MARCELINO GALANG, GUADALUPE GALANG, PETITIONERS, VS. COURT OF APPEALS, RAMON R. BUENAVENTURA, ANGELES BUENAVENTURA, CORAZON BUENAVENTURA, AND MA. LUISA BUENAVENTURA, RESPONDENTS.

This is a petition for review on certiorari of the
decision^[1]
of the Court of Appeals affirming in toto the
judgment rendered by the then Court of First Instance in Civil Case No.
R-82-7186 (107585). The dispositive
portion of the assailed decision reads as
follows:

“WHEREFORE, finding no reversible error in the judgment
appealed from, the same is hereby AFFIRMED IN TOTO without
any pronouncement as to costs at this instance.^[2]”

From the records, we find
the following facts.

On July 16, 1976, Ramon
Buenaventura on his own behalf and as attorney-in-fact of Angeles, Corazon,
Amparo, and Maria Luisa, all surnamed Buenaventura, sold to Guadalupe Galang
and Marcelino Galang two (2) parcels of land situated in Tagaytay City. The agreement was embodied in a Deed of Sale
which stated the following:

“I, RAMON R. BUENAVENTURA, Filipino, of legal age, married,
and residing at 2111 M. Adriatico, Malate, Manila, in his own behalf and as
attorney in fact of Angeles, Corazon, Amparo and Maria Luisa, all surnamed
Buenaventura as per the special powers of attorney already registered and
annotated at the back of the certificate of title, for and in consideration of
the sum of One Hundred Ninety Two Thousand Seven Hundred Ninety Five
(P192,795.00) Pesos, Philippine Currency, hereby SELL, TRANSFER AND CONVEY UNTO
MARCELINO GALANG and GUADALUPE GALANG, Filipino, of legal age, spouses and
residents of 72 4th St., New Manila, Quezon City, those parcels of land
situated at Tagaytay City, inherited by us from our parents and our exclusive
paraphernal property, of which we are the absolute owners, our title thereto
being evidenced by TCT No. T-3603 of Tagaytay City Register of Deeds, more
particularly described as follows:

x x x  x x x             x
x x

Under the following terms:

(a) 25% of the purchase price upon signing of
this instrument;

(b)  25% within three months or upon removal of the
‘encargado’ from the premises, with the delivery of the owner’s duplicate
certificate of title;

(c)  50% balance within one (1) year from date hereof
upon which the title will be transferred to the buyers but 12% interest per
annum will be charged after said one year in the event full payment is not
made.”^[3]

Marcelino and Guadalupe
Galang, herein petitioners paid to the sellers the first 25% of the purchase
price as stated in the deed. Thereafter, they allegedly demanded from
private respondents the removal of the “encargado” from the
premises and the delivery of the owners’ duplicate certificate of title. Private respondents failed to do so despite
the willingness of petitioners to pay the second 25% of the purchase
price. Consequently, Marcelino and
Guadalupe Galang filed on March 18, 1977 a complaint for specific performance
with damages where they alleged among others, that:

“5. The period
fixed within which the defendants should remove the ‘encargado’ from the
premises and to deliver the owner’s duplicate certificate of title had lapsed
without the defendants complying with their obligations thus preventing the
plaintiffs from taking possession of the property sold and from developing and
improving the same.

6. On several occasions, the plaintiffs
demanded from the defendants, both orally and in writing, the removal of the
latter’s ‘encargado’ from the premises sold and for them to deliver the owner’s
duplicate certificate of title to the plaintiffs but said defendants failed and
refused and still fail and refuse to do so, the demands notwithstanding.”^[4]

Defendants, herein
private respondents, denied the allegations and stated that the contract did
not state the true intention of the parties and that it was not their
fault that the “encargado”
refused to leave. Furthermore, they
filed on July 21, 1978, a third-party complaint against the
“encargado” for subrogation and reimbursement in case of an adverse
judgment against third-party
plaintiff. Upon the
“encargado’s” motion, the complaint was dismissed on the ground that
it did not state a cause of action for the ejectment of the tenant – the
“encargado.”

After trial, the lower
court rendered a decision, the dispositive portion of which is hereby
quoted, to wit:

“PREMISES CONSIDERED, the Court hereby orders the defendants
to pay jointly and severally, the plaintiffs P50,000.00 with interest at 12%
per annum from July 16, 1976; P5,000.00 by way of nominal damages; and
P3,000.00 as attorney’s fees and the costs.”^[5]

In rendering the
decision, the trial court reasoned that:

“There is no question that, because the defendants had not
complied with their obligation to remove the ‘encargado,’ the plaintiffs, as
injured parties, may choose between the fulfillment of the contract of sale and
its rescission, in accordance and (sic) Article 1191 of the Civil Code. They chose enforcement of the contract
which, however is legally impossible. The lands sold to the plaintiff are agricultural, planted to coffee,
among other plants, not only by the ‘encargado’ but also by his deceased
parents. The law prohibits, under pain
of damages, fine and imprisonment, a landlord from dispossessing his
agricultural tenant without the court’s approval and on grounds fixed by the
law, not one of which is shown to exist in respect defendants’ ‘encargado.’
(Section 31 and 36, The Agricultural Land Reform Code, RA 3844 as amended).

