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SECONDDIVISION

HEIRSOFCAYETANO
G.R.No.157374
PANGANandCONSUELO

Present:
PANGAN,*

Petitioners,
QUISUMBING,J.,Chairperson,

CARPIOMORALES,

BRION,

DELCASTILLO,and
versus
ABAD,JJ.

Promulgated:

SPOUSESROGELIO
August27,2009
PERRERASandPRISCILLA
PERRERAS,
Respondents.
xx

DECISION

BRION,J.:

[1]
The heirs of spouses Cayetano and Consuelo Pangan (petitionersheirs) seek the
[2]
reversaloftheCourtofAppeals(CA)decision ofJune26,2002,aswellitsresolution
of February 20, 2003, in CAG.R. CV Case No. 56590 through the present petition for
[3]
review on certiorari. The CA decision affirmed the Regional Trial Courts (RTC)
[4]
ruling whichgrantedthecomplaintforspecificperformancefiledbyspousesRogelio
and Priscilla Perreras (respondents) against the petitionersheirs, and dismissed the
complaint for consignation instituted by Consuelo Pangan (Consuelo) against the
respondents.

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THEFACTUALANTECEDENTS

The spouses Pangan were the owners of the lot and twodoor apartment (subject
[5]
properties)locatedat1142CasaasSt.,Sampaloc,Manila. On June 2, 1989, Consuelo
agreedtoselltotherespondentsthesubjectpropertiesforthepriceofP540,000.00.Onthe
same day, Consuelo received P20,000.00 from the respondents as earnest money,
[6]
evidencedbyareceipt(June2,1989receipt) thatalsoincludedthetermsoftheparties
agreement.

Threedayslater,oronJune5,1989,thepartiesagreedtoincreasethepurchasepricefrom
P540,000.00toP580,000.00.

In compliance with the agreement, the respondents issued two Far East Bank and Trust
CompanycheckspayabletoConsuelointheamountsofP200,000.00andP250,000.00on
June15,1989.Consuelo,however,refusedtoacceptthechecks.Shejustifiedherrefusal
bysayingthatherchildren(thepetitionersheirs)coownersofthesubjectpropertiesdid
notwanttosellthesubjectproperties.Forthesamereason,Consueloofferedtoreturnthe
P20,000.00 earnest money she received from the respondents, but the latter rejected it.
Thus,ConsuelofiledacomplaintforconsignationagainsttherespondentsonSeptember5,
1989,docketedasCivilCaseNo.8950258,beforetheRTCofManila,Branch28.

Therespondents,whoinsistedonenforcingtheagreement,inturninstitutedanactionfor
specificperformanceagainstConsuelobeforethesamecourtonSeptember26,1989.This
casewasdocketedasCivilCaseNo.8950259.TheysoughttocompelConsueloandthe
petitionersheirs(whoweresubsequentlyimpleadedascodefendants)toexecuteaDeed
ofAbsoluteSaleoverthesubjectproperties.

In her Answer, Consuelo claimed that she was justified in backing out from the
agreement on the ground that the sale was subject to the consent of the petitionersheirs
whobecamecoownersofthepropertyuponthedeathofherhusband,Cayetano.Sincethe
petitionersheirs disapproved of the sale, Consuelo claimed that the contract became
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ineffectiveforlackoftherequisiteconsent.Sheneverthelessexpressedherwillingnessto
returntheP20,000.00earnestmoneyshereceivedfromtherespondents.

TheRTCruledintherespondentsfavoritupheldtheexistenceofaperfectedcontractof
sale,atleastinsofarasthesaleinvolvedConsuelosconjugalandhereditarysharesinthe
subjectproperties.ThetrialcourtfoundthatConsuelosreceiptoftheP20,000.00 earnest
moneywasaneloquentmanifestationoftheperfectionofthecontract.Moreover,nothing
intheJune2,1989receiptshowedthattheagreementwasconditionedontheconsentof
thepetitionersheirs.Evenso,theRTCdeclaredthatthesaleisvalidandcanbeenforced
againstConsueloasacoowner,shehadfullownershipofthepartpertainingtohershare
whichshecanalienate,assign,ormortgage.Thepetitionersheirs,however,couldnotbe
compelled to transfer and deliver their shares in the subject properties, as they were not
parties to the agreement between Consuelo and the respondents. Thus, the trial court
ordered Consuelo to convey onehalf (representing Consuelos conjugal share) plus one
sixth (representing Consuelos hereditary share) of the subject properties, and to pay
P10,000.00 as attorneys fees to the respondents. Corollarily, it dismissed Consuelos
consignationcomplaint.

