VOL.

337, AUGUST 1, 2000 67

Santos vs. Court of Appeals
*
G.R. No. 120820. August 1, 2000.

SPS. FORTUNATO SANTOS and ROSALINDA R. SANTOS, petitioners,  vs.  COURT OF

APPEALS, SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.

Remedial Law; Appeals; There is a question of law in a given case when the doubt or difference arises as
to what the law is on a certain set of facts, and there is a question of fact when the doubt or difference arises
as to the truth or falsehood of the alleged facts.—There is a question of law in a given case when the doubt or
difference arises as to what the law is on a certain set of facts, and there is a question of fact when the doubt
or difference arises as to the truth or falsehood of the alleged facts. But we note that the first assignment of
error submitted by respondents for consideration by the appellate court dealt with the trial court’s finding
that herein petitioners got back the property in question because respondents did not have the means to pay
the installments and/or amortization of the loan. The resolution of this question involved an evaluation of
proof, and not only a consideration of the applicable statutory and case laws. Clearly, CA-G.R. CV No. 30955
did not involve pure questions of law, hence the Court of Appeals had jurisdiction and there was no violation
of our Circular No. 2-90.
Civil Law;  Contracts;  Sale;  A contract is what the law defines it to be, taking into consideration its
essential elements, and not what the contracting parties call it; The transfer of ownership in exchange for a
price paid or promised is the very essence of a contract of sale.—It must be emphasized from the outset that a
contract is what the law defines it to be, taking into consideration its essential elements, and not what the
contracting parties call it. Article 1458 of the Civil Code defines a contract of sale. Note that the said article
expressly obliges the vendor to transfer ownership of the thing sold as an essential element of a contract of
sale. This is because the

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* SECOND DIVISION.

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68 SUPREME COURT REPORTS

ANNOTATED

Santos vs. Court of Appeals

transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale.
Same; Same; Same; Contract of Sale Distinguished from a Contract to Sell.—As we earlier pointed out,
in a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase
price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive
condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring an obligatory force. This is entirely
different from the situation in a contract of sale, where non-payment of the price is a negative resolutory
condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the
thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell,
however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of
paying the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent,
he is enforcing the contract and not rescinding it.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     P.C. Jose & Associates for petitioner.
     Felix D. Gragasin for private respondents.

QUISUMBING, J.:

For review on certiorari is the decision of the Court of Appeals, dated March 28, 1995, in CA-G.R.
CV No. 30955, which reversed and set aside the judgment of the Regional Trial Court of Makati,
Branch 133, in Civil Case No. 89-4759. Petitioners (the Santoses) were the owners of a house and
lot informally sold, with conditions, to herein private respondents (the Casedas). In the trial
court, the Casedas had complained that the Santoses refused to deliver said house and lot despite
repeated demands. The trial court dismissed the complaint for specific performance and damages,
but in the Court of Appeals, the dismissal was reversed, as follows:
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Santos vs. Court of Appeals

“WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and SET ASIDE
and a new one entered:

“1. GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the finality of
judgment within which to pay the balance of the obligation in accordance with their agreement;
“2. Ordering appellees to restore possession of the subject house and lot to the appellants upon receipt of
the full amount of the balance due on the purchase price; and
“3. No pronouncement as to costs.
1
“SO ORDERED.”

The undisputed facts of this case are as follows: The spouses Fortunato and Rosalinda Santos
owned the house and lot consisting of 350 square meters located at Lot 7, Block 8, Better Living
Subdivision, Parañaque, Metro Manila, as evidenced by TCT (S-11029) 28005 of the Register of
Deeds of Parañaque. The land together with the house, was mortgaged with the Rural Bank of
Salinas, Inc., to secure a loan of P150,000.00 maturing on June 16, 1987.
Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of hers in
Pasay City and soon became very good friends with her. The duo even became  kumadres  when
Carmen stood as a wedding sponsor of Rosalinda’s nephew.
On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of P16,915.84
in unpaid interest and other charges. Since the Santos couple had no funds, Rosalinda offered to
sell the house and lot to Carmen. After inspecting the real property, Carmen and her husband
agreed.
Sometime that month of June, Carmen and Rosalinda signed a document, which reads:
“Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to the (total) amount of
350,000.00 (house and lot) that is own (sic) by Mrs. Rosalinda R. Santos.
_______________
1 Rollo, pp. 77-78.

