the full value of the purchase price of the subject properties plus interest at 6% per
annum from 11 November 2003, the date of filing of the complaint, up to the finality
of this Decision, and thereafter, at the rate of 6% per annum. Upon payment of the
full amount, GRI shall immediately execute Deeds of Absolute Sale over the subject
properties and deliver the corresponding transfer certificate of title to Angeles.
In the event that the subject properties are no longer available, GRI should offer
substitute properties of equal value. Should Angeles refuse the substitute properties,
GRI shall refund to Angeles the actual value of the subject properties with 6%
interest per annum computed from 11 November 2003, the date of the filing of the
complaint, until fully paid.
Should Evelyn M. Angeles choose to accept payment of the cash surrender value,
she shall receive from GRI P574,148.40 with interest at 6% per annum, computed
from 11 November 2003, the date of the filing of the complaint, until fully paid.
Contracts to Sell Nos. 2271 and 2272 shall be deemed cancelled 30 days after
Angeles receipt of GRI’s full payment of the cash surrender value. No rent is further
charged upon Evelyn M. Angeles.
No costs.
SO ORDERED.
 
 
110
110 SUPREME COURT REPORTS ANNOTATED
Orbe vs. Filinvest Land, Inc.
This case is most akin to Active. There, as in this case, the subject property was
actually sold by the seller to a third person. Gatchalian mirrored Active in discerning
an equitable ruling in the event that its subject properties had been sold by the seller
to another person.
It was Active that originally identified two (2) options where a seller wrongly
cancelled a contract with a buyer and had since sold that property to a third person,
refunding the actual95 value of the lot sold plus interest or delivering a substitute lot
to the buyer:
Thus, for failure to cancel the contract in accordance with the procedure provided by
law, we hold that the contract to sell between the parties remains valid and
subsisting. Following Section 3(a) of R.A. No. 6552, respondent has the right to offer
to pay for the balance of the purchase price, without interest, which she did in this
case. Ordinarily, petitioner would have had no other recourse but to accept payment.
However, respondent can no longer exercise this right as the subject lot was already
sold by the petitioner to another buyer which lot, as admitted by the petitioner, was
valued at P1,700.00 per square meter. As respondent lost her chance to pay for the
balance of the P875,000.00 lot, it is only just and equitable that the petitioner be
ordered to refund to respondent the actual value of the lot resold, i.e., P875,000.00,
with 12% interest per annum computed from August 26, 1991 until fully paid or to
deliver a substitute lot at the option of the respondent.96  (Emphasis supplied)
_______________
95  N.b., the amount to be refunded was the actual value, not the original
contract price. The same value was used for reckoning the amount to be refunded
in Gatchalian. In Gatchalian, this Court stated:
“GRI shall refund to Angeles the actual value of the subject properties with 6%
interest per annum computed from 11 November 2003, the date of the filing of the
complaint, until fully paid.”
96  Active Realty & Development Corporation v. Daroya, supra note 48 at p.
761; pp. 160-161.
 
 
111
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Orbe vs. Filinvest Land, Inc.
In Active, the buyer managed to pay the full price of the principal value of the lot but
was still short of the total contract price net of interest. 97 Unlike the buyer in Active,
petitioner here has only made partial payments. Thus, a full refund of the actual
value of the lot, as Active and Gatchalian ordered, is improper. In addition, petitioner
has disavowed any interest in proceeding with the purchase. 98 She has even admitted
to not having the financial capacity for this. 99 The antecedents, too, demonstrate that
petitioner made no further attempt at proceeding with the purchase. Therefore, this
31
Court follows Active’s precedent, as it did in Gatchalian, but makes adjustments in
consideration of the peculiarities of this case.
Considering that it did not validly cancel its contract with petitioner and has also sold
the lot to another person, it is proper that respondent be ordered to refund petitioner.
This refund shall not be the full, actual value of the lot resold, as was ordered in
Active and Gatchalian, lest petitioner be unjustly enriched. Rather, it shall only be
the amount actually paid by petitioner to respondent, i.e., P608,648.20. In view of
Nacar v. Gallery Frames, this amount shall be subject to legal interest at the rate of
twelve percent (12%) per annum reckoned from the filing of petitioner’s
Complaint100 until June 30,
_______________
97   The principal amount was P224,025.00; total payments to be made, net of
interest, were P346,367.00; at the time of default, the buyer had paid P314,816.00.
98   Rollo, p. 21.
99   Id.
100  Respondent’s obligation to refund petitioner ensued at the moment it
became impossible for petitioner to avail of her rights under Section 4 of the Maceda
Law, that is, when respondent sold the property to Ruel Ymana. Interest on it
accrued from the moment of the filing of petitioner’s Complaint, the date of judicial
demand. Eastern Shipping Lines v. Court of Appeals (which articulated the
guidelines for the reckoning of legal interest that were in effect when the material
incidents of this case arose) explained that in the absence of stipulation, that interest
due on a breach of obligation consisting in the
112
112 SUPREME COURT REPORTS ANNOTATED
Orbe vs. Filinvest Land, Inc.
commercial, residential) the right of the seller to cancel the contract upon
nonpayment of an installment by the buyer, which is simply an
_______________
payment of a sum of money “shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand.”
101  716 Phil. 267; 703 SCRA 439 (2013) [Per J. Peralta, En Banc]. See Bangko
Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013.
 
 
113
VOL. 839, SEPTEMBER 6, 2017
Orbe vs. Filinvest Land, Inc.
event that prevents the obligation of the vendor to convey title from acquiring
binding force. (Associated Marine Officers and Seamen’s Union of the Philippines
PTGWO-ITF vs. Decena, 682 SCRA 308 [2012])
Before a contract to sell can be validly and effectively cancelled, the seller has (1) to
send a notarized notice of cancellation to the buyer and (2) to refund the cash
surrender value. Until and unless the seller complies with these twin mandatory
requirements, the contract to sell between the parties remains valid and subsisting.
(Communities Cagayan, Inc. vs. Nanol, 685 SCRA 453 [2012])
 
——o0o——

2013; and six percent (6%) per annum from July 1, 2013 until fully paid.101
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The
assailed October 11, 2012 Decision and July 3, 2013 Resolution of the Court of
Appeals in C.A.-G.R. S.P. No. 118285 are REVERSED and SET ASIDE.
Respondent Filinvest Land, Inc. is ordered to refund petitioner Priscilla Zafra
Orbe the amount of P608,648.20. This refund shall earn legal interest at twelve
percent (12%) per annum from November 17, 2004 to June 30, 2013, and six percent
(6%) per annum, reckoned from July 1, 2013 until fully paid.
This case is REMANDED to the Housing and Land Use Regulatory Board
Expanded National Capital Regional Field Office FOR PROPER EXECUTION.
SO ORDERED.
Velasco, Jr. (Chairperson), Bersamin, Martires and Gesmundo, JJ., concur.
Petition granted, judgment and resolution reversed and set aside.
Notes.—R.A. No. 6552, otherwise known as the Realty Installment Buyer
Protection Act, recognizes in conditional sales of all kinds of real estate (industrial,

32

G.R. No. 111238. January 25, 1995.*
ADELFA PROPERTIES, INC., petitioner, vs. COURT OF APPEALS,
ROSARIO JIMENEZ-CASTAÑEDA and SALUD JIMENEZ, respondents.
Civil Law; Contracts; Contract to Sell; Contract of Sale; In a contract of
sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a
contract to sell, by agreement the ownership is reserved in the vendor and is not to
pass until the full payment of the price. In a contract of sale, the vendor has lost and
cannot recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full payment of
the price.—ln view of the extended disquisition thereon by respondent court, it would
be worthwhile at this juncture to briefly discourse on the rationale behind our
treatment of the alleged option contract as a contract to sell, rather than a contract of
sale. The distinction between the two is important for in a contract of sale, the title
passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell,
by agreement the ownership is reserved in the vendor and is not to  VOL. 240, JANUARY 25, 1995  567
_______________
*
 SECOND DIVISION.
566
566  SUPREME COURT REPORTS ANNOTATED 
Adelfa Properties, Inc. vs. Court of Appeals
pass until the full payment of the price. In a contract of sale, the vendor has lost
and cannot recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full payment of
the price, such payment being a positive suspensive condition and failure of which is
not a breach but an event that prevents the obligation of the vendor to convey title
from becoming effective. Thus, a deed of sale is considered absolute in nature where
there is neither a stipulation in the deed that title to the property sold is reserved in
the seller until the full payment of the price, nor one giving the vendor the right to
unilaterally resolve the contract the moment the buyer fails to pay within a fixed
period.
Same; Same; Same; An implied agreement that ownership shall not pass to
the purchaser until he had fully paid the price is valid and therefore, binding and
enforceable between the parties. A contract which contains this kind of stipulation is
considered a contract to sell.—In effect, there was an implied agreement that
ownership shall not pass to the purchaser until he had fully paid the price. Article
1478 of the Civil Code does not require that such a stipulation be expressly made.
Consequently, an implied stipulation to that effect is considered valid and. therefore,
binding and enforceable between the parties. It should be noted that under the law
and jurisprudence, a contract which contains this kind of stipulation is considered a
contract to sell.
Same; Same; Same; Irrefragably, the controverted document should legally
be considered as a perfected contract to sell.—Irrefragably, the controverted
document should legally be considered as a perfected contract to sell. On this
particular point, therefore, we reject the position and ratiocination of respondent
Court of Appeals which, while awarding the correct relief to private respondents,
categorized the instrument as “strictly an option contract.”
Same; Same; Same; The important task in contract interpretation is always
the ascertainment of the intention of the contracting parties.—The important task in
contract interpretation is always the ascertainment of the intention of the contracting
parties and that task is, of course, to be discharged by looking to the words they used
to project that intention in their contract, all the words not just a particular word or
two, and words in context not words standing alone. Moreover, judging from the
subsequent acts of the parties which will hereinafter be discussed, it is undeniable
that the intention of the parties was to enter into a contract to sell. In addition, the
title of a contract does not necessarily determine its true nature. Hence, the fact that
the document under discussion is entitled “Exclusive Option to 
567
 
