G.R. No.

120820 August 1, 2000

Doctrine: “Contract of sale expressly
SPS. FORTUNATO SANTOS and obliges the vendor to transfer the ownership
ROSALINDA R SANTOS, petitioners, of the thing sold as an essential element of a
vs. contract of sale. Thus, the transfer of
COURT OF APPEALS, SPS. MARIANO R. ownership in exchange for a price paid or
CASEDA and CARMEN CASEDA, promised is the very essence of contract of
respondents. sale.”

QUISUMBING, J.: Case Title: Sps. Fortunato Santos and

Rosalinda Santos vs. CA, GR. No.
For review on certiorari is the decision of 120820, August 1, 2000 (QUISUMBING,
the Court of Appeals, dated March 28, J.)
1995, in CA-G.R. CV No. 30955, which
reversed and set aside the judgment of the Facts:
Regional Trial Court of Makati, Branch 133,
in Civil Case No. 89-4759. Petitioners (the The spouses Fortunato and Rosalinda
Santoses) were the owners of a house and Santos owned a House and Lot located in
lot informally sold, with conditions, to Paranaque. The said property was
herein private respondents (the Casedas). mortgaged with the Rural Bank of Salina,
In the trial court, the Casedas had Inc., to secure a loan of 150,000.00 on
complained that the Santoses refused to June 1987.
deliver said house and lot despite repeated
demands. The trial court dismissed the The bank sent Rosalinda Santos a letter
complaint for specific performance and demanding payment of P16,915.84 in
damages, but in the Court of Appeals, the unpaid interest and other charges. Since
dismissal was reversed, as follows: the Santos couple had no funds, Rosalinda
offered to sell the house and lot to Carmen.
"WHEREFORE, in view of the After inspecting the real property, Carmen
foregoing, the decision appealed from and her husband agreed. After the agreed
is hereby REVERSED and SET ASIDE to the offer, they executed a document
and a new one entered: containing some terms and conditions
which provides that the balance of the
"1. GRANTING plaintiffs-appellants a mortgage loan with the Rural Bank, the real
period of NINETY (90) DAYS from the estate taxes, the electric and water bills and
date of the finality of judgment within the balance of the cash price on its
which to pay the balance of the maturity plus the initial payment of the
obligation in accordance with their said property will be charged at the expense
agreement; of the Casedas.

"2. Ordering appellees to restore The Casedas gave an initial payment of

possession of the subject house and P54,100.00 and immediately took
lot to the appellants upon receipt of possession of the property, which they then
the full amount of the balance due on leased out. They also paid in installments of
the purchase price; and the mortgage loan. The Casedas, however,
failed to pay the remaining balance of the
"3. No pronouncement as to costs. loan because they suffered bankruptcy in
1987. Notwithstanding the state of their
"SO ORDERED."1 finances, Carmen nonetheless paid in
March 1990, the real estate taxes on the
property for 1981-1984. She also settled
The undisputed facts of this case are as the electric bills. All these payments were
follows: made in the name of Rosalinda Santos.