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70 SUPREME COURT REPORTS ANNOTATED

Santos vs. Court of Appeals

(Mrs.) (Sgd.) Carmen H. Caseda 

     direct buyer
Mrs. Carmen Caseda
“(Sgd.) Rosalinda Del R. Santos 
     Owner
Mrs. Rosalinda R. Santos

House and Lot 

Better Living Subd. Parañaque,
2
Metro Manila 
Section V Don Bosco St.”

The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay:
(1) the balance of the mortgage loan with the Rural bank amounting to P135,385.18; (2) the real
estate taxes; (3) the electric and water bills; and (4) the balance of
3
the cash price to be paid not
later than June 16, 1987, which was the maturity date of the loan.
The Casedas gave an initial payment of P54,100.00 and immediately took possession of the
property, which they then leased out. They also paid in installments, P81,696.84 of the mortgage
loan. The Casedas, however, failed to pay the remaining balance of the loan because they suffered
bankruptcy in 1987. Notwithstanding the state of their finances, Carmen nonetheless paid in
March 1990, the real estate taxes on the property for 1981-1984. She also settled the electric bills
from December 12, 1988 to July 12, 1989. All these payments were made in the name of
Rosalinda Santos.
In January 1989, the Santoses, seeing that the Casedas lacked the means to pay the
remaining installments and/or amortization of the loan, repossessed the property. The Santoses
then collected the rentals from the tenants.
In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approached
petitioners and offered to pay the balance of the purchase price for the house and lot. The parties,
however, could not agree, and the deal could not push through because the Santoses wanted a
higher price. For understandably, the real

_______________
2 Exhibit “D,” Records, p. 119.
3 Id. at 215.

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Santos vs. Court of Appeals

estate boom in Metro Manila at this time, had considerably jacked up realty value.
 On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of Makati, to
have the Santoses execute the final deed of conveyance over the property, or in default thereof, to
reimburse the amount of P180,000.00 paid in cash and P249,900.00 paid to the rural bank, plus
interest, as well as rentals for eight months amounting to P32,000.00, plus damages and costs of
suit.
After trial on the merits, the lower court disposed of the case as follows:
“WHEREFORE, judgment is hereby ordered:

(a) dismissing plaintiffs’ (Casedas’) complaint; and

(b) declaring the agreement marked as Annex “C” of the complaint rescinded. Costs against plaintiffs.
4
“SO ORDERED.”

Said judgment of dismissal is mainly based on the trial court’s finding that:
“Admittedly, the purchase price of the house and lot was P485,385.18, i.e. P350,000.00 as cash payment and
P135.385.18, assumption of mortgage. Of it plaintiffs [Casedas] paid the following: (1) P54,100.00 down
payment; and (2) P81,694.64 installment payments to the bank on the loan (Exhs. E to E-19) or a total of
P135,794.64. Thus,
5
plaintiffs were short of the purchase price. They cannot, therefore, demand specific
performance.”

The trial court further held that the Casedas were not entitled to reimbursement of payments
already made, reasoning that:
“As earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the purchase price of
P485,385.18. The property was in plaintiffs’ possession from June 1984 to January 1989 or a period of fifty-
five months. During that time, plaintiffs leased the property. Carmen said the property was rented for
P25.00 a day or P750.00 a month at the start

_______________
4 Rollo, p. 109.
5 Rollo, p. 107.

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72 SUPREME COURT REPORTS ANNOTATED