Adelfa Properties, Inc. vs. Court of Appeals
Purchase” is not controlling where the text thereof shows that it is a contract to
sell.
33
 Same; Same; Option Contract; Sales; An option is not a sale of property
but a sale of the right to purchase. It is simply a contract by which the owner of
property agrees with another person that he shall have the right to buy his property
at a fixed price within a certain time. He does not sell his land; he does not then
agree to sell it; but he does sell something, that is, the right or privilege to buy at the
election or option of the other party.—An option, as used in the law on sales, is a
continuing offer or contract by which the owner stipulates with another that the latter
shall have the right to buy the property at a fixed price within a certain time, or
under, or in compliance with, certain terms and conditions, or which gives to the
owner of the property the right to sell or demand a sale. It is also sometimes called an
“unaccepted offer.” An option is not of itself a purchase, but merely secures the
privilege to buy. It is not a sale of property but a sale of the right to purchase. It is
simply a contract by which the owner of property agrees with another person that he
shall have the right to buy his property at a fixed price within a certain time. He does
not sell his land; he does not then agree to sell it; but he does sell something, that is,
the right or privilege to buy at the election or option of the other party. Its
distinguishing characteristic is that it imposes no binding obligation on the person
holding the option, aside from the consideration for the offer. Until acceptance, it is
not, properly speaking, a contract, and does not vest, transfer, or agree to transfer,
any title to, or any interest or right in the subject matter, but is merely a contract by
which the owner of property gives the optionee the right or privilege of accepting the
offer and buying the property on certain terms.
Same; Same; Same; Same; An option is an unaccepted offer. It states the
terms and conditions on which the owner is willing to sell his land, if the holder
elects to accept them within the time limited. A contract of sale, on the other hand,
fixes definitely the relative rights and obligations of both parties at the time of its
execution. The offer and the acceptance are concurrent.—The distinction between an
“option” and a contract of sale is that an option is an unaccepted offer. It states the
terms and conditions on which the owner is willing to sell his land, if the holder
elects to accept them within the time limited. If the holder does so elect, he must give
notice to the other party, and the accepted offer thereupon becomes a valid and
binding contract. If an acceptance is not made within the time fixed, the owner is no
longer bound by his offer, and the option is at an end. A contract of sale, on the other
hand, fixes definitely the relative rights and obligations of both parties at the  not a contract to purchase, is effected by an agreement to sell real estate for
568
568  SUPREME COURT REPORTS ANNOTATED  to make payment, or to bind himself in any way other than the forfeiture of the
Adelfa Properties, Inc. vs. Court of Appeals
time of its execution. The offer and the acceptance are concurrent, since the
minds of the contracting parties meet in the terms of the agreement.
Same; Same; Same; Same; Except where a formal acceptance is so required,
it may be made either in a formal or an informal manner, and may be shown by acts,
conduct, or words of the accepting party that clearly manifest a present intention or
determination to accept the offer to buy or sell.—A perusal of the contract in this
case, as well as the oral and documentary evidence presented by the parties, readily
shows that there is indeed a concurrence of petitioner’s offer to buy and private
respondents’ acceptance thereof. The rule is that except where a formal acceptance is
so required, although the acceptance must be affirmatively and clearly made and
must be evidenced by some acts or conduct communicated to the offeror, it may be
made either in a formal or an informal manner, and may be shown by acts, conduct,
or words of the accepting party that clearly manifest a present intention or
determination to accept the offer to buy or sell. Thus, acceptance may be shown by
the acts, conduct, or words of a party recognizing the existence of the contract of
sale.
Same; Same; Same; Same; The test in determining whether a contract is a
“contract of sale or purchase” or a mere “option” is whether or not the agreement
could be specifically enforced.—Thetest in determining whether a contract is a
“contract of sale or purchase” or a mere “option” is whether or not the agreement
could be specifically enforced. There is no doubt that the obligation of petitioner to
pay the purchase price is specific, definite and certain, and consequently binding and
enforceable. Had private respondents chosen to enforce the contract, they could have
specifically compelled petitioner to pay the balance of P2,806,150.00. This is
distinctly made manifest in the contract itself as an integral stipulation, compliance
with which could legally and definitely be demanded from petitioner as a
consequence.
Same; Same; Same; Same; An agreement is only an “option” when no
obligation rests on the party to make any payment except such as may be agreed on
between the parties as consideration to support the option until he has made up his
mind within the time specified.—This is not a case where no right is as yet created
nor an obligation declared, as where something further remains to be done before the
buyer and seller obligate themselves, An agreement is only an “option” when no
obligation rests on the party to make any payment except such as may be agreed on
between the parties as consideration to support the option until he has made up his
mind within the time specified. An option, and 
569
VOL. 240, JANUARY 25, 1995  569 
Adelfa Properties, Inc. vs. Court of Appeals
payments to be made within a specified time and providing for forfeiture of money
paid upon failure to make payment, where the purchaser does not agree to purchase,
payments made. As hereinbefore discussed, this is not the situation obtaining in the
case at bar.
Same; Same; Same; Same; Earnest Money; It is a statutory rule that
whenever earnest money is given in a contract of sale, it shall be considered as part
of the price and as proof of the perfection of the contract It constitutes an advance
payment and must, therefore be deducted from the total price.—In other words, the
alleged option money of P50,000.00 was actually earnest money which was intended
to form part of the purchase price. The amount of P50,000.00 was not distinct from
34
the cause or consideration for the sale of the property, but was itself a part thereof. It
is a statutory rule that whenever earnest money is given in a contract of sale, it shall
be considered as part of the price and as proof of the perfection of the contract. lt
constitutes an advance payment and must, therefore, be deducted from the total price;
Also, earnest money is given by the buyer to the seller to bind the bargain.
Same; Same; Earnest Money; Option Money; Distinctions Between Earnest
Money and Option Money.—There are clear distinctions between earnest money and
option money, viz.: (a) earnest money is part of the purchase price, while option
money is the money given as a distinct consideration for an option contract; (b)
earnest money is given only where there is already a sale, while option money
applies to a sale not yet perfected; and (c) when earnest money is given, the buyer is
bound to pay the balance, while when the would-be buyer gives option money, he is
not required to buy.
Same; Same; Same; In a perfected contract to sell, Article 1590 would
properly apply.—To justify its failure to pay the purchase price within the agreed
period, petitioner invokes Article 1590 of the Civil Code which provides: “ART,
1590. Should the vendee be disturbed in the possession or ownership of the thing
acquired, or should he have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may suspend the payment of the
price until the vendor has caused the disturbance or danger to cease, unless the latter
gives security for the return of the price in a proper case, or it has been stipulated
that, notwithstanding any such contingency, the vendee shall be bound to make the
payment. A mere act of trespass shall not authorize the suspension of the payment of
the price.” Respon-
570
570  SUPREME COURT REPORTS ANNOTATED  act is not applicable to a contract to sell. Furthermore, judicial action for rescission of
Adelfa Properties, Inc. vs. Court of Appeals
dent court refused to apply the aforequoted provision of law on the erroneous
assumption that, the true agreement between the parties was a contract of option, As
we have hereinbefore discussed, it was not an option contract but a perfected contract
to sell. Verily, therefore, Article 1590 would properly apply,
Same; Same; Sales; In Article 1590, the vendor is bound to make payment
even with the existence of a vindicatory action if the vendee should give a security
for the return of the price.—Petitioner was justified in suspending payment of the
balance of the purchase price by reason of the aforesaid vindicatory action filed
against it. The assurance made by private respondents that petitioner did not have to
worry about the case because it was pure and simple harassment is not the . kind of
guaranty contemplated under the exceptive clause in Article 1590 wherein the
vendor is bound to make payment even with the , existence of a vindicatory action if
the vendee should give a security for the return of the price.
Same; Same; Same; It is consignation which is essential in order to extinguish
petitioner’s obligation to pay the balance of the purchase price. A contract to sell
involves the performance of an obligation, not merely the exercise of a privilege or a
right. Consequently, performance of payment may be effected not by tender of
payment alone but by both tender and consignation.—The mere sending of a letter by
the vendee expressing the intention to pay, without the accompanying payment, is
not considered a valid tender of payment. Besides, a mere tender of payment is not
sufficient to compel private respondents to deliver the property and execute the deed
of absolute sale. It is consignation which is essential in order to extinguish
petitioner’s obligation to pay the balance of the purchase price. The rule is different
in case of an option contract or in legal redemption or in a sale with right to
repurchase, wherein consignation is not necessary because these cases involve an
exercise of a right or privilege (to buy, redeem or repurchase) rather than the
discharge of an obligation, hence tender of payment would be sufficient to preserve
the right or privilege. This is because the provisions on consignation are not
applicable when there is no obligation to pay. A contract to sell, as ;in the case before
us, involves the performance of an obligation, not merely the exercise of a privilege
or a right. Consequently, performance or payment may be effected not by tender of
payment alone but by both tender and consignation.
Same; Same; Same; Judicial action for rescission of a contract is not
necessary where the contract provides for automatic rescission in case of breach.—
By reason of petitioner’s failure to comply with its 
571
VOL. 240, JANUARY 25, 1995  571 
Adelfa Properties, Inc. vs. Court of Appeals
obligation, private respondents elected to resort to and did announce the
rescission of the contract through its letter to petitioner dated July 27, 1990. That
written notice of rescission is deemed sufficient under the circumstances. Article
1592 of the Civil Code which requires rescission either by judicial action or notarial
a contract is not necessary where the contract provides for automatic rescission in
case of breach, as in the contract involved in the present controversy.
Same; Same; Same; Resolution of reciprocal contracts may be made
extrajudicially unless successfully impugned in court If the debtor impugns the
declaration, it shall be subject to judicial determination. Otherwise, if said party
does not oppose it, the extrajudicial rescission shall have legal effect.—We are not
unaware of the ruling in University of the Philippines vs. De los Angeles, etc.that the
right to rescind is not absolute, being ever subject to scrutiny and review by the
proper court. It is our considered view, however, that this rule applies to a situation
where the extrajudicial rescission is contested by the defaulting party. In other words,
resolution of reciprocal contracts may be made extrajudicially unless successfully
impugned in court. If the debtor impugns the declaration, it shall be subject to
judicial determination. Otherwise, if said party does not oppose it, the extrajudicial
rescission shall have legal effect.
PETITION for review on certiorari of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court. ,
35
      Bayani L. Bernardo for petitioner.
     Lucas C. Carpio, Jr. for private respondents Jimenezes.
     Danilo B. Banares for Emylene S. Chua.
REGALADO, J.:
The main issues presented for resolution in this petition for review on certiorari of
the judgment of respondent Court of appeals, dated April 6, 1993, in CA-G.R. CV
No. 347671 are (1) whether of not the "Exclusive Option to Purchase" executed
between petitioner Adelfa Properties, Inc. and private respondents Rosario Jimenez-
Castañeda and Salud Jimenez is an option contract; and (2) whether or not there was
a valid suspension of payment of the purchase price by said petitioner, and the legal
effects thereof on the contractual relations of the parties.
The records disclose the following antecedent facts which culminated in the present
appellate review, to wit:
1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were
the registered co-owners of a parcel of land consisting of 17,710 square meters,
covered by Transfer Certificate of Title (TCT) No. 309773,2situated in Barrio Culasi,
Las Piñas, Metro Manila.
2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of one-
half of said parcel of land, specifically the eastern portion thereof, to herein
petitioner pursuant to a "Kasulatan sa Bilihan ng Lupa."3Subsequently, a
"Confirmatory Extrajudicial Partition Agreement"4 was executed by the Jimenezes,
wherein the eastern portion of the subject lot, with an area of 8,855 square meters
was adjudicated to Jose and Dominador Jimenez, while the western portion was
allocated to herein private respondents.
3. Thereafter, herein petitioner expressed interest in buying the western portion of the
property from private respondents. Accordingly, on November 25, 1989, an
"Exclusive Option to Purchase"5 was executed between petitioner and private
respondents, under the following terms and conditions:
1. The selling price of said 8,655 square meters of the subject
property is TWO MILLION EIGHT HUNDRED FIFTY SIX
THOUSAND ONE HUNDRED FIFTY PESOS ONLY
(P2,856,150.00)
2. The sum of P50,000.00 which we received from ADELFA
PROPERTIES, INC. as an option money shall be credited as
partial payment upon the consummation of the sale and the balance
in the sum of TWO MILLION EIGHT HUNDRED SIX
THOUSAND ONE HUNDRED FIFTY PESOS (P2,806,150.00) to
be paid on or before November 30, 1989;
3. In case of default on the part of ADELFA PROPERTIES, INC.
to pay said balance in accordance with paragraph 2 hereof, this
option shall be cancelled and 50% of the option money to be
forfeited in our favor and we will refund the remaining 50% of said
money upon the sale of said property to a third party;
4. All expenses including the corresponding capital gains tax, cost
of documentary stamps are for the account of the VENDORS, and
expenses for the registration of the deed of sale in the Registry of
Deeds are for the account of ADELFA PROPERTIES, INC.
Considering, however, that the owner's copy of the certificate of title issued to
respondent Salud Jimenez had been lost, a petition for the re-issuance of a new
owner's copy of said certificate of title was filed in court through Atty. Bayani L.
Bernardo, who acted as private respondents' counsel. Eventually, a new owner's copy
of the certificate of title was issued but it remained in the possession of Atty.
Bernardo until he turned it over to petitioner Adelfa Properties, Inc.
4. Before petitioner could make payment, it received summons6 on November 29,
1989, together with a copy of a complaint filed by the nephews and nieces of private
respondents against the latter, Jose and Dominador Jimenez, and herein petitioner in
the Regional Trial Court of Makati, docketed as Civil Case No. 89-5541, for
annulment of the deed of sale in favor of Household Corporation and recovery of
ownership of the property covered by TCT No. 309773.7
5. As a consequence, in a letter dated November 29, 1989, petitioner informed
private respondents that it would hold payment of the full purchase price and
suggested that private respondents settle the case with their nephews and nieces,
adding that ". . . if possible, although November 30, 1989 is a holiday, we will be
waiting for you and said plaintiffs at our office up to 7:00 p.m."8 Another letter of the
same tenor and of even date was sent by petitioner to Jose and Dominador
Jimenez.9 Respondent Salud Jimenez refused to heed the suggestion of petitioner and
attributed the suspension of payment of the purchase price to "lack of word of
honor."
6. On December 7, 1989, petitioner caused to be annotated on the title of the lot its
option contract with private respondents, and its contract of sale with Jose and
Dominador Jimenez, as Entry No. 1437-4 and entry No. 1438-4, respectively.
36
7. On December 14, 1989, private respondents sent Francisca Jimenez to see Atty.
Bernardo, in his capacity as petitioner's counsel, and to inform the latter that they
were cancelling the transaction. In turn, Atty. Bernardo offered to pay the purchase
price provided that P500,000.00 be deducted therefrom for the settlement of the civil
case. This was rejected by private respondents. On December 22, 1989, Atty.
