SPOUSES VICENTE AND LOURDES PINGOL, PETITIONERS, VS. HON. COURT OF APPEALS AND HEIRS OF FRANCISCO N. DONASCO, NAMELY:  MELINDA D. PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, N…

An action denominated as one for specific performance and damages
was brought by the private respondents against the petitioners before the
Regional Trial Court (RTC) of Caloocan City which, after due trial, rendered a
decision in favor of the petitioners. On appeal, the respondent Court reversed the trial court’s decision.

It is from this judgment that the petitioners have appealed to
this Court by way of a petition for review on certiorari.

The material facts of this case are simple and undisputed.

Petitioner Vicente Pingol is the owner of Lot No. 3223 of the
Cadastral Survey of Caloocan, with an area of 549 square meters, located at
Bagong Barrio, Caloocan City and more particularly described in Transfer
Certificate of Title (TCT) No. 7435 of the Registry of Deeds of Caloocan City. On 17 February 1969, he executed a “DEED
OF ABSOLUTE SALE OF ONE-HALF (1/2) [OF] AN UNDIVIDED PORTION OF A PARCEL OF
LAND” in favor of Francisco N. Donasco which was acknowledged before a
notary public. The parcel of land
referred to therein is Lot No. 3223 and the pertinent portions of the document
read as follows:

“That for and in consideration of the sum of TWENTY THOUSAND
AND FIVE HUNDRED THIRTY (P20,530.00) PESOS, Philippine Currency, the VENDOR
hereby these presents SELL, CONVEY AND CONVEY by way of Absolute Sale the
one-half (½) portion, equivalent to Two Hundred Seventy Four and point Fifty
(274.50) square meters, to the VENDEE, the above-mentioned property, his heirs,
assigns and successors-in-interest;

That the VENDOR hereby confesses and acknowledges the receipt of
TWO THOUSAND (P2,000.00) PESOS from VENDEE as advanced (sic) and partial
payment to the above-cited consideration of the Sale herein mentioned, leaving
therefor a balance of Eighteen Thousand and Five Hundred Thirty (P18,530) Pesos
to be paid in several equal instalments within a period of six (6) years, beginning January,
1970;

That after computing the above-mentioned equal instalments, the
VENDEE agrees and undertakes to pay unto the VENDOR a monthly amount equivalent
to Two Hundred Fifty Seven (sic) and Thirty Six Centavos (P257.36) within a
period of Seventy One (71) months and on the Seven Two [sic] (72) month, the
amount of (P257.44) as the last and final instalment thereof;

That the VENDEE agrees that in case of default in the payment of
the instalments due the same shall earn a legal rate of interest, and to which
the VENDOR likewise agrees;

That
the VENDEE undertakes to pay unto the VENDOR the herein monthly instalment
within the first five (5) days of each month and the same shall be made
available and to be paid at the residence of the VENDOR, payment to be made
either directly to the VENDOR, his wife or his authorized representative or
factor;

That
in case of partition of the above-described property between herein VENDOR and
VENDEE, the same shall be divided into two (2) equal parts, the VENDOR gets the
corner facing J. De Jesus and Malolos Avenue and the VENDEE shall get the portion
with fifteen (15) meters frontage facing J. De Jesus Street only.”^[1]

Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion, designated as Lot No.
3223-A, was then segregated from the mother lot, and the parties prepared a
subdivision plan (Exhibit “C”) which was approved by the Land
Registration Commission.^[2]

Francisco Donasco immediately took possession of the subject lot
and constructed a house thereon. In
January 1970, he started paying the monthly installments but was able to pay
only up to 1972.

On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid
P8,369.00, plus the P2,000.00 advance payment, leaving a balance of P10,161.00
on the contract price.^[3] Lot
No. 3223-A remained in the possession of Donasco’s heirs.

On 19 October 1988, the heirs of Francisco Donasco filed an
action for “Specific Performance and Damages, with Prayer for Writ of
Preliminary Injunction” against the spouses Vicente and Lourdes Pingol
(petitioners herein) before the RTC of Caloocan City.  The action was docketed as Civil Case No. 13572 and raffled
off to Branch 125 of the said court.