Santos vs. Court of Appeals

and in 1987 it was increased to P2,000.00 and P4,000.00 a month. But the evidence is not precise when the
different amounts of rental took place. Be that as it may, fairness demands that plaintiffs must pay
defendants for their exercise of dominical rights over the property by renting it to others. The amount of
P2,000.00 a month would be reasonable based on the average of P750.00, P2,000.00, P4,000.00 lease-rentals
charged. Multiply P2,000.00 by 55 months, the plaintiffs must pay defendants P110,000.00 for the use of the
property. Deducting this amount from the P135.794.64 payment of the plaintiffs on the property, the
difference is P25,794.64. Should the plaintiffs be entitled to a reimbursement of this amount? The answer is
in the negative. Because of failure of plaintiffs to liquidated the mortgage loan on time, it had ballooned
from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of December 31, 1988. Defendants
[Santoses] had to pay the last amount to the bank to save the property from foreclosure. Logically, plaintiffs
must share in the burden arising from their failure to liquidate the loan per their contractual commitment.
Hence, the amount of P25,794.64
6
as their share in the defendants’ damages in the form of increased loan-
amount, is reasonable.”
On appeal, the appellate court, as earlier noted, reversed the lower court. The appellate court
held that rescission was not justified under the circumstances and allowed the Caseda spouses a
period of ninety days within which to pay the balance of the agreed purchase price.
Hence, this instant petition for review on certiorari filed by the Santoses.
Petitioners now submit the following issues for our consideration:
WHETHER OR NOT THE COURT OF APPEALS HAS JURISDICTION TO DECIDE PRIVATE
RESPONDENT’S APPEAL INTERPOSING PURELY QUESTIONS OF LAW.
WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE BUT A
MERE 7
ORAL CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND FOR RESCISSION (ART.
1592,  CIVIL CODE) IS NOT APPLICABLE.

_______________
6 Rollo, p. 108.
7 “ART. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the
price at the time

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Santos vs. Court of Appeals

ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED, WHETHER

PETITIONERS’ DEMAND AND PRAYER FOR RESCISSION CONTAINED IN THEIR ANSWER FILED
BEFORE THE TRIAL SATISFIED THE SAID REQUIREMENT.
WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE PURCHASE
PRICE INCLUDING THE NONCOMPLIANCE WITH THE STIPULATION TO LIQUIDATE THE
MORTGAGE LOAN ON TIME WHICH CAUSED GRAVE DAMAGE AND PREJUDICE TO
PETITIONERS, CONSTITUTE SUBSTANTIAL
8
BREACH TO JUSTIFY RESCISSION OF A CONTRACT
TO SELL UNDER ARTICLE 1191  (CIVIL CODE).

On the first issue, petitioners
9
argue that, since both the parties and the appellate court adopted
the findings of trial court,  no questions of fact were raised before the Court of Appeals. According
to petitioners,  CA-G.R. CV No. 30955, involved only pure questions of law. They aver that the
court a quo had no jurisdiction to hear, much less 10
decide, CA-G.R. CV No. 30955, without running
afoul of Supreme Court Circular No. 2-90 (4) [c].

_______________

agreed upon the rescission of contract shall of right take place, the vendee may 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 a notarial act.
After the demand, the court may not grant him a new term.”
8 “ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not

comply with what is incumbent upon him.

“The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become
impossible.
“The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
“This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.”
9 Rollo, p. 13.
10  “4.  Erroneous Appeals.—An appeal taken to either the Supreme Court or the Court of Appeals by the wrong or

inappropriate mode shall be dismissed.

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74 SUPREME COURT REPORTS ANNOTATED

Santos vs. Court of Appeals

There is a question of law in a given case when the doubt or difference arises as to what the law
is on a certain set of facts, and there is a question
11
of fact when the doubt or difference arises as to
the truth or falsehood of the alleged facts.   But we note that the first assignment of error
submitted by respondents for consideration by the appellate court dealt with the trial court’s
finding that herein petitioners got back the property in question because 12
respondents did not
have the means to pay the installments and/or amortization of the loan.  The resolution of this
question involved an evaluation of proof, and not only a consideration of the applicable statutory
and case laws. Clearly, CA-G.R. CV No. 30955 did not involve pure questions of law, hence the
Court of Appeals had jurisdiction and there was no violation of our Circular No. 2-90.
Moreover, we find that petitioners took an active part in the proceedings before the Court of
Appeals, yet they did not raise there the issue of jurisdiction. They should have raised this issue
at the earliest opportunity before the Court of Appeals. A party taking part in the proceedings
before the appellate court and submitting his case for its decision ought not to later on attack13
the
court’s decision for want of jurisdiction because the decision turns out to be adverse to him.
The second and  third issues  deal with the question: Did the Court of Appeals err in holding
that a judicial rescission of the agreement was necessary? In resolving both issues, we must first

