G.R. No.

91029 February 7, 1991

NORKIS DISTRIBUTORS, INC., petitioner,

vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.

GRIO-AQUINO, J.:

Subject of this petition for review is the decision of the Court of Appeals (Seventeenth Division) in CA-G.R. No. 09149,
affirming with modification the judgment of the Regional Trial Court, Sixth (6th) Judicial Region, Branch LVI.
Himamaylan, Negros Occidental, in Civil Case No. 1272, which was private respondent Alberto Nepales' action for
specific performance of a contract of sale with damages against petitioner Norkis Distributors, Inc.

The facts borne out by the record are as follows:

Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha motorcycles in Negros Occidental
with office in Bacolod City with Avelino Labajo as its Branch Manager. On September 20, 1979, private respondent
Alberto Nepales bought from the Norkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX
with Engine No. L2-329401K Frame No. NL2-0329401, Color Maroon, then displayed in the Norkis showroom. The
price of P7,500.00 was payable by means of a Letter of Guaranty from the Development Bank of the Philippines
(DBP), Kabankalan Branch, which Norkis' Branch Manager Labajo agreed to accept. Hence, credit was extended to
Nepales for the price of the motorcycle payable by DBP upon release of his motorcycle loan. As security for the loan,
Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. Branch Manager Labajo issued Norkis
Sales Invoice No. 0120 (Exh.1) showing that the contract of sale of the motorcycle had been perfected. Nepales
signed the sales invoice to signify his conformity with the terms of the sale. In the meantime, however, the
motorcycle remained in Norkis' possession.

On November 6, 1979, the motorcycle was registered in the Land Transportation Commission in the name of Alberto
Nepales. A registration certificate (Exh. 2) in his name was issued by the Land Transportation Commission on
November 6, 1979 (Exh. 2-b). The registration fees were paid by him, evidenced by an official receipt, Exhibit 3.

On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was allegedly the agent of Alberto
Nepales but the latter denies it (p. 15, t.s.n., August 2, 1984). The record shows that Alberto and Julian Nepales
presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros
Occidental Branch (p. 12, Rollo). The motorcycle met an accident on February 3, 1980 at Binalbagan, Negros
Occidental. An investigation conducted by the DBP revealed that the unit was being driven by a certain Zacarias Payba
at the time of the accident (p. 33, Rollo). The unit was a total wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), was
returned, and stored inside Norkis' warehouse.

On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis in the total sum of
P7,500. As the price of the motorcycle later increased to P7,828 in March, 1980, Nepales paid the difference of P328
(p. 13, Rollo) and demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for
specific performance with damages against Norkis in the Regional Trial Court of Himamaylan, Negros Occidental, Sixth
(6th) Judicial Region, Branch LVI, where it was docketed as Civil Case No. 1272. He alleged that Norkis failed to deliver
the motorcycle which he purchased, thereby causing him damages.

Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence,
the risk of loss or damage had to be borne by him as owner of the unit.

After trial on the merits, the lower court rendered a decision dated August 27, 1985 ruling in favor of private
respondent (p. 28, Rollo.) thus:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants. The defendants are ordered
to pay solidarity to the plaintiff the present value of the motorcycle which was totally destroyed, plus interest
equivalent to what the Kabankalan Sub-Branch of the Development Bank of the Philippines will have to charge the
plaintiff on fits account, plus P50.00 per day from February 3, 1980 until full payment of the said present value of the
motorcycle, plus P1,000.00 as exemplary damages, and costs of the litigation. In lieu of paying the present value of
the motorcycle, the defendants can deliver to the plaintiff a brand-new motorcycle of the same brand, kind, and
quality as the one which was totally destroyed in their possession last February 3, 1980. (pp. 28-29, Rollo.)

On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989, but deleted the award of
damages "in the amount of Fifty (P50.00) Pesos a day from February 3, 1980 until payment of the present value of the
damaged vehicle" (p35, Rollo). The Court of Appeals denied Norkis' motion for reconsideration. Hence, this Petition
for Review.

The principal issue in this case is who should bear the loss of the motorcycle. The answer to this question would
depend on whether there had already been a transfer of ownership of the motorcycle to private respondent at the
time it was destroyed.

Norkis' theory is that:

. . . After the contract of sale has been perfected (Art. 1475) and even before delivery, that is, even before the
ownership is transferred to the vendee, the risk of loss is shifted from the vendor to the vendee. Under Art. 1262, the
obligation of the vendor to deliver a determinate thing becomes extinguished if the thing is lost by fortuitous event
(Art. 1174), that is, without the fault or fraud of the vendor and before he has incurred in delay (Art. 11 65, par. 3). If
the thing sold is generic, the loss or destruction does not extinguish the obligation (Art. 1263). A thing is determinate
when it is particularly designated or physically segregated from all others of the same class (Art. 1460). Thus, the
vendor becomes released from his obligation to deliver the determinate thing sold while the vendee's obligation to
pay the price subsists. If the vendee had paid the price in advance the vendor may retain the same. The legal effect,
therefore, is that the vendee assumes the risk of loss by fortuitous event (Art. 1262) after the perfection of the
contract to the time of delivery. (Civil Code of the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.)

Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists that there was constructive
delivery of the unit upon: (1) the issuance of the Sales Invoice No. 0120 (Exh. 1) in the name of the private respondent
and the affixing of his signature thereon; (2) the registration of the vehicle on November 6, 1979 with the Land
Transportation Commission in private respondent's name (Exh. 2); and (3) the issuance of official receipt (Exh. 3) for
payment of registration fees (p. 33, Rollo).

That argument is not well taken. As pointed out by the private respondent, the issuance of a sales invoice does not
prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of
the nature, quantity and cost of the thing sold and has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p.
378).

In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled with the
intention of delivering the thing. The act, without the intention, is insufficient (De Leon, Comments and Cases on
Sales, 1978 Ed., citing Manresa, p. 94).

When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet to
transfer the title or ownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the
DBP for the release of the buyer's motorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP, reveals that
the execution in its favor of a chattel mortgage over the purchased vehicle is a pre-requisite for the approval of the
buyer's loan. If Norkis would not accede to that arrangement, DBP would not approve private respondent's loan
application and, consequently, there would be no sale.

In other words, the critical factor in the different modes of effecting delivery, which gives legal effect to the act, is the
actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no
tradition (Abuan vs. Garcia, 14 SCRA 759).

In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered
when it is "placed in the hands and possession of the vendee." (Civil Code, Art. 1462). It is true that the same article
declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the
contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor
shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been
made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must
be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is
sufficient. But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then fiction yields to reality-the delivery has riot been
effects .(Emphasis supplied.)

