FIRST DIVISION

G.R. No. 102909 September 6, 1993

SPOUSES VICENTE and LOURDES PINGOL, petitioners,

vs.
HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, namely:
MELINDA D. PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, NATIVIDAD
D. PELAYO, YOLANDA D. CACERES and MARY DONASCO, respondents.

Bernardo S. Chan for petitioners.

Orlando A. Galope for respondents.

DAVIDE, JR., J.:

An action denominated as one for specific performance and damages was brought by the private
respondents against the petitioners before the Regional Trial Court (RTC) of Caloocan City
which, after due trial, rendered a decision in favor of the petitioners. On appeal, the respondent
Court reversed the trial court's decision.

It is from this judgment that the petitioners have appealed to this Court by way of a petition for
review on certiorari.

The material facts of this case are simple and undisputed.

Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of Caloocan, with
an area of 549 square meters, located at Bagong Barrio, Caloocan City and more particularly
described in Transfer Certificate of Title (TCT) No. 7435 of the Registry of Deeds of Caloocan
City. On 17 February 1969, he executed a "DEED OF ABSOLUTE SALE OF ONE-HALF OF
(1/2) [OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" in favor of Francisco N.
Donasco which was acknowledged before a notary public. The parcel of land referred to herein is
Lot No. 3223 and the pertinent portions of the document read as follows:

That for and in consideration of the sum of TWENTY THOUSAND AND FIVE
HUNDRED THIRTY (P20,530.00) PESOS, Philippine Currency, the VENDOR
hereby these presents SELL, CONVEY AND CONVEY by way of Absolute Sale
the one-half (1/2) portion, equivalent to Two Hundred Seventy Four and point
Fifty (274.50) square meters, to VENDEE, the above-mentioned property, his
heirs, assigns and successors-in- interest;

That the VENDOR hereby confesses and acknowledges the receipt of TWO
THOUSAND (P2,000.00) PESOS from VENDEE as advanced (sic) and partial
payment to the above-cited consideration of the Sale herein mentioned, leaving
therefor a balance of Eighteen Thousand and Five Hundred Thirty (P18,530)
 Pesos to be paid in several equal installments within a period of six (6) years,
beginning January, 1970;

That after computing the above-mentioned equal installments, the VENDEE

agrees and undertakes to pay unto the VENDOR a monthly amount equivalent to
Two Hundred Fifty Seven (sic) and Thirty Six Centavos (P257.36) within a
period of Seventy One (71) months and on the Seven Two [sic] (72) month, the
amount of (P257.44) as the last and final installment thereof;

That the VENDEE agrees that in case of default in the payment of the installment
due the same shall earn a legal rate of interest, and to which the VENDOR
likewise agrees;

That the VENDEE undertakes to pay unto the VENDOR the herein monthly
installment within the first five (5) days of each month and the same shall be
made available and to be paid at the residence of the VENDOR, payment to be
made either directly to the VENDOR, his wife or his authorized representative or
factor;

That in case of partition of the above-described property between herein

VENDOR and VENDEE the same shall be divided into two (2) equal parts, the
VENDOR gets the corner facing J. De Jesus and Malolos Avenue and the
VENDEE shall get the portion with fifteen 15 meters frontage facing J. De Jesus
Street only.1

Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion, designated as
Lot No. 3223-A, was then segregated from the mother lot, and the parties prepared a subdivision
plan (Exhibit "C") which was approved by the Land Registration Commission.2

Francisco immediately took possession of the subject lot and constructed a house thereon. In
January 1970, he started paying the monthly installments but was able to pay only up to 1972.

On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid P8,369.00, plus
the P2,000.00 advance payment, leaving a balance of P10,161.00 on the contract price. 3 Lot No.
3223-A remained in the possession of Donasco's heirs.

On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific Performance
and Damages, with Prayer for Writ of Preliminary Injunction" against the spouses Vicente and
Lourdes Pingol (petitioners herein) before the RTC of Caloocan City. The action was docketed
as Civil Case No. 13572 and raffled off to Branch 125 of the said court.

In their complaint, 4 the plaintiffs (private respondents herein) averred that after the death of their
father, they offered to pay the balance of P10,161.00 plus the stipulated legal rate of interest
thereon to Vicente Pingol but the latter rebuffed their offer and has "been demanding for a bigger
and unreasonable amount, in complete variance to what is lawfully due and payable." They
stated that they had "exerted earnest efforts to forge or reach an amicable and peaceful settlement
with the defendants" for the payment of the property in question but to no avail. They further
alleged that the defendants were committing "acts of forcible entry and encroachment" upon their
land and asked that a writ of preliminary injunction be issued to restrain the defendants from the
acts complained of.

Plaintiffs then prayed that the defendants be ordered, inter alia:

a. . . . to accept the amount of P10,161.00, more or less, plus the stipulated legal
rate of interest due thereon, as full and complete payment of the balance for the
agreed price/consideration on the one- half (1/2) portion of the parcel of land . . .;
[and]

b. . . . to execute the final deed of sale on the one-half (1/2) portion of the lot . . .
in accordance with the partition reflected in the survey and subdivision plan, . . . .5

In their answer with counterclaim, 6 defendants admitted the execution of the aforementioned

deed of sale, the segregation of the portion sold and the preparation and approval of the
subdivision plan, but set up the following special and affirmative defenses: (1) plaintiffs' cause of
action had already prescribed; (2) the deed of sale embodied a conditional contract of sale "as the
consideration is to be paid on installment basis within a period of six years beginning January,
1970"; (3) the subdivision plan was prepared on the assumption that Francisco Donasco would
be able to comply with his obligation; (4) when Francisco died, he had not fully paid the total
consideration agreed upon; and (5) considering the breach by Francisco of his contractual
obligation way back in 1976, the sale was deemed to have been cancelled and the continuous
occupancy of Francisco after 1976 and by his heirs thereafter was by mere tolerance of Vicente
Pingol. They then asked that the plaintiffs be ordered to vacate the premises and to pay them
attorney's fees and a reasonable compensation for the use of the land.