_______________

xxx
[c] Raising issues purely of law in the Court of Appeals, or appeal by wrong mode.—If an appeal under Rule 41 is taken
from the Regional Trial Court to the Court of Appeals and therein the appellant raises only questions of law, the appeal
shall be dismissed, issues purely of law not being reviewable by said Court. So, too, if an appeal is attempted from the
judgment rendered by a Regional Trial Court in the exercise of its appellate jurisdiction by notice of appeal, instead of by
petition for review, the appeal is inefficacious and should be dismissed.”
11 Dela Torre v. Pepsi Cola Products Phils., Inc., 298 SCRA 363, 373 (1998); Commissioner of Internal Revenue v. Court

of Appeals, 298 SCRA 83, 91 (1998).

12 CA Rollo, p. 27.
13 Tijam v. Sibonghanoy, 23 SCRA 29, 35-36 (1968).

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make a preliminary determination of the nature of the contract in question: Was it a contract of
sale, as insisted by respondents or a mere contract to sell, as contended by petitioners?
Petitioners argue that the transaction between them and respondents was a mere contract to
sell, and not a contract of sale, since the sole documentary evidence (Exh. D, receipt) referring to
their agreement clearly showed that they did not transfer ownership of the property in question
simultaneous with its delivery and hence remained its owners, pending fulfillment of the other
suspensive conditions,  i.e.,  full payment of the balance of the purchase price and the loan
amortizations. Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon Brokerage
Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972), where we held that Article 1592 of
the Civil Code is inapplicable to a contract to sell. They charge, the court a quo  with reversible
error in holding that petitioners should have judicially rescinded the agreement with respondents
when the latter failed to pay the amortizations on the bank loan.
Respondents insist that there was a perfected contract of sale, since upon their partial
payment of the purchase price, they immediately took possession of the property as vendees, and
subsequently leased it, thus exercising all the rights of ownership over the property. This showed
that transfer of ownership was simultaneous with the delivery of the realty sold, according to
respondents.
It must be emphasized from the outset that a contract is what the law defines it to be, 14
taking
into 15
consideration its essential elements, and not what the contracting parties call it.   Article
1458  of the Civil Code defines a contract of sale. Note that the said article expressly obliges the
vendor to transfer ownership of the thing sold as an essential element of a contract of sale. This is
because the transfer of ownership in exchange for a price paid or promised

_______________
14 Quiroga v. Parsons Hardware Co., 38 Phil. 501 (1918).
15 “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.
“A contract of sale may be absolute or conditional.”

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76 SUPREME COURT REPORTS ANNOTATED

Santos vs. Court of Appeals
16
is the very essence of a contract of sale.   We have carefully examined the contents of the
unofficial receipt, Exh. D, with the terms and conditions informally agreed upon by the parties, as
well as the proofs submitted to support their respective contentions. We are far from persuaded
that there was a transfer of ownership simultaneously with the delivery of the property
purportedly sold. The records clearly show that, notwithstanding the fact that the Casedas first
took then lost possession of the disputed house and lot, the title to the property, TCT No. 28005
(S-11029) issued by 17
the Register of Deeds of Parañaque, has remained always in the name of
Rosalinda Santos.   Note further that although the parties had agreed that the Casedas would
assume the mortgage, all amortization
18
payments made by Carmen Caseda to the bank were in
the name of Rosalinda Santos.   We likewise find that the bank’s cancellation and 19
discharge of
mortgage dated January 20, 1990, was made in favor of Rosalinda Santos. The foregoing
circumstances categorically and clearly show that no valid transfer of ownership was made by the
Santoses to the Casedas. Absent this essential element, their agreement cannot be deemed a
contract of sale. We agree with petitioners’ averment that the agreement between Rosalinda
Santos and Carmen Caseda is a contract to sell. In contracts to sell, ownership is reserved by the
vendor and is not to pass until full payment of the purchase price. This we find fully applicable
and understandable in this case, given that the property involved is a titled realty under
mortgage to a bank and would require notarial and other formalities of law before transfer
thereof could be validly effected.
In view of our finding in the present case that the agreement between the parties is a contract
to sell, it follows that the appellate court erred when it decreed that a judicial rescission of said
agreement was necessary. This is because there was no rescission