Bernardo wrote private respondents on the same matter but this time reducing the
amount from P500,000.00 to P300,000.00, and this was also rejected by the latter.
8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil Case
No. 89-5541. Thus, on February 28, 1990, petitioner caused to be annotated anew on
TCT No. 309773 the exclusive option to purchase as Entry No. 4442-4.
9. On the same day, February 28, 1990, private respondents executed a Deed of
Conditional Sale 10 in favor of Emylene Chua over the same parcel of land for
P3,029,250, of which P1,500,000.00 was paid to private respondents on said date,
with the balance to be paid upon the transfer of title to the specified one-half portion.
10. On April 16, 1990, Atty. Bernardo wrote private respondents informing the latter
that in view of the dismissal of the case against them, petitioner was willing to pay
the purchase price, and he requested that the corresponding deed of absolute sale be
executed. 11 This was ignored by private respondents.
11. On July 27, 1990, private respondents' counsel sent a letter to petitioner enclosing
therein a check for P25,000.00 representing the refund of fifty percent of the option
money paid under the exclusive option to purchase. Private respondents then
requested petitioner to return the owner's duplicate copy of the certificate of title of
respondent Salud Jimenez. 12 Petitioner failed to surrender the certificate of title,
hence private respondents filed Civil Case No. 7532 in the Regional Trial Court of
Pasay City, Branch 113, for annulment of contract with damages, praying, among
others, that the exclusive option to purchase be declared null and void; that
defendant, herein petitioner, be ordered to return the owner's duplicate certificate of
title; and that the annotation of the option contract on TCT No. 309773 be cancelled.
Emylene Chua, the subsequent purchaser of the lot, filed a complaint in intervention.
12. The trial court rendered judgment 13 therein on September 5, 1991 holding that
the agreement entered into by the parties was merely an option contract, and
declaring that the suspension of payment by herein petitioner constituted a counter-
offer which, therefore, was tantamount to a rejection of the option. It likewise ruled
that herein petitioner could not validly suspend payment in favor of private
respondents on the ground that the vindicatory action filed by the latter's kin did not
involve the western portion of the land covered by the contract between petitioner
and private respondents, but the eastern portion thereof which was the subject of the
sale between petitioner and the brothers Jose and Dominador Jimenez. The trial court
then directed the cancellation of the exclusive option to purchase, declared the sale to
intervenor Emylene Chua as valid and binding, and ordered petitioner to pay
damages and attorney's fees to private respondents, with costs.
13. On appeal, respondent Court of appeals affirmed in toto the decision of the
court a quo and held that the failure of petitioner to pay the purchase price within the
period agreed upon was tantamount to an election by petitioner not to buy the
property; that the suspension of payment constituted an imposition of a condition
which was actually a counter-offer amounting to a rejection of the option; and that
Article 1590 of the Civil Code on suspension of payments applies only to a contract
of sale or a contract to sell, but not to an option contract which it opined was the
nature of the document subject of the case at bar. Said appellate court similarly
upheld the validity of the deed of conditional sale executed by private respondents in
favor of intervenor Emylene Chua.
In the present petition, the following assignment of errors are raised:
1. Respondent court of appeals acted with grave abuse of discretion in making its
finding that the agreement entered into by petitioner and private respondents was
strictly an option contract;
2. Granting arguendo that the agreement was an option contract, respondent court of
Appeals acted with grave abuse of discretion in grievously failing to consider that
while the option period had not lapsed, private respondents could not unilaterally and
prematurely terminate the option period;
3. Respondent Court of Appeals acted with grave abuse of discretion in failing to
appreciate fully the attendant facts and circumstances when it made the conclusion of
law that Article 1590 does not apply; and
4. Respondent Court of Appeals acted with grave abuse of discretion in conforming
with the sale in favor of appellee Ma. Emylene Chua and the award of damages and
attorney's fees which are not only excessive, but also without in fact and in law. 14
An analysis of the facts obtaining in this case, as well as the evidence presented by
the parties, irresistibly leads to the conclusion that the agreement between the parties
is a contract to sell, and not an option contract or a contract of sale.
I
1. In view of the extended disquisition thereon by respondent court, it would be
worthwhile at this juncture to briefly discourse on the rationale behind our treatment
of the alleged option contract as a contract to sell, rather than a contract of sale. The
distinction between the two is important for in contract of sale, the title passes to the
37
vendee upon the delivery of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a
contract to sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach
but an event that prevents the obligation of the vendor to convey title from becoming
effective. Thus, a deed of sale is considered absolute in nature where there is neither
a stipulation in the deed that title to the property sold is reserved in the seller until the
full payment of the price, nor one giving the vendor the right to unilaterally resolve
the contract the moment the buyer fails to pay within a fixed period. 15
There are two features which convince us that the parties never intended to transfer
ownership to petitioner except upon the full payment of the purchase price. Firstly,
the exclusive option to purchase, although it provided for automatic rescission of the
contract and partial forfeiture of the amount already paid in case of default, does not
mention that petitioner is obliged to return possession or ownership of the property
as a consequence of non-payment. There is no stipulation anent reversion or
reconveyance of the property to herein private respondents in the event that
petitioner does not comply with its obligation. With the absence of such a stipulation,
although there is a provision on the remedies available to the parties in case of
breach, it may legally be inferred that the parties never intended to transfer
ownership to the petitioner to completion of payment of the purchase price.
In effect, there was an implied agreement that ownership shall not pass to the
purchaser until he had fully paid the price. Article 1478 of the civil code does not
require that such a stipulation be expressly made. Consequently, an implied
stipulation to that effect is considered valid and, therefore, binding and enforceable
between the parties. It should be noted that under the law and jurisprudence, a
contract which contains this kind of stipulation is considered a contract to sell.
Moreover, that the parties really intended to execute a contract to sell, and not a
contract of sale, is bolstered by the fact that the deed of absolute sale would have
been issued only upon the payment of the balance of the purchase price, as may be
gleaned from petitioner's letter dated April 16, 1990 16 wherein it informed private
respondents that it "is now ready and willing to pay you simultaneously with the
execution of the corresponding deed of absolute sale."
Secondly, it has not been shown there was delivery of the property, actual or
constructive, made to herein petitioner. The exclusive option to purchase is not
contained in a public instrument the execution of which would have been considered
equivalent to delivery. 17 Neither did petitioner take actual, physical possession of the
property at any given time. It is true that after the reconstitution of private
respondents' certificate of title, it remained in the possession of petitioner's counsel,
Atty. Bayani L. Bernardo, who thereafter delivered the same to herein petitioner.
Normally, under the law, such possession by the vendee is to be understood as a
delivery.18 However, private respondents explained that there was really no intention
on their part to deliver the title to herein petitioner with the purpose of transferring
ownership to it. They claim that Atty. Bernardo had possession of the title only
because he was their counsel in the petition for reconstitution. We have no reason not
to believe this explanation of private respondents, aside from the fact that such
contention was never refuted or contradicted by petitioner.
2. Irrefragably, the controverted document should legally be considered as a
perfected contract to sell. On this particular point, therefore, we reject the position
and ratiocination of respondent Court of Appeals which, while awarding the correct
relief to private respondents, categorized the instrument as "strictly an option
contract."
The important task in contract interpretation is always the ascertainment of the
intention of the contracting parties and that task is, of course, to be discharged by
looking to the words they used to project that intention in their contract, all the words
not just a particular word or two, and words in context not words standing
alone. 19 Moreover, judging from the subsequent acts of the parties which will
hereinafter be discussed, it is undeniable that the intention of the parties was to enter
into a contract to sell. 20 In addition, the title of a contract does not necessarily
determine its true nature. 21 Hence, the fact that the document under discussion is
entitled "Exclusive Option to Purchase" is not controlling where the text thereof
shows that it is a contract to sell.
An option, as used in the law on sales, is a continuing offer or contract by which the
owner stipulates with another that the latter shall have the right to buy the property at
a fixed price within a certain time, or under, or in compliance with, certain terms and
conditions, or which gives to the owner of the property the right to sell or demand a
sale. It is also sometimes called an "unaccepted offer." An option is not of itself a
purchase, but merely secures the privilege to buy. 22 It is not a sale of property but a
sale of property but a sale of the right to purchase. 23 It is simply a contract by which
the owner of property agrees with another person that he shall have the right to buy
his property at a fixed price within a certain time. He does not sell his land; he does
not then agree to sell it; but he does sell something, that it is, the right or privilege to
buy at the election or option of the other party. 24 Its distinguishing characteristic is
that it imposes no binding obligation on the person holding the option, aside from the
consideration for the offer. Until acceptance, it is not, properly speaking, a contract,
and does not vest, transfer, or agree to transfer, any title to, or any interest or right in
the subject matter, but is merely a contract by which the owner of property gives the
optionee the right or privilege of accepting the offer and buying the property on
certain terms. 25
38
On the other hand, a contract, like a contract to sell, involves a meeting of minds two
persons whereby one binds himself, with respect to the other, to give something or to
render some service. 26 Contracts, in general, are perfected by mere consent, 27 which
is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. 28
The distinction between an "option" and a contract of sale is that an option is an
unaccepted offer. It states the terms and conditions on which the owner is willing to
sell the land, if the holder elects to accept them within the time limited. If the holder
does so elect, he must give notice to the other party, and the accepted offer thereupon
becomes a valid and binding contract. If an acceptance is not made within the time
fixed, the owner is no longer bound by his offer, and the option is at an end. A
contract of sale, on the other hand, fixes definitely the relative rights and obligations
of both parties at the time of its execution. The offer and the acceptance are
concurrent, since the minds of the contracting parties meet in the terms of the
agreement. 29
A perusal of the contract in this case, as well as the oral and documentary evidence
presented by the parties, readily shows that there is indeed a concurrence of
petitioner's offer to buy and private respondents' acceptance thereof. The rule is that
except where a formal acceptance is so required, although the acceptance must be
affirmatively and clearly made and must be evidenced by some acts or conduct
communicated to the offeror, it may be made either in a formal or an informal
manner, and may be shown by acts, conduct, or words of the accepting party that
clearly manifest a present intention or determination to accept the offer to buy or sell.
Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing
the existence of the contract of sale. 30
The records also show that private respondents accepted the offer of petitioner to buy
their property under the terms of their contract. At the time petitioner made its offer,
private respondents suggested that their transfer certificate of title be first
reconstituted, to which petitioner agreed. As a matter of fact, it was petitioner's
counsel, Atty. Bayani L. Bernardo, who assisted private respondents in filing a
petition for reconstitution. After the title was reconstituted, the parties agreed that
petitioner would pay either in cash or manager's check the amount of P2,856,150.00
for the lot. Petitioner was supposed to pay the same on November 25, 1989, but it
later offered to make a down payment of P50,000.00, with the balance of
P2,806,150.00 to be paid on or before November 30, 1989. Private respondents
agreed to the counter-offer made by petitioner. 31 As a result, the so-called exclusive
option to purchase was prepared by petitioner and was subsequently signed by
private respondents, thereby creating a perfected contract to sell between them.
It cannot be gainsaid that the offer to buy a specific piece of land was definite and
certain, while the acceptance thereof was absolute and without any condition or
qualification. The agreement as to the object, the price of the property, and the terms
of payment was clear and well-defined. No other significance could be given to such
acts that than they were meant to finalize and perfect the transaction. The parties
even went beyond the basic requirements of the law by stipulating that "all expenses
including the corresponding capital gains tax, cost of documentary stamps are for the
account of the vendors, and expenses for the registration of the deed of sale in the
Registry of Deeds are for the account of Adelfa properties, Inc." Hence, there was
nothing left to be done except the performance of the respective obligations of the
parties.
We do not subscribe to private respondents' submission, which was upheld by both
the trial court and respondent court of appeals, that the offer of petitioner to deduct
P500,000.00, (later reduced to P300,000.00) from the purchase price for the
settlement of the civil case was tantamount to a counter-offer. It must be stressed that
there already existed a perfected contract between the parties at the time the alleged
counter-offer was made. Thus, any new offer by a party becomes binding only when
it is accepted by the other. In the case of private respondents, they actually refused to
concur in said offer of petitioner, by reason of which the original terms of the
contract continued to be enforceable.
At any rate, the same cannot be considered a counter-offer for the simple reason that
petitioner's sole purpose was to settle the civil case in order that it could already
comply with its obligation. In fact, it was even indicative of a desire by petitioner to
immediately comply therewith, except that it was being prevented from doing so
because of the filing of the civil case which, it believed in good faith, rendered
compliance improbable at that time. In addition, no inference can be drawn from that
suggestion given by petitioner that it was totally abandoning the original contract.
More importantly, it will be noted that the failure of petitioner to pay the balance of
the purchase price within the agreed period was attributed by private respondents to
"lack of word of honor" on the part of the former. The reason of "lack of word of
honor" is to us a clear indication that private respondents considered petitioner
already bound by its obligation to pay the balance of the consideration. In effect,
private respondents were demanding or exacting fulfillment of the obligation from
herein petitioner. with the arrival of the period agreed upon by the parties, petitioner
was supposed to comply with the obligation incumbent upon it to perform, not
merely to exercise an option or a right to buy the property.
The obligation of petitioner on November 30, 1993 consisted of an obligation to give
something, that is, the payment of the purchase price. The contract did not simply
give petitioner the discretion to pay for the property. 32 It will be noted that there is
nothing in the said contract to show that petitioner was merely given a certain period
39
within which to exercise its privilege to buy. The agreed period was intended to give
time to herein petitioner within which to fulfill and comply with its obligation, that
is, to pay the balance of the purchase price. No evidence was presented by private
respondents to prove otherwise.
The test in determining whether a contract is a "contract of sale or purchase" or a
mere "option" is whether or not the agreement could be specifically
enforced. 33 There is no doubt that the obligation of petitioner to pay the purchase
price is specific, definite and certain, and consequently binding and enforceable. Had
private respondents chosen to enforce the contract, they could have specifically
compelled petitioner to pay the balance of P2,806,150.00. This is distinctly made