In their complaint,^[4] the
plaintiffs (private respondents herein) averred that after the death of their
father, they offered to pay the balance of P10,161.00 plus the stipulated legal rate of
interest thereon to Vicente Pingol but the latter rebuffed their offer and has
“been demanding for a bigger and unreasonable amount, in complete variance
to what is lawfully due and payable.” They stated that they had
“exerted earnest efforts to forge or reach an amicable and peaceful settlement
with the defendants” for the payment of the property in question but to no
avail. They further alleged that the
defendants were committing “acts of forcible entry and encroachment”
upon their land and asked that a writ of preliminary injunction be issued to
restrain the defendants from the acts complained of.

Plaintiffs then prayed that the defendants be ordered, inter alia:

“a. x x
x to accept the amount of P10,161.00, more or less, plus the stipulated
legal rate of interest due thereon, as full and complete payment of the balance for the agreed
price/consideration on the one-half (½)
portion of the parcel of land x x x; [and]

b. x x x to execute the final deed of sale on
the one-half (½) portion of the lot x x x in accordance with the partition
reflected in the survey and subdivision plan, x x x .”^[5]

In their answer with counterclaim,^[6]
defendants admitted the execution of the aforementioned deed of sale, the
segregation of the portion sold and the preparation and approval of the
subdivision plan, but set up the following special and affirmative
defenses: (1) the plaintiffs’ cause of
action had already prescribed; (2) the deed of sale embodied a conditional
contract of sale “as the consideration is to be paid on installment basis
within a period of six years beginning January, 1970”; (3) the subdivision
plan was prepared on the assumption that Francisco Donasco would be able to
comply with his obligation; (4) when Francisco died, he had not fully paid the
total consideration agreed upon; and (5) considering the breach by Francisco of
his contractual obligation way back in 1976, the sale was deemed to have been
cancelled and the continuous occupancy of Francisco after 1976 and by his heirs
thereafter was by mere tolerance of Vicente Pingol. They then asked that the plaintiffs be ordered to vacate the
premises and to pay them attorney’s fees and a reasonable compensation for the
use of the land.

In their Reply and Answer to Counterclaim,^[7] the
plaintiffs pointed out that there is no provision in the deed of sale for its cancellation
in case of default in the payment of the monthly installments and invoked
Article 1592 of the New Civil Code. They specifically denied the allegations in the counterclaim.

The issues having been joined, the case was then tried on the merits.

On 22 January 1990, the trial court rendered a decision^[8]
dismissing the complaint and ordering the plaintiffs to pay the defendants
P350.00 as reasonable monthly rental for the use of the premises from the
filing of the complaint, P10,000.00 by way of attorney’s fees, and the costs of
the suit. It held that: (1) the deed of absolute sale in question,
marked and offered in evidence as Exhibit “A,” is a contract to sell, not a contract of sale,
since Vicente Pingol had no intention to part with the ownership of the lot
unless the full amount of the agreed price had been paid; (2) the contract was
deemed to have been cancelled from the moment the late father of the plaintiffs
defaulted in the payment of the monthly installments; (3) title and ownership
over the lot did not pass to Francisco Donasco and his heirs since the contract
to sell was never consummated; and (5) assuming, arguendo, that the
plaintiffs have a cause of action for specific performance, such action had
already prescribed since the complaint was filed only on 19 October 1988 or
more than ten years from the time that they could have lawfully demanded
performance.^[9]

Plaintiffs elevated the case to the Court of Appeals where the
appeal was docketed as CA-G.R. CV No. 25967. On 12 November 1991, the said court rendered a decision^[10]
reversing the appealed decision and decreeing as follows:

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

(1)   
Ordering appellee-vendor Vicente Pingol to accept the sum of P10,161.00,
plus the legal interest due thereon from the date of institution of this action
on October 19, 1988;

(2)   
Upholding the validity of the ‘DEED OF ABSOLUTE SALE OF ONE?HALF
(½) (of) AN UNDIVIDED PORTION OF A PARCEL
OF LAND’ (Exh. A), and by virtue and on the strength of
which declaring the ‘Heirs of the Deceased Francisco N. Domingo’ as the owners
of the 274.50 sq. m. land, denominated as Lot 3223-A, (LRC) Psd-146255 under
the technical description (exh. D)
and reflected in the Plan of Subdivision Survey which was approved By
Commissioner of Land Registration on August 13, 1971 (exh. C), representing
one-half portion [of] lot 3223, situated at the corner of Malolos Avenue and G. de Jesus St., Bagong Barrio,
Caloocan City, and covered by TCT No. 7435 of the Registry of Deeds of Caloocan City (exh. B); and

(3)   
Ordering the defendants-appellees to pay the costs.

