~

'Ill
l\epublic of tbe ~bilippines
~upreme ~ourt
;iRllanila

SECOND DIVISION

SALVADORBUCE, G.R. No. 259066

Petitioner,
Present:

LEONEN, M.V.,
-versus- Chairperson,
LAZARO-JAVIER, A.,
LOPEZ, M.,
LOPEZ, J., and
HEIRS OF APOLONIO KHO, A., JJ.
GALANG, represented by
Crispin Galang as Attorney- Promulgated:
in-Fact,
Respondents.

X -----------------------------
DECISION

M. LOPEZ, J.:

In all transactions involving the sale of real estate on installment

payments, the contract shall subsists absent a valid cancellation or rescission.
The buyers are also allowed to reinstate the contract and pay their updated
accounts with the sellers. This rule finds significance in this Petition for
Review on Certiorari 1 assailing the Decision2 of the Court of Appeals (CA).

I Rollo, pp. 13-45.

2 Id. at 47-55. The January 6, 2021 Decision in CA-G.R. CV No. 111746 was penned by Associate Justice
Gabriel T. Robeniol and concurred in by Associate Justices Edwin D. Sorongon and Carlito B. Calpatura
of the Thirteenth (13 th) Division, Court of Appeals, Manila.

i
Decision 2 G.R. No. 259066

Antecedents

In January 1996, Apolonio Galang (Apolonio) offered to sell to

Salvador Buce (Salvador) an 80-square meter parcel of land for a total
purchase price of PHP 64,000.00. The parties then executed a document
denominated as Conditional Sale with the following provisions: 3

WHEREAS, the VENDOR offers to sell and [the] VENDEE is

willing to buy a portion equivalent to 80 square meters of the above
described property, ... under the following terms and conditions, to wit:

1. That the total purchase price shall be PHP 64,000.00, Philippine

Currency;

2. That the VENDEE shall pay the sum of PHP 10,000.00 as down
payment upon signing of this contract;

3. That the balance ofPHP 54,000.00 shall be paid by the VENDEE

unto the VENDOR by paying PHP 1,000.00 a month starting April 1, 1996
and every end of the month until fully paidfor thereafter;

4. That upon full payment VENDOR shall execute the corresponding

deed ofAbsolute Sale;

5. That all the expenses for the titling of the subject property shall
be shouldered by the VENDEE;

6. That VENDEE can occupy the premises and introduce

improvements thereon upon executing of [sic] this deed;

7. That VENDEE shall be charged 3% interest per month on the·

amount due and payable should VEND EE fails to pay her/his installment
on the date aforementioned

NOW THEREFORE, for and in consideration of the above

covenants and the sum of PHP 10,000.00, Phil. Currency, receipt hereof is
hereby acknowledged and confessed to the full and entire satisfaction of the
VENDOR, by virtue hereof, VENDOR hereby conditionally SELL,
TRANSFER and CONVEY the above mentioned 80 square meters parcel
of land unto the said VENDEE, his/her heirs and assigns, free from all liens
and encumbrances. 4 (Emphasis supplied)

From February 1996 to July 2007, Salvador paid 90 installments in

various amounts totaling PHP 72,000.00. 5 After Apolonio's death, Salvador
demanded from the heirs of Apolonio the execution of a deed of absolute sale
but to no avail. 6 Aggrieved, Salvador filed a Complaint7 against the heirs of
Apolonio for specific performance for the execution of the deed of absolute
sale before the Regional Trial Court (RTC) docketed as Civil Case No. 14-
10262. Salvador claimed that he is entitled to a deed of absolute sale after

3 Id. at 63-64.
4
Id.
5 /d.pp.65-106.
6 Id. p. 107.
1 Id. pp. 59-61.

t
Decision 3 G.R. No. 259066

paying in excess of the agreed price. In their Answer, 8 the heirs of Apolonio
countered that Salvador has no cause of action because he did not pay the
purchase price within the required period. Moreover, Salvador must pay the
accrued interests on account of his delay. 9

