EMILIO A.

SALAZAR and TERESITA DIZON, Petitioners, v. COURT OF APPEALS

and JONETTE BORRES, Respondents
G.R. No. 118203. July 5, 1996
DAVIDE, JR., J.
FACTS:
● Dr. Salazar is the owner of the two (2) parcels of land, he offered to sell his properties to
Jonette Borres for One Million Pesos (P1,000,000.00).
● Borres offered to buy the properties within 6 six months because she still had to go home
to the province to secure a loan, in which Dr. Salazar did not agree.
● Borres offered again that she can pay within three months’ time if Dr. Salazar can lend
her the title of the property so that she can secure a loan from the bank wherein Dr.
Salazar agreed on the condition that he should be assured that the title will not pass on
Borres until the full payment.
● Borres crafted the necessary documents as instructed by Dr. Salazar such as the Deed of
Absolute sale and the warranty. However, Dr. Salazar refused to sign it and demanded
full payment by the end of June. He also did not allow Borres to lend her the title.
● On June 2, 1989, Dr. Salazar reluctantly agreed to sign the Deed of Absolute Sale at
NAIA with an agreement that Jonette Borres pays one half (1/2) of the consideration or
P500,000.00 in "cash" by June 15, 1989 and the balance was payable on June 30, 1989.
● Plaintiff agreed to the above conditions and Dr. Salazar constituted co-defendant Teresa
Dizon as custodian at the Deed of Absolute Sale together with the Titles of the Land in
question with the instruction to Teresa Dizon not to surrender said documents to Jonette
Borres until upon payment of the full price in "cash"
RTC (Regional Trial Court):
The trial court held that the Deed of Absolute Sale was in reality a contract to sell, and that since
Borres failed to pay Salazar the downpayment of P500,000.00 on the agreed date, 15 June 1989,
the complaint for specific performance cannot prosper. It then dismissed the complaint and
ordered Borres to pay the petitioners P5,000.00 each as attorney’s fees and litigation expenses.
CA (Court of Appeals):
The Court of Appeals, in its challenged decision of 29 November 1994, ruled that the Deed of
Absolute Sale, whose existence and due execution was undisputed, is a perfected contract of
sale, with a definite object and a specific consideration which the parties had agreed upon.

ISSUE:
Whether or not the so-called Deed of Absolute Sale executed by petitioner Emilio A. Salazar in
favor of private respondent Jonette Borres is a perfected contract of sale or a mere contract to sell
RULING:
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.
If we are to consider only the Deed of Absolute Sale, we can easily say that the contract between
Salazar and Borres is one of sale. However, the Deed of Warranty and the oral testimony on the
circumstances surrounding the execution of the Deed of Absolute Sale, as well as the other
pieces of evidence submitted by Borres, sustain the finding and conclusion of the trial court that
the true agreement between the parties was a contract to sell in that the true intent of Salazar was
to transfer ownership of the property to Borres only after the latter pays the full consideration.

DISPOSITIVE PORTION:
WHEREFORE, the instant petition is hereby GRANTED. The challenged decision of 29
November 1994 of the Court of Appeals in CA-G.R. CV No. 40197 is REVERSED and SET
ASIDE, and the decision of 3 September 1992 of Branch 66 of the Regional Trial Court of
Manila in Civil Case No. 89-4468 is AFFIRMED, subject to the modification that the award for
attorney’s fees is deleted. No pronouncement as to costs.
SO ORDERED.
FULL TEXT:
THIRD DIVISION

[G.R. No. 118203. July 5, 1996.]

EMILIO A. SALAZAR and TERESITA DIZON, Petitioners, v. COURT OF APPEALS and

JONETTE BORRES, Respondents.

SYLLABUS

1. CIVIL LAW; SPECIAL CONTRACTS; SALES; CONTRACT OF SALE; DISTINGUISH

FROM 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.

2. ID.; ID.; ID.; GENERALLY, EXECUTION OF A DEED OF ABSOLUTE SALE

CONSTITUTES CONSTRUCTIVE DELIVERY OF OWNERSHIP; EXCEPTION. — The
withholding by Salazar through Dizon of the Deed of Absolute Sale, the certificates of title, and
all other documents relative to the two lots is an additional indubitable proof that Salazar did not
transfer to Borres either by actual or constructive delivery the ownership of the two lots. While
generally the execution of a deed of absolute sale constitutes constructive delivery of ownership,
the withholding by the vendor of that deed explicit agreement that it be delivered together with
the certificates of titles to the vendee only upon the latter’s full payment of the consideration
amounts to a suspension of the effectivity of the deed of sale as a binding contract.

