SECOND DIVISION

[G.R. No. 131074. March 27, 2000.]

CENTRAL BANK OF THE PHILIPPINES, Petitioner, v. SPOUSES ALFONSO and ANACLETA

BICHARA, Respondents.

DECISION

DE LEON, JR., J.:

Before us is a petition for review on certiorari praying for the reversal of the Decision 1 and Resolution 2 dated
February 28, 1997 and October 17, 1997, respectively, rendered by the Former Special Fourteenth Division 3 of the
Court of Appeals in CA-G.R. CV No. 44448. The appellate court reversed the judgment of the trial court and decreed
the contract of sale entered into by the opposing parties as rescinded.chanrobles.com : virtual law library

The facts are:chanrob1es virtual 1aw library

Respondents SPOUSES ALFONSO and ANACLETA BICHARA were the former registered owners of Lots 621-C-1
and 621-C-2 situated in Legazpi City and covered by Transfer Certificates of Title Nos. 18138 4 and 18139. 5 The
two properties have an aggregate area of 811 square meters. On July 19, 1983, the respondents sold the two
properties to petitioner CENTRAL BANK OF THE PHILIPPINES for the sum of P405,500.00, or at P500.00 per
square meter. 6 The deed of sale contained the following pertinent stipulations:chanrob1es virtual 1aw library

x       x       x

2. The VENDEE by virtue of the sale of real property agreed upon shall pay to the VENDORS at the rate of FIVE
HUNDRED PESOS (P500.00) per square meter or at a total price of FOUR HUNDRED FIVE THOUSAND FIVE
HUNDRED PESOS (P405,500.00), such payment to be effected only after this Deed of Sale shall have been duly
registered and a clean title issued in the name of VENDEE. It is agreed that all fees and expenses, cost of
documentary and science stamps necessary for the registration of the property with the Registry of Deeds and the
transfer of title of the parcels of the land herein sold to the VENDEE as well as the transfer tax due under this
transaction shall be borne by the VENDORS;

x       x       x

4. The VENDORS hereby likewise undertake at their expense to fill the parcels of land with an escombro free from
waste materials compacted to the street level upon signing of the Deed of Sale to suit the ground for the construction
of the regional office of the Central Bank of the Philippines thereat.

Petitioner caused the two properties to be consolidated, with several other parcels of land, into a single estate having
a total area of 6,700 square meters. Lots 621-C-1 and 621-C-2, shaped roughly like a right triangle, represent twelve
per cent of the total area and, more importantly, provide access to Calle Rizal. 7

The record discloses that despite respondents’ failure to pay the capital gains tax and other transfer fees, Transfer
Certificate of Title No. 25267 8 was nonetheless issued in petitioner’s name on September 6, 1983. Two annotations
were recorded in the memorandum of encumbrances. The first was a notice of adverse claim in favor of the heirs of
Lutgarda Arcos Rempillo filed under Entry No. 58127 dated December 27, 1983. The second was a notice of lis
pendens in favor of one Jaime Rempillo, in connection with Civil Case No. 7253 pending before the Court of First
Instance of Albay filed under Entry No. 58336 dated January 24, 1984. Both were subsequently cancelled pursuant
to a decision in Civil Case No. 7253, per Entry No. 60214 dated September 12, 1984.chanrobles virtual lawlibrary

Despite the issuance of the title, petitioner failed to pay Respondent. On its part, respondents did not fill up the lot
with escombro despite several demands made by petitioner. Petitioner was thus constrained to undertake the filling
up of the said lots, by contracting the services of BGV Construction. The filling up of the lots cost petitioner
P45,000.00. 9 Petitioner deducted the said amount from the purchase price payable to respondents. 10

Petitioner, however, still did not pay the respondents. Consequently, on September 7, 1992, respondents
commenced Civil Case No. 8645, an action for rescission or specific performance with damages, against petitioner
before the Regional Trial Court, Fifth Judicial Region, Branch 7, of Legazpi City. Respondents alleged that petitioner
failed to pay the purchase price despite demand. They prayed for the rescission of the contract of sale and the return
of the properties, or in the alternative that petitioner be compelled to pay the purchase price plus interest at the rate
of 12% per annum from July 19, 1983, until fully paid, and to pay the capital gains and documentary stamp taxes with
the Bureau of Internal Revenue and registration fees with the Register of Deeds.

Petitioner tendered payment to respondents 11 by Central Bank check no. 483008 12 in the amount of P360,500.00.
Respondents refused the tender, however, in view of their complaint for rescission. After receipt of summons,
petitioner filed its answer 13 averring that it was justified in delaying payment of the purchase price in view of
respondents’ breach of several conditions in the contract. First, petitioner alleged that respondents failed to deliver to
the former free and legal possession of the two properties, in view of the encumbrances noted in the title, in addition
to the presence of squatters who were not evicted by respondents. Second, it claimed that respondents did not fill up
the lots with escombro free from waste materials, as agreed upon. Petitioner counterclaimed for damages of
P8,000,000.00 representing payments for rentals for the lease of premises it used as a temporary regional office;
P100,000.00 as exemplary damages; P50,000.00 as attorney’s fees; and costs.

On January 22, 1993, petitioner filed a motion for consignation 14 before the trial court. The motion was granted per
an Order dated January 26, 1993. 15

After trial, the trial court issued its Decision dated October 26, 1993, 16 the dispositive portion of which
states:chanrob1es virtual 1aw library

WHEREFORE, in view of the foregoing, decision is hereby rendered as follows:chanrob1es virtual 1aw library

1. The plaintiffs are ordered to accept the deposited amount of’ P360,500.00 in February 1993 at the Office of the
RTC Clerk of Court as full payment for the properties in question, considering that the sum of P45,000.00 expended
by defendant in undertaking the filling up of the properties is credited to the original purchase price of P405,500.00;

2. The defendant is ordered to pay the plaintiffs legal interest at the rate of six (6) per cent per annum on the original
purchase price of P405,000.00 from September 6, 1983 up to July 13, 1992, when the P45,000.00 was credited to
the original purchase price (Exhibit 12-c);

3. The defendant is ordered to pay the plaintiffs legal interest at the rate of six (6) per cent per annum on the
remaining amount of P360,500.00 from July 14, 1992 up to February 1993, when said amount was deposited at the
Office of the RTC Clerk of Court;chanrobles.com.ph : red

4. And other forms of damages sustained by either plaintiffs or defendant are to be borne or shouldered by the
respective party.

With costs against defendant.

Both parties appealed the decision to the Court of Appeals. Initially, petitioner’s appeal was dismissed for failure to
file the docket fees, per a Resolution dated August 22, 1994. 17 The dismissal was recalled subsequently upon
petitioner’s filing of a Manifestation 18 informing the appellate court that it had withdrawn its appeal at the trial court
level. Said manifestation was duly noted. 19

On February 28, 1997 the appellate court rendered judgment 20 reversing the decision of the trial court. Instead, it
ordered the rescission of the contract of sale and the reconveyance of the properties to respondents. The appellate
court likewise ordered respondents to reimburse petitioner the cost of filling up the lot with escombro, and petitioner
to pay respondents attorney’s fees and costs. The motion for reconsideration filed by petitioner was denied in the
assailed Resolution of October 17, 1997. 21

Aggrieved by the ruling, petitioner elevated the matter to us via the instant petition, contending that:chanrob1es
virtual 1aw library

THE COURT OF APPEALS FAILED TO RULE THAT PRIVATE RESPONDENTS DID NOT COMPLY WITH THEIR
OBLIGATIONS TO CBP IN GOOD FAITH THUS PRIVATE RESPONDENTS ARE NOT ENTITLED AS A MATTER
OF RIGHT TO RESCISSION.

II

THE COURT OF APPEALS FAILED TO RULE THAT CBP WAS JUSTIFIED IN WITHHOLDING PAYMENT OF THE
PURCHASE PRICE OF THE SUBJECT LOT SOLD TO THEM BY PRIVATE RESPONDENTS.

III

THE COURT OF APPEALS FAILED TO RULE THAT THE TRIAL COURT DID NOT COMMIT A REVERSIBLE
ERROR WHEN IT ORDERED SPECIFIC PERFORMANCE INSTEAD OF RESCISSION. 22

The right to rescind a contract involving reciprocal obligations is provided for in Article 1191 of the Civil Code, which
states:chanrob1es virtual 1aw library

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.

The injured party may choose between fulfillment and the rescission of the obligation, with the payment of damages
in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become
impossible.chanrobles.com.ph:red

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.

The law speaks of the right of the "injured party" to choose between rescission or fulfillment of the obligation, with the
payment of damages in either case. Here, respondents claim to be the injured party and consequently seek the
rescission of the deed of sale, or in the alternative, its fulfillment but on terms different from those previously agreed
upon. Respondents aver that they are entitled to cancel the obligation altogether in view of petitioner’s failure to pay
the purchase price when the same became due. Petitioner disputes respondent’s stand, claiming that if anyone was
at fault, it was the latter who dismally failed to comply with their contractual obligations. Hence, it was entitled to
withhold payment of the purchase price.

An instance where the law clearly allows the vendee to withhold payment of the purchase price is Article 1590 of the
Civil Code, which provides:chanrob1es virtual 1aw library

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.

This is not, however, the only justified cause for retention or withholding the payment of the agreed price. A noted
authority on civil law states that the vendee is nonetheless entitled if the vendor fails to perform any essential
obligation of the contract. Such right is premised not on the aforequoted article, but on general principles of reciprocal
obligations. 23

This view is consistent with our rulings in earlier cases 24 that resolution is allowed only for substantial breaches and
not for those which are slight or casual. Consider our pronouncement in Borromeo v. Franco:25cralaw:red

The contract in question contains various clauses and stipulations but the defendants refused to fulfill their promise to
sell on the ground that the vendee had not perfected the title papers to the property in question within the six months
agreed upon in clause (c). That stipulation was not an essential part of the contract and a failure to comply therewith
is no obstacle to the fulfillment of the promise to sell.chanrobles.com.ph:red

x       x       x

The obligations which the purchaser, Borromeo, imposed upon himself, to perfect the papers to the property within a
period of six months, is not correlative with the obligation to sell the property. These obligations do not arise from the
same cause. They create no reciprocal rights between the contracting parties, so that a failure to comply with the
stipulation contained in clause (c) on the part of the plaintiff purchaser within the period of six months provided for in
the said contract, as he, the plaintiff himself admits, does not give the defendants the right to cancel the obligation
which they imposed upon themselves to sell the two houses in question in accordance with the provisions of article
1124 of the Civil Code, since no real juridical bilaterality or reciprocity existed between the two obligations, because
the obligation to perfect the title papers to the houses in question is not correlative with the obligation to fulfill the
promise to sell such property. One obligation is entirely independent of the other. The latter obligation is not
subordinated to nor does it depend upon the fulfillment of the obligation to perfect the title deeds of the property.

Certainly, non-payment of the purchase price constitutes a very good reason to rescind a sale, for it violates the very
essence of the contract of sale.

By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. 26

We have consequently held that the nonpayment of the purchase price is a resolutory condition, for which the
remedy is either rescission or specific performance under Article 1191. 27 This is true for reciprocal obligations,
where the obligation of one is a resolutory condition of the other. 28

In reversing the trial court, the Court of Appeals in the case at bench held that:chanrob1es virtual 1aw library

The trial court committed a reversible error when it ordered appellants to accept the amount consigned by appellee
with the Clerk of Court as full payment for the two lots sold by appellants to appellee. Appellee’s deliberate refusal to
pay appellants the purchase price for the two lots for nine (9) long years can not just be regarded as a casual, but
substantial and fundamental breach of obligation which defeats the object of the parties. Such substantial and
fundamental breach of obligation committed by appellee gave appellants, under the law, the right to rescind the
contract or ask for its specific performance, in either case with right to demand performance [sic].

In the case at bench, appellants were justified in electing rescission instead of specific performance. The deliberate
failure of appellee to pay the purchase price for nine (9) long years after the registration of the Deed of Absolute Sale,
and the subsequent issuance of a clean title to appellee constitutes a serious and unjustified breach of obligation. In
the case of Siy v. Court of Appeals, 138 SCRA 536, the Supreme Court held:chanrob1es virtual 1aw library

It is noteworthy to mention that in their answer to the petitioner’s complaint, the respondents prayed for the
annulment of both the Deed of Conditional Sale (Exh.’A’) and the Deed of Sale with Assumption of Mortgage
(Exh.’G’) which are the very bases of the supplemental agreements (Exhs.’1’, ‘2’ and ‘5’) executed between the
petitioner and the Respondent. The technical argument that the respondents never prayed for the rescission of the
contracts and that the trial court and the appellate court should never have rescinded the same has no merit.
Furthermore, by failing to pay the amount of P12,000.00 and the balance of P4,376.00 as stipulated in the contract
within the forty-five (45) days period, the petitioner clearly committed a breach of contract which sufficiently and justly
entitled the respondents to ask for the rescission of the contracts. In the case or Nagarmull v. Binalbagan Isabel
Sugar Co., Inc. (33 SCRA 52), we ruled that." . . The breach of contract committed by appellee gave appellant, under
the law and even under general principles of fairness, the right to rescind the contract or to ask for its specific
performance, in either case with right to demand damages . . .." It is evident, in the case at bar, that the respondents
chose to rescind the contracts after the petitioner repeatedly failed to pay not only the balance but the initial amount
as downpayment in consideration of which the contracts or agreements were executed. As a matter of fact, the
petitioner later asked the SSS to cancel his loan application. He thereby abandoned his own claim for specific
performance. Therefore, the appellate court correctly affirmed the rescission of the above-mentioned contracts. It
also correctly affirmed the payment of attorney’s fees. While the petitioner may not have acted in bad faith in filing his
complaint, still the payment of attorney’s fees is warranted in this case because of the environmental circumstances
which compelled the respondents to litigate for the protection of their interests [Citations omitted].chanrobles.com :
law library

While appellants are entitled to their claim for attorney’s fees, they are not entitled to an award of damages because
they were not able to substantiate their claim for damages to have suffered due to the failure of appellee to pay the
purchase price of the two lots after the registration of the Deed of Absolute Sale with the Register of Deeds of
Legaspi City, and the issuance of a clean title to appellee covering the two lots. . . .

x       x       x

In order that damages maybe recovered, the best evidence obtainable by the injured party must be presented. Actual
or compensatory damages cannot be presumed, but must be proved with reasonable degree of certainty. A court
cnnot [sic] rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend
upon competent proof that they have been suffered and on evidence of the actual amount. If the proof is flimsy and
unsubstantial, no damages will be awarded [Citation omitted]. 29

We disagree with the appellate court.

By law," [t]he vendee is bound to accept the delivery and to pay the price of the thing sold at the time and place
stipulated in the contract." 30 In the case at bench, petitioner’s obligation to pay arose as soon as the deed of sale
was registered and a clean title was issued. However, petitioner justifies non-payment on respondents’ breach of
several stipulations in the contract. We have examined these alleged violations vis-a-vis the pertinent provisions of
the deed of sale, keeping in mind that only a substantial breach of the terms and conditions thereof will warrant
rescission. Whether a breach is substantial is largely determined by the attendant circumstances. 31

Petitioner contends that it was entitled to retain the purchase price due to respondents’ failure to pay the capital gains
and documentary stamp taxes and other transfer fees. We have read and examined the contract of sale and we have
found nothing therein to show that payment of the said taxes and fees to be conditions precedent to petitioner’s duty
to pay. The stipulation is a standard clause in most contracts of sale and is nothing more than a specification of the
party who shall bear such fees and taxes.

Petitioner likewise insists that its delay in paying the purchase price was justified since squatters occupied the
premises, contravening the stipulation that the respondent vendors shall convey the properties free from liens and
encumbrances. Again, we cannot support petitioner’s view. The squatter’s illegal occupation cannot be deemed a lien
or encumbrance. By the express terms of Article 1590 of the Civil Code, a mere act of trespass will not authorize the
suspension of payment of the price. Be that as it may, the usurpation became moot and academic when the
squatters left of their own volition in 1988 following a storm. 32

So far, what emerges as clear is that petitioner’s obligation to pay was not subject to the foregoing "conditions," only
that its demandability is suspended until the opportune time. That arrived upon the registration of the deed of sale
and the issuance of a clean title in favor of the petitioner. Relative thereto, the notice of adverse claim and lis
pendens became moot issues 33 because they were cancelled less than a year after their inscription.

We now consider petitioner’s final argument, to wit, that it was not obliged to pay until respondents compact the lots
to street level with escombro free from waste material. Taking into account the facts of the case, we find that
particular argument of petitioner to be well-taken. The use to which the parcels of land was to be devoted was no
secret between the parties. The consolidated estate, which incorporated the lots sold by respondents to petitioner,
was intended as the site of petitioner’s regional office to serve the Bicol region. The project had its peculiar
requirements, not the least of which was that since a substantial edifice was to be built on the property, the site had
to be made suitable for the purpose. Thus, petitioner specified that the lots be filled up in the manner specified in
paragraph 4 of the contract. The importance thereof could not have been lost on respondents.

Evidently then, respondents were guilty of non-performance of said stipulation. The deed of sale expressly stipulated
that the vendors were to undertake, at their expense, the filling up of the lots with escombro free from waste material
compacted to the street level. This was to be accomplished upon the signing of the contract and insofar as petitioner
was concerned, respondents obligation was demandable at once. Other than his testimony, Alfonso Bichara offered
no proof tending to show that he had complied in the manner agreed upon. Although he did state that he saw no
need to comply with the stipulation because the parcels of land were already level with the street, 34 it was still not
shown that the same were in a condition suitable for the construction of petitioner’s regional office. We find it hard to
believe that the deed of sale would have specified the nature, quantity and quality of the filling material were it not to
prepare the lots for the construction. Where the terms of a contract are clear they should be fulfilled according to the
literal tenor of their stipulation. 35 If indeed it were true that the lots were already at street level, petitioner would not
have incurred the additional cost of P45,000.00 for having them filled up by the BGV Corporation.chanrobles virtual
lawlibrary

On the other hand, respondents argue that as proof of petitioner’s bad faith, the latter could have undertaken the
filling up of the lots as early as 1989, 36 when it would have cost only about P9,000.00. 37 The trial court concurred
with this view. 38 But we disagree. Petitioner was under no duty to have done, at the least cost to the latter, what was
clearly respondents’ obligation from the very beginning. If petitioner was forced to have the subject parcels of land
filled up by another party, and subsequently bill respondents, the former was entitled to do so by right. 39
Respondents are not in a position to question the resulting expense. Had they performed their obligation under the
contract of sale at the proper time, the expense would surely have been even less than the P9,000.00 estimate in
1989.

In this context, the appellate court erred in decreeing the rescission, otherwise called resolution, of the subject deed
of sale. Respondents should not be allowed to rescind the contract where they themselves did not perform their
essential obligation thereunder. It should be emphasized that a contract of sale involves reciprocity between the
parties. Since respondents were in bad faith, they may not seek the rescission of the agreement they themselves
breached. 40 Consequently, the decision rendered by the trial court should be reinstated as being just and proper
under the premises.

WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the Decision dated February 28,
1997 of the Court of Appeals. The Decision dated October 26, 1993 rendered by the Regional Trial Court of Legazpi
City in Civil Case No. 8645 is hereby REINSTATED. No pronouncement as to costs.chanrobles virtuallawlibrary:red

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 196251               July 9, 2014

OLIVAREZ REALTY CORPORATION and DR. PABLO R. OLIVAREZ, Petitioner,

vs.
BENJAMIN CASTILLO, Respondent.

DECISION

LEONEN, J.:

Trial may be dispensed with and a summary judgment rendered if the case can be resolved judiciously by plain resort
to the pleadings, affidavits, depositions, and other papers filed by the parties.

This is a petition for review on certiorari 1 of the Court of Appeals' decision2 dated July 20, 2010 and resolution3 dated
March 18, 2011 in CAG.R. CV No. 91244.

The facts as established from the pleadings of the parties are as follows:

Benjamin Castillo was the registered owner of a 346,918-squaremeter parcel of land located in Laurel, Batangas,
covered by Transfer Certificate of Title No. T-19972. 4 The Philippine Tourism Authority allegedly claimed ownership
of the sameparcel of land based on Transfer Certificate of Title No. T-18493. 5 On April 5, 2000, Castillo and Olivarez
Realty Corporation, represented by Dr. Pablo R. Olivarez, entered into a contract of conditional sale 6 over the
property. Under the deed of conditional sale, Castillo agreed to sell his property to Olivarez Realty Corporation for
₱19,080,490.00. Olivarez Realty Corporation agreed toa down payment of ₱5,000,000.00, to be paid according to
the following schedule:

DATE AMOUNT

April 8, 2000 500,000.00

May 8, 2000 500,000.00

May 16, 2000 500,000.00

June 8, 2000 1,000,000.00

July 8, 2000 500,000.00

August 8, 2000 500,000.00

September 8, 2000 500,000.00

October 8, 2000 500,000.00

November 8, 2000 500,000.00 7

As to the balance of ₱14,080,490.00, Olivarez Realty Corporation agreed to pay in 30 equal monthly installments
every eighth day of the month beginning in the month that the parties would receive a decision voiding the Philippine
Tourism Authority’s title to the property. 8 Under the deed of conditional sale, Olivarez RealtyCorporation shall file the
action against the Philippine Tourism Authority "with the full assistance of [Castillo]." 9 Paragraph C of the deed of
conditional sale provides:

C. [Olivarez Realty Corporation] assumes the responsibility of taking necessary legal action thru Court to have the
claim/title TCT T-18493 of Philippine Tourism Authority over the above-described property be nullified and voided;
with the full assistance of [Castillo][.] 10

Should the action against the Philippine Tourism Authority be denied, Castillo agreed to reimburse all the amounts
paid by Olivarez Realty Corporation. Paragraph D of the deed of conditional sale provides:
D. In the event that the Court denie[s] the petition against the Philippine Tourism Authority, all sums received by
[Castillo] shall be reimbursed to [Olivarez Realty Corporation] without interest[.] 11

As to the "legitimate tenants" occupying the property, Olivarez Realty Corporation undertook to pay them
"disturbance compensation," while Castillo undertook to clear the land of the tenants within six months from the
signing of the deed of conditional sale. Should Castillo fail to clear the land within six months, Olivarez Realty
Corporation may suspend its monthly down payment until the tenants vacate the property. Paragraphs E and F of the
deed of conditional sale provide: E. That [Olivarez Realty Corporation] shall pay the disturbance compensation to
legitimate agricultural tenants and fishermen occupants which in no case shall exceed ONE MILLION FIVE
HUNDRED THOUSAND (₱1,500,000.00) PESOS. Said amountshall not form part of the purchase price. In excess of
this amount, all claims shall be for the account of [Castillo];

F. That [Castillo] shall clear the land of [the] legitimate tenants within a period of six (6) months upon signing of this
Contract, and in case [Castillo] fails, [Olivarez Realty Corporation] shall have the right to suspend the monthly down
payment until such time that the tenants [move] out of the land[.] 12

The parties agreed thatOlivarez Realty Corporation may immediately occupy the property upon signing of the deed of
conditional sale. Should the contract be cancelled, Olivarez RealtyCorporation agreed to return the property’s
possession to Castillo and forfeit all the improvements it may have introduced on the property. Paragraph I of the
deed of conditional sale states:

I. Immediately upon signing thisContract, [Olivarez Realty Corporation] shall be entitled to occupy, possess and
develop the subject property. In case this Contract is canceled [sic], any improvement introduced by [the corporation]
on the property shall be forfeited in favor of [Castillo][.]13

On September 2, 2004, Castillo filed a complaint 14 against Olivarez Realty Corporation and Dr. Olivarez with the
Regional Trial Court of Tanauan City, Batangas.

Castillo alleged that Dr. Olivarez convinced him into selling his property to Olivarez Realty Corporation on the
representation that the corporation shall be responsible in clearing the property of the tenants and in paying them
disturbance compensation. He further alleged that Dr. Olivarez solely prepared the deed of conditional sale and that
he was made to sign the contract with its terms "not adequately explained [to him] in Tagalog." 15

After the parties had signed the deed of conditional sale, Olivarez Realty Corporation immediately took possession of
the property. However, the corporation only paid 2,500,000.00 ofthe purchase price. Contrary to the agreement, the
corporation did not file any action against the Philippine Tourism Authority to void the latter’s title to the property. The
corporation neither cleared the land of the tenants nor paid them disturbance compensation. Despite demand,
Olivarez Realty Corporation refused to fully pay the purchase price.16

Arguing that Olivarez Realty Corporation committed substantial breach of the contract of conditional sale and that the
deed of conditional sale was a contract of adhesion, Castillo prayed for rescission of contract under Article 1191 of
the Civil Code of the Philippines. He further prayed that Olivarez Realty Corporation and Dr. Olivarez be made
solidarily liable for moral damages, exemplary damages, attorney’s fees, and costs of suit. 17

In their answer,18 Olivarez Realty Corporation and Dr. Olivarez admitted that the corporation only paid ₱2,500,000.00
ofthe purchase price. In their defense, defendants alleged that Castillo failed to "fully assist" 19 the corporation in filing
an action against the Philippine Tourism Authority. Neither did Castillo clear the property of the tenants within six
months from the signing of the deed of conditional sale. Thus, according to defendants, the corporation had "all the
legal right to withhold the subsequent payments to [fully pay] the purchase price."20

Olivarez Realty Corporation and Dr. Olivarez prayedthat Castillo’s complaint be dismissed. By way of compulsory
counterclaim, they prayed for ₱100,000.00 litigation expenses and ₱50,000.00 attorney’s fees. 21

Castillo replied to the counterclaim, 22 arguing that Olivarez Realty Corporation and Dr. Olivarez had no right to
litigation expenses and attorney’s fees. According to Castillo, the deed of conditional sale clearly states that the
corporation "assume[d] the responsibility of taking necessary legal action" 23 against the Philippine Tourism Authority,
yet the corporation did not file any case. Also, the corporation did not pay the tenants disturbance compensation. For
the corporation’s failure to fully pay the purchase price, Castillo claimed that hehad "all the right to pray for the
rescission of the [contract],"24 and he "should not be held liable . . . for any alleged damages by way of litigation
expenses and attorney’s fees."25

On January 10, 2005, Castillo filed a request for admission, 26 requesting Dr. Olivarez to admit under oath the
genuineness of the deed of conditional sale and Transfer Certificate of Title No. T-19972. He likewise requested Dr.
Olivarez to admit the truth of the following factual allegations:

1. That Dr. Olivarez is the president of Olivarez Realty Corporation;

2. That Dr. Olivarez offered to purchase the parcel of land from Castillo and that he undertook to clear the property of
the tenants and file the court action to void the Philippine Tourism Authority’s title to the property;

3. That Dr. Olivarez caused the preparation of the deed of conditional sale;

4. That Dr. Olivarez signed the deed of conditional sale for and on behalf of Olivarez Realty Corporation;

5. That Dr. Olivarez and the corporation did not file any action against the Philippine Tourism Authority;

6. That Dr. Olivarez and the corporation did not pay the tenants disturbance compensation and failed to clear the
property of the tenants; and

7. That Dr. Olivarez and the corporation only paid ₱2,500,000.00 of the agreed purchase price.27

On January 25, 2005, Dr. Olivarez and Olivarez Realty Corporation filed their objections to the request for
admission,28 stating that they "reiterate[d] the allegations [and denials] in their [answer]." 29

The trial court conducted pre-trial conference on December 17, 2005.

On March 8, 2006, Castillo filed a motion for summary judgment and/or judgment on the pleadings. 30 He argued that
Olivarez Realty Corporation and Dr. Olivarez "substantially admitted the material allegations of [his]
complaint,"31 specifically:

1. That the corporation failed to fully pay the purchase price for his property; 32

2. That the corporation failed to file an action to void the Philippine Tourism Authority’s title to his property; 33 and

3. That the corporation failed to clear the property of the tenants and pay them disturbance compensation. 34

Should judgment on the pleadings beimproper, Castillo argued that summary judgment may still be rendered asthere
is no genuine issue as to any material fact. 35 He cited Philippine National Bank v. Noah’s Ark Sugar Refinery 36 as
authority.

Castillo attached to his motion for summary judgment and/or judgment on the pleadings his affidavit 37 and the
affidavit of a Marissa Magsino38 attesting to the truth of the material allegations of his complaint.

Olivarez Realty Corporation and Dr. Olivarez opposed 39 the motion for summary judgment and/or judgment on the
pleadings, arguing that the motion was "devoid of merit." 40 They reiterated their claim that the corporation withheld
further payments of the purchase price because "there ha[d] been no favorable decision voiding the title of the
Philippine Tourism Authority." 41 They added that Castillo sold the property to another person and that the sale was
allegedly litigated in Quezon City.42

Considering that a title adverse to that of Castillo’s existed, Olivarez Realty Corporation and Dr. Olivarez argued that
the case should proceed to trial and Castillo be required to prove that his title to the property is "not spurious or fake
and that he had not sold his property to another person." 43

In reply to the opposition to the motion for summary judgment and/or judgment on the pleadings, 44 Castillo
maintained that Olivarez Realty Corporation was responsible for the filing of an action against the Philippine Tourism
Authority. Thus, the corporation could not fault Castillo for not suing the PhilippineTourism Authority. 45 The
corporation illegally withheld payments of the purchase price.

As to the claim that the case should proceed to trial because a title adverse to his title existed, Castillo argued that
the Philippine Tourism Authority’s title covered another lot, not his property. 46

During the hearing on August 3, 2006, Olivarez Realty Corporation and Dr. Olivarez prayed that they be given 30
days to file a supplemental memorandum on Castillo’s motion for summary judgment and/or judgment on the
pleadings.47

The trial court granted the motion. Itgave Castillo 20 days to reply to the memorandum and the corporation and Dr.
Olivarez 15 days to respond to Castillo’s reply.48

In their supplemental memorandum, 49 Olivarez Realty Corporation and Dr. Olivarez argued that there was "an
obvious ambiguity"50 as to which should occur first — the payment of disturbance compensation to the tenants or the
clearing of the property of the tenants. 51 This ambiguity, according to defendants, is a genuine issue and "oughtto be
threshed out in a full blown trial."52
Olivarez Realty Corporation and Dr. Olivarez added that Castillo prayed for irreconcilable reliefs of reformation of
instrument and rescission of contract. 53 Thus, Castillo’s complaint should be dismissed.

Castillo replied54 to the memorandum, arguing that there was no genuine issue requiring trial of the case. According
to Castillo, "common sense dictates . . . that the legitimate tenants of the [property] shall not vacate the premises
without being paid any disturbance compensation . . ." 55 Thus, the payment of disturbance compensation should
occur first before clearing the property of the tenants.

With respect to the other issuesraised in the supplemental memorandum, specifically, that Castillo sold the property
to another person, he argued that these issues should not be entertained for not having been presented during pre-
trial.56

In their comment on the reply memorandum, 57 Olivarez Realty Corporation and Dr. Olivarez reiterated their
arguments that certain provisions of the deed of conditional sale were ambiguous and that the complaint prayed for
irreconcilable reliefs.58

As to the additional issues raised in the supplemental memorandum, defendants argued that issues not raised and
evidence not identified and premarked during pre-trial may still be raised and presented during trial for good cause
shown. Olivarez Realty Corporation and Dr. Olivarez prayed that Castillo’s complaint be dismissed for lack of merit. 59

Ruling of the trial court

The trial court found that Olivarez Realty Corporation and Dr. Olivarez’s answer "substantially [admitted the material
allegations of Castillo’s] complaint and [did] not . . . raise any genuine issue [as to any material fact]." 60

Defendants admitted that Castillo owned the parcel of land covered by Transfer Certificate of Title No. T-19972. They
likewise admitted the genuineness of the deed of conditional sale and that the corporation only paid ₱2,500,000.00 of
the agreed purchase price.61

According to the trial court, the corporation was responsible for suing the Philippine Tourism Authority and for paying
the tenants disturbance compensation. Since defendant corporation neither filed any case nor paid the tenants
disturbance compensation, the trial court ruled that defendant corporation had no right to withhold payments from
Castillo.62

As to the alleged ambiguity of paragraphs E and F of the deed of conditional sale, the trial court ruled that Castillo
and his witness, Marissa Magsino, "clearly established" 63 in their affidavits that the deed of conditional sale was a
contract of adhesion. The true agreement between the parties was that the corporation would both clear the land of
the tenants and pay them disturbance compensation.

With these findings, the trial court ruled that Olivarez Realty Corporation breached the contract ofconditional
sale.1âwphi1 In its decision64 dated April 23, 2007, the trial court ordered the deed of conditional sale rescinded and
the ₱2,500,000.00 forfeited in favor of Castillo "as damages under Article 1191 of the Civil Code." 65

The trial court declared Olivarez Realty Corporation and Dr. Olivarez solidarily liable to Castillo for 500,000.00 as
moral damages, ₱50,000.00 as exemplary damages, and ₱50,000.00 as costs of suit.66

Ruling of the Court of Appeals

Olivarez Realty Corporation and Dr. Olivarez appealed to the Court of Appeals. 67

In its decision68 dated July 20, 2010, the Court of Appeals affirmed in totothe trial court’s decision. According to the
appellate court, the trial court "did not err in its finding that there is no genuine controversy as to the facts involved [in
this case]."69 The trial court, therefore, correctly rendered summary judgment. 70

As to the trial court’s award of damages, the appellatecourt ruled that a court may award damages through summary
judgment "if the parties’ contract categorically [stipulates] the respective obligations of the parties in case of
default."71 As found by the trial court,paragraph I of the deed of conditional sale categorically states that "in case [the
deed of conditional sale] is cancelled, any improvementintroduced by [Olivarez Realty Corporation] on the property
shall be forfeited infavor of [Castillo]." 72 Considering that Olivarez Realty Corporation illegally retained possession of
the property, Castillo forewent rentto the property and "lost business opportunities." 73 The ₱2,500,000.00 down
payment, according to the appellate court, shouldbe forfeited in favor of Castillo. Moral and exemplary damages and
costs ofsuit were properly awarded.

On August 11, 2010, Olivarez RealtyCorporation and Dr. Olivarez filed their motion for reconsideration, 74 arguing that
the trial court exceeded its authority in forfeiting the ₱2,500,000.00 down payment and awarding ₱500,000.00 in
moral damages to Castillo. They argued that Castillo only prayed for a total of ₱500,000.00 as actual and moral
damages in his complaint. 75 Appellants prayed that the Court of Appeals "take a second hard look" 76 at the case and
reconsider its decision.

In the resolution77 dated March 18, 2011, the Court of Appeals denied the motion for reconsideration.

Proceedings before this court

Olivarez Realty Corporation and Dr. Olivarez filed their petition for review on certiorari 78 with this court.
Petitionersargue that the trial court and the Court of Appeals erred in awarding damages to Castillo. Under Section 3,
Rule 35 of the 1997 Rules ofCivil Procedure, summary judgment may be rendered except as to the amountof
damages. Thus, the Court of Appeals "violated the procedural steps in rendering summary judgment." 79

Petitioners reiterate that there are genuine issues ofmaterial fact to be resolved in this case. Thus, a full-blown trial is
required, and the trial court prematurely decided the case through summary judgment. They cite Torres v. Olivarez
Realty Corporation and Dr. Pablo Olivarez,80 a case decided by the Ninth Division of the Court of Appeals.

In Torres, Rosario Torres was the registeredowner of a parcel of land covered by Transfer Certificate of Title No. T-
19971. Under a deed of conditional sale, she sold her property to OlivarezRealty Corporation for ₱17,345,900.00.
When the corporation failed to fully pay the purchase price, she sued for rescission of contractwith damages. In their
answer, the corporation and Dr. Olivarez argued thatthey discontinued payment because Rosario Torres failed to
clear the land of the tenants.

Similar to Castillo, Torres filed a motion for summary judgment, which the trial court granted. On appeal, the Court of
Appeals set aside the trial court’s summary judgment and remanded the case to the trial court for further
proceedings.81 The Court of Appeals ruled that the material allegations of the complaint "were directly disputed by
[the corporation and Dr. Olivarez] in their answer" 82 when they argued that they refused to pay because Torres failed
to clear the land of the tenants.

With the Court of Appeals’ decision in Torres,Olivarez Realty Corporation and Dr. Olivarez argue that this case
should likewise be remanded to the trial court for further proceedings under the equipoise rule.

Petitioners maintain that Castillo availed himself of the irreconcilable reliefs of reformation of instrument and
rescission of contract.83 Thus, the trial court should have dismissed the case outright.

