[3] REYES v TUPARAN o She also resides in the building

G.R. No. 188064 | June 1, 2011 | Mendoza, J. o Other areas of the building, including the sidewalks, are being leased
and occupied
SUMMARY  December 1989 – Respondent leased from petitioner a space on the ground
Petitioner mortgaged her properties in order to secure a loan. Petitioner and floor for her pawnshop business for a monthly rental of P4,000
respondent entered into a conditional sale, wherein respondent would also assume  Petitioner and respondent became friends
payment of petitioner’s mortgage. Due to respondent’s default in paying the full o Respondent invested thousands of pesos to petitioner’s
price, non-compliance with their agreement, and other actions contrary to the financing/lending business
petitioner’s liking, the petitioner filed to rescind the contract because of  Petitioner mortgaged the real property to FSL Bank (June 20, 1988) in order to
respondent’s alleged breach. The Court said that the contract they agreed upon was secure a loan of P2Million, payable in installments
a Contract to Sell, with the condition being that respondent pay the full price. Due o Her account on the mortgage reached P2,278,078.13
to respondent’s failure to pay the full price, no obligation to sell has yet to arise o Petitioner decided to sell her properties in order to liquidate her bank
from the contract, and so, no breach could yet happen. loan and finance her business
 Because they were friends, respondent verbally offered to conditionally buy
DOCTRINE petitioner’s real properties for P4,200,000 payable on installment basis
A contract of sale is different from a contract to sell. A contract to sell cannot be without interest, as well as to assume the bank loan
rescinded for a supposed breach of contract because the obligation to sell arises o This amount is to be paid in the following way:
only upon the happening of the suspensive condition, and there can be no  P278,078.13 received in cash by petitioner, directly paid to FSL Bank,
rescission of an obligation that is yet to exist. as partial payment of the mortgage obligation of petitioner
 P721,921.87 received in cash by petitioner as payment
Sale, by its very nature, is a consensual contract because it is perfected by mere  1,200,000 to be paid in 3 installments
consent.  200k due January 31, 1991
 200k due June 30, 1991
 800k due Dec. 31, 1991
The essential elements of a contract of sale are the following:
 All installments were not to bear any interest
a) Consent or meeting of the minds, that is, consent to transfer ownership in
 2,000,000 outstanding balance of the mortgage obligation is
exchange for the price; assumed by respondent
b) Determinate subject matter; and
 Following agreements in order to induce the petitioner to accept respondent’s
c) Price certain in money or its equivalent. offer
o Conditional sale is cancelled if petitioner will be able to find a buyer of
PROVISION
the properties within the next 3 months
Art. 1458. By the contract of sale one of the contracting parties obligates himself to o Petitioner will continue to use the space occupied by her without any
transfer the ownership and to deliver a determinate thing, and the other to pay
rentals paid to respondent
therefor a price certain in money or its equivalent.
o There is a lease for 15 years in favor of petitioner over the drugstore
and cosmetics store of only P8k after full payment of the stipulated
A contract of sale may be absolute or conditional. (1445a) installment payment by respondent
o Petitioner will renew and pay the fire insurance policies until fully
FACTS
paying the total purchase price
Petitioner: Mila A. Reyes (owner of the lot)
 After agreeing with one another, they worked to obtain FSL’s approval for
Respondent: Victoria T. Tuparan
respondent to assume the mortgage account of petitioner
o Bank approved the proposal on the condition that petitioner will
 Petitioner is the registered owner of a residential and commercial lot in remain as co-maker for the mortgage obligation
Karahutan, Valenzuela City
o She put up a 3-storey commercial building (RBJ Building) in said lot, as
well as operating a drugstore and cosmetic store on the ground floor
 November 26, 1990 – petitioner, respondent, and FSL bank executed the o The balance of P805k is not a breach of contract, but merely an event
corresponding Deed of Conditional Sale of Real Properties with Assumption of that prevents the petitioner from conveying title to respondent
Mortgage
o Said deed only showed the agreement to pay the purchase price of ISSUE
1,200,000 in 3 fixed installments W/n the contract could be rescinded. NO
o FSL Bank didn’t incorporate any other side agreement between
petitioner and respondent RATIO
 Respondent defaulted in the payment of her obligations on the due dates The contract was a contract to sell (not contract of sale) wherein the petitioner’s
o Instead of paying in lump sum, respondent paid in small amounts from obligation to sell arises only upon fulfillment of the positive suspensive condition
time to time of full payment of the purchase price by the respondent
o Respondent verbally agreed to pay an interest of 6% a month - Based on the provisions1 of the contract, the title and ownership of the subject
according to petitioner properties remains with the petitioner until the respondent fully pays the
 Petitioner claims that despite finding a buyer, respondent reneged on her balance of the purchase price and the assumed mortgage obligation.
promise to allow the cancellation of their deed of conditional sale o Thereafter, FSL Bank shall then issue the corresponding deed of
o Respondent allegedly repeatedly assured her that the verbal side cancellation of mortgage, and
agreement they had would be honored o Petitioner shall execute the corresponding deed of absolute sale in
 Shown by the fact that respondent hadn’t collected any favor of the respondent
rentals for the drugstore/cosmetics store - Without respondent's full payment, there can be no breach of contract to
 Respondent had taken possession of the subject properties and had been speak of because petitioner has no obligation yet to turn over the title.
collecting and receiving income from tenants, without sharing with petitioner o Failure to pay in full is not a breach of contract contemplated by
 September 2, 1992 – respondent offered to pay the remaining full amount of Article 11912, but just an event that prevents petitioner from being
the purchase price and demanded simultaneous execution of the bound to convey title to respondent
corresponding deed of absolute sale
 Petitioner wants to rescind her contract with respondent, with a claim for
damages.
 RTC found that respondent failed to pay the full P4.2M total purchase price and
left a balance of P805k
o The checks and receipts on the mortgage obligation with FSL Bank was
considered as payment
o Considered the contract as a contract to sell, not a contract of sale
o The non-payment is not a substantial breach of the contract, thereby
not allowing for rescission
 CA affirmed the RC decision,