manifest in the contract itself as an integral stipulation, compliance with which could
legally and definitely be demanded from petitioner as a consequence.
This is not a case where no right is as yet created nor an obligation declared, as
where something further remains to be done before the buyer and seller obligate
themselves. 34 An agreement is only an "option" when no obligation rests on the
party to make any payment except such as may be agreed on between the parties as
consideration to support the option until he has made up his mind within the time
specified. 35 An option, and not a contract to purchase, is effected by an agreement to
sell real estate for payments to be made within specified time and providing
forfeiture of money paid upon failure to make payment, where the purchaser does not
agree to purchase, to make payment, or to bind himself in any way other than the
forfeiture of the payments made. 36 As hereinbefore discussed, this is not the situation
obtaining in the case at bar.
While there is jurisprudence to the effect that a contract which provides that the
initial payment shall be totally forfeited in case of default in payment is to be
considered as an option contract, 37 still we are not inclined to conform with the
findings of respondent court and the court a quo that the contract executed between
the parties is an option contract, for the reason that the parties were already
contemplating the payment of the balance of the purchase price, and were not
merely quoting an agreed value for the property. The term "balance," connotes a
remainder or something remaining from the original total sum already agreed upon.
In other words, the alleged option money of P50,000.00 was actually earnest money
which was intended to form part of the purchase price. The amount of P50,000.00
was not distinct from the cause or consideration for the sale of the property, but was
itself a part thereof. It is a statutory rule that whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and as proof of the
perfection of the contract. 38 It constitutes an advance payment and must, therefore,
be deducted from the total price. Also, earnest money is given by the buyer to the
seller to bind the bargain.
There are clear distinctions between earnest money and option money, viz.: (a)
earnest money is part of the purchase price, while option money ids the money given
as a distinct consideration for an option contract; (b) earnest money is given only
where there is already a sale, while option money applies to a sale not yet perfected;
and (c) when earnest money is given, the buyer is bound to pay the balance, while
when the would-be buyer gives option money, he is not required to buy. 39
The aforequoted characteristics of earnest money are apparent in the so-called option
contract under review, even though it was called "option money" by the parties. In
addition, private respondents failed to show that the payment of the balance of the
purchase price was only a condition precedent to the acceptance of the offer or to the
exercise of the right to buy. On the contrary, it has been sufficiently established that
such payment was but an element of the performance of petitioner's obligation under
the contract to sell. 40
II
1. This brings us to the second issue as to whether or not there was valid suspension
of payment of the purchase price by petitioner and the legal consequences thereof.
To justify its failure to pay the purchase price within the agreed period, petitioner
invokes Article 1590 of the civil Code which provides:
Art. 1590. Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a
foreclosure of mortgage, he may suspend the payment of the price
until the vendor has caused the disturbance or danger to cease,
unless the latter gives security for the return of the price in a proper
case, or it has been stipulated that, notwithstanding any such
contingency, the vendee shall be bound to make the payment. A
mere act of trespass shall not authorize the suspension of the
payment of the price.
Respondent court refused to apply the aforequoted provision of law on the erroneous
assumption that the true agreement between the parties was a contract of option. As
we have hereinbefore discussed, it was not an option contract but a perfected contract
to sell. Verily, therefore, Article 1590 would properly apply.
Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed
against the parties herein involved only the eastern half of the land subject of the
deed of sale between petitioner and the Jimenez brothers, it did not, therefore, have
any adverse effect on private respondents' title and ownership over the western half
of the land which is covered by the contract subject of the present case. We have
gone over the complaint for recovery of ownership filed in said case 41 and we are
40
not persuaded by the factual findings made by said courts. At a glance, it is easily
discernible that, although the complaint prayed for the annulment only of the
contract of sale executed between petitioner and the Jimenez brothers, the same
likewise prayed for the recovery of therein plaintiffs' share in that parcel of land
specifically covered by TCT No. 309773. In other words, the plaintiffs therein were
claiming to be co-owners of the entire parcel of land described in TCT No. 309773,
and not only of a portion thereof nor, as incorrectly interpreted by the lower courts,
did their claim pertain exclusively to the eastern half adjudicated to the Jimenez
brothers.
Such being the case, petitioner was justified in suspending payment of the balance of
the purchase price by reason of the aforesaid vindicatory action filed against it. The
assurance made by private respondents that petitioner did not have to worry about
the case because it was pure and simple harassment 42 is not the kind of guaranty
contemplated under the exceptive clause in Article 1590 wherein the vendor is bound
to make payment even with the existence of a vindicatory action if the vendee should
give a security for the return of the price.
2. Be that as it may, and the validity of the suspension of payment notwithstanding,
we find and hold that private respondents may no longer be compelled to sell and
deliver the subject property to petitioner for two reasons, that is, petitioner's failure to
duly effect the consignation of the purchase price after the disturbance had ceased;
and, secondarily, the fact that the contract to sell had been validly rescinded by
private respondents.
The records of this case reveal that as early as February 28, 1990 when petitioner
caused its exclusive option to be annotated anew on the certificate of title, it already
knew of the dismissal of civil Case No. 89-5541. However, it was only on April 16,
1990 that petitioner, through its counsel, wrote private respondents expressing its
willingness to pay the balance of the purchase price upon the execution of the
corresponding deed of absolute sale. At most, that was merely a notice to pay. There
was no proper tender of payment nor consignation in this case as required by law.
The mere sending of a letter by the vendee expressing the intention to  of the veracity and validity of private respondents' claim. 53 Furthermore, the
pay, without the accompanying payment, is not considered a valid tender of
payment. 43 Besides, a mere tender of payment is not sufficient to compel private
respondents to deliver the property and execute the deed of absolute sale. It is
consignation which is essential in order to extinguish petitioner's obligation to pay
the balance of the purchase price. 44 The rule is different in case of an option
contract 45 or in legal redemption or in a sale with right to repurchase, 46 wherein
consignation is not necessary because these cases involve an exercise of a right or
privilege (to buy, redeem or repurchase) rather than the discharge of an obligation,
hence tender of payment would be sufficient to preserve the right or privilege. This is
because the provisions on consignation are not applicable when there is no obligation
to pay. 47 A contract to sell, as in the case before us, involves the performance of an
obligation, not merely the exercise of a privilege of a right. consequently,
performance or payment may be effected not by tender of payment alone but by both
tender and consignation.
Furthermore, petitioner no longer had the right to suspend payment after the
disturbance ceased with the dismissal of the civil case filed against it. Necessarily,
therefore, its obligation to pay the balance again arose and resumed after it received
notice of such dismissal. Unfortunately, petitioner failed to seasonably make
payment, as in fact it has deposit the money with the trial court when this case was
originally filed therein.
By reason of petitioner's failure to comply with its obligation, private respondents
elected to resort to and did announce the rescission of the contract through its letter
to petitioner dated July 27, 1990. That written notice of rescission is deemed
sufficient under the circumstances. Article 1592 of the Civil Code which requires
rescission either by judicial action or notarial act is not applicable to a contract to
sell. 48 Furthermore, judicial action for rescission of a contract is not necessary where
the contract provides for automatic rescission in case of breach,49 as in the contract
involved in the present controversy.
We are not unaware of the ruling in University of the Philippines vs. De los Angeles,
etc. 50 that the right to rescind is not absolute, being ever subject to scrutiny and
review by the proper court. It is our considered view, however, that this rule applies
to a situation where the extrajudicial rescission is contested by the defaulting party.
In other words, resolution of reciprocal contracts may be made extrajudicially unless
successfully impugned in court. If the debtor impugns the declaration, it shall be
subject to judicial determination51 otherwise, if said party does not oppose it, the
extrajudicial rescission shall have legal effect. 52
In the case at bar, it has been shown that although petitioner was duly furnished and
did receive a written notice of rescission which specified the grounds therefore, it
failed to reply thereto or protest against it. Its silence thereon suggests an admission
initiative of instituting suit was transferred from the rescinder to the defaulter by
virtue of the automatic rescission clause in the contract. 54 But then, the records bear
out the fact that aside from the lackadaisical manner with which petitioner treated
private respondents' latter of cancellation, it utterly failed to seriously seek redress
from the court for the enforcement of its alleged rights under the contract. If private
respondents had not taken the initiative of filing Civil Case No. 7532, evidently
petitioner had no intention to take any legal action to compel specific performance
from the former. By such cavalier disregard, it has been effectively estopped from
seeking the affirmative relief it now desires but which it had theretofore disdained.
41
WHEREFORE, on the foregoing modificatory premises, and considering that the
same result has been reached by respondent Court of Appeals with respect to the
relief awarded to private respondents by the court a quo which we find to be correct,
its assailed judgment in CA-G.R. CV No. 34767 is hereby AFFIRMED.
SO ORDERED.
G.R. No. 103577. October 7, 1996.*
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.
CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of
Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA
A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs. THE
COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA
PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact,
respondents.
Contracts; Sales; Essential Elements of a Contract of Sale.—Sale, by its very
nature, is a consensual contract because it is perfected by mere consent. The essential
elements of a contract of sale are the following: 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.
_______________
* THIRD DIVISION.
16
16 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
Same; Same; Words and Phrases; “Contract to Sell” and “Contract of Sale,”
Distinguished; In a contract to sell, the prospective seller explicitly reserves the
transfer of title to the prospective buyer, meaning, the prospective seller does not as
yet agree or consent to transfer ownership of the property subject of the contract to
sell until the happening of an event.—Under this definition, a Contract to Sell may
not be considered as a Contract ofSale because the first essential element is lacking.
In a contract to sell, the prospective seller explicitly reserves the transfer of title to
the prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as the full payment
of the purchase price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the purchase price is
delivered to him. In other words the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment 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.
Same; Same; Same; Same; “Contract to Sell,” Defined.—A contract to sell
may thus be 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.
Same; Same; Same; Same; A contract to sell may not even be considered as a
conditional contract of sale because in a conditional contract of sale, the first
element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur.—A contract to sell as defined
hereinabove, 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
first element of consent is present, although it is conditioned upon the happening of a
contingent event which may or may not occur. If the suspensive condition is not
fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and
Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]).
17
VOL. 263, OCTOBER 7, 1996 17
Coronel vs. Court of Appeals
However, if the suspensive condition is fulfilled, the contract of sale is thereby
perfected, such that if there had already been previous delivery of the property
subject of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by the
seller.
Same; Same; Same; Same; In a contract to sell, upon the fulfillment of the
suspensive condition, ownership will not automatically transfer to the buyer — the
prospective seller still has to convey title to the prospective buyer by entering into a
contract of absolute sale.—In a contract to sell, upon the fulfillment of the
suspensive condition which is the full payment of the purchase price, ownership will
not automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the
prospective buyer by entering into a contract of absolute sale.
Same; Same; Same; Same; In a contract to sell, there being no previous sale of
the property, a third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price cannot be
deemed a buyer in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property — there is no double sale in such case.—It is essential
to distinguish between a contract to sell and a conditional contract of sale specially in
cases where the subject property is sold by the owner not to the party the seller
contracted with, but to a third person, as in the case at bench. In a contract to sell,
there being no previous sale of the property, a third person buying such property
despite the fulfillment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and the
42
prospective buyer cannot seek the relief of reconveyance of the property. There is no
double sale in such case. Title to the property will transfer to the buyer after
registration because there is no defect in the owner-seller’s title per se, but the latter,
of course, may be sued for damages by the intending buyer.
Same; Same; Same; Same; In a conditional contract of sale, upon the
fulfillment of the suspensive condition, the sale becomes absolute and this will
definitely affect the seller’s title thereto.—In a conditional contract of sale, however,
upon the fulfillment of the suspensive condition, the sale becomes absolute and this
will definitely affect the seller’s title thereto. In fact, if there had been
18
18 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
previous delivery of the subject property, the seller’s ownership or title to the
property is automatically transferred to the buyer such that, the seller will no longer
have any title to transfer to any third person. Applying Article 1544 of the Civil
Code, such second buyer of the property who may have had actual or constructive
knowledge of such defect in the seller’s title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyer’s title. In case a title is issued to the second buyer,
the first buyer may seek reconveyance of the property subject of the sale.
Same; Same; Same; Same; When the sellers declared in the “Receipt of Down
Payment” that they received an amount as purchase price for their house and lot
without any reservation of title until full payment of the entire purchase price, the
natural and ordinary idea conveyed is that they sold their property.—It is a canon in
the interpretation of contracts that the words used therein should be given their
natural and ordinary meaning unless a technical meaning was intended (Tan vs.
Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the
said “Receipt of Down Payment” that they — Received from Miss Ramona Patricia
Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase
price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of
Deeds of Quezon City, in the total amount of P1,240,000.00. Without any
reservation of title until full payment of the entire purchase price, the natural and
ordinary idea conveyed is that they sold their property.
Sale; Ownership; Succession; Rights to the succession are transmitted from
the moment of death of the decedent.—Article 774 of the Civil Code defines
Succession as a mode of transferring ownership as follows: Art. 774. Succession is a
mode of acquisition by virtue of which the property, rights and obligations to the
extent and value of the inheritance of a person are transmitted through his death to
another or others by his will or by operation of law. Petitioners-sellers in the case at
bar being the sons and daughters of the decedent Constancio P. Coronel are