Petitioners likewise argue that the trial court had no jurisdiction to decide the case as Castillo failed topay the correct
docket fees.84 Petitioners argue that Castillo should have paid docket fees based on the property’s fair market value
since Castillo’s complaint is a real action.85

In his comment,86 Castillo maintains that there are no genuine issues as to any material fact inthis case. The trial
court, therefore, correctly rendered summary judgment.

As to petitioners’ claim that the trial court had no jurisdiction to decide the case, Castillo argues that he prayed for
rescission of contract in his complaint. This action is incapable of pecuniary estimation, and the Clerk of Court
properly computed the docket fees based on this prayer. 87 Olivarez Realty Corporation and Dr. Olivarez
replied,88 reiterating their arguments in the petition for review on certiorari.

The issues for our resolution are the following:

I. Whether the trial court erred in rendering summary judgment;

II. Whether proper docket fees were paid in this case.

The petition lacks merit.

I
The trial court correctly rendered
summary judgment, as there were no

genuine issues of material fact in this case

Trial "is the judicial examination and determination of the issues between the parties to the action." 89 During trial,
parties "present their respective evidence of their claims and defenses." 90 Parties to an action have the right "to a
plenary trial of the case"91 to ensure that they were given a right to fully present evidence on their respective claims.
There are instances, however, whentrial may be dispensed with. Under Rule 35 of the 1997 Rules of Civil Procedure,
a trial court may dispense with trial and proceed to decide a case if from the pleadings, affidavits, depositions, and
other papers on file, there is no genuine issue as to any material fact. In such a case, the judgment issued is called a
summary judgment.

A motion for summary judgment is filed either by the claimant or the defending party. 92 The trial court then hears the
motion for summary judgment. If indeed there are no genuine issues of material fact, the trial court shall issue
summary judgment. Section 3, Rule 35 of the 1997 Rules of Civil Procedure provides:

SEC. 3. Motion and proceedings thereon. – The motion shall be served at least ten (10) days beforethe time
specified for the hearing. The adverse party may serve opposing affidavits, depositions, or admission at least three
(3) days before the hearing. After the hearing, the judgment sought shall be rendered forthwith ifthe pleadings,
supporting affidavits, depositions, and admissions on file, showthat, except as to the amount of damages, there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

An issue of material fact exists if the answer or responsive pleading filed specifically denies the material allegations
of fact set forth in the complaint or pleading. If the issue offact "requires the presentation of evidence, it is a genuine
issue of fact."93 However, if the issue "could be resolved judiciously by plain resort" 94 to the pleadings, affidavits,
depositions, and other paperson file, the issue of fact raised is sham, and the trial court may resolve the action
through summary judgment.

A summary judgment is usually distinguished from a judgment on the pleadings. Under Rule 34 of the 1997 Rules of
Civil Procedure, trial may likewise be dispensed with and a case decided through judgment on the pleadings if the
answer filed fails to tender an issue or otherwise admits the material allegations of the claimant’s pleading. 95

Judgment on the pleadings is proper when the answer filed fails to tender any issue, or otherwise admitsthe material
allegations in the complaint. 96 On the other hand, in a summary judgment, the answer filed tenders issues as specific
denials and affirmative defenses are pleaded, but the issues raised are sham, fictitious, or otherwise not genuine. 97

In this case, Olivarez Realty Corporation admitted that it did not fully pay the purchase price as agreed upon inthe
deed of conditional sale. As to why it withheld payments from Castillo, it set up the following affirmative defenses:
First, Castillo did not filea case to void the Philippine Tourism Authority’s title to the property; second,Castillo did not
clear the land of the tenants; third, Castillo allegedly sold the property to a third person, and the subsequent sale is
currently being litigated beforea Quezon City court.

Considering that Olivarez RealtyCorporation and Dr. Olivarez’s answer tendered an issue, Castillo properly availed
himself of a motion for summary judgment.

However, the issues tendered by Olivarez Realty Corporation and Dr. Olivarez’s answer are not genuine issues of
material fact. These are issues that can be resolved judiciously by plain resort to the pleadings, affidavits,
depositions, and other papers on file; otherwise, these issues are sham, fictitious, or patently unsubstantial.

Petitioner corporation refused to fully pay the purchase price because no court case was filed to void the Philippine
Tourism Authority’s title on the property. However, paragraph C of the deed of conditional sale is clear that petitioner
Olivarez Realty Corporation is responsible for initiating court action against the Philippine Tourism Authority:

C. [Olivarez Realty Corporation] assumes the responsibility of taking necessary legal action thru Court to have the
claim/title TCT T-18493 of Philippine Tourism Authority over the above-described property be nullified and voided;
with the full assistance of [Castillo].98

Castillo’s alleged failureto "fully assist" 99 the corporation in filing the case is not a defense. As the trial court said,
"how can [Castillo] assist [the corporation] when [the latter] did not file the action [in the first place?]" 100

Neither can Olivarez Realty Corporation argue that it refused to fully pay the purchase price due to the Philippine
Tourism Authority’s adverse claim on the property. The corporation knew of this adverse claim when it entered into a
contract of conditional sale. It even obligated itself under paragraph C of the deed of conditional sale to sue the
Philippine Tourism Authority. This defense, therefore, is sham.

Contrary to petitioners’ claim, there is no "obvious ambiguity" 101 as to which should occur first — the payment of the
disturbance compensation or the clearing of the land within six months from the signing of the deed of conditional
sale. The obligations must be performed simultaneously. In this case, the parties should have coordinated to ensure
that tenants on the property were paid disturbance compensation and were made to vacate the property six months
after the signingof the deed of conditional sale.

On one hand, pure obligations, or obligations whose performance do not depend upon a future or uncertainevent, or
upon a past event unknown to the parties, are demandable at once. 102 On the other hand, obligations with a
resolutory period also take effect at once but terminate upon arrival of the day certain. 103
Olivarez Realty Corporation’s obligation to pay disturbance compensation is a pure obligation. The performance of
the obligation to pay disturbance compensation did not depend on any condition. Moreover, the deed of conditional
sale did not give the corporation a period to perform the obligation. As such, the obligation to pay disturbance
compensation was demandable at once. Olivarez RealtyCorporation should have paid the tenants disturbance
compensation upon execution of the deed of conditional sale.

With respect to Castillo’s obligation to clear the land of the tenants within six months from the signing of the contract,
his obligation was an obligation with a resolutory period. The obligation to clear the land of the tenants took effect at
once, specifically, upon the parties’ signing of the deed of conditional sale. Castillo had until October 2, 2000, six
months from April 5, 2000 when the parties signed the deed of conditional sale, to clear the land of the tenants.

Olivarez Realty Corporation, therefore, had no right to withhold payments of the purchase price. As the trial court
ruled, Olivarez Realty Corporation "can only claim non-compliance [of the obligation to clear the land of the tenants
in] October 2000."104 It said:

. . . it is clear that defendant [Olivarez Realty Corporation] should have paid the installments on the ₱5 million
downpayment up to October 8, 2000, or a total of ₱4,500,000.00. That is the agreement because the only time that
defendant [corporation] can claim non-compliance of the condition is after October, 2000 and so it has the clear
obligation topay up to the October 2000 the agreed installments. Since it paid only 2,500,000.00, then a violation of
the contract has already been committed. . . .105

The claim that Castillo sold the property to another is fictitious and was made in bad faith to prevent the trial court
from rendering summary judgment. Petitioners did not elaborate on this defense and insisted on revealing the identity
of the buyer only during trial. 106 Even in their petition for review on certiorari, petitioners never disclosed the name of
this alleged buyer. Thus, as the trial court ruled, this defense did not tender a genuine issue of fact, with the defense
"bereft of details."107

Castillo’s alleged prayer for the irreconcilable reliefs of rescission of contract and reformation of instrument is not a
ground to dismiss his complaint. A plaintiff may allege two or more claims in the complaint alternatively or
hypothetically, either in one cause of action or in separate causes of action per Section 2, Rule 8 of the 1997 Rules of
Civil Procedure.108 It is the filing of two separatecases for each of the causes of action that is prohibited since the
subsequently filed case may be dismissed under Section 4, Rule 2 of the 1997 Rules of Civil Procedure 109 on splitting
causes of action.

As demonstrated, there are no genuineissues of material fact in this case. These are issues that can be resolved
judiciously by plain resort to the pleadings, affidavits, depositions, and other papers on file. As the trial court found,
Olivarez Realty Corporation illegally withheld payments of the purchase price. The trial court did not err in rendering
summary judgment.

II
Castillo is entitled to cancel the contract
of conditional sale

Since Olivarez Realty Corporation illegally withheld payments of the purchase price, Castillo is entitled to cancel his
contract with petitioner corporation. However, we properly characterize the parties’ contract as a contract to sell, not
a contract of conditional sale.

In both contracts to sell and contracts of conditional sale, title to the property remains with the seller until the buyer
fully pays the purchase price.110 Both contracts are subject to the positive suspensive condition of the buyer’s full
payment of the purchase price.111

In a contract of conditional sale, the buyer automatically acquires title to the property upon full payment of the
purchase price.112 This transfer of title is "by operation of law without any further act having to be performed by the
seller."113 In a contract to sell, transfer of title to the prospective buyer is not automatic. 114 "The prospective seller
[must] convey title to the property [through] a deed of conditional sale." 115

The distinction is important to determine the applicable laws and remedies in case a party does not fulfill his or her
obligations under the contract. In contracts of conditional sale, our laws on sales under the Civil Code of the
Philippines apply. On the other hand, contracts to sell are not governed by our law on sales 116 but by the Civil Code
provisions on conditional obligations.

Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal obligations does not apply to contracts to
sell.117 As this court explained in Ong v. Court of Appeals, 118 failure to fully pay the purchase price in contracts to sell
is not the breach of contract under Article 1191. 119 Failure to fully pay the purchase price is "merely an event which
prevents the [seller’s] obligation to convey title from acquiring binding force." 120 This is because "there can be no
rescission of an obligation that is still nonexistent, the suspensive condition not having [happened]." 121

In this case, Castillo reserved his title to the property and undertook to execute a deed of absolute sale upon Olivarez
Realty Corporation’s full payment of the purchase price. 122 Since Castillo still has to execute a deed of absolute sale
to Olivarez RealtyCorporation upon full payment of the purchase price, the transfer of title is notautomatic. The
contract in this case is a contract to sell.

As this case involves a contract tosell, Article 1191 of the Civil Code of the Philippines does not apply. The contract
to sell is instead cancelled, and the parties shall stand as if the obligation to sell never existed. 123

Olivarez Realty Corporation shall return the possession of the property to Castillo. Any improvement that Olivarez
Realty Corporation may have introduced on the property shall be forfeited in favor of Castillo per paragraph I of the
deed of conditional sale:

I. Immediately upon signing thisContract, [Olivarez Realty Corporation] shall be entitled to occupy, possess and
develop the subject property. In case this Contract is cancelled, any improvement introduced by [Olivarez Realty
Corporation] on the property shall be forfeited in favor of [Castillo.]124

As for prospective sellers, thiscourt generally orders the reimbursement of the installments paidfor the property when
setting aside contracts to sell.125 This is true especially ifthe property’s possession has not been delivered to the
prospective buyer prior to the transfer of title.

In this case, however, Castillo delivered the possession of the property to Olivarez Realty Corporation prior to the
transfer of title. We cannot order the reimbursement of the installments paid.

In Gomez v. Court of Appeals, 126 the City of Manila and Luisa Gomez entered into a contract to sell over a parcel of
land. The city delivered the property’s possession to Gomez. She fully paid the purchase price for the property but
violated the terms of the contract to sell by renting out the property to other persons. This court set aside the contract
to sell for her violation of the terms of the contract to sell. It ordered the installments paid forfeited in favor of the City
of Manila "as reasonable compensation for [Gomez’s] use of the [property]"127 for eight years.

In this case, Olivarez Realty Corporation failed to fully pay the purchase price for the property. It only paid
₱2,500,000.00 out of the ₱19,080,490.00 agreed purchase price. Worse, petitioner corporation has been in
possession of Castillo’s property for 14 years since May 5, 2000 and has not paid for its use of the property.

Similar to the ruling in Gomez, we order the ₱2,500,000.00 forfeited in favor of Castillo as reasonable compensation
for Olivarez Realty Corporation’s use of the property.

III
Olivarez Realty Corporation is liable for
moral and exemplary damages and
attorney’s fees

We note that the trial court erred in rendering summary judgment on the amount of damages. Under Section 3, Rule
35 of the 1997 Rules of Civil Procedure, summary judgment may be rendered, except as to the amount of damages.

In this case, the trial court erred in forfeiting the ₱2,500,000.00 in favor of Castillo as damages under Article 1191 of
the Civil Code of the Philippines. As discussed, there is nobreach of contract under Article 1191 in this case.

The trial court likewise erred inrendering summary judgment on the amount of moral and exemplary damages and
attorney’s fees.

Nonetheless, we hold that Castillois entitled to moral damages, exemplary damages, and attorney’s fees.

Moral damages may be awarded in case the claimant experienced physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. 128

As for exemplary damages, they are awarded in addition to moral damages by way of example or correction for the
public good.129 Specifically in contracts, exemplary damages may be awarded if the defendant acted in a wanton,
fraudulent,reckless, oppressive, or malevolent manner.130

Under the deed of conditional sale, Olivarez Realty Corporation may only suspend the monthly down payment in
case Castillo fails to clear the land of the tenants six months from the signing of the instrument. Yet, even before the
sixth month arrived, Olivarez Realty Corporation withheld payments for Castillo’s property. It evenused as a defense
the fact that no case was filed against the PhilippineTourism Authority when, under the deed of conditional sale,
Olivarez Realty Corporation was clearly responsible for initiating action against the Philippine Tourism Authority.
These are oppressive and malevolent acts, and we find Castillo entitled to ₱500,000.00 moral damages and
₱50,000.00 exemplary damages:
Plaintiff Castillo is entitled to moral damages because of the evident bad faith exhibited by defendants in dealing with
him regarding the sale of his lot to defendant [Olivarez Realty Corporation]. He suffered much prejudice due to the
failure of defendants to pay him the balance of purchase price which he expected touse for his needs which caused
him wounded feelings, sorrow, mental anxiety and sleepless nights for which defendants should pay ₱500,000.00 as
moral damages more than six (6) years had elapsed and defendants illegally and unfairly failed and refused to pay
their legal obligations to plaintiff, unjustly taking advantage of a poor uneducated man like plaintiff causing much
sorrow and financial difficulties. Moral damages in favor of plaintiff is clearly justified . . . [Castillo] is also entitled to
₱50,000.00 as exemplary damages to serve as a deterrent to other parties to a contract to religiously comply with
their prestations under the contract.131

We likewise agree that Castillo is entitled to attorney’s fees in addition to the exemplary damages. 132 Considering that
Olivarez Realty Corporation refused to satisfy Castillo’splainly valid, just, and demandable claim, 133 the award of
₱50,000.00 as attorney’s fees is in order. However, we find that Dr. Pablo R.Olivarez is not solidarily liable with
Olivarez Realty Corporation for the amount of damages.

Under Article 1207 of the Civil Code of the Philippines, there is solidary liability only when the obligation states it or
when the law or the nature of the obligation requires solidarity. 134 In case of corporations, they are solely liable for
their obligations.135 The directors or trustees and officers are not liable with the corporation even if it is through their
acts that the corporation incurred the obligation. This is because a corporation is separate and distinct from the
persons comprising it.136

As an exception to the rule, directors or trustees and corporate officers may be solidarily liable with the corporation
for corporate obligations if they acted "in bad faith or with gross negligence in directing the corporate affairs." 137

In this case, we find that Castillo failed to prove with preponderant evidence that it was through Dr. Olivarez’s bad
faith or gross negligence that Olivarez Realty Corporation failed to fully pay the purchase price for the property. Dr.
Olivarez’s alleged act of making Castillo sign the deed of conditional sale without explaining to the latter the deed’s
terms in Tagalog is not reason to hold Dr. Olivarez solidarily liable with the corporation. Castillo had a choice not to
sign the deed of conditional sale. He could have asked that the deed of conditional sale be written in Tagalog. Thus,
Olivarez Realty Corporation issolely liable for the moral and exemplary damages and attorney’s fees to Castillo.

IV
The trial court acquired jurisdiction over
Castillo’s action as he paid the correct
docket fees

Olivarez Realty Corporation and Dr. Olivarez claimed that the trial court had no jurisdiction to take cognizance of the
case. In the reply/motion to dismiss the complaint 138 they filed with the Court of Appeals, petitioners argued that
Castillo failed to pay the correct amount of docket fees. Stating that this action is a real action, petitioners argued that
the docket fee Castillo paid should have been based on the fair market value of the property. In this case, Castillo
only paid 4,297.00, which is insufficient "if the real nature of the action was admitted and the fair market value of the
property was disclosed and made the basis of the amount of docket fees to be paid to the court." 139 Thus, according
to petitioners, the case should be dismissed for lack of jurisdiction.

Castillo countered that his action for rescission is an action incapable of pecuniary estimation. Thus, the Clerk of
Court of the Regional Trial Court of Tanauan City did not err in assessing the docket fees based on his prayer.

We rule for Castillo. In De Leon v. Court of Appeals, 140 this court held that an action for rescission of contract of sale
of real property is an action incapable of pecuniary estimation. In De Leon, the action involved a real property.
Nevertheless, this court held that "it is the nature of the action as one for rescission of contract which is
controlling."141 Consequently, the docket fees to be paid shall be for actions incapableof pecuniary estimation,
regardless if the claimant may eventually recover the real property. This court said:

. . . the Court in Bautista v.Lim, held that an action for rescission of contract is one which cannot be estimated and
therefore the docket fee for its filing should be the flat amount of ₱200.00 as then fixed in the former Rule 141, §141,
§5(10). Said this Court:

We hold that Judge Dalisay did not err in considering Civil Case No. V-144 as basically one for rescission or
annulment of contract which is not susceptible of pecuniary estimation (1 Moran's Comments on the Rules of Court,
1970 Ed, p. 55; Lapitan vs. Scandia, Inc., L-24668, July 31, 1968, 24 SCRA 479, 781-483).

Consequently, the fee for docketing it is ₱200, an amount already paid by plaintiff, now respondent Matilda
Lim.1âwphi1 (She should pay also the two pesos legal research fund fee, if she has not paid it, as required in Section
4 of Republic Act No. 3870, the charter of the U.P. Law Center).

Thus, although eventually the result may be the recovery of land, it is the nature of the action as one for rescission of
contract which is controlling. The Court of Appeals correctly applied these cases to the present one. As it said:
We would like to add the observations that since the action of petitioners [private respondents] against private
respondents [petitioners] is solely for annulment or rescission which is not susceptible of pecuniary estimation, the
action should not be confused and equated with the "value of the property" subject of the transaction; that by the very
nature of the case, the allegations, and specific prayer in the complaint, sans any prayer for recovery of money
and/or value of the transaction, or for actual or compensatory damages, the assessment and collection of the legal
fees should not be intertwined with the merits of the case and/or what may be its end result; and that to sustain
private respondents' [petitioners'] position on what the respondent court may decide after all, then the assessment
should be deferred and finally assessed only after the court had finally decided the case, which cannot be done
because the rules require that filing fees should be based on what is alleged and prayed for in the face of the
complaint and paid upon the filing of the complaint. 142

Although we discussed that there isno rescission of contract to speak of in contracts of conditional sale, we hold that
an action to cancel a contract to sell, similar to an action for rescission of contract of sale, is an action incapable of
pecuniary estimation. Like any action incapable of pecuniary estimation, an action to cancel a contract to sell
"demands an inquiry into other factors" 143 aside from the amount of money to be awarded to the claimant. Specifically
in this case, the trial court principally determined whether Olivarez Realty Corporation failed to pay installments of the
property’s purchase price as the parties agreed upon in the deed of conditional sale. The principal natureof Castillo’s
action, therefore, is incapable of pecuniary estimation.

All told, there is no issue that the parties in this case entered into a contract to sell a parcel of land and that Olivarez
Realty Corporation failed to fully pay the installments agreed upon.Consequently, Castillo is entitled to cancel the
contract to sell.

WHEREFORE, the petition for review on certiorari is DENIED. The Court of Appeals’ decision dated July 20, 2010
and in CA-G.R. CV No. 91244 is AFFIRMEDwith MODIFICATION.

The deed of conditional sale dated April 5, 2000 is declared CANCELLED. Petitioner Olivarez Realty Corporation
shall RETURN to respondent Benjamin Castillo the possession of the property covered by Transfer Certificate of Title
No. T-19972 together with all the improvements that petitioner corporation introduced on the property. The amount of
₱2,500,000.00 is FORFEITED in favor of respondent Benjamin Castillo as reasonable compensation for the use of
petitioner Olivarez Realty Corporation of the property.

Petitioner Olivarez Realty Corporation shall PAY respondent Benjamin Castillo ₱500,000.00 as moral damages,
₱50,000.00 as exemplary damages, and ₱50,000.00 as attorney's fees with interest at 6% per annum from the time
this decision becomes final and executory until petitioner

corporation fully pays the amount of damages. 144

SO ORDERED.
 G.R. No. 225033, August 15, 2018

SPOUSES ANTONIO BELTRAN AND FELISA BELTRAN, Petitioners, v. SPOUSES APOLONIO CANGAYDA, JR.

AND LORETA E. CANGAYDA, Respondents.

DECISION

CAGUIOA, J.:

The Case

This is a Petition for Review on Certiorari (Petition) filed under Rule 45 of the Rules of Court against the
Decision1 dated October 19, 2015 (assailed Decision) and Resolution 2 dated May 17, 2016 (assailed Resolution) in
CA-G.R. CV No. 03414-MIN rendered by the Court of Appeals-Cagayan de Oro City (CA) Twenty-First Division and
Special Former Twenty-First Division, respectively.

The assailed Decision and Resolution stem from an appeal from the Decision 3 dated July 15, 2013 issued by the
Regional Trial Court (RTC), 11th Judicial Region, Davao del Norte, Branch 31 in Civil Case No. 4020, directing
petitioners Antonio and Felisa Beltran (collectively, petitioners) to vacate a 300-square-meter residential lot situated
in Barangay Magugpo, Tagum City, Davao del Norte (disputed property) registered in the name of respondents
Apolonio, Jr. and Loreta Cangayda (collectively, respondents) under TCT No. T-74907.

The Facts

Sometime in August 1989,4 respondents verbally agreed to sell the disputed property to petitioners for P35,000.00.
After making an initial payment, 5 petitioners took possession of the disputed property and built their family home
thereon.6 Petitioners subsequently made additional payments, which, together with their initial payment, collectively
amounted to P29,690.00.7

However, despite respondents' repeated demands, petitioners failed to pay their remaining balance of
P5,310.00.8 This prompted respondents to refer the matter to the Office of the Barangay Chairman of Barangay
Magugpo, Tagum City (OBC).9

Before the OBC, the parties signed an Amicable Settlement dated August 24, 1992, bearing the following terms:

3. That herein [petitioner Antonio] have already (sic) paid the amount of x x x P29,690.00 x x x to
[respondent Apolonio, Jr.] and [there is a] remaining balance of x x x P5,310.00 x x x;

4. That herein [petitioner Antonio] promise(s) to pay the aforesaid balance to [respondent
Apolonio, Jr.] [within a] one week period (sic) to start AUGUST 24, 1992 (Monday);

5. That herein [petitioner Antonio] is willing to pay the all (sic) expenses of the titling of the
aforesaid lot; and

6. That herein [respondent Apolonio, Jr.] is also willing to signed (sic) a deed of sale
agreement after [petitioner Antonio] were (sic) able to pay the remaining balance x x x.

Failure to comply on (sic) the said agreement[,] the [OBC] is willing to indorse (sic) this case to
the higher court for proper legal action. 10 (Emphasis supplied)

Petitioners failed to pay within the period set forth in the Amicable Settlement. 11

On January 14, 2009, or nearly 17 years after the expiration of petitioners' period to pay their remaining balance,
respondents served upon petitioners a "Last and Final Demand" to vacate the disputed property within 30 days from
notice. This demand was left unheeded. 12

RTC Proceedings

Consequently, on March 12, 2009, respondents filed a complaint for recovery of possession and damages
(Complaint) before the RTC.13 Respondents alleged, among others, that petitioners had been occupying the disputed
property without authority, and without payment of rental fees. 14

In their Answer, petitioners admitted that they failed to settle their unpaid balance of P5,310.00 within the period set
in the Amicable Settlement. However, petitioners alleged that when they later attempted to tender payment two days
after said deadline,15 respondents refused to accept their payment, demanding, instead, for an additional payment of
P50,000.00.16

On July 15, 2013, the RTC issued a Decision, the dispositive portion of which reads:
 WHEREFORE, premises considered, [petitioners], their heirs, successors-in-interest and/or
assigns are ordered to vacate the portion of Lot No. 11 presently occupied by them within [60
days] from receipt of x x x this Decision.

However, as there was no express agreement between the parties that [respondents] may retain
the sum of P29,600.00 already paid to them by [petitioners], [respondents] are hereby ordered
to return the said sum to [petitioners], likewise within [60] days from receipt of this
Decision.17 (Emphasis supplied)

In so ruling, the RTC characterized the oral agreement between the parties as a contract to sell. The RTC held that
the consummation of this contract to sell was averted due to petitioners' failure to pay the purchase price in
full.18 Hence the RTC held that ownership over the disputed property never passed to petitioners. 19

Petitioners filed a Motion for Reconsideration, which the RTC denied. 20

CA Proceedings

Aggrieved, petitioners brought the case to the CA via ordinary appeal. Therein, petitioners argued that the oral
agreement they had entered into with respondents was not a contract to sell but rather, a contract of sale which had
the effect of transferring ownership of the disputed property upon its delivery. 21

Petitioners also raised, for the first time on appeal, that the sale of the disputed property constitutes a sale on
installment covered by Republic Act (R.A.) No. 6552,22 otherwise known as the Maceda Law. Corollarily, petitioners
argued that respondents should not be granted relief, since they failed to comply with the specific procedure for
rescission of sales of real estate on installment basis set forth under the statute.23

On October 19, 2015, the CA rendered the assailed Decision, disposing the appeal as follows:

WHEREFORE, the appeal is DISMISSED. The July 15, 2013 Decision of the [RTC], Branch 31,
11th Judicial Region, Tagum City, Davao del Norte, in Civil Case No. 4020 is AFFIRMED.24

The CA affirmed the findings of the RTC anent the nature of the contract entered into by the parties. 25 In addition, it
rejected petitioners' invocation of the Maceda Law. According to the CA, to allow petitioners to seek protection under
said law for the first time on appeal would violate the tenets of due process and fair play. 26

Petitioners filed a Motion for Reconsideration which was later denied through the assailed Resolution.

Thus, the present Petition now prays that the Court: (i) reverse the judgment of the CA and RTC; and (ii) direct
respondents to allow them to settle their remaining balance of P5,310.00 and, subsequently, convey the disputed
property in their favor.

Petitioners maintain, as they did before the CA, that the oral agreement they entered into with respondents is a
contract of sale, and that, as a necessary incident of such contract, ownership over the disputed property had been
transferred in their favor when they took possession and built improvements thereon. 27

Further, petitioners argue that respondents are not entitled to recover possession of the disputed property since they
failed to cancel their oral agreement by way of a notarial act, in accordance with the provisions of the Maceda Law.28

Finally, petitioners aver that respondents' Complaint is an action upon a written agreement, as it is based on the
Amicable Settlement. Thus, petitioners conclude that respondents' action already prescribed, since it was filed more
than 10 years after the lapse of petitioners' period to pay their outstanding balance. Petitioners further argue that the
Complaint is also barred by laches, considering that respondents allowed petitioners to continue staying in the
disputed property for a period of 17 years after such failure to pay.29

The Issues

The Petition calls on the Court to resolve the following issues:

1. Whether the CA erred when it affirmed the RTC Decision characterizing the oral agreement between the
parties as a contract to sell;
2. Whether the oral agreement between the parties is covered by the Maceda Law; and
3. Whether respondents' action for recovery of possession should have been dismissed on the ground of
prescription and/or laches.

The Court's Ruling

The Petition is meritorious.

The agreement between the parties is
an oral contract of sale. As a
consequence, ownership of the
disputed property passed to
petitioners upon its delivery.

The CA characterized the parties' agreement as a contract to sell primarily on the basis of respondent Loreta's
testimony which purportedly confirms their intent to reserve ownership of the disputed property until full payment of
the purchase price. The CA held:

At trial, [respondent Loreta] testified thus —

[x x x x]

Q: Now, if any, tell us who are in possession of the [disputed property] x x x?

A: [Petitioners] and their children who are also married.

Q: Now, if you know, how did [petitioners] and their children occupied (sic) the land you have just
mentioned?
A: I know because we have [an oral] agreement with [petitioners] that they will buy [the
disputed property].

Q: Tell us what happened to the [oral] agreement of (sic) [petitioners] if you can recall?
A: Our [oral] agreement with [petitioner Antonio] that about 300 square meters lot (sic)
that they will pay P35,000.00 to us but [petitioner Antonio] told us that they will pay the
amount of P35,000.00 when [their] house will be sold, then they will pay us.

Q: If you can recall, did [petitioners] comply with the [oral] agreement to pay you P35,000.00?
A: At that time, [petitioners] gave me only P15,000.00.

Q: Other than the P15,000.00 (sic) if you can recall, did they pay you?
A: x x x [Petitioners] has a rattan furniture, they made us a chair and it costs about P14,600.00.

Q: In short, Miss witness, please tell us how much amount (sic) [petitioners] paid you?
A: According to their total, they paid me P29,690.00

[Respondent Loreta's] testimony — that at the moment the [oral] agreement was entered
into by the parties, [petitioners] "will buy that property" — suggests that the contract of
sale was expected to be entered into at some future date when a condition has been
fulfilled. In this case, that condition appears to be the full payment of the purchase
price. The Court notes that this testimony was not controverted. In their Brief, [petitioners]
merely counter with the bare insistence that what the parties entered into verbally was a contract
of sale.30 (Emphasis supplied.)

According to the CA, the foregoing finding is further bolstered by clause 6 of the Amicable Settlement, to which
petitioner Antonio expressed his assent. Clause 6 reads:

That herein [respondent Apolonio, Jr.] is also willing to signed (sic) a deed of sale agreement
after [petitioner Antonio] were (sic) able to pay the remaining balance x x x.31

The CA's finding is erroneous.

Article 1458 of the Civil Code defines a contract of sale:

By the contract of sale one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.

"[A] contract to sell, [on the other hand], is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite its delivery to the prospective buyer, commits to
sell the property exclusively to the prospective buyer"32 upon full payment of the purchase price.

Jurisprudence defines the distinctions between a contract of sale and a contract to sell to be as follows:

In a contract of sale, 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, x x
x.33 (Emphasis supplied)
Based on the foregoing distinctions, the Court finds, and so holds, that the oral agreement entered into by the parties
constitutes a contract of sale and not a contract to sell.

A contract of sale is consensual in nature, and is perfected upon the concurrence of its essential requisites, 34 thus:

The essential requisites of a contract under Article 1318 of the New Civil Code are: (1)
consent of the contracting parties; (2) object certain which is the subject matter of the
contract; and (3) cause of the obligation which is established. Thus, contracts, other than
real contracts are perfected by mere consent which is manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to constitute the contract. Once
perfected, they bind other contracting parties and the obligations arising therefrom have the force
of law between the parties and should be complied with in good faith. The parties are bound not
only to the fulfillment of what has been expressly stipulated but also to the consequences which,
according to their nature, may be in keeping with good faith, usage and law.

Being a consensual contract, 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. A perfected contract of sale imposes reciprocal obligations on the parties
whereby the vendor obligates himself to transfer the ownership of and to deliver a determinate
thing to the buyer who, in turn, is obligated to pay a price certain in money or its equivalent.
Failure of either party to comply with his obligation entitles the other to rescission as the power to
rescind is implied in reciprocal obligations.35 (Emphasis supplied)

Contrary to the CA's findings, neither respondent Loreta's testimony nor clause 6 of the Amicable Settlement
supports the conclusion that the parties' agreement is not a contract of sale, but only a contract to sell — the reason
being that it is not evident from said testimony and clause 6 that there was an express agreement to reserve
ownership despite delivery of the disputed property.

A plain reading of respondent Loreta's testimony shows that the parties' oral agreement constitutes a meeting of the
minds as to the sale of the disputed property and its purchase price. Respondent Loreta's statements do not in any
way suggest that the parties intended to enter into a contract of sale at a later time. Such statements only pertain to
the time at which petitioners expected, or at least hoped, to acquire the sufficient means to pay the purchase price
agreed upon. For emphasis, the Court reproduces the relevant statements relied upon by the CA:

Our [oral] agreement with [petitioner Antonio] that about 300 square meters lot (sic) that they will
pay P35,000.00 to us but [petitioner Antonio] told us that they will pay the amount of
P35,000.00 when [their] house will be sold, then they will pay us.36 (Emphasis supplied)

Clause 6 of the Amicable Settlement merely states respondent Apolonio, Jr.'s commitment to formalize and reduce
the oral agreement of the parties into a public instrument upon payment of petitioners' outstanding balance. It bears
emphasizing that a formal document is not necessary for the sale transaction to acquire binding effect.37 Hence, the
subsequent execution of a formal deed of sale does not negate the perfection of the parties' oral contract of sale
which had already taken place upon the meeting of the parties' minds as to the subject of the transaction and its
purchase price.

In a contract of sale, ownership of a thing sold shall pass to the buyer upon actual or constructive delivery thereof in
the absence of any stipulation to the contrary.38 Reference to Articles 1477 and 1478 of the Civil Code is in order:

Article 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual
or constructive delivery thereof.

Article 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser
until he has fully paid the price.

In accordance with the cited provisions, ownership of the disputed property passed to petitioners when its possession
was transferred in their favor, as no reservation to the contrary had been made.

Considering that respondents' Complaint is anchored upon their alleged ownership of the disputed property, their
prayer to recover possession thereof as a consequence of such alleged ownership cannot prosper.

Slight delay is not sufficient to justify

rescission.

Article 1191 of the Civil Code39 lays down the remedies that the injured party may resort to in case of breach of a
reciprocal obligation — fulfillment of the obligation or rescission thereof, with damages in either case.

Thus, in a contract of sale, the vendor's failure to pay the price agreed upon generally constitutes breach, and
extends to the vendor the right to demand the contract's fulfillment or rescission. 40
It is important to stress, however, that the right of rescission granted to the injured party under Article 1191 is
predicated on a breach of faith by the other party who violates the reciprocity between them. 41 Stated otherwise,
rescission may not be resorted to in the absence of breach of faith.

In this connection, Article 1592 extends to the vendee in a sale of immovable property the right to effect payment
even after expiration of the period agreed upon, as long as no demand for rescission has been made upon him by
the vendor. The provision states:

Article 1592. In the sale of immovable property, even though it may have been stipulated that
upon failure to pay the price at the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the period, as long as no demand
for rescission of the contract has been made upon him either judicially or by a notarial act. After
the demand, the court may not grant him a new term.

A reading of Article 1592 in conjunction with Article 1191 thus suggests that in the absence of any stipulation to the
contrary, the vendor's failure to pay within the period agreed upon shall not constitute a breach of faith, so long as
payment is made before the vendor demands for rescission, either judicially, or by notarial act.

Hence, in Taguba v. Peralta,42 (Taguba) the Court held that slight delay in the payment of the purchase price
does not serve as a sufficient ground for the rescission of a sale of real property:

Despite the denomination of the deed as a "Deed of Conditional Sale" a reading of the conditions
x x x therein set forth reveals the contrary. Nowhere in the said contract in question could we find
a proviso or stipulation to the effect that title to the property sold is reserved in the vendor until
full payment of the purchase price. There is also no stipulation giving the vendor (petitioner
Taguba) the right to unilaterally rescind the contract the moment the vendee (private respondent
de Leon) fails to pay within a fixed period x x x.

Considering, therefore, the nature of the transaction between petitioner Taguba and private
respondent, which We affirm and sustain to be a contract of sale, absolute in nature the
applicable provision is Article 1592 of the New Civil Code x x x.

xxxx

In the case at bar, it is undisputed that petitioner Taguba never notified private respondent by
notarial act that he was rescinding the contract, and neither had he filed a suit in court to rescind
the sale.