18. That the title and ownership of the subject real properties shall remain with the First Party until the 2Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
full payment of the Second Party of the balance of the purchase price and liquidation of the mortgage should not comply with what is incumbent upon him.
obligation of 2,000,000.00. Pending payment of the balance of the purchase price and liquidation of the The injured party may choose between the fulfillment and the rescission of the obligation, with the
mortgage obligation that was assumed by the Second Party, the Second Party shall not sell, transfer and payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if
convey and otherwise encumber the subject real properties without the written consent of the First and the latter should become impossible.
Third Party. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
9. That upon full payment by the Second Party of the full balance of the purchase price and the assumed period.
mortgage obligation herein mentioned the Third Party shall issue the corresponding Deed of Cancellation This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
of Mortgage and the First Party shall execute the corresponding Deed of Absolute Sale in favor of the accordance with articles 1385 and 1388 and the Mortgage Law. (1124)
Second Party.
 Contract of Sale vs. Contract to Sell (citing Nabus v. Joaquin & Julia Pacson) RULING
The petition is denied. The Deed cannot be rescinded. Respondent is given the
Sale, by its very nature, is a consensual contract because it is perfected by mere chance to complete the payment of the remaining balance for the full purchase
consent. The essential elements of a contract of sale are the following: price. Once this has been paid, petitioner should transfer ownership to respondent.
a) Consent or meeting of the minds, that is, consent to transfer ownership
in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
A Contract to Sell may not be considered as a Contract of Sale because the first
essential element is lacking.

In a contract to sell, the prospective seller explicitly reserves the transfer of

- There can be no rescission of an obligation that did not yet exist since the
suspensive condition had not taken place (Heirs of Atienza v Espidol)
- Assuming arguendo that a rescission under Art. 1191 can be permitted, there
would have been only a slight breach in the fulfillment of the obligation
o Only a balance of P805k remains from the original P4,200,00
o Respondent was able to pay an amount of P3M (paid the mortgage
obligation, paid directly to petitioner)
 Balance of P1.2M remained, payable in 3 installments
o Respondent had paid on several dates the first and second
installments
o Respondent only failed to pay the last installment on the due date
- But respondent had offered to pay the amount of P751k, which petitioner
rejected
- It is just and right to allow respondent to settle the balance of the unpaid
purchase price
o She had showed sincerity and willingness to comply with her
obligation
- 6% interest claimed by petitioner is not substantiated because the contract
itself shows that “all installments shall not bear interest”
o But an interest of 6% is awarded starting the filing of the complaint
though.
- No damages and attorney’s fees could be granted because there is no evidence
to prove that respondent acted fraudulently and maliciously.