3. ID.; CONTRACTS; INTERPRETATION; FORM OF INSTRUMENT CANNOT PREVAIL

OVER THE TRUE INTENT OF THE PARTIES. — If we are to consider only the Deed of
Absolute Sale, we can easily say that the contract between Salazar and Borres is one of sale.
However, the Deed of Warranty and the oral testimony on the circumstances surrounding the
execution of the Deed of Absolute Sale, as well as the other pieces of evidence submitted by
Borres, sustain the finding and conclusion of the trial court that the true agreement between the
parties was a contract to sell in that the true intent of Salazar was to transfer ownership of the
property to Borres only after the latter pays the full consideration.

4. ID.; OBLIGATIONS; SUSPENSIVE CONDITION; NUN-FULFILLMENT THEREOF

BARS THE OBLIGATION FROM TAKING EFFECT. — Accordingly, since Borres was
unable to pay the consideration, which was a suspensive condition, Salazar cannot be compelled
to deliver to her the deed of sale, certificates of title, and other documents concerning the two
lots. In other words, no right in her favor and no corresponding obligation an the part of Salazar
were created.

5. ID.; DAMAGES; ATTORNEY’S FEES; SHOULD NOT BE CHARGED AGAINST A

PARTY IN THE ABSENCE (IF BAD FAITH ON HIS PART. — The challenged decision of the
Court of Appeals must then be reversed. That of the trial court must be affirmed, with the
modification consisting in the deletion of the award of attorney’s fees in favor of the petitioners
which we find to be without basis. The award of attorney’s fees as damages is the exception
rather than the rule; it is not to be given to the defendant every time the latter prevails. The right
to litigate is so precious that a penalty should not be charged on those who may exercise it
erroneously, unless, of course such party acted in bad faith.

6. COMMERCIAL LAW; NEGOTIABLE INSTRUMENT; CROSSED CHECK OF SIMPLE

TYPE; CANNOT BE PAID TO ANYONE EXCEPT THE PAYEE, OR IT CAN BE
DEPOSITED WITH A BANK WHERE THE LATTER MAINTAINS AN ACCOUNT. — Even
granting for the sake of argument that, as ruled by the Court of Appeals, the agreement of
Salazar and Borres as evidenced by the Deed of Absolute Sale was a perfected contract of sale,
Borres’s action for specific performance must likewise fail. We are in full accord with the trial
court and, perforce, disagree with the Court of Appeals, that Borres was not ready to pay
P500,000.00 on or before 15 June 1989. That Borres had a check of P1.5 million, or of more than
the full consideration of the two lots, is of no moment. The check, dated 15 June 1989, is a
crossed check payable to "Atty. Jonette Borres," or herein private Respondent. The crossing is of
simple type — two parallel lines at the upper left hand corner without the words "and company"
between the lines. Accordingly, it cannot be paid to anyone except Borres, or it can be deposited
with a bank where she keeps an account.

DECISION

DAVIDE, JR., J.:

Petitioners seek to set aside the decision 1 of 29 November 1994 of the Court of Appeals in CA-
G.R. CV No. 40197, which reversed the decision 2 of 3 September 1992 of Branch 66 of the
Regional Trial Court (RTC) of Makati, Metro Manila, in Civil Case No. 89-4468.

The primary issues presented for our resolution are whether (a) the so-called Deed of Absolute
Sale executed by petitioner Emilio A. Salazar in favor of private respondent Jonette Borres is a
perfected contract of sale or a mere contract to sell, and (b) the action for specific performance
which the latter filed will lie to compel the former to deliver the Deed of Absolute Sale, the
Transfer Certificates of Title, and other documents relative to the property in question.

The factual antecedents of this case, as summarized by the trial court, are as follows:chanrob1es
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That defendant Dr. Salazar is the owner of the two (2) parcels of land with improvements
thereon located at 2914 Finlandia Street, Makati, Metro Manila and covered by Transfer
Certificate of Title Nos. 31038 and 31039 of the Registry of Deeds of Makati; that Dr. Salazar
offered to sell his properties to Jonette Borres for One Million Pesos (P1,000,000.00) (TSN pp. 7
and 8, November 5, 1991). The initial proposal took place at the Dimsum Restaurant, Makati,
whereby it was proposed that the payment of the consideration was to be made within six (6)
months but was objected to by Dr. Salazar and he reduced it to a three (3) months period (TSN
Direct Examination on Jonette Borres p. 22, November 12, 1991); that sometime on [May] 28,
1989, Jonette Borres together with a certain Emilio T. Salazar went to see Dr. Salazar at the
latter’s residence in Bataan bearing a copy of a Deed of Absolute sale (Exhibit ("C") and Deed of
Warranty (Exhibit "D") but Dr. Salazar refused to sign because Jonette Borres did not have the
money ready then. In said occasion Dr. Salazar further reduced the period within which plaintiff
may purchase the lots, to one (1) month or up to June 30, 1989 (TSN Direct Examination on
Jonette Borres November 5, [1991], pp. 10 and 11).