compulsory heirs who were called to succession by operation of law. Thus, at the
point their father drew his last breath, petitioners stepped into his shoes insofar as the
subject property is concerned, such that any rights or obligations pertaining thereto
became binding and enforceable upon them. It is expressly provided that rights to the
succession are
19
VOL. 263, OCTOBER 7, 1996 19
Coronel vs. Court of Appeals
transmitted from the moment of death of the decedent (Article 777, Civil
Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Same; Same; Estoppel; Having represented themselves as the true owners of
the subject property at the time of sale, the sellers cannot claim later that they were
not yet the absolute owners thereof at that time.—Aside from this, petitioners are
precluded from raising their supposed lack of capacity to enter into an agreement at
that time and they cannot be allowed to now take a posture contrary to that which
they took when they entered into the agreement with private respondent Ramona P.
Alcaraz. The Civil Code expressly states that: Art. 1431. Through estoppel an
admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon. Having
represented themselves as the true owners of the subject property at the time of sale,
petitioners cannot claim now that they were not yet the absolute owners thereof at
that time.
Same; Rescission; Pleadings and Practice; Evidence; Allegations must be
proven by sufficient evidence — mere allegation is not an evidence.—We do not
agree with petitioners that there was a valid rescission of the contract of sale in the
instant case. We note that these supposed grounds for petitioners’ rescission, are
mere allegations found only in their responsive pleadings, which by express
provision of the rules, are deemed controverted even if no reply is filed by the
plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft
of any supporting evidence to substantiate petitioners’ allegations. We have stressed
time and again that allegations must be proven by sufficient evidence (Ng Cho Cio
vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]).
Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Same; Same; A seller cannot unilaterally and extrajudicially rescind a
contract of sale where there is no express stipulation authorizing him to
extrajudicially rescind.—Even assuming arguendo that Ramona P. Alcaraz was in
the United States of America on February 6, 1985, we cannot justify petitioners-
sellers’ act of unilaterally and extrajudicially rescinding the contract of sale, there
being no express stipulation authorizing the sellers to extrajudicially rescind the
contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de De
Leon, 132 SCRA 722 [1984])20
20 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
Same; In case of double sale, what finds relevance and materiality is not
whether or not the second buyer was a buyer in good faith but whether or not said
second buyer registers such second sale in good faith, that is, without knowledge of
any defect in the title of the property sold.—In a case of double sale, what finds
43
relevance and materiality is not whether or not the second buyer was a buyer in good
faith but whether or not said second buyer registers such second sale in good faith,
that is, without knowledge of any defect in the title of the property sold. As clearly
borne out by the evidence in this case, petitioner Mabanag could not have in good
faith, registered the sale entered into on February 18, 1985 because as early as
February 22, 1985, a notice of lis pendens had been annotated on the transfer
certificate of title in the names of petitioners, whereas petitioner Mabanag registered
the said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been previously sold to
private respondents, or, at least, she was charged with knowledge that a previous
buyer is claiming title to the same property. Petitioner Mabanag cannot close her
eyes to the defect in petitioners’ title to the property at the time of the registration of
the property.
PETITION for review on certiorari of a decision of the Court of Appeals.
   The facts are stated in the opinion of the Court.
  Leven S. Puno for petitioners.
  Perfecto G. Paner for private respondents.
MELO, J.:
The petition before us has its roots in a complaint for specific performance to
compel herein petitioners (except the last named, Catalina Balais Mabanag) to
consummate the sale of a parcel of land with its improvements located along
Roosevelt Avenue in Quezon City entered into by the parties sometime in January
1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this
wise:21
VOL. 263, OCTOBER 7, 1996 21
Coronel vs. Court of Appeals
On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter
referred to as Coronels) executed a document entitled “Receipt of Down Payment”
(Exh. “A”) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as
Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
                               P1,240,000.00—Total amount
                                    50,000.00—Down payment
                               P1,190,000.00—Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the
sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered
by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father,
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of
the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute
the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall
immediately pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos
upon execution of the document aforestated;
2.  The Coronels will cause the transfer in their names of the title of the
property registered in the name of their deceased father upon receipt of the Fifty
Thousand (P50,000.00) Pesos down payment;
3.  Upon the transfer in their names of the subject property, the Coronels will
execute the deed of absolute sale in favor of Ramona and the latter will pay the
former the whole balance of One Million One Hundred Ninety Thousand
(P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz,
(hereinafter referred to as Concepcion), mother of Ramona, paid the down payment
of Fifty Thousand (P50,000.00) Pesos (Exh. “B,” Exh. “2”).
On February 6, 1985, the property originally registered in the name of the
Coronel’s father was transferred in their names under TCT No. 327043 (Exh. “D”;
Exh. “4”).22
22 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
On February 18, 1985, the Coronels sold the property covered by TCT No.
327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as
Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos
after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. “F-3”;
Exh. “6-C”).
For this reason, Coronels canceled and rescinded the contract (Exh. “A”) with
Ramona by depositing the down payment paid by Concepcion in the bank in trust for
Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et al., filed a complaint for specific
performance against the Coronels and caused the annotation of a notice of lis
pendens at the back of TCT No. 327403 (Exh. “E”; Exh. “5”).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim
covering the same property with the Registry of Deeds of Quezon City (Exh. “F”;
Exh. “6”).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the
subject property in favor of Catalina (Exh. “G”; Exh. “7”).
On June 5, 1985, a new title over the subject property was issued in the name of
Catalina under TCT No. 351582 (Exh. “H”; Exh. “8”).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon
City) the parties agreed to submit the case for decision solely on the basis of
documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered
their documentary evidence accordingly marked as Exhibits “A” through “J,”
44
inclusive of their corresponding submarkings. Adopting these same exhibits as their
own, then defendants (now petitioners) accordingly offered and marked them as
Exhibits “1” through “10,” likewise inclusive of their corresponding submarkings.
Upon motion of the parties, the trial court gave them thirty (30) days within which to
simultaneously submit their respective memoranda, and an additional 15 days within
which to submit their corresponding comment or reply thereto, after which, the case
would be deemed submitted for resolution.23
VOL. 263, OCTOBER 7, 1996 23
Coronel vs. Court of Appeals
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo
Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of
Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from
his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as
follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering
defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel
of land embraced in and covered by Transfer Certificate of Title No. 327403 (now
TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the
improvements existing thereon free from all liens and encumbrances, and once
accomplished, to immediately deliver the said document of sale to plaintiffs and
upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance
of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of
Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor
is hereby canceled and declared to be without force and effect. Defendants and
intervenor and all other persons claiming under them are hereby ordered to vacate
the subject property and deliver possession thereof to plaintiffs. Plaintiffs’ claim for
damages and attorney’s fees, as well as the counterclaims of defendants and
intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding
judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada,
thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to
render anew decision by the undersigned Presiding Judge should be denied for the
following reasons: (1) The instant case became submitted for decision as of April 14,
1988 when the parties terminated the presentation of their respective documentary
evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The
fact that they were allowed to file memoranda
24
24 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
at some future date did not change the fact that the hearing of the case was
terminated before Judge Roura and therefore the same should be submitted to him
for decision; (2) When the defendants and intervenor did not object to the authority
of Judge Reynaldo Roura to decide the case prior to the rendition of the decision,
when they met for the first time before the undersigned Presiding Judge at the
hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988,
they were deemed to have acquiesced thereto and they are now estopped from
questioning said authority of Judge Roura after they received the decision in question
which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura
was merely a Judge-on-detail at this Branch of the Court, he was in all respects the
Presiding Judge with full authority to act on any pending incident submitted before
this Court during his incumbency. When he returned to his Official Station at
Macabebe, Pampanga, he did not lose his authority to decide or resolve such cases
submitted to him for decision or resolution because he continued as Judge of the
Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge.
The standing rule and supported by jurisprudence is that a Judge to whom a case is
submitted for decision has the authority to decide the case notwithstanding his
transfer to another branch or region of the same court (Sec. 9, Rule 135, Rules of
Court).
Coming now to the twin prayer for reconsideration of the Decision dated March
1, 1989 rendered in the instant case, resolution of which now pertains to the
undersigned Presiding Judge, after a meticulous examination of the documentary
evidence presented by the parties, she is convinced that the Decision of March 1,
1989 is supported by evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the “Motion for Reconsideration and/or to
Annul Decision and Render Anew Decision by the Incumbent Presiding Judge”
dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court
of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully
agreeing with the trial court.25
VOL. 263, OCTOBER 7, 1996 25
Coronel vs. Court of Appeals
Hence, the instant petition which was filed on March 5, 1992. The last pleading,
private respondents’ Reply Memorandum, was filed on September 15, 1993. The
case was, however, re-raffled to undersigned ponente only on August 28, 1996, due
to the voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition
of respondent court in the affirmance of the trial court’s decision, we definitely find
the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the
other issues in the case at bar is the precise determination of the legal significance of
45
the document entitled “Receipt of Down Payment” which was offered in evidence by
both parties. There is no dispute as to the fact that said document embodied the
binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of
Constancio P. Coronel on the other, pertaining to a particular house and lot covered
by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines
which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to render some service.
While, it is the position of private respondents that the “Receipt of Down
Payment” embodied a perfected contract of sale, which perforce, they seek to enforce
by means of an action for specific performance, petitioners on their part insist that
what the document signified was a mere executory contract to sell, subject to certain
suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left
for the United States of America, said contract could not possibly ripen into a
contract of absolute sale.
Plainly, such variance in the contending parties’ contentions is brought about by
the way each interprets the terms and/or conditions set forth in said private
instrument. Withal,
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26 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
based on whatever relevant and admissible evidence may be available on record, this
Court, as were the courts below, is now called upon to adjudge what the real intent of
the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. 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 therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following:
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.
Under this definition, a Contract to Sell may not be considered as a
Contract of Sale because the first essential element is lacking. In a contract to sell,
the prospective seller explicitly reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or consent to transfer ownership
of the property subject of the contract to sell until the happening of an event, which
for present purposes we shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is delivered to him. In other
words the full payment of the purchase price partakes of a suspensive condition, the
non-fulfillment 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. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had
occasion to rule:27
VOL. 263, OCTOBER 7, 1996 27
Coronel vs. Court of Appeals
Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass
until the full payment of the price, such payment being a positive suspensive
condition and failure of which is not a breach, casual or serious, but simply an event
that prevented the obligation of the vendor to convey title from acquiring binding
force.
Stated positively, upon the fulfillment of the suspensive condition which is the
full payment of the purchase price, the prospective seller’s obligation to sell the
subject property by entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a consideration
distinct from the price.
A contract to sell may thus be 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.
A contract to sell as defined hereinabove, 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 first element of consent is present, although it is
conditioned upon the happening of a contingent event which may or may not occur.
If the suspensive condition is not fulfilled, the perfection of the contract of sale is
completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133
SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of
sale is thereby
28
28 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
perfected, such that if there had already been previous delivery of the property
subject of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by the
seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the
full payment of the purchase price, ownership will not automatically transfer to the
buyer although the property may have been previously delivered to him. The
46
prospective seller still has to convey title to the prospective buyer by entering into a
contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract
of sale specially in cases where the subject property is sold by the owner not to the
party the seller contracted with, but to a third person, as in the case at bench. In a
contract to sell, there being no previous sale of the property, a third person buying
such property despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer in bad faith
and the prospective buyer cannot seek the relief of reconveyance of the property.
There is no double sale in such case. Title to the property will transfer to the buyer
after registration because there is no defect in the owner-seller’s title per se, but the
latter, of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the seller’s title
thereto. In fact, if there had been previous delivery of the subject property, the
seller’s ownership or title to the property is automatically transferred to the buyer
such that, the seller will no longer have any title to transfer to any third person.
Applying Article 1544 of the Civil Code, such second buyer of the property who
may have had actual or constructive knowledge of such defect in the seller’s title, or
at least was charged with the obligation to discover such defect, cannot be a
registrant in good faith. Such second buyer cannot defeat the first buyer’s title. In
case
29
VOL. 263, OCTOBER 7, 1996 29
Coronel vs. Court of Appeals
a title is issued to the second buyer, the first buyer may seek reconveyance of the
property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of