The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated September 20, 1979
(Exh. B) and the registration of the vehicle in the name of plaintiff-appellee (private respondent) with the Land
Registration Commission (Exhibit C) was not to transfer to Nepales the ownership and dominion over the motorcycle,
but only to comply with the requirements of the Development Bank of the Philippines for processing private
respondent's motorcycle loan. On March 20, 1980, before private respondent's loan was released and before he even
paid Norkis, the motorcycle had already figured in an accident while driven by one Zacarias Payba. Payba was not
shown by Norkis to be a representative or relative of private respondent. The latter's supposed relative, who allegedly
took possession of the vehicle from Norkis did not explain how Payba got hold of the vehicle on February 3, 1980.
Norkis' claim that Julian Nepales was acting as Alberto's agent when he allegedly took delivery of the motorcycle (p.
20, Appellants' Brief), is controverted by the latter. Alberto denied having authorized Julian Nepales to get the
motorcycle from Norkis Distributors or to enter into any transaction with Norkis relative to said motorcycle. (p. 5,
t.s.n., February 6, 1985). This circumstances more than amply rebut the disputable presumption of delivery upon
which Norkis anchors its defense to Nepales' action (pp. 33-34, Rollo).

Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the
things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is applicable to this case, for
there was neither an actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne by the
seller, Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This is in accordance
with the well-known doctrine of res perit domino.

WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. No. 09149, we deny the
petition for review and hereby affirm the appealed decision, with costs against the petitioner.

SO ORDERED.
G.R. No. L-6389 November 29, 1954

PASTOR AMIGO and JUSTINO AMIGO, petitioners,

vs.
SERAFIN TEVES, respondent.

Enrique Medina for petitioner.

Capistrano and Capistrano for respondent.

BAUTISTA ANGELO, J.:

This is a petition for review of a decision of the Court of Appeals modifying that of the court of origin in the sense that
plaintiffs, now petitioners, should not be made to pay the sum of P100 as attorney's fees.

This petition stems from an action filed by petitioners in the Court of First Instance of Negros Oriental praying that
judgment be rendered: (a) declaring that the contract entered into between Marcelino M. Amigo and Sefarin Teves
on October 30, 1938 is merely a contract of mortgage and not a sale with right to repurchase; (b) declaring that even
if said contract be one of sale with right to repurchase, the offer to repurchase by the vendors was made within the
period agreed upon; (c) condemning respondents to execute a deed of reconveyance; and (c) condemning
respondents to restore the property to petitioners and to pay P2,500 as damages.

The important facts which need to be considered for purposes of this petition as found by the Court of Appeals may
be briefly summarized as follows: On August 11, 1937, Macario Amigo and Anacleto Cagalitan executed in favor of
their son, Marcelino Amigo, a power of attorney granting to the latter, among others, the power "to lease, let,
bargain, transfer, convey and sell, remise, release, mortgage and hypothecate, part or any of the properties . . . upon
such terms and conditions, and under such covenants as he shall think fit."

On October 30, 1938, Marcelino Amigo, in his capacity as attorney-in-fact, executed a deed of sale of a parcel of land
for a price of P3,000 in favor of Serafin Teves stipulating therein that the vendors could repurchase the land within a
period of 18 months from the date of the sale. In the same document, it was also stipulated that vendors would
remain in possession of the land as lessees for a period of 18 months subject to the following terms and conditions:
(a) the lessees shall pay P180 as rent every six months from the date of the agreement; (b) the period of the lease
shall terminate on April 30, 1940; (c) in case of litigation, the lessees shall pay P100 as attorney's fees; and (d) in case
of failure to pay any rental as agreed upon, the lease shall automatically terminate and the right of ownership of
vendee shall become absolute.

On July 20, 1939, the spouses Macario Amigo and Anacleta Cagalitan donated to their sons Justino Amigo and Pastor
Amigo several parcels of land including their right to repurchase the land in litigation. The deed of donation was made
in a public instrument, was duly accepted by the donees, and was registered in the Office of the Register of Deeds.

The vendors-lessees paid the rental corresponding to the first six months, but not the rental for the subsequent
semester, and so on January 8, 1940, Serafin Teves, the vendee-lessor, executed an "Affidavit of Consolidation of
Title" in view of the failure of the lessees to pay the rentals as agreed upon, and registered said affidavit in the Office
of the Register of Deeds of Negros Oriental, who, on January 28, 1940, issued to Serafin Teves the corresponding
transfer of title over the land in question.

On March 9, 1940, Justino Amigo and Pastor Amigo, as donees of the right to repurchase the land in question, offered
to repurchase the land from Serafin Teves by tendering to him the payment of the redemption price but the latter
refused on the ground that the ownership had already been consolidated in him as purchaser a retro. Hence, on April
26, 1940, before the expiration of the 18th-month period stipulated for the redemption of the land, the donees
instituted the present action.

The issues posed by petitioners are: (1) The lease covenant contained in the deed of sale with pacto de retro
executed by Marcelino Amigo as attorney-in-fact in favor of Serafin Teves is not germane to, nor within the purview
of, the powers granted to said attorney-in-fact and, therefore, is ultra vires and null and void; (2) the penal clause
stipulated in the lease covenant referring to the automatic termination of the period of redemption is null and void;
and (3) petitioners should be allowed to repurchase the land on equitable grounds considering the great
disproportion between the redemption price and the market value of the land on the date the period of redemption
is supposed to expire.

Petitioners contend that, while the attorney-in-fact, Marcelino Amigo, had the power to execute a deed of sale with
right to repurchase under the power of attorney granted to him, however, the covenant of lease contained in said
deed whereby the vendors agreed to remain in possession of the land as lessees is not germane to said power of
attorney and, therefore, Marcelino Amigo acted in excess of his powers as such attorney-in-fact. The Court of
Appeals, therefore, committed an error in not declaring said covenant of lease ultra vires and null and void.

The Court of Appeals, after analyzing the extent and scope of the powers granted to Marcelino Amigo in the power of
Attorney executed in his favor by his principals, found that such powers are broad enough to justify the execution of
any contract concerning the lands covered by the authority even if this be a contract of lease. The court even went
further: even in the supposition that the power to take the land under lease is not included within the authority
granted, petitioners cannot now impugn the validity of the lease covenant because such right devolves upon the
principals, who are the only one who can claim that their agent has exceeded the authority granted to him, and
because said principals had tacitly ratified the act done by said agent.

