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Nabus vs. Pacson

The petition was granted, the Court of Appeals decision was reversed and set aside, and the sale by Julie and Michelle Nabus to Betty Tolero, together with TCT Nos. T-18650 and T-18651 in Tolero’s name, was upheld. Spouses Joaquin and Julia Pacson had earlier entered into a Deed of Conditional Sale with Spouses Bate and Julie Nabus over 1,000 square meters, paid ₱112,455.16, and left a balance of ₱57,544.84. The instrument was held to be a contract to sell, not a contract of sale, because the vendors reserved title until full payment, which was a positive suspensive condition. Since full payment did not occur, no breach or obligation to execute a deed of absolute sale arose, and the Nabuses could validly convey the property to Tolero. The Pacsons were entitled to reimbursement and ₱10,000 nominal damages, but not moral or exemplary damages.

Primary Holding

A contract denominated as a “Deed of Conditional Sale” is a contract to sell, not a contract of sale, where the vendor reserves title until full payment of the purchase price and promises to execute a deed of absolute sale only upon such full payment; full payment is a positive suspensive condition, and its non-fulfillment does not constitute breach but prevents the vendor’s obligation to convey title from arising. Because the contract to sell was without force and effect, the vendor could validly sell the property to another buyer.

Background

Spouses Bate and Julie Nabus owned registered parcels totaling 1,665 square meters in Pico, La Trinidad, Benguet, covered by TCT No. T-9697 and mortgaged to the Philippine National Bank, La Trinidad Branch, to secure a ₱30,000 loan. They agreed to sell 1,000 square meters of that property to Spouses Joaquin and Julia Pacson under a Deed of Conditional Sale, while the Pacsons took possession and operated a truck body-building and auto repair shop on the land. The Civil Code provisions on sale, contracts to sell, suspensive conditions, and damages govern the characterization of that instrument and the consequences of the parties’ subsequent dealings.

History

  1. RTC of La Trinidad, Benguet, Branch 10 — Respondents filed a Complaint for Annulment of Deeds, damages, and preliminary injunction, docketed as Civil Case No. 84-CV-0079 (the text states the filing date as March 28, 2008).

  2. RTC, September 30, 1993 — Ruled in favor of respondents, ordering Betty Tolero to execute a deed of absolute sale in favor of the Spouses Pacson upon payment of ₱57,544.84, to surrender her owner’s duplicate copies of TCT Nos. T-18650 and T-18651, and ordering Julie Nabus, Michelle Nabus, and Betty Tolero to pay moral damages, exemplary damages, and attorney’s fees.

  3. Court of Appeals, November 28, 2003 — Affirmed the RTC Decision but deleted the award of attorney’s fees; the appeal was dismissed for lack of merit.

  4. Supreme Court, November 25, 2009 — Granted the petition for review on certiorari, reversed and set aside the Court of Appeals Decision, upheld the validity of the sale to Betty Tolero and TCT Nos. T-18650 and T-18651, and ordered reimbursement and nominal damages with 12% annual interest.

Facts

Spouses Bate and Julie Nabus owned parcels of land with a total area of 1,665 square meters in Pico, La Trinidad, Benguet, registered under TCT No. T-9697 and mortgaged to the Philippine National Bank, La Trinidad Branch, to secure a ₱30,000 loan. On February 19, 1977, they executed a Deed of Conditional Sale covering 1,000 square meters of the property in favor of Spouses Joaquin and Julia Pacson for ₱170,000, notarized on February 21, 1977. The consideration was payable as follows: ₱13,000 more or less on or before February 21, 1977 directly to PNB and forming part of the purchase price; after paying PNB, a balance of about ₱17,500 remained as mortgage balance, to be paid by the vendee at not less than ₱3,000 a month beginning March 1977 until fully liquidated, with all payments to PNB forming part of the consideration; and as soon as the mortgage obligation was fully paid, the vendee obligated himself to pay not less than ₱2,000 a month to the vendor until the full ₱170,000 was covered, including the payments in the first two paragraphs. The deed further provided that as soon as full consideration was paid, the corresponding transfer documents would be executed by the vendor to the vendee for the portion sold; that a segregation survey would be executed at the vendee’s expense; that if the vendor were defeated in a pending civil case over the entire property, he would return all monies paid; that the vendor would cooperate in ousting Marcos Tacloy from possession; and that the instrument would bind the parties’ heirs, successors, or assigns. Pursuant to the deed, the Pacsons paid PNB ₱12,038.86 on February 22, 1977 and ₱20,744.30 on July 17, 1978 for the full payment of the loan. Tacloy and the spouses Delfin and Nelita Flores vacated the property after the Pacsons paid them ₱4,000 each. The Pacsons then took possession, constructed an 80 by 32-feet building and a steel-matting fence around the property, and operated the “Emiliano Trucking Body Builder and Auto Repair Shop.”