The spouses Fortunato and Rosalinda The Santoses saw that the Casedas lacked
Santos owned the house and lot consisting the means to pay the remaining
of 350 square meters located at Lot 7, installments of loan. Thus, repossed the
Block 8, Better Living Subdivision, property. Moreover, they collected the
Parañaque, Metro Manila, as evidenced by rentals from the tenants. On the other
TCT (S-11029) 28005 of the Register of hand, Carmen Caseda sold their fishpond,
Deeds of Parañaque. The land together with she then approached the Santoses to pay
the house, was mortgaged with the Rural for the remaining balance, however, the
Bank of Salinas, Inc., to secure a loan of parties could not agree because the
P150,000.00 maturing on June 16, 1987. Santoses wanted a higher price than their
stipulation. As a result, Casedas filed a
Sometime in 1984, Rosalinda Santos met case against the Santoses to have the
Carmen Caseda, a fellow market vendor of Santoses execute the final deed of
hers in Pasay City and soon became very conveyance over the property, or in default
good friends with her. The duo even thereof, to reimburse the amount of
became kumadres when Carmen stood as a P180,000.00 paid in cash and P249,900.00
wedding sponsor of Rosalinda's nephew. paid to the rural bank, plus interest, as well
as rentals for eight months amounting to
On June 16, 1984, the bank sent Rosalinda P32,000.00, plus damages and costs of
Santos a letter demanding payment of suit.
P16,915.84 in unpaid interest and other
charges. Since the Santos couple had no RTC dismissed the case. It ruled that the
funds, Rosalinda offered to sell the house plaintiffs were short of the purchase price.
and lot to Carmen. After inspecting the real They cannot, therefore, demand specific
property, Carmen and her husband agreed. performance. The trial court further held
that the Casedas were not entitled to
Sometime that month of June, reimbursement of payments already made
Carmen and Rosalinda signed a because of failure of plaintiffs to liquidated
document, which reads: the mortgage loan on time.

"Received the amount of P54,100.00 On appeal, the appellate court, as earlier

as a partial payment of Mrs. Carmen noted, reversed the lower court. The
Caseda to the (total) amount of appellate court held that rescission was not
350,000.00 (house and lot) that is justified under the circumstances and
own (sic) by Mrs. Rosalinda R. allowed the Caseda spouses a period of
Santos. ninety days within which to pay the balance
of the agreed purchase price.
(Sgd.) Carmen H. Caseda
Hence, this instant petition for review on
direct buyer certiorari filed by the Santoses.

Mrs. Carmen Caseda Issue:

"(Sgd.) Rosalinda Del R. Santos Whether or not the transaction between the
parties is a contract of absolute sale or a
Owner mere oral contract to sell.

Held:
 Mrs. Rosalinda R. Santos
It is a mere oral contract to sell. The court
House and Lot ruled that a contract of sale is what the law
defines it to be, taking into consideration its
Better Living Subd. Parañaque, Metro elements, and not what the contracting
Manila parties call it.

Section V Don Bosco St."2 Under Art. 1458 of NCC, contract of sale
expressly obliges the vendor to transfer the
The other terms and conditions that the ownership of the thing sold as an essential
parties agreed upon were for the Caseda element of a contract of sale. Thus, the
spouses to pay: (1) the balance of the transfer of ownership in exchange for a
mortgage loan with the Rural bank price paid or promised is the very essence
amounting to P135,385.18; (2) the real of contract of sale.
estate taxes; (3) the electric and water bills;
and (4) the balance of the cash price to be The court is far from persuaded that there
paid not later than June 16, 1987, which was a transfer of ownership simultaneously
was the maturity date of the loan.3 with the delivery of the property
purportedly sold. The records clearly show
The Casedas gave an initial payment of that, notwithstanding the fact that the
P54,100.00 and immediately took Casedas first took then lost possession of
possession of the property, which they then the disputed house and lot, the title to the
leased out. They also paid in installments, property, TCT No. 28005 (S-11029) issued
P81,696.84 of the mortgage loan. The by the Register of Deeds of Parañaque, has
Casedas, however, failed to pay the remained always in the name of Rosalinda
remaining balance of the loan because they Santos and although the parties agreed
suffered bankruptcy in 1987. that the Casedas would assume the
Notwithstanding the state of their finances, mortgage, all amortization payments made
Carmen nonetheless paid in March 1990, by Carmen Caseda to the bank were in the
the real estate taxes on the property for name of Rosalinda Santos.
1981-1984. She also settled the electric
bills from December 12, 1988 to July 12, The foregoing circumstances categorically
1989. All these payments were made in the and clearly show that no valid transfer of
name of Rosalinda Santos. ownership was made by the Santoses to the
Casedas. Absent this essential element,
In January 1989, the Santoses, seeing that their agreement cannot be deemed a
the Casedas lacked the means to pay the contract of sale. The court therefore agrees
remaining installments and/or amortization with petitioner's averment that the
of the loan, repossessed the property. The agreement between Rosalinda Santos and
Santoses then collected the rentals from the Carmen Caseda is a contract to sell. In
tenants. contracts to sell, ownership is reserved the
by the vendor and is not to pass until full
In February 1989, Carmen Caseda sold her payment of the purchase price. Thus, the
fishpond in Batangas. She then approached court finds fully applicable and
petitioners and offered to pay the balance of understandable in this case, given that the
the purchase price for the house and lot. property involved is a titled realty under
The parties, however, could not agree, and mortgage to a bank and would require
the deal could not push through because notarial and other formalities of law before
the Santoses wanted a higher price. For transfer thereof could be validly effected.
understandably, the real estate boom in
Metro Manila at this time, had considerably
jacked up realty values. On August 11, In view of our finding in the present case
1989, the Casedas filed Civil Case No. 89- that the agreement between the parties is a
4759, with the RTC of Makati, to have the contract to sell, it follows that the appellate
Santoses execute the final deed of court erred when it decreed that a judicial
conveyance over the property, or in default rescission of said agreement was necessary.
thereof, to reimburse the amount of This is because there was no rescission to
P180,000.00 paid in cash and P249,900.00 speak of in the first place.
paid to the rural bank, plus interest, as well
as rentals for eight months amounting to WHEREFORE, the instant petition is
P32,000.00, plus damages and costs of GRANTED and the assailed decision of the
suit.1âwphi1.nêt Court of Appeals in CA-G.R. CV No. 30955
is REVERSED and SET ASIDE.
After trial on the merits, the lower court
disposed of the case as follows:

