G.R. No. 179965.February 20, 2013.

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NICOLAS P. DIEGO, petitioner, vs. RODOLFO P. DIEGO and EDUARDO P. DIEGO, respondents.
Civil Law; Sales; Contract to Sell; Where the vendor promises to execute a deed of absolute sale
upon the completion by the vendee of the payment of the price, indicates that the parties entered into a
contract to sell.This stipulation, i.e., to execute a deed of absolute sale upon full payment of the
purchase price, is a unique and distinguishing characteristic of a contract to sell. In Reyes v.
Tuparan, 650 SCRA 283 (2011), this Court ruled that a stipulation in the contract, [w]here the
vendor promises to execute a deed of absolute sale upon the completion by the vendee of
the payment of the price, indicates that the parties entered into a contract to sell. According to
this Court, this particular provision is tantamount to a reservation of ownership on the part of the
vendor. Explicitly stated, the Court ruled that the agreement to execute a deed of sale upon full
payment of the purchase price shows that the vendors reserved title to the subject property
until full payment of the purchase price.
Same; Same; Same; 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.In Chua v. Court of Appeals, 401 SCRA 54 (2003), the parties reached an impasse
when the seller wanted to be first paid the consideration before a new transfer certificate of title
(TCT) is issued in the name of the buyer. Contrarily, the buyer wanted to secure a new TCT in his
name before paying the full amount. Their agreement was embodied in a receipt containing 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 x x x; and (3) if [the buyer] fails to pay the balance x x x the
[seller] has the right to forfeit the earnest money x x x. The case eventually reached this Court. In
resolving the impasse, the Court, speaking through Justice Carpio, held that [a] perusal of the
Receipt shows that the true agreement between the parties was a contract to sell. The
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* SECOND DIVISION.
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362 SUPREME COURT REPORTS ANNOTATED
Diego vs. Diego
Court noted that the agreement x x x was embodied in a receipt rather than in a deed of sale,
ownership not having passed between them. The Court thus concluded that [t]he 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. Thus, the true agreement between the parties was a contract to sell.
Same; Same; Same; The need to execute a deed of absolute sale upon completion of payment of
the price generally indicates that it is a contract to sell, as it implies the reservation of title in the
vendor until the vendee has completed the payment of the price.In fine, the need to execute a
deed of absolute sale upon completion of payment of the price generally indicates that it
is a contract to sell, as it implies the reservation of title in the vendor until the vendee has
completed the payment of the price. In addition, [a] stipulation reserving ownership in the
vendor until full payment of the price is x x x typical in a contract to sell. Thus, contrary to the
pronouncements of the trial and appellate courts, the parties to this case only entered into a contract
to sell; as such title cannot legally pass to Rodolfo until he makes full payment of the agreed
purchase price.
Same; Same; Same; Rescission; The remedy of rescission is not available in contracts to sell.
The remedy of rescission is not available in contracts to sell. As explained in Spouses Santos v. Court
of Appeals, 337 SCRA 67 (2000): 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 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 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,
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Diego vs. Diego
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 of the
purchase price as a resolutory condition. It does not apply to a contract to sell. As to Article 1191, it
is subordinated to the provisions of Article 1592 when applied to sales of immovable property.
Neither provision is applicable in the present case.
Same; Damages; Attorneys Fees; Although attorneys fees are not allowed in the absence of
stipulation, the court can award the same when the defendants act or omission has compelled the
plaintiff to incur expenses to protect his interest or where the defendant acted in gross and evident bad
faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim.Although
attorneys fees are not allowed in the absence of stipulation, the court can award the same when the
defendants act or omission has compelled the plaintiff to incur expenses to protect his interest or
where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly
valid, just and demandable claim. In the instant case, it is beyond cavil that petitioner was
constrained to file the instant case to protect his interest because of respondents unreasonable and
unjustified refusal to render an accounting and to remit to the petitioner his rightful share in rents
and fruits in the Diego Building. Thus, we deem it proper to award to petitioner attorneys fees in the
amount of P50,000.00, as well as litigation expenses in the amount of P20,000.00 and the sum of
P1,000.00 for each court appearance by his lawyer or lawyers, as prayed for.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.364
364 SUPREME COURT REPORTS ANNOTATED
Diego vs. Diego
Cesar M. Cario for petitioner.