On December 24, 1977, before the balance of the mortgage amount with PNB was paid, Bate Nabus died. On August 17, 1978, his surviving spouse Julie Nabus and their minor daughter Michelle Nabus executed a Deed of Extra Judicial Settlement over the land covered by TCT No. 9697. On the basis of that document, TCT No. T-17718 was issued on February 17, 1984 in the names of Julie and Michelle Nabus. Meanwhile, the Pacsons continued paying their balance, not in ₱2,000 installments as agreed but in various, often small amounts ranging from as low as ₱10 to as high as ₱15,566, over almost seven years from March 9, 1977 to January 17, 1984. There were 364 receipts of payment, mostly signed by Julie Nabus, who also signed as Julie Quan after remarrying; other signatories included Bate Nabus, PNB La Trinidad Branch, Maxima Nabus, Sylvia Reyes, Michelle Nabus, and Julie’s second husband Gereon Quan. The receipts showed that the total sum paid by the Pacsons to the Spouses Nabus was ₱112,455.16, leaving a balance of ₱57,544.84. The sum of ₱30,000, representing the value of a pick-up truck allegedly sold and delivered in 1978 to the Spouses Nabus, was not considered as payment because the registration papers remained in the name of its owner, Dominga D. Pacson, Joaquin Pacson’s sister; the vehicle was also returned to the Pacsons.

During the last week of January 1984, Julie Nabus, accompanied by her second husband, approached Joaquin Pacson to ask for full payment of the lot. Joaquin agreed to pay but told her to return after four days because his daughter Catalina Pacson would have to go over the numerous receipts to determine the balance. When Julie returned after four days, Joaquin sent her and Catalina to Atty. Elizabeth Rillera for the execution of the deed of absolute sale. Because Julie was a widow with a minor daughter, Atty. Rillera required Julie to return in four days with the necessary documents, such as the deed of extrajudicial settlement, the transfer certificate of title in the names of Julie and Michelle Nabus, and the guardianship papers of Michelle. Julie did not return. Catalina, becoming suspicious, went to the Register of Deeds of the Province of Benguet and found that the title was still in the name of Julie and Michelle Nabus. After a week, Catalina heard a rumor that the lot had already been sold to Betty Tolero. Catalina and Atty. Rillera went to the Register of Deeds and found that Julie Nabus and her minor daughter Michelle Nabus, represented by the former’s mother as appointed guardian by a court order dated October 29, 1982, had executed a Deed of Absolute Sale in favor of Betty Tolero on March 5, 1984, covering the whole lot of 1,665 square meters. The property was described as four lots: Lot A-2-A with 832 square meters, Lot A-2-B with 168 square meters, Lot A-2-C with 200 square meters, and Lot A-2-D with 465 square meters. Lots A-2-A and A-2-B, with a combined area of 1,000 square meters, corresponded to the lot previously sold to the Pacsons in the Deed of Conditional Sale. The certificate of title in the name of Julie and Michelle Nabus was cancelled on March 16, 1984, and four titles were issued in the name of Betty Tolero: TCT No. T-18650 for Lot A-2-A, TCT No. T-18651 for Lot A-2-B, TCT No. T-18652 for Lot A-2-C, and TCT No. T-18653 for Lot A-2-D. On March 22, 1984, the gate to the Pacsons’ repair shop was padlocked, and a sign was displayed stating “No Trespassing.” On March 26, 1984, Catalina Pacson filed an affidavit-complaint regarding the padlocking with the police station at La Trinidad, Benguet.

