G.R. No. 188064. June 1, 2011.

MILA A. REYES, petitioner, vs. VICTORIA T. TUPARAN,

respondent.

Civil Law; Sales; Contract to Sell; Respondent’s failure to pay

in full the purchase price 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 the respondent.—The 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 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 the respondent.
Same; Contracts; Rescission; Rescission is allowed only when
the breach of the contract is substantial and fundamental to the
fulfillment of the obligation.—Unless the parties stipulated it,
rescission is allowed only when the breach of the contract is
substantial and fundamental to the fulfillment of the obligation.
Whether the breach is slight or substantial is largely determined
by the attendant circumstances.

PETITION for review on certiorari of a decision of the

Court of Appeals.
   The facts are stated in the opinion of the Court.
  Venustiano S. Roxas & Associates Law Office for
petitioner.
  Alentajan Law Office for respondent.
  Aireen D. Sison co-counsel for respondent.

_______________

* SECOND DIVISION.

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 Reyes vs. Tuparan

MENDOZA, J.:
Subject of this petition for review is the February 13,
2009 Decision1 of the Court of Appeals (CA) which affirmed
with modification the February 22, 2006 Decision2 of the
Regional Trial Court, Branch 172, Valenzuela City (RTC),
in Civil Case No. 3945-V-92, an action for Rescission of
Contract with Damages.
On September 10, 1992, Mila A. Reyes (petitioner) filed a
complaint for Rescission of Contract with Damages against
Victoria T. Tuparan (respondent) before the RTC. In her
Complaint, petitioner alleged, among others, that she was
the registered owner of a 1,274 square meter residential
and commercial lot located in Karuhatan, Valenzuela City,
and covered by TCT No. V-4130; that on that property, she
put up a three-storey commercial building known as RBJ
Building and a residential apartment building; that since
1990, she had been operating a drugstore and cosmetics
store on the ground floor of RBJ Building where she also
had been residing while the other areas of the buildings
including the sidewalks were being leased and occupied by
tenants and street vendors.
In December 1989, respondent leased from petitioner a
space on the ground floor of the RBJ Building for her
pawnshop business for a monthly rental of P4,000.00. A
close friendship developed between the two which led to the
respondent investing thousands of pesos in petitioner’s
financing/lending business from February 7, 1990 to May
27, 1990, with interest at the rate of 6% a month.
On June 20, 1988, petitioner mortgaged the subject real
properties to the Farmers Savings Bank and Loan Bank,
Inc.

_______________

1 Rollo, pp. 72-102; penned by Associate Justice Celia C. Librea-

Leagogo and concurred in by Associate Justice Juan Q. Enriquez, Jr. and
Associate Justice Normandie B. Pizarro.
2 Id., at pp. 147-162.

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(FSL Bank) to secure a loan of P2,000,000.00 payable in
installments. On November 15, 1990, petitioner’s
outstanding account on the mortgage reached
P2,278,078.13. Petitioner then decided to sell her real
properties for at least P6,500,000.00 so she could liquidate
her bank loan and finance her businesses. As a gesture of
friendship, respondent verbally offered to conditionally buy
petitioner’s real properties for P4,200,000.00 payable on
installment basis without interest and to assume the bank
loan. To induce the petitioner to accept her offer,
respondent offered the following conditions/concessions:

“1. That the conditional sale will be cancelled if the plaintiff

(petitioner) can find a buyer of said properties for the amount of
P6,500,000.00 within the next three (3) months provided all
amounts received by the plaintiff from the defendant (respondent)
including payments actually made by defendant to Farmers
Savings and Loan Bank would be refunded to the defendant with
additional interest of six (6%) monthly;
2. That the plaintiff would continue using the space occupied
by her and drugstore and cosmetics store without any rentals for
the duration of the installment payments;
3. That there will be a lease for fifteen (15) years in favor of
the plaintiff over the space for drugstore and cosmetics store at a
monthly rental of only P8,000.00 after full payment of the
stipulated installment payments are made by the defendant;
4. That the defendant will undertake the renewal and
payment of the fire insurance policies on the two (2) subject
buildings following the expiration of the then existing fire
insurance policy of the plaintiff up to the time that plaintiff is
fully paid of the total purchase price of P4,200,000.00.”3

After petitioner’s verbal acceptance of all the

conditions/concessions, both parties worked together to
obtain FSL Bank’s approval for respondent to assume her
(petitioner’s) outstanding bank account. The assumption
would be part of

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3 Paragraph 11 of the Complaint, id., at p. 176.