Jonette Borres then met again Dr. Salazar on June 2, 1989 at the Ninoy International Airport who
was about to leave for the United States of America where he is a resident. Jonette Borres had
with her the Deed of Absolute Sale and asked Dr. Salazar to sign said document. Dr. Salazar
reluctantly agreed to sign the document provided that Jonette Borres pays one half (1/2) of the
consideration or P500,000.00 in "cash" by June 15, 1989 and the balance was payable on June
30, 1989 (TSN Direct Examination on Emilio A. Salazar, May 21, [1991], p. 9; TSN Cross
Examination on Jonette Borres, November 12, [1991], pp. 29 and 30). It was during this occasion
that Dr. Salazar again emphasized to Jonette Borres that he needed the money because he was
then buying a property in the United States (TSN pp. 15-20, November 5, 1991; pp. 22 and 23,
May 21, 1991; and pp. 56-57, May 21, 1991).

Plaintiff agreed to the above conditions (TSN Cross Examination on Jonette Borres November
12, 1989, p. 32) and Dr. Salazar constituted co-defendant Teresa Dizon as custodian at the Deed
of Absolute Sale (Exhibit "C") together with the Titles of the Land in question with the
instruction to Teresa Dizon not to surrender said documents to Jonette Borres until upon payment
of the full price in "cash" (TSN Direct Examination on Emilio A. Salazar, May 21, [1991], p.
11).

On June 14, 1989 Jonette Borres informed defendant Dizon that she will be able to pay the full
amount of P1,000,000.00 on June 15, 1989 (TSN Direct Examination Jonette Borres, November
5, [1991], p. 25) and on the next day, she then went to the house of Teresa Dizon to see and get
the documents entrusted to her by Dr. Salazar. The documents not being in Dizon’s possession,
they agreed to meet at Metro Bank West Avenue Branch to get the documents and then to
proceed to Makati to meet the plaintiff’s business partner a certain Balao who allegedly gave
plaintiff a Far East Bank and Trust Company check for the amount of P1,500,000.00 (Exhibit
"F") with which to buy the property (TSN Direct Examination on Jonette Borres November 5,
[1991], pp. 30, 32 and 33). For some reason or another Jonette Borres and defendant Dizon failed
to proceed to Makati.

In the meantime or on June 16, 1992, Dr. Salazar made an overseas call to co-defendant Dizon to
inquire if Jonette Borres had already paid the down payment of P500,000.00 and Teresa Dizon
replied to Dr. Salazar that Jonette Borres had not paid the down payment. Dr. Salazar then
ordered Dizon to stop the sale (TSN Direct Examination on Emilio A. Salazar, May 21, [1991],
pp. 12 and 13).

As maybe seen from the evidence presented by the plaintiff and the defendants, the terms and
conditions of the agreement for the sale of the two (2) parcels of land owned by Dr. Salazar in
favor of the plaintiff Jonette Borres, are that the purchase price is in the amount of
P1,000,000.00, fifty percent (50%) of which or P500,000.00 was to be paid on or before June 15,
1989 while the balance thereof was to be paid on or before June 30, 1989 (TSN May 21, 1991, p.
27); that the payment was to be made in "cash" (TSN May 21, 1991, p. 55); that the place of
payment is at defendant’s bank, Metropolitan Bank Quezon City Branch (TSN October 21, 1991,
p. 23). 3

The trial court held that the Deed of Absolute Sale was in reality a contract to sell, and that since
Borres failed to pay Salazar the downpayment of P500,000.00 on the agreed date, 15 June 1989,
the complaint for specific performance cannot prosper. It then dismissed the complaint and
ordered Borres to pay the petitioners P5,000.00 each as attorney’s fees and litigation expenses. 4

In ruling that the Deed of Absolute Sale was a contract to sell, the trial court considered pertinent
the circumstances attending its execution. First, that the Deed of Absolute Sale was "reluctantly
signed" by Dr. Salazar, who was then about to leave for the United States of America, in order
that if Borres would comply with the terms and conditions of their agreement, he need not come
to the Philippines just to sign it; hence, it does not bind Dr. Salazar until the suspensive
condition, i. e., the downpayment of P500,000.00 to be effected on or before 15 June 1989 and
the balance to be paid on or before 30 June 1989, is complied with. Second, Borres was not, in
fact, financially prepared to buy the parcels of land on or before 15 June 1989 considering that