Finally, it has been ruled that "where time is not of the essence of the agreement, a slight
delay on the part of one party in the performance of his obligation is not a sufficient
ground for the rescission of the agreement". Considering that in the instant case, private
respondent had already actually paid the sum of P12,500.00 of the total stipulated
purchase price of P18,000.00 and had tendered payment of the balance of P5,500.00
within the grace period of six months from December 31, 1972, equity and justice mandate
that she be given additional period within which to complete payment of the purchase
price.43 (Emphasis supplied)

The Court applied the foregoing principles in the subsequent case of Dignos v. Court of Appeals, 44 (Dignos) where it
resolved to grant respondent therein an additional period within which to settle his outstanding balance of P4,000.00,
considering that he "was delayed in payment only for one month."45 It is worth noting that in Dignos, the Court
granted the vendee an additional period to pay the balance, despite the fact that no grace period had been stipulated
upon by the parties therein, as in Taguba.

Here, petitioners acknowledge that they failed to settle the purchase price of the disputed property in full within the
deadline set by the Amicable Settlement. Nevertheless, the Court does not lose sight of the fact that petitioners have
already paid more than three-fourths of the purchase price agreed upon. Further, petitioners have constituted their
family home on the disputed property in good faith, and have lived thereon for 17 years without protest.

In addition, respondents do not dispute that petitioners offered to settle their outstanding balance of P5,310.00 "two
(2) days after the deadline [set by the Amicable Settlement] and a few times thereafter," 46 which offers respondents
refused to accept.47 Respondents also do not claim to have made a demand for rescission at any time before
petitioners made such offers to pay, either through judicial or extra-judicial means, such as through a notarial act.

Thus, pursuant to Article 1592, and consistent with the Court's rulings in Taguba and Dignos, the Court deems it
proper to grant petitioners a period of 30 days from notice of this Decision to settle their outstanding balance.

Assuming that petitioners' failure to

pay constitutes breach, respondents'
cause of action is already barred by
prescription.

Respondents hinge their cause of action on petitioners' failure to pay within the period set by the Amicable
Settlement. Hence, this would mean that respondents' action is one that proceeds from a breach of a written
agreement, which, under Article 1144 of the Civil Code, prescribes in 10 years. 48

Respondents' Complaint was filed 17 years after the expiration of the payment period stipulated in the Amicable
Settlement. Assuming that petitioners' failure to pay within said period constitutes sufficient breach which gives rise to
a cause of action, such action has clearly prescribed.

Considering the foregoing, the Court deems it unnecessary to delve into the other issues raised in the Petition.

WHEREFORE, the Petition is GRANTED. The Decision and Resolution respectively dated October 19, 2015 and
May 17, 2016 rendered by the Court of Appeals-Cagayan de Oro City in CA-G.R. CV No. 03414-MIN, and the
Decision dated July 15, 2013 issued by the Regional Trial Court, Branch 31, 11th Judicial Region, Davao del Norte
(RTC) in Civil Case No. 4020 are REVERSED and SET ASIDE.

Petitioners Antonio and Felisa Beltran are ORDERED to pay respondents Apolonio Cangayda, Jr. and Loreta E.
Cangayda the sum of P5,310.00, representing their outstanding balance, within 30 days from notice of this Decision.
In case of refusal or inability on the part of respondents to receive said amount, petitioners are DIRECTED to deposit
the same with the RTC for the account of respondents. The sum due shall earn interest at the rate of six percent
(6%) per annum from the date of finality of this Decision until full payment, in accordance with the Court's ruling
in Nacar v. Gallery Frames49.

Upon receipt of the foregoing sum, or the deposit of such sum with the RTC, respondents
are DIRECTED to EXECUTE a Deed of Absolute Sale in favor of petitioners for the purpose of formalizing the oral
contract of sale concerning the 300-square-meter residential lot situated in Barangay Magugpo, Tagum City, Davao
del Norte, covered by TCT No. T-74907, and DELIVER to petitioners the original owner's duplicate copy of TCT No.
T-74907. In case of refusal or inability on the part of respondents to execute a Deed of Absolute Sale and/or deliver
said owner's duplicate copy, this Decision shall be sufficient to grant the proper Registrar of Deeds the necessary
authority to cancel TCT No. T-74907 and issue a new title in the name of petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179965               February 20, 2013

NICOLAS P. DIEGO, Petitioner,
vs.
RODOLFO P. DIEGO and EDUARDO P. DIEGO, Respondents.

DECISION

DEL CASTILLO, J.:

It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates that the seller shall
execute a deed of sale only upon or after tl1ll payment of the purchase price is a contract to sell, not a contract of
sale. In Reyes v. Tuparan, 1 this Court declared in categorical terms that "[w]here the vendor promises to execute
a deed of absolute sale upon the completion by the vendee of the payment of the price, the contract is only a
contract to sell. The aforecited stipulation shows that the vendors reserved title to the subject property until
full payment of the purchase price."

In this case, it is not disputed as in tact both parties agreed that the deed of sale shall only be executed upon
payment of the remaining balance of the purchase price. Thus, pursuant to the above stated jurisprudence, we
similarly declare that the transaction entered into by the parties is a contract to sell.

Before us is a Petition for Review on Certiorari2 questioning the June 29, 2007 Decision 3 and the October 3, 2007
Resolution4 of the Court of Appeals (CA) in CA-G.R. CV No. 86512, which affirmed the April 19, 2005 Decision 5 of the
Regional Trial Court (RTC), Branch 40, of Dagupan City in Civil Case No. 99-02971-D.

Factual Antecedents

In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein, entered into an oral
contract to sell covering Nicolas’s share, fixed at ₱500,000.00, as co-owner of the family’s Diego Building situated in
Dagupan City. Rodolfo made a downpayment of ₱250,000.00. It was agreed that the deed of sale shall be executed
upon payment of the remaining balance of ₱250,000.00. However, Rodolfo failed to pay the remaining balance.

Meanwhile, the building was leased out to third parties, but Nicolas’s share in the rents were not remitted to him by
herein respondent Eduardo, another brother of Nicolas and designated administrator of the Diego Building. Instead,
Eduardo gave Nicolas’s monthly share in the rents to Rodolfo. Despite demands and protestations by Nicolas,
Rodolfo and Eduardo failed to render an accounting and remit his share in the rents and fruits of the building, and
Eduardo continued to hand them over to Rodolfo.

Thus, on May 17, 1999, Nicolas filed a Complaint 6 against Rodolfo and Eduardo before the RTC of Dagupan City and
docketed as Civil Case No. 99-02971-D. Nicolas prayed that Eduardo be ordered to render an accounting of all the
transactions over the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the
rents; and that Eduardo and Rodolfo be held solidarily liable for attorney’s fees and litigation expenses.

Rodolfo and Eduardo filed their Answer with Counterclaim 7 for damages and attorney’s fees. They argued that
Nicolas had no more claim in the rents in the Diego Building since he had already sold his share to Rodolfo. Rodolfo
admitted having remitted only ₱250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase
price to Nicolas only after the latter shall have executed a deed of absolute sale.

Ruling of the Regional Trial Court

After trial on the merits, or on April 19, 2005, the trial court rendered its Decision 8 dismissing Civil Case No. 99-
02971-D for lack of merit and ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment
by the latter of the ₱250,000.00 balance of the agreed purchase price. It made the following interesting
pronouncement:

It is undisputed that plaintiff (Nicolas) is one of the co-owners of the Diego Building, x x x. As a co-owner, he is
entitled to [his] share in the rentals of the said building. However, plaintiff [had] already sold his share to defendant
Rodolfo Diego in the amount of ₱500,000.00 and in fact, [had] already received a partial payment in the purchase
price in the amount of ₱250,000.00. Defendant Eduardo Diego testified that as per agreement, verbal, of the
plaintiff and defendant Rodolfo Diego, the remaining balance of ₱250,000.00 will be paid upon the execution
of the Deed of Absolute Sale. It was in the year 1997 when plaintiff was being required by defendant Eduardo
Diego to sign the Deed of Absolute Sale. Clearly, defendant Rodolfo Diego was not yet in default as the plaintiff
claims which cause [sic] him to refuse to sign [sic] document. The contract of sale was already perfected as early as
the year 1993 when plaintiff received the partial payment, hence, he cannot unilaterally revoke or rescind the same.
From then on, plaintiff has, therefore, ceased to be a co-owner of the building and is no longer entitled to the fruits of
the Diego Building.

Equity and fairness dictate that defendant [sic] has to execute the necessary document regarding the sale of his
share to defendant Rodolfo Diego. Correspondingly, defendant Rodolfo Diego has to perform his obligation as per
their verbal agreement by paying the remaining balance of ₱250,000.00. 9

To summarize, the trial court ruled that as early as 1993, Nicolas was no longer entitled to the fruits of his aliquot
share in the Diego Building because he had "ceased to be a co-owner" thereof. The trial court held that when Nicolas
received the ₱250,000.00 downpayment, a "contract of sale" was perfected. Consequently, Nicolas is obligated to
convey such share to Rodolfo, without right of rescission. Finally, the trial court held that the ₱250,000.00 balance
from Rodolfo will only be due and demandable when Nicolas executes an absolute deed of sale.

Ruling of the Court of Appeals

Nicolas appealed to the CA which sustained the trial court’s Decision in toto. The CA held that since there was a
perfected contract of sale between Nicolas and Rodolfo, the latter may compel the former to execute the proper sale
document. Besides, Nicolas’s insistence that he has since rescinded their agreement in 1997 proved the existence of
a perfected sale. It added that Nicolas could not validly rescind the contract because: "1) Rodolfo ha[d] already made
a partial payment; 2) Nicolas ha[d] already partially performed his part regarding the contract; and 3) Rodolfo
opposes the rescission."10

The CA then proceeded to rule that since no period was stipulated within which Rodolfo shall deliver the balance of
the purchase price, it was incumbent upon Nicolas to have filed a civil case to fix the same. But because he failed to
do so, Rodolfo cannot be considered to be in delay or default.

Finally, the CA made another interesting pronouncement, that by virtue of the agreement Nicolas entered into with
Rodolfo, he had already transferred his ownership over the subject property and as a consequence, Rodolfo is legally
entitled to collect the fruits thereof in the form of rentals. Nicolas’ remaining right is to demand payment of the
balance of the purchase price, provided that he first executes a deed of absolute sale in favor of Rodolfo.

Nicolas moved for reconsideration but the same was denied by the CA in its Resolution dated October 3, 2007.

Hence, this Petition.

Issues

The Petition raises the following errors that must be rectified:

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THERE WAS NO
PERFECTED CONTRACT OF SALE BETWEEN PETITIONER NICOLAS DIEGO AND
RESPONDENT RODOLFO DIEGO OVER NICOLAS’S SHARE OF THE BUILDING BECAUSE
THE SUSPENSIVE CONDITION HAS NOT YET BEEN FULFILLED.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE CONTRACT OF

SALE BETWEEN PETITIONER AND RESPONDENT RODOLFO DIEGO REMAINS LEGALLY
BINDING AND IS NOT RESCINDED GIVING MISPLACED RELIANCE ON PETITIONER
NICOLAS’ STATEMENT THAT THE SALE HAS NOT YET BEEN REVOKED.

III

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER

NICOLAS DIEGO ACTED LEGALLY AND CORRECTLY WHEN HE UNILATERALLY
RESCINDED AND REVOKED HIS AGREEMENT OF SALE WITH RESPONDENT RODOLFO
DIEGO CONSIDERING RODOLFO’S MATERIAL, SUBSTANTIAL BREACH OF THE
CONTRACT.
 IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS NO

MORE RIGHTS OVER HIS SHARE IN THE BUILDING, DESPITE THE FACT THAT THERE
WAS AS YET NO PERFECTED CONTRACT OF SALE BETWEEN PETITIONER NICOLAS
DIEGO AND RODOLFO DIEGO AND THERE WAS YET NO TRANSFER OF OWNERSHIP OF
PETITIONER’S SHARE TO RODOLFO DUE TO THE NON-FULFILLMENT BY RODOLFO OF
THE SUSPENSIVE CONDITION UNDER THE CONTRACT.

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT

RODOLFO HAS UNJUSTLY ENRICHED HIMSELF AT THE EXPENSE OF PETITIONER
BECAUSE DESPITE NOT HAVING PAID THE BALANCE OF THE PURCHASE PRICE OF THE
SALE, THAT RODOLFO HAS NOT YET ACQUIRED OWNERSHIP OVER THE SHARE OF
PETITIONER NICOLAS, HE HAS ALREADY BEEN APPROPRIATING FOR HIMSELF AND
FOR HIS PERSONAL BENEFIT THE SHARE OF THE INCOME OF THE BUILDING AND THE
PORTION OF THE BUILDING ITSELF WHICH WAS DUE TO AND OWNED BY PETITIONER
NICOLAS.

VI

THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING ACTUAL DAMAGES,

ATTORNEY’S FEES AND LITIGATION EXPENSES TO THE PETITIONER DESPITE THE
FACT THAT PETITIONER’S RIGHTS HAD BEEN WANTONLY VIOLATED BY THE
RESPONDENTS.11

Petitioner’s Arguments

In his Petition, the Supplement 12 thereon, and Reply,13 Nicolas argues that, contrary to what the CA found, there was
no perfected contract of sale even though Rodolfo had partially paid the price; that in the absence of the third
element in a sale contract – the price – there could be no perfected sale; that failing to pay the required price in full,
Nicolas had the right to rescind the agreement as an unpaid seller.

Nicolas likewise takes exception to the CA finding that Rodolfo was not in default or delay in the payment of the
agreed balance for his (Nicolas’s) failure to file a case to fix the period within which payment of the balance should be
made. He believes that Rodolfo’s failure to pay within a reasonable time was a substantial and material breach of the
agreement which gave him the right to unilaterally and extrajudicially rescind the agreement and be discharged of his
obligations as seller; and that his repeated written demands upon Rodolfo to pay the balance granted him such
rights.

Nicolas further claims that based on his agreement with Rodolfo, there was to be no transfer of title over his share in
the building until Rodolfo has effected full payment of the purchase price, thus, giving no right to the latter to collect
his share in the rentals.

Finally, Nicolas bewails the CA’s failure to award damages, attorney’s fees and litigation expenses for what he
believes is a case of unjust enrichment at his expense.

Respondents’ Arguments

Apart from echoing the RTC and CA pronouncements, respondents accuse the petitioner of "cheating" them,
claiming that after the latter received the ₱250,000.00 downpayment, he "vanished like thin air and hibernated in the
USA, he being an American citizen,"14 only to come back claiming that the said amount was a mere loan.

They add that the Petition is a mere rehash and reiteration of the petitioner’s arguments below, which are deemed to
have been sufficiently passed upon and debunked by the appellate court.

Our Ruling

The Court finds merit in the Petition.

The contract entered into by Nicolas and Rodolfo was a contract to sell.

a) The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and
distinguishing characteristic of a contract to sell. It also shows that the vendor reserved title to the property
until full payment.
There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in the Diego Building for the price of
₱500,000.00. There is also no dispute that of the total purchase price, Rodolfo paid, and Nicolas received,
₱250,000.00. Significantly, it is also not disputed that the parties agreed that the remaining amount of ₱250,000.00
would be paid after Nicolas shall have executed a deed of sale.

This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a unique and
distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this Court ruled that a stipulation in the
contract, "[w]here the vendor promises to execute a deed of absolute sale upon the completion by the vendee
of the payment of the price," indicates that the parties entered into a contract to sell. According to this Court, this
particular provision is tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court
ruled that the agreement to execute a deed of sale upon full payment of the purchase price "shows that the
vendors reserved title to the subject property until full payment of the purchase price." 16

In Tan v. Benolirao,17 this Court, speaking through Justice Brion, ruled that the parties entered into a contract to
sell as revealed by the following stipulation:

d) That in case, BUYER has complied with the terms and conditions of this contract, then the SELLERS shall execute
and deliver to the BUYER the appropriate Deed of Absolute Sale;18

The Court further held that "[j]urisprudence has established that where the seller promises to execute a deed
of absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract
to sell."19

b) The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the parties show
that they agreed on a contract to sell, not of sale. The absence of a formal deed of conveyance is indicative
of a contract to sell.

In San Lorenzo Development Corporation v. Court of Appeals,20 the facts show that spouses Miguel and Pacita Lu
(Lu) sold a certain parcel of land to Pablo Babasanta (Pablo). After several payments, Pablo wrote Lu demanding
"the execution of a final deed of sale in his favor so that he could effect full payment of the purchase price." 21 To
prove his allegation that there was a perfected contract of sale between him and Lu, Pablo presented a receipt
signed by Lu acknowledging receipt of ₱50,000.00 as partial payment. 22

However, when the case reached this Court, it was ruled that the transaction entered into by Pablo and Lu was only
a contract to sell, not a contract of sale. The Court held thus:

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (₱50,000.00) from
Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation
that the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of
a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer
ownership to Babasanta except upon full payment of the purchase price.

Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the
execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly
refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be
transferred to him until such time as he shall have effected full payment of the price. Moreover, had the
sellers intended to transfer title, they could have easily executed the document of sale in its required form
simultaneously with their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed
by Pacita Lu should legally be considered as a perfected contract to sell.23

In the instant case, records show that Nicolas signed a mere receipt 24 acknowledging partial payment of ₱250,000.00
from Rodolfo. It states:

July 8, 1993

Received the amount of [₱250,000.00] for 1 share of Diego Building as partial payment for
Nicolas Diego.

(signed)
Nicolas Diego25

As we ruled in San Lorenzo Development Corporation v. Court of Appeals,26 the parties could have executed a
document of sale upon receipt of the partial payment but they did not. This is thus an indication that Nicolas did not
intend to immediately transfer title over his share but only upon full payment of the purchase price. Having thus
reserved title over the property, the contract entered into by Nicolas is a contract to sell. In addition, Eduardo
admitted that he and Rodolfo repeatedly asked Nicolas to sign the deed of sale 27 but the latter refused because he
was not yet paid the full amount. As we have ruled in San Lorenzo Development Corporation v. Court of
Appeals,28 the fact that Eduardo and Rodolfo asked Nicolas to execute a deed of sale is a clear recognition on their
part that the ownership over the property still remains with Nicolas. In fine, the totality of the parties’ acts convinces
us that Nicolas never intended to transfer the ownership over his share in the Diego Building until the full payment of
the purchase price. Without doubt, the transaction agreed upon by the parties was a contract to sell, not of sale.

In Chua v. Court of Appeals,29 the parties reached an impasse when the seller wanted to be first paid the
consideration before a new transfer certificate of title (TCT) is issued in the name of the buyer. Contrarily, the buyer
wanted to secure a new TCT in his name before paying the full amount. Their agreement was embodied in a receipt
containing the following terms: "(1) the balance of ₱10,215,000.00 is payable on or before 15 July 1989; (2) the
capital gains tax is for the account of x x x; and (3) if [the buyer] fails to pay the balance x x x the [seller] has the right
to forfeit the earnest money x x x." 30 The case eventually reached this Court. In resolving the impasse, the Court,
speaking through Justice Carpio, held that "[a] perusal of the Receipt shows that the true agreement between the
parties was a contract to sell." 31 The Court noted that "the agreement x x x was embodied in a receipt rather than in a
deed of sale, ownership not having passed between them." 32 The Court thus concluded that "[t]he absence of a
formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of
ownership, but only a transfer after full payment of the purchase price." 33 Thus, the "true agreement between
the parties was a contract to sell."34

In the instant case, the parties were similarly embroiled in an impasse. The parties’ agreement was likewise
embodied only in a receipt. Also, Nicolas did not want to sign the deed of sale unless he is fully paid. On the other
hand, Rodolfo did not want to pay unless a deed of sale is duly executed in his favor. We thus say, pursuant to our
ruling in Chua v. Court of Appeals35 that the agreement between Nicolas and Rodolfo is a contract to sell.

This Court cannot subscribe to the appellate court’s view that Nicolas should first execute a deed of absolute sale in
favor of Rodolfo, before the latter can be compelled to pay the balance of the price. This is patently ridiculous, and
goes against every rule in the book. This pronouncement virtually places the prospective seller in a contract to sell at
the mercy of the prospective buyer, and sustaining this point of view would place all contracts to sell in jeopardy of
being rendered ineffective by the act of the prospective buyers, who naturally would demand that the deeds of
absolute sale be first executed before they pay the balance of the price. Surely, no prospective seller would
accommodate.

In fine, "the need to execute a deed of absolute sale upon completion of payment of the price generally
indicates that it is a contract to sell, as it implies the reservation of title in the vendor until the vendee has
completed the payment of the price." 36 In addition, "[a] stipulation reserving ownership in the vendor until full
payment of the price is x x x typical in a contract to sell." 37 Thus, contrary to the pronouncements of the trial and
appellate courts, the parties to this case only entered into a contract to sell; as such title cannot legally pass to
Rodolfo until he makes full payment of the agreed purchase price.

c) Nicolas did not surrender or deliver title or possession to Rodolfo.

Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer Rodolfo.
This was made clear by the nature of the agreement, by Nicolas’s repeated demands for the return of all rents
unlawfully and unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo’s repeated demands for Nicolas
to execute a deed of sale which, as we said before, is a recognition on their part that ownership over the subject
property still remains with Nicolas.

Significantly, when Eduardo testified, he claimed to be knowledgeable about the terms and conditions of the
transaction between Nicolas and Rodolfo. However, aside from stating that out of the total consideration of
₱500,000.00, the amount of ₱250,000.00 had already been paid while the remaining ₱250,000.00 would be paid
after the execution of the Deed of Sale, he never testified that there was a stipulation as regards delivery of title or
possession.38

It is also quite understandable why Nicolas belatedly demanded the payment of the rentals. Records show that the
structural integrity of the Diego Building was severely compromised when an earthquake struck Dagupan City in
1990.39 In order to rehabilitate the building, the co-owners obtained a loan from a bank. 40 Starting May 1994, the
property was leased to third parties and the rentals received were used to pay off the loan. 41 It was only in 1996, or
after payment of the loan that the co-owners started receiving their share in the rentals. 42 During this time, Nicolas
was in the USA but immediately upon his return, he demanded for the payment of his share in the rentals which
Eduardo remitted to Rodolfo. Failing which, he filed the instant Complaint. To us, this bolsters our findings that
Nicolas did not intend to immediately transfer title over the property.

It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title to the
property to the prospective buyer pending the latter’s payment of the price in full. It certainly is absurd to assume that
in the absence of stipulation, a buyer under a contract to sell is granted ownership of the property even when he has
not paid the seller in full. If this were the case, then prospective sellers in a contract to sell would in all likelihood not
be paid the balance of the price.

This ponente has had occasion to rule that "[a] contract to sell is one where the prospective seller reserves the
transfer of title to the prospective buyer until the happening of an event, such as full payment of the purchase price.
What the seller obliges himself to do is to sell the subject property only when the entire amount of the purchase price
has already been delivered to him. ‘In other words, the full payment of the purchase price partakes of a suspensive
condition, the nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by
the prospective seller without further remedies by the prospective buyer.’ It does not, by itself, transfer ownership to
the buyer."43

The contract to sell is terminated or cancelled.

Having established that the transaction was a contract to sell, what happens now to the parties’ agreement?

The remedy of rescission is not available in contracts to sell.44 As explained in Spouses Santos v. Court of Appeals:45

In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that
the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because
there was no rescission to speak of in the first place. As we earlier pointed out, in a contract to sell, title remains with
the vendor and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the
payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere
breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an
obligatory force. This is entirely different from the situation in a contract of sale, where non-payment of the price is a
negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership
of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell,
however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying
the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing
the contract and not rescinding it. When the petitioners in the instant case repossessed the disputed house and lot
for failure of private respondents to pay the purchase price in full, they were merely enforcing the contract and not
rescinding it. As petitioners correctly point out, the Court of Appeals erred when it ruled that petitioners should have
judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-
payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. As to Article 1191, it is
subordinated to the provisions of Article 1592 when applied to sales of immovable property. Neither provision is
applicable in the present case.46

Similarly, we held in Chua v. Court of Appeals 47 that "Article 1592 of the Civil Code permits the buyer to pay, even
after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either
judicially or by notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the
ownership until full payment of the price,"48 as in this case.1âwphi1

Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase price, the contract to
sell was deemed terminated or cancelled.49 As we have held in Chua v. Court of Appeals,50 "[s]ince the agreement x x
x is a mere contract to sell, the full payment of the purchase price partakes of a suspensive condition.  The non-
fulfillment of the condition prevents the obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer." Similarly, we held in Reyes v. Tuparan51 that "petitioner’s obligation to sell
the subject properties becomes demandable only upon the happening of the positive suspensive condition, which is
the respondent’s full payment of the purchase price. Without respondent’s full payment, there can be no breach
of contract to speak of because petitioner has no obligation yet to turn over the title. Respondent’s failure to
pay in full the purchase price in full is not the breach of contract contemplated under Article 1191 of the New Civil
Code but rather just an event that prevents the petitioner from being bound to convey title to respondent." Otherwise
stated, Rodolfo has no right to compel Nicolas to transfer ownership to him because he failed to pay in full the
purchase price. Correlatively, Nicolas has no obligation to transfer his ownership over his share in the Diego Building
to Rodolfo.52

Thus, it was erroneous for the CA to rule that Nicolas should have filed a case to fix the period for Rodolfo’s payment
of the balance of the purchase price. It was not Nicolas’s obligation to compel Rodolfo to pay the balance; it was
Rodolfo’s duty to remit it.

It would appear that after Nicolas refused to sign the deed as there was yet no full payment, Rodolfo and Eduardo
hired the services of the Daroya Accounting Office "for the purpose of estimating the amount to which [Nicolas] still
owes [Rodolfo] as a consequence of the unconsummated verbal agreement regarding the former’s share in the co-
ownership of [Diego Building] in favor of the latter." 53 According to the accountant’s report, after Nicolas revoked his
agreement with Rodolfo due to non-payment, the downpayment of ₱250,000.00 was considered a loan of Nicolas
from Rodolfo.54 The accountant opined that the ₱250,000.00 should earn interest at 18%. 55 Nicolas however objected
as regards the imposition of interest as it was not previously agreed upon. Notably, the contents of the accountant’s
report were not disputed or rebutted by the respondents. In fact, it was stated therein that "[a]ll the bases and
assumptions made particularly in the fixing of the applicable rate of interest have been discussed with [Eduardo]." 56

We find it irrelevant and immaterial that Nicolas described the termination or cancellation of his agreement with
Rodolfo as one of rescission. Being a layman, he is understandably not adept in legal terms and their implications.
Besides, this Court should not be held captive or bound by the conclusion reached by the parties. The proper
characterization of an action should be based on what the law says it to be, not by what a party believed it to be. "A
contract is what the law defines it to be x x x and not what the contracting parties call it." 57

On the other hand, the respondents’ additional submission – that Nicolas cheated them by "vanishing and
hibernating" in the USA after receiving Rodolfo’s ₱250,000.00 downpayment, only to come back later and claim that
the amount he received was a mere loan – cannot be believed. How the respondents could have been cheated or
disadvantaged by Nicolas’s leaving is beyond comprehension. If there was anybody who benefited from Nicolas’s
perceived "hibernation", it was the respondents, for they certainly had free rein over Nicolas’s interest in the Diego
Building. Rodolfo put off payment of the balance of the price, yet, with the aid of Eduardo, collected and appropriated
for himself the rents which belonged to Nicolas.

Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the rents.

For his complicity, bad faith and abuse of authority as the Diego Building administrator, Eduardo must be held
solidarily liable with Rodolfo for all that Nicolas should be entitled to from 1993 up to the present, or in respect of
actual damages suffered in relation to his interest in the Diego Building. Eduardo was the primary cause of Nicolas’s
loss, being directly responsible for making and causing the wrongful payments to Rodolfo, who received them under
obligation to return them to Nicolas, the true recipient.1âwphi1 As such, Eduardo should be principally responsible to
Nicolas as well. Suffice it to state that every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith; and every person who, contrary
to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same. 58

Attorney’s fees and other costs.

"Although attorney’s fees are not allowed in the absence of stipulation, the court can award the same when the
defendant’s act or omission has compelled the plaintiff to incur expenses to protect his interest or where the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable
claim."59 In the instant case, it is beyond cavil that petitioner was constrained to file the instant case to protect his
interest because of respondents’ unreasonable and unjustified refusal to render an accounting and to remit to the
petitioner his rightful share in rents and fruits in the Diego Building. Thus, we deem it proper to award to petitioner
attorney’s fees in the amount of ₱50,000.00, 60 as well as litigation expenses in the amount of ₱20,000.00 and the
sum of ₱1,000.00 for each court appearance by his lawyer or lawyers, as prayed for.

WHEREFORE, premises considered, the Petition is GRANTED. The June 29, 2007 Decision and October 3, 2007
Resolution of the Court of Appeals in CA-G.R. CV No. 86512, and the April 19, 2005 Decision of the Dagupan City
Regional Trial Court, Branch 40 in Civil Case No. 99-02971-D, are hereby ANNULLED and SET ASIDE.

The Court further decrees the following:

1. The oral contract to sell between petitioner Nicolas P. Diego and respondent Rodolfo P. Diego
is DECLARED terminated/cancelled;

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

3. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to immediately render an accounting of all
the transactions, from the period beginning 1993 up to the present, pertaining to Nicolas P. Diego’s share in the
Diego Building, and thereafter commanded to jointly and severally remit to the petitioner all rents, monies, payments
and benefits of whatever kind or nature pertaining thereto, which are hereby deemed received by them during the
said period, and made to them or are due, demandable and forthcoming during the said period and from the date of
this Decision, with legal interest from the filing of the Complaint;

4. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED, immediately and without further delay upon
receipt of this Decision, to solidarily pay the petitioner attorney’s fees in the amount of ₱50,000.00; litigation
expenses in the amount of ₱20,000.00 and the sum of ₱1,000.00 per counsel for each court appearance by his
lawyer or lawyers;

5. The payment of ₱250,000.00 made by respondent Rodolfo P. Diego, with legal interest from the filing of the
Complaint, shall be APPLIED, by way of compensation, to his liabilities to the petitioner and to answer for all
damages and other awards and interests which are owing to the latter under this Decision; and

6. Respondents’ counterclaim is DISMISSED.

SO ORDERED.
G.R. No. 164136             January 25, 2006

CARLOS R. TAMAYO, Petitioner,
vs.
MILAGROS HUANG, JOSEFINO HUANG, HUANG SUI SIN, MIGUEL HUANG and IAP TONG HA, Respondents

DECISION

CARPIO MORALES, J.:

On August 14, 1978, respondents Huang Sui Sin, Josefino Huang, Miguel Huang and Milagros Huang, four of five
registered owners of four parcels of land located in Barangay Matina, Davao City and covered by Transfer
Certificates of Title Nos. T-20694, T-20704, T-20717 and a portion of TCT No. T-20729, executed a contract of
"Indenture" with EAP Development Corporation (EAP) under which EAP undertook to manage and develop said
parcels of land into a first class subdivision and sell the lots therein in consideration for which EAP would retain 55%
percent of the sales proceeds.1 The parcels of land were later known as Doña Luisa Village (the subdivision).

On or about April 30, 1981, Carlos R. Tamayo (petitioner) entered into a contract to sell 2 (the contract) with
respondents through their Attorney-in-Fact and Manager, EAP, for the purchase of Lot No. 15, Block No. 11 (the lot)
of the subdivision, covered by TCT No. T-74582 (a transfer from TCT-20717) with an area of 1,424 square meters
at P170.00 per square meter or for the total price of P242,080.00.

Under the contract, petitioner was to pay upon execution P35,749.60 and the balance, including interest at the rate of
14% per annum, in 60 monthly installments of P4,791.40, without necessity of demand; and if petitioner failed to pay
the installments, respondents were given the right to demand interest thereon at the rate of 14% per annum, to be
computed on the same day of the month the installments became due.

Petitioner did make the down payment alright and paid monthly installments up to June 1982 after which he stopped
paying. At that time, petitioner had paid a total of P59,706.60.

In the meantime, as EAP had abandoned the development of the subdivision, respondents filed on June 27, 1985 a
complaint against EAP for rescission of their "Indenture" contract before the Regional Trial Court (RTC) of Davao,
docketed as Civil Case No. 17625. 3

More than five years after the parties executed the contract on April 30, 1981,4 respondents appear to have sent
petitioner a letter demanding payment of the lot, for in a letter 5 dated December 24, 1986 addressed to respondents,
petitioner stated that he intentionally desisted from paying further monthly installments due to non-development of the
subdivision as agreed upon in the contract.

Nothing had been heard from the parties until January 2, 1991 when, after noting that the development of the
subdivision was in progress, petitioner issued Prudential Bank Check No. 023014 6 dated January 2, 1991 in the
amount of P270,527.00 purportedly representing full payment of the purchase price of the lot, for which he was
issued a receipt.7

Respondents immediately returned the check to petitioner, however, by letter of January 9, 1991, they claiming that
their employee had committed a mistake in receiving it. Respondents’ letter bearing the check was returned
unopened, drawing respondents to return it again, by letter 8 dated February 28, 1991 addressed to and received by
petitioner’s son.

Petitioner later filed a complaint 9 on July 24, 1997 against respondents, for specific performance and delivery of title
with damages, before the Housing and Land Use Regulatory Board (HLURB), Region XI, Davao City, the subject of
the petition at bar, anchoring his rights under Presidential Decree No. 957 (the subdivision and condominium buyers’
protective decree).

In his complaint before the HLURB, petitioner posited that from the execution of the contract up to the time he sent
his above-said letter dated December 24, 1986, respondents failed to develop the subdivision, in support of which he
submitted the January 31, 1990 decision 10 of Branch 14 of the RTC Davao City in Civil Case No. 17625 rescinding
the "Indenture" forged by respondents and EAP for the latter’s failure to develop the subdivision. Petitioner also
submitted a Certification11 dated November 24, 1997 of the President of Homeowners Association of the subdivision
that the entrance road of the subdivision connecting to the Quimpo Boulevard was concreted only about two years
earlier, and that as of said date, the drainage system was not completed and some of the roads were not yet
concreted.

In their Answer to the complaint,12 respondents averred that the EAP stopped the development of the subdivision only
by the end of 1983; petitioner had no factual or legal basis for not paying his monthly installment beginning July 1982
since the development of the subdivision was then in progress; the contract was deemed rescinded on April 30, 1986
five (5) years after its execution, and if petitioner wanted to go on with the purchase of the lot, it would be under terms
different from those executed in the contract; petitioner was not entitled to the provisions of Republic Act No. 6552
(the realty installment buyer act) as the therein prescribed condition of two-year continuous payment of monthly
installments for entitlement to rights thereunder was not complied with; and if petitioner had any right at all, it was
only to a refund of what he had already paid.

In the interim, petitioner consigned on September 4, 1997 with the HLURB two checks, one dated August 29, 1997,
and the other dated September 2, 1997, in the amounts of P270,000.00 and P527.00, respectively.13

By a Counter-Manifestation,14 respondents informed that they were refusing to accept petitioner’s checks as these
were issued and consigned long after the expiration of the contract on April 30, 1986.

By Decision15 of February 16, 1998, HLRUB Arbiter Atty. Joselito F. Melchor dismissed petitioner’s complaint, holding
that payment by tender and consignation was not legally effected, the check dated January 9, 1991 having been sent
back to petitioner’s son, and the consignation of the two checks dated 1997 having failed to meet the requirements
set forth by law for a valid consignation.

And so the HLURB decision disposed:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered ordering:

1. The DISMISSAL of the instant case for lack of merit.

2. The complainant to immediately pay in full his account with the payment of corresponding interest and penalty
under the terms and conditions of his contract with the respondents. In the event cancellation procedures of the
contract between the parties have already been effected by respondents in accordance with RA 6552, the
respondent shall give the complainant a grace period of not less than sixty days from finality of this judgment to pay
his unpaid obligations as stated above. Failure on the part of the complainant to pay said unpaid obligations at the
expiration of the grace period, the respondents may cancel the contract after thirty days from receipt by the
complainant of the notice of cancellation or demand for rescission of the contract by notarial act;

3. The complainant to pay respondents the amount of P100,000.00 as damages because of former’s breach of

obligation and P50,000.00 as attorney’s fee; and

4. The complainant to pay the cost of litigation.

SO ORDERED.16 (Underscoring supplied)

Petitioner thereupon filed a petition for review before the HLURB Board of Commissioners questioning the award of
damages and attorney’s fee to respondents, and praying that respondents be ordered to receive the amount
of P270,527.00 consigned with the HLURB Davao City and execute the final deed of sale and deliver the title.

By Decision of August 25, 1998, the HLURB Board of Commissioners affirmed the Arbiter’s decision, but deleted the
award to respondents of damages and costs.

Respondents appealed the HLURB Board of Commissioners’ decision to the Office of the President (OP).