SO ORDERED.”^[11]

The Court of Appeals ruled that the deed of sale in question
reveals the clear intention of Vicente Pingol to part with the ownership of the
one-half portion of the land by way of an absolute sale; that the failure to
fully pay the agreed price was not a ground for the cancellation of the sale;
and that the plaintiffs’ action is imprescriptible since it is akin to an
action to quiet title to property in one’s possession.^[12]

Dissatisfied with the decision of the Court of Appeals, the
defendants, hereinafter referred to as the petitioners, filed this petition for
certiorari on 9
January 1992. Plaintiffs, hereinafter
referred to as the private respondents, filed their comment thereto on 10
September 1992 to which the petitioners filed a reply on 11 November 1992. We gave due course to the petition and
required the parties to submit their respective memoranda,^[13] which
they subsequently complied with.

Petitioners
contend that the
Court of Appeals erred:

“I

IN HOLDING THAT THE DOCUMENT (EXHIBIT “A”) DENOMINATED AS
‘ABSOLUTE DEED OF SALE OF ONE-HALF (½) OF AN UNDIVIDED PORTION OF A PARCEL OF
LAND’ IS AN ABSOLUTE DEED OF SALE SUFFICIENT TO CONFER OWNERSHIP ON THE VENDEE
AND HIS SUCCESSORS-IN-INTEREST, DESPITE THE FACT THAT BY ITS TERMS AND
CONDITIONS, LIKE THE PRICE BEING PAYABLE ON INSTALLMENTS WITHIN A FIXED PERIOD,
THE SAME IS A CONDITIONAL DEED OF SALE.

II

IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE VENDEE FAILED TO
COMPLY WITH THE TERMS OF THE CONTRACT (EXHIBIT “A”) SPECIFICALLY TO
COMPLETE THE PAYMENT OF THE CONSIDERATION ON THE DATE STIPULATED IN THE
CONTRACT WHICH WAS SUPPOSED TO BE IN JANUARY 1976, COMPLETE PAYMENT THEREOF
CAN STILL BE ENFORCED IN AN ACTION INSTITUTED BY THE HEIRS OF THE VENDEE FILED
ON OCTOBER 19, 1988 OR A PERIOD OF
MORE THAN TWELVE (12) YEARS FROM THE TIME COMPLETE PAYMENT SHOULD HAVE BEEN
MADE;

III

IN HOLDING THAT THE PRIVATE RESPONDENTS’ ACTION IS ONE WHICH IS AN
OFFER TO COMPLETE THE PAYMENT LEFT UNPAID BY PRIVATE RESPONDENTS’ FATHER WHICH
DOES NOT PRESCRIBE;

IV

IN HOLDING THAT PRIVATE RESPONDENTS’ CAUSE OF ACTION HAS NOT
PRESCRIBED.”^[14]

The decisive issue in this case is whether Exhibit “A”
embodies a contract of sale or a contract to sell. The distinction between the two is important for in a contract of
sale, the title passes to the vendee upon the delivery of the thing sold,
whereas in a contract to sell,
by agreement, ownership is reserved in the vendor and is not to pass until the
full payment of the price. In a
contract of sale, the vendor has lost and cannot recover ownership until and
unless the contract is resolved or rescinded, whereas in a contract to sell,
title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition, failure of which is not a breach
but an event that prevented the obligation of the vendor to convey title from
becoming effective.^[15]

A perusal of Exhibit “A” leads to no other conclusion than
that it embodies a contract of sale. The plain and clear tenor of the “DEED
OF ABSOLUTE SALE OF ONE-HALF (½) [OF] AN UNDIVIDED PORTION OF A PARCEL OF
LAND” is that “the VENDOR hereby x x x SELL, CONVEY AND CONVEY by way
of Absolute Sale the one-half (½) portion x x x to the VENDEE x x x his heirs, assigns and
successors-in-interest.” That the vendor, petitioner Vicente Pingol, had
that clear intention was further evidenced by his failure to reserve his title
thereto until the full payment of the price.