ConsueloandthepetitionersheirsappealedtheRTCdecisiontotheCAclaimingthatthe
trialcourterredinnotfindingthattheagreementwassubjecttoasuspensiveconditionthe
consent of the petitionersheirs to the agreement. The CA, however, resolved to dismiss
theappealand,therefore,affirmedtheRTCdecision.AstheRTCdid,theCAfoundthat
the payment and receipt of earnest money was the operative act that gave rise to a
perfectedcontract,andthattherewasnothinginthepartiesagreementthatwouldindicate
thatitwassubjecttoasuspensivecondition.Itdeclared:

Nowhereintheagreementoftheparties,ascontainedintheJune2,1989receiptissued
by[Consuelo]xxx,indicatesthat[Consuelo]reservedtitledon[sic]theproperty,nordoes
itcontainanyprovisionsubjectingthesaletoapositivesuspensivecondition.

Unconvinced by the correctness of both the RTC and the CA rulings, the
petitionersheirsfiledthepresentappealbycertiorariallegingreversibleerrorscommitted
bytheappellatecourt.

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THEPETITION

The petitionersheirs primarily contest the finding that there was a perfected
contract executed by the parties. They allege that other than the finding that Consuelo
receivedP20,000.00fromtherespondentsasearnestmoney,nootherevidencesupported
the conclusion that there was a perfected contract between the parties they insist that
Consuelospecificallyinformedtherespondentsthatthesalestillrequiredthepetitioners
heirs consent as coowners. The refusal of the petitionersheirs to sell the subject
propertiespurportedlyamountedtotheabsenceoftherequisiteelementofconsent.
Evenassumingthattheagreementamountedtoaperfectedcontract,thepetitioners
heirsposedthequestionoftheagreementspropercharacterizationwhetheritisacontract
of sale or a contract to sell. The petitionersheirs posit that the agreement involves a
contract to sell, and the respondents belated payment of part of the purchase price, i.e.,
one day after the June 14, 1989 due date, amounted to the nonfulfillment of a positive
suspensive condition that prevented the contract from acquiring obligatory force. In
supportofthiscontention,thepetitionersheirscitetheCourtsrulinginthecaseofAdelfa
[7]
Rivera,etal.v.FideladelRosario,etal.:

Inacontractofsale,thetitletothepropertypassestothevendeeuponthedelivery
ofthethingsoldwhileinacontracttosell,ownershipis,byagreement,reservedinthe
vendor and is not to pass to the vendee until full payment of the purchase price. In a
contracttosell,thepaymentofthepurchasepriceisapositivesuspensivecondition,
thefailureofwhichisnotabreach,casualorserious,butasituationthatprevents
theobligationofthevendortoconveytitlefromacquiringanobligatoryforce.

[Rivera],however,failedtocompletepaymentofthesecondinstallment.Thenon
fulfillmentoftheconditionrenderedthecontracttosellineffectiveandwithoutforceand
effect.[Emphasisintheoriginal.]

Fromthesecontentions,wesimplifythebasicissuesforresolutiontothreequestions:

1.Wasthereaperfectedcontractbetweentheparties?
2.Whatisthenatureofthecontractbetweenthem?and
3.Whatistheeffectoftherespondentsbelatedpaymentontheircontract?

THECOURTSRULING
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Therewasaperfectedcontractbetweentheparties
sincealltheessentialrequisitesofacontractwere
present

Article 1318 of the Civil Code declares that no contract exists unless the following
requisites concur: (1) consent of the contracting parties (2) object certain which is the
subjectmatterofthecontractand(3)causeoftheobligationestablished.Sincetheobject
ofthepartiesagreementinvolvespropertiescoownedbyConsueloandherchildren,the
petitionersheirsinsistthattheirapprovalofthesaleinitiatedbytheirmother,Consuelo,
wasessentialtoitsperfection.Accordingly,theirrefusalamountedtotheabsenceofthe
requiredelementofconsent.

Thatathingissoldwithouttheconsentofallthecoownersdoesnotinvalidatethesaleor
[8]
renderitvoid.Article493oftheCivilCode recognizestheabsoluterightofacoowner
tofreelydisposeofhisproindivisoshareaswellasthefruitsandotherbenefitsarising
fromthatshare,independentlyoftheothercoowners.Thus,whenConsueloagreedtosell
totherespondentsthesubjectproperties,whatsheinfactsoldwasherundividedinterest
that, as quantified by the RTC, consisted of onehalf interest, representing her conjugal
share,andonesixthinterest,representingherhereditaryshare.