_______________
 16 Schmid & Oberly, Inc. v. RJL Martinez Fishing Corp., 166 SCRA 493, 501 (1988) citing Commissioner of Internal
Revenue v. Constantino, 31 SCRA 779, 785 (1970); Ker & Co., Ltd. v. Lingad, 38 SCRA 524, 530 (1971) citing Salisbury v.
Brooks, 94 SE 117 (1917).
17 Exhibit “A,” Records, pp. 112-115.
18 Exhibit “E,” Id. p. 120; Exhibits “E-1” to “E-17,” Id. pp. 121-129.
19 Exhibit “3,” Id. at 164.

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to speak of in the first place. As we earlier pointed out, in a contract to sell, title remains with the
vendor and does not pass on to the vendee until the purchase price is paid in full. Thus, in a
contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to
pay the price agreed upon is not a mere breach, casual or serious, but a situation 20
that prevents
the obligation of the vendor to convey title from acquiring an obligatory force. This is entirely
different from the situation in a contract of sale, where non-payment of the price is a negative
resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost
ownership
21
of the thing sold and cannot recover it, unless the contract of sale is rescinded and set
aside.  In a contract to sell, however, the vendor remains the owner for as long as the vendee has
not complied fully with the condition of paying the purchase price. If the vendor should eject the
vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding
it. When the petitioners in the instant case repossessed the disputed house and lot for failure of
private respondents to pay the purchase price in full, they were merely enforcing the contract and
not rescinding it. As petitioners correctly point out, the Court of Appeals erred when it ruled that
petitioners should have judicially rescinded the contract pursuant to Articles 1592 and 1191 of
the Civil Code. Article 1592 speaks of non-payment 22
of the purchase price as a resolutory
condition. It does not apply to a contract to sell.   As to Article 1191, it is 23
subordinated to the
provisions of Article 1592 when applied to sales of immovable property.   Neither provision is
applicable in the present case.
As to the  last issue,  we need not tarry to make a determination of whether the breach of
contract by private respondents is so substantial as to defeat the purpose of the parties in
entering into the agreement and thus entitle petitioners to rescission. Having ruled

_______________
20 Ong v. Court of Appeals, 310 SCRA 1, 10 (1999) citing Agustin v. Court of Appeals, 186 SCRA 375 (1990); Roque v.

Lapuz, 96 SCRA 741(1980); Manuel v. Rodriguez, Sr., 109 Phil. 1 (1960).

21 TOLENTINO, V CIVIL CODE 24 (1992).
22 Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93, 104 (1972).
23 Villaruel v. Tan King, 43 Phil. 251, 255 (1922).

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78 SUPREME COURT REPORTS ANNOTATED

People vs. Villanos

that there is no rescission to speak of in this case, the question is moot.

WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court of
Appeals in CA-G.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of the Regional
Trial Court of Makati, Branch 133, with respect to the DISMISSAL of the complaint in Civil Case
No. 89-4759, is hereby REINSTATED. No pronouncement as to costs.
SO ORDERED.

     Mendoza (Actg. Chairman), Buena and De Leon, Jr., JJ., concur.

     Bellosillo (Chairman), J., On Official leave.

Petition granted, judgment reversed and set aside. Judgment of court a quo reinstated.

Note.—In determining the nature of a contract, the Court looks at the intent of the parties
and not at the nomenclature used to describe it. (Lao vs. Court of Appeals,275 SCRA 237 [1997])

——o0o——