During the pendency of the appeal before the OP, respondents filed on October 13, 2000 a "Manifestation and
Motion,"17 averring for the first time that on April 1997, they sold the disputed lot to one Nene Abijar in whose favor a
"Deed of Absolute Sale" was executed on November 2, 1997, and to whom was issued on November 11, 1997 TCT
No. T-29227918 which cancelled respondents’ TCT No. T-74582. 19 The records disclose that on September 3, 2001,
Abijar oddly filed an Answer with Counter-claim against petitioner and Cross-claim against respondents in HLURB
REM-A-980316-0042 before the HLURB Davao after the said case had been resolved by the HLURB Davao and
while it was on appeal before the OP.20

By Decision of December 12, 2001, the OP upheld the HLURB finding that there was no effective cancellation of the
contract, but nevertheless ruled that Abijar’s right as an innocent purchaser for value must be accorded preference
over that of petitioner, without prejudice to the right of petitioner to recover what he had paid under the
contract.21 Thus the OP held:

x x x M[s]. Abijar, three (3) months before the appellee[-herein petitioner] instituted the present action, bought the
property from the appellants[-herein respondents] apparently without notice that some other person has a right to, or
has interest over the same. Fact is, M[s]. Abijar was able to register title to the property under h[er] name, and there
appears nothing in h[er] title which indicates any encumbrance, lien or inchoate right which may subsequently defeat
h[er] right thereto. A person dealing with a registered land is not, as a rule, required to go behind the register to
determine the condition of the property, and is only charged with notice of the burdens on the property which are
noted on the face of the register or certificate of title [Radiowealth Finance Company v. Manuelito S. Palileo, 197
SCRA 245]. It thus strikes us as rather unconscionable, if not legally impossible, to take the literal application of RA
6552. Otherwise, we shall be asking the appellants to surrender the subject property to the appellee after its sale to,
and registration under the name of, M[s]. Abijar. If that would be the case, then our judgment would run counter to the
doctrine on the efficacy and conclusiveness of the certificate of title which the Torrens system seeks to ensure and
protect.22 (Underscoring supplied)

The OP thus reversed the decision of the HLURB Board of Commissioners, the dispositive portion of which reads:

WHEREFORE, premises considered judgment is hereby MODIFIED to wit:

1) Ordering appellants[-herein respondents] to refund to appellee the amount of P59,706.00, the sum total of the
amortizations paid by the appellee, with legal interest from the date of conveyance by appellants of the subject parcel
of land to Mr. Nene Abijar;

2) Ordering the release to appellee Carlos R. Tamayo of the amount of  P270,537.00 which he consigned to the
HLURB; and

3) Ordering the appellants[-herein respondents] to pay to HLURB the amount of P 20,000 as administrative fine.

SO ORDERED. (Underscoring supplied)

His motion for reconsideration having been denied by Order 23 of June 17, 2003, petitioner filed a petition for review
with the appellate court before which he argued, inter alia, that the OP erred in applying equity in favor of Abijar who
was not a party to the case.

By decision24 rendered on January 23, 2004, the appellate court dismissed the petition for lack of merit. Petitioner’s
motion for reconsideration having been denied by resolution of June 29, 2004, he filed the present petition.

It is not disputed that EAP, acting as the Attorney-in-Fact and Manager of respondents, totally abandoned the
development of the subdivision in 1983, 25 thus prompting respondents to continue development thereof on May 22,
198526 and to even file a complaint to rescind its contract of "Indenture" with EAP which the RTC Davao granted.

Paragraph 8 of the contract between petitioner and respondents through EAP provides:

Eight. – SUBDIVISION IMPROVEMENTS: - To insure the beauty of the subdivision in line with the modern trend of
urban development, EAP Development Corporation hereby obligates itself to provide the subdivision with:

(a) Concrete Paved road or asphalt when price of cement becomes prohibitive

(b) Concrete curbs and gutters

(c) Underground drainage system

(d) Water distribution system

(e) Electrical lighting system

(f) 24 hour Security Guard Service

x x x x (Underscoring supplied)

The subdivision and condominium buyers’ protective decree directs every owner and developer of real property to
provide the necessary facilities, improvements, infrastructures and other forms of development, failure to carry out
which is sufficient cause for the buyer to suspend payment, and any sums of money already paid shall not be
forfeited.

Sections 20 and 23 of P.D. 957 of the same decree further direct as follows:

Sec. 20. Time of Completion. - Every owner or developer shall construct and provide the facilities, improvements,
infrastructures and other forms of development, including water supply and lighting facilities, which are offered and
indicated in the approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any
form of advertisement, within one year from the date of the issuance of the license for the subdivision or
condominium project or such other period of time as may be fixed by the Authority. (Underscoring supplied)
Sec. 23. Non-Forfeiture of Payments. – No installment payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer,
after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer
to develop the subdivision or condominium project according to the approved plans and within the time limit for
complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization
interest but excluding delinquency interests, with interest thereon at the legal rate. (Underscoring supplied)

In case the developer of a subdivision or condominium fails in its obligation under Section 20, Section 23 gives the
buyer the option to demand reimbursement of the total amount paid, or to wait for further development of the
subdivision,27 and when the buyer opts for the latter alternative, he may suspend payment of installments until such
time that the owner or developer had fulfilled its obligation to him.28

From petitioner’s earlier-mentioned letter of December 24, 1986, he made clear his intention not to seek
reimbursement of the total amount he had already paid but to comply with his obligation to pay the balance in full
upon completion of the development of the subdivision.

xxxx

Please be informed that I int[en]tionally stopped paying my monthly installment because I could not see any
development in your subdivision, like concrete road, electrical facilities, drainage and water among others as
stipulated in our contract. Under existing laws, I understand I can suspend my payment pending your completion of
the subdivision facilities as agreed in our contract. I’ll only resume payment if you complete the development of the
subdivision.

x x x x (Underscoring supplied)

The claim-advice of petitioner notwithstanding, respondents were mum about it. Such silence suggests an admission
of the veracity and validity of petitioner’s claim.29

Respondents nevertheless claim that the contract was "deemed rescinded" five years after its execution on April 30,
1981. Respondents’ demand for payment of the unpaid balance sometime between the period of April 30, 1986 to
December 24, 1986 betrays such claim, however. In any event, it puts them in estoppel.

As for respondents’ position that before petitioner could lawfully withhold his monthly payments, he needed to secure
previous clearance from the HLURB following Section 23 of Rule VI of the Rules implementing the subdivision and
condominium buyers’ protective decree, law and jurisprudence are not on their side.

Section 23 of PD 957 -- the law upon which the Implementing Rule cited was based -- requires  only due notice to the
owner or developer for stopping further payments by reason of the latter’s failure to develop the subdivision
according to the approved plans and within the time limit. x x x

To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the enabling law. An
implementing rule or regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule
that is not consistent with the statute itself is null and void. x x x

Section 23 of Rule VI of the Implementing Rules cannot rise higher than Section 23 of PD 957, which is the source of
its authority. For that matter, PD 957 would have expressly required the written approval of the HLURB before any
stoppage of amortization payments if it so intended, in the same manner that the decree specifically mandates
written consent or approval by the NHA (now the HLURB) in Section 18.

xxxx

Apropos, to require clearance from the HLURB before stopping payment would not be in keeping with the intent of
the law to protect innocent buyers of lots or homes from scheming subdivision developers. To give full effect to such
intent, it would be fitting to treat the right to stop payment to be immediately effective upon giving due notice to the
owner or developer or upon filing a complaint before the HLURB against the erring developer . Such course of action
would be without prejudice to the subsequent determination of its propriety and consequences, should the
suspension of payment subsequently be found improper.30 (Italics supplied)

Section 4 of the realty installment act directs as follows in case a buyer defaults in the payment of succeeding
installments where he has paid less than two years of installments, as in petitioner’s case:

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. (Underscoring supplied)

As noted earlier, petitioner, by letter of December 24, 1986, informed respondents that he desisted from further
paying monthly installments and that he would resume payment if the development of the subdivision had been
completed. Yet respondents sent no notarized notice or any notice of cancellation at all. In fact, it was only after
petitioner filed on July 24, 1997 the complaint before the HLURB that respondents offered to reimburse petitioner of
the total amount he had already paid.

The contract not having been cancelled in accordance with law, it has remained valid and subsisting. It was,
therefore, within petitioner’s right to maintain his option to await the completion of the development of and
introduction of improvements in the subdivision and thereafter, upon full payment of the purchase price, without
interest, compel respondents to execute a deed of absolute sale.

The decision of the OP, however, which passed upon the sale of the lot to Abijar whom it found to be a buyer in good
faith and for value – basis of its ruling that petitioner can no longer exercise above-said right, which decision was
deemed affirmed too by the appellate court, does not lie. For, the subsequent sale was brought to light by
respondents only while their appeal was pending before the OP, and as correctly argued by petitioner, Abijar was not
a party to the case. Parenthetically, the records of the case do not bear whether the deed of absolute sale in favor of
Abijar was in fact registered, and TCT No. T-74582 in the name of respondents was indeed cancelled and TCT No.
T-292279 in the name of Abijar was issued in its stead. As petitioner points out, what was appended to the records of
the OP was a plain uncertified photocopy of TCT No. T-292279.

The decision of the OP which was deemed affirmed by the appellate court ordering a full refund of the installment
payments of petitioner in the amount of P59,706.00 and the release to petitioner of the amount of P270,537.00 he
had consigned does not lie too, for under the law, petitioner is entitled to the lot he contracted to purchase after
payment of the outstanding balance which he was ready and willing to do.31

If the sale of the lot to Abijar is eventually declared valid, respondents should refund petitioner its actual value as
resold to Abijar, to bear 12% interest per annum computed from the date of such sale until fully paid or deliver a
substitute lot at the option of petitioner. So this Court instructs in Active Realty and Development Corporation v.
Daroya:32

In the case at bar, respondent offered to pay for her outstanding balance of the contract price but respondent refused
to accept it. Neither did petitioner adduce proof that the respondent's offer to pay was made after the effectivity date
stated in its notice of cancellation. Moreover, there was no formal notice of cancellation or court action to rescind the
contract. Given the circumstances, we 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
after she has paid for, not just the contract price, but more than the consideration stated in the contract to sell.

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. (Italics in the original; underscoring supplied)

This Court, not being a trier of facts, thus resolves to remand the case to the HLURB for a proper determination of
the respective rights of the parties vis a vis the alleged sale of the lot to Abijar in accordance with the foregoing
discussions.

WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE. The case is REMANDED to the
Housing and Land Use Regulatory Board of Davao City for further proceedings in accordance with the directive in the
immediately preceding paragraph.

SO ORDERED.
G.R. No. 160107               October 22, 2014

SPOUSES JAIME SEBASTIAN AND EVANGELINE SEBASTIAN, Petitioners,

vs.
BPI FAMILY BANK, INC., CARMELITA ITAPO AND BENJAMIN HAO, Respondents.

DECISION

BERSAMIN, J.:

The protection of Republic Act No. 6552 (Realty Installment Buyer Protection Act) does not cover a loan extended by
the employer to enable its employee to finance the purchase of a house and lot. The law protects only a buyer
acquiring the property by installment, not a borrower whose rights are governed by the terms of the loan from the
employer.

The Case

Under appeal is the decision promulgated on November 21, 2002, 1 whereby the Court of Appeals (CA) affirmed the
dismissal of the action for injunction filed by the petitioners against the respondents to prevent the foreclosure of the
mortgage constituted on the house and lot acquired out of the proceeds of the loan from respondent BPI Family Bank
(BPI Family), their employer.

Antecedents

The petitioners are spouses who used to work for BPI Family. At the time material to this case, Jaime was the Branch
Manager of BPI Family’s San Francisco del Monte Branch in Quezon City and Evangeline was a bank teller at the
Blumentritt Branch in Manila. On October 30, 1987, they availed themselves of a housing loan from BPI Family as
one of the benefits extended to its employees. Their loan amounted to ₱273,000.00, and was covered by a Loan
Agreement,2 whereby they agreed that the loan would be payable in 108 equal monthly amortizations of ₱3,277.57
starting on January 10, 1988 until December 10, 1996; 3 and that the monthly amortizations would be deducted from
his monthly salary.4 To secure the payment of the loan, they executed a real estate mortgage in favor of BPI
Family5 over the property situated in Bo. Ibayo, Marilao, Bulacan and covered by TCT No. T-30.827 (M) of the
Register of Deeds of Bulacan.6

Apart from the loan agreement and the real estate mortgage, Jaime signed an undated letter-memorandum
addressed to BPI Family,7 stating as follows:

In connection with the loan extended to me by BPI Family Bank, I hereby authorize you to automatically deduct an
amount from my salary or any money due to me to be applied to my loan, more particularly described as follows:

xxxx

This authority is irrevocable and shall continue to exist until my loan is fully paid. I hereby declare that I have signed
this authority fully aware of the circumstances leading to the loan extended to me by BPI Family Bank and with full
knowledge of the rights, obligations, and liabilities of a borrower under the law.

I am an employee of BPI Family Bank and I acknowledge that BPI Family Bank has granted to me the above-
mentioned loan in consideration of this relationship. In the event I leave, resign or am discharged from the service of
BPI Family Bank or my employment with BPI Family Bank is otherwise terminated, I also authorize you to apply any
amount due me from BPI Family Bank to the payment of the outstanding principal amount of the aforesaid loan and
the interest accrued thereon which shall thereupon become entirely due and demandable on the effective date of
such discharge, resignation or termination without need of notice of demand, and to do such other acts as may be
necessary under the circumstances. (Bold emphasis added)

x x x x.

The petitioners’ monthly loan amortizations were regularly deducted from Jaime’s monthly salary since January 10,
1988.1âwphi1 On December 14, 1989, however, Jaime received a notice of termination from BPI Family’s Vice
President, Severino P. Coronacion, 8 informing him that he had been terminated from employment due to loss of trust
and confidence resulting from his wilful non-observance of standard operating procedures and banking laws.
Evangeline also received a notice of termination dated February 23, 1990, 9 telling her of the cessation of her
employment on the ground of abandonment. Both notices contained a demand for the full payment of their
outstanding loans from BPI Family, viz:
Demand is also made upon you to pay in full whatever outstanding obligations by way of Housing Loans,Salary
Loans, etc. that you may have with the bank. You are well aware that said obligations become due and demandable
upon your separation from the service of the bank.10 (Emphasis supplied.)

Immediately, the petitioners filed a complaint for illegal dismissal against BPI Family in the National Labor Relations
Commission (NLRC).11

About a year after their termination from employment, the petitioners received a demand letter dated January 28,
1991 from BPI Family’s counsel requiring them to pay their total outstanding obligation amounting to
₱221,534.50.12 The demand letter stated that their entire outstanding balance had become due and demandable
upon their separation from BPI Family. They replied through their counsel on February 12, 1991. 13

In the meantime, BPI Family instituted a petition for the foreclosure of the real estate mortgage. 14 The petitioners
received on March 6, 1991 the notice of extrajudicial foreclosure of mortgage dated February 21, 1991.

To prevent the foreclosure of their property, the petitioners filed against the respondents their complaint for injunction
and damages with application for preliminary injunction and restraining order 15 in the Regional Trial Court (RTC) in
Malolos, Bulacan.16 They therein alleged that their obligation was not yet due and demandable considering that the
legality of their dismissal was still pending resolution by the labor court; hence, there was yet no basis for the
foreclosure of the mortgaged property; and that the property sought to be foreclosed was a family dwelling in which
they and their four children resided.

In its answer with counterclaim,17 BPI Family asserted that the loan extended to the petitioners was a special privilege
granted to its employees; that the privilege was coterminous withthe tenure of the employees with the company; and
that the foreclosure of the mortgaged property was justified by the petitioners’ failure to pay their past due loan
balance.

Judgment of the RTC

On June 27, 1995, the RTC rendered judgment,18 disposing thusly:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment DISMISSING the instant
case as well as defendant bank’s counterclaim withoutany pronouncement as to costs.

SO ORDERED.19

Decision of the CA

The petitioners appealed upon the following assignment of errors, namely:

I. THE TRIAL COURT ERRED IN FINDING THAT APPELLEE BANK’S FORECLOSURE OF THE REAL ESTATE
MORTGAGE CONSTITUTED ON APPELLANT’S FAMILY HOME WAS IN ORDER.

A. Appellants cannot be consideredas terminated from their employment with appellee bank during the pendency of
their complaint for illegal dismissal with the NLRC.

B. Appellee bank wrongfully refused to accept the payments of appellants’ monthly amortizations.

II. THE TRIAL COUT ERRED IN DENYING APPELLANT’S PRAYER FOR INJUNCTION.

A. The foreclosure of appellants’ mortgage was premature.

B. Appellants are entitled to damages. 20

On November 21, 2002, the CA promulgated its assailed decision affirming the judgment of the RTC in toto. 21

The petitioners then filed their motion for reconsideration, 22 in which they contended for the first timethat their rights
under Republic Act No. 6552 (Realty Installment Buyer Protection Act) had been disregarded, considering that
Section 3 of the law entitled them to a grace period within which to settle their unpaid installments without interest;
and that the loan agreement was in the natureof a contract of adhesion that must be construed strictly against the
one who prepared it, that is, BPI Family itself.

On September 18, 2003, the CA denied the petitioners’ motion for reconsideration. 23
 Issues

In this appeal, the petitioners submit for our consideration and resolution the following issues, to wit:

WHETHER OR NOT RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING THE

FORECLOSURE OF THE REAL ESTATE MORTGAGE ON PETITIONERS’ FAMILY HOME IN ORDER.

WHETHER OR NOT RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DENYING PETITIONERS’

MOTION FOR RECONSIDERATION DESPITE JUSTIFIABLE REASONS THEREFOR.24

Ruling

The petition for review has no merit.

When the petitioners appealed the RTC decision to the CA, their appellants’ brief limited the issues to the following:

(a) Whether or not appellee bank wrongfully refused to accept payments by appellants of their monthly amortizations.

(b) Whether or not the foreclosure of appellants’ real estate mortgage was premature. 25

The CA confined its resolution to these issues. Accordingly, the petitioners could not raise the applicability of
Republic Act No. 6552, or the strict construction of the loan agreement for being a contract of adhesion as issues for
the first time either in their motion for reconsideration or in their petition filed in this Court. To allow them to do so
would violate the adverse parties’ right to fairness and due process. As the Court held in S.C. Megaworld
Construction and Development Corporation v. Parada:26

It is well-settled that no question will be entertained on appeal unless it has been raised in the proceedings below.
Points of law, theories, issues and arguments not brought to the attention of the lower court, administrative agency or
quasi-judicial body, need not be considered by the viewing court, as they cannot be raised for the first time at that
late stage. Basic considerations of fairness and due process impel this rule. Any issue raised for the first time on
appeal is barred by estoppel.

The procedural misstep of the petitioners notwithstanding, the Court finds no substantial basis to reverse the
judgments of the lower courts.

Republic Act No. 6552 was enacted to protect buyers of real estate on installment payments against onerous and
oppressive conditions.27 The protections accorded to the buyers were embodied in Sections 3, 4 and 5 of the law, to
wit:

Section 3. In all transactions or contracts, involving the sale or financing of real estateon 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 byRepublic Act Sixty-three hundred
eighty-nine, where the buyer has paid atleast 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 that 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
per cent every year but not to exceed ninety per cent of the total payments made; Provided, That the actual
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. In case where less than two years of installments were paid, the seller shall give the buyers a grace
period of not less than sixty days from the date the installment become 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.
SECTION 5. Under Section 3 and 4,the buyer shall have the right to sell his rights or assign the same to another
person or to reinstate the contract by updating the account during the grace period and before actual cancellation of
the contract. The deed of sale or assignment shall be done by notarial act.

Having paid monthly amortizations for two years and four months, the petitioners now insist that they were entitled to
the grace period within which to settle the unpaid amortizations without interest provided under Section 3,
supra.28 Otherwise, the foreclosure of the mortgaged property should be deemed premature inasmuch as their
obligation was not yet due and demandable.29

The petitioners’ insistence would have been correct if the monthly amortizations being paid to BPI Family arose from
a sale or financing of real estate. In their case, however, the monthly amortizations represented the installment
payments of a housing loan that BPI Family had extended to them as an employee’s benefit. The monthly
amortizations they were liable for was derived from a loan transaction, not a sale transaction, thereby giving rise to a
lender-borrower relationship between BPI Family and the petitioners. It bears emphasizing that Republic Act No.
6552 aimed to protect buyers of real estate on installment payments, not borrowers or mortgagors who obtained a
housing loan to pay the costs of their purchase of real estate and used the real estate assecurity for their loan. The
"financing of real estate in installment payments" referred to in Section 3, supra, should be construed only as a mode
of payment vis-à-vis the seller of the real estate, and excluded the concept of bank financing that was a type of loan.
Accordingly, Sections 3, 4 and 5, supra, must be read as to grant certain rights only to defaulting buyers of real
estate on installment, which rights are properly demandable only against the seller of real estate.

Thus, in Luzon Brokerage Co., Inc. v.Maritime Building Co., Inc.,30 the Court held:

Congress in enacting in September 1972 Republic Act 6552 (the Maceda law), has by law which is its proper and
exclusive province (and not that of this Court which is not supposed to legislate judicially) has taken care of Justice
Barredo’s concern over "the unhappy and helpless plight of thousands upon thousands of subdivision buyers" of
residential lots.

The Act even in residential properties recognizes and reaffirms the vendor's right to cancel the contractto sell upon
breach and non-payment of the stipulated installments but requires a grace period after at least two years of regular
installment payments (of one month for every one year of installment payments made, but to be exercise by the
buyer only once in every five years of the life of the contract) with a refund of certain percentages of payments made
on account of the cancelled contract (starting with fifty percent with gradually increasing percentages after five years
of installments). In case of industrial and commercial properties, as in the case at bar, the Act recognizes and
reaffirms the Vendor's right unqualifiedly to cancel the sale upon the buyer's default.

The petitioners purchased the realestate from PHILVILLE Realty, 31 not from BPI Family. Without the buyer-seller
relationship between them and BPI Family, the provisions of Republic Act No. 6552 were inapplicable and could not
be invoked by them against BPI Family.

Apart from relying on the grace period provided in Republic Act No. 6552 to assert the prematurity of the foreclosure
of the mortgage,32 the petitioners argue that the foreclosure of the mortgage was null and void because BPI Family’s
acceptance of their late payments estopped it from invoking sanctions against them. 33 They further argue that the
printed conditions appearing at the back of BPI Family’s official receipt, 34 which the CA cited to affirm the validity of
the foreclosure, partook of a contract of adhesion that must be strictly construed against BPI Family as the party who
prepared the same.35

The petitioners’ arguments do not persuade. To reiterate, their reliance on Republic Act No. 6552 was misplaced
because its provisions could not extend to a situation bereft of any seller-buyer relationship. Hence, they could not
escape the consequences of the maturity of their obligation by invoking the grace period provided in Section 3, supra.

The CA correctly found that there was basis to declare the petitioners’ entire outstanding loan obligation matureas to
warrant the foreclosure of their mortgage. It is settled that foreclosure is valid only when the debtor is in default in the
payment of his obligation. 36 Here, the records show that the petitioners were defaulting borrowers, a fact that the CA
thoroughly explained in the following manner:

Appellants insist that there was no valid ground for appellee bank to institute the foreclosure proceedings because
they still have a pending case for illegal dismissal before the NLRC. They argue that the reason for the bank’s
foreclosure is their dismissal from employment. As they are still questioning the illegality of their dismissal, the bank
has no legal basis in foreclosing the property.

xxxx

The arguments fail to persuade Us.

First, appellants cannot rely on the mere possibility that if the decision of the NLRC will be in their favor, part of the
reliefs prayed for would be reinstatement without loss of seniority and other privilege. Such argument is highly
speculative. On the contrary, in a thirteen-page decision, the Labor Arbiter exhaustively discussed the validity of
appellant Jaime Sebastian’s termination. x x x
 xxxx

Moreover, appellants appealed the Labor Arbiter’s decision as early as January 10, 1994. To date, however, nothing
has been heard from appellants if they obtained a favorable judgment from the NLRC.

Second, even if it turns out the appellants werenot validly terminated from their employment, there is valid reason to
foreclose the mortgaged property.

Appellants themselves admit that they were in arrears when they made the late payments in March, 1991. While this
admission was not in the course of the testimony of appellant Jaime Sebastian, this was done during the hearing of
the case when the trial judge propounded the question to him. Hence, this constitute (sic) judicial admission. An
admission, verbal or written, made by a party in the course of the trial or other proceedings in the same case does
not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or
that no such admission is made. Judicial admissions are those made voluntarily by a party, which appear on record
in the proceedings of the court. Formal acts done by a party or his attorney in court on the trial of a cause for the
purpose of dispensing with proof by the opposing party of some fact claimed by the latter to be true.

xxxx

Fourth, the terms and conditions of the loan agreement, promissory notes and the real estate mortgage contract, do
not partake of a contract of adhesion. It must be noted that appellants are personnel of the bank.

Jaime Sebastian was then a branch manager while his wife Evangeline was a bank teller. It is safe to conclude that
they are familiar with the documents they signed, including the conditions stated therein. It is also presumed that they
take ordinary care of their concerns and that they voluntarily and knowingly signed the contract.

Appellant Jaime Sebastian, in his letter addressed to appellee bank, even acknowledged that "in the event of
resignation or otherwise terminated from his employment, the principal as well as the interest due shall become
entirely due and demandable" (Exh. "E"). The freedom to enter into contracts is protected by law and the courts are
not quick to interfere with such freedom unless the contract is contrary to law, morals, good customs, public policy or
public order. Courts are not authorized to extricate parties from the necessary consequences of their acts, and the
fact that the contractual stipulations may turn out to be financially disadvantageous will not relieve parties thereto of
their obligations,

Fifth, We cannot also buy appellants’ argument that appellee refused to accept the subsequent payments made by
them. It is settled that an issue which was not raised during the trial in the court below could not be raised for the first
time on appeal, as to do so, would be offensive to the basic rules of fair play, justice and due process. Here,
appellant Jaime Sebastian twice testified before the Court, first, during the hearing on the preliminary injunction and
on the trial proper. Nothing was mentioned about the refusal on the part of the bank to accept their subsequent
payments.

Assuming, arguendo, that appellee bank indeed refused to accept the subsequent payment from appellants, they
could have consigned the same before the Court. They failed to do so. There was no effort on their part to continue
paying their obligations.

Thus, having signed a deed of mortgage in favor of appellee bank, appellants should have foreseen thatwhen their
principal obligation was not paid when due, the mortgagee has the right to foreclose the mortgage and to have the
property seized and sold with a view to applying the proceeds to the payment ofthe principal obligation. 37

Equally notable was that Jaime’s undated letter-memorandum to BPI Family expressly stated the following:

x x x In the event I leave, resign or amdischarged from the service of BPI Family Bank or my employment with BPI
Family Bank is otherwise terminated, I also authorize you to apply any amount due me from BPI Family Bank to the
payment of the outstanding principal amount of the aforesaid loan and the interest accrued thereon which shall there
upon become entirely due and demandable on the effective date of such discharge, resignation or termination
without need of notice of demand, and to do such other acts as may be necessary under the circumstances. 38

(Bold emphasis supplied.)

The petitioners thereby explicitly acknowledged that BPI Family Bank had granted the housing loan inconsideration
of their employer employee relationship. They were thus presumed to understand the conditions for the grant of their
housing loan. Considering that the maturity of their loan obligation did not depend on the legality of their termination
from employment, their assertion that the resolution of their labor complaint for illegal dismissal was prejudicial to the
ripening of BPI Family’s cause of action was properly rejected. Indeed, a finding of illegal dismissal in their favor
would not automatically and exclusively result in their reinstatement. As fittingly ruled in Bani Rural Bank, Inc. v. De
Guzman:39
"By jurisprudence derived from this provision, separation pay may [also] be awarded to an illegally dismissed
employee in lieu of reinstatement." Section 4(b), Rule I of the Rules Implementing Book VI of the Labor Code
provides the following instances when the award of separation pay, in lieu of reinstatement to an illegally dismissed
employee, is proper: (a) when reinstatement is no longer possible, in cases where the dismissed employee s position
is no longer available; (b) the continued relationship between the employer and the employee is no longer viable due
to the strained relations between them; and(c) when the dismissed employee opted not to be reinstated, or the
payment of separation benefits would be for the best interest of the parties involved. In these instances, separation
pay is the alternative remedy to reinstatement in addition to the award of backwages. The payment of separation pay
and reinstatement are exclusive remedies. The payment of separation pay replaces the legal consequences of
reinstatement to an employee who was illegally dismissed.

Nonetheless, it is noteworthy that the Labor Arbiter ultimately ruled that Jaime’s dismissal was valid and legal. Such
ruling affirmed the legality of the termination of James from BPI Family’s employment. Under the circumstances, the
entire unpaid balance of the housing loan extended to him by BPI Family became due and demandable upon such
termination in accordance with Jaime’s express and written commitment to BPI Family. Even if we were to disregard
this condition, their admission of default in their monthly amortizations constituted an event of default within the
context of Section 7 of the loan agreement that produced the same effect of rendering any outstanding loan balance
due and demandable. Section 7 the loan agreement reads as follows:

SECTION 7. EVENTS OF DEFAULT

If any of the following Events of Default shall have occurred and be continuing:

a) The Borrower shall fail to pay when due the Loan(s) any installment thereof, or any other amount payable under
this Agreement the Note(s) or under the Collateral; or

xxxx

then, and in any such event, the Bank may by written notice to the Borrower cancel the Commitment and/or declare
all amounts owing to the Bank under this Agreement and the Note(s), whether of principal, interest or otherwise, to
be forthwith due and payable, whereupon all such amounts shall become immediately due and payable without
demand or other notice of any kind, all of which are expressly waived by the Borrower. The Borrower shall pay on
demand by the Bank, in respect of any amount or principal paid in advance of stated maturity pursuant to this Section
7, a prepayment penalty equal to the rate mentioned in Section 2.07 (c).40

With demand, albeit unnecessary, having been made on the petitioners, they were undoubtedly in default in their
obligations.

The foreclosure of a mortgage is but the necessary consequence of the non-payment of an obligation secured by the
mortgage.1âwphi1 Where the parties have stipulated in their agreement, mortgage contract and promissory note that
the mortgagee is authorized to foreclose the mortgage upon the mortgagor's default, the mortgagee has a clear right
to the foreclosure in case of the mortgagor's default. Thereby, the issuance of a writ of preliminary injunction upon the
application of the mortgagor to prevent the foreclosure will be improper. 41 As such, the lower courts did not err in
dismissing the injunction complaint of the petitioners.

WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated on
November 21, 2002; and ORDERS the petitioners to pay the costs of suit.

SO ORDERED.
 G.R. No. 208185, September 06, 2017

PRISCILLA ZAFRA ORBE, Petitioner, v. FILINVEST LAND, INC., Respondent.

DECISION

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 31 to become available, it refers to 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 Certiorari 3 under Rule 45 of the 1997 Rules of Civil Procedure praying that the
assailed October 11, 2012 Decision4 and July 3, 2013 Resolution 5 of the Court of Appeals in CA-G.R. SP No. 118285
be reversed and set aside.

The assailed Court of Appeals October 11, 2012 Decision reversed the prior rulings of the Office of the President, the
Board of Commissioners of the Housing and Land Use Regulator; Board (HLURB Board of Commissioners), and of
Housing and Land Use 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:

Total Contract Price : [P]2,566,795.00

Reservation Fee : [P]20,000.00

Down Payments : [P]493,357.00

Payable on installments : [P]54,818.00 monthly

from 8/4/01-4/4/02

Balance : [P]2,053,436.00

Payable on installments

for a period of 7 years

from 5/8/024/8/09

First year : [P]27,936.84 monthly

Second year : [P]39,758.84 monthly

Third year : [P]41,394.84 monthly

Fourth year to Seventh year : [P]42,138.84 monthly9

From June 17, 2001 to July 14, 2004, Orbe paid a total of P608,648.20. These were mainly through several
Metrobank checks, for which Filinvest issued official receipts.10 Check payments were made as follows:
METROBANK CHECK NO. DATE                      AMOUNT

Metro Bank Check No. 0306533 June 17, 2001 [P]20,000.00

Metro Bank Check No. 0306544 July 29, 2001 [P]54,818.00

Metro Bank Check No. 0306545 Aug. 29, 2001 [P]54,818.00

Metro Bank Check No. 0306546 Sept. 29, 2001 [P]54,818.00

Metro Bank Check No. 032()243 May 8, 2002 [P]100,000.00

Metro Bank Check No. 0320244 May 22, 2002 [P]100,000.00

Metro Bank Check No. 0370882 March 26, 2003 [P]80,000.00

 Metro Bank Check No. 0370883 April 26, 2003 [P]75,789.00

Metro Bank Check No. 0401000 Feb. 12, 2004 [P]37,811.00

Metro Bank Check No. 0531301 July 14, 2004 [P]30,000.0011

Orbe was unable to make further payments allegedly on account of financial difficulties. 12

On October 4, 2004, Filinvest sent a notice of cancellation,13 which was received by Orbe on October 18, 2004. 14 The
notice and its accompanying jurat read:
PRISCILLA Z. ORBE
#107 Morena St. Villaverde Homes
Novaliches, Q,C.

Re: Account No.    6181426

Project        HIGH
Phase          1
Block          10
Lot           1

Gentlemen (sic):

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,Republic of the

Philippines )
Makati City )S.S.

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.Doc. No.314
Page No. 64
Book No. XVIII
Series of 200415

Noting that "efforts . . . to seek for a reconsideration of said cancellation . . . proved futile," and that the parcel had
since been sold by Filinvest to a certain Ruel Ymana "in evident bad faith,"16 Orbe filed against Filinvest a Complaint
for refund with damages dated November 13, 2007 before the HLURB Field Office. 17 Orbe emphasized that she had
made payments "beginning June, 2001 up to October, 2004." 18 She further asserted that the October 4, 2004 Notice
did not amount to an "effective cancellation by notarial act."19

In its Answer with Counterclaim, Filinvest asserted that Orbe failed to make 24 monthly amortization payments on her
account, and thus, could not benefit from Section 3 of Republic Act No. 6552. According to Filinvest, the P608,648.20
paid by Orbe from June 17, 2001 to July 14, 2004 covered only the reservation fee, down payment, and late payment
charges, exclusive of the monthly amortization payments stipulated in the Purchase Agreement. 20

In his July 25, 2008 Decision,21 Arbiter Soriano of the HLURB Field Office ruled in favor of Orbe. He held that since
Orbe made payments "from 17 June 2001 to 14 July 2004, or a period of more than two years," 22 all of which should
be credited to the principal,23 she was entitled to a refund of the cash surrender value equivalent to 50% of the total
payments she had made, pursuant to 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:

[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 ears 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

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 ha.s 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,46Pagtalunan v. Vda. de Manzano,47Active Realty and Development v. Daroya,48Associated Marine Officers
and Seamen's Union of the Philippines PTGWO-ITF v. Decena,49 and Gatchalian Realty v. Angeles.50

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." 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 often times 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 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 recognizes to be
disadvantageous and onerous conditions, the Maceda Law's 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 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.

If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments made and, after five years of installments, an additional
five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual
(b)
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.
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 tom unduly claiming 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 disregard for the value that the buyer has actually conveyed. 57 It refers
to the 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 spe 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 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:
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
downpayment.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.

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.

As respondent failed to pay at least two years of installments, he is not, under above-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 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
mon1hly 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:
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
lvfanila.66 (Emphasis supplied)
This is not, however, the valid notarial act contemplated by the Maceda Law.

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 acknowledgement, 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;

is attested to be personally known to the notary public or identified by the notary public through competent
(b)
evidence of identity as defined by these Rules; and

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, declares that he has executed the instrument or
(c)
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 acknowledgement is necessary in the customary rendition of public documents, with greater reason
should an acknowledgement be imperative in notices of cancellation or demands for rescission made under Sections
3 and 4 of the Maceda Law.

Through an acknowledgement, 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 by-laws.

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 acknowledgement, 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:
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;

is personally known to the notary public or identified by the notary public through competent evidence of identity
(b)
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 acknowledgement 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:

at least one current identification document issued by an official agency bearing the photograph and signature of
(a)
the individual; or

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
(b)
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:

1. 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 Persons (NCWDP), Department of Social Welfare and
Development (DSWD) certification; or
2. 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."73Realty Exchange Venture Corp. v. Sendino 74 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."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,80Coca Cola Bottlers Philippines, Inc. v. Dela Cruz,81Victorio-Aquino v. Pacific Plans,
Inc.,82 and Reyes 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 acknowledgement 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 by-laws.