Balbino V. Diego for respondents.
DEL CASTILLO,J.:
It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates
that the seller shall execute a deed of sale only upon or after full payment of the purchase price is
a contract to sell, not a contract of sale. In Reyes v. Tuparan,1 this Court declared in categorical
terms that [w]here the vendor promises to execute a deed of absolute sale upon the
completion by the vendee of the payment of the price, the contract is only a contract to
sell. The aforecited stipulation shows that the vendors reserved title to the subject
property until full payment of the purchase price.
In this case, it is not disputed as in fact both parties agreed that the deed of sale shall only be
executed upon payment of the remaining balance of the purchase price. Thus, pursuant to the
abovestated jurisprudence, we similarly declare that the transaction entered into by the parties is a
contract to sell.
Before us is a Petition for Review on Certiorari2 questioning the June 29, 2007 Decision3 and the
October 3, 2007 Resolution4 of the Court of Appeals (CA) in CA-G.R. CV No. 86512, which affirmed
the April 19, 2005 Decision5 of the Regional
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1 G.R. No. 188064, June 1, 2011, 650 SCRA 283, 299. Citation omitted. Emphasis supplied.
2 Rollo, pp. 8-5.
3 Id., at pp. 46-62; penned by Presiding Justice Ruben T. Reyes and concurred in by Associate
Justices Regalado E. Maambong and Celia C. Librea-Leagogo.
4 Id., at pp. 63-64; penned by Associate Justice Celia C. Librea-Leagogo and concurred in by
Associate Justices Regalado E. Maambong and Estela M. Perlas-Bernabe (now a member of this
Court).
5 Id., at pp. 73-78; penned by Acting Presiding Judge Emma M. Torio.
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Diego vs. Diego
Trial Court (RTC), Branch 40, of Dagupan City in Civil Case No. 99-02971-D.
Factual Antecedents
In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein, entered
into an oral contract to sell covering Nicolass share, fixed at P500,000.00, as co-owner of the familys
Diego Building situated in Dagupan City. Rodolfo made a downpayment of P250,000.00. It was
agreed that the deed of sale shall be executed upon payment of the remaining balance of
P250,000.00. However, Rodolfo failed to pay the remaining balance.
Meanwhile, the building was leased out to third parties, but Nicolass share in the rents were not
remitted to him by herein respondent Eduardo, another brother of Nicolas and designated
administrator of the Diego Building. Instead, Eduardo gave Nicolass monthly share in the rents to
Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and Eduardo failed to render an
accounting and remit his share in the rents and fruits of the building, and Eduardo continued to
hand them over to Rodolfo.
Thus, on May 17, 1999, Nicolas filed a Complaint 6 against Rodolfo and Eduardo before the RTC of
Dagupan City and docketed as Civil Case No. 99-02971-D. Nicolas prayed that Eduardo be ordered to
render an accounting of all the transactions over the Diego Building; that Eduardo and Rodolfo be
ordered to deliver to Nicolas his share in the rents; and that Eduardo and Rodolfo be held solidarily
liable for attorneys fees and litigation expenses.
Rodolfo and Eduardo filed their Answer with Counterclaim 7 for damages and attorneys fees. They
argued that Nicolas had no more claim in the rents in the Diego Building since he
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6 Records, pp. 1-4.
7 Id., at pp. 22-25.
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366 SUPREME COURT REPORTS ANNOTATED
Diego vs. Diego
had already sold his share to Rodolfo. Rodolfo admitted having remitted only P250,000.00 to Nicolas.
He asserted that he would pay the balance of the purchase price to Nicolas only after the latter shall
have executed a deed of absolute sale.