In their Reply and Answer to Counterclaim, 7 the plaintiffs pointed out that there is no provision
in the deed of sale for its cancellation in case of default in the payment of the monthly
installments and invoked Article 1592 of the New Civil Code. They specifically denied the
allegations in the counterclaim.

The issues having been joined, the case was then tried on the merits.

On 22 January 1990, the trial court rendered a decision 8 dismissing the complaint and ordering
the plaintiffs to pay the defendants P350.00 as reasonable monthly rental for the use of the
premises from the filing of the complaint, P10,000.00 by way of attorney's fees, and the costs of
the suit. It held that: (1) the deed of absolute sale in question, marked and offered in evidence as
Exhibit "A," is a contract to sell, not a contract of sale, since Vicente Pingol had no intention to
part with the ownership of the loan unless the full amount of the agreed price had been paid; (2)
the contract was deemed to have been cancelled from the moment the late father of the plaintiffs
defaulted in the payment of the monthly installments; (3) title and ownership over the lot did not
pass to Francisco Donasco and his heirs since the contract to sell was never consummated; and
(5) assuming, arguendo, that the plaintiffs have a cause of action for specific performance, such
action had already prescribed since the complaint was filed only on 19 October 1988 or more
than ten years from the time that they could have lawfully demanded performance.9

Plaintiffs elevated the case to the Court of Appeals where the appeal was docketed as CA-G.R.
CV No. 25967. On 12 November 1991, the said court rendered a decision 10 reversing the
appealed decision and decreeing as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET

ASIDE and another one is rendered:

(1) Ordering appellee-vendor Vicente Pingol to accept the sum of P10,161.00,

plus the legal interest due thereon from the date of institution of this action on
October 19, 1988;

(2) Upholding the validity of the "DEED OF ABSOLUTE SALE OF ONE-

HALF (1/2) (of) AN UNDIVIDED PORTION OF A PARCEL OF LAND" (Exh.
A), and by virtue and on the strength of which declaring the "Heirs of the
Deceased Francisco N. Domingo" as the owners of the 274.50 sq. m. land,
denominated as Lot 3223-A, (LRC) Psd-146255 under the technical description
(exh. D) and reflected in the Plan of Subdivision Survey which was approved By
Commissioner of Land Registration on August 13, 1971 (exh. C), representing
one-half portion [of] lot 3223, situated at the corner of Malolos Avenue and G. de
Jesus St., Bagong Barrio, Caloocan City, and covered by TCT No. 7435 of the
Registry of Deeds of Caloocan City (exh. B); and

(3) Ordering the defendants-appellees to pay the costs.

SO ORDERED. 11

The Court of Appeals ruled that the deed of sale in question reveals the clear intention of Vicente
Pingol to part with the ownership of the one-half portion of the land by way of an absolute sale;
that the failure to fully pay the agreed price was not a ground for the cancellation of the sale; and
that the plaintiffs' action is imprescriptible since it is akin to an action to quiet title to property in
one's possession.12

Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter referred to as
the petitioners, filed this petition for certiorari on 9 January 1992. Plaintiffs, hereinafter referred
to as the private respondents, filed their comment thereto on 10 September 1992 to which the
petitioners filed a reply 11 November 1992. We gave due course to the petition and required the
parties to submit their respective memoranda, 13 which they subsequently complied with.

Petitioners contend that the Court of Appeals erred:

I.

IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED AS

"ABSOLUTE DEED OF SALE OF ONE-HALF (½) OF AN UNDIVIDED
PORTION OF A PARCEL OF LAND" IS AN ABSOLUTE DEED OF SALE
SUFFICIENT TO CONFER OWNERSHIP ON THE VENDEE AND HIS
SUCCESSORS-IN-INTEREST, DESPITE THE FACT THAT BY ITS TERMS
AND CONDITIONS, LIKE THE PRICE BEING PAYABLE ON
INSTALLMENTS WITHIN A FIXED PERIOD, THE SAME IS A
CONDITIONAL DEED OF SALE.

II

IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE

VENDEE FAILED TO COMPLY WITH THE TERMS OF THE CONTRACT
(EXHIBIT "A") SPECIFICALLY TO COMPLETE THE PAYMENT OF THE
CONSIDERATION ON THE DATE STIPULATED IN THE CONTRACT
WHICH WAS SUPPOSED TO BE IN JANUARY 1976, COMPLETE
PAYMENT THEREOF CAN STILL BE ENFORCED IN AN ACTION
INSTITUTED BY THE HEIRS OF THE VENDEE FILED ON OCTOBER 19,
1988  OR A PERIOD OF MORE THAN TWELVE (12) YEARS FROM THE
TIME COMPLETE PAYMENT SHOULD HAVE BEEN MADE;

III

IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE

WHICH IS AN OFFER TO COMPLETE THE PAYMENT LEFT UNPAID BY
PRIVATE RESPONDENTS' FATHER WHICH DOES NOT PRESCRIBE;

IV

IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION HAS

NOT PRESCRIBE.14

The decisive issue in this case is whether Exhibit "A" embodies a contract of sale or a contract to
sell. The distinction between the two is important for in a contract of sale, the title passes to the
ven