[s]he was just looking for possible buyers or business partners. First, she requested that the
pertinent documents like the Deed of Sale (Exhibit "C") and the corresponding Transfer
Certificates of Titles Nos. 31038 and 31039 of the Register of Deeds of Rizal (Exhibits "A" and
"B") be entrusted to her even before making the downpayment of P500,000.00 purposely to raise
the amount needed. When Dr. Salazar refused her request, Jonette Borres approached a certain
businessman P.D. Dionisio for loan and was turned down when Jonette Borres cannot [sic]
produce the Deed of Absolute Sale and the Titles of the parcels of land in question (TSN
November 5, 1991, pp. 20-25). Then she approached a certain Benjamin Balao a realtor
developer. Although Balao had issued to her his check in the amount of P1,500,000.00 (Exhibit
"F") he instructed his bank not to honor his check without his presence (TSN November 14,
1991, pp. 81 to 84). Jonette Borres admitted that she was not in a position to encash the check
(Exhibit "F") although it was payable to ‘cash’ (TSN November 21, 1991, pp. 41 and 44). 5

Salazar’s victory was short-lived. On Borres’s appeal from the decision of the trial court, the
Court of Appeals, in its challenged decision of 29 November 1994, ruled that the Deed of
Absolute Sale, whose existence and due execution was undisputed, is a perfected contract of
sale, with a definite object and a specific consideration which the parties had agreed upon. As
proof that it is a contract of sale and not a contract to sell, the Court of Appeals stressed the
absence of a proviso that the title to the property is reserved in the vendor until full payment of
the purchase price or that the vendor may unilaterally rescind the contract the moment the
vendee fails to pay within the fixed period. 6 Salazar’s reluctance to sign it is of no moment,
since there is no allegation of fraud, forgery, or duress. And even assuming that Borres failed to
pay the contract price, such failure did not convert the contract into one without cause or
consideration as to vitiate the validity of the contract, it not being essential for the existence of
cause that payment or full payment be made at the time of the contract. Neither did such failure
ipso facto resolve the contract in question. The remedy of the vendor, Dr. Emilio A. Salazar, is to
demand specific performance or rescission, with damages in either case. On the other hand, the
vendee, Jonette Borres, may demand specific performance, i.e. compel the vendor to accept the
price and deliver the title of the land object of the contract.

The Court of Appeals disagreed with the trial court’s finding that Borres was not in a position to
pay the downpayment because:chanrob1es virtual 1aw library

[o]n June 15, 1989, plaintiff-appellant had a Far East Bank check payable to her order, in the
amount of P1,500,000.00 — more than the whole agreed purchase price of P1,000,000.00.
Defendant-appellee Teresa Dizon agreed (on June 14, 1989) to meet her on June 15, 1989, at
Metro Bank West and thereafter to proceed to Makati in order to encash the Far East Bank
check. Defendant-appellee Teresa Dizon somehow managed to manipulate things by making
herself unavailable so that the payment could not be made on June 15, 1989. (TSN, Nov. 5,
1991, pp. 27-41). On the next day, June 16, 1989, defendant-appellee Teresa Dizon informed
plaintiff-appellant that defendant-appellee Dr. Emilio A. Salazar called up in the evening of June
15, 1989 asking whether plaintiff-appellant paid on that day and upon being answered in the
negative, said vendor said that he is revoking the contract. (TSN, Nov. 5, 1991, pp. 41-42).
Defendant-appellee Teresa Dizon having her own interested buyer, evidently acted in bad faith,
tried and indeed succeeded to frustrate the efforts of plaintiff-appellant to comply with her
reciprocal obligation to pay the agreed purchase price.

The fact that the Far East Bank check was payable to the Order of plaintiff-appellant, and it
covers the amount of P1,500,000.00 — which is much more than the agreed purchase price of
P1,000,000.00 — reveals that plaintiff-appellant was financially prepared to comply with her
reciprocal obligation. That plaintiff-appellant filed the present suit for specific performance on
July 6, 1989, bolsters the fact that she is really willing and able to pay the agreed purchase price.
How and from whom she borrowed/obtained the said amount, is of no consequence. 7

Accordingly, the respondent Court reversed the decision of the trial court and handed down a
new judgment ordering Emilio A. Salazar to accept from Jonette Borres the payment
representing the purchase price in the amount of P1 Million and thereafter to comply with his
reciprocal obligation to surrender the original copies of the deed of absolute sale and Torrens
title covering the parcels of land subject of the contract. Finding petitioner Teresita Dizon to
have "acted in bad faith in frustrating the efforts" of Borres to comply with her obligation to pay
the purchase price, the appellate court ordered her to pay Borres the amounts of P80,000.00 as
moral damages; P50,000.00 as exemplary damages; and P100,000.00 as attorney’s fees.