We find no plausible reason to disturb this findings of the Court of Appeals. The same, in our opinion, is in
consonance with the evidence presented and with the conclusions that should be drawn from said evidence. This can
be shown from a mere examination of the power of attorney (Exhibit D.) A cursory reading thereof would at once
reveal that the power granted to the agent is so broad that it practically covers the celebration of any contract and
the conclusion of any covenant or stipulation. Thus, among the powers granted are: to bargain, contract, agree for,
purchase, receive, and keep lands, tenements, hereditaments, and accept the seizing and possessing of all lands," or
"to lease, let, bargain, transfer, convey and sell, remise, release, mortgage and hypothecate . . . upon such terms and
conditions, and under such covenants as he shall think fit." (Emphasis supplied). When the power of attorney says
that the agent can enter into any contract concerning the land, or can sell the land under any term or condition and
covenant he may think fit, it undoubtedly means that he can act in the same manner and with the same breath and
latitude as the principal could concerning the property. The fact that the agent has acted in accordance with the wish
of his principals can be inferred from their attitude in donating to the herein petitioners the right to redeem the land
under the terms and conditions appearing in the deed of sale executed by their agent.

On the other hand, we find nothing unusual in the lease covenant embodied in the deed of sale for such is common in
contracts involving sales of land with pacto de retro. The lease that a vendor executes on the property may be
considered as a means of delivery or tradition by constitutum possessorium. Where the vendor a retrocontinues to
occupy the land as lessee, by fiction of law, the possession is deemed to be constituted in the vendee by virtue of this
mode of tradition (10 Manresa, 4th ed. p.124). We may say therefore that this covenant regarding the lease of the
land sold is germane to the contract of sale with pacto de retro.

While the lease covenant may be onerous or may work hardship on the vendor because of its clause providing for the
automatic termination of the period of redemption, however, the same is not contrary to law, morals, or public order,
which may serve as basis for its nullification. Rather than obnoxious are oppressive , it is a clause common in a sale
with pacto de retro, and as such it received the sanction of our courts. As an instance, we may cite the case of Vitug
Dimatulac vs. Coronel, 40 Phil., 686, which, because of its direct bearing on our case, we will presently discuss.

In that case, Dimatulac sold a piece of land to Dolores Coronel for the sum of P9,000, reserving the privilege to
repurchase within the period of 5 years. The contract contained a provision "commonly found in contracts of this
character" converting the vendor into a lessee of the vendee at an agreed rental, payable annually in the months
of January and February, and permitting the vendor to retain possession of the property as lessee until the time
allowed for its repurchase. It was also stipulated that in the event the vendor should fail to pay the agreed rental for
any year of the five, the right to repurchase would be lost and the ownership consolidated in the vendee. The vendor
fails to perform this obligation and continued in arrears in the payment of rent for at least three years, and taking
advantage of the clause by which the consolidation of the property was accelerated, the vendee impleaded the
vendor in a civil action to compel him to surrender the property. This case, however, was settled by a compromise by
virtue of which the vendor agreed to place the property at the disposal of the vendee so that the latter may apply to
products of the land to the payment of the rent. Later, the vendor offered to redeem the property under the contract
of sale with pacto de retro, the period of redemption not having as yet expired. The vendee refused the offer on the
ground that her title to the property had already been consolidated. This Court declared the lease covenant
contained in the contract as lawful, although it found that the act of the vendee in taking possession of the land by
way of compromise constituted a waiver of the penal provision relative to the acceleration of the period of
redemption. On this point, the Court said:

It is undeniable that the clause in the contract of sale with pacto de retro of June 30, 1911, providing for extinction of
the right of the plaintiff to repurchase in case he should default in the payment of the rent for any year was lawful.
The parties to a contract of this character may legitimately fix any period to please, not in excess of ten years, for the
redemption of the property by the vendor; and no sufficient reason occurs to us why the determination of the right of
redemption may not be made to depend upon the delinquency of the vendor now become lessee-in the payment
of the stipulated rent. The Supreme Court of Spain sustains the affirmative of this proposition (decision of January
18,1900); and although such a provision, being of a penal nature, may involve hardships to the lessee, the
consequence are not worse than such as follow from many other forms of agreement to which contracting parties
may lawfully attach their signatures. Nevertheless, admitting the validity of such a provision, it is not be expected that
any court will be reluctant to relieve from its effects wherever this can be done consistently with established
principles of law.

We have not failed to take notice of the Court's warning that "admitting the validity of such a provision, it is not to be
expected that any court will be reluctant to relieve from its effects wherever this can be done consistently with
established principles of law." We only wish that in this case, as in the Dimatulac case, a way may be found consistent
with law whereby we would relieve the petitioners from the effects of the penal clause under consideration, but, to
our regret, none we have found, for respondent has been alert and quick enough to assert his right by consolidating
his ownership when the first chance to do so has presented itself. He has shown no vacillation, nor offered any
compromise which may deem as a waiver or a justification for forfeiting the privilege given him under the penal
clause. The only alternative left is to enforce it as stipulated in the agreement.

Petitioners also contend that as the assessed value of the land in 1938, when the contract was celebrated, was
P4,280, the selling price of P3,000 agreed upon is considered as not written, and petitioners should be allowed to
exercise the right to repurchase on equitable considerations. And in support of this contention, counsel presented
evidence to show that the market price of the land in 1940, the year the period of redemption was supposed to
expire was fourteen times more than the money paid for it by respondent such that, if that should be taken as basis,
the value of the land would be P43,004.50.

While this contention may have some basis when considered with reference to an absolute contract of sale, it loses
weight when applied to a contract of sale with pacto de retro, where the price is usually less than in absolute sale for
the reason that in a sale with pacto de retro, the vendor expects to re-acquire or redeem the property sold. Another
flaw we find is that all the evidence presented refers to sales which were executed in 1940 and 1941 and none was
presented pertaining to 1938, or its neighborhood, when the contract in question was entered into. And the main
reason we find for not entertaining this claim is that it involves a question of fact and as the Court of Appeals has
found that the price paid for the land is not unreasonable as to justify the nullification of the sale, such finding, in
appeal by certiorari, is final and conclusive upon this Court.

Finding no error in the decision appealed from, the same is hereby affirmed, without pronouncement as to costs.
[G.R. No. 119255. April 9, 2003]

TOMAS K. CHUA, petitioner, vs. COURT OF APPEALS and ENCARNACION VALDES-CHOY, respondents.
DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari seeking to reverse the decision[1] of the Court of Appeals in an action for
specific performance[2] filed in the Regional Trial Court[3] by petitioner Tomas K. Chua (Chua) against respondent
Encarnacion Valdes-Choy (Valdes-Choy). Chua sought to compel Valdes-Choy to consummate the sale of her
paraphernal house and lot in Makati City. The Court of Appeals reversed the decision[4] rendered by the trial court in
favor of Chua.