The petitionersheirs nevertheless argue that Consuelos consent was predicated on their
consent to the sale, and that their disapproval resulted in the withdrawal of Consuelos
consent. Yet, we find nothing in the parties agreement or even conduct save Consuelos
selfserving testimony that would indicate or from which we can infer that Consuelos
consentdependedonherchildrensapprovalofthesale.TheexplicittermsoftheJune8,
[9]
1989receipt providenooccasionforanyreadingthattheagreementissubjecttothe
petitionersheirsfavorableconsenttothesale.

The presence of Consuelos consent and, corollarily, the existence of a perfected

contract between the parties are further evidenced by the payment and receipt of
P20,000.00,anearnestmoneybythecontractingpartiescommonusage.Thelawonsales,
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specifically Article 1482 of the Civil Code, provides that whenever earnest money is
giveninacontractofsale,itshallbeconsideredaspartofthepriceandproofofthe
perfectionofthecontract.Althoughthepresumptionisnotconclusive,asthepartiesmay
treattheearnestmoneydifferently,thereisnothingallegedinthepresentcasethatwould
give rise to a contrary presumption. In cases where the Court reached a conclusion
contrary to the presumption declared inArticle 1482, we found that the money initially
paidwasgiventoguaranteethatthebuyerwouldnotbackoutfromthesale,considering
thatthepartiestothesalehaveyettoarriveatadefiniteagreementastoitstermsthatis,
[10]
a situation where the contract has not yet been perfected.
These situations do not
obtaininthepresentcase,asneitherofthepartiesclaimedthattheP20,000.00wasgiven
merelyasguaranteebytherespondents,asvendees,thattheywouldnotbackoutfromthe
sale. As we have pointed out, the terms of the parties agreement are clear and explicit
indeed,alltheessentialelementsofaperfectedcontractarepresentinthiscase.Whilethe
respondentsrequiredthattheoccupantsvacatethesubjectpropertiespriortothepayment
ofthesecondinstallment,thestipulationdoesnotaffecttheperfectionofthecontract,but
onlyitsexecution.

Insum,thecasecontainsnoelement,factualorlegal,thatnegatestheexistenceofa
perfectedcontractbetweentheparties.

The characterization of the contract can be

considered irrelevant in this case in light of
Article 1592 and the Maceda Law, and the
petitionersheirspayment

Thepetitionersheirspositthatthepropercharacterizationofthecontractenteredintoby
thepartiesissignificantinordertodeterminetheeffectoftherespondentsbreachofthe
contract (which purportedly consisted of a oneday delay in the payment of part of the
purchaseprice)andtheremediestowhichthey,asthenondefaultingparty,areentitled.

Thequestionofcharacterizationofthecontractinvolvedherewouldnecessarilycallfora
thoroughanalysisofthepartiesagreementasembodiedintheJune2,1989receipt,their
contemporaneous acts, and the circumstances surrounding the contracts perfection and
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execution.Unfortunately,thelowercourtsfactualfindingsprovideinsufficientdetail
forthepurpose.Astipulationreservingownershipinthevendoruntilfullpaymentofthe
[11]
priceis,undercaselaw,typicalinacontracttosell.
Inthiscase,thevendormadeno
reservationontheownershipofthesubjectproperties.Fromthisperspective,theparties
agreement may be considered a contract of sale. On the other hand, jurisprudence has
similarlyestablishedthattheneedtoexecuteadeedofabsolutesaleuponcompletionof
payment of the price generally indicates that it is a contract to sell, as it implies the
reservationoftitleinthevendoruntilthevendeehascompletedthepaymentoftheprice.
WhentherespondentsinstitutedtheactionforspecificperformancebeforetheRTC,they
prayedthatConsuelobeorderedtoexecuteaDeedofAbsoluteSalethisactmaybetaken
toconcludethatthepartiesonlyenteredintoacontracttosell.

Admittedly, the given facts, as found by the lower courts, and in the absence of
additionaldetails,canbeinterpretedtosupporttwoconflictingconclusions.Thefailureof
thelowercourtstopryintothesemattersmayunderstandablybeexplainedbytheissues
raised before them, which did not require the additional details. Thus, they found the
question of the contracts characterization immaterial in their discussion of the facts and
the law of the case. Besides, the petitionersheirs raised the question of the contracts
characterizationandtheeffectofthebreachforthefirsttimethroughthepresentRule45
petition.