Unable to accept the reversal of the trial court’s decision, the petitioners filed the instant petition
wherein they submit that the Court of Appeals committed grave and serious errors:chanrob1es
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A. . . . in relying on the Deed of Absolute Sale dated May 30, 1989 notwithstanding the fact
that:chanrob1es virtual 1aw library

1. BORRES EXECUTED A DEED OF WARRANTY (EXHS. "D" AND "2") STATING

THEREIN THAT UNTIL AND UNLESS THE AMOUNT OF P1,000,000.00 REPRESENTING
THE PURCHASE PRICE FOR THAT PARCELS OF LAND COVERED BY TCT NOS. S-
31038 AND S-31039 BE PAID BY HER TO SALAZAR, SHE HAS NO RIGHT
WHATSOEVER TO THE ORIGINAL COPIES OF THE DEED OF ABSOLUTE SALE AND
THAT SHE HAS NO LEGAL RIGHT WHATSOEVER TO ANY AND ALL PERTINENT
RECORDS OF THE ABOVE-MENTIONED LOTS;

2. UPON HER BEHEST, BORRES WAS GIVEN A PHOTOCOPY OF THE DEED OF

ABSOLUTE SALE BY DIZON BUT ONLY AFTER THE LATTER ERASED THE
SIGNATURE OF SALAZAR AS THE VENDEE THEREIN;

3. BORRES HAD NOT PAID ANY PORTION OF THE AGREED PURCHASE PRICE AND
THUS RENDERS THE DEED OF ABSOLUTE SALE VOID AB INITIO.

B. . . . in concluding that the agreement between SALAZAR and BORRES is a contract of sale
and thus, perfected upon agreement on the subject matter and consideration, notwithstanding the
fact that:chanrob1es virtual 1aw library

1. THE AGREEMENT BETWEEN THE PARTIES IS ESSENTIALLY A CONTRACT TO

SELL SUBJECT TO SUSPENSIVE CONDITION, THE BIRTH OR EFFECTIVITY OF
WHICH SHOULD TAKE PLACE ONLY IF AND WHEN THE EVENT WHICH
CONSTITUTES THE CONDITION HAPPENS OR IS FULFILLED. SINCE BORRES
FAILED TO COMPLY WITH HER OBLIGATION, THE AGREEMENT TO SELL BECAME
STILLBORN;

2. THERE WAS AN EXPRESS AGREEMENT BETWEEN THE PARTIES THAT BORRES

SHALL BE ENTITLED TO THE PROPERTY OR ANY RECORDS PERTAINING THERETO
OR ORIGINAL COPIES OF THE DEED OF ABSOLUTE SALE ONLY UPON FULL
PAYMENT OF THE PURCHASE PRICE.

C. . . . in holding that DIZON acted in bad faith and succeeded to frustrate the efforts of
BORRES to comply with her reciprocal obligation to pay the purchase price notwithstanding the
fact that:chanrob1es virtual 1aw library

1. AT THE TIME THAT BORRES WAS OBLIGED TO PAY AT LEAST 50% OF THE
PURCHASE PRICE OR ON JUNE 15, 1989, SHE WAS NOT READY, WILLING AND
ABLE TO DO SO. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE
LATTER HAD THE FINANCIAL CAPABILITY TO MEET HER OBLIGATION, THE FACT
REMAINS THAT SHE FAILED TO PROPERLY TENDER PAYMENT OF HER
OBLIGATION AND IN CASE TENDER OF PAYMENT WAS REFUSED, TO CONSIGN
THE SAME IN COURT;
2. DIZON HAD NO REASON TO FRUSTRATE THE EFFORTS OF BORRES TO COMPLY
WITH HER OBLIGATION TO PAY THE AGREED PURCHASE PRICE SINCE SHE WAS
MERELY CONSTITUTED AS CUSTODIAN OF THE DEED OF ABSOLUTE SALE AND
TITLES OF THE PROPERTY WITH SPECIFIC INSTRUCTIONS TO RELEASE THE SAME
TO BORRES ONLY UPON RECEIPT OF THE PURCHASE PRICE IN FULL AND IN CASH
WITHIN THE AGREED PERIOD.

D. . . . in ordering Dizon to pay Borres the amount of P80,000.00 moral damages; P50,000.00
exemplary damages and P100,000.00 as attorney’s fees by way of damages notwithstanding the
fact that the evidence adduced before the trial court clearly shows that BORRES had no cause of
action against the former. 8

We shall first face the issue of whether the agreement between petitioner Salazar and private
respondent Borres is a contract of sale or 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 a event that prevents the obligation of the vendor
to convey title from becoming effective. 9

If we are to consider only the Deed of Absolute Sale, 10 we can easily say that the contract
between Salazar and Borres is one of sale. However, the Deed of Warranty 11 and the oral
testimony on the circumstances surrounding the execution of the Deed of Absolute Sale, as well
as the other pieces of evidence submitted by Borres, sustain the finding and conclusion of the
trial court that the true agreement between the parties was a contract to sell in that the true intent
of Salazar was to transfer ownership of the property to Borres only after the latter pays the full
consideration.