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Reyes vs. Tuparan
respondent’s purchase price for petitioner’s mortgaged real
properties. FSL Bank approved their proposal on the
condition that petitioner would sign or remain as co-maker
for the mortgage obligation assumed by respondent.
On November 26, 1990, the parties and FSL Bank
executed the corresponding Deed of Conditional Sale of
Real Properties with Assumption of Mortgage. Due to their
close personal friendship and business relationship, both
parties chose not to reduce into writing the other terms of
their agreement mentioned in paragraph 11 of the
complaint. Besides, FSL Bank did not want to incorporate
in the Deed of Conditional Sale of Real Properties with
Assumption of Mortgage any other side agreement between
petitioner and respondent.
Under the Deed of Conditional Sale of Real Properties
with Assumption of Mortgage, respondent was bound to
pay the petitioner a lump sum of P1.2 million pesos
without interest as part of the purchase price in three (3)
fixed installments as follows:
a) P200,000.00 – due January 31, 1991
b) P200,000.00 – due June 30, 1991
c) P800,000.00 – due December 31, 1991
Respondent, however, defaulted in the payment of her
obligations on their due dates. Instead of paying the
amounts due in lump sum on their respective maturity
dates, respondent paid petitioner in small amounts from
time to time. To compensate for her delayed payments,
respondent agreed to pay petitioner an interest of 6% a
month. As of August 31, 1992, respondent had only paid
P395,000.00, leaving a balance of P805,000.00 as principal
on the unpaid installments and P466,893.25 as unpaid
accumulated interest.
Petitioner further averred that despite her success in
finding a prospective buyer for the subject real properties
within the 3-month period agreed upon, respondent
reneged on her promise to allow the cancellation of their
deed of conditional sale. Instead, respondent became
interested in owning the
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subject real properties and even wanted to convert the

entire property into a modern commercial complex.
Nonetheless, she consented because respondent repeatedly
professed friendship and assured her that all their verbal
side agreement would be honored as shown by the fact that
since December 1990, she (respondent) had not collected
any rentals from the petitioner for the space occupied by
her drugstore and cosmetics store.
On March 19, 1992, the residential building was gutted
by fire which caused the petitioner to lose rental income in
the amount of P8,000.00 a month since April 1992.
Respondent neglected to renew the fire insurance policy on
the subject buildings.
Since December 1990, respondent had taken possession
of the subject real properties and had been continuously
collecting and receiving monthly rental income from the
tenants of the buildings and vendors of the sidewalk
fronting the RBJ building without sharing it with
petitioner.
On September 2, 1992, respondent offered the amount of
P751,000.00 only payable on September 7, 1992, as full
payment of the purchase price of the subject real properties
and demanded the simultaneous execution of the
corresponding deed of absolute sale.
Respondent’s Answer
Respondent countered, among others, that the tripartite
agreement erroneously designated by the petitioner as a
Deed of Conditional Sale of Real Property with Assumption
of Mortgage was actually a pure and absolute contract of
sale with a term period. It could not be considered a
conditional sale because the acquisition of contractual
rights and the performance of the obligation therein did not
depend upon a future and uncertain event. Moreover, the
capital gains and documentary stamps and other
miscellaneous expenses and real estate taxes up to 1990
were supposed to be paid by petitioner but she failed to do
so.
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Respondent further averred that she successfully