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.

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. Angeles 88 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,89Pagtalunan v. Vda. de Manzano,90Active 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 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 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 computedfrom 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 notice 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 specifical1y 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 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)
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)
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 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, 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 CA-G.R. SP 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.
 G.R. No. 230832, November 12, 2018

ROYAL PLAINS VIEW, INC. AND/OR RENATO PADILLO, Petitioners, v. NESTOR C. MEJIA, Respondent.

DECISION

J. REYES, JR., J.:

The Case

This resolves the Petition for Review on Certiorari1 questioning the Decision2 dated May 26, 2016 and the
Resolution3 dated February 7, 2017 of the Court of Appeals (CA)-Cagayan de Oro City, in CA-GR. CV No. 03284-
MIN which reversed and set aside the Decision 4 dated April 12, 2013 of the Regional Trial Court (RTC) ofTagum City,
Davao del Norte, Branch 31 that dismissed with prejudice Civil Case No. 4263, for Declaration of Nullity of the
Instrument denominated as Rescission of Conditional Sale, Specific Performance, Sums of Money, etc. 5

The Facts

Subject of the present controversy is a parcel of land in Magdum, Tagum City, Davao del Norte known as Lot No.
371 with an original area of 123,099 square meters, more or less, covered by Original Certificate of Title (OCT) No.
(P-1324) P-2326 of the Register of Deeds of the Province of Davao. The late Dominador Ramones (Dominador) was
the registered owner of the said parcel of land.7

During his lifetime, Dominador executed a Contract of Sale in favor of Bias Mejia (Bias), father of respondent Nestor
C. Mejia (Nestor), involving the western portion of the subject land, consisting of 7,309 square meters. 8 The parties
however, agreed to reduce the area of the purchased lot to six hectares. 9 Despite the sale, the title over the property
remained in the name of Dominador married to Maria Ramones (spouses Ramones). 10 The remaining portion of the
lot was sold to a certain Pablo Benitez (Pablo) on February 17, 1965 through a Deed of Absolute Sale of Land. 11

After that transaction, Bias died and he was survived by his son, Nestor. Sometime in 2005, Nestor met petitioner
Renato Padillo (Renato), the President of petitioner Corporation, Royal Plains View, Inc., a real estate company. At
that time, Nestor was in actual physical occupation of a parcel of land with an entire area of 12.3 hectares covered by
OCT No. (P-1324) P-232, registered in the name of spouses Ramones.12 Nestor had in his possession, too, of an
ancient instrument denominated as Contract of Sale executed on September 17, 1960 by the parties then alive
(Dominador in favor of Blas, for the six hectares) and another Deed of Sale dated February 17, 1965, in favor of
Pablo, for the other 6.3 hectares.13

Renato and Nestor agreed to split the entire lot (OCT No. [P-1324] P-232) into two titles resulting to the issuance of
Transfer Certificates of Title (TCT) Nos. T-225549 and T-225550.14 Both titles were still under the name of spouses
Ramones.15 As agreed upon, petitioner Corporation (through Renato) retained TCT No. T-225549 while TCT No. T-
225550 was delivered to a person named Casimiro Benitez.16

On March 23, 2005, Nestor and petitioner Corporation, represented by Renato's wife, Rosemarie Padillo, entered into
a contract denominated as Deed of Conditional Sale involving that said parcel of land covered by TCT No. T-225549
and registered in the name of Dominador.17 Under that contract, petitioner Corporation bound itself to pay Nestor the
sum of P8,000,000.00 of which P500,000.00 was for down payment. The balance was to be paid in 36 equal monthly
installments of P208,333.30 beginning June 30, 2005 up to May 30, 2008.18

The March 23, 2005 Deed of Conditional Sale was later revoked and a new deed was executed on April 11, 2007
between Nestor and petitioner Corporation, represented by Renato.19 The new Deed of Conditional Sale20 stated that
petitioner Corporation had paid respondent the amount of P1,972,000.00 and the remaining balance was to be paid
in 40 equal monthly installment of P150,000.00 starting on July 1, 2007 and ending in June 2010.

It was also alleged that petitioner Corporation (through Renato) and Nestor entered into a verbal gentlemen's
agreement that they would divide the 60,000-square meter lot (covered by TCT No. T-225549) into two, such that
half will be given to petitioner Corporation and the other half would be retained by Nestor. 21 Since petitioner
Corporation handled the splitting of the title, it had in its possession TCT No. T-225549 covering the portion sold to
Blas.22

One day, Nestor asked petitioner Renato to give him the original owner's duplicate copy of TCT No. T-
225549.23 Petitioner Renato found out that Nestor had sold the whole property to the spouses Harris and Caroline
Egina (spouses Egina) for the sum of P12,000,000.00.24 As a consequence, eight TCTs were issued by the Register
of Deeds of Davao del Norte in the name of the spouses Egina.25 These eight TCTs were later on cancelled and the
Court reinstated the derivative titles which are TCT Nos. T-225549 and T-225550. Because of legal controversies
besetting TCT No. T-225549, it is now in the custody of the Registry of Deeds of Tagum City. 26

Renato attempted several times to contact Nestor, but the latter did not take his calls and simply vanished. 27 Instead,
Renato received a document entitled "Rescission of Deed of Conditional Sale" 28 dated February 5, 2010 from Nestor
whereby the latter rescinded the April 11, 2007 Deed of Conditional Sale alleging that petitioners (Renato and the
Corporation) had defaulted in the payment of the monthly installments agreed upon. 29 Renato alleged that since the
time when TCT No. T-225549 was gone, petitioner Corporation already stopped its marketing business. 30 Also, no
one who bought the individual lot had entered the subject property yet, as they were barred by respondent
Nestor.31 Because of this, petitioners are now facing various cases in court filed by some disgruntled lot buyers. 32

On October 12, 2011, petitioners filed a Complaint for Declaration of Nullity of the Instrument denominated as
Rescission of Conditional Sale, Specific Performance, Sums of Money, etc. against respondent Nestor and the heirs
of the spouses Ramones, represented by Remedios Ramones-Emperado, docketed with the RTC as Civil Case No.
4263.33 Nestor did not file an Answer.34 Hence, he was declared in default in an Order35 dated May 31, 2012.

On November 20, 2012, the RTC issued an Order36 dropping the heirs of the spouses Ramones as defendants in
Civil Case No. 4263. Petitioners were allowed to present their evidence ex parte.37

Ruling of the RTC

On April 12, 2013, the RTC issued a Decision38 dismissing petitioners' complaint with prejudice. The RTC found that
the whole transaction between petitioners and Nestor was tainted with badges of fraud. It ruled that respondent
Nestor could not have been the owner of the subject property because his father's (Bias') contract with Dominador
was a conditional sale and there was yet no conveyance of the same in Bias' favor. There was also nothing on record
which shows that Dominador's OCT No. (P-1324) P-232 was cancelled with the issuance of TCT Nos. T-225549 and
T-225550. Petitioners, knowing that the subject property was still registered in the name of Dominador, should not
have paid a hefty amount to Nestor. The RTC concluded that there was an attempt by petitioners and Nestor to
deprive Dominador's heirs of their rights to the subject property. Thus, the RTC found it difficult to sympathize with
petitioners' predicament as they did not come to court with clean hands. Aggrieved, petitioners filed an appeal with
the CA. Notwithstanding that Nestor was already declared in default in the RTC, the CA required him to file his
Appellee's Brief.

Ruling of the Court of Appeals

In reversing the RTC, the CA, in its Decision39 dated May 26, 2016, ruled that from the intent of the parties, the Deed
of Conditional Sale entered into by them is a Contract to Sell. As explicitly stated in the contract, upon full payment of
the purchase price, Nestor would be bound to execute the Deed of Absolute Sale. The CA made no doubt that the
intention of the contract is to reserve the ownership of the land to the seller (Nestor) until the buyers (petitioners)
made full payment of the purchase price. Since petitioners had already paid at least two years of installments then
the provisions of Republic Act (R.A.) No. 6552 or the Maceda Law should be applied. When Nestor cancelled the
contract, he failed to comply with the requirement under the Maceda Law, that is, the refund of the cash surrender
value.

The CA concluded that since there was no valid rescission of the contract to sell, petitioners have not lost the
statutory grace period within which to pay. Hence, the CA ordered as follows: (1) the petitioners may pay Nestor the
amount of P4,432,500.00 as balance of the purchase price plus interest at 6% per annum from December 2009 until
full payment within 60 days from finality of this Decision; (2) upon payment, Nestor shall execute a Deed of Absolute
Sale of the land and deliver the certificate of title in favor of petitioners; and (3) in case of failure to pay within 60 days
from finality of this Decision, petitioners shall immediately vacate the premises without need of further demand, and
the down payment and installment payments thus far made by them shall serve as rental for their use and enjoyment
of the subject property.

Petitioners filed a Motion for Reconsideration of the aforesaid CA Decision. In a Resolution 40 dated February 7, 2017,
the CA denied the said motion for lack of merit. Hence, the instant petition.

The Issues

In their appeal with this Court, petitioners argue that the CA erred as follows:

1. [In] ordering/requiring respondent Nestor x x x who was already declared in default to

file and thereafter admit his Appellee's Brief; and for the CA to give full faith and
credence to Mejia's version;
2. By applying the provisions of [R.A. No.] 6552 otherwise known as the Maceda Law in
resolving the main issue of the original case which is "the nullification of that
instrument denominated as Rescission and Cancellation of Deed of Conditional Sale,
etc."[;]
3. Not considering the entirety of the original complaint, in which the plaintiffs also prayed
for Specific Performance and Damages[; and]
4. In not accepting the alternative way to dispose the case based on the principle of
equity, in view of petitioner's inability to perform his obligation at present, that is: to pay
the balance of P4.4 Million. Too, the CA erred in not sustaining the agreement of the
parties to divide the property covered by TCT No. T-225549[.] 41

Petitioners prayed as follows: (1) to return to them the owner's duplicate copy of TCT No.T-225549 and all its
derivative titles; (2) to honor the Deed of Conditional Sale which they entered into with respondent Nestor; (3) should
the return of TCT No. T-225549 and its derivative titles could no longer be possible or since they could no longer pay
the balance, to split the title between both of them as per their gentlemen's agreement; (4) to order the return of the
sum already paid for by petitioners if the transaction between the parties finds its demise; and (5) to grant such other
relief as justice and equity will allow.
Two main issues were formed from the assigned errors of the petitioners: First, the propriety of filing an appellee's
brief by respondent Nestor despite the fact that he was declared in default in the trial court; and second, the propriety
of the rescission and cancellation of the conditional sale executed by the parties.

The Courts Ruling

I.

Preliminarily, we found nothing irregular when the CA required respondent Nestor, who has been declared in default
in the trial court, to submit his appellee's brief.

While, concededly, a defending party declared in default loses his standing in the trial court and his right to adduce
evidence and to present his defense,42 this, however, does not impliedly suggest a loss of all his/her rights in the
stages of the case after the default judgment. This can be clearly inferred from the wordings of Section 3, Rule 9 of
the 1997 Rules of Court. Thus:
SEC. 3. Default; declaration of. - If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party, and
proof of such failure, declare the defending party in default. Thereupon, the court shall proceed
to render judgment granting the claimant such relief as his pleading may warrant, unless the
court in its discretion requires the claimant to submit evidence. Such reception of evidence may
be delegated to the clerk of court.

(a) Effect of order of default. - A party in default shall be entitled to notice of subsequent

proceedings but not to take part in the trial.
It is evident from the foregoing rule that even when a defendant is already declared in default, he is entitled to notice
of subsequent proceedings.43

Default, therefore, is not meant to punish the defendant, but to enforce the prompt filing of the answer to the
complaint.44 Its existence is justified on the ground that it is the one final expedient to induce defendant to join issue
upon the allegations tendered by the plaintiff, and to do so without unnecessary delay. 45

The provision that the defaulting party cannot take part in the trial only meant that he/she has already lost his/her
standing in the trial court. In other words, the effect of the judgment of default is limited only to those stages in the
prosecution of the case which terminated with and included in the judgment of the trial court on the merits. 46

In Lina v. Court of Appeals,47 the Court discussed the remedies available to a defendant declared in default, one of
which is to appeal from the judgment under Section 1, Rule 41 of the 1997 Rules of Court, even if no petition to set
aside the order of default has been resorted to.48

There is no question that a defaulted party may appeal from the judgment rendered against him. And concomitant
with the said right is the filing of the appellant's brief in order to be heard. The defaulting party can appeal the
judgment by default on the ground that the plaintiff failed to prove the material allegations of the complaint, or that the
decision is contrary to law, even without need of the prior filing of a motion to set aside the order of
default.49 However, a defaulting party is proscribed from seeking a modification or reversal of the assailed decision on
the basis of the evidence submitted by him in the CA, for if it were otherwise, he would thereby be allowed to regain
his right to adduce evidence, a right which he lost in the trial court when he was declared in default, and which he
failed to have vacated.50

Verily, if the defaulting party appealed his case and filed his appellant's brief in the process then there is no reason to
proscribe a defaulting party, who is an appellee, from filing an appellee's brief. There was nothing from our present
rules which provides that a party in default shall also lose his right to appeal if the judgment should be favorable to
him. As such, even if he is the winning party in the court below, he is not precluded to file his appellee's brief on the
same grounds as available to the losing party that was declared in default by the trial court.

Thus, in this case, whether or not respondent Nestor (a party in default) can file an appellee's brief is a question
which should obviously not be decided by any order or judgment by default of the trial court, but by the appellate
court. To hold otherwise would result to the detestable consequence that the trial court has the power by its default
order or judgment to interfere with or to control the procedure in the appellate court.

II.

In order to fully pass upon the validity and propriety of the Rescission of the Deed of Conditional Sale executed by
respondent Nestor, it is vital to characterize the nature of the agreement between the parties - whether the same is a
contract of sale or a contract to sell. The courts have repeatedly recognized the distinction between the two concepts.
The ruling of the Supreme Court in Lim v. Court of Appeals (182 SCRA 564 [1990]) is most
illuminating. In the said case, a contract to sell and a contract of sale were clearly and thoroughly
distinguished from each other, with the High Tribunal stressing that in a contract of sale, the title
passes to the buyer upon the delivery of the thing sold. In a contract to sell, the ownership is
reserved in the seller and is not to pass until the full payment of the purchase price is made. In
the first case, non-payment of the price is a negative resolutory condition; in the second case, full
payment is a positive suspensive condition. In the first case, the vendor has lost and cannot
recover the ownership of the property until and unless the contract of sale is itself resolved and
set aside. In the second case, the title remains in the vendor if the vendee does not comply with
the condition precedent of making payment at the time specified in the contract. 51
This Court agrees with the CA that the April 11, 2007 Deed of Conditional Sale executed between the parties is a
contract to sell. Pertinent portion of the agreement indicative that it is a contract to sell reads:
That for and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00) Philippine
currency, receipt of which is hereby acknowledged from the VENDEE, the VENDOR does
hereby SELL, CEDE, TRANSFER and CONVEY unto the said VENDEE, its heirs[,] successors,
executors and assigns, the above-mentioned property subject to the terms and conditions herein
set forth:
xxxx

e. And upon full payment of the agreed consideration the Vendor shall
execute the deed of absolute sale in favor of the Vendee. 52
As worded, the Deed of Conditional Sale dated April 11, 2007 (which substitutes the earlier Deed of Conditional Sale
dated March 23, 2005 except that there was already a down payment made) provides that upon full payment of the
agreed consideration, the vendor shall execute the deed of absolute sale in favor of the vendee. 53 This stipulation
evinces the intention of the parties for the vendor (respondent) to reserve ownership of the land and the same is not
to pass until the remaining balance (payable in 40 monthly installments) has been fully paid by the vendee
(petitioners). As fortified by this Court in the case of Diego v. Diego:54
It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates
that the seller shall execute a deed of sale only upon or after full payment of the purchase price
is a contract to sell, not a contract of sale. In Reyes v. Tuparan, this Court declared in categorical
terms that where the vendor promises to execute a deed of absolute sale upon the completion
by the vendee of the payment of the price, the contract is only a contract to sell. The aforecited
stipulation shows that the vendors reserved title to the subject property until full payment of the
purchase price.
However, contrary to the findings of the CA, the protection55 provided under R.A. No. 6552 (Maceda Law) is not
applicable. Notwithstanding the parties' stipulation for installment payments, wherein the payment of the price is more
than one, the parties' contract to sell does not automatically fall under the coverage of the Maceda Law. R.A. No.
6552 provides exclusions for its application. Thus:
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. (Underscoring supplied)
It is clear that the buyer's protection under R.A. No. 6552 only applies to contracts of sale of real estate on installment
payments, including residential condominium apartments, but excluding industrial lots, commercial buildings and
sales to tenants. A purchase by a company involved in the real estate business, just like the petitioners in this case,
of a six-hectare lot can hardly be considered as residential. This is the same interpretation conveyed in the case
of Spouses Garcia v. Court of Appeals,56 when this Court held that the subject lands, comprising five parcels and
aggregating 69,028 square meters, do not comprise residential real estate within the contemplation of the Maceda
Law. Moreso in this case where it was shown that petitioner Corporation is already engaged in the selling of the
portions of the said lots to individual buyers.

But this is not to say that sellers in a contract to sell of industrial and commercial lots are precluded to cancel the
contract when buyers defaulted in one installment. The old case of Luzon Brokerage Co., Inc. v. Maritime Building
Co., Inc.57 made it clear that R.A. No. 6552 or the Maceda Law expressly recognizes the vendor's right of cancellation
of sale on installments of industrial and commercial properties with full retention of previous payments. In the said
case, the Supreme Court En Bane held:
The enactment on September 14, 1972 by Congress of Republic Act No. 6552 entitled "An Act to
Provide Protection to Buyer[s] of Real Estate on Installment Payments" which inter alia compels
the seller of real estate on installments (but excluding industrial lots, commercial
buildings among others from the Act's coverage) to grant one month's grace period for every one
year of installments made before the contract to sell may be cancelled for non-payment of the
installments due forecloses any overturning of this Court's long-established
jurisprudence. Republic Act 6552 recognizes in conditional sales of all kinds of real estate
(industrial and commercial as well as residential) the non-applicability of Article 1592 (1504) Civil
Code to such contracts to sell on installments and the right of the seller to cancel the contract (in
accordance with the established doctrine of this Court) upon non-payment "which is simply an
event that prevents the obligation of the vendor to convey title from acquiring binding force."
(Manuel v. Rodriguez, 109 Phil. 1, 10, per Reyes, J.B.L.). The Act in modifying the terms and
application of Art. 1592 Civil Code reaffirms the vendor's right to cancel unqualifiedly in the case
of industrial lots and commercial buildings (as in the case at bar) and requires a grace period in
other cases, particularly residential lots, with a refund of certain percentages of payments made
on account of the cancelled contract.58 (Underscoring supplied)
In other words, whether the property is residential, commercial or industrial, Maceda Law does not make any
distinction insofar as the availability of the remedy of cancellation by the seller in case of nonpayment of installments
is concerned. The only distinction lies on the added protection given by the law to residential buyers, which is not
enjoyed by commercial and industrial lot buyers. Indeed, the Maceda Law addressed the predicament of thousands
upon thousands of residential property buyers who, in the words of this Court, are hounded to suffer the loss of their
life earnings only because of an oversight or difficulty in paying one or two installments. 59 This is not the case for
industrial or commercial lot buyers, who, the law perceives to have deep pockets. To quote the verbatim
pronouncement of this Court:
The Act even in residential properties recognizes and reaffirms the vendor's right to cancel the
contract to sell upon breach and [nonpayment] of the stipulated installments but requires a grace
period after at least two years of regular installment payments (of one month for every one year
 of installment payments made, but to be exercise[d] by the buyer only once in every five years of
the life of the contract) with a refund of certain percentages of payments made on account of the
cancelled contract (starting with fifty percent with gradually increasing percentages after five
years of installments). In case of industrial and commercial properties, as in the case at bar, the
Act recognizes and reaffirms the Vendor's right unqualifiedly to cancel the sale upon the buyer's
default.60
It is clear by the said provision that in case of industrial and commercial properties, the seller can unqualifiedly cancel
the sale upon the buyer's default.

A careful reading of the notarized "Rescission of Deed of Conditional Sale" executed by respondent Nestor reveals
that he availed of the remedy of rescission apparently because petitioners defaulted in the payment of their monthly
installment in the amount of P150,000.00.61 Obviously, respondent Nestor used the word "rescission" in a loose
sense. To say that a contract to sell is rescissible is quite misplaced. Jurisprudence abounds with rulings that the
remedies of rescission, under Articles 119162 and 159263 of the Civil Code, are not available in contracts to sell. This
Court succinctly explains:
The respondent court did not err when it did not apply Articles 1191 and 1592 of the Civil Code
on rescission to the case at bar. The contract between the parties is not an absolute conveyance
of real property but a contract to sell. In a contract to sell real property on installments, the full
payment of the purchase price is a positive suspensive condition, the failure of which is not
considered a breach, casual or serious, but simply an event which prevented the obligation of
the vendor to convey title from acquiring any obligatory force. The transfer of ownership and title
would occur after full payment of the purchase price.64
The breach contemplated in Article 1191 of the Civil Code is the obligor's failure to comply with an obligation already
extant, not a failure of a condition to render binding that obligation. 65 Article 1592, on the other hand, speaks of
nonpayment of the purchase price as a resolutory condition.66 It permits the buyer to pay, even after the expiration of
the period, as long as no demand for rescission of the contract has been made upon him either judicially or by
notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until
full payment of the price.67

This only lends credence to the rule that rescission in its technical sense is not proper in a contract to sell. Such that
failure to pay the price agreed upon is not a mere breach, casual or serious, rather, nonpayment is a condition that
prevents the obligation from acquiring an obligatory force. 68 This is entirely different from the situation in a contract of
sale, where nonpayment of the price is a negative resolutory condition. The effects in law are not identical. In a
contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is
rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has
not complied fully with the condition of paying the purchase price.69 Strictly speaking, in a contract to sell, there can
be no rescission or resolution of an obligation that is still non-existent due to the non-happening of the suspensive
condition.70

Considering the foregoing, as well as the pronouncement by this Court in the Luzon Brokerage case, it follows then
that respondent Nestor's act of rescinding the Deed of Conditional Sale, or, more correctly, canceling it, is
theoretically valid and the parties shall stand as if the obligation to sell never existed. 71 The reason is not that
respondent Nestor has the power to rescind such contract, but because their obligation thereunder did not arise. 72

However, while we recognize the seller's right to unqualifiedly cancel the contract to sell (of industrial or commercial
properties) upon the buyer's default, as pronounced in the earlier cited case of Luzon Brokerage,73 such cancellation
must be made with notice to the other party who failed to perform his end part of the bargain. This gives the
opportunity to the other party to question the cancellation made on account of error, abuse or any other grounds.
Such that this time, the burden of instituting an action is shifted from the injured party to the defaulter.

Indeed, the act of a party in treating a contract as cancelled or resolved on 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.74 Thus, in the old case of University of the Philippines v. De Los Angeles,75 the Court,
through Justice Jose B.L. Reyes, underscored the necessity of judicial validation of unilateral rescission, to wit:
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.
In the same manner that in unilateral cancellation of contracts to sell, notice to the other party is important. If the
other party perceives that the cancellation of the contract is not proper, he/she is free to question and raise his/her
objection to the court. It is the court who will settle once and for all if the cancellation is warranted. Thus:
[I]n 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 will be necessary, as without it, the extrajudicial resolution will
remain contestable and subject to judicial invalidation, unless attack thereon should become
barred by acquiescence, estoppel or prescription.76
Guided by the foregoing pronouncements, respondent Nestor's action in canceling (through a notarized Rescission of
Conditional Sale) the contract to sell is unjustified.

First. There was no showing that respondent Nestor made a demand (judicially or extrajudicially) to pay the
remaining balance at the moment petitioners failed to pay the monthly installment due for December 2009.
Technically speaking, petitioners have not incurred in delay, and thus, were not yet in default. Under Article 1169 of
the Civil Code, one incurs in delay or is in default from the time the obligor demands the fulfillment of the obligation
from the obligee.77 The circumstances upon which demand is no longer necessary do not obtain in the instant case.
Nowhere from the contract between the parties did they stipulate on waiver of demand.

Second. It appearing that payment was still not made, there is no showing that respondent Nestor sent a notice to
petitioners informing them that he is already canceling the contract to sell or, at the very least, his intent to cancel the
said contact. Then again, notice will now give petitioners the opportunity either to agree with the cancellation or
question it before the courts.

Considering that the Deed of Conditional Sale was not validly cancelled, it follows then that the same subsists and
remains effective.

In the given case, the contract price involved is P8,000,000.00 and the petitioners already paid the substantial
amount of P3,567,500.00 as found by the CA.78 This is almost half of the purchase price. Thus, for equitable
consideration, this Court will give leeway to petitioners to pay the balance of the unpaid purchase price within a
reasonable period of time. In the case of Reyes v. Tuparan,79 the Court was likewise confronted with the situation
where there has already been payment of a substantial amount and thus, it deemed it right and just to allow the
respondent therein to settle, within a reasonable period of time, the balance of the unpaid purchase price.

In a normal setting, this Court would have entrusted to the trial court the determination of the proper amount to be
paid and the period within which to pay. However, by doing so, this Court will merely prolong the proceedings and
delay the relief that the parties are duly entitled to. As such, this Court finds it proper to set the date wherein
petitioners should tender the amount due. Therefore, petitioners are given a period of 60 days from finality of this
Decision80 to settle the amount of P4,432,500.00 representing the unpaid balance of the P8,000,000.00 contract
price, less the payments already made. Damages in the form of interest pursuant to Article 2209 of the Civil
Code, viz.:
If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest, which is six
percent per annum.
is not warranted. Article 2209 governs transactions involving the payment of indemnity in the concept of damages
arising from delay in the discharge of obligations consisting of the payment of a sum of money. 81 There was no
showing that petitioners incurred in delay. As discussed, records show that respondent Nestor never made a demand
for petitioners to pay.

Neither are petitioners entitled to damages. In the case of Reyes v. Tuparan,82 this Court denied petitioner's prayer
for moral, temperate, liquidated or compensatory damages, and exemplary damages for the reason that the case
involves a contract to sell, wherein full payment of the purchase price is a positive suspensive condition, the non-
fulfillment of which is not a breach of contract, but merely an event that prevents the seller from conveying title to the
purchaser.83 Since there was no breach of contract in this case, there can be no damages to speak of.

Petitioners, however, are not entirely fault-free. It is undisputed that petitioners were remiss in their obligation to pay
the remaining balance as of December 2009. Because of petitioners' failure to fully pay the purchase price,
respondent Nestor is under no obligation, and may not be compelled, to convey title to petitioners and receive the full
purchase price.84 Hence, their prayer for specific performance (to deliver the title to them) cannot be granted.

The remedy of refund prayed for by petitioners is also not proper. Since the Deed of Conditional Sale remains valid
and subsisting, the amount paid by petitioners cannot be returned as this option is not part of the parties' stipulation
under the said Deed.

The prayer of petitioners for this Court to honor their gentlemen's agreement of dividing the subject lots between
them, since they could no longer pay the balance, cannot likewise be granted. Apart from the fact that said
gentlemen's agreement was not sufficiently established by clear and competent evidence, the amount paid is still not
sufficient to cover the portion of the lot being prayed for. Besides, mere inability to pay is not a justifiable reason to
renege on one's contractual obligation.

WHEREFORE, the instant petition is PARTLY GRANTED. Accordingly, the appealed Decision dated May 26, 2016
of the Court of Appeals-Cagayan de Oro City in CA-GR. CV No. 03284-MIN is MODIFIED as follows:

1. The Complaint for the Nullification of the document denominated as Rescission of the Deed of Conditional
Sale is GRANTED.
2. The Deed of Conditional Sale between the parties is declared VALID and SUBSISTING, and the parties
are enjoined to comply with the other stipulations embodied therein.
3. Petitioners Royal Plains View, Inc. and/or Renato Padillo are ORDERED to PAY respondent Nestor Mejia
in the amount of P4,432,500.00 as remaining balance of the agreed purchase price within sixty (60) days
from finality of this Decision.
4. Upon full payment of the purchase price, respondent Nestor Mejia shall EXECUTE the corresponding
Deed of Absolute Sale over the property covered by TCT No. T-225549.
5. In case of failure of petitioners to pay the sum as herein adjudged, the Deed of Conditional Sale is deemed
cancelled and the payments they had already paid will be considered rentals for the use of the property.
No pronouncement as to costs.

SO ORDERED.
 G.R. No. 230817, September 04, 2019

VIVE EAGLE LAND, INC., PETITIONER, v. NATIONAL HOME MORTGAGE FINANCE CORPORATION, JOSEPH
PETER S. SISON, AND CAVACON CORPORATION, RESPONDENTS.

DECISION

PERALTA, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision1 dated August 23, 2016 and the Resolution 2 dated March 30, 2017 of the Court of Appeals (CA) in CA-G.R.
CV No. 105312, which affirmed the Decision 3 dated September 18, 2014 of the Regional Trial Court (RTC), Branch
138, Makati City and the Order4 dated June 15, 2015 of the RTC, Branch 139, Makati City, in Civil Case No. 06-308.

The antecedent facts are as follows.

On April 18, 2006, petitioner Vive Eagle Land, Inc., a corporation engaged in the realty business and represented by
its President, Virgilio O. Cervantes, filed a complaint for declaration of nullity of rescission, declaration of suspension
of payment of purchase price and interest, and other reliefs against respondents National Home Mortgage Finance
Corporation (NHMFC), a government corporation created by virtue of Presidential Decree No. 1267, Joseph Peter S.
Sison, President of NHMFC, and Cavacon Corporation, a domestic corporation engaged in the business of
construction. In its complaint, Vive alleged that on November 17, 1999, it entered into a Deed of Sale of Rights,
Interests, and Participation Over Foreclosed Assets, whereby it agreed to purchase NHMFC's rights, interests, and
participation in the foreclosed property of Alyansa ng mga Maka-Maralitang Asosasyon at Kapatirang Organisasyon,
Inc. located at Barangay Sta. Catalina, Angeles City, with an area of 73.5565 hectares covered by Transfer
Certificate of Title (TCT) Nos. 86340 and 86341 for a total purchase price of P40,000,000.00 payable in the following
manner: (1) the amount of P8,000,000.00 as 20% downpayment payable in two equal installments, the first of which
shall be due on or before December 4, 1999, and the second, from the execution of the Deed of Conditional Sale, but
in no case shall be later than January 4, 2000; and (2) the balance of P32,000,000.00 shall be paid in 10 equal
installments in the amount of P3,200,000.00 per installment, plus 14% interest per annum, with the first installment
due on July 4, 2000 and every 6 months thereafter until fully paid. Pursuant to the Deed of Sale, Vive paid the first
installment of the downpayment in the amount of P4,000,000.00. 5

Vive, however, did not pay the subsequent installments. According to Vive, it failed to pay because it was prevented
from exercising its right to avail of a developmental loan under Section 8 of the Deed of Sale due to issues on the
subject property, particularly: (1) the issuance of numerous certificates of land awards over the same; and (2) the
classification of the same as agricultural, subjecting it to the coverage of the Comprehensive Agrarian Reform
Program (CARP).6 While awaiting the resolution of said issues, Vive requested NHMFC for a moratorium or
suspension of the period of payment, the corresponding waiver of interest, and a 10% reduction of the purchase price
for litigation costs it incurred. On June 17, 2004, NHMFC, through its then President, Atty. Angelico T. Salud, initially
agreed on the moratorium but advised Vive to submit its request of waiver and interest reduction to the NHMFC's
Board of Directors.7

Notwithstanding the agreement, NHMFC, through Sison, notified Vive through a letter dated February 10, 2006 of the
rescission/cancellation and/or revocation of the Deed of Sale due to the alleged non-payment of the balance of the
purchase price. It reiterated its decision to rescind in another letter dated February 27, 2006. Said non-payment by
Vive of the subsequent installments became NHMFC's defense in its Answer to Vive's complaint. According to
NHMFC, its decision to rescind the Deed of Sale was valid in view of Vive's refusal to pay the subject installments.
Moreover, since Vive was well aware of the condition of the property prior to its purchase, it was not justified in
suspending its payment of the purchase price.

Vive amended its complaint arguing that without its knowledge and consent, NHMFC and Cavacon, in bad faith,
entered into a Memorandum of Agreement on August 7, 2008 by virtue of which NHMFC sold the subject property on
an "as is-where is" basis to Cavacon for P35,000,000.00 despite the pendency of the instant case and Cavacon's
knowledge of the prior sale. NHMFC countered that by virtue of Section 5 of the Deed of Sale, it had the right to
rescind the Deed of Sale due to Vive's continuous failure to pay the purchase price and to thereafter freely dispose of
the subject property as if the Deed of Sale has never been made.8

On September 18, 2014, the RTC of Makati City, Branch 138, dismissed Vive's complaint, finding NHMFC's
rescission of the Deed of Sale to be valid.9 It disposed of the case as follows:cralawred

WHEREFORE, in view of the foregoing, finding the rescission of the Deed of Sale to be valid, the
complaint filed by the plaintiff Vive Eagle Land, Inc. against defendants National Home Mortgage
Finance Corporation, Joseph Peter S. Sison and defendant Cavacon for Declaration of Nullity of
Rescission, Declaration of Suspension of Payment of Purchase Price and Interest and Other
Reliefs is hereby DISMISSED for lack of merit.

SO ORDERED.10
 chanRoblesvirtualLaw1ibrary

On Vive's motion, however, the Presiding Judge of Branch 138 inhibited himself and ordered the re-raffling of the
case. Subsequently, the case was raffled to the RTC Branch 133 which, on January 13, 2015, granted Vive's motion
for reconsideration, declaring null and void NHMFC's rescission of the Deed of Sale, declaring Vive as the owner of
the property, declaring due and demandable the subsequent installments of the downpayment without interest, and
ordering NHMFC to pay attorney's fees and litigation expenses. The dispositive portion of the Order
provides:cralawred

WHEREFORE, foregoing considered, the Motion for Reconsideration of the plaintiff is

GRANTED, the Decision dated September 18, 2014 is REVERSED and SET ASIDE, judgment
is hereby rendered against the defendants and in favour of the plaintiff as follows:cralawred

1. declaring NULL and VOID defendant NHMFC's rescission/cancellation of the Deed of

Sale dated November 17, 1999 between plaintiff VELI and defendant NHMFC;
2. declaring VALID and SUBSISTING the Deed of Sale dated November 17, 1999
between plaintiff VELI and defendant NHMFC;
3. declaring plaintiff VELI as the OWNER of the subject properties covered by Deed of
Sale dated November 17, 1999;
4. declaring DUE and DEMANDABLE the second installment of the downpayment under
Section 1.01 of the Deed of Sale without imposition of any interest or penalty within
thirty (30) days from plaintiffs receipt of this Order;
5. declaring VALID and SUBSISTING the schedule of payments under Section 1.02 of
the Deed of Sale with the first ten (10) equal semi-annual installments in the amount of
THREE MILLION TWO HUNDRED THOUSAND PESOS (P3,200,000.00) to be paid
six (6) months after payment of the second installment of the downpayment under
Section 1.01, and the subsequent ones every six (6) months thereafter without
imposition of any interest or penalty; and
6. ordering defendants, jointly and severally, to pay plaintiff attorney's fees and litigation
expenses in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00) and
costs of suit.

SO ORDERED.11

Pursuant to the court's Order, Vive tendered the second installment of the downpayment in the amount of
P4,000,000.00 to NHMFC which refused to accept. Thereafter, on NHMFC's motion, the Presiding Judge of Branch
133 voluntarily inhibited himself and again ordered the re-raffling of the case, which was next raffled to RTC Branch
139. In an Order12 dated June 15, 2015, said court granted NHMFC's motion for reconsideration and reinstated the
Decision of RTC Branch 138 finding NHMFC's rescission valid. Thus:cralawred

WHEREFORE, IN LIGHT OF THE FOREGOING, the defendants' Motions for Reconsideration

both filed on 5 February 2015 are hereby GRANTED. The Order of this Court (Branch 133)
dated 13 January 2015, which granted the Motion of Reconsideration filed by plaintiff VELI,
reversed and set aside its (Branch 138) Decision dated 18 September 2014 and rendered
judgment against the defendants and in favor of plaintiff, is RECONSIDERED AND SET ASIDE.
The Decision of this Court (Branch 138) dated 18 September 2014 finding the rescission of the
Deed of Sale to be valid and dismissing for lack of merit the complaint filed by the plaintiff Vive
Eagle Land, Inc. against defendants National Home Mortgage Finance Corporation, Joseph
Peter S. Sison and defendant Cavacon for Declaration of Nullity of Suspension of Payment of
Purchase Price and Interest and Other Reliefs, is hereby REINSTATED.