At the trial, Salvador testified and presented documents consisting of

copies of the contract, receipts, statement of payments, demand letter, and
certificate to file action. 10 On the other hand, the heirs of Apolonio sought to
dismiss the case for insufficiency of evidence and lack of cause of action. The
heirs of Apolonio argued that Salvador admitted the breach of contract after
he failed to pay the purchase price inclusive of interests. Thus, Salvador
cannot compel the execution of the deed of absolute sale. 11

On March 27, 2017, 12 the RTC granted the Demurrer to Evidence and
dismissed the Complaint for insufficiency of evidence. The Trial Court
explained that the parties entered into a contract to sell as evident from its
terms and conditions, which must prevail over the nomenclature of the
agreement. The RTC also pointed out that Salvador admitted violating the
contract several times and not paying the accrued interests. As such, the heirs
of Apolonio cannot be compelled to execute a deed of absolute sale in favor
of Salvador:

Salvador admitted that he violated the contract 39 times during the said
period of time. That based on the contract, the payment should be [PHP]
54,000.00 balance payable at [PHP] 1,000.00 per month or equivalent to 54
months after April 1, 1996. That counting 54 months from April 1996, it
should be complied until October 2000 for [] 4 years and a half.... Also,
Salvador acceded that there is a covering penalty of 3% interest for every
month he delayed payment. Based on his computation in the Statement of
Payment he never included the interest because he claims to have fully paid
already. In the totality ofpayment prepared by Salvador, again he clarified
that there was no interest included in his computation.

As regards the insufficiency of evidence of the plaintiff, the Court is

convinced that he failed to prove his claims by preponderant evidence,
considering the facts and circumstances present in this case, the
improbability of the witnesses testimony, and the weight/credit of the
documentary evidence and of similar others[.]

On the second issue, that plaintifffailed to pay the full contract price
~f the Conditional Sale within the period, in effect, breached the
aforementioned agreement avoiding the execution of the Deed of Sale. At
this point, we have to clarify certain matters, viz.: the nature of the contract.
Well established is the rule that it is not the title of the contract but the terms

8
Id. at 123-129.
9 Id. at 124-127.
10
Id. at 134-140.
11 Id. at 313-334, Respectful Demurrer to Evidence.
12
Id. at 375-389. The March 27, 2017 Order in Civil Case No. 14-10262 was penned by Presiding Judge
Mary Josephine P. Lazaro of Branch 74, Regional Trial Court, Antipolo City.

r
 Decision 4 G.R. No. 259066

and stipulations of the parties which determine the kind of contract. In the
case at bar, although the name/title of the aforementioned contract is
"Conditional Sale," it is actually a '-Contract to Sell." The Contract
stipulated that "upon full payment, Vendor shall execute the corresponding
Deed of Absolute Sale," partakes· the nature of a suspensive condition, an
element of contract to sell. Where the vendor promises to execute a Deed of
Absolute Sale upon completion of the vendee of the contract price, it is only
a contract to sell. The aforementioned stipulations show that the vendor
reserved title to the property until the payment of the said price. Clearly, the
vendee violated the stipulated conditions ofthe contract, to pay the amount
[PHPJ 1,000.00 monthly as well as the 3% penalty per month in case of
arrears. Based on the documentary and testimonial evidence presented.,
several times, specifically 39 times plaintiff delayed in the payment of his
obligations.

In addition given its contingent nature, the failure of the prospective

buyer to make full payment and/or abide by his commitments stated in the
contract to sell prevents the obligation of the prospective seller to execute
the corresponding deed of sale to effect the transfer of ownership to the
buyer from arising[.]

In cases of non-payment of the full contract price of the conditional

sale of real property, the vendee, herein plaintiff, is not entitled to the
execution of the deed of sale. There exists no cause of action, hence,
plaintiff is not entitled to the reliefs prayed for. Upon closed scrutiny of the
records of the instant case, the plaintiff miserably failed to show evidence
to the satisfaction of this Court to support the grounds anchored upon in his
Complaint.