deciphering the real nature of the contract entered into by petitioners and private
respondents.
It is a canon in the interpretation of contracts that the words used therein should
be given their natural and ordinary meaning unless a technical meaning was intended
(Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared
in the said “Receipt of Down Payment” that they—
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the
sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered
by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of
P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the
natural and ordinary idea conveyed is that they sold their property.
When the “Receipt of Down Payment” is considered in its entirety, it becomes
more manifest that there was a clear intent on the part of petitioners to transfer title to
the buyer, but since the transfer certificate of title was still in the name of petitioner’s
father, they could not fully effect such transfer although the buyer was then willing
and able to immediately pay the purchase price. Therefore, petitioners-sellers
undertook upon receipt of the down payment from private respondent Ramona P.
Alcaraz, to cause the issuance of a new certificate of title in their names from that of
their father, after which, they promised to present said title, now in their names, to
the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn,
pay the entire balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of ownership or title to the subject parcel of land.
Furthermore, the circumstance which prevented the parties from entering into
30
30 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
an absolute contract of sale pertained to the sellers themselves (the certificate of title
was not in their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court may safely presume that,
had the certificate of title been in the names of petitioners-sellers at that time, there
would have been no reason why an absolute contract of sale could not have been
executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely
promise to sell the property to private respondent upon the fulfillment of the
suspensive condition. On the contrary, having already agreed to sell the subject
property, they undertook to have the certificate of title changed to their names and
immediately thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers,
after compliance by the buyer with certain terms and conditions, promised to sell the
property to the latter. What may be perceived from the respective undertakings of the
parties to the contract is that petitioners had already agreed to sell the house and lot
they inherited from their father, completely willing to transfer full ownership of the
subject house and lot to the buyer if the documents were then in order. It just so
happened, however, that the transfer certificate of title was then still in the name of
their father. It was more expedient to first effect the change in the certificate of title
so as to bear their names. That is why they undertook to cause the issuance of a new
transfer of the certificate of title in their names upon receipt of the down payment in
the amount of P50,000.00. As soon as the new certificate of title is issued in their
names, petitioners were committed to immediately execute the deed of absolute sale.
Only then will the obligation of the buyer to pay the remainder of the purchase price
arise.
There is no doubt that unlike in a contract to sell which is most commonly
entered into so as to protect the seller against a buyer who intends to buy the property
in installment by withholding ownership over the property until the buyer
31
VOL. 263, OCTOBER 7, 1996 31
Coronel vs. Court of Appeals
47
effects full payment therefor, in the contract entered into in the case at bar, the sellers
were the ones who were unable to enter into a contract of absolute sale by reason of
the fact that the certificate of title to the property was still in the name of their father.
It was the sellers in this case who, as it were, had the impediment which prevented,
so to speak, the execution of a contract of absolute sale.
What is clearly established by the plain language of the subject document is that
when the said “Receipt of Down Payment” was prepared and signed by petitioners
Romulo A. Coronel, et al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of
title from the name of petitioners’ father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled
on February 6, 1985 (Exh. “D”; Exh. “4”). Thus, on said date, the conditional
contract of sale between petitioners and private respondent Ramona P. Alcaraz
became obligatory, the only act required for the consummation thereof being the
delivery of the property by means of the execution of the deed of absolute sale in a
public instrument, which petitioners unequivocally committed themselves to do as
evidenced by the “Receipt of Down Payment.”
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly
applies to the case at bench. Thus.
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.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the
extinguishment or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition.
32
32 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
Since the condition contemplated by the parties which is the issuance of a
certificate of title in petitioners’ names was fulfilled on February 6, 1985, the
respective obligations of the parties under the contract of sale became mutually
demandable, that is, petitioners, as sellers, were obliged to present the transfer
certificate of title already in their names to private respondent Ramona P. Alcaraz,
the buyer, and to immediately execute the deed of absolute sale, while the buyer on
her part, was obliged to forthwith pay the balance of the purchase price amounting to
P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition,
petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves “to effect the transfer in
our names from our deceased father Constancio P. Coronel, the transfer certificate of
title immediately upon receipt of the downpayment abovestated.” The sale was still
subject to this suspensive condition. (Emphasis supplied)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject
to a suspensive condition. Only, they contend, continuing in the same paragraph,
that:
. . . Had petitioners-sellers not complied with this condition of first transferring
the title to the property under their names, there could be no perfected contract of
sale. (Emphasis supplied)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the
Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than
these mere hypothetical arguments is the fact that the condition herein referred to
was actually and 
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VOL. 263, OCTOBER 7, 1996 33
Coronel vs. Court of Appeals
indisputably fulfilled on February 6, 1985, when a new title was issued in the names
of petitioners as evidenced by TCT No. 327403 (Exh. “D”; Exh. “4”).
The inevitable conclusion is that on January 19, 1985, as evidenced by the
document denominated as “Receipt of Down Payment” (Exh. “A”; Exh. “1”), the
parties entered into a contract of sale subject only to the suspensive condition that the
sellers shall effect the issuance of new certificate title from that of their father’s name
to their names and that, on February 6, 1985, this condition was fulfilled (Exh. “D”;
Exh. “4”).
We, therefore, hold that, in accordance with Article 1187 which pertinently
provides—
Art. 1187. The effects of conditional obligation to give, once the condition has
been fulfilled, shall retroact to the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the
retroactive effect of the condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of
sale became mutually due and demandable as of the time of fulfillment or occurrence
of the suspensive condition on February 6, 1985. As of that point in time, reciprocal
obligations of both seller and buyer arose.
Petitioners also argue that there could have been no perfected contract on January
19, 1985 because they were then not yet the absolute owners of the inherited
property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring
ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property,
rights and obligations to the extent and value of the inheritance of a person are
transmitted through his death to another or others by his will or by operation of law.
48
 34
34 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
Petitioners-sellers in the case at bar being the sons and daughters of the decedent
Constancio P. Coronel are compulsory heirs who were called to succession by
operation of law. Thus, at the point their father drew his last breath, petitioners
stepped into his shoes insofar as the subject property is concerned, such that any
rights or obligations pertaining thereto became binding and enforceable upon them. It
is expressly provided that rights to the succession are transmitted from the moment
of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil.
850 [1952]).
Be it also noted that petitioners’ claim that succession may not be declared unless
the creditors have been paid is rendered moot by the fact that they were able to effect
the transfer of the title to the property from the decedent’s name to their names on
February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of
capacity to enter into an agreement at that time and they cannot be allowed to now
take a posture contrary to that which they took when they entered into the agreement
with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against
the person relying thereon.
Having represented themselves as the true owners of the subject property at the
time of sale, petitioners cannot claim now that they were not yet the absolute owners
thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of
sale between them and Ramona P. Alcaraz, the latter breached her reciprocal
obligation when she rendered impossible the consummation thereof by going to the
United States of America, without leaving her address, telephone number, and
Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory
Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason,  Article 1169 of the Civil Code defines when a party in a contract involving
35
VOL. 263, OCTOBER 7, 1996 35
Coronel vs. Court of Appeals
so petitioners conclude, they were correct in unilaterally rescinding the contract of
sale.
We do not agree with petitioners that there was a valid rescission of the contract
of sale in the instant case. We note that these supposed grounds for petitioners’
rescission, are mere allegations found only in their responsive pleadings, which by
express provision of the rules, are deemed controverted even if no reply is filed by
the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely
bereft of any supporting evidence to substantiate petitioners’ allegations. We have
stressed time and again that allegations must be proven by sufficient evidence (Ng
Cho Cio vs. Ng Diong, 110 Phil. 882 [1961];Recaro vs. Embisan, 2 SCRA 598
[1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376
[1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of
America on February 6, 1985, we cannot justify petitioners-sellers’ act of unilaterally
and extrajudicially rescinding the contract of sale, there being no express stipulation
authorizing the sellers to extrajudically rescind the contract of sale. (cf. Dignos vs.
CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona
P. Alcaraz because although the evidence on record shows that the sale was in the
name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with
Concepcion D. Alcaraz, Ramona’s mother, who had acted for and in behalf of her
daughter, if not also in her own behalf. Indeed, the down payment was made by
Concepcion D. Alcaraz with her own personal check (Exh. “B”; Exh. “2”) for and in
behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever
questioned Concepcion’s authority to represent Ramona P. Alcaraz when they
accepted her personal check. Neither did they raise any objection as regards payment
being effected by a third person. Accordingly, as far as petitioners are concerned, the
physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of
sale.36
36 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar
as her obligation to pay the full purchase price is concerned. Petitioners who are
precluded from setting up the defense of the physical absence of Ramona P. Alcaraz
as above-explained offered no proof whatsoever to show that they actually presented
the new transfer certificate of title in their names and signified their willingness and
readiness to execute the deed of absolute sale in accordance with their agreement.
Ramona’s corresponding obligation to pay the balance of the purchase price in the
amount of P1,190,000.00 (as buyer) never became due and demandable and,
therefore, she cannot be deemed to have been in default.
reciprocal obligations may be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment of
their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon
him. From the moment one of the parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale
between petitioners and respondents.
49
 With the foregoing conclusions, the sale to the other petitioner, Catalina B.
Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code
will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.
Should if be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.37
VOL. 263, OCTOBER 7, 1996 37
Coronel vs. Court of Appeals
Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof to the person who
presents the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985
as proof of the second contract of sale was registered with the Registry of Deeds of
Quezon City giving rise to the issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544
shall apply.
The above-cited provision on double sale presumes title or ownership to pass to
the first buyer, the exceptions being: (a) when the second buyer, in good faith,
registers the sale ahead of the first buyer, and (b) should there be no inscription by
either of the two buyers, when the second buyer, in good faith, acquires possession
of the property ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice of the first
buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now
a distinguished member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in
right). Knowledge by the first buyer of the second sale cannot defeat the first buyer’s
rights except when the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register, since
knowledge taints his registration with bad faith (see also Astorga vs. Court of
Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232,
22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection
of Art. 1544, second paragraph, that the second realty buyer must act in good faith in
registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99,
Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
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38 SUPREME COURT REPORTS ANNOTATED
Coronel vs. Court of Appeals
Petitioners point out that the notice of lis pendens in the case at bar was
annotated on the title of the subject property only on February 22, 1985, whereas, the
second sale between petitioners Coronels and petitioner Mabanag was supposedly
perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time
petitioner Mabanag, the second buyer, bought the property under a clean title, she
was unaware of any adverse claim or previous sale, for which reason she is a buyer
in good faith.
We are not persuaded by such agreement.
In a case of double sale, what finds relevance and materiality is not whether or
not the second buyer was a buyer in good faith but whether or not said second buyer
registers such second sale in good faith, that is, without knowledge of any defect in
the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not
have in good faith, registered the sale entered into on February 18, 1985 because as
early as February 22, 1985, a notice of lis pendens had been annotated on the transfer
certificate of title in the names of petitioners, whereas petitioner Mabanag registered
the said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been previously sold to
private respondents, or, at least, she was charged with knowledge that a previous
buyer is claiming title to the same property. Petitioner Mabanag cannot close her
eyes to the defect in petitioners’ title to the property at the time of the registration of
the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge
that there was a previous sale of the same property to a third party or that another
person claims said property in a previous sale, the registration will constitute a
registration in bad faith and will not confer upon him any right. (Salvoro vs.
Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Lands, 43 Phil.
146; Cagaoan vs. Cagaoan, 43 Phil. 554;Fernandez vs. Mercader, 43 Phil. 581)
39
VOL. 263, OCTOBER 7, 1996 39
Coronel vs. Court of Appeals
Thus, the sale of the subject parcel of land between petitioners and Ramona P.
Alcaraz, perfected on February 6, 1985, prior to that between petitioners and
Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts
below.
Although there may be ample indications that there was in fact an agency
between Ramona as principal and Concepcion, her mother, as agent insofar as the
subject contract of sale is concerned, the issue of whether or not Concepcion was
also acting in her own behalf as a co-buyer is not squarely raised in the instant
petition, nor is such assumption disputed between mother and daughter. Thus, We
will not touch this issue and no longer disturb the lower courts’ ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED
and the appealed judgment AFFIRMED.
SO ORDERED.
Narvasa (C.J., Chairman), Davide, Jr. and Francisco, JJ., concur.
50
 Panganiban, J., No part. Close personal relation with a party’s counsel.
Petition dismissed.
Note.—In double sales of real property, prior registration vests no preferential
right if second vendee is in bad faith. (Berico vs. Court of Appeals, 225 SCRA 469
[1993])
——o0o——