"WHEREFORE, judgment is hereby

ordered:

(a) dismissing plaintiff's (Casedas')

complaint; and

(b) declaring the agreement; marked

as Annex "C" of the complaint
rescinded. Costs against plaintiffs.

"SO ORDERED."4

Said judgment of dismissal is mainly based

on the trial court's finding that:

"Admittedly, the purchase price of the

house and lot was P485,385.18, i.e.
P350,000.00 as cash payment and
P135,385.18, assumption of
mortgage. Of it plaintiffs [Casedas]
paid the following: (1) P54,100.00
down payment; and (2) P81,694.64
installment payments to the bank on
the loan (Exhs. E to E-19) or a total
of P135,794.64. Thus, plaintiffs were
short of the purchase price. They
cannot, therefore, demand specific
performance."5

The trial court further held that the

Casedas were not entitled to
reimbursement of payments already made,
reasoning that:

"As earlier mentioned, plaintiffs made

a total payment of P135,794.64 out of
 the purchase price of P485,385.18.
The property was in plaintiffs'
possession from June 1984 to
January 1989 or a period of fifty-five
months. During that time, plaintiffs
leased the property. Carmen said the
property was rented for P25.00 a day
or P750.00 a month at the start and
in 1987 it was increased to P2,000.00
and P4,000 a month. But the
evidence is not precise when the
different amounts of rental took
place. Be that as it may, fairness
demands that plaintiffs must pay
defendants for the exercise of
dominical rights over the property by
renting it to others. The amount of
P2,000.00 a month would be
reasonable based on the average of
P750.00, P2,000.00, P4,000.00 lease-
rentals charged. Multiply P2,000 by
55 months, the plaintiffs must pay
defendants P110,000 for the use of
the property. Deducting this amount
from the P135,794.64 payment of the
plaintiffs on the property the
difference is P25,794.64. Should the
plaintiffs be entitled to a
reimbursement of this amount? The
answer is in the negative. Because of
failure of plaintiffs to liquidated the
mortgage loan on time, it had
ballooned from its original figure of
P135,384.18 as of June 1984 to
P337,280.78 as of December 31,
1988. Defendants [Santoses] had to
pay the last amount to the bank to
save the property from foreclosure.
Logically, plaintiffs must share in the
burden arising from their failure to
liquidate the loan per their
contractual commitment. Hence, the
amount of P25,794.64 as their share
in the defendants' damages in the
form of increased loan-amount, is
reasonable."6

On appeal, the appellate court, as earlier

noted, reversed the lower court. The
appellate court held that rescission was not
justified under the circumstances and
allowed the Caseda spouses a period of
ninety days within which to pay the balance
of the agreed purchase price.

