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Court of Appeals
G.R. No. 124045 May 21, 1998
The Babasa spouses (vendor) entered into a contract of conditiona sale of registered lands
with Tabangao Realty (vendee) over 3 parcels of land in Batangas City for P2M, P300K as
It was agreed that the balance of the purchase price shall be paid by Tabangao upon
presentation by the Babasas of transfer certificates of titles in their name in favor of Tabangao
within twenty (20) months from the signing of the contract.
Consequently, Tabangao leased the parcels of land to Shell. Shell immediately started the
construction thereon of a Liquefied Petroleum Gas Terminal Project, an approved zone export
enterprise of the Export Processing Zone.
Two days prior to the expiration of the 20-month period, specifically on 31 December 1982,
the Babasas asked Tabangao for an indefinite extension within which to deliver clean titles over
the lots. Because Tabangao did not want to pay the montly interests.
The Babasa spouses executed a notarized unilateral rescission dated 28 February 1983 to which
TABANGAO responded by reminding the BABASAS that they were the ones who did not comply
with their contractual obligation to deliver clean titles within the stipulated 20-month period,
hence, had no right to rescind their contract. The BABASAS insisted on the unilateral rescission
and demanded that SHELL vacate the lots. The Babasas put up structures to to impede the
movements of persons and vehicles in the lot.
Babasas contention:
Their contract with Tabangao became null and void with the expiration of the 20-month period
given them within which to deliver clean certificates of title. The contract was a lease contract,
not of sale. Even assuming that it was indeed a sale, its nature was conditional only, the efficacy
of which was extinguished upon the non-happening of the condition (non-delivery of clean
certificates of title w/in 20 mos).
1. WON the contract was a lease contract? NO, It was a CONTRACT OF SALE.
2. WON the Babasas have the right to rescind the contract on the premise that they have not
complied with their obligation to deliver the titles to Tabangao (thus making such contract null
and void)? NO
The contract is laden with terms and stipulations clearly indicative of a contract of sale. The
parties desire and mutually agreed on the sale and purchase of the three parcels of land.
There was a vendors and a vendee, not lessor and lessee. In fact, Tabangao was granted
absolute and unconditional right to take immediate possession of the premises. Even if there
was no word ownership mentioned in the contract, it does not mean that the contract was one
of lease. It is too late for petitioners to insist that the contract is not what they intended it to be.
Even if it was titled as a contract of conditional sale, it is one of absolute sale. There is
absolutely no proviso reserving title to the Babasas until full payment of the purchase price, nor
any stipulation giving them the right to unilaterally rescind the contract in case of non-
payment. A deed of sale is absolute in nature although denominated a conditional sale absent
such stipulations. In such cases, ownership of the thing sold passes to the vendee upon the
constructive or actual delivery thereof. Constructive delivery was accomplished upon the
execution of the contract without any reservation to the Babasas. Actual delivery was made
when Tabangao took unconditional possession of the lots and leased them to Shell.
Babasas act of unilaterally rescinding their contract with Tabangao was improper. In fact, it
should Tabangao who has the right to rescind the contract on account of Babasas failure to do
its obligation to deliver clean certificates of title. Besides, it would be the height of inequity to
allow the BABASAS to rescind their contract of sale with TABANGAO by invoking as a ground
therefor their own failure to deliver the titles over the lots within the stipulated period.
A condition imposed to perfect a contract is different from a condition imposed for the
performance of an obligation. The non-fulfillment of a condition to perfect a contract results in
the failure of a contract. The failure to comply with the conditions imposed for a performance
of a contract merely gives the other party (Tabangao) the option to either refuse to proceed
with the sale or to waive the condition.