Ruling of the Regional Trial Court
After trial on the merits, or on April 19, 2005, the trial court rendered its Decision 8 dismissing
Civil Case No. 99-02971-D for lack of merit and ordering Nicolas to execute a deed of absolute sale in
favor of Rodolfo upon payment by the latter of the P250,000.00 balance of the agreed purchase price.
It made the following interesting pronouncement:
It is undisputed that plaintiff (Nicolas) is one of the co-owners of the Diego Building, x x x. As a
co-owner, he is entitled to [his] share in the rentals of the said building. However, plaintiff [had]
already sold his share to defendant Rodolfo Diego in the amount of P500,000.00 and in fact, [had]
already received a partial payment in the purchase price in the amount of P250,000.00. Defendant
Eduardo Diego testified that as per agreement, verbal, of the plaintiff and defendant
Rodolfo Diego, the remaining balance of P250,000.00 will be paid upon the execution of
the Deed of Absolute Sale. It was in the year 1997 when plaintiff was being required by defendant
Eduardo Diego to sign the Deed of Absolute Sale. Clearly, defendant Rodolfo Diego was not yet in
default as the plaintiff claims which cause [sic] him to refuse to sign [sic] document. The contract of
sale was already perfected as early as the year 1993 when plaintiff received the partial payment,
hence, he cannot unilaterally revoke or rescind the same. From then on, plaintiff has, therefore,
ceased to be a co-owner of the building and is no longer entitled to the fruits of the Diego Building.
Equity and fairness dictate that defendant [sic] has to execute the necessary document regarding
the sale of his share to defendant Rodolfo Diego. Correspondingly, defendant Rodolfo Diego has to
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8 Rollo, pp. 73-78.
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Diego vs. Diego
perform his obligation as per their verbal agreement by paying the remaining balance of
P250,000.00.9
 To summarize, the trial court ruled that as early as 1993, Nicolas was no longer entitled to the
fruits of his aliquot share in the Diego Building because he had ceased to be a co-owner thereof.
The trial court held that when Nicolas received the P250,000.00 downpayment, a contract of sale
was perfected. Consequently, Nicolas is obligated to convey such share to Rodolfo, without right of
rescission. Finally, the trial court held that the P250,000.00 balance from Rodolfo will only be due
and demandable when Nicolas executes an absolute deed of sale.
Ruling of the Court of Appeals
Nicolas appealed to the CA which sustained the trial courts Decision in toto. The CA held that
since there was a perfected contract of sale between Nicolas and Rodolfo, the latter may compel the
former to execute the proper sale document. Besides, Nicolass insistence that he has since rescinded
their agreement in 1997 proved the existence of a perfected sale. It added that Nicolas could not
validly rescind the contract because: 1) Rodolfo ha[d] already made a partial payment; 2) Nicolas
ha[d] already partially performed his part regarding the contract; and 3) Rodolfo opposes the
rescission.10
The CA then proceeded to rule that since no period was stipulated within which Rodolfo shall
deliver the balance of the purchase price, it was incumbent upon Nicolas to have filed a civil case to
fix the same. But because he failed to do so, Rodolfo cannot be considered to be in delay or default.
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9 Id., at p. 77. Emphasis supplied.
10 Id., at p. 56.
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Diego vs. Diego
Finally, the CA made another interesting pronouncement, that by virtue of the agreement Nicolas
entered into with Rodolfo, he had already transferred his ownership over the subject property and as
a consequence, Rodolfo is legally entitled to collect the fruits thereof in the form of rentals. Nicolas
remaining right is to demand payment of the balance of the purchase price, provided that he first
executes a deed of absolute sale in favor of Rodolfo.
Nicolas moved for reconsideration but the same was denied by the CA in its Resolution dated
October 3, 2007.
Hence, this Petition.
Issues
The Petition raises the following errors that must be rectified:
I
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THERE WAS NO
PERFECTED CONTRACT OF SALE BETWEEN PETITIONER NICOLAS DIEGO AND
RESPONDENT RODOLFO DIEGO OVER NICOLASS SHARE OF THE BUILDING BECAUSE
THE SUSPENSIVE CONDITION HAS NOT YET BEEN FULFILLED.