The Facts

Valdes-Choy advertised for sale her paraphernal house and lot (Property) with an area of 718 square meters located
at No. 40 Tampingco Street corner Hidalgo Street, San Lorenzo Village, Makati City. The Property is covered by
Transfer Certificate of Title No. 162955 (TCT) issued by the Register of Deeds of Makati City in the name of Valdes-
Choy. Chua responded to the advertisement. After several meetings, Chua and Valdes-Choy agreed on a purchase
price of P10,800,000.00 payable in cash.

On 30 June 1989, Valdes-Choy received from Chua a check for P100,000.00. The receipt (Receipt) evidencing the
transaction, signed by Valdes-Choy as seller, and Chua as buyer, reads:

30 June 1989

RECEIPT

RECEIVED from MR. TOMAS K. CHUA PBCom Check No. 206011 in the amount of ONE HUNDRED THOUSAND PESOS
ONLY (P100,000.00) as EARNEST MONEY for the sale of the property located at 40 Tampingco cor. Hidalgo, San
Lorenzo Village, Makati, Metro Manila (Area : 718 sq. meters).

The balance of TEN MILLION SEVEN HUNDRED THOUSAND (P10,700,000.00) is payable on or before 15[5] July 1989.
Capital Gains Tax for the account of the seller. Failure to pay balance on or before 15 July 1989 forfeits the earnest
money. This provided that all papers are in proper order.[6]

CONFORME: ENCARNACION VALDES

Seller

TOMAS K. CHUA

Buyer

x x x.[7]

In the morning of 13 July 1989, Chua secured from Philippine Bank of Commerce (PBCom) a managers check for
P480,000.00. Strangely, after securing the managers check, Chua immediately gave PBCom a verbal stop payment
order claiming that this managers check for P480,000.00 was lost and/or misplaced.[8] On the same day, after receipt
of Chuas verbal order, PBCom Assistant VicePresident Julie C. Pe notified in writing[9] the PBCom Operations Group
of Chuas stop payment order.

In the afternoon of 13 July 1989, Chua and Valdes-Choy met with their respective counsels to execute the necessary
documents and arrange the payments.[10] Valdes-Choy as vendor and Chua as vendee signed two Deeds of Absolute
Sale (Deeds of Sale). The first Deed of Sale covered the house and lot for the purchase price of P8,000,000.00.[11] The
second Deed of Sale covered the furnishings, fixtures and movable properties contained in the house for the purchase
price of P2,800,000.00.[12] The parties also computed the capital gains tax to amount to P485,000.00.

On 14 July 1989, the parties met again at the office of Valdes-Choys counsel. Chua handed to Valdes-Choy the PBCom
managers check for P485,000.00 so Valdes-Choy could pay the capital gains tax as she did not have sufficient funds to
pay the tax. Valdes-Choy issued a receipt showing that Chua had a remaining balance of P10,215,000.00 after
deducting the advances made by Chua. This receipt reads:

July 14, 1989

Received from MR. TOMAS K. CHUA PBCom. Check No. 325851 in the amount of FOUR HUNDRED EIGHTY FIVE
THOUSAND PESOS ONLY (P485,000.00) as Partial Payment for the sale of the property located at 40 Tampingco Cor.
Hidalgo St., San Lorenzo Village, Makati, Metro Manila (Area 718 sq. meters), covered by TCT No. 162955 of the
Registry of Deeds of Makati, Metro Manila.

The total purchase price of the above-mentioned property is TEN MILLION EIGHT HUNDRED THOUSAND PESOS only,
broken down as follows:

SELLING PRICE P10,800,000.00

EARNEST MONEY P100,000.00

PARTIAL PAYMENT 485,000.00

____________________585,000.00

BALANCE DUE TO
ENCARNACION VALDEZ-CHOY P10,215,000.00
VVVVVVVVVVVV

PLUS P80,000.00 for documentary

stamps paid in advance by seller ___80,000.00

P10,295,000.00

x x x.[13]

On the same day, 14 July 1989, Valdes-Choy, accompanied by Chua, deposited the P485,000.00 managers check to
her account with Traders Royal Bank. She then purchased a Traders Royal Bank managers check for P480,000.00
payable to the Commissioner of Internal Revenue for the capital gains tax. Valdes-Choy and Chua returned to the
office of Valdes-Choys counsel and handed the Traders Royal Bank check to the counsel who undertook to pay the
capital gains tax. It was then also that Chua showed to Valdes-Choy a PBCom managers check for P10,215,000.00
representing the balance of the purchase price. Chua, however, did not give this PBCom managers check to Valdes-
Choy because the TCT was still registered in the name of Valdes-Choy. Chua required that the Property be registered
first in his name before he would turn over the check to Valdes-Choy. This angered Valdes-Choy who tore up the
Deeds of Sale, claiming that what Chua required was not part of their agreement.[14]

On the same day, 14 July 1989, Chua confirmed his stop payment order by submitting to PBCom an affidavit of
loss[15] of the PBCom Managers Check for P480,000.00. PBCom Assistant Vice-President Pe, however, testified that
the managers check was nevertheless honored because Chua subsequently verbally advised the bank that he was
lifting the stop-payment order due to his special arrangement with the bank.[16]

On 15 July 1989, the deadline for the payment of the balance of the purchase price, Valdes-Choy suggested to her
counsel that to break the impasse Chua should deposit in escrow the P10,215,000.00 balance.[17] Upon such deposit,
Valdes-Choy was willing to cause the issuance of a new TCT in the name of Chua even without receiving the balance
of the purchase price. Valdes-Choy believed this was the only way she could protect herself if the certificate of title is
transferred in the name of the buyer before she is fully paid. Valdes-Choys counsel promised to relay her suggestion
to Chua and his counsel, but nothing came out of it.