rescued the properties from a definite foreclosure by paying
the assumed mortgage in the amount of P2,278,078.13 plus
interest and other finance charges. Because of her
payment, she was able to obtain a deed of cancellation of
mortgage and secure a release of mortgage on the subject
real properties including petitioner’s ancestral residential
property in Sta. Maria, Bulacan.
 Petitioner’s claim for the balance of the purchase price of
the subject real properties was baseless and unwarranted
because the full amount of the purchase price had already
been paid, as she did pay more than P4,200,000.00, the
agreed purchase price of the subject real properties, and
she had even introduced improvements thereon worth more
than P4,800,000.00. As the parties could no longer be
restored to their original positions, rescission could not be
resorted to.
Respondent added that as a result of their business
relationship, petitioner was able to obtain from her a loan
in the amount of P400,000.00 with interest and took
several pieces of jewelry worth P120,000.00. Petitioner also
failed and refused to pay the monthly rental of P20,000.00
since November 16, 1990 up to the present for the use and
occupancy of the ground floor of the building on the subject
real property, thus, accumulating arrearages in the amount
of P470,000.00 as of October 1992.
Ruling of the RTC
On February 22, 2006, the RTC handed down its
decision finding that respondent failed to pay in full the
P4.2 million total purchase price of the subject real
properties leaving a balance of P805,000.00. It stated that
the checks and receipts presented by respondent refer to
her payments of the mortgage obligation with FSL Bank
and not the payment of the balance of P1,200,000.00. The
RTC also considered the Deed of Conditional Sale of Real
Property with Assumption of Mortgage executed by and
among the two parties and FSL
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Bank a contract to sell, and not a contract of sale. It was of

the opinion that although the petitioner was entitled to a
rescission of the contract, it could not be permitted because
her non-payment in full of the purchase price “may not be
considered as substantial and fundamental breach of the
contract as to defeat the object of the parties in entering
into the contract.”4 The RTC believed that the respondent’s
offer stated in her counsel’s letter dated September 2, 1992
to settle what she thought was her unpaid balance of
P751,000.00 showed her sincerity and willingness to settle
her obligation. Hence, it would be more equitable to give
respondent a chance to pay the balance plus interest within
a given period of time.
 Finally, the RTC stated that there was no factual or
legal basis to award damages and attorney’s fees because
there was no proof that either party acted fraudulently or
in bad faith.
Thus, the dispositive portion of the RTC Decision reads:

“WHEREFORE, judgment is hereby rendered as follows:

1. Allowing the defendant to pay the plaintiff within thirty
(30) days from the finality hereof the amount of P805,000.00,
representing the unpaid purchase price of the subject property,
with interest thereon at 2% a month from January 1, 1992 until
fully paid. Failure of the defendant to pay said amount within the
said period shall cause the automatic rescission of the contract
(Deed of Conditional Sale of Real Property with Assumption of
Mortgage) and the plaintiff and the defendant shall be restored to
their former positions relative to the subject property with each
returning to the other whatever benefits each derived from the
transaction;
2. Directing the defendant to allow the plaintiff to continue
using the space occupied by her for drugstore and cosmetic store
without any rental pending payment of the aforesaid balance of
the purchase price.
3. Ordering the defendant, upon her full payment of the
purchase price together with interest, to execute a contract of
lease for

_______________

4 Id., at p. 160.

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fifteen (15) years in favor of the plaintiff over the space for the
drugstore and cosmetic store at a fixed monthly rental of
P8,000.00; and
4. Directing the plaintiff, upon full payment to her by the
defendant of the purchase price together with interest, to execute
the necessary deed of sale, as well as to pay the Capital Gains
Tax, documentary stamps and other miscellaneous expenses
necessary for securing the BIR Clearance, and to pay the real
estate taxes due on the subject property up to 1990, all necessary
to transfer ownership of the subject property to the defendant.
No pronouncement as to damages, attorney’s fees and costs.
SO ORDERED.”5

Ruling of the CA
 On February 13, 2009, the CA rendered its decision
affirming with modification the RTC Decision. The CA
agreed with the RTC that the contract entered into by the
parties is a contract to sell but ruled that the remedy of
rescission could not apply because the respondent’s failure
to pay the petitioner the balance of the purchase price in
the total amount of P805,000.00 was not a breach of
contract, but merely an event that prevented the seller
(petitioner) from conveying title to the purchaser
(respondent). It reasoned that out of the total purchase
price of the subject property in the amount of
P4,200,000.00, respondent’s remaining unpaid balance was
only P805,000.00. Since respondent had already paid a
substantial amount of the purchase price, it was but right
and just to allow her to pay the unpaid balance of the
purchase price plus interest. Thus, the decretal portion of
the CA Decision reads:

“WHEREFORE, premises considered, the Decision dated 22

February 2006 and Order dated 22 December 2006 of the
Regional Trial Court of Valenzuela City, Branch 172 in Civil Case
No. 3945-V-92 are AFFIRMED with MODIFICATION in that
defendant-appellant Victoria T. Tuparan is hereby ORDERED to
pay plaintiff-