On March 28, 2008, as stated in the text, the Pacsons filed with the RTC a Complaint for Annulment of Deeds, with damages and a prayer for a writ of preliminary injunction. They sought the annulment of the Extra-judicial Settlement of Estate insofar as their right to the 1,000-square-meter lot subject of the Deed of Conditional Sale was affected; TCT No. T-17718 issued in the names of Julie and Michelle Nabus; and the Deed of Absolute Sale in favor of Betty Tolero and the transfer certificates of title issued pursuant thereto. They also prayed for actual, moral, and exemplary damages, as well as attorney’s fees. In their Answer, Julie and Michelle Nabus alleged that Joaquin Pacson did not proceed with the conditional sale when he learned that there was a pending case over the whole property; that Joaquin proposed instead to lease the property with a monthly rental of ₱2,000 and to apply the ₱13,000 as rentals, since the amount had already been paid to the bank and could no longer be withdrawn; and that he therefore did not affix his signature to the second page of a copy of the Deed of Conditional Sale. Julie Nabus alleged that in March 1994, due to her own economic needs and those of her minor daughter, she sold the property to Betty Tolero with authority from the court. At the hearing, Julie testified that she sold the property to Tolero because she needed money; that she was free to sell it because the Deed of Conditional Sale had been converted into a contract of lease; that when the deed was being explained by the notary public, Joaquin Pacson allegedly did not like the portion stating that there was a pending case involving the property, so he did not continue signing the document and the second page remained unsigned; and that thereafter it was their understanding that the Pacsons would occupy the property as lessees and whatever amount they paid would be considered rentals.

Betty Tolero defended as a purchaser in good faith and for value. She testified that Julie Nabus went to her house and offered to sell the property consisting of two lots with a combined area of 1,000 square meters; that she consulted Atty. Aurelio de Peralta before agreeing to buy; that she and Julie brought to Atty. De Peralta pertinent papers such as TCT No. T-17718 in the names of Julie and Michelle Nabus, the guardianship papers of Michelle Nabus, and the blueprint copy of the survey plan showing the two lots; and that after examining the documents and finding the title clean, Atty. De Peralta gave her the go-signal to buy. Upon payment of the agreed price of ₱200,000, the Deed of Absolute Sale was executed and registered, resulting in the cancellation of the title of Julie and Michelle Nabus and the issuance in Tolero’s name of TCT Nos. T-18650 and T-18651 corresponding to the two lots. Tolero thereafter asked her common-law husband, Ben Ignacio, to padlock the gate to the property and hang the “No Trespassing” sign. She testified that as the new owner she was surprised and shocked to receive the Complaint; that she knew the Spouses Pacson very well because they used to buy vegetables regularly from her; that she had been residing along the highway at Kilometer 4, La Trinidad, Benguet since 1971; that she knew the land in question because it was only 50 meters away across the highway; and that she knew the Spouses Pacson had a shop on the property for the welding and body-building of vehicles. She was not aware of the Deed of Conditional Sale and saw the document for the first time when Joaquin Pacson showed it to her after she had already bought the property and the title had been transferred in her name. At the time she bought the property, Julie Nabus informed her that the Pacsons were merely renting the property; she did not bother to verify if that was true because the Pacsons had not been on the property for two years before she bought it.

The trial court found that the Deed of Conditional Sale was not converted into a contract of lease because the original copy of the contract showed that all pages were signed by all the parties, and by the presumption of regularity all other carbon copies must have been duly signed; Joaquin Pacson’s failure to sign the second page of one carbon copy was sheer inadvertence and of no consequence because the signatures in all other copies were complete. The receipts expressly stated that payments were made for the lot, and not a single receipt showed payment for rental. The trial court also found that Betty Tolero was not a purchaser in good faith because she had actual knowledge of the conditional sale of the property to the Pacsons. These factual findings, together with the terms of the Deed of Conditional Sale, formed the basis for the Supreme Court’s analysis of whether the instrument was a contract to sell or a contract of sale.

Arguments of the Petitioners

  • Nature of the Contract: Petitioners argued that the contract executed by the Spouses Nabus and respondents was a contract to sell, not a contract of sale; it was subject to the suspensive condition of full payment of the consideration before ownership could be transferred, and because respondents failed to pay the full amount, leaving a balance of ₱57,544.84, the vendors’ obligation to execute a deed of absolute sale did not arise, making the subsequent sale to Betty Tolero valid even if Tolero knew of the earlier deed.
  • Conversion into Lease: Petitioners Julie and Michelle Nabus maintained that the Deed of Conditional Sale was converted into a contract of lease because Joaquin Pacson did not sign the second page of a copy of the deed and the parties understood that the Pacsons would occupy the property as lessees, with their payments treated as rentals.
  • Violation of Payment Terms: Petitioners contended that respondents violated the stipulated condition that the monthly installment be ₱2,000, as respondents gave meager amounts as low as ₱10.
  • Failure to Tender or Consign: Petitioners asserted that respondents’ claim that Julie Nabus failed to bring the pertinent documents necessary for the execution of the final deed of absolute sale was a lame and shallow excuse for violation of the Deed of Conditional Sale; respondents could have made a valid tender of payment of the remaining balance and, upon refusal, consigned the payment to court, but they did not.
  • Relief Not Prayed For: Petitioners argued that even assuming Betty Tolero was aware of the Deed of Conditional Sale, the trial court and the Court of Appeals erred in ordering Tolero to execute a deed of absolute sale in favor of respondents and to surrender the owner’s duplicate copies of TCT Nos. T-18650 and T-18651, because this relief was not prayed for in the complaint.
  • Good Faith of Tolero: Petitioners argued that the Court of Appeals erred in finding that Betty Tolero failed to inquire from respondents about the status of the property before her purchase, contrary to the facts established by evidence, and in considering her a buyer in bad faith, ignoring the doctrine in Rodolfo Alfonso, et al. vs. Court of Appeals, G.R. No. 63745.