On 17 July 1989, Chua filed a complaint for specific performance against Valdes-Choy which the trial court dismissed
on 22 November 1989. On 29 November 1989, Chua re-filed his complaint for specific performance with damages.
After trial in due course, the trial court rendered judgment in favor of Chua, the dispositive portion of which reads:

Applying the provisions of Article 1191 of the new Civil Code, since this is an action for specific performance where
the plaintiff, as vendee, wants to pursue the sale, and in order that the fears of the defendant may be allayed and still
have the sale materialize, judgment is hereby rendered:

I. 1. Ordering the defendant to deliver to the Court not later than five (5) days from finality of this decision:

a. the owners duplicate copy of TCT No. 162955 registered in her name;

b. the covering tax declaration and the latest tax receipt evidencing payment of real estate taxes;

c. the two deeds of sale prepared by Atty. Mark Bocobo on July 13, 1989, duly executed by defendant in favor of the
plaintiff, whether notarized or not; and

2. Within five (5) days from compliance by the defendant of the above, ordering the plaintiff to deliver to the Branch
Clerk of Court of this Court the sum of P10,295,000.00 representing the balance of the consideration (with the sum of
P80,000.00 for stamps already included);

3. Ordering the Branch Clerk of this Court or her duly authorized representative:

a. to make representations with the BIR for the payment of capital gains tax for the sale of the house and lot (not to
include the fixtures) and to pay the same from the funds deposited with her;

b. to present the deed of sale executed in favor of the plaintiff, together with the owners duplicate copy of TCT No.
162955, real estate tax receipt and proof of payment of capital gains tax, to the Makati Register of Deeds;

c. to pay the required registration fees and stamps (if not yet advanced by the defendant) and if needed update the
real estate taxes all to be taken from the funds deposited with her; and

d. surrender to the plaintiff the new Torrens title over the property;

4. Should the defendant fail or refuse to surrender the two deeds of sale over the property and the fixtures that were
prepared by Atty. Mark Bocobo and executed by the parties, the Branch Clerk of Court of this Court is hereby
authorized and empowered to prepare, sign and execute the said deeds of sale for and in behalf of the defendant;

5. Ordering the defendant to pay to the plaintiff;

a. the sum of P100,000.00 representing moral and compensatory damages for the plaintiff; and

b. the sum of P50,000.00 as reimbursement for plaintiffs attorneys fees and cost of litigation.

6. Authorizing the Branch Clerk of Court of this Court to release to the plaintiff, to be taken from the funds said
plaintiff has deposited with the Court, the amounts covered at paragraph 5 above;

7. Ordering the release of the P10,295,000.00 to the defendant after deducting therefrom the following amounts:

a. the capital gains tax paid to the BIR;

b. the expenses incurred in the registration of the sale, updating of real estate taxes, and transfer of title; and
c. the amounts paid under this judgment to the plaintiff.

8. Ordering the defendant to surrender to the plaintiff or his representatives the premises with the furnishings intact
within seventy-two (72) hours from receipt of the proceeds of the sale;

9. No interest is imposed on the payment to be made by the plaintiff because he had always been ready to pay the
balance and the premises had been used or occupied by the defendant for the duration of this case.

II. In the event that specific performance cannot be done for reasons or causes not attributable to the plaintiff,
judgment is hereby rendered ordering the defendant:

1. To refund to the plaintiff the earnest money in the sum of P100,000.00, with interest at the legal rate from June 30,
1989 until fully paid;

2. To refund to the plaintiff the sum of P485,000.00 with interest at the legal rate from July 14, 1989 until fully paid;

3. To pay to the plaintiff the sum of P700,000.00 in the concept of moral damages and the additional sum of
P300,000.00 in the concept of exemplary damages; and

4. To pay to the plaintiff the sum of P100,000.00 as reimbursement of attorneys fees and cost of litigation.

SO ORDERED.[18]

Valdes-Choy appealed to the Court of Appeals which reversed the decision of the trial court. The Court of Appeals
handed down a new judgment, disposing as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and another one is rendered:

(1) Dismissing Civil Case No. 89-5772;

(2) Declaring the amount of P100,000.00, representing earnest money as forfeited in favor of defendant-appellant;

(3) Ordering defendant-appellant to return/refund the amount of P485,000.00 to plaintiff-appellee without interest;

(4) Dismissing defendant-appellants compulsory counter-claim; and

(5) Ordering the plaintiff-appellee to pay the costs.[19]

Hence, the instant petition.

The Trial Courts Ruling

The trial court found that the transaction reached an impasse when Valdes-Choy wanted to be first paid the full
consideration before a new TCT covering the Property is issued in the name of Chua. On the other hand, Chua did not
want to pay the consideration in full unless a new TCT is first issued in his name. The trial court faulted Valdes-Choy
for this impasse.

The trial court held that the parties entered into a contract to sell on 30 June 1989, as evidenced by the Receipt for
the P100,000.00 earnest money. The trial court pointed out that the contract to sell was subject to the following
conditions: (1) the balance of P10,700,000.00 was payable not later than 15 July 1989; (2) Valdes-Choy may stay in
the Property until 13 August 1989; and (3) all papers must be in proper order before full payment is made.

The trial court held that Chua complied with the terms of the contract to sell. Chua showed that he was prepared to
pay Valdes-Choy the consideration in full on 13 July 1989, two days before the deadline of 15 July 1989. Chua even
added P80,000.00 for the documentary stamp tax. He purchased from PBCom two managers checks both payable to
Valdes-Choy. The first check for P485,000.00 was to pay the capital gains tax. The second check for P10,215,000.00
was to pay the balance of the purchase price. The trial court was convinced that Chua demonstrated his capacity and
readiness to pay the balance on 13 July 1989 with the production of the PBCom managers check for P10,215,000.00.

On the other hand, the trial court found that Valdes-Choy did not perform her correlative obligation under the
contract to sell to put all the papers in order. The trial court noted that as of 14 July 1989, the capital gains tax had
not been paid because Valdes-Choys counsel who was suppose to pay the tax did not do so. The trial court declared
that Valdes-Choy was in a position to deliver only the owners duplicate copy of the TCT, the signed Deeds of Sale, the
tax declarations, and the latest realty tax receipt. The trial court concluded that these documents were all useless
without the Bureau of Internal Revenue receipt evidencing full payment of the capital gains tax which is a pre-
requisite to the issuance of a new certificate of title in Chuas name.

The trial court held that Chuas non-payment of the balance of P10,215,000.00 on the agreed date was due to Valdes-
Choys fault.

The Court of Appeals Ruling

In reversing the trial court, the Court of Appeals ruled that Chuas stance to pay the full consideration only after the
Property is registered in his name was not the agreement of the parties. The Court of Appeals noted that there is a
whale of difference between the phrases all papers are in proper order as written on the Receipt, and transfer of title
as demanded by Chua.

Contrary to the findings of the trial court, the Court of Appeals found that all the papers were in order and that Chua
had no valid reason not to pay on the agreed date. Valdes-Choy was in a position to deliver the owners duplicate copy
of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. The Property was also free
from all liens and encumbrances.