No. L-28602. September 29, 1970.

UNIVERSITY OF THE PHILIPPINES, petitioner, vs.WALFRIDO DE LOS
ANGELES,in his capacity as JUDGE of the COURT OF FIRST INSTANCE IN
QUEZON CITY, ET AL., respondents.
Civil Law; Obligations and Contracts; Rescission; Effect of unilateral
rescission without court intervention.—In the first place, UP and ALUMCO had
expressly stipulated in the “Acknowledgment of Debt and Proposed Manner of
Payment” that, upon default by the debtor ALUMCO, the creditor (UP) has “the
right and the power to consider the Logging Agreement dated 2 December 1960 as
rescinded without the necessity of any judicial suit.” As to such special stipulation,
and in connection with Article 1191 of the Civil Code, this Court stated in Froilan vs.
Pan Oriental Shipping Co., et al., L-11897, 31 October 1964, 12 SCRA 276: “there is
nothing in the law that prohibits the parties from entering into agreement that
violation of the terms of the contract would cause cancellation thereof, even without
court intervention. In other words, it is not always necessary for the injured party to
resort to court for rescission of the contract.”

ORIGINAL PETITION in the Supreme Court. Certiorari and prohibition.

The facts are stated in the opinion of the Court.

51
      Solicitor General Antonio P. Barredo, Solicitor Augusto M.
Amores and Special Counsel Perfecto V. Fernandez for petitioner.  paragraph are not sufficient to liquidate the foregoing indebtedness
103
VOL. 35, SEPTEMBER 29, 1970  103  outstanding after the said payments have been applied shall be paid
University of the Philippines vs. De los Angeles
     Norberto J. Quisumbing for private respondents.
REYES, J.B.L., J.:
Three (3) orders of the Court of First Instance of Rizal (Quezon City), issued in its
Civil Case No. 9435, are sought to be annulled in this petition for certiorari and
prohibition, filed by herein petitioner University of the Philippines (or UP) against
the above-named respondent judge and the Associated Lumber Manufacturing
Company, Inc. (or ALUMCO). The first order, dated 25 February 1966, enjoined UP
from awarding logging rights over its timber concession (or Land Grant), situated at
the Lubayat areas in the provinces of Laguna and Quezon; the second order, dated 14
January 1967, adjudged UP in contempt of court, and directed Sta. Clara Lumber
Company, Inc. to refrain from exercising logging rights or conducting logging
operations on the concession; and the third order, dated 12 December 1967, denied
reconsideration of the order of contempt. 
As prayed for in the petition, a writ of preliminary injunction against the enforcement
or implementation of the three (3) questioned orders was issued by this Court, per its
resolution on 9 February 1968.  complaint against ALUMCO, which was docketed as Civil Case No. 9435 of the
The petition alleged the following:
That the above-mentioned Land Grant was segregated from the public domain and
given as an endowment to UP, an institution of higher learning, to be operated and
developed for the purpose of raising additional income for its support, pursuant to
Act 3608;
That on or about 2 November 1960, UP and ALUMCO entered into a logging
agreement under which the latter was granted exclusive authority, for a period
starting from the date of the agreement to 31 December 1965, extendible for a further
period of five (5) years by mutual agreement, to cut, collect and remove timber from
the Land Grant, in consideration of payment to UP of royalties, forest fees, etc.; that
ALUMCO cut and removed timber therefrom but, as of 8 December 1964, it had
incurred an unpaid account of P219,362.94, which, despite repeated demands, it had
failed to pay; that after it had received notice that UP would rescind or terminate the
logging agreement, ALUMCO executed an instrument, entitled "Acknowledgment of
Debt and Proposed Manner of Payments," dated 9 December 1964, which was
approved by the president of UP, and which stipulated the following:
3. In the event that the payments called for in Nos. 1 and 2 of this
of the DEBTOR in favor of the CREDITOR, the balance
by the DEBTOR in full no later than June 30, 1965;
xxx xxx xxx
5. In the event that the DEBTOR fails to comply with any of its
promises or undertakings in this document, the DEBTOR agrees
without reservation that the CREDITOR shall have the right and
the power to consider the Logging Agreement dated December 2,
1960 as rescinded without the necessity of any judicial suit, and the
CREDITOR shall be entitled as a matter of right to Fifty Thousand
Pesos (P50,000.00) by way of and for liquidated damages;
ALUMCO continued its logging operations, but again incurred an unpaid account,
for the period from 9 December 1964 to 15 July 1965, in the amount of P61,133.74,
in addition to the indebtedness that it had previously acknowledged. 
That on 19 July 1965, petitioner UP informed respondent ALUMCO that it had, as of
that date, considered as rescinded and of no further legal effect the logging
agreement that they had entered in 1960; and on 7 September 1965, UP filed a
Court of First Instance of Rizal (Quezon City), for the collection or payment of the
herein before stated sums of money and alleging the facts hereinbefore specified,
together with other allegations; it prayed for and obtained an order, dated 30
September 1965, for preliminary attachment and preliminary injunction restraining
ALUMCO from continuing its logging operations in the Land Grant.
That before the issuance of the aforesaid preliminary injunction UP had taken steps
to have another concessionaire take over the logging operation, by advertising an
invitation to bid; that bidding was conducted, and the concession was awarded to Sta.
Clara Lumber Company, Inc.; the logging contract was signed on 16 February 1966. 
That, meantime, ALUMCO had filed several motions to discharge the writs of
attachment and preliminary injunction but were denied by the court;
That on 12 November 1965, ALUMCO filed a petition to enjoin petitioner
University from conducting the bidding; on 27 November 1965, it filed a second
petition for preliminary injunction; and, on 25 February 1966, respondent judge
issued the first of the questioned orders, enjoining UP from awarding logging rights
over the concession to any other party.
52
That UP received the order of 25 February 1966 after it had concluded its contract In the first place, UP and ALUMCO had expressly stipulated in the
with Sta. Clara Lumber Company, Inc., and said company had started logging "Acknowledgment of Debt and Proposed Manner of Payments" that, upon default by
operations.  the debtor ALUMCO, the creditor (UP) has "the right and the power to consider, the
Logging Agreement dated 2 December 1960 as rescinded without the necessity of
That, on motion dated 12 April 1966 by ALUMCO and one Jose Rico, the court, in any judicial suit." As to such special stipulation, and in connection with Article 1191
an order dated 14 January 1967, declared petitioner UP in contempt of court and, in of the Civil Code, this Court stated in Froilan vs. Pan Oriental Shipping Co., et
the same order, directed Sta. Clara Lumber Company, Inc., to refrain from exercising al., L-11897, 31 October 1964, 12 SCRA 276:
logging rights or conducting logging operations in the concession. 
there is nothing in the law that prohibits the parties from entering
The UP moved for reconsideration of the aforesaid order, but the motion was denied into agreement that violation of the terms of the contract would
on 12 December 1967.  cause cancellation thereof, even without court intervention. In
other words, it is not always necessary for the injured party to
Except that it denied knowledge of the purpose of the Land Grant, which purpose, resort to court for rescission of the contract.
anyway, is embodied in Act 3608 and, therefore, conclusively known, respondent
ALUMCO did not deny the foregoing allegations in the petition. In its answer, Of course, it must be understood that the act of party in treating a contract as
respondent corrected itself by stating that the period of the logging agreement is five cancelled or resolved on account of infractions by the other contracting party must be
(5) years - not seven (7) years, as it had alleged in its second amended answer to the made known to the other and is always provisional, being ever subject to scrutiny
complaint in Civil Case No. 9435. It reiterated, however, its defenses in the court and review by the proper court. If the other party denies that rescission is justified, it
below, which maybe boiled down to: blaming its former general manager, Cesar is free to resort to judicial action in its own behalf, and bring the matter to court.
Guy, in not turning over management of ALUMCO, thereby rendering it unable to Then, should the court, after due hearing, decide that the resolution of the contract
pay the sum of P219,382.94; that it failed to pursue the manner of payments, as was not warranted, the responsible party will be sentenced to damages; in the
stipulated in the "Acknowledgment of Debt and Proposed Manner of Payments" contrary case, the resolution will be affirmed, and the consequent indemnity awarded
because the logs that it had cut turned out to be rotten and could not be sold to Sta. to the party prejudiced.
Clara Lumber Company, Inc., under its contract "to buy and sell" with said firm, and
which contract was referred and annexed to the "Acknowledgment of Debt and In other words, the party who deems the contract violated may consider it resolved or
Proposed Manner of Payments"; that UP's unilateral rescission of the logging rescinded, and act accordingly, without previous court action, but it proceeds at its
contract, without a court order, was invalid; that petitioner's supervisor refused to own risk. For it is only the final judgment of the corresponding court that will
allow respondent to cut new logs unless the logs previously cut during the conclusively and finally settle whether the action taken was or was not correct in
management of Cesar Guy be first sold; that respondent was permitted to cut logs in law. But the law definitely does not require that the contracting party who believes
the middle of June 1965 but petitioner's supervisor stopped all logging operations on itself injured must first file suit and wait for a judgment before taking extrajudicial
15 July 1965; that it had made several offers to petitioner for respondent to resume steps to protect its interest. Otherwise, the party injured by the other's breach will
logging operations but respondent received no reply.  have to passively sit and watch its damages accumulate during the pendency of the
suit until the final judgment of rescission is rendered when the law itself requires that
The basic issue in this case is whether petitioner U.P. can treat its contract with he should exercise due diligence to minimize its own damages (Civil Code, Article
ALUMCO rescinded, and may disregard the same before any judicial 2203).
pronouncement to that effect. Respondent ALUMCO contended, and the lower court,
in issuing the injunction order of 25 February 1966, apparently sustained it (although We see no conflict between this ruling and the previous jurisprudence of this Court
the order expresses no specific findings in this regard), that it is only after a final invoked by respondent declaring that judicial action is necessary for the resolution of
court decree declaring the contract rescinded for violation of its terms that U.P. could a reciprocal obligation,1 since in every case where the extrajudicial resolution is
disregard ALUMCO's rights under the contract and treat the agreement as breached contested only the final award of the court of competent jurisdiction can conclusively
and of no force or effect.  settle whether the resolution was proper or not. It is in this sense that judicial action
will be necessary, as without it, the extrajudicial resolution will remain contestable
We find that position untenable.  and subject to judicial invalidation, unless attack thereon should become barred by
acquiescence, estoppel or prescription.

53
Fears have been expressed that a stipulation providing for a unilateral rescission in
case of breach of contract may render nugatory the general rule requiring judicial
action (v. Footnote, Padilla, Civil Law, Civil Code Anno., 1967 ed. Vol. IV, page
140) but, as already observed, in case of abuse or error by the rescinder the other
party is not barred from questioning in court such abuse or error, the practical effect
of the stipulation being merely to transfer to the defaulter the initiative of instituting
suit, instead of the rescinder. 
In fact, even without express provision conferring the power of cancellation upon
one contracting party, the Supreme Court of Spain, in construing the effect of Article
1124 of the Spanish Civil Code (of which Article 1191 of our own Civil; Code is
practically a reproduction), has repeatedly held that, a resolution of reciprocal or
synallagmatic contracts may be made extrajudicially unless successfully impugned in
court.  1964 ("Acknowledgment of Debt and Proposed Manner of Payment"); that the
El articulo 1124 del Codigo Civil establece la facultad de resolver
las obligaciones reciprocas para el caso de que uno de los
obligados no cumpliese lo que le incumbe, facultad que, segun
jurisprudencia de este Tribunal, surge
immediatamente despuesque la otra parte incumplio su deber, sin
necesidad de una declaracion previa de los Tribunales. (Sent. of
the Tr. Sup. of Spain, of 10 April 1929; 106 Jur. Civ. 897).
Segun reiterada doctrina de esta Sala, el Art. 1124 regula la
resolucioncomo una "facultad" atribuida a la parte perjudicada por
el incumplimiento del contrato, la cual tiene derecho do opcion
entre exigir el cumplimientoo la resolucion de lo convenido, que
puede ejercitarse, ya en la via judicial, ya fuera de ella, por
declaracion del acreedor, a reserva, claro es, que si la declaracion
de resolucion hecha por una de las partes se impugna por la otra,
queda aquella sometida el examen y sancion de los Tribunale, que
habran de declarar, en definitiva, bien hecha la resolucion o por el
contrario, no ajustada a Derecho. (Sent. TS of Spain, 16 November
1956; Jurisp. Aranzadi, 3, 447).
La resolucion de los contratos sinalagmaticos, fundada en el
incumplimiento por una de las partes de su respectiva prestacion,
puedetener lugar con eficacia" 1. o Por la declaracion de voluntad
de la otra hecha extraprocesalmente, si no es impugnada en juicio
luego con exito. y 2. 0 Por la demanda de la perjudicada, cuando
no opta por el cumplimientocon la indemnizacion de danos y
perjuicios realmente causados, siempre quese acredite, ademas,
una actitud o conducta persistente y rebelde de laadversa o la
satisfaccion de lo pactado, a un hecho obstativo que de un
modoabsoluto, definitivo o irreformable lo impida, segun el art.
1.124, interpretado por la jurisprudencia de esta Sala, contenida en
las Ss. de 12 mayo 1955 y 16 Nov. 1956, entre otras, inspiradas por
el principio del Derecho intermedio, recogido del Canonico, por el
cual fragenti fidem, fides non est servanda. (Ss. de 4 Nov. 1958 y
22 Jun. 1959.) (Emphasis supplied).
In the light of the foregoing principles, and considering that the complaint of
petitioner University made out a prima facie case of breach of contract and defaults
in payment by respondent ALUMCO, to the extent that the court below issued a writ
of preliminary injunction stopping ALUMCO's logging operations, and repeatedly
denied its motions to lift the injunction; that it is not denied that the respondent
company had profited from its operations previous to the agreement of 5 December
excuses offered in the second amended answer, such as the misconduct of its former
manager Cesar Guy, and the rotten condition of the logs in private respondent's pond,
which said respondent was in a better position to know when it executed the
acknowledgment of indebtedness, do not constitute on their face sufficient excuse for
non-payment; and considering that whatever prejudice may be suffered by
respondent ALUMCO is susceptibility of compensation in damages, it becomes plain
that the acts of the court a quo in enjoining petitioner's measures to protect its interest
without first receiving evidence on the issues tendered by the parties, and in
subsequently refusing to dissolve the injunction, were in grave abuse of discretion,
correctible by certiorari, since appeal was not available or adequate. Such injunction,
therefore, must be set aside.
For the reason that the order finding the petitioner UP in contempt of court has open
appealed to the Court of Appeals, and the case is pending therein, this Court abstains
from making any pronouncement thereon. 
WHEREFORE, the writ of certiorari applied for is granted, and the order of the
respondent court of 25 February 1966, granting the Associated Lumber Company's
petition for injunction, is hereby set aside. Let the records be remanded for further
proceedings conformably to this opinion.
54