From the beginning to the end, such intention of Salazar was unequivocal and manifest. He
rejected Borres’s offer to pay the consideration within six months to give her time to secure a
loan. When Borres proposed that he lend her the certificates of title of the lots so that she could
secure a loan from the banks in Manila and be able to pay, within three months, 12 the
consideration out of the proceeds of the loan, Salazar agreed provided that she would assure him
that the title would not pass to her until he is fully paid. Borres forthwith promised to execute a
warranty. She then prepared a Deed of Absolute Sale for Salazar’s signature and a Deed of
Warranty for her signature. When finally she presented to him the Deed of Absolute Sale,
Salazar did not sign it and insisted that he be paid the purchase price at the end of June 1989; he
further told her that he would not lend her the certificates of title until he is so paid. He signed it
only after Borres agreed to pay by the end of June 1989 at a bank in Makati. But he did not give
the Deed of Absolute Sale to her; instead, he told her to just meet him at the Ninoy Aquino
International Airport on 2 June 1989, when he would leave for the United States of America, so
she would know to whom he would entrust the document and other papers relative to the
property. We quote verbatim Borres’s own testimony on direct examination upon these
points:chanrob1es virtual 1aw library

Q. Have you met the owner of the lot mentioned a while ago?

A. Yes, your Honor, I met Dr. Salazar, the owner, sometime last week of April, 1989 at Dimsum
Restaurant.

Q. You met at Dimsum, in what particular place was that?

A. We met at Dimsum Restaurant in Makati after I was called by Emilio T. Salazar to meet at
Dimsum because Dr. Salazar wanted to sell the property and he wanted to talk to you [sic].

COURT:chanrob1es virtual 1aw library

Talk to you?

A. To discuss the matter of sale to me at Dimsum Sir.

ATTY. BORRES:chanrob1es virtual 1aw library

Q. And so you really met at Dimsum.

A. Yes, Ma’am.

Q. What transpired at Dimsum?

A. Dr. Salazar offered me to buy the properties for a total of ONE MILLION PESOS
(P1,000,000.00) excluding all and any other expenses that may be involved in the transfer of the
properties in case I am interested to by [sic], in case Atty. Borres wanted to buy.

Q. What then was your reply?

A. I am interested to buy.

Q. Dr. Salazar. . . I asked . . . what did Dr. Salazar say after that?

A. I answered Dr. Salazar that I could buy or able to buy the properties within six (6) months
because I have to go home to the province to secure a loan.

Q. What did Dr. Salazar say regarding your proposal?

A. I told Dr. Salazar. Dr. Salazar said that he could not wait for that, six (6) months is a very long
time.
Q. What else did you say?

A. I told Dr. Salazar that "it is possible that I can pay within three (3) months’ time if you can
lend me the title of your property because banks here in Manila usually release loans in three
months’ time and I will have less problem to complete the payment of ONE MILLION PESOS
(P1,000,000.00)."cralaw virtua1aw library

Q. So, what did Dr. Salazar say?

A. Dr. Salazar said that "if it is the best for our transaction I can lend you the title provided I can
be assured that the title will not pass on you until you are fully paid.

Q. What was your answer then?

A. I told Dr. Salazar that I can execute a warranty to the effect that the property could not be
transferred to me until I have fully paid him.

Q. What did Dr. Salazar say?

A Dr. Salazar said "I will agree to that."cralaw virtua1aw library

COURT:chanrob1es virtual 1aw library

Dr. Salazar told you that he is agreeable to the proposal.

A. Yes, Dr. Salazar said "you prepare a craft, the necessary document and bring it to
Bataan."cralaw virtua1aw library

ATTY. BORRES:chanrob1es virtual 1aw library

Q. And what was your answer to Dr. Salazar?

A. I answered Dr. Salazar that "I will be ever willing to go to, Bataan any time you wanted me
to.

Q. And you really did go to Bataan.

A. Yes, I did.

x         x          x

ATTY. BORRES:chanrob1es virtual 1aw library

Q. And what happened while there in Bataan?

x         x          x

Q. And what happened while you got all seated in the sala of Dr. Salazar.

A. I showed him a document which he instructed me to prepare and he has read and agreed to the
Deed of Absolute Sale and the warranty I made. He gave me back the documents for signing.

Q. And you did sign the document?

A. Yes, I did sign it and passed it on to Dr. Salazar.

Q. After you passed it to Dr. Salazar, what happened?

A. Dr. Salazar did not sign the document and told me that he is only going to sign it if I am going
to pay by the end of June and that he could not lend me the title and he said he is going to sign it
and not to give me a copy until the purchase price is fully paid.

Q. And what was your reaction with the statement?

A. I said "what about the loan that we have agreed at Dimsum if you will not lend me the title
and the document that we have signed now?" Dr. Salazar said "I could not lend you the title and I
care less how you are going to loan the property and raise the money you are going to pay me,
what is important to me is you pay me the whole amount of One Million Pesos (P1,000,000.00)
not later than June 30, 1989" .