Arguments of the Respondents

  • Annulment of Deeds and Titles: Respondents sought annulment of the Extra-judicial Settlement of Estate insofar as their right to the 1,000-square-meter lot subject of the Deed of Conditional Sale was affected; TCT No. T-17718 issued in the names of Julie and Michelle Nabus; and the Deed of Absolute Sale in favor of Betty Tolero and the transfer certificates of title issued pursuant thereto.
  • Damages and Injunctive Relief: Respondents prayed for actual, moral, and exemplary damages, attorney’s fees, and the issuance of a writ of preliminary injunction.

Issues

  • Conversion into Lease: Whether the Deed of Conditional Sale was converted into a contract of lease.
  • Nature of the Contract: Whether the Deed of Conditional Sale was a contract to sell or a contract of sale.
  • Consequences and Damages: Whether, given the nature of the contract, the sale to Betty Tolero was valid and what damages or reimbursement respondents are entitled to.

Ruling

  • Conversion into Lease: No. The Deed of Conditional Sale was not converted into a contract of lease; the 364 receipts referred to partial payment of the lot, and the original and other copies of the contract were signed by all parties, Joaquin Pacson’s omission on one carbon copy being mere inadvertence.
  • Nature of the Contract: It was a contract to sell, not a contract of sale. The express stipulation that transfer documents would be executed only upon full payment shows that the vendors reserved title until full payment, which is a positive suspensive condition.
  • Consequences and Damages: The sale to Betty Tolero was valid. Because the suspensive condition was not fulfilled, the contract to sell was without force and effect, no breach or specific performance arose, and respondents were entitled to reimbursement of ₱112,455.16 and ₱10,000 nominal damages, but not moral or exemplary damages.