_______________

5 Id., at p. 162.

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appellee/appellant Mila A. Reyes, within 30 days from finality of

this Decision, the amount of P805,000.00 representing the unpaid
balance of the purchase price of the subject property, plus interest
thereon at the rate of 6% per annum from 11 September 1992 up
to finality of this Decision and, thereafter, at the rate of 12% per
annum until full payment. The ruling of the trial court on the
automatic rescission of the Deed of Conditional Sale with
Assumption of Mortgage is hereby DELETED. Subject to the
foregoing, the dispositive portion of the trial court’s decision is
AFFIRMED in all other respects.
SO ORDERED.”6

After the denial of petitioner’s motion for

reconsideration and respondent’s motion for partial
reconsideration, petitioner filed the subject petition for
review praying for the reversal and setting aside of the CA
Decision anchored on the following

ASSIGNMENT OF ERRORS
A. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN DISALLOWING THE
OUTRIGHT RESCISSION OF THE SUBJECT DEED OF
CONDITIONAL SALE OF REAL PROPERTIES WITH
ASSUMPTION OF MORTGAGE ON THE GROUND THAT
RESPONDENT TUPARAN’S FAILURE TO PAY
PETITIONER REYES THE BALANCE OF THE PURCHASE
PRICE OF P805,000.00 IS NOT A BREACH OF CONTRACT
DESPITE ITS OWN FINDINGS THAT PETITIONER STILL
RETAINS OWNERSHIP AND TITLE OVER THE SUBJECT
REAL PROPERTIES DUE TO RESPONDENT’S REFUSAL
TO PAY THE BALANCE OF THE TOTAL PURCHASE
PRICE OF P805,000.00 WHICH IS EQUAL TO 20% OF THE
TOTAL PURCHASE PRICE OF P4,200,000.00 OR 66% OF
THE STIPULATED LAST INSTALLMENT OF P1,200,000.00
PLUS THE INTEREST THEREON. IN EFFECT, THE
COURT OF APPEALS AFFIRMED AND ADOPTED THE
TRIAL COURT’S CONCLUSION THAT THE
RESPONDENT’S NON-PAYMENT OF THE

_______________

6 Id., at pp. 101-102.

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Reyes vs. Tuparan

P805,000.00 IS ONLY A SLIGHT OR CASUAL BREACH OF

CONTRACT.
B. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN DISREGARDING AS
GROUND FOR THE RESCISSION OF THE SUBJECT
CONTRACT THE OTHER FRAUDULENT AND
MALICIOUS ACTS COMMITTED BY THE RESPONDENT
AGAINST THE PETITIONER WHICH BY THEMSELVES
SUFFICIENTLY JUSTIFY A DENIAL OF A GRACE
PERIOD OF THIRTY (30) DAYS TO THE RESPONDENT
WITHIN WHICH TO PAY TO THE PETITIONER THE
P805,000.00 PLUS INTEREST THEREON.
C. EVEN ASSUMING ARGUENDO THAT PETITIONER
IS NOT ENTITLED TO THE RESCISSION OF THE
SUBJECT CONTRACT, THE COURT OF APPEALS STILL
SERIOUSLY ERRED AND ABUSED ITS DISCRETION IN
REDUCING THE INTEREST ON THE P805,000.00 TO
ONLY “6% PER ANNUM STARTING FROM THE DATE OF
FILING OF THE COMPLAINT ON SEPTEMBER 11, 1992”
DESPITE THE PERSONAL COMMITMENT OF THE
RESPONDENT AND AGREEMENT BETWEEN THE
PARTIES THAT RESPONDENT WILL PAY INTEREST ON
THE P805,000.00 AT THE RATE OF 6% MONTHLY
STARTING THE DATE OF DELINQUENCY ON
DECEMBER 31, 1991.
D. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN THE APPRECIATION
AND/OR MISAPPRECIATION OF FACTS RESULTING
INTO THE DENIAL OF THE CLAIM OF PETITIONER
REYES FOR ACTUAL DAMAGES WHICH CORRESPOND
TO THE MILLIONS OF PESOS OF RENTALS/FRUITS OF
THE SUBJECT REAL PROPERTIES WHICH
RESPONDENT TUPARAN COLLECTED CONTINUOUSLY
SINCE DECEMBER 1990, EVEN WITH THE UNPAID
BALANCE OF P805,000.00 AND DESPITE THE FACT THAT
RESPONDENT DID NOT CONTROVERT SUCH CLAIM OF
THE PETITIONER AS CONTAINED IN HER AMENDED
COMPLAINT DATED APRIL 22, 2006.
E. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN THE APPRECIATION
OF FACTS RESULTING INTO THE DENIAL OF THE
CLAIM OF