Points of law, theories, issues and arguments not brought to the attention of the
lowercourtneednotbe,andordinarilywillnotbe,consideredbythereviewingcourt,as
theycannotberaisedforthefirsttimeattheappellatereviewstage.Basicconsiderations
[12]
offairnessanddueprocessrequirethisrule.

Atanyrate,wedonotfindthequestionofcharacterizationsignificanttofullypass
upon the question of default due to the respondents breach ultimately, the breach was
curedandthecontractrevivedbytherespondentspaymentadayaftertheduedate.

Incasesofbreachduetononpayment,thevendormayavailoftheremedyof
rescission in a contract of sale. Nevertheless, the defaulting vendee may defeat the
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vendorsrighttorescindthecontractofsaleifhepaystheamountduebeforehereceivesa
demandforrescission,eitherjudiciallyorbyanotarialact,fromthevendor.Thisrightis
providedunderArticle1592oftheCivilCode:

Article 1592. In the sale of immovable property, even though it may have been
stipulatedthatuponfailuretopaythepriceatthetimeagreedupontherescissionofthe
contractshallofrighttakeplace,thevendeemaypay,evenaftertheexpirationofthe
period,aslongasnodemandforrescissionofthecontracthasbeenmadeuponhim
eitherjudiciallyorbyanotarialact. Afterthedemand,thecourtmaynotgranthima
newterm.[Emphasissupplied.]

Nonpayment of the purchase price in contracts to sell, however, does not

constitute a breach rather, nonpayment is a condition that prevents the obligation from
[13]
acquiring obligatory force and results in its cancellation. We stated in Ong v. CA
that:

Inacontracttosell,thepaymentofthepurchasepriceisapositivesuspensive
condition,thefailureofwhichisnotabreach,casualorserious,butasituationthat
preventstheobligationofthevendortoconveytitlefromacquiringobligatoryforce.
The nonfulfillment of the condition of full payment rendered the contract to sell
ineffectiveandwithoutforceandeffect.[Emphasissupplied.]

Asintherescissionofacontractofsalefornonpaymentoftheprice,thedefaulting
vendeeinacontracttosellmaydefeatthevendorsrighttocancelbyinvokingtherights
grantedtohimunderRepublicActNo.6552ortheRealtyInstallmentBuyerProtection
Act(alsoknownastheMacedaLaw)thislawprovidesfora60daygraceperiodwithin
whichthedefaultingvendee(whohaspaidlessthantwoyearsofinstallments)maystill
pay the installments due. Only after the lapse of the grace period with continued
nonpaymentoftheamountsduecantheactualcancellationofthecontracttakeplace.The
pertinentprovisionsoftheMacedaLawprovide:
xxxx

Section2.Itisherebydeclaredapublicpolicytoprotectbuyersofrealestateon
installmentpaymentsagainstonerousandoppressiveconditions.

Sec.3.Inall transactions orcontractsinvolving the saleor financing of real

estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under RepublicAct
NumberedThirtyeighthundredfortyfourasamendedbyRepublicActNumberedSixty
threehundredeightynine,wherethebuyerhaspaidatleasttwoyearsofinstallments,the
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buyerisentitledtothefollowingrightsincasehedefaultsinthepaymentofsucceeding
installments:

xxxx

Section 4. In case where less than two years of installments were paid, the
sellershallgivethebuyeragraceperiodofnotlessthan60daysfromthedatethe
installmentbecamedue.Ifthebuyerfailstopaytheinstallmentsdueattheexpirationof
thegraceperiod,thesellermaycancelthecontractafterthirtydaysfromthereceiptbythe
buyerofthenoticeofcancellationorthedemandforrescissionofthecontractbynotarial
act.[Emphasissupplied.]

Significantly,theCourthasconsistentlyheldthattheMacedaLawcoversnotonlysales
on installments of real estate, but also financing of such acquisition its Section 3 is
comprehensiveenoughtoincludebothcontractsofsaleandcontractstosell,providedthat
thetermsonpaymentofthepricerequireatleasttwoinstallments.Thecontractentered
intobythepartieshereincanverywellfallundertheMacedaLaw.