The Court of Appeals declared that the trial court erred in considering Chuas showing to Valdes-Choy of the PBCom
managers check for P10,215,000.00 as compliance with Chuas obligation to pay on or before 15 July 1989. The Court
of Appeals pointed out that Chua did not want to give up the check unless the property was already in his name.[20]
Although Chua demonstrated his capacity to pay, this could not be equated with actual payment which he refused to
do.

The Court of Appeals did not consider the non-payment of the capital gains tax as failure by Valdes-Choy to put the
papers in proper order. The Court of Appeals explained that the payment of the capital gains tax has no bearing on
the validity of the Deeds of Sale. It is only after the deeds are signed and notarized can the final computation and
payment of the capital gains tax be made.

The Issues

In his Memorandum, Chua raises the following issues:

1. WHETHER THERE IS A PERFECTED CONTRACT OF SALE OF IMMOVABLE PROPERTY;

2. WHETHER VALDES-CHOY MAY RESCIND THE CONTRACT IN CONTROVERSY WITHOUT OBSERVING THE PROVISIONS
OF ARTICLE 1592 OF THE NEW CIVIL CODE;

3. WHETHER THE WITHHOLDING OF PAYMENT OF THE BALANCE OF THE PURCHASE PRICE ON THE PART OF CHUA (AS
VENDEE) WAS JUSTIFIED BY THE CIRCUMSTANCES OBTAINING AND MAY NOT BE RAISED AS GROUND FOR THE
AUTOMATIC RESCISSION OF THE CONTRACT OF SALE;

4. WHETHER THERE IS LEGAL AND FACTUAL BASIS FOR THE COURT OF APPEALS TO DECLARE THE EARNEST MONEY IN
THE AMOUNT OF P100,000.00 AS FORFEITED IN FAVOR OF VALDES-CHOY;

5. WHETHER THE TRIAL COURTS JUDGMENT IS IN ACCORD WITH LAW, REASON AND EQUITY DESERVING OF BEING
REINSTATED AND AFFIRMED.[21]
The issues for our resolution are: (a) whether the transaction between Chua and Valdes-Choy is a perfected contract
of sale or a mere contract to sell, and (b) whether Chua can compel Valdes-Choy to cause the issuance of a new TCT in
Chuas name even before payment of the full purchase price.

The Courts Ruling

The petition is bereft of merit.

There is no dispute that Valdes-Choy is the absolute owner of the Property which is registered in her name under TCT
No.162955, free from all liens and encumbrances. She was ready, able and willing to deliver to Chua the owners
duplicate copy of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There is also
no dispute that on 13 July 1989, Valdes-Choy received PBCom Check No. 206011 for P100,000.00 as earnest money
from Chua. Likewise, there is no controversy that the Receipt for the P100,000.00 earnest money embodied the terms
of the binding contract between Valdes-Choy and Chua.

Further, there is no controversy that as embodied in the Receipt, Valdes-Choy and Chua agreed on the following
terms: (1) the balance of P10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the
account of Valdes-Choy; and (3) if Chua fails to pay the balance of P10,215,000.00 on or before 15 July 1989, Valdes-
Choy has the right to forfeit the earnest money, provided that all papers are in proper order. On 13 July 1989, Chua
gave Valdes-Choy the PBCom managers check for P485,000.00 to pay the capital gains tax.

Both the trial and appellate courts found that the balance of P10,215,000.00 was not actually paid to Valdes-Choy on
the agreed date. On 13 July 1989, Chua did show to Valdes-Choy the PBCom managers check for P10,215,000.00, with
Valdes-Choy as payee. However, Chua refused to give this check to Valdes-Choy until a new TCT covering the Property
is registered in Chuas name. Or, as the trial court put it, until there is proof of payment of the capital gains tax which
is a pre-requisite to the issuance of a new certificate of title.

First and Second Issues: Contract of Sale or Contract to Sell?

Chua has consistently characterized his agreement with Valdez-Choy, as evidenced by the Receipt, as a contract to
sell and not a contract of sale. This has been Chuas persistent contention in his pleadings before the trial and
appellate courts.

Chua now pleads for the first time that there is a perfected contract of sale rather than a contract to sell. He contends
that there was no reservation in the contract of sale that Valdes-Choy shall retain title to the Property until after the
sale. There was no agreement for an automatic rescission of the contract in case of Chuas default. He argues for the
first time that his payment of earnest money and its acceptance by Valdes-Choy precludes the latter from rejecting
the binding effect of the contract of sale. Thus, Chua claims that Valdes-Choy may not validly rescind the contract of
sale without following Article 1592[22] of the Civil Code which requires demand, either judicially or by notarial act,
before rescission may take place.

Chuas new theory is not well taken in light of well-settled jurisprudence. An issue not raised in the court below cannot
be raised for the first time on appeal, as this is offensive to the basic rules of fair play, justice and due process.[23] In
addition, when a party deliberately adopts a certain theory, and the case is tried and decided on that theory in the
court below, the party will not be permitted to change his theory on appeal. To permit him to change his theory will
be unfair to the adverse party.[24]

Nevertheless, in order to put to rest all doubts on the matter, we hold that the agreement between Chua and Valdes-
Choy, as evidenced by the Receipt, is a contract to sell and not a contract of sale. The distinction between a contract
of sale and contract to sell is well-settled:

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.[25]

A perusal of the Receipt shows that the true agreement between the parties was a contract to sell. Ownership over
the Property was retained by Valdes-Choy and was not to pass to Chua until full payment of the purchase price.

First, the Receipt provides that the earnest money shall be forfeited in case the buyer fails to pay the balance of the
purchase price on or before 15 July 1989. In such event, Valdes-Choy can sell the Property to other interested parties.
There is in effect a right reserved in favor of Valdes-Choy not to push through with the sale upon Chuas failure to
remit the balance of the purchase price before the deadline. This is in the nature of a stipulation reserving ownership
in the seller until full payment of the purchase price. This is also similar to giving the seller the right to rescind
unilaterally the contract the moment the buyer fails to pay within a fixed period.[26]

Second, the agreement between Chua and Valdes-Choy was embodied in a receipt rather than in a deed of sale,
ownership not having passed between them. The signing of the Deeds of Sale came later when Valdes-Choy was
under the impression that Chua was about to pay the balance of the purchase price. The absence of a formal deed of
conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer
after full payment of the purchase price.[27]

Third, Valdes-Choy retained possession of the certificate of title and all other documents relative to the sale. When
Chua refused to pay Valdes-Choy the balance of the purchase price, Valdes-Choy also refused to turn-over to Chua
these documents.[28] These are additional proof that the agreement did not transfer to Chua, either by actual or
constructive delivery, ownership of the Property.[29]

It is true that Article 1482 of the Civil Code provides that [W]henever earnest money is given in a contract of sale, it
shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks of
earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The Receipt
evidencing the contract to sell stipulates that the earnest money is a forfeitable deposit, to be forfeited if the sale is
not consummated should Chua fail to pay the balance of the purchase price. The earnest money forms part of the
consideration only if the sale is consummated upon full payment of the purchase price. If there is a contract of sale,
Valdes-Choy should have the right to compel Chua to pay the balance of the purchase price. Chua, however, has the
right to walk away from the transaction, with no obligation to pay the balance, although he will forfeit the earnest
money. Clearly, there is no contract of sale. The earnest money was given in a contract to sell, and thus Article 1482,
which speaks of a contract of sale, is not applicable.