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PETITIONER REYES FOR THE P29,609.00 BACK

RENTALS THAT WERE COLLECTED BY RESPONDENT
TUPARAN FROM THE OLD TENANTS OF THE
PETITIONER.
F. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN DENYING THE
PETITIONER’S EARLIER “URGENT MOTION FOR
ISSUANCE OF A PRELIMINARY MANDATORY AND
PROHIBITORY INJUNCTION” DATED JULY 7, 2008 AND
THE “SUPPLEMENT” THERETO DATED AUGUST 4, 2008
THEREBY CONDONING THE UNJUSTIFIABLE
FAILURE/REFUSAL OF JUDGE FLORO ALEJO TO
RESOLVE WITHIN ELEVEN (11) YEARS THE
PETITIONER’S THREE (3) SEPARATE “MOTIONS FOR
PRELIMINARY INJUNCTION/TEMPORARY
RESTRAINING ORDER, ACCOUNTING AND DEPOSIT OF
RENTAL INCOME” DATED MARCH 17, 1995, AUGUST 19,
1996 AND JANUARY 7, 2006 THEREBY PERMITTING THE
RESPONDENT TO UNJUSTLY ENRICH HERSELF BY
CONTINUOUSLY COLLECTING ALL THE
RENTALS/FRUITS OF THE SUBJECT REAL PROPERTIES
WITHOUT ANY ACCOUNTING AND COURT DEPOSIT OF
THE COLLECTED RENTALS/FRUITS AND THE
PETITIONERS “URGENT MOTION TO DIRECT
DEFENDANT VICTORIA TUPARAN TO PAY THE
ACCUMULATED UNPAID REAL ESTATE TAXES AND SEF
TAXES ON THE SUBJECT REAL PROPERTIES” DATED
JANUARY 13, 2007 THEREBY EXPOSING THE SUBJECT
REAL PROPERTIES TO IMMINENT AUCTION SALE BY
THE CITY TREASURER OF VALENZUELA CITY.
G. THE COURT OF APPEALS SERIOUSLY ERRED
AND ABUSED ITS DISCRETION IN DENYING THE
PETITIONER’S CLAIM FOR MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY’S FEES AGAINST THE
RESPONDENT.

In sum, the crucial issue that needs to be resolved is

whether or not the CA was correct in ruling that there was
no legal basis for the rescission of the Deed of Conditional
Sale with Assumption of Mortgage.
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Reyes vs. Tuparan

Position of the Petitioner

The petitioner basically argues that the CA should have
granted the rescission of the subject Deed of Conditional
Sale of Real Properties with Assumption of Mortgage for
the following reasons:

1. The subject deed of conditional sale is a reciprocal

obligation whose outstanding characteristic is reciprocity arising
from identity of cause by virtue of which one obligation is
correlative of the other.
2. The petitioner was rescinding—not enforcing—the subject
Deed of Conditional Sale pursuant to Article 1191 of the Civil
Code because of the respondent’s failure/refusal to pay the
P805,000.00 balance of the total purchase price of the petitioner’s
properties within the stipulated period ending December 31, 1991.
3. There was no slight or casual breach on the part of the
respondent because she (respondent) deliberately failed to comply
with her contractual obligations with the petitioner by violating
the terms or manner of payment of the P1,200,000.00 balance and
unjustly enriched herself at the expense of the petitioner by
collecting all rental payments for her personal benefit and
enjoyment.

Furthermore, the petitioner claims that the respondent

is liable to pay interest at the rate of 6% per month on her
unpaid installment of P805,000.00 from the date of the
delinquency, December 31, 1991, because she obligated
herself to do so.
Finally, the petitioner asserts that her claim for
damages or lost income as well as for the back rentals in
the amount of P29,609.00 has been fully substantiated and,
therefore, should have been granted by the CA. Her claim
for moral and exemplary damages and attorney’s fees has
been likewise substantiated.