Q. And what did you say?

A. Since I could not do anything and I really wanted to buy the property, I agreed to Dr.
Salazar’s condition that I pay the property by the end of June and I will pay only at the bank in
Makati.

Q. And what did Dr. Salazar say?

A. Dr. Salazar said "okey I will sign this and have this notarized but I could not lend you and
never have a [copy] of the title as well as the Deed of Sale and you just wait at NAIA and wait if
you could have this document because I am leaving on June 2 for the US. You meet me there" .

Q. And after that what did Dr. Salazar do?

A. It was only then that he signed the document after I have agreed to his proposal but he was
very much stand [sic] to the payments and he was no longer the same when I met at Dimsum. 13

Clearly then, the original intention in the execution of the Deed of Absolute Sale was to
implement the proposal of Borres that Salazar "lend" her the transfer certificates of title so that
she could secure a loan from a bank in Manila whose proceeds would be applied to the payment
of the purchase price of the property, and the original purpose of the Deed of Warranty was to
assure Salazar that, as demanded by him, title to the lots will not pass to her until she pays the
full consideration. The lending of the certificates of title for the above purpose could have been
easily accomplished through a special power of attorney under which Salazar will authorize her
to obtain a loan and to mortgage the property as security therefor. But, perhaps anticipating
Salazar’s departure to the United States of America where he resides, Borres, who is a lawyer,
prepared instead a Deed of Absolute Sale and Deed of Warranty. Notwithstanding Borre’s
deliberate characterizations of the documents, we are convinced that they were prepared in
connection with and in the implementation of the agreement regarding the lending of the
certificates of title. They do not weaken the adamantine position of Salazar not to part with his
title to the two lots until full payment of the agreed price therefor. Borres’s execution of the Deed
of Warranty was in fact a recognition of Salazar’s position. Despite its careful wordings and
phraseology to make some sort of distinction between Borres’s right to the ownership or title
over the lots on the one hand, and her right to possess or keep the Deed of Absolute Sale and the
other documents relative to the lots, the totality of the Deed of Warranty manifests an indubitable
recognition by Borres of the aforementioned intention of Salazar. She declares therein as
follows:chanrob1es virtual 1aw library

1. That until and unless the amount of ONE MILLION (P1,000,000.00) PESOS representing the
purchase price for that parcels of land covered by Transfer Certificate of Title Nos. S-31038 and
S-31039 be paid by the undersigned unto Dr. Emilio A. Salazar, the undersigned has no absolute
right whatsoever to the original copies of the Deed of Absolute Sale executed by said Dr. Emilio
A. Salazar dated May ___, 1989;

2. That she has no legal right whatsoever to any and all pertinent records of the aforementioned
lots;

3. That upon payment of the aforementioned amount Dr. Emilio A. Salazar or his representative
is obliged to surrender the original of these presents together with all the original documents and
titles covering the sale of the aforementioned lots unto the undersigned. 14

Then, too, in her Memorandum of Agreement with Monteland Realty Corporation, 15 dated 15
June 1989, Borres explicitly mentioned only her "rights and interests" under the Deed of
Absolute Sale signed by Salazar and therein conveyed, transferred, and assigned to the said
corporation only such "rights and interests." Also worth noting is the statement in the second
whereas clause of the Memorandum of Agreement that Monteland Realty Corporation.

has full knowledge of the sales [sic] and conditions of the SELLER-OWNER of the property . . .
that the buyer [Borres] has an obligation to pay DR. EMILIO SALAZAR the amount of ONE
MILLION PESOS (P1,000,000.00) and that there is already a Deed of Absolute Deed of [sic]
Sale in favor of [Borres] of which both copies of the titles of the properties for sale and all
documents including the Deed of Absolute Sale aforementioned are under the custody of MS.
TERESA DIZON who will only release the Title and the Deed of Absolute Sale after the
obligation of [Borres] is fully paid. 16

The withholding by Salazar through Dizon of the Deed of Absolute Sale, the certificates of title,
and all other documents relative to the two lots is an additional indubitable proof that Salazar did
not transfer to Borres either by actual or constructive delivery the ownership of the two lots.
While generally the execution of a deed of absolute sale constitutes constructive delivery of
ownership, the withholding by the vendor of that deed under explicit agreement that it be
delivered together with the certificates of titles to the vendee only upon the latter’s full payment
of the consideration amounts to a suspension of the effectivity of the deed of sale as a binding
contract.

Undoubtedly, Salazar and Borres mutually agreed that despite the Deed of Absolute Sale title to
the two lots in question was not to pass to the latter until full payment of the consideration of P1
million. The form of the instrument cannot prevail over the true intent of the parties as
established by the evidence.