Since the agreement between Valdes-Choy and Chua is a mere contract to sell, the full payment of the purchase price
partakes of a suspensive condition. The non-fulfillment of the condition prevents the obligation to sell from arising
and ownership is retained by the seller without further remedies by the buyer.[30] Article 1592 of the Civil Code
permits the buyer to pay, even after the expiration of the period, as long as no demand for rescission of the contract
has been made upon him either judicially or by notarial act. However, Article 1592 does not apply to a contract to sell
where the seller reserves the ownership until full payment of the price.[31]

Third and Fourth Issues: Withholding of Payment of the Balance

of the Purchase Price and Forfeiture of the Earnest Money

Chua insists that he was ready to pay the balance of the purchase price but withheld payment because Valdes-Choy
did not fulfill her contractual obligation to put all the papers in proper order. Specifically, Chua claims that Valdes-
Choy failed to show that the capital gains tax had been paid after he had advanced the money for its payment. For
the same reason, he contends that Valdes-Choy may not forfeit the earnest money even if he did not pay on time.

There is a variance of interpretation on the phrase all papers are in proper order as written in the Receipt. There is no
dispute though, that as long as the papers are in proper order, Valdes-Choy has the right to forfeit the earnest money
if Chua fails to pay the balance before the deadline.
The trial court interpreted the phrase to include payment of the capital gains tax, with the Bureau of Internal Revenue
receipt as proof of payment. The Court of Appeals held otherwise. We quote verbatim the ruling of the Court of
Appeals on this matter:

The trial court made much fuss in connection with the payment of the capital gains tax, of which Section 33 of the
National Internal Revenue Code of 1977, is the governing provision insofar as its computation is concerned. The trial
court failed to consider Section 34-(a) of the said Code, the last sentence of which provides, that [t]he amount
realized from the sale or other disposition of property shall be the sum of money received plus the fair market value
of the property (other than money) received; and that the computation of the capital gains tax can only be finally
assessed by the Commission on Internal Revenue upon the presentation of the Deeds of Absolute Sale themselves,
without which any premature computation of the capital gains tax becomes of no moment. At any rate, the
computation and payment of the capital gains tax has no bearing insofar as the validity and effectiveness of the deeds
of sale in question are concerned, because it is only after the contracts of sale are finally executed in due form and
have been duly notarized that the final computation of the capital gains tax can follow as a matter of course. Indeed,
exhibit D, the PBC Check No. 325851, dated July 13, 1989, in the amount of P485,000.00, which is considered as part
of the consideration of the sale, was deposited in the name of appellant, from which she in turn, purchased the
corresponding check in the amount representing the sum to be paid for capital gains tax and drawn in the name of
the Commissioner of Internal Revenue, which then allayed any fear or doubt that that amount would not be paid to
the Government after all.[32]

We see no reason to disturb the ruling of the Court of Appeals.

In a contract to sell, the obligation of the seller to sell becomes demandable only upon the happening of the
suspensive condition. In this case, the suspensive condition is the full payment of the purchase price by Chua. Such
full payment gives rise to Chuas right to demand the execution of the contract of sale.

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. Article 1458 of the Civil Code defines a contract of sale as follows:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

x x x. (Emphasis supplied)

Prior to the existence of the contract of sale, the seller is not obligated to transfer ownership to the buyer, even if
there is a contract to sell between them. It is also upon the existence of the contract of sale that the buyer is
obligated to pay the purchase price to the seller. Since the transfer of ownership is in exchange for the purchase
price, these obligations must be simultaneously fulfilled at the time of the execution of the contract of sale, in the
absence of a contrary stipulation.

In a contract of sale, the obligations of the seller are specified in Article 1495 of the Civil Code, as follows:

Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the
object of the sale. (Emphasis supplied)

The obligation of the seller is to transfer to the buyer ownership of the thing sold. In the sale of real property, the
seller is not obligated to transfer in the name of the buyer a new certificate of title, but rather to transfer ownership
of the real property. There is a difference between transfer of the certificate of title in the name of the buyer, and
transfer of ownership to the buyer. The buyer may become the owner of the real property even if the certificate of
title is still registered in the name of the seller. As between the seller and buyer, ownership is transferred not by the
issuance of a new certificate of title in the name of the buyer but by the execution of the instrument of sale in a
public document.

In a contract of sale, ownership is transferred upon delivery of the thing sold. As the noted civil law commentator
Arturo M. Tolentino explains it, -
Delivery is not only a necessary condition for the enjoyment of the thing, but is a mode of acquiring dominion and
determines the transmission of ownership, the birth of the real right. The delivery, therefore, made in any of the
forms provided in articles 1497 to 1505 signifies that the transmission of ownership from vendor to vendee has taken
place. The delivery of the thing constitutes an indispensable requisite for the purpose of acquiring ownership. Our law
does not admit the doctrine of transfer of property by mere consent; the ownership, the property right, is derived
only from delivery of the thing. x x x.[33] (Emphasis supplied)

In a contract of sale of real property, delivery is effected when the instrument of sale is executed in a public
document. When the deed of absolute sale is signed by the parties and notarized, then delivery of the real property is
deemed made by the seller to the buyer. Article 1498 of the Civil Code provides that

Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred.

x x x.

Similarly, in a contract to sell real property, once the seller is ready, able and willing to sign the deed of absolute sale
before a notary public, the seller is in a position to transfer ownership of the real property to the buyer. At this point,
the seller complies with his undertaking to sell the real property in accordance with the contract to sell, and to
assume all the obligations of a vendor under a contract of sale pursuant to the relevant articles of the Civil Code. In a
contract to sell, the seller is not obligated to transfer ownership to the buyer. Neither is the seller obligated to cause
the issuance of a new certificate of title in the name of the buyer. However, the seller must put all his papers in
proper order to the point that he is in a position to transfer ownership of the real property to the buyer upon the
signing of the contract of sale.