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Position of the Respondent

The respondent counters that the subject Deed of
Conditional Sale with Assumption of Mortgage entered into
between the parties is a contract to sell and not a contract
of sale because the title of the subject properties still
remains with the petitioner as she failed to pay the
installment payments in accordance with their agreement.
Respondent echoes the RTC position that her inability to
pay the full balance on the purchase price may not be
considered as a substantial and fundamental breach of the
subject contract and it would be more equitable if she
would be allowed to pay the balance including interest
within a certain period of time. She claims that as early as
1992, she has shown her sincerity by offering to pay a
certain amount which was, however, rejected by the
petitioner.
Finally, respondent states that the subject deed of
conditional sale explicitly provides that the installment
payments shall not bear any interest. Moreover, petitioner
failed to prove that she was entitled to back rentals.
The Court’s Ruling
The petition lacks merit.
The Court agrees with the ruling of the courts below
that the subject Deed of Conditional Sale with Assumption
of Mortgage entered into by and among the two parties and
FSL Bank on November 26, 1990 is a contract to sell and
not a contract of sale. The subject contract was correctly
classified as a contract to sell based on the following
pertinent stipulations:

“8. That the title and ownership of the subject real properties
shall remain with the First Party until the full payment of the
Second Party of the balance of the purchase price and liquidation
of the mortgage obligation of P2,000,000.00. Pending payment of
the balance of the purchase price and liquidation of the mortgage
obligation

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that was assumed by the Second Party, the Second Party shall not
sell, transfer and convey and otherwise encumber the subject real
properties without the written consent of the First and Third
Party.
9. That upon full payment by the Second Party of the full
balance of the purchase price and the assumed mortgage
obligation herein mentioned the Third Party shall issue the
corresponding Deed of Cancellation of Mortgage and the First
Party shall execute the corresponding Deed of Absolute Sale in
favor of the Second Party.”7

Based on the above provisions, the title and ownership

of the subject properties remains with the petitioner until
the respondent fully pays the balance of the purchase price
and the assumed mortgage obligation. Thereafter, FSL
Bank shall then issue the corresponding deed of
cancellation of mortgage and the petitioner shall execute
the corresponding deed of absolute sale in favor of the
respondent.
Accordingly, the 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
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
the respondent. The 2009 case of Nabus v. Joaquin & Julia
Pacson8 is enlightening:
 “The Court holds that the contract entered into by the Spouses
Nabus and respondents was a contract to sell, not a contract of
sale.
A contract of sale is defined in Article 1458 of the Civil Code,
thus:

_______________

7 Memorandum for Respondent, id., at p. 395.

8 G.R. No. 161318, November 25, 2009, 605 SCRA 334, 348-353.

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Art. 1458. By the contract of sale, one of the contracting

parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent.
x x x
Sale, by its very nature, is a consensual contract because it is
perfected by mere consent. The essential elements of a contract of
sale are the following:
a) Consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered
as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicitly
reserves the transfer of title to the prospective buyer, meaning,
the prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take
as the full payment of the purchase price. What the seller agrees
or obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is
delivered to him. In other words, the full payment of the purchase
price partakes of a suspensive condition, the non-fulfillment of
which prevents the obligation to sell from arising and, thus,
ownership is retained by the prospective seller without further
remedies by the prospective buyer.
x x x x x x x x x
Stated positively, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the
prospective seller’s obligation to sell the subject property by
entering into a contract of sale with the prospective buyer
becomes demandable as provided in Article 1479 of the Civil Code
which states:
Art. 1479. A promise to buy and sell a determinate thing for
a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.

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A contract to sell may thus be defined as a bilateral contract

whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be
considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the
fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it
is conditioned upon the happening of a contingent event which
may or may not occur. If the suspensive condition is not fulfilled,
the perfection of the contract of sale is completely abated.
However, if the suspensive condition is fulfilled, the contract of
sale is thereby perfected, such that if there had already been
previous delivery of the property subject of the sale to the buyer,
ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed
by the seller.
In a contract to sell, upon the fulfillment of the suspensive
condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although
the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer
by entering into a contract of absolute sale.
Further, Chua v. Court of Appeals, cited this distinction
between a contract of sale and a contract to sell:
In a contract of sale, the title to the property passes to
the vendee upon the delivery of the thing sold; in a contract
to sell, ownership is, by agreement, reserved in the vendor
and is not to pass to the vendee until full payment of the
purchase price. Otherwise stated, in a contract of sale, the
vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or
 rescinded; whereas, in a contract to sell, title is retained by
the vendor until full payment of the price. In the latter
contract, payment of the price is a positive suspensive
condition, failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from
becoming effective.