WHEREFORE, the Demurrer to Evidence filed by the defendants,

Heirs of Apolonio Galang, represented by Crispin Galang, through counsel,
is hereby GRANTED. Accordingly, the instant Complaint is hereby ordered
DISMISSED for insufficiency of evidence.

SO ORDERED. 13 (Emphasis supplied)

Unsuccessful at a reconsideration, 14 Salvador elevated the case to the

CA, docketed as CA-G.R. CV No. 111746. Salvador insisted that the RTC
erred in granting the demurrer to evidence given that he discharged the burden
to prove the existence of the contract and the full payment of the purchase
price. On January 6, 2021, 15 the CA affirmed the RTC's findings that the
contract between the parties is a contract to sell and that Salvador failed to
substantiate his cause of action for specific perfonnance. Moreover, Salvador
incurred arrearages which should be factored in the computation of the
purchase price:

13 Id. at 380-389.
14 Id. at 390-391.
15
Id. at 47--55.

I
 Decision . 5 G.R. No. 259066

Significantly, the Receipts and Statement of Payment presented by

the plaintiff-appellant show that the payments he made were irregular and
intermittent. If the terms of the contract will be followed to the letter,
plaintiff-appellant should have completed his payments by September 2000.
Yet, he only made three (3) payments ·in 1996 and 1997. Furthermore, the
Statement of Payment shows that payments were made only until July 2007.

Although plaintiff-appellant already made an aggregate payment of

[PHP] 72,000.00, that amount cannot qualify as a full and complete
payment. Plaintiff-appellant still has to contend with the penalty of 3%
interest per month on the amount due and payable in case of default as
provided for in the Conditional Sale. Verily, from his own evidence, it
appears that plaintiff-appellant had incurred arrearages which should be
factored in [} the computation of the full purchase price of the subject
property.

Plaintiff-appellant's arrears in the principal amount as well as the

stipulated penalties preclude this Court from finding, even prima facie, that
he has paid the purchase price in full.

In essence, the parties have entered into a contract to sell where full payment
is a suspensive condition for the execution of a deed of absolute sale.

Ergo, without plaintiff-appellant having fully paid the purchase

price on the subject property inclusive of the penalties due for the delayed
payments, he cannot compel defendants-appellants to execute a final deed
ofabsolute sale. More to the point, he had no cause ofaction therefor.

Thus, the Court perceives neither error of fact, law or both to have
tainted the Trial Court's grant of defendants-appellees' Respectful
Demurrer to Evidence in the March 27, 2017 Order.

WHEREFORE, the appeal is DENIED. The Order dated March 27~

2017 and Order dated September 11, 2017 of the Regional Trial Court,
Branch 74, Antipolo City, in Civil Case No. 14-10262, are AFFIRMED.

SO ORDERED. 16 (Emphasis supplied)

Salvador sought reconsideration, but was denied by the CA. 17

Hence, this Petition. 18

16 Id. at 52-54.
17
Id. at 57-58.
18
Id. at 13-45.
 Decision 6 G.R. No. 259066

Salvador reiterates that the CA and the RTC erred in dismissing the
action for specific performance despite preponderant evidence of full payment
of the purchase price. In contrast, the heirs of Apolonio maintained that the
CA and the RTC properly granted the Demurrer to Evidence because Salvador
did not prove the complete payment of the purchase price and stipulated
interest. 19

Ruling

The title of the contract is not conclusive as to its nature and

characteristics. The courts are not bound as to how the parties may call their
agreement but by the governing principles oflaw. 20 Moreover, it is a cardinal
rule in the interpretation of a contract that the intention of the parties should
always prevail because their will has the force of law between them. Hence,
the consecrated rule that the literal sense of the stipulations shall be followed
if the terms of a contract are clear. Yet, the intention of the parties shall be
controlling if the words in the contract appear to be contrary to their evident
will. 21 As such, the courts cannot solely rely on the nomenclature of the
contract as it does not adequately capture the true intention of the parties
which must be ascertained from the express terms of the agreement and their
contemporaneous and subsequent acts: 22