Accordingly, since Borres was unable to pay the consideration, which was a suspensive
condition, Salazar cannot be compelled to deliver to her the deed of sale, certificates of title, and
other documents concerning the two lots. In other words, no right in her favor and no
corresponding obligation on the part of Salazar were created. Article 1181 of the Civil Code
provides:chanrob1es virtual 1aw library

In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired shall depend upon the happening of the event which constitutes the condition.

Even granting for the sake of argument that, as ruled by the Court of Appeals, the agreement of
Salazar and Borres as evidenced by the Deed of Absolute Sale was a perfected contract of sale,
Borres’s action for specific performance must likewise fail. We are in full accord with the trial
court and, perforce, disagree with the Court of Appeals, that Borres was not ready to pay
P500,000.00 on or before 15 June 1989. That Borres had a check of P1.5 million, or of more than
the full consideration of the two lots, is of no moment. The check, 17 dated 15 June 1989, is a
crossed check payable to "Atty. Jonette Borres," or herein private Respondent. The crossing is of
simple type — two parallel lines at the upper left hand corner without the words "and company"
between the lines. Accordingly, it cannot be paid to anyone except Borres, or it can be deposited
with a bank where she keeps an account. 18

There is absolutely no evidence that Borres encashed the check and tendered to Salazar thru
Dizon the sum of P500,000.00 on 15 June 1989. On the contrary, the check itself was cancelled
as shown by the word cancelled handwritten across it. Moreover, the delivery of the check by
Monteland Realty Corporation through Balao was not unconditional. Per the receipt 19 Borres
signed on 15 June 1989, encashment of the check "is subject to the verifications as to the
authenticity of documents pertaining to the subject property." Neither is there evidence that
Borres paid the downpayment on 15 June 1989 with money she got from other sources. No
payment appears to have been made thereafter or during the pendency of the case before the trial
court or the Court of Appeals. She should have consigned the payment in court pursuant to
Article 1256 of the Civil Code for her to be released from her obligation and, consequently, exact
fulfillment by Salazar of his corresponding obligation.

The challenged decision of the Court of Appeals must then be reversed. That of the trial court
must be affirmed, with the modification consisting in the deletion of the award of attorney’s fees
in favor of the petitioners which we find to be without basis. The award of attorney’s fees as
damages is the exception rather than the rule; it is not to be given to the defendant every time the
latter prevails. The right to litigate is so precious that a penalty should not be charged on those
who may exercise it erroneously, unless, of course such party acted in bad faith. 20

WHEREFORE, the instant petition is hereby GRANTED. The challenged decision of 29

November 1994 of the Court of Appeals in CA-G.R. CV No. 40197 is REVERSED and SET
ASIDE, and the decision of 3 September 1992 of Branch 66 of the Regional Trial Court of
Manila in Civil Case No. 89-4468 is AFFIRMED, subject to the modification that the award for
attorney’s fees is deleted. No pronouncement as to costs.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

Endnotes:

1. Rollo, 40-46. Per Ishani, A., J., with Ibay-Somera, C., and Lipana-Reyes, C., JJ., concurring.

2. Original Records (OR) 286-295. Per Judge Eriberto U. Rosario, Jr.

3. OR, 287-291.

4. Id., 294-295.

5. OR, 293-294.

6. Citing Visayan Sawmill Co., Inc. v. Court of Appeals, 219 SCRA 378 [1993].

7. Rollo, 44-45.

8. Rollo, 16-18.

9. Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 46 SCRA 381, 387 [1972]; Jacinto
v. Kaparaz, 209 SCRA 246 254[1992]; Visayan Sawmill Co., Inc. v. Court of Appeals, supra
note 6, at 389; Pingol v. Court of Appeals, 226 SCRA 118, 126 [1993].

10. Exhibits "C" and "1," Folder of Exhibits, 6 and 22.

11. Exhibit "2," Id., 24.

12. TSN, 5 November 1991, 8.

13. TSN, 5 November 1991, 8-14.

14. Exhibit "2," Folder of Exhibits, 24.

15. Exhibit "G," Id., 16-17.

16. Exhibit "G," Folder of Exhibits, 16.

17. Exhibit "F," Folder of Exhibits, 15.

18. AGUEDO F. AGBAYANI, Commentaries and Jurisprudence on the Commercial Laws of

the Philippines, vol. 1 [1987 ed.], 449.

19. Exhibit "D," Folder of Exhibits, 8.

20. Tierra International Construction Corp. v. NLRC, 211 SCRA 73, 81 [1992]; Albenson
Enterprises Corp. v. Court of Appeals, 217 SCRA 16, 31 [1993]; De La Peña v. Court of
Appeals, 231 SCRA 456, 462 [1994].