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It is not the title of the contract, but its express terms or

stipulations that determine the kind of contract entered into by
the parties. In this case, the contract entitled “Deed of Conditional
Sale” is actually a contract to sell. The contract stipulated that “as
soon as the full consideration of the sale has been paid by the
vendee, the corresponding transfer documents shall be executed
by the vendor to the vendee for the portion sold.” 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.
x x x
Unfortunately for the Spouses Pacson, since the Deed of
Conditional Sale executed in their favor was merely a contract to
sell, the obligation of the seller to sell becomes demandable only
upon the happening of the suspensive condition. The full payment
of the purchase price is the positive suspensive condition, the
failure of which is not a breach of contract, but simply an event
that prevented the obligation of the vendor to convey title
from acquiring binding force. Thus, for its non-fulfilment,
there is no contract to speak of, the obligor having failed to
perform the suspensive condition which enforces a juridical
relation. With this circumstance, there can be no rescission or
fulfillment of an obligation that is still non-existent, the
suspensive condition not having occurred as yet. Emphasis should
be made that the breach contemplated in Article 1191 of the
New 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.” [Emphases and underscoring
supplied]

Consistently, the Court handed down a similar ruling in

the 2010 case of Heirs of Atienza v. Espidol,9 where it was
written:
 “Regarding the right to cancel the contract for non-
payment of an installment, there is need to initially
determine if what the parties had was a contract of sale or
a contract to sell. In a contract of sale, the title to the property
passes to

_______________

9 G.R. No. 180665, August 11, 2010, 628 SCRA 256, 262-263.

300

300 SUPREME COURT REPORTS ANNOTATED

Reyes vs. Tuparan

the buyer upon the delivery of the thing sold. In a contract to sell,
on the other hand, the ownership is, by agreement, retained by
the seller and is not to pass to the vendee until full payment of
the purchase price. In the contract of sale, the buyer’s non-
payment of the price is a negative resolutory condition; in the
contract to sell, the buyer’s full payment of the price is a positive
suspensive condition to the coming into effect of the agreement. In
the first case, the seller 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 seller if
the buyer does not comply with the condition precedent of making
payment at the time specified in the contract. Here, it is quite
evident that the contract involved was one of a contract to sell
since the Atienzas, as sellers, were to retain title of ownership to
the land until respondent Espidol, the buyer, has paid the agreed
price. Indeed, there seems no question that the parties understood
this to be the case.
Admittedly, Espidol was unable to pay the second installment
of P1,750,000.00 that fell due in December 2002. That payment,
said both the RTC and the CA, was a positive suspensive
condition failure of which was not regarded a breach in the sense
that there can be no rescission of an obligation (to turn
over title) that did not yet exist since the suspensive
condition had not taken place. x  x  x.” [Emphases and
underscoring supplied]

Thus, the Court fully agrees with the CA when it

resolved: “Considering, however, that the Deed of
Conditional Sale was not cancelled by Vendor Reyes
(petitioner) and that out of the total purchase price of the
subject property in the amount of P4,200,000.00, the
remaining unpaid balance of Tuparan (respondent) is only
P805,000.00, a substantial amount of the purchase price
has already been paid. It is only right and just to allow
Tuparan to pay the said unpaid balance of the purchase
price to Reyes.”10
Granting that a rescission can be permitted under
Article 1191, the Court still cannot allow it for the reason
that, considering the circumstances, there was only a slight
or casual breach in the fulfillment of the obligation.

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10 CA Decision, Rollo, p. 100.