On several occasions, we have decreed that in determining the

nature of a contract, courts are not bound by the title or name given by the
parties. The decisive factor in evaluating an agreement is the intention of
the parties, as shown, not necessarily by the terminology used in the contract
but, by their conduct, words, actions and deeds prior to, during and
immediately after executing the agreement. Thus, to ascertain the intention
of the parties, their contemporaneous and subsequent acts should be
considered. Once the intention of the parties is duly ascertained, that intent
is deemed as integral to the contract as its originally expressed unequivocal
terms. 23 (Citations omitted)

Here, we agree with the unanimous findings of the CA and the RTC
that the transaction between the parties was a contract to sell although
denominated as a conditional sale. The Court had distinguished a contract to
sell from a contract ofsale and a conditional contract ofsale as to their nature
and effects:

19
Id. at 447-450.
20
Baluran v. Judge.Navarro, 169 Phii. _•05, 3 l0 (1977) LPer J. Muflos-Pa!ma, First Division].
11
Kasilag v. Rodriguez~ 69 Phil. 217. 225---226 (1939) (Per J. Imperial].
22 Ace Foods, Inc. v. .Micro Pacific Technologies Company, Ltd., 723 Phil. 742 (2013) [Per J. Perlas-
Bemabe, Second Division].
23 Rockville Excel International Exim Corporation v. Spouses Cul/a, 617 Phil. 328, 335-336 (2009) [Per
J. Brion, Second Division].
 Decision 7 G.R. No. 259066

A contract to sell is a bilateral contract whereby the prospective

seller, while expressly reserving the ownership of the subject property
despite delivery thereof to the prospective buyer, binds himself to sell the
said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.

In such contract, the prospective seller expressly reserves the

transfer of title to the prospective buyer, until the happening of an event,
which in this case is the full payment of the purchase price. What the seller
agrees or obligates himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is delivered to him.
Stated differently, the full payment of the purchase price partakes of a
suspensive condition, the non-fulfillment of which prevents the obligation
to sell from arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.

It is different from contracts ofsale, since ownership in contracts to

sell is reserved by the vendor and is not to pass to the vendee until full
payment of the purchase price, while in contracts of sale, title to the
property passes to the vendee upon the delivery of the thing sold.
In contracts of sale the vendor loses ownership over the property and
cannot recover it unless and until the contract is resolved or rescinded,
while in contracts to sell, title is retained by the vendor until full payment
of the price. In contracts to sell, full payment is a positive suspensive
condition while in contracts of sale, non-payment is a negative resolutory
condition.

A contract to sell may further be distinguished from a conditional

contract of sale, in that, the fulfillment of the suspensive condition, which
is the full payment of the purchase price, will not automatically transfer
ownership to the buyer although the property may have been previously
delivered to him. The prospective vendor still has to convey title to the
prospective buyer by entering into a contract of absolute sale. While in
a conditional contract of sale, the fulfillment of the suspensive condition
renders the sale absolute and affects the seller's title thereto such that if
there was previous delivery of the property, the seller's ownership or title
to the property is automatically transferred to the buyer.

Indeed, in contracts to sell the obligation of the seller to sell

becomes demandable only upon the happening of the suspensive condition,
that is, the full payment of the purchase price by the buyer. It is only upon
the existence of the contract of sale that the seller becomes obligated to
transfer the ownership of the thing sold to the buyer. Prior to the existence
of the contract ~f sale, the seller is not obligated to transfer the ownership
to the buyer, even if there is a contract to sell between them. 24 (Emphasis
supplied, citations omitted)