Hence, this instant petition for review on

certiorari filed by the Santoses.

Petitioners now submit the following issues

for our consideration:

WHETHER OR NOT THE COURT OF

APPEALS, HAS JURISDICTION TO
DECIDE PRIVATE RESPONDENT'S
APPEAL INTERPOSING PURELY
QUESTIONS OF LAW.

WHETHER THE SUBJECT

TRANSACTION IS NOT A CONTRACT
OF ABSOLUTE SALE BUT A MERE
ORAL CONTRACT TO SELL IN
WHICH CASE JUDICIAL DEMAND
FOR RESCISSION (ART. 1592,7 CIVIL
CODE) IS NOT APPLICABLE.

ASSUMING ARGUENDO THAT A

JUDICIAL DEMAND FOR
RESCISSION IS REQUIRED,
WHETHER PETITIONERS' DEMAND
AND PRAYER FOR RESCISSION
CONTAINED IN THEIR ANSWER
FILED BEFORE THE TRIAL
SATISFIED THE SAID
REQUIREMENT.

WHETHER OR NOT THE NON-

PAYMENT OF MORE THAN HALF OF
THE ENTIRE PURCHASE PRICE
INCLUDING THE NON-COMPLIANCE
WITH THE STIPULATION TO
LIQUIDATE THE MORTGAGE LOAN
ON TIME WHICH CAUSED GRAVE
DAMAGE AND PREJUDICE TO
PETITIONERS, CONSTITUTE
SUBSTANTIAL BREACH TO JUSTIFY
RESCISSION OF A CONTRACT TO
SELL UNDER ARTICLE 1191 8 (CIVIL
CODE).

On the first issue, petitioners argue that,

since both the parties and the apellate
court adopted the findings of trial court,9 no
questions of fact were raised before the
Court of Appeals. According to petitioners,
CA-G.R. CV No. 30955, involved only pure
questions of law. They aver that the court a
quo had no jurisdiction to hear, much less
decide, CA-G.R. CV No. 30955, without
running afoul of Supreme Court Circular
No. 290 (4) [c].10

There is a question of law in a given case

when the doubt or difference arises as to
how the law is on a certain set of facts, and
there is a question of fact when the doubt
or difference arises as to the truth or
falsehood of the alleged facts.11 But we note
that the first assignment of error submitted
by respondents for consideration by the
appellate court dealt with the trial court's
finding that herein petitioners got back the
property in question because respondents
did not have the means to pay the
installments and/or amortization of the
loan.12 The resolution of this question
involved an evaluation of proof, and not
only a consideration of the applicable
statutory and case laws. Clearly, C.A.-G.R.
CV No. 30955 did not involve pure
questions of law, hence the Court of
Appeals had jurisdiction and there was no
violation of our Circular No. 2-90.

Moreover, we find that petitioners took an

active part in the proceedings before the
Court of Appeals, yet they did not raise
there the issue of jurisdiction. They should
have raised this issue at the earliest
opportunity before the Court of Appeals. A
party taking part in the proceedings before
the appellate court and submitting his case
for its decision ought not to later on attack
the court's decision for want of jurisdiction
because the decision turns out to be
adverse to him.13

The second and third issues deal with the

question: Did the Court of Appeals err in
holding that a judicial rescission of the
agreement was necessary? In resolving both
issues, we must first make a preliminary
determination of the nature of the contract
in question: Was it a contract of sale, as
insisted by the respondents or a mere
contract to sell, as contended by
petitioners?