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Reyes vs. Tuparan

Unless the parties stipulated it, rescission is allowed

only when the breach of the contract is substantial and
fundamental to the fulfillment of the obligation. Whether
the breach is slight or substantial is largely determined by
the attendant circumstances.11 In the case at bench, the
subject contract stipulated the following important
provisions:

“2. That the purchase price of P4,200,000.00 shall be paid as

follows:
a) P278,078.13 received in cash by the First Party but
directly paid to the Third Party as partial payment of the
mortgage obligation of the First Party in order to reduce the
amount to P2,000,000.00 only as of November 15, 1990;
b) P721,921.87 received in cash by the First Party as
additional payment of the Second Party;
c) P1,200,000.00 to be paid in installments as follows:
1. P200,000.00 payable on or before January 31,
             1991;
2. P200,000.00 payable on or before June 30, 1991;
3. P800,000.00 payable on or before December 31,
             1991;
Note: All the installments shall not bear any
            interest.
d) P2,000,000.00 outstanding balance of the mortgage
obligation as of November 15, 1990 which is hereby assumed by
the Second Party.
x x x
3. That the Third Party hereby acknowledges receipts from
the Second Party P278,078.13 as partial payment of the loan
obligation of First Party in order to reduce the account to only
P2,000,000.00 as of November 15, 1990 to be assumed by the
Second Party effective November 15, 1990.”12

From the records, it cannot be denied that respondent

paid to FSL Bank petitioner’s mortgage obligation in the
amount

_______________

11 GG Sportswear Mfg. Corp. v. World Class Properties, Inc., G.R. No.
182720, March 2, 2010, 614 SCRA 75, 87.
12 Rollo, pp. 25-26.

302

302 SUPREME COURT REPORTS ANNOTATED

Reyes vs. Tuparan

of P2,278,078.13, which formed part of the purchase price

of the subject property. Likewise, it is not disputed that
respondent paid directly to petitioner the amount of
P721,921.87 representing the additional payment for the
purchase of the subject property. Clearly, out of the total
price of P4,200,000.00, respondent was able to pay the total
amount of P3,000,000.00, leaving a balance of
P1,200,000.00 payable in three (3) installments.
Out of the P1,200,000.00 remaining balance, respondent
paid on several dates the first and second installments of
P200,000.00 each. She, however, failed to pay the third and
last installment of P800,000.00 due on December 31, 1991.
Nevertheless, on August 31, 1992, respondent, through
counsel, offered to pay the amount of P751,000.00, which
was rejected by petitioner for the reason that the actual
balance was P805,000.00 excluding the interest charges.
Considering that out of the total purchase price of
P4,200,000.00, respondent has already paid the substantial
amount of P3,400,000.00, more or less, leaving an unpaid
balance of only P805,000.00, it is right and just to allow her
to settle, within a reasonable period of time, the balance of
the unpaid purchase price. The Court agrees with the
courts below that the respondent showed her sincerity and
willingness to comply with her obligation when she offered
to pay the petitioner the amount of P751,000.00.
On the issue of interest, petitioner failed to substantiate
her claim that respondent made a personal commitment to
pay a 6% monthly interest on the P805,000.00 from the
date of delinquency, December 31, 1991. As can be gleaned
from the contract, there was a stipulation stating that: “All
the installments shall not bear interest.” The CA was,
however, correct in imposing interest at the rate of 6% per
annum starting from the filing of the complaint on
September 11, 1992.
Finally, the Court upholds the ruling of the courts below
regarding the non-imposition of damages and attorney’s
fees.
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Reyes vs. Tuparan

Aside from petitioner’s self-serving statements, there is not

enough evidence on record to prove that respondent acted
fraudulently and maliciously against the petitioner. In the
case of Heirs of Atienza v. Espidol,13 it was stated:

“Respondents are not entitled to moral damages because

contracts are not referred to in Article 2219 of the Civil Code,
which enumerates the cases when moral damages may be
recovered. Article 2220 of the Civil Code allows the recovery of
moral damages in breaches of contract where the defendant acted
fraudulently or in bad faith. However, this 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. Since there is no breach of
contract in this case, respondents are not entitled to moral
damages.

In the absence of moral, temperate, liquidated or

compensatory damages, exemplary damages cannot be
granted for they are allowed only in addition to any of the
four kinds of damages mentioned.”
WHEREFORE, the petition is DENIED.
SO ORDERED.

Carpio (Chairperson), Nachura, Peralta and Abad, JJ.,

concur.

Petition denied.

Note.—Mutual restitution is required in cases involving

rescission under Article 1191. (Unlad Resources
Development Corporation vs. Dragon, 560 SCRA 63 [2008])
——o0o—— 

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 13 Supra note 9.

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