Impossible conditions, those contrary to good customs or public
policy and those prohibited by law shall annul the obligation which depends
upon them. (Article 1183, Civil
Code). Since the consummation of the
sale between the parties is dependent upon the ouster of an agricultural
lessee, which cannot be done because it is against good custom, public policy and the law, the sale is
a nullity. x x x”^[6]

Agreeing that the
“encargado” was an agricultural tenant who could not be
ejected without cause, the Court of Appeals affirmed the decision.

Hence, this petition.

In their petition,
Marcelino and Guadalupe Galang argued that respondent Court erred in
ordering the rescission instead of specific performance of the contract of sale
on the ground that the ejectment of the
“encargado”-tenant was a legally impossible condition that
prevented the fulfillment of the contract. Contrary to the reason advanced
by the Court of Appeals and the trial court, petitioners averred that the
removal of the “encargado” was not a condition precedent to
the fulfillment of the contract as
paragraph two (2) thereof provides for an alternative period within which
petitioners would have to pay the second 25% of the purchase price
and concomitantly, private respondents would deliver the owner’s duplicate
certificate of title. Thus, whether or
not the “encargado” was removed, the amount would still be due and
private respondents would still have to deliver the duplicate title.

We are now confronted
with the question: Was the removal of
the “encargado” a condition precedent to the fulfillment of the
contract of sale such that the finding that it was a legally impossible
condition would entitle the buyers to the rescission of the contract?

We answer in the
negative.

The trial court and the
Court of Appeals based their decision on Art. 1183 of the Civil Code
which provides, thus:

“Art. 1183. Impossible
conditions, those contrary to good customs or public policy and those
prohibited by law shall annul the obligation which depends upon them. x x x”

Both courts declared the
“encargado” a tenant. This
being the case, it follows that he may not be removed from the subject land
without just cause, as provided by Presidential Decree No. 1038. Since the Galangs, then plaintiffs demanded
the removal of the “encargado” which, being legally impossible, could
not be met, the contract of sale
was rescinded by the courts.

We disagree with the
conclusion arrived at by the respondent court. Reviewing the terms of the Deed of Sale quoted earlier, it is clear that
the parties had reached the stage of perfection of the contract of sale, there
being already “a meeting of the minds upon the thing which is the object
of the contract and upon the price,”^[7] and on the basis of which both parties
had the personal right to reciprocally demand from the other the fulfillment of
their respective obligations. But
contracts of sale may either be absolute or conditional.^[8] One
form of conditional sales, is what is now popularly termed as a “Contract
to Sell,” where ownership or title is retained until the fulfillment of a
positive condition, normally the payment of the purchase price in the manner
agreed upon. The breach of that
condition can prevent the obligation to convey title from acquiring a binding
force.^[9]
Where the condition is imposed, instead, upon the perfection of the contract,
the failure of such condition would prevent such perfection.^[10]
What we have here is a contract to sell for it is the transfer of ownership,
not the perfection of the contract that was subjected to a condition. Ownership was not to vest in the buyers until full payment of the
purchase price and the transfer of the title to the buyers. Apart from full payment of the purchase
price, we find no other condition which would affect the obligations of the parties,
i.e., to pay, on the part of the buyer and to convey ownership, on the part of
the seller.

The alleged condition
precedent, the removal of the “encargado,” was simply an alternative
period for payment of the second 25% of the purchase price given by the
seller to the buyer. Assuming that the
removal of the “encargado” could not be brought about, the buyers,
petitioners herein, could have nonetheless demanded the delivery of the owner’s
duplicate certificate of title by paying the second 25% of the sale price
within three months. In this case, the
filing of the complaint for specific performance of the seller’s obligation was
the root of the errors committed first, by the trial court and later, by the
Court of Appeals. Both courts
overlooked the obvious fact that only the time for paying the second 25% of the
purchase price was qualified and that the entire paragraph reads: “25% within three months or upon
removal of the “encargado” from the premises x x x” and not simply 25% upon removal of the
“encargado.”