No. L-56076. September 21, 1983.*
PALAY, INC. and ALBERT ONSTOTT petitioner, vs.JACOBO C. CLAVE,
Presidential Executive Assistant, NATIONAL HOUSING AUTHORITY and
NAZARIO DUMPIT respondents.
Civil Law; Contracts, Contract to sell real estate subdivision lots on
installment; Rescission; Notice to defaulting lot buyer in his payments,
indispensable; Judicial action for rescission of contract to sell not necessary where
contract provides for its revocation and cancellation for violation of any of its terms
and conditions, provided written notice is sent to defaulter informing him of the
rescission.—Well settled is the role, as held in previous jurisprudence, that judicial
action for the rescission of a contract is not necessary where the contract provides
that it may be revoked and cancelled for violation of any of its terms and conditions.
However, even in the cited cases, there was at least a written notice sent to the
defaulter informing him of the rescission. As stressed in University of the Philippines
vs. Walfrido de los Angeles the act of a party in treating a contract as cancelled
should he made known to the other.
______________
*
 FIRST DIVISION.
639
VOL. 124, SEPTEMBER 21, 1983  639  its stockholders or those of the legal entities to which it may be connected and vice
Palay, Inc. vs. Clave
Same; Same; Same; Same; Same; Extrajudicial rescission has legal effect,
unless the other party impugns it.—This was reiterated in Zulueta vs. Mariano where
we held that extrajudicial rescission has legal effect where the other party does not
oppose it. Where it is objected to, a judicial determination of the issue is still
necessary. In other words, resolution of reciprocal contracts may be made extra
judicially unless successfully impugned in Court. If the debtor impugns the
declaration, it shall be subject to judicial determination.
Same; Same; Same; Same; Same; Waiver of notices; Contract of
adhesion; Waiver of right of defaulting lot buyer to be notified of rescission of
contract must be certain and unequivocal and intelligently made; Contracts to sell
by real estate developers are contracts of adhesion; Public policy to protect buyers
of real estate on installment payments against onerous and oppressive conditions
such as waiver of notice.—The contention that private respondent had waived his
right to be notified under paragraph 6 of the contract is neither meritorious because it
was a contract of adhesion, a standard form of petitioner corporation, and private
respondent had no freedom to stipulate. A waiver must be certain and unequivocal,
and intelligently made; such waiver follows only where liberty of choice has been
fully accorded. Moreover, it is a matter of public policy to protect buyers of real
estate on installment payments against onerous and oppressive conditions. Waiver of
notice is one such onerous and oppressive condition to buyers of real estate on
installment payments.
Same; Same; Same; Same; Refund of installments to lot buyer, proper, where
property of defaulting lot buyer already sold to a third person and absent evidence
that other lots are still available.—As a consequence of the resolution by petitioners,
rights to the lot should be restored to private respondent or the same should be
replaced by another acceptable lot. However, considering that the property had
already been sold to a third person and there is no evidence on record that other lots
are still available, private respondent is entitled to the refund of installments paid
plus interest at the legal rate of 12% computed from the date of the institution of the
action. It would be most inequitable if petitioners were to be allowed to retain private
respondent’s payments and at the same time appropriate the proceeds of the second
sale to another.
Same; Corporation Law; General rule that a corporation may not be made to
answer for acts or liabilities of its stockholders or those of
640
640  SUPREME COURT REPORTS ANNOTATED 
Palay, Inc. vs. Clave
legal entities to which it may be connected and vice versa; Exceptions to rule
that veil of corporate fiction may not be pierced.—It is basic that a Corporation is
invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be related.
As a general rule, a corporation may not be made to answer for acts or liabilities of
versa. However, the veil of corporate fiction may be pierced when it is used as a
55
shield to further an end subversive of justice; or for purposes that could not have
been intended by the law that created it; or to defeat public convenience, justify
wrong, protect fraud, or defend crime; or to perpetuate fraud or confuse legitimate
issues; or to circumvent the law or perpetuate deception; or as an alter ego, adjunct or
business conduit for the sole benefit of the stockholders.
Same; Same; Absence of badges of fraud of subdivision owner when it
rescinded a contract to sell extrajudicially and sold the property to a third person.—
We find no badges of fraud on petitioners’ part. They had literally relied, albeit
mistakenly, on paragraph 6 (supra) of its contract with private respondent when it
rescinded the contract to sell extrajudicially and had sold it to a third person.
Same; Same; President of real estate corporation cannot be held personally
liable where he appears to be controlling stockholder absent sufficient proof that he
used the corporation to defraud defaulting lot buyer; Mere ownership by a single
stockholder or by another corporation of all or nearly all capital stock of
corporation not sufficient ground for disregarding corporate personality; Case at
bar.—In this case, petitioner Onstott was made liable because he was then the
President of the corporation and he appeared to be the controlling stockholder. No
sufficient proof exists on record that said petitioner used the corporation to defraud
private respondent. He cannot, therefore, be made personally liable just because he
“appears to be the controlling stockholder”. Mere ownership by a single stockholder
or by another corporation of all or nearly all of the capital stock of a corporation is
not of itself sufficient ground for disregarding the separate corporate personality.
PETITION to review the resolution of the Presidential Executive Assistant.
The facts are stated in the opinion of the Court.
641
VOL. 124, SEPTEMBER 21, 1983  641  November 8, 1974. Petitioners' Motion for Reconsideration of said Resolution was
Palay, Inc. vs. Clave
     Santos, Calcetas-Santos & Geronimo Law Office for petitioner.
     Wilfredo E. Dizon for private respondent.
MELENCIO-HERRERA, J.:
The Resolution, dated May 2, 1980, issued by Presidential Executive Assistant
Jacobo Clave in O.P. Case No. 1459, directing petitioners Palay, Inc. and Alberto
Onstott jointly and severally, to refund to private respondent, Nazario Dumpit, the
amount of P13,722.50 with 12% interest per annum, as resolved by the National
Housing Authority in its Resolution of July 10, 1979 in Case No. 2167, as well as the
Resolution of October 28, 1980 denying petitioners' Motion for Reconsideration of
said Resolution of May 2, 1980, are being assailed in this petition.  in a contract to sell.
On March 28, 1965, petitioner Palay, Inc., through its President, Albert Onstott
executed in favor of private respondent, Nazario Dumpit, a Contract to Sell a parcel
of Land (Lot No. 8, Block IV) of the Crestview Heights Subdivision in Antipolo,
Rizal, with an area of 1,165 square meters, - covered by TCT No. 90454, and owned
by said corporation. The sale price was P23,300.00 with 9% interest per annum,
payable with a downpayment of P4,660.00 and monthly installments of P246.42 until
fully paid. Paragraph 6 of the contract provided for automatic extrajudicial rescission
upon default in payment of any monthly installment after the lapse of 90 days from
the expiration of the grace period of one month, without need of notice and with
forfeiture of all installments paid.
Respondent Dumpit paid the downpayment and several installments amounting to
P13,722.50. The last payment was made on December 5, 1967 for installments up to
September 1967. 
On May 10, 1973, or almost six (6) years later, private respondent wrote petitioner
offering to update all his overdue accounts with interest, and seeking its written
consent to the assignment of his rights to a certain Lourdes Dizon. He followed this
up with another letter dated June 20, 1973 reiterating the same request. Replying
petitioners informed respondent that his Contract to Sell had long been rescinded
pursuant to paragraph 6 of the contract, and that the lot had already been resold.
Questioning the validity of the rescission of the contract, respondent filed a letter
complaint with the National Housing Authority (NHA) for reconveyance with an
altenative prayer for refund (Case No. 2167). In a Resolution, dated July 10, 1979,
the NHA, finding the rescission void in the absence of either judicial or notarial
demand, ordered Palay, Inc. and Alberto Onstott in his capacity as President of the
corporation, jointly and severally, to refund immediately to Nazario Dumpit the
amount of P13,722.50 with 12% interest from the filing of the complaint on
denied by the NHA in its Order dated October 23, 1979. 1
On appeal to the Office of the President, upon the allegation that the NHA
Resolution was contrary to law (O.P. Case No. 1459), respondent Presidential
Executive Assistant, on May 2, 1980, affirmed the Resolution of the NHA.
Reconsideration sought by petitioners was denied for lack of merit. Thus, the present
petition wherein the following issues are raised:
I
Whether notice or demand is not mandatory under the
circumstances and, therefore, may be dispensed with by stipulation
II
56
 Whether petitioners may be held liable for the refund of the
installment payments made by respondent Nazario M. Dumpit.
III
Whether the doctrine of piercing the veil of corporate fiction has
application to the case at bar.
IV
Whether respondent Presidential Executive Assistant committed
grave abuse of discretion in upholding the decision of respondent
NHA holding petitioners solidarily liable for the refund of the
installment payments made by respondent Nazario M. Dumpit
thereby denying substantial justice to the petitioners, particularly
petitioner Onstott
We issued a Temporary Restraining Order on Feb 11, 1981 enjoining the
enforcement of the questioned Resolutions and of the Writ of Execution that had
been issued on December 2, 1980. On October 28, 1981, we dismissed the petition
but upon petitioners' motion, reconsidered the dismissal and gave due course to the
petition on March 15, 1982.
On the first issue, petitioners maintain that it was justified in cancelling the contract
to sell without prior notice or demand upon respondent in view of paragraph 6
thereof which provides-
6. That in case the BUYER falls to satisfy any monthly installment
or any other payments herein agreed upon, the BUYER shall be
granted a month of grace within which to make the payment of the
t in arrears together with the one corresponding to the said month
of grace. -It shall be understood, however, that should the month of
grace herein granted to the BUYER expire, without the payment &
corresponding to both months having been satisfied, an interest of
ten (10%) per cent per annum shall be charged on the amounts the
BUYER should have paid; it is understood further, that should a
period of NINETY (90) DAYS elapse to begin from the expiration
of the month of grace hereinbefore mentioned, and the BUYER
shall not have paid all the amounts that the BUYER should have
paid with the corresponding interest up to the date, the SELLER
shall have the right to declare this contract cancelled and of no
effect without notice, and as a consequence thereof, the SELLER
may dispose of the lot/lots covered by this Contract in favor of
other persons, as if this contract had never been entered into. In
case of such cancellation of this Contract, all the amounts which
may have been paid by the BUYER in accordance with the
agreement, together with all the improvements made on the
premises, shall be considered as rents paid for the use and
occupation of the above mentioned premises and for liquidated
damages suffered by virtue of the failure of the BUYER to fulfill
his part of this agreement : and the BUYER hereby renounces his
right to demand or reclaim the return of the same and further
obligates peacefully to vacate the premises and deliver the same to
the SELLER.
Well settled is the rule, as held in previous jurisprudence, 2 that judicial action for the
rescission of a contract is not necessary where the contract provides that it may be
revoked and cancelled for violation of any of its terms and conditions. However,
even in the cited cases, there was at least a written notice sent to the defaulter
informing him of the rescission. As stressed in University of the Philippines vs.
Walfrido de los Angeles 3 the act of a party in treating a contract as cancelled should
be made known to the other. We quote the pertinent excerpt:
Of course, it must be understood that the act of a party in treating a
contract as cancelled or resolved in account of infractions by the
other contracting party must be made known to the other and is
always provisional being ever subject to scrutiny and review by
the proper court. If the other party denies that rescission is
justified it is free to resort to judicial action in its own behalf, and
bring the matter to court.Then, should the court, after due hearing,
decide that the resolution of the contract was not warranted, the
responsible party will be sentenced to damages; in the contrary
case, the resolution will be affirmed, and the consequent indemnity
awarded to the party prejudiced.
In other words, the party who deems the contract violated may
consider it resolved or rescinded, and act accordingly, without
previous court action, but it proceeds at its own risk. For it is only
the final judgment of the corresponding court that will conclusively
and finally settle whether the action taken was or was not correct in
law. But the law definitely does not require that the contracting
party who believes itself injured must first file suit and wait for a
judgment before taking extrajudicial steps to protect its interest.
Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the
pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that he should exercise due
diligence to minimize its own damages (Civil Code, Article 2203).
57
 We see no conflict between this ruling and the previous
jurisprudence of this Court invoked by respondent declaring that
judicial action is necessary for the resolution of a reciprocal
obligation (Ocejo Perez & Co., vs. International Banking Corp., 37
Phil. 631; Republic vs. Hospital de San Juan De Dios, et al., 84
Phil 820) since in every case where the extrajudicial resolution is
contested only the final award of the court of competent
jurisdiction can conclusively settle whether the resolution was
proper or not. It is in this sense that judicial action win be
necessary, as without it, the extrajudicial resolution will remain
contestable and subject to judicial invalidation unless attack
thereon should become barred by acquiescense, estoppel or
prescription.
Fears have been expressed that a stipulation providing for a
unilateral rescission in case of breach of contract may render
nugatory the general rule requiring judicial action (v. Footnote,
Padilla Civil Law, Civil Code Anno., 1967 ed. Vol. IV, page 140)
but, as already observed, in case of abuse or error by the rescinder
the other party is not barred from questioning in court such abuse
or error, the practical effect of the stipulation being merely to
transfer to the defaulter the initiative of instituting suit, instead of
the rescinder (Emphasis supplied).
Of similar import is the ruling in Nera vs. Vacante 4 , reading:
A stipulation entitling one party to take possession of the land and
building if the other party violates the contract does not ex propio
vigore confer upon the former the right to take possession thereof
if objected to without judicial intervention and determination.
This was reiterated in Zulueta vs. Mariano  5 where we held that extrajudicial
rescission has legal effect where the other party does not oppose it.6 Where it is
objected to, a judicial determination of the issue is still necessary.
In other words, resolution of reciprocal contracts may be made extrajudicially unless
successfully impugned in Court. If the debtor impugns the declaration, it shall be
subject to judicial determination. 7
In this case, private respondent has denied that rescission is justified and has resorted
to judicial action. It is now for the Court to determine whether resolution of the
contract by petitioners was warranted.
We hold that resolution by petitioners of the contract was ineffective and inoperative
against private respondent for lack of notice of resolution, as held in the U.P. vs.
Angeles case, supra
Petitioner relies on Torralba vs. De los Angeles  8 where it was held that "there was
no contract to rescind in court because from the moment the petitioner defaulted in
the timely payment of the installments, the contract between the parties was
deemed ipso facto rescinded." However, it should be noted that even in that case
notice in writing was made to the vendee of the cancellation and annulment of the
contract although the contract entitled the seller to immediate repossessing of the
land upon default by the buyer.
The indispensability of notice of cancellation to the buyer was to be later
underscored in Republic Act No. 6551 entitled "An Act to Provide Protection to
Buyers of Real Estate on Installment Payments." which took effect on September 14,
1972, when it specifically provided:
Sec. 3(b) ... the actual cancellation of the contract shall take place
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 and upon full payment of the cash surrender value to
the buyer. (Emphasis supplied).
The contention that private respondent had waived his right to be notified under
paragraph 6 of the contract is neither meritorious because it was a contract of
adhesion, a standard form of petitioner corporation, and private respondent had no
freedom to stipulate. A waiver must be certain and unequivocal, and intelligently
made; such waiver follows only where liberty of choice has been fully
accorded. 9 Moreover, it is a matter of public policy to protect buyers of real estate on
installment payments against onerous and oppressive conditions. Waiver of notice is
one such onerous and oppressive condition to buyers of real estate on installment
payments.
Regarding the second issue on refund of the installment payments
made by private respondent. Article 1385 of the Civil Code
provides:
ART. 1385. Rescission creates the obligation to return the things
which were the object of the contract, together with their fruits, and
the price with its interest; consequently, it can be carried out only
when he who demands rescission can return whatever he may be
obliged to restore.
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 Neither sham rescission take place when the things which are the WHEREFORE, the questioned Resolution of respondent public official, dated May
object of the contract are legally in the possession of third persons 2, 1980, is hereby modified. Petitioner Palay, Inc. is directed to refund to respondent
who did not act in bad faith. Nazario M. Dumpit the amount of P13,722.50, with interest at twelve (12%) percent
per annum from November 8, 1974, the date of the filing of the Complaint. The
In this case, indemnity for damages may be demanded from the temporary Restraining Order heretofore issued is hereby lifted. 
person causing the loss.
No costs. 
As a consequence of the resolution by petitioners, rights to the lot should be restored
to private respondent or the same should be replaced by another acceptable lot. SO ORDERED.
However, considering that the property had already been sold to a third person and
there is no evidence on record that other lots are still available, private respondent is
entitled to the refund of installments paid plus interest at the legal rate of 12%
computed from the date of the institution of the action. 10 It would be most
inequitable if petitioners were to be allowed to retain private respondent's payments
and at the same time appropriate the proceeds of the second sale to another. 

We come now to the third and fourth issues regarding the personal liability of
petitioner Onstott who was made jointly and severally liable with petitioner
corporation for refund to private respondent of the total amount the latter had paid to
petitioner company. It is basic that a corporation is invested by law with a
personality separate and distinct from those of the persons composing it as wen as
from that of any other legal entity to which it may be related. 11 As a general rule, a
corporation may not be made to answer for acts or liabilities of its stockholders or
those of the legal entities to which it may be connected and vice versa. However, the
veil of corporate fiction may be pierced when it is used as a shield to further an end
subversive of justice 12 ; or for purposes that could not have been intended by the law
that created it 13 ; or to defeat public convenience, justify wrong, protect fraud, or
defend crime. 14 ; or to perpetuate fraud or confuse legitimate issues 15 ; or to
circumvent the law or perpetuate deception 16; or as an alter ego, adjunct or business
conduit for the sole benefit of the stockholders. 17

We find no badges of fraud on petitioners' part. They had literally relied, albeit
mistakenly, on paragraph 6 (supra) of its contract with private respondent when it
rescinded the contract to sell extrajudicially and had sold it to a third person.

In this case, petitioner Onstott was made liable because he was then the President of
the corporation and he a to be the controlling stockholder. No sufficient proof exists
on record that said petitioner used the corporation to defraud private respondent. He
cannot, therefore, be made personally liable just because he "appears to be the
controlling stockholder". Mere ownership by a single stockholder or by another
corporation is not of itself sufficient ground for disregarding the separate corporate
personality. 18 In this respect then, a modification of the Resolution under review is
called for. 

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