Petitioners argue that the transaction

between them and respondents was a mere
contract to sell, and not a contract of sale,
since the sole documentary evidence (Exh.
D, receipt) referring to their agreement
clearly showed that they did not transfer
ownership of the property in question
simultaneous with its delivery and hence
remained its owners, pending fulfillment of
the other suspensive conditions, i.e. full
payment of the balance of the purchase
price and the loan amortizations.
Petitioners point to Manuel v. Rodriguez,
109 Phil. 1 (1960) and Luzon Brokerage Co.,
Inc. v. Maritime Building Co., Inc., 43 SCRA
93 (1972), where he held that article 1592
of the Civil Code is inapplicable to a
contract to sell. They charge the court a
quo with reversible error in holding that
petitioners should have judicially rescinded
the agreement with respondents when the
latter failed to pay the amortizations on the
bank loan.

Respondents insist that there was a

perfected contract of sale, since upon their
partial payment of the purchase price, they
immediately took possession of the property
as vendees, and subsequently leased it,
thus exercising all the rights of ownership
over the property. This showed that transfer
of ownership was simultaneous with the
delivery of the realty sold, according to
respondents.

It must be emphasized from the outset that

a contract is what the law defines it to be,
taking into consideration its essential
elements, and not what the contracting
parties call it.14 Article 145815 of the Civil
Code defines a contract of sale. Note that
the said article expressly obliges the vendor
to transfer the ownership of the thing sold
as an essential element of a contract of
sale.16 We have carefully examined the
contents of the unofficial receipt, Exh. D,
with the terms and conditions informally
agreed upon by the parties, as well as the
proofs submitted to support their respective
contentions. We are far from persuaded
that there was a transfer of ownership
simultaneously with the delivery of the
property purportedly sold. The records
clearly show that, notwithstanding the fact
that the Casedas first took then lost
possession of the disputed house and lot,
the title to the property, TCT No. 28005 (S-
11029) issued by the Register of Deeds of
Parañaque, has remained always in the
name of Rosalinda Santos.17 Note further
that although the parties agreed that the
Casedas would assume the mortgage, all
amortization payments made by Carmen
Caseda to the bank were in the name of
Rosalinda Santos.18 We likewise find that
the bank's cancellation and discharge of
mortgage dated January 20, 1990, was
made in favor of Rosalinda Santos.19 The
foregoing circumstances categorically and
clearly show that no valid transfer of
ownership was made by the Santoses to the
Casedas. Absent this essential element,
their agreement cannot be deemed a
contract of sale. We agree with petitioner's
averment that the agreement between
Rosalinda Santos and Carmen Caseda is a
contract to sell. In contracts to sell,
ownership is reserved the by the vendor
and is not to pass until full payment of the
purchase price. This we find fully applicable
and understandable in this case, given that
the property involved is a titled realty under
mortgage to a bank and would require
notarial and other formalities of law before
transfer thereof could be validly effected.

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, 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 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.20 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.21 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. 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.22 As to Article 1191, it is
subordinated to the provisions of Article
1592 when applied to sales of immovable
property.23 Neither provision is applicable in
the present case.

As to the last issue, we need not tarry to

make a determination of whether the
breach of contract by private respondents is
so substantial as to defeat the purpose of
the parties in entering into the agreement
and thus entitle petitioners to rescission.
Having ruled that there is no rescission to
speak of in this case, the question is moot.

WHEREFORE, the instant petition

is GRANTED and the assailed decision of
the Court of Appeals in CA-G.R. CV No.
30955 is REVERSED and SET ASIDE. The
judgment of the Regional Trial Court of
Makati, Branch 133, with respect to
the DISMISSAL of the complaint in Civil
Case No. 89-4759, is hereby REINSTATED.
No pronouncement as to costs.1âwphi1.nêt

SO ORDERED.