The case before us could have been resolved by the lower courts
without ruling on whether the “encargado” was a tenant or not. Granting that it was necessary to rule on
the legal status of the “encargado,” we find that the courts had been
quite precipitate in holding that the “encargado” was a tenant. There was no sufficient evidence to support
that conclusion apart from the affidavits of the “encargado” and his
neighbor. The conclusion of the Court
of Appeals regarding this matter rested on
surmises. It held:

“We discern no reversible error in the finding and conclusion
of the trial court that the unnamed ‘encargado’ on the lands in question is
actually a tenant or agricultural lessee. The bases of this ineluctable conclusion are not hard to see. As succinctly pointed out by the court a
quo, the ‘encargado’ is staying in his own existing house thereon, and
subject agricultural land is planted to coffee and other plants not only by the
‘encargado’ but also his deceased parents. Indeed, if the ‘encargado’s’ parents were not tenants or agricultural
lessees, the present ‘encargado’ could not have continued occupying and working
thereon, without facing ejectment proceedings; considering that one of the
landowners, defendant-appellees here, is a lawyer himself. In fact, as can be gleaned from the decision
under scrutiny, defendants-appellees filed a third-party complaint against the
‘encargado’ but they did not pursue such a course of action because they did
not have a clearance from the then Ministry, now the Department of Agrarian
Reform, to proceed against such ‘encargado.’ Then, too, if the said ‘encargado’
did not have the status of a tenant or agricultural lessee entitled to
protection under the agrarian reform laws, he would not have been given the
attention and importance as to be brought before the court a quo twice, just for a possible amicable settlement, and he would not
have had the firmness to reject an offer for him to continue working half the
area under controversy.

Equally supportive of the foregoing  opinion
are the following ratiocinations in Cruz v. Court of Appeals, L-50350, May 15,
1984, 129 SCRA 222:

“x x x it is also undisputed that respondent lives on a hut
erected on the landholding. This fully supports
the appellate court’s conclusion, since only tenants are entitled to a homelot
where he can build his house thereon as an incident to this right as a
tenant.”

x x x              x x x                 x
x x

“Also, the Court is aware of the practice of landowners, by
way of evading the provisions of tenancy laws, to have their tenants sign
contracts or agreements intended to camouflage the real import of their
relationship.”

All things duly considered, let alone the better
rule that all doubts vis-a-vis the status of a tiller of the soil should be
resolved in favor of tenancy, relationship. We cannot help but conclude here that the ‘encargado’ on the landholding
deeded out in the deed of sale (Exhibit “A”) is a tenant or agricultural
lessees within the purview and under the mantle protection of the Code of
Agrarian Reforms.”^[11]

To summarize, we hold
that there was no basis for rescinding the contract because the removal of the
“encargado” was not a condition precedent to the contract of
sale. Rather, it was one of the
alternative periods for the payment of the second installment given by the
seller himself to the buyers. Secondly,
even granting that it was indeed a condition precedent rendering
necessary the determination of the legal status of the “encargado,”
the lower courts were rash in holding that the “encargado” was a tenant of the land in question.

In view of the foregoing
circumstances, we are convinced that specific performance by the parties
of their respective obligations is
proper. Accordingly, petitioners
Marcelino and Guadalupe Galang are ordered to pay private respondents the
second 25% of the purchase price. Considering, however, the time that has lapsed since the parties entered into the contract, payment of the
full balance, that is, 75% of the purchase price, P192,795.00 is in order. However, the 12% interest per annum that was
stipulated in paragraph 3 of the contract of sale should not be assessed
against petitioners. On the other hand,
private respondents Ramon Buenaventura, Angeles Buenaventura, Corazon Buenaventura,
and Maria Luisa Buenaventura are obliged to deliver the owner’s duplicate
certificate of title and to transfer the title to the land in question
upon payment of the purchase price by petitioners.

Under the Civil Code, private respondents are liable for damages
to the injured party, the petitioners in this case. However, in lieu of actual payment of damages, and considering
the fact that private respondents were in possession of the land during the
entire period that this case was pending, private respondents are no longer
entitled to the interest payments which would have been due from petitioners.^[12]

WHEREFORE, in view of the foregoing, the petition is
hereby GRANTED and the decision of the Court of Appeals is REVERSED and SET
ASIDE. Petitioners Marcelino and
Guadalupe Galang are hereby ordered to pay the full 75% balance of the purchase
price (P144,596.25) within thirty (30) days from notice, with interest upon
default. Private respondents Ramon
Buenaventura, Corazon Buenaventura and Maria Luisa Buenaventura are hereby
ordered to transfer the title to petitioners upon full payment of the purchase
price.

SO ORDERED.

Feliciano, (Chairman), Bidin, Melo, and Vitug, JJ., concur.

^[1]
CA-GR. CR No. 00093, March 27, 1987, penned by Justice Fidel P. Purisima, and
concurred in by Justices Emerito C. Cui and Nicolas P. Lapena, Jr.

^[2]
Rollo, p. 83.

^[3]
Rollo, p. 21.

^[4]
Ibid, p. 17.

^[5]
Rollo, p. 45.

^[6]
Rollo, pp. 43-45.

^[7]
Art. 1475, Civil Code.

^[8]
Art. 1458, Civil Code.

^[9]
Roque v. Lapuz, 96 SCRA 741.

^[10]
People’s Homesite and Housing
Corporation v. Court of Appeals,
133 SCRA 777.

^[11]
Rollo, pp. 81-82.

^[12]
Art. 1191.       x x x                 x x x                             x x x

The injured party may choose
between the fulfillment and the rescission of the obligation, with the payment
of damages in either case. x x x