Furnish copies of this Order to the plaintiff, the defendants and their respective counsels.

SO ORDERED."13

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In a Decision dated August 23, 2016, the CA affirmed the Decision of the RTC Branch 139.  First, the appellate court
held that Vive's failure to pay the purchase price on the date and in the manner prescribed by the Deed of Sale is an
event of default giving NHMFC the right to annul/cancel the contract and forfeiting whatever right Vive may have
acquired thereunder pursuant to Section 5 thereof. 14Second, it is clear from Section 7 15 of the Deed of Sale that the
parties intended their agreement to be a contract to sell or a conditional sale. The title to the property was not
immediately transferred, through a formal deed of conveyance, in the name of Vive prior to or at the time of the first
payment. Thus, since the title and ownership remains with NHMFC until Vive fully pays the balance of the purchase
price, the Deed of Sale was merely a contract to sell. As such, NHMFC can validly exercise its right to annul and/or
cancel the Deed of Sale upon failure of Vive to pay the purchase price on the date and manner prescribed. Thus,
considering that the Deed of Sale was validly annulled and/or cancelled, the subsequent transaction and MOA
entered into between NHMFC and Cavacon is valid.16

Moreover, the appellate court, in its Resolution dated March 30, 2017, rejected Vive's contention that NHMFC's grant
of the moratorium was proven through a letter dated June 17, 2004 when Atty. Salud, then President of NHMFC,
initially agreed to the moratorium on the collection period for the balance of the purchase price. 17 It found nothing in
the records to indicate that the NHMFC Board of Directors approved the undertaking made by Atty. Salud. Thus,
since it was unilaterally granted without board approval, the CA denied Vive's motion for reconsideration. 18

On May 22, 2017, Vive filed a Petition for Review on Certiorari before the Court assailing the Decision of the CA. It
invoked the following arguments:cralawred

I.

THE COURT OF APPEALS COMMITTED MANIFEST ERROR AND DEVIATED FROM

ESTABLISHED LAW AND JURISPRUDENCE WHEN IT FOUND THAT THE DEED OF SALE
OF RIGHTS, INTERESTS, AND PARTICIPATION OVER FORECLOSED ASSETS DATED 17
NOVEMBER 1999 EXECUTED BETWEEN PETITIONER AND RESPONDENT [NHMFC] WAS
A CONTRACT TO SELL AND NOT A CONTRACT OF SALE CONSIDERING THAT THERE
WAS AN ABSOLUTE TRANSFER OF OWNERSHIP OF THE SUBJECT MATTER OF THE
SALE TO PETITIONER UPON EXECUTION THEREOF.

II.

THE COURT OF APPEALS COMMITTED MANIFEST ERROR AND DEVIATED FROM

ESTABLISHED LAW AND JURISPRUDENCE WHEN IT FOUND PETITIONER IN DEFAULT
CONSIDERING THAT THERE WAS A MORATORIUM ON THE COLLECTION ON THE
BALANCE OF THE PURCHASE PRICE OF THE AMAKO PROPERTY.

III.

THE COURT OF APPEALS COMMITTED MANIFEST ERROR AND DEVIATED FROM

ESTABLISHED LAW AND JURISPRUDENCE WHEN IT UPHELD THE RESCISSION OF THE
DEED OF SALE OF RIGHTS, INTERESTS, AND PARTICIPATION OVER FORECLOSED
ASSETS DATED 17 NOVEMBER 1999 CONSIDERING THAT THERE WAS NO SUBSTANTIAL
BREACH THEREOF.

IV.

THE COURT OF APPEALS COMMITTED MANIFEST ERROR AND DEVIATED FROM

ESTABLISHED LAW AND JURISPRUDENCE WHEN IT EFFECTIVELY UPHELD THE
VALIDITY OF THE MEMORANDUM OF AGREEMENT DATED 07 AUGUST 2008 ENTERED
INTO BY RESPONDENT [NHMFC] AND [RESPONDENT] CAVACON CORPORATION AND
WAS NOT ENTERED INTO IN BAD FAITH.

V.

THE COURT OF APPEALS COMMITTED MANIFEST ERROR AND DEVIATED FROM

ESTABLISHED LAW AND JURISPRUDENCE WHEN IT EFFECTIVELY UPHELD THE
DISMISSAL OF PETITIONER'S CLAIM FOR ATTORNEY'S FEES. 19

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First, Vive alleged that the Deed of Sale is a valid contract of sale which absolutely transferred to Vive all of NHMFC's
rights, interests, and participation over the property. The fact that the contract is bereft of any provision requiring
NHMFC to execute a Deed of Absolute Sale in order to transfer ownership to Vive indicates that there was no
intention to retain ownership by NHMFC. Had the parties intended on a contract to sell, there would not have been a
necessity to annul/cancel a Deed of Sale to allow NHMFC to dispose the property upon default for basic is the rule
that contracts to sell need not be annulled for non-payment since such payment is a positive suspensive condition,
failure of which is not really a breach, but an event that prevents the obligation of NHMFC to convey title from arising.

Second, even assuming that the Deed of Sale is a contract to sell, Vive was never in default to pay the balance of the
purchase price. It was an essential consideration of the contract for Vive to be able to use the property as collateral
for a loan to develop the same into a residential subdivision. But Vive discovered issues, such as the coverage of the
CARP, affecting the property after the execution of the Deed of Sale rendering it impossible for Vive to use the same
as intended. Thus, further payments are suspended pending resolution of the DARAB of the issues affecting the
property. Vive added that since NHMFC itself, in failing to assist Vive with the litigation on the subject property,
prevented Vive from obtaining the loan to pay the balance of the purchase price, Vive should be considered as
having constructively fulfilled its obligation in view of Article 1186 of the Civil Code which provides that the condition
shall be deemed fulfilled when the obligor voluntarily prevents its fulfilment. 20

Third, Vive further argued that it could not have been in default as it was validly granted a moratorium. Contrary to
the CA's finding that there is nothing in the June 17, 2004 letter that would indicate NHMFC's acquiescence to said
moratorium, Vive cited the portion of said letter which states that "In line with our discussion, we initially agreed for a
moratorium on the collection period, we cannot, however, favorably consider your request for discount on purchase
price and waiver of interest and penalties without prior approval from our Board." According to Vive, the matter that
would be referred for board approval was the request for discount and waiver of interests. There was no mention,
however, of the necessity to secure approval for the moratorium. Moreover, Vive added that even NHMFC's
actuations showed that it consented to the moratorium since it only demanded payment in its letter dated February
10, 2006, under its new President, Sison, despite the fact that the second installment was scheduled as early as
January 4, 2000 and the first 10 semi-annual installments was scheduled on July 4, 2000. 21 Thus, such inaction was
an affirmation that there was a valid moratorium.

Fourth, Vive maintained that since there was a valid and subsisting moratorium suspending payment of the purchase
price until resolution of the DARAB cases, it did not commit any breach of contract that supposedly entitled NHMFC
to unilaterally rescind the Deed of Sale. In fact, Vive points out that in its letter to NHMFC, dated July 4, 2005, it
categorically thanked NHMFC for the moratorium it granted. Despite this, NHMFC never replied to said letter. Clearly,
NHMFC had full and actual knowledge of the moratorium and did not deny nor repudiate the same. It is, therefore,
now estopped from denying its existence and validity.22

Fifth, Vive asseverated that the subsequent MOA between NHMFC and Cavacon whereby NHMFC sold the subject
property to Cavacon was entered into in bad faith because of the fact that they entered into said contract despite their
full knowledge of the instant case. In fact, they even conveniently entered into the MOA on August 7, 2008, after the
issues over the property have been removed, as when the CLOAs over the property have been decreed cancelled
with finality by the Court on March 17, 2008. 23

In a Resolution24 dated June 7, 2017, the Court denied Vive's Petition for Review on Certiorari for failure to
sufficiently show any reversible error in the assailed judgment of the CA to warrant the exercise of discretionary
appellate jurisdiction.

On July 19, 2017, Vive filed a Motion for Reconsideration praying that the Court take a second look at the
circumstances of the case, especially considering that the lower courts themselves are at odds with one another as
to how the issues should be resolved. 25 Aside from reiterating its arguments in the Petition, Vive alleged for the first
time that since the Deed of Sale contemplates the sale of two (2) parcels of land which are not classified as
commercial or industrial, the payment for which is to be made in installments, the Court should take judicial notice of
Republic Act (R.A.) No. 6552, known as the Realty Installment Buyer Act or the Maceda Law. Thus, in view of the
fact that NHMFC's cancellation failed to comply with the Act's mandatory twin requirements of a notarized notice of
cancellation and a refund of the cash surrender value, the Deed of Sale remains valid and subsisting. 26 Vive added
that even assuming that the rescission effected by NHMFC was valid, the lower courts should have ordered mutual
restitution and that the parties surrender that which they received, and to place each other in their original position.
NHMFC has no basis to lay claim on and reap the benefits of Vive's labor to cleanse the title of the property from any
and all adverse claims.27

On October 25, 2017, respondents NHMFC and Cavacon filed their Comment refuting the arguments raised by Vive
in its Motion for Reconsideration. First, they maintained that the Deed of Sale is a conditional sale or contract to sell
for as expressly stipulated by Vive in its Offer to Purchase, the downpayment shall be payable within a few days from
the signing of a "Deed of Conditional Sale." 28 This is also shown by the fact that the original duplicate copies of the
titles were not delivered to Vive.

Second, respondents insist that there was no valid moratorium on the collection period. Since Atty. Salud, in initially
agreeing to a moratorium, did not secure prior board approval, said moratorium is unenforceable against NHMFC.
Moreover, citing the ruling of the RTC, Branch 138, respondents assert that while it may be true that Atty. Salud
granted a moratorium on the schedule of payments, but such grant cannot extend beyond the end of the term on
January 4, 2005, or until the resolution of the legal issues affecting the property, because this would make the terms
of the payment indefinite, in contravention of Article 1182 of the Civil Code which states that "when the fulfillment of
the condition depends upon the sole will of the debtor, the conditional obligation shall be void." 29 In addition,
respondents reject Vive's invocation of apparent authority, equitable estoppel, and laches in the absence of
supporting evidence presented during trial. The government is not bound by unauthorized acts of its agent, even
though within the apparent scope of their authority. 30 Also, Vive failed to adduce evidence during trial to show that
NHMFC had, indeed, clothed Atty. Salud with apparent power to grant the moratorium by presenting evidence that
Atty. Salud, had, in the past, granted similar moratoriums in Vive's or other parties' favor. Furthermore, NHMFC's
silence and lack of effort in collecting installments does not amount to implied ratification of Atty. Salud's
unauthorized grant of moratorium because for an act of the principal to be considered as ratification, such act must
be inconsistent with any other hypothesis than that he approved and intended to adopt what has been done in his
name.31

Third, respondents asseverate that the Deed of Sale was validly rescinded on the ground of substantial violation of
the terms thereof by failing to pay the purchase price within the stipulated period. Vive cannot unilaterally make its
principal obligation to pay conditional on the resolution of the issues affecting the properties. 32 Moreover, respondents
point to the absence of evidence that Vive had asked NHMFC for some documents needed for the resolution of the
DARAB cases nor was there evidence showing that Vive ever attempted to apply for a loan after the execution of the
Deed of Sale. In addition, contrary to Vive's contention, respondents allege that the Maceda Law is inapplicable to
the instant case for the same covers transactions involving the sale of real estate on installment payments where the
buyer has paid at least 2 years of installments. Here, Vive has only paid the first installment of P4 million. Because of
Vive's failure to pay and NHMFC's valid rescission of the contract, Vive had forfeited whatever rights it might have
acquired over the properties and has no right to ask for the refund of the P4 million pursuant to Section 5.2 of the
Deed of Sale which provides that "the sums of money paid shall be considered and treated as rentals for the
occupancy and use of the property and VENDEE waives all rights to ask or demand the return
thereof."33 Respondents add that as stipulated in the Offer to Purchase and the Deed of Sale, Vive was fully aware of
the limiting conditions inherent in the properties and the legal problems affecting the same. Thus, it is not entitled to
the reimbursement for expenses it incurred in the litigation of the same.34

Fourth, respondents argue that the MOA was entered into in good faith, citing the ruling of the RTC, Branch 139,
which held that Cavacon disclosed to Vive the fact that it entered into the MOA in its Answer to Vive's Amended
Complaint, while NHMFC disclosed the same in its Opposition to the Motion to Admit the Amended Complaint. As to
Vive's assertion that NHMFC conveniently sold the property to Cavacon only after the legal issues affecting it had
been resolved, respondents allege that Vive failed to present any supporting evidence to show when respondents
became aware to the said decision of the Court.35

On October 20, 2017, respondent Sison filed its own, separate Comment 36 essentially refuting the arguments raised
by Vive in its Motion for Reconsideration and declaring that the Court should not allow Vive to make allegations that
are a mere rehash of the ones taken up in the proceedings below and to raise entirely new issues not agreed to a
pre-trial nor taken up during trial. On October 25, 2017, Vive filed its Reply 37 refuting the allegations in respondents'
Comment. Thereafter, on November 8, 2017, NHMFC and Cavacon filed a Manifestation and Motion seeking to have
the Comment filed by respondent Sison and the Reply filed by Vive in response thereto be expunged from the
records of the case because they tend to mislead, confuse, and waste the time of the Court. NHMFC and Cavacon
assert that Sison's Comment came as a surprise for neither they, nor their counsel, who was also Sison's counsel,
were informed that he was getting a separate counsel to file his own Comment. On November 24, 2017, Vive filed its
Reply to the Comment of NHMFC and Cavacon. In response, NHMFC and Cavacon filed their Rejoinder on
November 29, 2017. Likewise, Sison filed his Rejoinder on December 1, 2017. Thereafter, in a Counter-Manifestation
filed also on December 1, 2017, Sison rejects the allegations of NHMFC and Cavacon stating that he has all the right
to choose, engage, and be represented by a primary or collaborating counsel either in his personal or private
capacity, having been resigned from NHMFC as President thereof. In its Reply filed on December 27, 2017, Vive
alleged that since Sison's co-respondents as well as his original counsels were blindsided by the sudden appearance
of new collaborating counsel, the same is irregular, illegal, and unauthorized, and should be expunged from the
records.

In a Resolution38 dated April 18, 2018, the Court resolved to grant Vive's Motion for Reconsideration, giving due
course to the Petition for Review on Certiorari, and to require respondents to file their comments on said petition.
After an exchange of pleadings wherein the parties essentially reiterated their arguments in their respective
Comments and Rejoinders, the Court shall now resolve the conflicting issues presented by the parties.

We rule in favor of the respondents.

At the outset, the Court sustains the appellate court's finding that the nature of the agreement between the parties
herein is one akin to a contract to sell. A contract to sell is 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 latter upon his fulfillment of the conditions agreed
upon, i.e., the full payment of the purchase price and/or compliance with the other obligations stated in the contract to
sell. Given its contingent nature, the failure of the prospective buyer to make full payment and/or abide by his
commitments stated in the contract to sell prevents the obligation of the prospective seller to execute the
corresponding deed of sale to effect the transfer of ownership to the buyer from arising. A contract to sell is akin to a
conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the
happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would
stand as if the conditional obligation had never existed. In a contract to sell, the fulfillment of the suspensive condition
will not automatically transfer ownership 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. Conversely, in a conditional contract of sale, the fulfillment of the suspensive condition renders the sale
absolute and the previous delivery of the property has the effect of automatically transferring the seller's ownership or
title to the property to the buyer.39

A plain and simple reading of the contract executed by the parties readily reveals that the same is a contract to sell
and not a contract of sale. Section 7 thereof provides:cralawred

Section 7. TITLE OF PROPERTY

Upon full payment by the VENDEE of the sales price of the rights, interest and participations
in the property and other sums due, the VENDOR shall execute a Certificate of [full payment)
and deliver the Duplicate Original Transfer Certificate of Title Nos. 86340 and 86341 to the
VENDEE. Expenses for the transfer of the title to VENDEE shall be for VENDEE's account. 40
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As clearly stipulated above, it is only upon Vive's full payment of the purchase price shall NHMFC be obligated to
deliver the title to the property. Otherwise put, by virtue of the aforequoted provision, NHMFC expressly reserved title
and ownership of the subject property in its name pending Vive's payment of the full amount even though possession
thereof was already granted in favor of Vive. It is, therefore, clear that the parties intended their agreement to be
merely a contract to sell, conditioned upon the full payment of the purchase price. Time and again, the Court has
ruled that in a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold
whereas in a contract to sell, the ownership is, by agreement, retained by the vendor and is not to pass to the vendee
until full payment of the purchase price. In a contract of sale, the vendee's non payment of the price is a negative
resolutory condition, while in a contract to sell, the vendee's full payment of the price is a positive suspensive
condition to the coming into effect of the agreement. In the first case, the vendor has lost and cannot recover the
ownership of the property unless he takes action to set aside the contract of sale. In the second case, the title simply
remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time
specified in the contract. Verily, in a contract to sell, the prospective vendor binds himself to sell the property subject
of the agreement exclusively to the prospective vendee upon fulfilment of the condition agreed upon which is the full
payment of the purchase price but reserving to himself the ownership of the subject property despite delivery thereof
to the prospective buyer.41

On this matter, Vive insists that the subject contract is a contract of sale because of the following paragraph
therein:cralawred

NOW THEREFORE, for in consideration of the foregoing premises and the sum of FORTY
MILLION PESOS (P40,000,000.00) Philippine currency x x x VENDOR hereby SELLS,
TRANSFERS and CONVEYS to the VENDEE, whatever rights, interest, and participation the
VENDOR has over the above-described parcel of land and all the improvements found thereon
by way of negotiated sale x x x.

The contention is not completely accurate. A cursory reading of the above excerpt in its entirety would show that the
phrase "subject to the following terms and conditions:" was left out from the citation. As such, Vive cannot argue that
by virtue of the foregoing incomplete text, NHMFC absolutely, unconditionally, and without reservation, sold its
ownership over the subject property because the same was categorically made "subject to the following terms and
conditions," one of which is Section 7 of the agreement. It is well to remember that contracts must always be read
and interpreted in its totality, never in isolation only to serve one's claims and interests. Certainly, a more cohesive
reading of the parties' agreement herein would lead to no other conclusion than that NHMFC transferred to Vive its
rights over the property subject to the condition that the latter fully pays the balance of the purchase price.

It is of no moment that what Section 7 requires from NHMFC is the execution of a "Certificate of Full Payment" and
not a "Deed of Absolute Sale." The mere fact that it expressly states that NHMFC shall deliver the titles to the
property upon full payment of the purchase price suffices to evince the intent of NHMFC to reserve ownership in its
name. As pointed out by the CA, this intention was sufficiently established by, and may reasonably inferred from, the
fact that title to the subject property was not immediately transferred, through a formal deed of conveyance, in the
name of Vive prior to or at the time of Vive's first payment of P4,000,000.00. 42 To the Court, moreover, if Vive truly
believed that by virtue of the subject contract, it was already acquiring absolute ownership of the property, it should
have already demanded the delivery of the Duplicate Original Transfer Certificate of Title Nos. 86340 and 86341 right
from the execution of the same. What is more is that the parties even stipulated in their contract that it shall be
considered as an event of default should Vive subdivide, lease, sell, transfer, assign, or otherwise dispose of the
property without prior written consent of NHMFC. If, indeed, NHMFC absolutely parted with the ownership of the
property, it should no longer have any business insofar as Vive's decisions relating to the property is concerned.
Settled is the rule that ownership of a property includes the right to enjoy and dispose of the thing owned without
other limitations than those established by law.43

It is, likewise, of no moment that the contract grants NHMFC the right to rescind the same as a consequence of an
event of default. Vive asserts that if the parties truly intended on a contract to sell, there would not have been a
necessity to annul or cancel the contract upon default in view of the rule that contracts to sell need not be annulled
for non-payment since such payment is a positive suspensive condition, failure of which is not really a breach, but an
event that prevents the obligation of NHMFC to convey title from arising. The argument deserves scant
consideration. Instead, We concur with the appellate court in finding that it is immaterial that the parties described the
cancellation of the agreement as one of rescission, which is not available in contracts to sell. The parties, as laymen,
are understandably not adept in the legal terms and their implications. At any rate, courts are not held captive by the
conclusions of the parties in their contracts. It is an established principle in law that a contract is what the law defines
it to be and not what the contracting parties call it.44

In its Petition, Vive further claims that even assuming that the Deed of Sale is a contract to sell, it was never in
default to pay the balance of the purchase price because further payments are suspended pending resolution of the
issues affecting the property. According to Vive, it was an essential consideration of the contract for Vive to be able to
use the property as collateral for a loan to develop the same into a residential subdivision. But the issues surrounding
the property rendered it impossible for Vive to do so. In fact, NHMFC further prevented Vive from obtaining the loan
when it failed to assist with the litigation on the property. The assertion, however, fails to persuade. On the contrary, a
cursory reading of the agreement would reveal that Vive was in truth aware of the nature of the property it was
purchasing. The pertinent provisions explicitly state:cralawred
 WHEREAS, pursuant to the disposition policies under Board Resolution No. 2391, dated June
23, 1994, VENDOR was authorized to sell and convey whatever rights, interests, and
participation it has on "as is where is basis" the property of ALYANSA NO MGA MAKA
MARALITANG ASOSASYON AT KAPATIRANG ORGANISASYON, INC. (AMAKO), X X X.

WHEREAS, VENDEE has full knowledge of the nature and extent of the VENDOR's rights,
interests, and participation over the foreclosed property subject of this contract including
pending litigation involving claims of alleged tenants to the property.

xxxx

Section 9. EJECTMENT

VENDEE at his own expense assumes responsibility of ejecting

squatters and/or occupants of the property, if any.45

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In view of the foregoing, Vive cannot be permitted to place the blame on NHMFC or the issues affecting the property
for its failure to comply with its obligation to pay when it explicitly admitted in the contract its awareness thereof.
Besides, as aptly pointed out by respondents, there is nothing in the contract giving NHMFC the obligation to assist in
the litigation of the issues surrounding the property. Neither was there any evidence presented supporting the
allegation that NHMFC even prevented Vive from obtaining the developmental loan.

As for Vive's argument that it could not have been in default as it was validly granted a moratorium, the same must
necessarily fail. Vive consistently maintains that NHMFC, through its then President, Atty. Salud, agreed on a
moratorium on the collection period as evidenced by Salud's June 17, 2004 letter. Vive cannot deny, however, that
the alleged moratorium did not have board approval. It is a fundamental principle in corporate law that a juridical
entity cannot act or give its consent except through its board of directors as a collective body, which is vested with
the power and responsibility to decide whether the corporation should enter into a contract that will bind the
corporation, subject to the Articles of Incorporation, By-Laws, or relevant provisions of law. 46 Section 23 of the
Corporation Code provides:cralawred

SEC. 23. The board of directors or trustees. — Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks, or where there is no stock, from among
the members of the corporation, who shall hold office for one (1) year and until their successors
are elected and qualified.

Thus, NHMFC, being a juridical person, cannot conduct its business, make decisions, or act in any manner without
action from its board of directors. Said board must act as a body in order to exercise corporate powers. 47 As such, no
person, not even its officers, can validly bind a corporation without the authority of the corporation's board of
directors. Nevertheless, the corporation may delegate through a board resolution its corporate powers or functions to
a representative, subject to limitations under the law and the corporation's articles of incorporation. 48 Accordingly,
without delegation by the board of directors or trustees, acts of a person — including those of the corporation's
directors, trustees, shareholders, or officers — executed on behalf of the corporation are generally not binding on the
corporation.49 In view of the absence of a resolution from NHMFC's Board of Directors authorizing Atty. Salud to grant
any kind of moratorium, We adopt with approval the CA's finding that NHMFC is not liable under the same.

This notwithstanding, Vive argues that even granting that Atty. Salud did not have power to grant a moratorium, his
act can nevertheless bind NHMFC under the doctrine of apparent authority. According to Vive, it cannot be faulted for
relying on Atty. Salud's letter because NHMFC made it appear that Salud was empowered to negotiate, administer,
and execute the subject Deed of Sale. Vive added that contrary to the findings of the trial court, NHMFC even had
knowledge of the moratorium granted in Vive's favor. This is shown by a July 4, 2005 letter written by Vive thanking
NHMFC for the moratorium on the collection period. Vive asserts that said letter was addressed to Atty. Rustico P.
Cacal, in his capacity as Senior Vice-President, Corporate Legal Counsel, and Board Secretary. Thus, the knowledge
gained by Atty. Cacal in said capacity constitutes knowledge of NHMFC for basic is the rule that notice to the agent is
notice to the principal. In support of this contention, Vive cites Our ruling in  Francisco v. Government Service
Insurance System (GSIS),50 where We held that "knowledge of facts acquired by an officer or agent of a corporation
in relation to matters within the scope of his authority is notice to the corporation whether he communicates such
knowledge or not." Moreover, even assuming that Atty. Salud was not vested with apparent authority to grant a
moratorium, NHMFC is effectively estopped from denying the same in view of its silence following the grant thereof.
As shown by the records, NHMFC made no efforts to collect the installments after the moratorium was granted.

The contention is devoid of merit.

The doctrine of apparent authority is a species of the doctrine of estoppel. Article 1431 of the Civil Code provides that
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. Estoppel rests on the rule that when a party has, by his
own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to
act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to
falsify it.51 In certain instances, therefore, the Court has recognized presumed or apparent authority or capacity to
bind corporate representatives in cases when the corporation, through its silence or other acts of recognition, allowed
others to believe that persons, through their usual exercise of corporate powers, were conferred with authority to deal
on the corporation's behalf.52

The present case, however, does not involve any of those instances. First of all, there is no proof to show that Atty.
Salud was, in truth, represented to be "the face" of NHMFC. As NHMFC correctly maintained, Vive failed to adduce
evidence during trial to establish that NHMFC had, indeed, clothed Atty. Salud with apparent power to grant the
moratorium or that Atty. Salud, had, in the past, granted similar moratoriums in Vive's favor. It bears stressing,
moreover, that even the mere execution of the subject deed of sale was accomplished not by Atty. Salud, but by
NHMFC's then President Augusto A. Legasto, Jr.53 Second, just because Vive sent a letter to Atty. Rustico P. Cacal,
in his capacity as Senior Vice-President, Corporate Legal Counsel, and Board Secretary, does not mean that
NHMFC already had knowledge of the moratorium. While it may be true that knowledge of an officer is considered
knowledge of the corporation, this rule applies only when the officer is acting within the authority given to him or her
by the corporation.54 In University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, We ratiocinated:cralawred

The public should be able to rely on and be protected from the representations of a corporate
representative acting within the scope of his or her authority. This is why an authorized officer's
knowledge is considered knowledge of corporation. However, just as the public should be
able to rely on and be protected from corporate representations, corporations should also
be able to expect that they will not be bound by unauthorized actions made on their
account.

Thus, knowledge should be actually communicated to the corporation through its

authorized representatives. A corporation cannot be expected to act or not act on a
knowledge that had not been communicated to it through an authorized representative.
There can be no implied ratification without actual communication. Knowledge of the
existence of contract must be brought to the corporation's representative who has
authority to ratify it. Further, "the circumstances must be shown from which such
knowledge may be presumed."

The Spouses Guillermo and Dolores Torres' knowledge cannot be interpreted as knowledge of
petitioner. Their knowledge was not obtained as petitioner's representatives. It was not shown
that they were acting for and within the authority given by petitioner when they acquired
knowledge of the loan transactions and the mortgages. The knowledge was obtained in the
interest of and as representatives of the thrift banks. 55

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On the basis of the foregoing pronouncement, Atty. Cacal's alleged knowledge acquired through a letter addressed to
him cannot instantly be assumed as knowledge of NHMFC itself. This is especially so in view of the fact that apart
from its mere allegation, Vive failed to present any evidence to establish that Atty. Cacal was actually appointed by
the corporation as its authorized representative. Neither did it present any explanation as to why it chose to send its
"thank you" letter to Atty. Cacal instead of the board of directors itself considering the fact that Atty. Salud, in his June
17, 2004 letter, stated that he "will submit the request to the Board for consideration and guidance" and that he "will
seek authority to negotiate" with Vive. Said statements should have already alerted Vive, an established business
entity engaged in real estate, of the need for board approval.

Unfortunately for Vive, moreover, it cannot rely on our ruling in Francisco. There, Francisco sought the redemption of
a property that GSIS acquired in a foreclosure proceeding due to the failure of the former's daughter to pay the loan
she obtained from the latter. Thus, he sent a telegram of his proposal to the general manager of GSIS who, in turn,
stated in another telegram that the GSIS approved the proposal. In fulfillment of his proposed redemption scheme,
Francisco began remitting several amounts to GSIS, which received the same and issued corresponding official
receipts therefor. After a few months, however, GSIS sent Francisco a letter demanding for the payment of the loan
and informing the latter that the oneyear redemption period had already expired. It also consolidated the title to the
property in its name. Aggrieved, Francisco filed a complaint alleging that the GSIS must honor their agreement in the
telegram he sent. In ruling in Francisco's favor, the Court held that first, the GSIS did not disown its general
manager's telegram of acceptance but only alleged mistake in the wording thereof. Second, when Francisco made
his first remittance to GSIS, he accompanied the same with a telegram wherein he referred to the acceptance made
by GSIS's general manager. This notwithstanding, GSIS made no effort to correct the telegram of acceptance as it
later on claimed to be erroneous. More importantly, it even received the payments made by Francisco. Thus, the
Court ruled that this silence, taken together with the unconditional acceptance of three other subsequent remittances
from [Francisco], constitutes in itself a binding ratification of the original agreement. 56

The same cannot be said in this case, however, under the obtaining undisputed facts. Unlike GSIS, NHMFC never
accepted any form of payment from Vive in furtherance of their alleged amended contract. Also, unlike GSIS,
NHMFC made no representation making Atty. Cacal as its representative authorized to receive notice of a supposed
moratorium on NHMFC's behalf. In view of this absence of evidence pointing to similar acts that can be interpreted as
NHMFC holding Atty. Cacal to receive information or even Atty. Salud to grant a moratorium in its behalf, there can
be no apparent authority that would render NHMFC as estopped from denying the binding effect of the unauthorized
acts of these officers. Certainly, consent of NHMFC cannot simply be presumed from representations of its individual
officers without authority from the board, especially if obligations will be incurred as a result. 57

Neither can NHMFC be deemed to have ratified the unauthorized acts of its officers. Time and again, the Court has
held that "ratification is a voluntary and deliberate confirmation or adoption of a previous unauthorized act. It converts
the unauthorized act of an agent into an act of the principal. It cures the lack of consent at the time of the execution of
the contract entered into by the representative, making the contract valid and enforceable. It is, in essence, consent
belatedly given through express or implied acts that are deemed a confirmation or waiver of the right to impugn the
unauthorized act."58 But as already mentioned, not only was it proven that the grant of the moratorium was
unauthorized by the board, it was also shown that NHMFC was not duly informed about the same. It is rather
impossible for NHMFC to ratify, whether expressly or impliedly by its silence, an unauthorized act of its agent which it
had no knowledge of. Indeed, silence, acquiescence, retention of benefits, and acts that may be interpreted as
approval of the act do not by themselves constitute implied ratification. For an act' to constitute an implied ratification,
there must be no acceptable explanation for the act other than that there is an intention to adopt the act as his or her
own. It cannot be inferred from acts that a principal has a right to do independently of the unauthorized act of the
agent.

In an attempt to save its plight, Vive raised for the first time in its Motion for Reconsideration before the Court the
argument that the Deed of Sale must remain valid and subsisting in view of NHMFC's failure to comply with the
mandatory twin requirements of a notarized notice of cancellation and a refund of the cash surrender value under the
Maceda Law. Specifically, Vive argues that since the instant transaction involves the sale of real estate payable in
installments, and that the subject property is not one that is excluded in Section 3 59 of the Maceda Law, the
provisions under Section 460 thereof should apply. Thus, NHMFC may only cancel their contract after giving Vive a
grace period of not less than sixty days from the date the installment became due and upon the expiration of said
grace period, only after thirty days from receipt by Vive of a notice of cancellation or demand for rescission by a
notarial act. But since NHMFC failed to comply with the requirements of Section 4, its notice to rescind not being a
notarized document, their contract must be deemed valid and subsisting.

The contention is untenable.

In the first place, it has not escaped the Court's attention that the argument was raised for the first time before the
Court, not in Vive's Petition for Review on Certiorari, but only in its Motion for Reconsideration. It is a rudimentary
principle of law that matters neither alleged in the pleadings nor raised during the proceedings below cannot be
ventilated for the first time on appeal before the Supreme Court. It would be offensive to the basic rules of fair play
and justice to allow Vive to raise an issue that was not brought up before the trial court and appellate court. While it is
true that litigation is not a game of technicalities, it is equally true that elementary considerations of due process
require that a party be duly apprised of a claim against him before judgment may be rendered. 61

But even if We make an exception and give due course to the belated assertion, Vive's argument still would not alter
the outcome of the case. Contrary to Vive's claims, the Maceda Law does not apply to the instant contract to sell.

In Active Realty Development Corporation v. Daroya,62 the Court unequivocally pronounced that the declared policy
of the Maceda Law is to protect the innocent, low-income buyers of real estate who are eager to acquire property
upon which to build their homes from the exploitative and onerous installment schemes of private housing developers
who get to forfeit all payments upon default by the buyer and resell the same property under the same exigent
conditions. We elucidated in the following wise:cralawred

The contract to sell in the case at bar is governed by Republic Act No. 6552 — "The Realty
Installment Buyer Protection Act," or more popularly known as the Maceda Law — which came
into effect in September 1972. 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 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 them from
one-sided and pernicious contract stipulations.63

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 Seen in the foregoing light, the Court, in Spouses Garcia v. Court of Appeals, refused to apply the Maceda Law to the
contract to sell between buyers, the Spouses Garcia, and seller, Emerlita Dela Cruz, covering five (5) parcels of land
in Cavite. There, the spouses refused to pay the last installment claiming to have discovered an infirmity on the
subject lots. Consequently, Dela Cruz rescinded their contract and sold the property to another buyer. When the
spouses questioned Dela Cruz' rescission, the Court ruled that their contract was clear in the sense that Dela Cruz
had the right to cancel the contract upon the failure of the spouses to pay the purchase price on the stipulated dates.
In particular, We held that while the Maceda Law applies to contracts of sale of real estate on installment payments,
including residential condominium apartments but excluding industrial lots, commercial buildings and sales to
tenants, the subject lands, comprising five (5) parcels and aggregating 69,028 square meters, do not comprise
residential real estate within the contemplation of the Maceda Law.64

By the same token, the Court, in Spouses Dela Cruz v. Court of Appeals, ruled that the Maceda Law does not govern
the contract to sell entered into by sellers, the Spouses Dela Cruz and buyers, the Spouses Aguila, of a house
located in Town and Country Executive Village, Antipolo, Rizal, because it is not a contract involving a subdivision
owner or developer but only between two couples, i.e., the original house-owners and the subsequent buyers of the
house and lot.65

Guided by the foregoing precepts, the Court cannot apply the provisions of the Maceda Law to the present case. The
contract to sell herein is between Vive, a corporation engaged in the realty business, and NHMFC, a government
corporation mandated to increase the availability of loans for Filipinos who seek to acquire their own homes by
operating a secondary market for home mortgages. 66 As such, it is rather obvious that the contract before Us is not
the kind of onerous contract of adhesion under the Maceda Law drawn up by private real estate developers designed
to entrap innocent low-income earners by requiring installment payments for several years only to be forfeited by the
former upon failure to make a single payment. In fact, Vive, the buyer of the subject property, has been insisting that
it was an essential consideration of the contract for Vive to be able to use the property as collateral for a loan to
develop the same into a residential subdivision. It cannot be denied, therefore, that Vive is not the "innocent, low-
income buyer" that the Maceda Law was enacted to protect. Neither is NHMFC the "real estate developer" that said
law intends to regulate in order to prevent the enjoyment of any unnecessary exploitation. To repeat, the Maceda law
was enacted to remedy the plight of low and middle-income lot buyers, save them from the exacting default clauses
in real estate sales, and assure them of a home they can call their own.67

In a last-ditch effort to protect its interests, Vive similarly raised for the first time in its Motion for Reconsideration that
even assuming that the rescission effected by NHMFC was valid, the lower courts should have ordered mutual
restitution and that the parties surrender that which they received and to place each other in their original position.
Referring to its efforts in cleansing the title of the property from adverse claims, Vive added that NHMFC should not
be permitted to benefit therefrom especially when it conveniently sold the property to Cavacon only after the legal
issues affecting it had been resolved. The Court remains unconvinced. For one, there is no proof of NHMFC's bad
faith in allegedly waiting for the resolution of the legal issues before it decided to sell the property to Cavacon. As
NHMFC asserted, Vive did not present any evidence to show when it became aware of the said resolution. For
another, We go back to the provisions of the contract itself, the pertinent portions of which state:cralawred

WHEREAS, pursuant to the disposition policies under Board Resolution No. 2391, dated June
23, 1994, VENDOR was authorized to sell and convey whatever rights, interests, and
participation it has on "as is where is basis" the property of ALYANSA NG MGA MAKA
MARALITANG ASOSASYON AT KAPATIRANG ORGANISASYON, INC. (AMAKO), X X X.