In Dignos vs. Court of Appeals,^[16]
we held that a deed of sale is absolute in nature although denominated as a
“Deed of Conditional Sale” where there is no stipulation in the deed
that title to the property sold is reserved in the seller until the full payment
of the price, nor is there a stipulation giving the vendor the right to
unilaterally resolve the contract the moment the buyer fails to pay within a
fixed period. Exhibit “A”
contains neither stipulation. What is
merely stated therein is that “the VENDEE agrees that in case of default in the payment of the
instalments due the same shall earn a legal rate of interest, and to which the
VENDOR likewise agrees.”

Furthermore, as found by the Court of Appeals, the acts of the
parties, contemporaneous and subsequent to the contract, clearly show that an
absolute deed of sale was intended by the parties and not a contract to sell:

“[P]ursuant to the deed, the vendor delivered actual and
constructive possession of the property to the vendee, who occupied and took
such possession, constructed a building thereon, had the property surveyed and
subdivided and a plan of the property was prepared and submitted to the Land
Registration Commission which approved it preparatory to segregating the
same and obtaining the corresponding TCT in his name. Since the sale, appellee continuously possessed and occupied the
property as owner up to his death on July 13, 1984 and his heirs, after his
death, continued the occupancy and possession of the property up to the
present. Those contemporaneous and
subsequent events are demonstrative acts that the vendor since the sale
recognized the vendee as the absolute owner of the property sold. All those attributes of ownership are
admitted by defendants in their answer, specifically in paragraphs 7 and 9 of
their special and affirmative defenses.”^[17]

The contract here being one of absolute sale, the ownership of
the subject lot was transferred to the buyer upon the actual and constructive
delivery thereof. The constructive
delivery of the subject lot was made upon the execution of the deed of sale^[18]
while the actual delivery was effected when the private respondents took
possession of and constructed a house on Lot No. 3223-A.

The delivery of the object of the contract divested the vendor of
the ownership over the same and he cannot recover the title unless the contract
is resolved or rescinded pursuant to Article 1592 of the New Civil Code which
provides that:

“In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
rescission of the 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.”

Both the trial court and the Court of Appeals
did not find that a notarial or judicial rescission of the contract had been
made. Although Vicente Pingol asserts
that he had declared to Francisco Donasco that he was cancelling the contract,
he did not prove that his demand for rescission was made either judicially or
by a notarial act.

Petitioners fault the respondent Court for holding that the
action of the petitioners is not barred by the statute of limitations. They argue that the private respondents’
action, being based upon a written contract, has prescribed since it was
brought only in 1988 or more than ten years from the time when the latter could
have lawfully demanded performance.^[19]

We disagree.

Although the private respondents’ complaint before the trial
court was denominated as one for specific performance, it is in effect an
action to quiet title. In this regard,
the following excerpt from Bucton
vs. Gabar^[20] is apropos:

“The real and ultimate basis of petitioners’ action is their
ownership of one-half of the lot coupled with their possession thereof, which
entitles them to a conveyance of the property. In Sapto, et al. v. Fabiana [103 Phil. 683, 686-87 (1958)], this Court,
speaking thru Mr. Justice J.B.L. Reyes, explained that under the circumstances
no enforcement of the contract is needed,
since the delivery of possession of the land sold had consummated the
sale and transferred title to the purchaser, and that, actually, the action for
conveyance is one to quiet title, i.e., to remove the cloud upon the appellee’s
ownership by the refusal of the appellants to recognize the sale made by their
predecessors.”

That a cloud has been cast on the title of the private
respondents is indubitable. Despite the
fact that the title had been transferred to them by the execution of the deed
of sale and the delivery of the object of the contract, the petitioners
adamantly refused to accept the tender of payment by the private respondents
and steadfastly insisted that their obligation to transfer title had been
rendered ineffective.