Under a contract to sell, the prospective seller retains title to the thing
to be sold until the prospective buyer fully pays the agreed purchase price.
The full payment is a positive suspensive condition, while the non-fulfillment
of which is not a breach of contract, but merely an event that prevents the
prospective selier from conveying title to the prospective buyer. 25 In this case,
24 Ursa/ v. Court ofAppeals, 509 Phil. 628 (2005) [Per J. Austria-Martinez, Second Division].
25 Cordero v. F.S. Management & Development Corporation, 536 Phi1. 1151, 1160 (2006) [Per J. Carpio
Morales, Third Division].
Decision 8 G.R. No. 259066

the true intention of the parties was to reserve ownership of the land in
Apolonio until Salvador paid the total purchase price. Apolonio shall execute
the corresponding deed of absolute sale only upon full payment of the price.
Moreover, Apolonio transferred only the possession of the real property and
not its ownership when the contract allowed Salvador to occupy the premises
and introduce improvements. Verily, the ownership of the land remained with
Apolonio and his heirs even after Salvador paid the down payment and
possessed the property. Consequently, the crucial question now is whether
Salvador completely paid the purchase price which, in tum, will give rise to
the obligation of Apolonio and his heirs to convey title to the land.

On this point, we refer again to the terms and conditions of the contract
that provided how the balance shall be paid: "[t]hat the balance of
[PHP] 54,000.00 shall be paid by the VENDEE unto the VENDOR by paying
[PHPJ 1,000.00 a month starting April 1, 1996 and every end of the month
until fully paid for thereafter. " 26 The contract likewise stipulated that the
corresponding penalty shall be imposed in case of default: "[t]hat VENDEE
shall be charged 3% interest per month on the amount due and payable should
VENDEE fails to pay her/his installment on the date aforementioned." 21
Thus, Salvador must pay [PHP] 1,000.00 in 54 monthly installments or from
April 1996 to September 2000. Admittedly, Salvador defaulted in his
obligation when he made irregular and intermittent payments or 90
installments in various amounts totaling [PHP] 72,000.00 until July 2007.
Worse, Salvador violated the contract 39 times without paying the accrued
interests. Obviously, Salvador cannot ignore the required 54-month period by
claiming that he has paid in excess of the purchase price. As the CA and the
RTC aptly observed, the accrued interests must be included in the
computation of the purchase price. In reciprocal obligations, neither party
incurs in delay if the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. From the moment one of
the parties fulfills his obligation, delay by the other begins. 28 Here, Apolonio
and his heirs performed their part of the obligation by allowing Salvador to
continue in possession and use of the property. Clearly, when Salvador did
not pay the monthly amortizations in accordance with the terms of the
contract, he was in delay and liable for damages. However, the default on the
part of Salvador with respect to his obligation could be compensated by the
interest imposed upon him under the contract. Considering that Salvador did
not pay the full purchase price with the stipulated interest, the obligation of
Apolonio and his heirs to convey title to the property did not arise.

26
Rollo, p. 63.
27
Id. at 64.

I
28 NEW CIVIL CODE, art. 1 I 69.
 Decision 9 G.R. No. 259066

Notably, Republic Act No. 6552 or the Realty Installment Buyer

Protection Act governs the sale of real estate on installment payments.
Pursuant to the law, the actual cancellation of a contract to sell takes place
after 30 days from receipt by the buyer of the notarized notice of
cancellation, and upon full payment of the cash surrender value to the
buyer. In other words, before a contract to sell can be validly and effectively
cancelled, the seller has (1) to send a notarized notice of cancellation to the
buyer and (2) to refund the cash surrender value. Until and unless the seller
complies with these twin mandatory requirements, the contract to sell between
the parties remains valid and subsisting. 29 Here, the contract to sell was not
validly cancelled or rescinded. Apolonio died without cancelling the contract
to sell. The heirs of Apolonio also failed to cancel the contract in accordance
with law. Corollarily, Salvador has the right to continue occupying the
property subject of the contract to sell, and may "still reinstate the contract by
updating the account during the grace period and before the actual
cancellation" of the contract. 30