Ruling Rationale

  • Conversion into Lease: The Court found no conversion because the 364 receipts issued to the Spouses Pacson contained either the phrase “as partial payment of lot located in Km. 4” or “cash vale” or “cash vale (partial payment of lot located in Km. 4),” evidencing sale under the contract and not lease. The trial court’s finding that Joaquin Pacson’s non-signing of the second page of a carbon copy was through sheer inadvertence was sustained, since the original contract and the other copies were all signed by Joaquin Pacson and the other parties. No receipt showed payment for rental.
  • Nature of the Contract: Article 1458 of the Civil Code defines a contract of sale and provides that it may be absolute or conditional. Ramos vs. Heruela differentiates an absolute sale from a conditional sale: in a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price; full payment partakes of a suspensive condition, and non-fulfillment prevents the obligation to sell from arising. Coronel vs. Court of Appeals distinguished a contract to sell from a contract of sale: in a contract to sell, the prospective seller explicitly reserves the transfer of title until full payment; the seller’s obligation is to fulfill the promise to sell when the entire price is delivered; full payment is a suspensive condition, and non-fulfillment prevents the obligation to sell from arising, with ownership retained by the seller. Upon fulfillment, the seller’s obligation to sell becomes demandable under Article 1479. Chua vs. Court of Appeals further explained that in a contract of sale, title passes to the vendee upon delivery, while in a contract to sell, ownership is reserved in the vendor until full payment; payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the vendor’s obligation to convey title from becoming effective. The Court held that it is not the title of the contract but its express terms that determine its kind. Although the instrument was entitled “Deed of Conditional Sale,” it 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.” This showed that the vendors reserved title until full payment. Where the vendor promises to execute a deed of absolute sale upon completion of payment, the contract is only a contract to sell. If respondents had paid according to the stipulations, the consideration would have been fully paid in June 1983, but they did not. The full payment of the purchase price was the positive suspensive condition; its failure was not a breach of contract but an event that prevented the vendor’s obligation to convey title from acquiring binding force. For its non-fulfillment, there was no contract to speak of, and there could be no rescission or fulfillment of an obligation that was still non-existent. The breach contemplated in Article 1191 is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render that obligation binding. Thus, the trial court erred in applying Article 1191 and ordering fulfillment, and the Court of Appeals erred in affirming. Ayala Life Insurance, Inc. vs. Ray Burton Development Corporation held that before specific performance may be availed of, there must be a breach; under a contract to sell, non-payment of the purchase price renders the contract ineffective and without force and effect, and a cause of action for specific performance does not arise. Since the contract to sell was without force and effect, Julie Nabus validly conveyed the subject property to Betty Tolero through a contract of absolute sale, and new transfer certificates of title were duly issued to Tolero.
  • Consequences and Damages: The Spouses Pacson had the right to reimbursement of their payments to the Nabuses and were entitled to nominal damages. Under Articles 2221 and 2222 of the Civil Code, nominal damages are adjudicated to vindicate or recognize a right that has been violated or invaded, not to indemnify for loss. The trial court found that under the Deed of Conditional Sale, respondents had the right to demand from Julie and Michelle Nabus the execution of a deed of absolute sale when they were ready to pay the remaining balance; the Nabuses had the corresponding duty to respect that right but violated it because they had already sold the property to Betty Tolero and could no longer execute the document. Hence, nominal damages of ₱10,000 were awarded. Respondents were 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. Although Article 2220 allows moral damages in breaches of contract where the defendant acted fraudulently or in bad faith, this case involved a contract to sell in which full payment was a positive suspensive condition; its non-fulfillment was not a breach of contract but merely an event that prevented the seller from conveying title. Since there was no breach, moral damages were not proper. In the absence of moral, temperate, liquidated, or compensatory damages, exemplary damages could not be granted under Article 2229, because they are allowed only in addition to any of those four kinds of damages.

Doctrines

  • Contract to Sell vs. Contract of Sale — A contract of sale is perfected by mere consent and has as essential elements consent or meeting of the minds to transfer ownership in exchange for the price, determinate subject matter, and price certain in money or its equivalent. In a contract to sell, the first element is lacking because the prospective seller explicitly reserves the transfer of title until full payment of the purchase price; the seller merely binds himself to sell exclusively to the buyer upon fulfillment of the condition. In a contract of sale, title passes to the vendee upon delivery; in a contract to sell, ownership is reserved in the vendor and does not pass until full payment. The Court applied this doctrine to hold that the instrument entitled “Deed of Conditional Sale” was actually a contract to sell.
  • Primacy of Express Terms over Contract Title — The kind of contract entered into by the parties is determined not by the title of the contract but by its express terms or stipulations. The Court applied this principle to classify the “Deed of Conditional Sale” as a contract to sell because it stipulated that transfer documents would be executed only upon full payment of the consideration.
  • Suspensive Condition in a Contract to Sell — Full payment of the purchase price in a contract to sell is a positive suspensive condition. Its non-fulfillment is not a breach of contract but an event that prevents the vendor’s obligation to convey title from acquiring binding force. For its non-fulfillment, there is no contract to speak of, and there can be no rescission or fulfillment of an obligation that is still non-existent. The breach contemplated in Article 1191 is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render that obligation binding. The Court applied this doctrine to hold that the trial court erred in ordering specific performance and that the later sale to Tolero was valid.
  • Nominal Damages — Nominal damages are adjudicated to vindicate or recognize a right that has been violated or invaded, not to indemnify the plaintiff for loss. The Court applied this doctrine because the Nabuses violated the Pacsons’ right to demand the execution of a deed of absolute sale when they were ready to pay the remaining balance, but could no longer do so after selling the property to Tolero.
  • Moral and Exemplary Damages in a Contract to Sell — Moral damages are not recoverable in breaches of contract unless the case falls under Article 2219 or the defendant acted fraudulently or in bad faith under Article 2220. In a contract to sell, non-fulfillment of the suspensive condition of full payment is not a breach of contract, so moral damages are not proper. Exemplary damages cannot be granted in the absence of moral, temperate, liquidated, or compensatory damages. The Court applied these rules to deny moral and exemplary damages to the Pacsons.