In the instant case, Valdes-Choy was in a position to comply with all her obligations as a seller under the contract to
sell. First, she already signed the Deeds of Sale in the office of her counsel in the presence of the buyer. Second, she
was prepared to turn-over the owners duplicate of the TCT to the buyer, along with the tax declarations and latest
realty tax receipt. Clearly, at this point Valdes-Choy was ready, able and willing to transfer ownership of the Property
to the buyer as required by the contract to sell, and by Articles 1458 and 1495 of the Civil Code to consummate the
contract of sale.

Chua, however, refused to give to Valdes-Choy the PBCom managers check for the balance of the purchase price.
Chua imposed the condition that a new TCT should first be issued in his name, a condition that is found neither in the
law nor in the contract to sell as evidenced by the Receipt. Thus, at this point Chua was not ready, able and willing to
pay the full purchase price which is his obligation under the contract to sell. Chua was also not in a position to assume
the principal obligation of a vendee in a contract of sale, which is also to pay the full purchase price at the agreed
time. Article 1582 of the Civil Code provides that

Art. 1582. The vendee is bound to accept delivery and to pay the price of the thing sold at the time and place
stipulated in the contract.
x x x. (Emphasis supplied)

In this case, the contract to sell stipulated that Chua should pay the balance of the purchase price on or before 15 July
1989. The signed Deeds of Sale also stipulated that the buyer shall pay the balance of the purchase price upon signing
of the deeds. Thus, the Deeds of Sale, both signed by Chua, state as follows:

Deed of Absolute Sale covering the lot:

xxx

For and in consideration of the sum of EIGHT MILLION PESOS (P8,000,000.00), Philippine Currency, receipt of which in
full is hereby acknowledged by the VENDOR from the VENDEE, the VENDOR sells, transfers and conveys unto the
VENDEE, his heirs, successors and assigns, the said parcel of land, together with the improvements existing thereon,
free from all liens and encumbrances.[34] (Emphasis supplied)
Deed of Absolute Sale covering the furnishings:

xxx

For and in consideration of the sum of TWO MILLION EIGHT HUNDRED THOUSAND PESOS (P2,800,000.00), Philippine
Currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE, the VENDOR sells,
transfers and conveys unto the VENDEE, his heirs, successors and assigns, the said furnitures, fixtures and other
movable properties thereon, free from all liens and encumbrances.[35] (Emphasis supplied)

However, on the agreed date, Chua refused to pay the balance of the purchase price as required by the contract to
sell, the signed Deeds of Sale, and Article 1582 of the Civil Code. Chua was therefore in default and has only himself to
blame for the rescission by Valdes-Choy of the contract to sell.

Even if measured under existing usage or custom, Valdes-Choy had all her papers in proper order. Article 1376 of the
Civil Code provides that:

Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of a
contract, and shall fill the omission of stipulations which are ordinarily established.

Customarily, in the absence of a contrary agreement, the submission by an individual seller to the buyer of the
following papers would complete a sale of real estate: (1) owners duplicate copy of the Torrens title;[36] (2) signed
deed of absolute sale; (3) tax declaration; and (3) latest realty tax receipt. The buyer can retain the amount for the
capital gains tax and pay it upon authority of the seller, or the seller can pay the tax, depending on the agreement of
the parties.

The buyer has more interest in having the capital gains tax paid immediately since this is a pre-requisite to the
issuance of a new Torrens title in his name. Nevertheless, as far as the government is concerned, the capital gains tax
remains a liability of the seller since it is a tax on the sellers gain from the sale of the real estate. Payment of the
capital gains tax, however, is not a pre-requisite to the transfer of ownership to the buyer. The transfer of ownership
takes effect upon the signing and notarization of the deed of absolute sale.

The recording of the sale with the proper Registry of Deeds[37] and the transfer of the certificate of title in the name
of the buyer are necessary only to bind third parties to the transfer of ownership.[38] As between the seller and the
buyer, the transfer of ownership takes effect upon the execution of a public instrument conveying the real estate.[39]
Registration of the sale with the Registry of Deeds, or the issuance of a new certificate of title, does not confer
ownership on the buyer. Such registration or issuance of a new certificate of title is not one of the modes of acquiring
ownership.[40]

In this case, Valdes-Choy was ready, able and willing to submit to Chua all the papers that customarily would
complete the sale, and to pay as well the capital gains tax. On the other hand, Chuas condition that a new TCT be first
issued in his name before he pays the balance of P10,215,000.00, representing 94.58% of the purchase price, is not
customary in a sale of real estate. Such a condition, not specified in the contract to sell as evidenced by the Receipt,
cannot be considered part of the omissions of stipulations which are ordinarily established by usage or custom.[41]
What is increasingly becoming customary is to deposit in escrow the balance of the purchase price pending the
issuance of a new certificate of title in the name of the buyer. Valdes-Choy suggested this solution but unfortunately,
it drew no response from Chua.

Chua had no reason to fear being swindled. Valdes-Choy was prepared to turn-over to him the owners duplicate copy
of the TCT, the signed Deeds of Sale, the tax declarations, and the latest realty tax receipt. There was no hindrance to
paying the capital gains tax as Chua himself had advanced the money to pay the same and Valdes-Choy had procured
a managers check payable to the Bureau of Internal Revenue covering the amount. It was only a matter of time
before the capital gains tax would be paid. Chua acted precipitately in filing the action for specific performance a
mere two days after the deadline of 15 July 1989 when there was an impasse. While this case was dismissed on 22
November 1989, he did not waste any time in re-filing the same on 29 November 1989.
Accordingly, since Chua refused to pay the consideration in full on the agreed date, which is a suspensive condition,
Chua cannot compel Valdes-Choy to consummate the sale of the Property. Article 1181 of the Civil Code provides that
-

ART. 1181. 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.

Chua acquired no right to compel Valdes-Choy to transfer ownership of the Property to him because the suspensive
condition - the full payment of the purchase price - did not happen. There is no correlative obligation on the part of
Valdes-Choy to transfer ownership of the Property to Chua. There is also no obligation on the part of Valdes-Choy to
cause the issuance of a new TCT in the name of Chua since unless expressly stipulated, this is not one of the
obligations of a vendor.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 37652 dated 23 February 1995 is AFFIRMED in
toto.

SO ORDERED.