Based on the above discussion, we conclude that the respondents payment on June 15,
1989 of the installment due on June 14, 1989 effectively defeated the petitionersheirs
right to have the contract rescinded or cancelled. Whether the parties agreement is
characterizedasoneofsaleortosellisnotrelevantinlightoftherespondentspayment
withinthegraceperiodprovidedunderArticle1592oftheCivilCodeandSection4ofthe
Maceda Law. The petitionersheirs obligation to accept the payment of the price and to
conveyConsuelosconjugalandhereditarysharesinthesubjectpropertiessubsists.

WHEREFORE,weDENYthepetitionersheirspetitionforreviewoncertiorari,
andAFFIRMthedecisionoftheCourtofAppealsdatedJune24,2002anditsresolution
datedFebruary20,2003inCAG.R.CVCaseNo.56590.Costsagainstthepetitioners
heirs.

SOORDERED.
ARTUROD.BRION
AssociateJustice

WECONCUR:
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LEONARDOA.QUISUMBING
AssociateJustice
Chairperson

CONCHITACARPIOMORALES
AssociateJustice

MARIANOC.DELCASTILLO
AssociateJustice

ROBERTOA.ABAD
AssociateJustice

ATTESTATION

IattestthattheconclusionsintheaboveDecisionhadbeenreachedinconsultationbefore
thecasewasassignedtothewriteroftheopinionoftheCourtsDivision.
LEONARDOA.QUISUMBING
AssociateJustice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
ChairpersonsAttestation,itisherebycertifiedthattheconclusionsintheaboveDecision
werereachedinconsultationbeforethecasewasassignedtothewriteroftheopinionof
theCourtsDivision.

REYNATOS.PUNO
ChiefJustice

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*Deceased.
[1]
Victor,Ludinila,Hermelina,Virgilio,andEditha,allsurnamedPanganrollo,p.33.
[2]
Penned byAssociate Justice Elvi John S.Asuncion (separated from the service), withAssociate Justice PortiaAlio
HormachuelosandAssociateJusticeEdgardoF.Sundiam(deceased),concurring,id.,pp.2125.
[3]
UnderRule45oftheRulesofCourtid.,pp.1018.
[4]
InCivilCaseNos.8950258and8950259,pennedbyJudgeEdVincentS.AlbanoonJanuary27,1997,id.,pp.3349.
[5]
ThelandiscoveredbyTCTNo.16098andregisteredinthenameofspousesCayetanoandConsueloPangan.
[6]
Rollo,p.6.Thereceiptstated:
ReceivedfromMrs.PrisicillaPerrerasof#35NicanorRoxasSt.,Sta.MesaHeights,Q.C.theamountof
TwentyThousandPesos(P20,000.00)asEARNESTMONEYforthehouseandlotlocatedat11401142
CasaasSt.,Sampaloc,Manila.
Thetotalpurchased[sic]priceisFiveHundredFortyThousandPesos(P540,000.00).
TwoHundredFiftyThousandPesos(P250,000.00)tobegivenonorbeforeJune14/89.
The total balance of Two Hundred Seventy Thousand Pesos (P270,000.00) to be given once the
tenantsvacated[sic]thepremises.[Emphasisintheoriginal.]
[7]
G.R.No.144934,January15,2004,419SCRA626.
[8]
ThefulltextofArticle493oftheCivilCodereads:
Eachcoownershallhavefullownershipofhispartandofthefruitsandbenefitspertainingthereto,andhe
maythereforealienate,assignormortgageit,andevensubstituteanotherpersoninitsenjoyment,except
whenpersonalrightsareinvolved.Buttheeffectofthealienationorthemortgage,withrespecttotheco
owners,shallbelimitedtotheportionwhichmaybeallottedtohiminthedivisionupontheterminationof
thecoownership.
[9]
Supranote6.
[10]
SeeManila Metal Container Corporation v. Tolentino, G.R. No. 166862, December 20, 2006, 511 SCRA 444 San
MiguelPropertiesPhil.,Inc.v.Huang,G.R.No.137290,July31,2000,336SCRA737,citingSpousesDoromalv.CA,66
SCRA575(1975).
[11]
SeeCorderov.F.S.ManagementandDevelopmentCorporation,Inc.,G.R.No.167213,October31,2006,506SCRA
451Ramosv.Santiago,G.R.No.145330,October14,2005,473SCRA79 Rayosv.CA,G.R.No. 135528, July 14,
2004,434SCRA365.
[12]
PagAsaSteelWorks,Inc.v.CA,G.R.No.166647,March31,2006,486SCRA475.
[13]
G.R.No.97347,July6,1999,310SCRA1.

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