WHEREAS, VENDEE has full knowledge of the nature and extent of the VENDOR's rights,
interests, and participation over the foreclosed property subject of this contract including
pending litigation involving claims of alleged tenants to the property.

xxxx

Section 5: EFFECTS OF DEFAULT

Upon the occurrence of an event of default, NHMFC shall have the right
to:cralawred

xxxx

VENDOR shall then be at liberty to dispose of the same as if this Deed of Sale of Rights, Interest and
participation over Foreclosed Assets has never been made, and in the event of such annulment, the sums of
money paid shall be considered and treated as rentals for the occupancy and use of the property and  VENDEE
5.2
waives all rights to ask or demand the return hereof. VENDEE further agrees to peacefully and quickly
vacate the property. All permanent I fixed improvements found in the premises shall belong to the VENDOR
without liability on the part of VENDOR to reimburse VENDEE of the cost of said improvements;

xxxx
 Section 9. EJECTMENT

VENDEE at his own expense assumes responsibility of ejecting

squatters and/or occupants of the property, if any.68

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It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulations shall control. A court's purpose in
examining a contract is to interpret the intent of the contracting parties, as objectively manifested by them. Where the
written terms of the contract are not ambiguous and can only be read one way, the court will interpret the contract as
a matter of law.69 The contract to sell executed by the parties herein could not be any clearer. In a language too clear
to be mistaken, Vive entered into the agreement fully aware of the nature and condition of the subject property and
expressly assumed responsibility over the pending legal issues affecting the same. It also deliberately waived all its
rights to demand for the return of any and all amounts it had paid NHMFC prior to its commission of an event of
default. As such, and as We have declared above, Vive cannot now be permitted to put the blame on NHMFC or the
issues affecting the property for its failure to adhere to the clear provisions of the contract.

Stripped of all complexities, the simple fact remains that Vive failed to comply with its obligation to pay the stipulated
amounts for the purchase of the property subject of the agreement. This comprises as an event of default which,
under the contract, produces the following effects:cralawred

Section 5: EFFECTS OF DEFAULT

Upon the occurrence of an event of default, NHMFC shall have the right to:cralawred

Declare the contract annulled I cancelled. VENDEE shall forfeit and waive whatever rights he might have
5.1
acquired over the property.

VENDOR shall then be at liberty to dispose of the same as if this Deed of Sale of Rights, Interest and
participation over Foreclosed Assets has never been made, and in the event of such annulment, the sums
of money paid shall be considered and treated as rentals for the occupancy and use of the property and
5.2 VENDEE waives all rights to ask or demand the return hereof. VENDEE further agrees to peacefully and
quickly vacate the property. All permanent I fixed improvements found in the premises shall belong to the
VENDOR without liability on the part of VENDOR to reimburse VENDEE of the cost of said improvements; x x
x.70

Indubitably, by the clear and express provisions of the agreement, the default on the part of Vive unequivocally gave
NHMFC the right to: (1) annul and cancel the contract; (2) dispose of the property as if the contract was never
executed; and (3) treat the sums of money paid by Vive as rentals for the latter's use and occupancy thereof. As a
matter of fact, Vive even consciously and categorically waived any and all rights to demand for the return of the sums
of money it paid to NHMFC. It is for this reason that the Court cannot give credence to Vive's argument that the
subsequent sale between NHMFC and Cavacon was entered into in bad faith. As far as NHMFC was concerned, it
was merely acting in accordance with the provisions of the contract to sell, having every right to dispose of the
property as if the sale of the same to Vive was never executed. As the Court similarly held in Spouses Garcia v.
Court of Appeals,71 Dela Cruz, the seller of the property, was within her rights to sell the subject lands to another
buyer as a result of the Spouses Garcia's failure to pay the balance of the purchase price on the stipulated date of
their contract to sell.

All told, the Court finds no cogent reason to reverse the conclusions reached by the appellate court. At the risk of
being repetitive, Vive consistently failed to pay the balance of the purchase price on the date and in the manner
prescribed by the contract to sell. Unfortunately for Vive, moreover, this failure could not be justified by its contentions
that ownership was already transferred to it in the absolute sense, that it was granted a moratorium or that the issues
inherent in the subject property suspended all subsequent payments. The provisions of the contract are clear. To
begin with, the agreement executed by the parties is a contract to sell as shown by the fact that NHMFC expressly
reserved its title to the subject property. As such, Vive's non-payment constituted an event of default that granted
NHMFC the right to cancel their contract. The argument that Vive was granted a moratorium on the collection period
hardly persuades in the absence of proof that NHMFC 's board of directors approved the same or that NHMFC
authorized its officers to grant the suspension on its behalf.

At the end of the day, there is no denying that Vive was well aware of the complications surrounding the property.
Yet, despite knowledge of the pending issues, Vive still endeavored to acquire the lots and even assumed all
responsibility for the resolution thereof. It cannot, therefore, take refuge on this condition of the property as an excuse
for its breach of contract. Thus, in view of Vive's failure to comply with its obligations under the agreement, We rule
that NHMFC validly cancelled the same. That the cancellation was not executed in compliance with the Maceda Law
is of little relevance for said law is inapplicable to the present contract. Ultimately, as a legal consequence of Vive's
default, and by the express authority of the agreement, NHMFC cannot be faulted for selling the property to Cavacon.
The subsequent transaction entered into between NHMFC and Cavacon is, therefore, valid.
WHEREFORE, premises considered, the instant petition is DENIED. The assailed Decision dated August 23, 2016
and the Resolution dated March 30, 2017 of the Court of Appeals in CA-G.R. CV No. 105312 are AFFIRMED.

SO ORDERED.
 G.R. No. 212740, November 13, 2019

SPOUSES CELIA FRANCISCO AND DANILO FRANCISCO, PETITIONERS, v. ALBINA D. BATTUNG,

RESPONDENT.

DECISION

A. REYES, JR., J.:

This resolves a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court assailing the Decision 2 dated
September 19, 2013 (Assailed Decision) and Resolution 3 dated May 13, 2014 (Assailed Resolution) issued by the
Court of Appeals (CA) in CA-G.R. CV No. 93745.

Factual Antecedents

Albina D. Battung (respondent) is the owner of a parcel of land located in San Gabriel, Tuguegarao City (subject
land) covered by Transfer Certificate of Title (TCT) No. 118686 of the Registry of Deeds of the Province of Cagayan.
On February 25, 1997, Celia Francisco entered into a Deed of Conditional Sale of Registered Land 4 (Deed) as the
buyer with respondent as the seller over the subject land.5 The Deed provides the following terms and conditions:
1. That the VENDOR is the owner of a parcel of land located at [sic] Ugac Norte now San
Gabriel[,] Tuguegarao, Cagayan and hereto described as follows:
"Lot No. 4179-C-6, Psd-2-01-006109 with an area of 433 square meters
more or less and still covered by TCT No. T _______ (sic)."
2. That the VENDOR has offered to sell the above-described land to the VENDEE, [subject] to
the following terms and conditions:
a. That the amount of sale shall be THREE HUNDRED FORTY SIX
THOUSAND FOUR HUNDRED PESOS (P346,400.00), Philippine Currency,
the same to be paid as follows:

aa. P20,000.00 shall be paid upon the execution of this instrument;

bb. P5,000.00 monthly effective March 30, 1997 and to so (sic) until the full
amount of the one-half of the purchase price in the amount of P173,000.00
is fully paid;

cc. P73,000.00 shall be paid in full on or before December 30, 1999.

b. That the Deed of Absolute Sale of the above-described lot shall only be executed in favor of
the vendee upon the full payment of the full (sic) amount of the purchase price in the amount of
P346,400.00 and after which the title shall be transferred in the name of the vendee.

c. That all expenses for the transfer of the title in the name of the vendee shall be shouldered by
the vendee without bothering the vendor of the payment of these expenses like capital gains tax,
tax transfer fee and registration fees.

x x x x6
Respondent's Action for Unlawful Detainer with Damages and Decisions Therein

On April 2, 2003, respondent filed an action for unlawful detainer with damages 7 against Celia before the Municipal
Trial Court in Cities of Tuguegarao City, Branch 2 (MTCC), docketed as Civil Case No. 2374. 8

On January 12, 2004, the MTCC issued a Decision ordering Celia to vacate the property and consider the payment
of P89,000.00 as rent. Celia appealed to the Regional Trial Court (RTC) of Tuguegarao City, Branch 5 (RTC Branch
5), docketed as Civil Case No. 6303. On June 23, 2004, the RTC Branch 5 affirmed the Decision of the MTCC but
vacated the order that the amount of P89,000.00 be considered a rent. Dissatisfied, Celia filed a Petition for Review
with the CA entitled "Celia Francisco v. Albina Battung," docketed as CA-G.R. SP No. 85819, assailing the June 23,
2004 RTC Branch 5 Decision. In a Decision dated July 31, 2006, the CA nullified and set aside the June 23, 2004
RTC Branch 5 Decision and dismissed the complaint. A Motion for Reconsideration was filed but the CA denied the
same in a Resolution dated February 6, 2007. Respondent filed a petition for certiorari with the Court, but the same
was dismissed in a Resolution dated June 6, 2007. 9

Petitioners' Complaint for Specific Performance with Damages

On April 30, 2003, Celia and her husband Danilo Francisco (petitioners) filed a complaint for specific performance
with damages against respondent before the RTC of Tuguegarao City, Branch 3 (RTC Branch 3), docketed as Civil
Case No. 6153.10

In addition to the terms and conditions of the Deed, petitioners alleged that while the Deed was entered on February
25, 1997,11 they already made an advance payment on February 22, 1997. 12 They said that after the execution of the
Deed and pursuant to the terms therein, petitioners made installment payments amounting to Pl51,000.00.
Subsequently, they discovered that the subject land was already titled and sold by respondent to another person. For
this reason, they stopped continuing the payment agreed upon. Later on, they learned that the previous title of the
subject land in the name of another person was cancelled to the effect that it reverts to its former status as a clean
title. Petitioners then manifested their intention to pay their balance in the conditional sale by sending a letter to
respondent informing him of their willingness to pay the balance amounting to P215,000.00. Nonetheless, despite
due receipt of the letter, respondent failed and still fail to get the said balance. 13

In her Answer, respondent averred that the subject land is covered by the mother title TCT No. T-41612 of the
Registry of Deeds of the Province of Cagayan. She added that petitioners have only paid a total amount of
P89,000.00 or less and that she had a hard time collecting from the petitioners. 14 She explained that she could have
tolerated the delayed payments were it not for the discovery sometime in June 2001 of the cheatings committed by
Celia.15 Instead of paying, Celia asked her to affix her signature on the figure P5,000.00 and on the figure
P151,000.00 that she listed in her notebook. Celia claimed that the figure were the payments she made to
respondent before leaving for a vacation sometime in April 2000. Respondent refused to sign the same. 16

Respondent further asserted that the discovery of the erroneous titling of the subject lot in the name of Ms. Ma.
Victoria B. Te (Ms. Te) gave petitioners an alibi not to further pay the balance of the purchase price of one half
portion of the subject land despite the assurance that the subject land was not sold to Ms. Te and that steps were
taken to correct the mistake. She also narrated that she sent a written demand dated July 2, 2001 to pay for the
whole amount of P257,400.00 plus legal interest at 12% from January 1, 2000, the date of default, up to the time the
obligation is paid. Petitioners, however, refused and continued to refuse to pay the same. 17

Moreover, respondent clarified that petitioners only offered to pay the amount of P22,000,00 instead of the amount
demanded. As such, she did not accept the same. She added that on November 22, 2002, an Order granting the
petition for correction of title was issued and TCT No. 118688 (sic) in the name of Ms. Te was cancelled by the
Registry of Deeds of Tuguegarao City. Upon the correction of Ms. Te's title, respondent gave petitioners the chance
to buy the one-half portion of the lot they are occupying. Thus, on January 6, 2003, she sent a letter to them
demanding the balance of the one-half portion of the subject land amounting to P84,000.00 plus legal interest at 12%
computed from January 2000 up to the time of settlement.18

As a counterclaim, respondent maintained that the Deed is a contract to sell where the ownership or title is retained
by the seller and is passed only upon the full payment of the purchase price. The full payment is considered a
positive suspensive condition and failure of which is not a serious breach, but merely an event preventing the
obligation of the vendor to convey the title from acquiring binding force. Hence, she may not be compelled to execute
a deed of absolute sale in favor of petitioners as the conditions of the Deed were not satisfied. 19 She then prayed for
the dismissal of the complaint, for petitioners to vacate and clear the subject land, and for the application of the
payments made by petitioners in the amount of P89,000.00 or less as payment of the rentals of the subject land. 20

On November 6, 2007, petitioners filed a Motion to Consign the amount of P215,300.00 representing the balance of
the purchase price of the subject land. They asserted that they tendered the amount of P215,300.00 for the purchase
of the subject land on November 5, 2007 at the Barangay Hall of Caggay, Tuguegarao City, but respondent refused
to accept the same.21

Respondent opposed the said motion and refused to accept the amount of P215,300.00 but expressed her
willingness to accept P121,538.00 representing one-half of the balance of the purchase price inclusive of interest.
Nevertheless, petitioners refused to tender and pay the said amount.22

On November 23, 2007, the RTC Branch 3 issued an Order whereby the parties agreed that petitioners shall hand
one-half of P215,300.00, or the amount of P107,650.00, to respondent and the remaining portion to be deposited
with the clerk of court. Respondent signed the corresponding Acknowledgment Receipt. 23

On November 27, 2007, petitioners marked and formally offered the following documents: (1) Acknowledgment
Receipt covering the amount of P107,650.00; (2) Official Receipt of Consignation in the RTC Branch 3 covering the
same amount; (3) Official Receipt of Consignation Fee of P300.00; and (4) Official Receipt of Consignation Fee of
P200.00. The RTC admitted the foregoing documentary exhibits.24

RTC Branch 3 Decision

On January 30,2009, the RTC Branch 3 rendered a judgment25 in favor of petitioners. The trial court ratiocinated that
the judgment in CA-G.R. SP No. 85819, where it was ruled that the Deed was a contract of sale, is applicable in this
case and binds both parties under the principle of the law of the case. The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of [petitioners]:
xxxx

1. Ordering [respondent] to execute the deed of absolute sale in favor of [petitioners] covering
the property subject of [the Deed], particularly Lot No. 4179-C-6, containing an area of Four
Hundred Thirty-Three (433) square meters;

2. Ordering [petitioners] to pay [respondent] the unpaid balance of the purchase price amounting
to Two Hundred Fifty Seven Thousand Pesos (P257,000.00) plus interest thereon at twelve
percent per annum effective December 30, 1999 amounting to P277,560.00 as of December 31,
2008 thus totaling Five Hundred Thirty-Four Thousand Five Hundred Sixty Pesos [P534,560.00];
and; (sic)

3. Dismissing the counterclaim of [respondent].

SO ORDERED.26
Respondent filed a Motion for Reconsideration but the same was denied in an Order dated April 27, 2009. 27

Likewise, petitioners filed a Motion for Partial Reconsideration but the same was denied in an Order dated May 15,
2009.28

Perturbed, petitioners filed a Notice of Partial Appeal which was given due course by the RTC Branch 3 in an Order
dated May 25, 2009.29

CA Decision

On September 19, 2013, the CA rendered the Assailed Decision30 dismissing the appeal.

The appellate court ruled that the Deed is a contract to sell and not a contract of sale31 thereby reversing and setting
aside the January 30, 2009 RTC Branch 3 Decision.32 The dispositive position reads:
WHEREFORE, premises considered, judgment is hereby rendered:

1. [Petitioners] are ordered to vacate the subject land immediately[,] upon the finality of this
decision;

2. [Respondent] is ordered to return the amount of P196,650.00, Philippine Currency,

representing the total amount paid by [petitioners] with interest at the rate of twelve percent
(12%) per annum upon the finality of this decision;

3. The amount of P107,650.00, Philippine Currency deposited with the Clerk of Court must
likewise be returned to [petitioners];

4. [Petitioners] are hereby ordered to pay [respondent] P50,000.00, Philippine Currency by way
of nominal damages.

xxxx

SO ORDERED.33
Petitioners filed a Motion for Reconsideration but the CA denied the same in the Assailed Resolution. 34

Hence, the present recourse.

Petitioners argue that the CA erred (1) when it revived the issue on the nature of the contract between the parties,
considering that it has already been resolved in CA G.R. SP No. 85819, in violation of the doctrines of the principles
of the law of the case, res judicata, and immutability of judgments; (2) when it revived the said issue by treating it as
an "assigned error" thereby granting an affirmative relief in favor of respondent who did not appeal at all and
rendering other issues raised by petitioners in their partial appeal moot and academic; and (3) when it ignored the
provisions of Republic Act (R.A.) No. 6552, otherwise known as the "Realty Installment Buyer Act" or the "Maceda
Law," by ruling that the Deed was "ineffective and without force and effect" despite the receipt by respondent in open
court of the sum of P107,560.00 made in consideration of the Deed. 35

On her part, respondent maintained that: (1) the issue as to the nature of the contract between the parties has not
been put to rest in CA G.R. SP No. 85819 since the subject of the said case involved unlawful detainer; 36 (2)
reiterating the CA, the present case is an action for specific performance and while both cases may appear to have a
similar set of facts, the parties, and arguments, these have different issues which are clearly beyond the purview of
the principle of the law of the case;37 and (3) R.A. No. 6552, if at all applicable to this case, does not apply to other
half of the subject land sold eventually by respondent to another person allegedly by virtue of a novation of a contract
made sometime in April 2001 and with the knowledge and consent of petitioners. 38]

The Issues

As raised by petitioners, the following are the issues for the resolution of the Court:

I.

Whether or not the CA committed serious error of law when it revived the issue on the nature of the Deed, which
issue is said to have been long resolved by another division of the CA, disregarding the doctrines of the law of the
case, res judicata, and immutability of judgments.

II.

Whether or not the CA committed serious error of law when it revived the said issue by considering it an "assigned
error" that in effect granted an affirmative relief in favor of respondent who did not appeal and rendered the other
issues raised by petitioners in their partial appeal moot and academic, and leading to the complete reversal of the
partially appealed RTC Branch 3 decision, in violation of Rule 51, Section 8 of the Rules of Court.

III.

Whether or not the CA committed serious error of law by allegedly ignoring the provisions of R.A. No. 6552 when it
ruled that the Deed was "ineffective and without force and effect" notwithstanding that the receipt by respondent in
open court of the sum of P107,560.00 was made in consideration of the Deed arguably indicative enough that the
Deed still subsisted and has never been cancelled nor rescinded at all.

IV.

Whether or not the acceptance in the course of the proceedings by respondent of the sum of P107,650.00 constitutes
partial performance of the Deed, indicating that as between the parties, the Deed was subsisting and has never been
rescinded, contrary to the findings of the CA that it was ineffective and without force and effect.

Ruling of the Court

This Court finds the instant petition unmeritorious.

The CA was not precluded to rule on the true nature of the Deed as the principles of the law of the case, res judicata,
and immutability of judgments are not applicable in this case.

As to the first issue, petitioners contend that another division of the CA in CA G.R. SP No. 85819 already ruled that
the Deed was a contract of sale and not a contract to sell and as such, the principles of the law of the case, res
judicata, and immutability of judgments bar the reopening of the issue on the real nature of the Deed. 39

The Court is not persuaded.

Law of the case is the opinion rendered on a former appeal.40 It dictates that whatever is once permanently
established as the controlling legal rule of decision involving the same parties in the same case persists to be the law
of the case regardless of the correctness on general principles so long as the facts on which such decision was
premised remain to be the facts of the case before the court.41 Simply stated, the ruling of the appellate court cannot
be deviated from in the subsequent proceedings in the same case.42 It applies only to the same case.43

As correctly found by the CA, the application of the principle of the law of the case is misplaced. While the petitioners'
action for specific performance and respondent's action for unlawful detainer, which was the subject of CA G.R. SP
No. 85819, involve a similar set of facts, these are two different cases. Thus, whatever ensuing incident in the
petitioners' action for specific performance cam1ot be considered a subsequent proceeding in CA G.R. SP No.
85819.

Meanwhile, the doctrine of res judicata provides that "a final judgment or decree on the merits by a court of
competent jurisdiction of the rights of the parties is conclusive of the rights of the parties or their privies in all later
suits on all points and matters determined in the former suit."44 Said final judgment becomes conclusive as to the
rights of the parties and their privies and serves as an absolute bar to subsequent actions involving the same claim,
demand, or cause of action.45

In this case, the doctrine of res judicata is also not applicable. While there is an identity of parties in the action for
unlawful detainer and action for specific performance, there is no identity of the claims, demands, and causes of
action. As aptly noted by the CA, the action for unlawful detainer dealt with the issue of possession and any
pronouncement on the title or ownership over the subject land is merely provisional while the action for specific
performance involved the determination of the rights over the subject land of the petitioners and respondent under
the Deed.46 Thus, the ruling inCA G.R. SP No. 85819 is not conclusive of the rights of petitioners and respondent in
the action for specific performance.

Along the same line, the doctrine of finality of judgment or immutability of judgments provides that once a decision
has acquired finality, it becomes immutable, unalterable, and may no longer be modified in any aspect, regardless if
the modification is meant to correct erroneous factual and legal conclusions and if it be made by the court that
rendered it or by this Court.47

Similarly, said doctrine of finality of judgment or immutability of judgments does not apply in this case. In Sps. Diu v.
Ibajan,48 this Court held that in detainer, being a mere quieting process, the issues on real property are incidentally
discussed and the court may only make an initial determination of ownership so as to resolve possession in the
absence of evidence on the latter. Nonetheless, this determination of ownership is "not clothed with finality" and will
not "constitute a binding and conclusive adjudication on the merits with respect to the issue of ownership." 49

In the present case, the nature of the Deed was incidentally passed upon in the action for unlawful detainer to
determine the rights of petitioners and respondent relative to the ownership of the subject land so as to determine
who is entitled to possession thereto. Then again, such determination of ownership based on the Deed is provisional,
thus, not a conclusive adjudication on the merits of the case. Thus, the CA was not precluded to revisit the issue on
the nature of the Deed and make its ascertainment based on the facts and evidence on record.

The CA appropriately revived the issue on the true nature of the Deed, considering that the determination of the
same was necessary for the complete and just resolution of the case.

With respect to the second issue, petitioners argue that they were the ones who filed the partial appeal of the RTC
Decision with the CA assailing only the correct amount of the balance of the purchase price, the correct interest rate,
and the correct interest period. They asserted that the matter concerning the nature of the Deed as a contract of sale
was not an assigned error and as such, the CA should not have considered it.50

Section 8, Rule 51, of the Rules of Court provides that as a general rule, only matters assigned as errors in the
appeal may be resolved. As an exception thereto, the CA may review errors that are not assigned but are closely
 related to or dependent on an assigned error and is given discretion if it finds that the consideration of such is
necessary for a complete and just resolution of the case.51

Applying the foregoing to this case, the determination of the nature of the Deed was indeed necessary for the
complete and just resolution of the case. After all, establishing the true nature of the Deed would set forth the
contractual rights and obligations of petitioners and respondent. It would clarify who is legally vested with the
ownership of the subject land. Consequently, the CA cannot be faulted for re-examining the contractual relations of
petitioners and respondent based on the Deed.

At this juncture, it is imperative for the Court to finally conclude the true nature of the Deed. Based on the provisions
of the Deed, the CA is correct in ruling that the Deed is a contract to sell and not a contract of sale.

In Diego v. Diego,52 the Court held that an agreement stipulating that the execution of the deed of sale shall be
contingent on the full payment of the purchase price is a contract to sell, thus:
It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates
that the seller shall execute a deed of sale only upon or after full payment of the purchase price
is a contract to sell, not a contract of sale. In Reyes v. Tuparan, this Court declared in categorical
terms that "[w]here the vendor promises to execute a deed of absolute sale upon the
completion by the vendee of the payment of the price, the contract is only a contract to
sell. The aforecited stipulation shows that the vendors reserved title to the subject
property until full payment of the purchase price."

In this case, it is not disputed as in fact both parties agreed that the deed of sale shall only be
executed upon payment of the remaining balance of the purchase price. Thus, pursuant to the
above stated jurisprudence, we similarly declare that the transaction entered into by the parties
is a contract to sell.53 (Citation omitted)
Clause 2(b) of the Deed readily reveals that respondent shall only execute the Deed and transfer the title over the
subject land in favor of petitioners upon full payment of the purchase price:
That the Deed of absolute sale of the above-described lot shall only be executed in favor of the vendee upon the
b. full payment of the full (sic) amount of the purchase price in the amount of P346,400.00 and after which the title
shall be transferred in the name of the vendee.54
Resultantly, given that the ownership over the subject land was retained by respondent until full payment by
"petitioners of the purchase price," the Deed is a contract to sell.

Petitioners cannot avail of the rights of the buyer under Section 3 of RA No. 6552 because they did not diligently and
consistently satisfy the legal requirement of paying at least two (2) years of installments.

Regarding the third issue, petitioners assert that granting that the Deed was a contract to sell and given that the
subject land is a residential lot and that respondent received in open court the sum of P107,560.00 in consideration
of the Deed, RA No. 6552 would apply. Thus, they claim that before the Deed was cancelled, the following
requirements under Section 3 thereof should have been complied with: (1) receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by notarial act and (2) full payment of the cash surrender
value to the buyer. They point out that these requisites were not satisfied in this case. 55

RA No. 6552 expressly grants the buyer, who must have paid at least two (2) years of installments, the following
rights:
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
canceled, the seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments made, and, after five years of
installments, an additional five per cent every year but not to exceed ninety per cent of the total
payments made: Provided, That the actual cancellation of the contract shall take place after 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. (Emphasis supplied)
In Orbe v. Filinvest Land, Inc.,56 the Court emphasized that "at least two years of installments" means the "equivalent
of the totality of payments diligently or consistently made throughout a period of two (2) 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:

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 tom unduly claiming the rights provided in Section 3 of R.A. 6552. (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 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.

Laws should never be so interpreted as to produce results that are absurd or unreasonable.
Sustaining petitioner's contention that spe 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 3's
protection.57 (Citation omitted)
In this case, petitioners did not diligently and consistently pay at least two (2) years of monthly installments. As
pointed by the CA, instead of paying P5,000.00 monthly effective March 30, 1997, they merely paid small
amounts, i.e., P300.00, P500.00, P700.00, P1,000.00, P1,500.00, P2,000.00, or P2,500.00, from time to time, thus:
In fact, there is evidence showing that [petitioners] were unable to pay the amount due within the
period fixed in the Deed. Instead of paying P5,000.00 monthly effective March 30, 1997 until the
amount of P173,000.00, representing one-half (1/2) of the purchase price, is paid, they failed to
complete it and only paid small amounts, i.e., P300, P500, P700, P1,000.00, P1,500.00,
P2,000.00, or P2,500.00, from time-to-time. [Celia] also admitted, on cross-examination, that she
failed to complete the payment of P173,000.00 corresponding to the other half of the purchase
price that fell due on December 30, 1999.58
Clearly, petitioners are unjustifiably claiming their rights under Section 3 of R.A. No. 6552. They failed to faithfully
comply with the requirement of paying their monthly installments for two (2) years and yet they have the audacity to
invoke Section 3. Treating the receipt by respondent in open court of the sum of P107,560.00 in consideration of the
Deed as substantial compliance by petitioners of the provisions of Section 3 would be unfair and defiant of the
purpose of RA No. 6552. It would tolerate arbitrariness on the part of the buyer when satisfying his monetary
obligations to the seller.

There could no longer be a performance of the Deed upon petitioners' failure to pay the purchase price of the subject
land in accordance with the terms of the Deed.

Anent the last issue, petitioners claim that the receipt by the respondent of the sum of P107,650.00 constitutes partial
performance of the Deed, indicating that as between the parties, the Deed was subsisting and has never been
rescinded, contrary to the findings of the CA that it was ineffective and without force and effect.

In Ayala Life Assurance, Inc. v. Ray Burton Development Corporation,59 the Court held that the payment by the buyer
of purchase price is a positive suspensive condition and the non-fulfillment of which is an event that prevents the
seller from conveying title to the buyer. Said nonpayment of the purchase price renders the contract to sell ineffective
and without force and effect.60 Therefore, a cause of action for specific performance does not arise.61

Here, petitioners failed to realize that there could no longer be a performance, not even partial, of the Deed the
moment that they failed to pay the purchase price of the subject land in accordance with the terms of the Deed. It is
worthy to note that at the time of the receipt by the respondent of the sum of P107,650.00, the Deed was already
without force and effect. Thus, there could have been no partial performance, let alone a cause of action for specific
performance.

WHEREFORE, the petition is DENIED. The Decision dated September 19, 2013 and the Resolution dated May 13,
2014 of the Court of Appeals in CA-G.R. CV No. 93745 are hereby AFFIRMED.

SO ORDERED.
 G.R. No. 194533, April 19, 2017

PHILIPPINE STEEL COATING CORP., Petitioner, v. EDUARD QUIÑONES, Respondent.

DECISION

SERENO, C.J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Court of Appeals
(CA) Decision1 and Resolution.2 The CA affirmed in toto the Regional Trial Court (RTC) Decision in Civil Case No. A-
1708 for damages.3

THE FACTS

This case arose from a Complaint for damages filed by respondent Quiñones (owner of Amianan Motors) against
petitioner PhilSteel. The Complaint alleged that in early 1994, Richard Lopez, a sales engineer of PhilSteel, offered
Quiñones their new product: primer-coated, long-span, rolled galvanized iron (G.I.) sheets. The latter showed
interest, but asked Lopez if the primer-coated sheets were compatible with the Guilder acrylic paint process used by
Amianan Motors in the finishing of its assembled buses. Uncertain, Lopez referred the query to his immediate
superior, Ferdinand Angbengco, PhilSteel's sales manager.

Angbengco assured Quiñones that the quality of their new product was superior to that of the non-primer coated G.I.
sheets being used by the latter in his business. Quiñones expressed reservations, as the new product might not be
compatible with the paint process used by Amianan Motors.

Angbengco further guaranteed that a laboratory test had in fact been conducted by PhilSteel, and that the results
proved that the two products were compatible; hence, Quiñones was induced to purchase the product and use it in
the manufacture of bus units.

However, sometime in 1995, Quiñones received several complaints from customers who had bought bus units,
claiming that the paint or finish used on the purchased vehicles was breaking and peeling off. Quiñones then sent a
letter-complaint to PhilSteel invoking the warranties given by the latter. According to respondent, the damage to the
vehicles was attributable to the hidden defects of the primer-coated sheets and/or their incompatibility with the
Guilder acrylic paint process used by Amianan Motors, contrary to the prior evaluations and assurances of PhilSteel.
Because of the barrage of complaints, Quiñones was forced to repair the damaged buses.

PhilSteel counters that Quifiones himself offered to purchase the subject product directly from the former without
being induced by any of PhilSteel's representatives. According to its own investigation, PhilSteel discovered that the
breaking and peeling off of the paint was caused by the erroneous painting application done by Quiñones.

The RTC rendered a Decision4 in favor of Quiñones and ordered PhilSteel to pay damages. The trial court found that
Lopez's testimony was damaging to PhilSteel's position that the latter had not induced Quiñones or given him
assurance that his painting system was compatible with PhilSteel's primer-coated G.I. sheets. The trial court
concluded that the paint blistering and peeling off were due to the incompatibility of the painting process with the
primer-coated G.I. sheets. The RTC also found that the assurance made by Angbengco constituted an express
warranty under Article 1546 of the Civil Code. Quiñones incurred damages from the repair of the buses and suffered
business reverses. In view thereof, PhilSteel was held liable for damages.

THE RULING OF THE CA

TheCA affirmed the ruling of the RTC in toto.

The appellate court ruled that PhilSteel in fact made an express warranty that the primer-coated G.I. sheets were
compatible with the acrylic paint process used by Quiñones on his bus units. The assurances made by Angbengco
were confirmed by PhilSteel's own employee, Lopez.

The CA further held that the cause of the paint damage to the bus units of Quiñones was the incompatibility of the
primer-coated sheet with the acrylic paint process used by Amianan Motors. The incompatibility was in fact
acknowledged through a letter dated 29 June 1996 from Angbengco himself.5

The CA also agreed with the RTC that PhilSteel was liable for both actual and moral damages. For actual damages,
the appellate court reasoned that PhilSteel committed a breach of duty against Quiñones when the company made
assurances and false representations that its primer-coated sheets were compatible with the acrylic paint process of
Quiñones. The CA awarded moral damages, ruling that PhilSteel's almost two years of undue delay in addressing the
repeated complaints about paint blisters constituted bad faith.

In addition, the CA concurred with the RTC that attorney's fees were in order since Quiñones was forced to file a
case to recover damages.

Accordingly, the CA dismissed the appeal of PhilSteel.

Petitioner sought a reversal of the Decision in its Motion for Reconsideration. The motion was, however, denied by
the CA in its Resolution dated 19 November 2010.

Hence, this Petition.

ISSUES

Petitioner raises the following issues:chanRoblesvirtualLawlibrary

1. Whether vague oral statements made by sel1er on the characteristics of a generic good can
be considered warranties that may be invoked to warrant payment of damages;

2. Whether general warranties on the suitability of products sold prescribe in six (6) months
under Article 1571 of the Civil Code;

3. Assuming that statements were made regarding the characteristics of the product, whether
respondent as buyer is equally negligent; and

4. Whether non-payment of price is justified on allegations of breach of warranty. 6

OUR RULING

We DENY the Petition.

This Court agrees with the CA that this is a case of express warranty under Article 1546 of the Civil Code, which
provides:chanRoblesvirtualLawlibrary
Any affirmation of fact or any promise by the seller relating to the thing is an express warranty if
the natural tendency of such affirmation or promise is to induce the buyer to purchase the same,
and if the buyer purchases the thing relying thereon. No affirmation of the value of the thing, nor
any statement purporting to be a statement of the seller's opinion only, shall be construed as a
warranty, unless the seller made such affirmation or statement as an expert and it was relied
upon by the buyer.
As held in Carrascoso, Jr. v. CA,7 the following requisites must be established in order to prove that there is an
express warranty in a contract of sale: (1) the express warranty must be an affirmation of fact or any promise by the
seller relating to the subject matter of the sale; (2) the natural effect of the affirmation or promise is to induce the
buyer to purchase the thing; and (3) the buyer purchases the thing relying on that affirmation or promise.

An express warranty can be oral when it is a positive affirmation of a fact that the buyer relied on.

Petitioner argues that the purported warranties by mere "vague oral statements" cannot be invoked to warrant the
payment of damages.

A warranty is a statement or representation made by the seller of goods - contemporaneously and as part of the
contract of sale that has reference to the character, quality or title of the goods; and is issued to promise or undertake
to insure that certain facts are or shall be as the seller represents them.8 A warranty is not necessarily written. It may
be oral as long as it is not given as a mere opinion or judgment. Rather, it is a positive affirmation of a fact that
buyers rely upon, and that influences or induces them to purchase the product.9

Contrary to the assertions of petitioner, the finding of the CA was that the former, through Angbengco, did not simply
make vague oral statements on purported warranties.10 Petitioner expressly represented to respondent that the
primer-coated G.I. sheets were compatible with the acrylic paint process used by the latter on his bus units. This
representation was made in the face of respondent's express concerns regarding incompatibility. Petitioner also
claimed that the use of their product by Quiñones would cut costs. Angbengco was so certain of the compatibility that
he suggested to respondent to assemble a bus using the primer-coated sheet and have it painted with the acrylic
paint used in Amianan Motors.