Key Excerpts

  • “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.” — This states the controlling principle that the denomination of the instrument does not control; the Court used it to classify the deed as a contract to sell despite its title.
  • “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.” — This is the ratio for holding that no breach or specific performance arose from the Pacsons’ non-payment.
  • “Since the contract to sell was without force and effect, Julie Nabus validly conveyed the subject property to another buyer, petitioner Betty Tolero, through a contract of absolute sale, and on the strength thereof, new transfer certificates of title over the subject property were duly issued to Tolero.” — This states the dispositive legal consequence: the later sale to Tolero and the titles issued to her were valid.
  • “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.” — This defines the damages ruling and explains why moral damages were denied.

Precedents Cited

  • Ramos vs. Heruela, G.R. No. 145330, October 14, 2005, 473 SCRA 79 — Differentiated an absolute sale from a conditional sale; in a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full payment, which partakes of a suspensive condition.
  • Coronel vs. Court of Appeals, 331 Phil. 294 (1996) — Distinguished a contract to sell from a contract of sale; in a contract to sell, the prospective seller explicitly reserves the transfer of title until full payment, and the seller’s obligation to sell becomes demandable only upon fulfillment of that suspensive condition.
  • Chua vs. Court of Appeals, 449 Phil. 25 (2003) — Cited for the distinction that in a contract of sale, title passes to the vendee upon delivery, while in a contract to sell, ownership is reserved in the vendor until full payment; payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the vendor’s obligation to convey title from becoming effective.
  • Ver Reyes vs. Salvador, Sr., G.R. Nos. 139047 & 139365, September 11, 2008, 564 SCRA 456 — Cited for the rule that where the vendor promises to execute a deed of absolute sale upon completion by the vendee of the payment of the price, the contract is only a contract to sell; also cited for the validity of the conveyance to another buyer when the contract to sell is without force and effect.
  • Ayala Life Insurance, Inc. vs. Ray Burton Development Corporation, G.R. No. 163075, January 23, 2006, 479 SCRA 462 — Held that before the remedy of specific performance may be availed of, there must be a breach of contract; under a contract to sell, non-payment of the purchase price renders the contract ineffective and without force and effect, and a cause of action for specific performance does not arise.
  • Heirs of Pedro Escanlar vs. Court of Appeals, G.R. No. 119777, October 23, 1997, 281 SCRA 176 — Cited for the rule that full payment of the purchase price is a 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.
  • Cheng vs. Genato, 360 Phil. 891 (1998) — Cited for the rule that for non-fulfillment of the suspensive condition, there is no contract to speak of, and there can be no rescission or fulfillment of an obligation that is still non-existent; the breach contemplated in Article 1191 is the obligor’s failure to comply with an obligation already extant.

Provisions

  • Article 1458, Civil Code — Defines a contract of sale and provides that a sale may be absolute or conditional. The Court used this provision to frame the distinction between a contract of sale and a contract to sell.
  • Article 1479, Civil Code — Provides that a promise to buy and sell a determinate thing for a price certain is reciprocally demandable. The Court cited it to explain that upon fulfillment of the suspensive condition of full payment, the seller’s obligation to sell becomes demandable.
  • Article 1191, Civil Code — Provides for rescission of reciprocal obligations. The trial court applied it, but the Supreme Court held it inapplicable because the breach contemplated is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render that obligation binding.
  • Article 2221, Civil Code — Provides that nominal damages are adjudicated to vindicate or recognize a right that has been violated or invaded, not to indemnify for loss. The Court applied it to award nominal damages to the Pacsons.
  • Article 2222, Civil Code — Provides that the court may award nominal damages in every obligation arising from any source or in every case where any property right has been invaded. The Court cited it as basis for nominal damages.
  • Article 2219, Civil Code — Enumerates the cases when moral damages may be recovered. The Court held that contracts are not referred to in this article, so moral damages were not recoverable.
  • Article 2220, Civil Code — Allows moral damages in breaches of contract where the defendant acted fraudulently or in bad faith. The Court held it inapplicable because there was no breach of contract in this case.
  • Article 2229, Civil Code — Provides that exemplary damages are imposed in addition to moral, temperate, liquidated, or compensatory damages. The Court held that in the absence of those damages, exemplary damages could not be granted.
  • Rule 45, Rules of Court — The procedural basis for the petition for review on certiorari filed with the Supreme Court.

Notable Concurring Opinions

Renato C. Corona (Chairperson), Minita V. Chico-Nazario, Presbitero J. Velasco, Jr., and Antonio Eduardo B. Nachura concurred. No separate concurring opinions are indicated in the text.