In Leano v. Court of Appeals, 31 the Court held that should the buyer
wish to reinstate the contract to sell, she would have to update her payments
with the seller in accordance with the statement of accounts. 32 In Spouses
Rayos v. Court of Appeals,33 the Court likewise ruled that the buyers may
reinstate the contract to sell by tendering the unpaid installment, and the
sellers may agree and accept the late payment, provided that the property has
not been sold to a third-party who acted in good faith:

However, the respondents may reinstate the contract to sell by

paying the [PHP] 29,223.67, and the petitioners may agree thereto and
accept the respondents' late payment. In this case, the petitioners had
decided before and after the respondents filed this complaint in Civil Case
No. 15639 to accept the payment of [PHP] 29,223.67, to execute the deed
of absolute sale over the property and cause the transfer of the title of the
subject property to the respondents. The petitioners even filed its amended
complaint in Civil Case No. 15984 for the collection of the said amount.
The Court of Appeals cannot, thus, be faulted for affirming the [D ]ecision
of the trial court and ordering the petitioners to convey the property to the
respondents upon the latter's payment of the amount of [PHP] 29,223.67,
provided that the property has not been sold to a third-party who acted in
good faith. 34 (Citation omitted)

29
Active Realty & Development Corporation v. Daroya~ 431 Phil. 753, 761-762 (2002) [Per J. Puno, First
Division].
3
° Communities Cagayan, Inc. v. Spouses Arsenio (deceased) and Angeles Nano/, 698 Phil. 648, 659 (2012)
[Per J. De] Castil1o, Second Division].
31
420 Phil. 836 (2001) [Per J. Pardo, First Division].
32 Id. at 847.
33
478 Phil. 477 (2004) [Per J. Callejo, Sr., Second Division].
34 Id. at 496.
 Decision 10 G.R. No. 259066

In Pagtalunan v. Dela Cruz Vda. de Manzano, 35 the Court agreed with

the CA that it is only right to allow the buyer to pay her arrears and settle the
balance of the purchase price absent valid cancellation of the contract to sell:

The Court notes that this case has been pending for more than ten
years. Both parties prayed for other reliefs that are just and equitable under
the premises. Hence, the rights of the parties over the subject property shall
be resolved to finally dispose of that issue in this case.

Considering that the Contract to Sell was not cancelled by the

vendor, Patricio, during his lifetime or by petitioner in accordance with R.A.
No. 6552 ... the Court agrees with the CA that it is only right and just to
allow respondent to pay her arrears and settle the balance of the purchase
price.

For respondent's delay in the payment of the installments, the Court,

in its discretion, and applying Article 2209 of the Civil Code, may award
interest at the rate of 6% per annum on the unpaid balance considering that
there is no stipulation in the Contract to Sell for such interest[.]3 6 (Citations
omitted)

Based on the records, the land has not been sold to another buyer for
value in good faith. Applying the case law, the Court finds it just and equitable
for both parties that Salvador be allowed to pay the balance of the purchase
price with the stipulated interest in accordance with the terms and conditions
of the contract to sell. The heirs of Apolonio shall then be required to execute
the corresponding deed of absolute sale in favor of Salvador after complete
payment of the updated accounts. To determine the updated purchase price,
the case is remanded to the trial court for computation of the unpaid balance
inclusive of accrued interest.

ACCORDINGLY, the Court of Appeals' Decision dated January 6,

2021 in CA-G.R. CV No. 111746 is REVERSED. Salvador Buce is ordered
to pay the balance of the purchase price with the stipulated interest. Thereafter,
the heirs of Apolonio Galang are required to execute a deed of absolute sale
in favor of Salvador Buce. The case is REMANDED to the Regional Trial
Court for computation of the updated accounts.

SO ORDERED.

35
559 Phil. 658 (2007) [Per J. Azcuna, First Division].
36
Id. at 670.
f
Decision 11 G.R. No. 259066

WE CONCUR:

Associate Justice
Chairperson
f ~

AMY / 2LAZ~0-JA ~VIER JHOS~LOPEZ

A wociate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the w~ter of the opinion of the
Court's Division.

Senior Associate Justice

Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution and the Division

Chairperson's Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.