At the outset, Quiñones had reservations about the compatibility of his acrylic paint primer with the primer-coated G.I.
sheets of PhilSteel. But he later surrendered his doubts about the product after 4 to 5 meetings with Angbengco,
together with the latter's subordinate Lopez. Only after several meetings was Quiñones persuaded to buy their G.I.
sheets. On 15 April 1994, he placed an initial order for petitioner's product and, following Angbengco's instructions,
had a bus painted with acrylic paint. The results of the painting test turned out to be successful. Satisfied with the
initial success of that test, respondent made subsequent orders of the primer-coated product and used it in Amianan
Motors' mass production of bus bodies. 11

Thus, it was not accurate for petitioner to state that they had made no warranties. It insisted that at best, they only
gave "assurances" of possible savings Quiñones might have if he relied on PhilSteel's primer-coated G.I. sheets and
eliminated the need to apply an additional primer.12

All in all, these "vague oral statements" were express affirmations not only of the costs that could be saved if the
buyer used PhilSteel's G.I. sheets, but also of the compatibility of those sheets with the acrylic painting process
customarily used in Amianan Motors. Angbengco did not aimlessly utter those "vague oral statements" for nothing,
but with a clear goal of persuading Quiñones to buy PhilSteel's product.

Taken together, the oral statements of Angbengco created an express warranty. They were positive affirmations of
fact that the buyer relied on, and that induced him to buy petitioner's primer-coated G.I. sheets.

Under Article 1546 of the Civil Code, "[n]o affirmation of the value of the thing, nor any statement purporting to be a
statement of the seller's opinion only, shall be construed as a warranty, unless the seller made such affirmation or
statement as an expert and it was relied upon by the buyer."

Despite its claims to the contrary, petitioner was an expert in the eyes of the buyer Quiñones. The latter had asked if
the primer-coated G.I. sheets were compatible with Amianan Motors' acrylic painting process. Petitioner's former
employee, Lopez, testified that he had to refer Quiñones to the former's immediate supervisor, Angbengco, to answer
that question. As the sales manager of PhilSteel, Angbengco made repeated assurances and affirmations and even
invoked laboratory tests that showed compatibility.13 In the eyes of the buyer Quiñones, PhilSteel - through its
representative, Angbengco -was an expert whose word could be relied upon.

This Court cannot subscribe to petitioner's stand that what they told Quiñones was mere dealer's talk or an
exaggeration in trade that would exempt them from liability for breach of warranty. Petitioner cites Gonzalo Puyat &
Sons v. Arco Amusement Company,14 in which this Court ruled that the contract is the law between the parties and
should include all the things they agreed to. Therefore, what does not appear on the face of the contract should be
regarded merely as "dealer's" or "trader's talk," which cannot bind either party. 15

Contrary however to petitioner's position, the so-called dealer's or trader's talk cannot be treated as mere
exaggeration in trade as defined in Article 1340 of the Civil Code. 16 Quiñones did not talk to an ordinary sales clerk
such as can be found in a department store or even a sari-sari store. If Lopez, a sales agent, had made the
assertions of Angbengco without true knowledge about the compatibility or the authority to warrant it, then his would
be considered dealer's talk. But sensing that a person of greater competence and knowledge of the product had to
answer Quiñones' concerns, Lopez wisely deferred to his boss, Angbengco.

Angbengco undisputedly assured Quiñones that laboratory tests had been undertaken, and that those tests showed
that the acrylic paint used by Quiñones was compatible with the primer-coated G.I. sheets of Philsteel. Thus,
Angbengco was no longer giving a mere seller's opinion or making an exaggeration in trade. Rather, he was making
it appear to Quifiones that PhilSteel had already subjected the latter's primed G.I. sheets to product testing. PhilSteel,
through its representative, was in effect inducing in the mind of the buyer the belief that the former was an expert on
the primed G.I. sheets in question; and that the statements made by petitioner's representatives, particularly
Angbengco (its sales manager),17 could be relied on. Thus, petitioner did induce the buyer to purchase the former's
G.I. sheets.

The prescription period of the express warranty applies to the instant case.

Neither the CA nor the RTC ruled on the prescription period applicable to this case. There being an express
warranty, this Court holds that the prescription period applicable to the instant case is that prescribed for breach of an
express warranty. The applicable prescription period is therefore that which is specified in the contract; in its
absence, that period shall be based on the general rule on the rescission of contracts: four years (see Article 1389,
Civil Code).18 In this case, no prescription period specified in the contract between the parties has been put forward.
Quiñones filed the instant case on 6 September 199619 or several months after the last delivery of the thing
sold.20 His filing of the suit was well within the prescriptive period of four years; hence, his action has not prescribed.

The buyer cannot be held negligent in the instant case.

Negligence is the absence of reasonable care and caution that an ordinarily prudent person would have used in a
given situation.21 Under Article 1173 of the Civil Code, 22 where it is not stipulated in the law or the contract, the
diligence required to comply with one's obligations is commonly referred to as paterfamilias; or, more specifically,
as bonos paterfamilias or "a good father of a family." A good father of a family means a person of ordinary or average
diligence. To determine the prudence and diligence that must be required of all persons, we must use as basis the
abstract average standard corresponding to a normal orderly person. Anyone who uses diligence below this standard
is guilty of negligence.23

Respondent applied acrylic primers, which are stronger than epoxy primers. The G.I. sheets of PhilSteel were primer-
coated with epoxy primer. By applying the acrylic over the epoxy primer used on the G.I. sheets, the latter primer was
either dissolved or stripped off the surface of the iron sheets.24

Petitioner alleges that respondent showed negligence by disregarding what it calls a "chemical reaction so
elementary that it could not have escaped respondent Quiñones who has been in the business of manufacturing,
assembling, and painting motor vehicles for decades." 25 For this supposed negligence, petitioner insists that
respondent cannot hide behind an allegation of breach of warranty as an excuse for not paying the balance of the
unpaid purchase price.

It bears reiteration that Quiñones had already raised the compatibility issue at the outset. He relied on the manpower
and expertise of PhilSteel, but at the same time reasonably asked for more details regarding the product. It was not
an impulsive or rush decision to buy. In fact, it took 4 to 5 meetings to convince him to buy the primed G.I. sheets.
And even after making an initial order, he did not make subsequent orders until after a painting test, done upon the
instructions of Angbengco proved successful. The test was conducted using their acrylic paint over PhilSteel's
primer-coated G.I. sheets. Only then did Quiñones make subsequent orders of the primer-coated product, which was
then used in the mass production of bus bodies by Amianan Motors.26

This Court holds that Quiñones was not negligent and should therefore not be blamed for his losses.

The nonpayment of the unpaid purchase price was just(fied, since a breach of warranty was proven.

Petitioner takes issue with the nonpayment by Quiñones to PhilSteel of a balance of P448,041.50, an amount that he
has duly admitted.27 It is the nonpayment of the unpaid balance of the purchase price, of the primer-coated G.I.
 sheets that is at the center of the present controversy.

Quiñones, through counsel, sought damages against petitioner for breach of implied warranty arising from hidden
defects under Article 1561 of the Civil Code, which provides:chanRoblesvirtualLawlibrary
The vendor shall be responsible for warranty against the hidden detects which the thing sold
may have, should they render it unfit for the use for which it is intended, or should they diminish
its fitness for such use to such an extent that, had the vendee been aware thereof, he would not
have acquired it or would have given a lower price for it; but said vendor shall not be answerable
tor patent defects or those which may be visible, or for those which are not visible if the vendee
is an expert who, by reason of his trade or profession, should have known them.
In seeking a remedy from the trial court, Quiñones opted not to pay the balance of the purchase price, in line with a
proportionate reduction of the price under Article 1567 Civil Code, which states:chanRoblesvirtualLawlibrary
In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between
withdrawing from the contract and demanding a proportionate reduction of the price, with
damages in either case.
Petitioner reasons that since the action of respondent is based on an implied warranty, the action has already
prescribed under Article 157128 of the Civil Code. According to petitioner, Quiñones can no longer put up the defense
of hidden defects in the product sold as a basis for evading payment of the balance.29

We agree with petitioner that the nonpayment of the balance cannot be premised on a mere allegation of nonexisting
warranties. This Court has consistently ruled that whenever a breach of warranty is not proven, buyers who refuse to
pay the purchase price or even the unpaid balance of the goods they ordered - must be held liable therefor. 30

However, we uphold the finding of both the CA and the RTC that petitioner's breach of warranty was proven by
respondent.

Since what was proven was express warranty, the remedy for implied warranties under Article 1567 of the Civil Code
does not apply to the instant case. Instead, following the ruling of this Court in Harrison Motors Corporation v.
Navarro,31 Article 1599 of the Civil Code applies when an express warranty is breached. The provision
reads:chanRoblesvirtualLawlibrary
Where there is a breach of warranty by the seller, the buyer may, at his election:

Accept or keep the goods and set up against the seller, the breach of warranty by way of recoupment in
(1)
diminution or extinction of the price;

(2) Accept or keep the goods and maintain an action against the seller for damages for the breach of warranty;

(3) Refuse to accept the goods, and maintain an action against the seller for damages for the breach of warranty;

Rescind the contract of sale and refuse to receive the goods or if the goods have already been received, return
(4)
them or offer to return them to the seller and recover the price or any part thereof which has been paid.

When the buyer has claimed and been granted a remedy in anyone of these ways, no other remedy can
thereafter be granted, without prejudice to the provisions of the second paragraph of article 1191.

Where the goods have been delivered to the buyer, he cannot rescind the sale if he knew of the breach of
warranty when he accepted the goods without protest, or if he fails to notify the seller within a reasonable time of
the election to rescind, or if he fails to return or to offer to return the goods to the seller in substantially as good
condition as they were in at the time the ownership was transferred to the buyer. But if deterioration or injury of
the goods is due to the breach or warranty, such deterioration or injury shall not prevent the buyer from returning
or offering to return the goods to the seller and rescinding the sale.

Where the buyer is entitled to rescind the sale and elects to do so, he shall cease to be liable for the price upon
returning or offering to return the goods. If the price or any part thereof has already been paid, the seller shall be
liable to repay so much thereof as has been paid, concurrently with the return of the goods, or immediately after
an offer to return the goods in exchange for repayment of the price.

Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the
buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but
subject to a lien to secure the payment of any portion nf the price which has been paid, and with the remedies for
the enforcement of such lien allowed to an unpaid seller by article 1526.

(5) In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing
 proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery
to the buyer and the value they would have had if they had answered to the warranty.
Quiñones has opted for a reduction in price or nonpayment of the unpaid balance of the purchase price. Applying
Article 1599 (1), this Court grants this remedy.

The above provisions define the remedy of recoupment in the diminution or extinction of price in case of a seller's
breach of warranty. According to the provision, recoupment refers to the reduction or extinction of the price of the
same item, unit, transaction or contract upon which a plaintiff's claim is founded. 32

In the case at bar, Quiñones refused to pay the unpaid balance of the purchase price of the primer-coated G.I. sheets
PhilSteel had delivered to him. He took this action after complaints piled up from his customers regarding the
blistering and peeling-off of the paints applied to the bus bodies they had purchased from his Amianan Motors. The
unpaid balance of the purchase price covers the same G.I. sheets. Further, both the CA and the RTC concurred in
their finding that the seller's breach of express warranty had been established. Therefore, this Court finds that
respondent has legitimately defended his claim for reduction in price and is no longer liable for the unpaid balance of
the purchase price of P448,041.50.

The award of attorney's fees is deleted.

Contrary to the finding of the CA and the RTC, this Court finds that attorney's fees are not in order. Neither of these
courts cited any specific factual basis to justify the award thereof. Records merely show that Quiñones alleged that
he had agreed to pay 25% as attorney's fees to his counsel. 33 Hence, if the award is based on a mere allegation or
testimony that a party has agreed to pay a certain percentage for attorney's fees, the award is not in order. 34

WHEREFORE, in view of the foregoing, the instant Petition is DENIED. The Court of Appeals Decision dated 17
March 2010 and Resolution dated 19 November 2010 denying petitioner's Motion for Reconsideration are
hereby AFFIRMED, except for the award of attorney's fees, which is hereby DELETED.

SO ORDERED.
G.R. No. 239088

SPOUSES JOHN T. SY AND LENY N. SY, AND VALENTINO T. SY, Petitioners

vs.
MA. LOURDES DE VERA-NAVARRO AND BENJAEMY HO TAN LANDHOLDINGS, INC.,
HEREIN REPRESENTED BY GRACE T. MOLINA, IN HER CAPACITY AS CORPORATE
SECRETARY, Respondents

DECISION

CAGUIOA, J.:

Before the Court is a Petition for Review on Certiorari1 (Petition) under Rule 45 of the Rules of
Court filed by petitioners Spouses John T. Sy (petitioner John) and Leny N. Sy (collectively,
petitioners Sps. Sy), and Valentino T. Sy (petitioner Valentino), assailing the Decision 2 dated
November 23, 2017 (assailed Decision) and Resolution3 dated April 20, 2018 (assailed
Resolution) of the Court of Appeals - Cagayan de Oro City (CA) Special Twenty-Second
Division, and Former Special Twenty-Second Division, respectively, in CA G.R. CV No. 04016-
MIN, which reversed the Decision 4 dated October 8, 2014 issued by the Regional Trial Court of
Zamboanga City, Branch 12 (RTC) in Civil Case No. 6333.

The Facts and Antecedent Proceedings

As narrated by the CA in the assailed Decision, the essential facts and antecedent proceedings
of the instant case are as follows:

This case stems from a Complaint filed by petitioners Sps. Sy against respondents Ma. Lourdes
De Vera-Navarro (respondent De Vera-Navarro) and Benjaemy Ho Tan Landholdings, Inc.
(respondent BHTLI) before the RTC for Declaration of Nullity of Deed of Absolute Sale,
Cancellation of Transfer Certificate of Titles, Recovery of Ownership, and Damages, docketed as
Civil Case No. 6333.

In their Complaint, it is alleged that petitioner John was one of the coowners of a parcel of land
and the four-storey building found therein situated at Rizal Street, Barangay Zone IV,
Zamboanga City, covered by Transfer Certificate of Title No. (TCT) T-171,105 (subject
property).5 Petitioners Sps. Sy alleged that the subject property has a market value of more than
₱40,000,000.00.

The controversy arose when on May 31, 2006, petitioner John, for himself and in representation
of his co-owners, borrowed ₱3,720,000.00 from respondent De Vera-Navarro, secured by a Real
Estate Mortgage Contract (Mortgage Contract) over the subject property. Such Mortgage
Contract was annotated on TCT T-171,105 on June 2, 2006. 6 Petitioners Sps. Sy then alleged
that immediately after the execution of the Mortgage Contract, as per usual practice, respondent
De Vera-Navarro asked petitioner John to execute an undated Deed of Absolute Sale with a
stated consideration in the amount of ₱5,000,000.00, supposedly for the purpose of providing
additional security for the loan. 7 Petitioners Sps. Sy also claimed that petitioner John and
respondent De Vera-Navarro verbally agreed that the mode of payment for the said loan would
be respondent De Vera-Navarro's collection of rental payments from the tenants of the subject
property in the total amount of ₱70,000.00 per month for five years.

Afterwards, on March 22, 2011, to the surprise of petitioner John, he was informed by
respondent BHTLI through a letter from its representative that the ownership of the subject
property had been transferred to respondent De Vera-Navarro; that a TCT, i.e., TCT T-199,
288,8 was issued in favor of respondent De Vera-Navarro; and that respondent BHTLI was
demanding that the petitioners Sps. Sy vacate the subject property.

Upon learning this, on March 24, 2011, one of the co-owners, petitioner Valentino, caused the
annotation of an adverse claim on TCT T-199, 288. 9 Such annotation of adverse claim was
carried over to TCT T-129-2011001530. 10

Thereafter, on March 30, 2011, a Deed of Absolute Sale was executed by respondent De Vera-
Navarro in favor of respondent BHTLI. The records reveal that on July 21, 2011, a new
title, i.e., TCT T-129-2011001530,11 was issued in favor of respondent BHTLI.In the main,
petitioners Sps. Sy claimed that they are the rightful owners of the subject property since the
undated Deed of Absolute Sale executed purportedly between petitioner John and respondent
De Vera-Navarro is allegedly null and void, and that, despite the execution of the Deed of
Absolute Sale dated March 30, 2011 by respondent De Vera-Navarro in favor of respondent
BHTLI, the latter has no right to own the property as it was allegedly not a buyer in good faith.
On the other hand, respondent De Vera-Navarro, while admitting the existence of the Mortgage
Contract to secure the ₱3,720,000.00 loan agreement with petitioners Sps. Sy, alleged that the
amount remained unpaid and that John even obtained additional loans reaching more or less
₱10,500,000.00. Further, respondent De Vera-Navarro claimed that on February 6, 2007,
petitioner John sold to her the subject property by virtue of the undated Deed of Absolute Sale. It
must be noted that this is the same undated Deed of Absolute Sale identified by petitioners Sps.
Sy, the difference being that respondent De Vera-Navarro claimed that the said Deed was
executed only on February 6, 2007 and not immediately after the execution of the Mortgage
Contract on May 31, 2006, as alleged by petitioners Sps. Sy. Respondent De Vera-Navarro also
alleged that the undated Deed of Absolute Sale is, for all intents and purposes, a legitimate
contract of sale, while petitioners Sps. Sy alleged that there was no real contract of sale between
the parties and that the said Deed was merely intended to provide added security to the Mortage
Contract.

For its part, respondent BHTLI alleged that it is a buyer in good faith since the sale between it
and respondent De Vera-Navarro over the subject property was supposedly consummated on
March 14, 2011, or 10 days prior to the annotation of the adverse claim on March 24, 2011.
Since it was supposedly not aware of any infirmity involving the subject property, respondent
BHTLI alleged that it should be treated as a buyer in good faith.

The Ruling of the RTC

On October 8, 2014, the RTC issued a Decision 12 declaring the purported Deed of Absolute Sale
between petitioner John and respondent De Vera-Navarro an equitable mortgage and thus null
and void. The dispositive portion of the said Decision reads as follows:

WHEREFORE, all the foregoing premises considered, judgment is hereby

rendered in favor of the plaintiffs as against the defendants, in the following
manner:

1. Declaring the Deed of Absolute Sale dated February 6, 2007 between the
plaintiff John T. Sy and defendant Ma. Lourdes De Vera-Navarro as an
equitable mortgage and not a document of sale;

2. Directing the plaintiffs to pay defendant Navarro the sum of

P5,000,000.00 representing their unpaid loan to said defendant within 30
days from the date the herein judgment becomes final and executory with
6% interest per annum compounded until full payment is made to be
reckoned from February 6, 2007, otherwise, the ownership of the property
covered under TCT No. T-199,288 shall be vested finally on the defendant
Navarro for all intents and purposes;

3. Directing the Register of Deeds for the City of Zamboanga, upon full
payment of the sum of P5,000,000.00 plus interest by plaintiffs to defendant
Navarro as above directed, to cancel TCT No. T-199,288 in the name of
defendant Ma. Lourdes De Vera-Navarro and to restore TCT No. T-171-105
in the names of the plaintiffs;

4. Declaring the Deed of Absolute Sale dated March 30, 2011 executed by
defendant Navarro in favor of defendant Benjaemy Ho Tan Landholdings,
Inc., as null and void and directing the Register of Deeds of the City of
Zamboanga to cause the immediate cancellation of the resulting title thereof
in the name of defendant Benjaemy under TCT No. T-129-2011001530;

5. Ordering defendant Ma. Lourdes De Vera-Navarro to return to defendant

Benjaemy the purchase price of P13,000,000.00 plus the sum of
P1,800,000.00 in reimbursements for the expenses of the transfer of the title
in the name of said defendant;

6. Ordering defendant Navarro to pay plaintiffs the sum of P50,000.00

representing moral damages; P50,000.00 in exemplary damages;
P20,000.00 in attorney's fees plus P2,000.00 per appearance of plaintiffs
counsels in court; and, P30,000.00 in litigation expenses;

7. Ordering defendants to jointly and severally pay the costs of this suit.

SO ORDERED.13
In the main, the RTC held that there was really no intention on the part of the parties to enter into
a contract of sale over the subject property and that the undated Deed of Absolute Sale was
merely an additional security for the loan obtained by petitioner John from respondent De Vera-
Navarro.[14] Further, the RTC pointed out that, instead of a valid contract of sale, what
transpired between the parties was an equitable mortgage due to the existence of certain
circumstances which jurisprudence identifies as badges of an equitable mortgage, i.e., (1) the
Deed of Absolute Sale is not dated; (2) the consideration of ₱5,000,000.00 is grossly
inadequate; and (3) petitioners Sps. Sy continue to be in actual possession of the subject
property despite the supposed sale.15

Furthermore, the RTC held that respondent BHTLI cannot be considered a buyer in good faith
because there was a notice of adverse claim and because petitioners Sps. Sy were still in the
possession of the subject property which should have alerted respondent BHTLI to inquire and
investigate regarding the possible defects in the title of the seller of the subject property. 16

Respondents De Vera-Navarro and BHTLI filed their respective Motions for Reconsideration on
October 22, 2014 and October 26, 2014, respectively. On October 28, 2014, petitioners Sps. Sy
filed their Comment/Opposition to respondents De Vera-Navarro and BHTLI's Motions for
Reconsideration with Partial Motion for Reconsideration.[17] In an Order[18] dated November
24, 2014, the RTC denied the Motions for Reconsideration of respondents De Vera-Navarro and
BHTLI, and the Partial Motion for Reconsideration of the petitioners Sps. Sy.

On December 11, 2014, petitioners Sps. Sy filed an appeal with the CA. Respondent BHTLI
likewise filed an appeal with the CA. In its Resolution 19 dated May 19, 2016, respondent De
Vera-Navarro's appeal was deemed abandoned and dismissed for failure to file an appellant's
brief within the prescribed period.

The Ruling of the CA

In the assailed Decision20 dated November 23, 2017, the CA reversed the rulings of the RTC and
denied the appeal of petitioners Sps. Sy, while granting the appeal of respondent BHTLI. The
dispositive portion of the said Decision reads:

WHEREFORE, premises considered, the appeal of the Spouses John and

Leny Sy is DENIED while the appeal of Benjaemy Ho Tan Landholdings
is GRANTED. The Decision dated October 8, 2014 of the Regional Trial
Court, Branch 12, Zamboanga City in Civil Case No. 6333 is SET ASIDE.
Perforce, another Judgment is hereby rendered DISMISSING the Complaint
of Spouses John T. Sy and Leny N. Sy against Ma. Lourdes De Vera-
Navarro and Benjaemy Ho Tan Landholdings, Inc. in Civil Case No. 6333 for
lack of merit. No pronouncement as to costs.

SO ORDERED.21

Contrary to the findings of the RTC, the CA held that the undated Deed of Absolute Sale
between petitioner John and respondent De Vera-Navarro was indeed a contract of sale
because the records are supposedly bereft of any evidence indicative that there was an
equitable mortgage.22 Further, the CA posited that the transaction involved in the instant case is
in fact a dacion en pago.23 Lastly, the CA also held that respondent BHTLI was a buyer in good
faith as there was supposedly no showing that respondent BHTLI was aware of any irregularity
as to the title covering the subject property.24

On December 21, 2017, the petitioners Sps. Sy filed their Motion for Reconsideration 25 dated
December 18, 2017, which was subsequently denied by the CA in the assailed
Resolution26 dated April 20, 2018.

Hence, the instant appeal via Petition for Review on Certiorari under Rule 45 of the Rules of
Court.27

On June 13, 2018, respondent BHTLI filed its Comment/Opposition 28 to the instant Petition, to
which petitioners Sps. Sy filed their Reply to Respondents' Comments/Opposition 29 dated
October 8, 2018.

Issue

Stripped to its core, the critical question to be resolved by the Court is whether the CA erred
when it held in the assailed Decision dated November 23, 2017 and assailed Resolution dated
April 20, 2018 that the transaction between petitioner John and respondent De Vera-Navarro
was a valid contract of sale and not an equitable mortgage, and that respondent BHTLI was a
buyer in good faith, reversing the previous ruling of the RTC.

The Court's Ruling

The instant Petition is meritorious.

The purported contract of sale between

petitioner John and respondent De Vera-

Navarro is an equitable mortgage and not a

legitimate contract of sale.

At the heart of the assailed CA Decision is the view that petitioners Sps. Sy failed to provide
sufficient evidence that an equitable mortgage exists in the instant case.

The applicable law, jurisprudence, and the evidence on record clearly belie the CA's conclusion.

An equitable mortgage is defined as one which although lacking in some formality, or form or
words, or other requisites demanded by a statute, nevertheless reveals the intention of the
parties to charge real property as security for a debt, and contains nothing impossible or contrary
to law. Its essential requisites are: (1) that the parties entered into a contract denominated
as a contract of sale; and (2) that their intention was to secure an existing debt by way of a
mortgage.30

Article 1602 of the Civil Code states that a contract shall be presumed to be an equitable
mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.

Article 1604 of the Civil Code, in turn, provides that the abovementioned badges of an equitable
mortgage apply to a contract purporting to be an absolute sale, such as in the instant case.

At this juncture, it must be stressed that the RTC, after an exhaustive trial and appreciation of the
evidence presented by the parties, concluded that the supposed contract of sale entered
between petitioner John and respondent De Vera-Navarro is in fact an equitable mortgage.

The factual findings of the trial court, its calibration of the testimonies of the witnesses, and its
assessment of their probative weight are given high respect, if not conclusive effect, unless the
trial court ignored, misconstrued, misunderstood or misinterpreted cogent facts and
circumstances of substance, which, if considered, will alter the outcome of the case. The trial
court is in the best position to ascertain and measure the sincerity and spontaneity of witnesses
through its actual observation of the witnesses' manner of testifying, demeanor and behavior
while in the witness box.

Upon examination of the records of the instant case, the Court finds that there was no reason for
the CA to reverse the RTC's correct finding that an equitable mortgage exists in the instant case.

Jurisprudence consistently shows that the presence of even one of the circumstances
enumerated in Article 1602 suffices to convert a purported contract of sale into an equitable
mortgage.31 The existence of any of the circumstances defined in Article 1602 of the New Civil
Code, not the concurrence nor an overwhelming number of such circumstances, is sufficient for
a contract of sale to be presumed an equitable mortgage. 32

In fact, the Court has previously ruled that when in doubt, courts are generally inclined to
construe a transaction purporting to be a sale as an equitable mortgage, which involves a lesser
transmission of rights and interests over the property in controversy. 33

Applying the foregoing to the instant case, the Court finds that the presence of at least four
badges of an equitable mortgage creates a very strong presumption that the purported contract
of sale entered between petitioner John and respondent De Vera-Navarro is an equitable
mortgage.

First, it is not disputed by any party that the supposed vendor of the subject property, petitioner
John, remains to be in possession of the subject property despite purportedly selling the latter to
respondent De Vera-Navarro. It is uncanny for a supposed buyer to desist from taking
possession over property which he/she has already purchased.

Second, the purchase price of the purported sale indicated in the undated Deed of Absolute Sale
is inadequate.

According to the Rules of Court, Rule 129, Section 2, a court may take judicial notice of matters
which are of public knowledge. In fact, the Court has previously held that trial courts can take
judicial notice of the general increase in rentals of real estate especially of the business
establishments.34

In the instant case, the RTC took judicial notice of the public knowledge that similar
establishments located at the commercial center of Zamboanga City have a value of around
₱20,000,000.00. Thus, the ₱5,000,000.00 purchase price supposedly agreed upon by the
parties is grossly inadequate. 35

The inadequacy of the purchase price is even confirmed by the acts of respondent De Vera-
Navarro herself. As noted by the RTC, respondent De Vera-Navarro was able to mortgage the
subject property with Landbank of the Philippines for an amount of ₱13,000,000.00. Respondent
De Vera-Navarro also sold the subject property to respondent BHTLI for the same amount of
₱13,000,000.00.36

Hence, the Court cannot accept the CA's finding that the inadequacy of the purchase price is not
supported by any evidence on record.

Third, the evidence on record shows that respondent De Vera-Navarro retained for herself the
supposed purchase price. Aside from the testimony of petitioner John that no consideration was
paid at all for the supposed contract of sale, the RTC also noted that no proof was presented by
respondent De Vera-Navarro that she actually parted with the sum of ₱5,000,000.00 in favor of
petitioner John pursuant to the undated Deed of Absolute Sale.

Fourth, from the evidence presented by petitioners Sps. Sy, it is established that the real
intention of the parties is for the purported contract of sale to merely secure the payment of their
debt owing to respondent De Vera Navarro.

According to testimonies of petitioners Sps. Sy given under oath in open court, during the
execution of the Mortgage Contract in favor of respondent De Vera-Navarro on May 31, 2006,
petitioner John, right then and there, was immediately asked to sign an undated Deed of
Absolute Sale in favor of respondent De Vera-Navarro as it was agreed upon that such Deed
was to be used as mere additional security to the Mortgage Contract.37

The CA's hesitance in accepting the foregoing testimonies just because they are parol evidence
and that the undated Deed of Absolute Sale is unequivocal on paper in stating that a sale was
intended by the parties is misplaced. As the Court previously held,

x x x a document which appears on its face to be a sale-absolute x x x may

be proven by the vendor x x x to be one of a loan with mortgage. In this
case, parol evidence becomes competent and admissible to prove that the
instrument was in truth and in fact given merely as a security for the
payment of a loan. And upon proof of the truth of such allegations, the court
will enforce the agreement or understanding in consonance with the true
intent of the parties at the time of the execution of the contract. Sales with a
right to repurchase are not favored.38
It must also be stressed that the nomenclature given by the parties to the contract is not
conclusive of the nature and legal effects thereof. Even if a document appears on its face to be a
sale, the owner of the property may prove that the contract is really a loan with mortgage, and
that the document does not express the true intent of the parties.39

Hence, bearing in mind the jurisprudential rule that the courts are generally inclined to construe a
transaction purporting to be a sale as an equitable mortgage, it was incumbent upon respondent
De Vera-Navarro to rebut the petitioners Sps. Sy's testimonies and substantiate the claim that
there was indeed a legitimate contract of sale between the parties.

In this regard, it must be emphasized that all the documentary evidence of respondent De Vera-
Navarro supporting her claims were not admitted into evidence; the Formal Offer of Evidence of
De Vera-Navarro was ordered expunged by the RTC in its Order 40 dated April 11, 2014.
According to the Rules of Court41 and jurisprudence,42 evidence not formally offered has no
probative value and must be excluded by the court. Thus, the expunction of the evidence
presented by respondent De Vera-Navarro completely negates the CA's finding that respondent
De Vera-Navarro was able to present evidence that the parties really intended to enter into a
contract of sale covering the subject property.

In any case, even if the documentary evidence presented by respondent De Vera-Navarro were
considered, her contention of a valid contract of sale still fails to convince. The evidence
presented by respondent De Vera-Navarro center mainly on the fact that the UNDATED Deed of
Absolute Sale was properly notarized. However, as held previously by the Court, the notarization
of a document does not guarantee its validity because it is not the function of the notary public to
validate an instrument that was never intended by the parties to have any binding legal effect on
them. Neither is the notarization of a document conclusive of the nature of the transaction
conferred by the said document, nor is it conclusive of the true agreement of the parties
thereto.43

Therefore, to reiterate, established jurisprudence provides that the presence of even one of the
circumstances enumerated in Article 1602 suffices to convert a purported contract of sale into an
equitable mortgage,44 and that courts are inclined to construe a transaction purporting to be a
sale as an equitable mortgage, as it involves a lesser transmission of rights and interests over
the subject property.45 Bearing that in mind, the concurrence of four badges of equitable
mortgage, which in fact is a majority of the six circumstances identified under Article 1602 of the
Civil Code, creates the very strong presumption of the existence of an equitable mortgage in the
instant case.

With respondent De Vera-Navarro miserably failing to controvert this presumption, especially

considering the expunction of her evidence from the records of the case, the Court indubitably
finds that the purported contract of sale entered into by petitioner John and respondent De Vera-
Navarro is in truth and in fact an equitable mortgage. Hence, with the undated Deed of Absolute
Sale being null and void, as it is in fact an equitable mortgage, the prevailing agreement
governing petitioner John and respondent De Vera-Navarro is the loan agreement secured by
the Mortgage Contract entered into by the parties.

Respondent BHTLI is NOT a buyer in good

faith.

Consequently, since the purported contract of sale between petitioner John and respondent De
Vera-Navarro was in fact an equitable mortgage, the sale of the subject property to respondent
BHTLI by respondent De Vera Navarro was correctly adjudged by the RTC to be null and void,
considering that the latter had absolutely no right and capacity to sell the subject property.

Respondent BHTLI contends that since it is an innocent purchaser for value, supposedly having
no knowledge on any infirmity on the sale at the time of its transaction with respondent De Vera-
Navarro, the sale should still be upheld with respect to respondent BHTLI.

Respondent BHTLI's contention lacks merit.

Jurisprudence holds that he who alleges that he is a purchaser of registered land is burdened to
prove such statement. Such burden is not discharged by simply invoking the ordinary
presumption of good faith. 46 In the instant case, the Court finds that respondent BHTLI failed to
discharge such burden. Instead of showing good faith on the part of respondent BHTLI, the
incontrovertible facts establish respondent BHTLI's status as a buyer in bad faith.

The Court has held that actual lack of knowledge of the flaw in title by one's transferor is not
enough to constitute a buyer in good faith where there are circumstances that should put a party
 on guard, such as the presence of occupants in the subject property. 47 Again, it is not disputed
that petitioners Sps. Sy have been in continuing possession of the subject property.  Yet,
this fact did not prompt respondent BHTLI to investigate further as to the contract of sale it
entered with respondent De Vera-Navarro.

Further, respondent BHTLI cannot seriously feign ignorance of any infirmity, considering that
prior to its entering into the Deed of Absolute Sale dated March 30, 2011 with respondent De
Vera-Navarro, petitioner Valentino had already caused on March 24, 2011 the annotation of an
adverse claim on TCT T-199,288.

Therefore, contrary to the CA's findings m its assailed Decision, respondent BHTLI is not a buyer
in good faith.1âшphi1

All in all, with the Court's finding that the purported contract of sale between petitioner John and
respondent De Vera-Navarro is an equitable mortgage and not a legitimate contract of sale, and
that respondent BHTLI is not a buyer in good faith, the Court finds merit in the instant Petition.

WHEREFORE, the appeal is hereby GRANTED. The Decision dated November 23, 2017 and
Resolution dated April 20, 2018 of the Court of Appeals in CA-G.R. CV No. 04016-MIN
are REVERSED. Accordingly, the Decision dated October 8, 2014 issued by the Regional Trial
Court of Zamboanga City, Branch 12 in Civil Case No. 6333 is REINSTATED WITH
MODIFICATIONS, to be read as follows:

WHEREFORE, all the foregoing premises considered, judgment is hereby

rendered in favor of the plaintiffs as against the defendants, in the following
manner:

1. Declaring the Deed of Absolute Sale dated February 6, 2007 between

plaintiff John T. Sy and defendant Ma. Lourdes De Vera-Navarro as an
equitable mortgage and not a document of sale;

2. Declaring the Deed of Absolute Sale dated March 30, 2011 executed by
defendant Ma. Lourdes De Vera Navarro in favor of defendant Benjaemy Ho
Tan Landholdings, Inc. as null and void and directing the Register of Deeds
of the City of Zamboanga to cause the immediate cancellation of the
resulting title thereof in the name of Benjaemy Ho Tan Landholdings, Inc.
under TCT No. T-129-2011001530;

3. Directing the Register of Deeds for the City of Zamboanga to cancel TCT
No. T-199,288 in the name of defendant Ma. Lourdes De Vera-Navarro and
to restore TCT No. T-171-105 in the names of the plaintiffs with all its
original annotations prior to the annotation of the sale to defendant Ma.
Lourdes De Vera-Navarro and the cancellation of TCT No. T- 171-105;

4. Ordering defendant Ma. Lourdes De Vera-Navarro to return to defendant

Benjaemy Ho Tan Landholdings, Inc. the purchase price of P13,000,000.00
plus the sum of P1,800,000.00 in reimbursements for the expenses of the
transfer of the title in the name of said defendant;

5. Ordering defendant Ma. Lourdes De Vera-Navarro to pay plaintiffs the

sum of P50,000.00 representing moral damages; P50,000.00 in exemplary
damages; P20,000.00 in attorney's fees plus P2,000.00 per appearance of
plaintiffs counsel in court; and P30,000.00 in litigation expenses;

6. Ordering defendants to jointly and severally pay the costs of this suit.

SO ORDERED.