A vendee in an oral contract to convey land who had made part
payment thereof, entered upon the land and had made valuable improvements
thereon, is entitled to bring
suit to clear his title against the vendor who had refused to transfer the
title to him. It is not necessary that
the vendee has an absolute title, an equitable title being sufficient to clothe
him with personality to bring an action to quiet title.^[21]

Prescription thus cannot be invoked against the private
respondents for it is aphoristic that an action to quiet title to property
in one’s possession is imprescriptible.^[22] The
rationale for this rule has been aptly stated thus:

“The owner of real property who is in possession thereof may
wait until his possession is invaded or his title is attacked before taking steps
to vindicate his right. A person
claiming title to real property, but not in possession thereof, must act
affirmatively and within the time provided by the statute. Possession is a continuing right as is the
right to defend such possession. So it
has been determined that an owner of real property in possession has a
continuing right to invoke a court of
equity to remove a cloud that is a continuing menace to his title. Such a menace is compared to a continuing
nuisance or trespass which is treated as successive nuisances or trespasses,
not barred by statute until continued without interruption for a length of time
sufficient to affect a change of title as a matter of law.”^[23]

Private respondents shall, however, be liable to pay the legal
rate of interest on the unpaid balance of the purchase price from the date of
default or on 6 January 1976, when the entire balance should have been paid,
pursuant to the provision in the deed of sale.

WHEREFORE, except as above modified, the Decision appealed
from is hereby AFFIRMED. As modified,
the interest on the unpaid balance of P10,161.00, at the legal rate, shall be
computed from 6 January 1976. Upon the
payment by the private respondents to the petitioners of the said amount and
the interest thereon, the latter are ordered to deliver Transfer Certificate of
Title No. 7435 to the Register of Deeds of Caloocan City who shall cancel the
same and issue two new transfer certificates of title in lieu thereof, one of
which shall be in the name of the herein private respondents covering Lot No.
3223-A and the other in the name of the petitioners covering the remainder of
the lot.

SO ORDERED.

Cruz, (Chairman), Griño-Aquino, Bellosillo, and Quiason, JJ., concur.

^[1]
Rollo, 23-24.

^[2]
Id., 18.

^[3]
Id., 64.

^[4]
Annex “A” of Petition; Rollo, 17-22.

^[5]
Id., 21.

^[6]
Annex “B” of Petition; Rollo, 25-29.

^[7]
Id., 30-33.

^[8]
Annex “D” of Petition; Rollo, 34-41. Per Judge Geronimo S. Mangay.

^[9]
Id., 38-41.

^[10]
Annex “G” of Petition Id.,
60-73. Per Associate Justice Artemon D.
Luna, concurred in by Associate Justices Celso L. Magsino and Jainal D. Rasul.

^[11]
Rollo, 72-73.

^[12]
Id., 67-71.

^[13]
Rollo, 97.

^[14]
Rollo, 8.

^[15]
Lim vs. Court of Appeals, 182 SCRA 564 [1990]; Jacinto vs.
Kaparaz, 209 SCRA 246 [1992]; Visayan Sawmill Co., Inc. vs. Court of
Appeals, G.R. No. 83851, 3 March 1993.

^[16]
158 SCRA [1988].

^[17]
Rollo, 68.

^[18]
Article 1498, New Civil Code.

^[19]
Article 1144, New Civil Code.

^[20]
55 SCRA 499 [1974]; see also, Gallar vs. Husain, 20 SCRA 186 [1967].

^[21]
Ojeda vs. Ojeda, 461
S.W.2d 487 (Tex. Civ. App. 1970).

^[22]
Sapto vs. Fabiana, 103 Phil. 683 [1958]; Bucton vs. Gabar, supra;
Caragay-Layno vs. Court of Appeals, 133 SCRA 718 [1984]; Coronel vs.
Intermediate Appellate Court, 155 SCRA 270 [1987]; Solid State Multi-Products
Corp. vs. Court of Appeals, 196 SCRA 630 [1991].

^[23]
Ford vs. Clendenin, 109 N.E. 124 (N.Y. Ct. App. 1915).