Contract to sell and conditional sale distinguished…
Both contracts are subject to the positive suspensive condition of
THIRD DIVISION, G.R. No. 196251, July 09, 2014, OLIVAREZ REALTY
CORPORATION AND DR. PABLO R. OLIVAREZ, PETITIONERS, VS.
BENJAMIN CASTILLO, RESPONDENT
Olivarez Realty Corporation and Benjamin executed a deed of conditional
sale over a parcel of lot owned by Bejamin, covered by TCT No. T-19972,
which is also claimed by the Philippine Tourism Authority under TCT No.
T-18493. Under the terms of the contract, the corporation shalll buy the
land for P19,080,490, with an agreed downpayment of P5,000,000.00
payable in several instalments. The balance of the purchase price shall be
paid by the corporation in 30 equal monthly installments, commencing on
the day the title of the Philippine Tourism Authority had been cancelled.
The corporation shall file the case against PTA, with the full assistance of
Benjamin. Also, the corporation agreed to pay disturbance compensation
up to P1,500,000.00 only, to the tenants therein, and Benjamin shall be
responsible for clearing the tenants. The parties agreed that corporation
shall immediately occupy the lot, and in case the contract is cancelled, the
improvements put up by the company shall inure to Benjamin.
Thereafter, Benjamin filed an action to rescind the contract under Article
1191 of the Civil Code. According to him, the company only paid him the
amount of P2,500,000.00. out of the P5,000,000.00 instalment price.
Contrary to the company’s representation, the company did not file any
action against the Philippine Tourism Authority, nor paid disturbance
compensation to the tenants. Despite demand, the company refused to
pay the full purchase price of the property. He also argued that the
contract was a contract of adhesion, and even so, the company committed
substantial breach of the obligation warranting rescission under Art. 1191
of the Civil Code.
The company, on the other hand, countered that Benjamin did not fully
assist in the case to be filed against PTA; he also did not clear the
property of tenants, thus the company had all the legal right to withhold
instalment payment. When his request for admission to Dr. Pablo Olivarez
was objected to by the company, Benjamin filed a motion for judgment on
the pleadings and/or summary judgment, attaching thereto his affidavit
and the affidavit of a witness attesting to the material allegations of his
complaint. According to him, the company had already admitted the
material allegations of his complaint, that is, that the company have not yet
commenced an action against PTA, nor paid the disturbance
compensation. Should judgment on the pleadings be denied, a summary
judgment is still porper, since there are no genuine issues tendered by the
company. The company opposed the motion, since there were genuine
issues which need to be resolved and a full blown trial is necessary to
fresh out the issues.
The trial court granted Benjamin’s motion and rendered summary
judgment, ruling that the company substantially admitted the material
allegations in Benjamin’s complaint, and there were no genuine issues
tendered by it. It rescinded the contract of conditional sale between
Benjamin and Olivarez Realty Corporation and forfeited the P2,500.000.00
as damages under Art. 1191 of the Civil Code. On appeal to the Court of
Appeals, the appellate court affirmed the findings of the trial court.
The company thus filed a petition for certiorari under Rule 45 of the Rules
of Court to try to reverse the judgments of the lower courts. Among the
issues it presented for consideration was the propriety of the summary
judgment. According to the company, it cannot be faulted for withholding
instalment payments.
What then is the nature of the contract between the company and
Benjamin?
The Supreme Court:
Since Olivarez Realty Corporation illegally withheld payments of the
purchase price, Castillo is entitled to cancel his contract with petitioner
corporation. However, we properly characterize the parties’ contract as a
contract to sell, not a contract of conditional sale.
In both contracts to sell and contracts of conditional sale, title to the
property remains with the seller until the buyer fully pays the purchase
price.
the buyer’s full payment of the purchase price.
In a contract of conditional sale, the buyer automatically acquires title to
the property upon full payment of the purchase price. This transfer of title
is “by operation of law without any further act having to be performed by
the seller.” In a contract to sell, transfer of title to the prospective buyer is
not automatic. “The prospective seller [must] convey title to the property
[through] a deed of conditional sale.”
The distinction is important to determine the applicable laws and remedies
in case a party does not fulfill his or her obligations under the contract. In
contracts of conditional sale, our laws on sales under the Civil Code of the
Philippines apply. On the other hand, contracts to sell are not governed by
our law on sales but by the Civil Code provisions on conditional
obligations.
Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal
obligations does not apply to contracts to sell. As this court explained in
Ong v. Court of Appeals, failure to fully pay the purchase price in contracts
to sell is not the breach of contract under Article 1191. Failure to fully pay
the purchase price is “merely an event which prevents the [seller’s]
obligation to convey title from acquiring binding force.” This is because
“there can be no rescission of an obligation that is still non-existent, the
suspensive condition not having [happened].”
In this case, Castillo reserved his title to the property and undertook to
execute a deed of absolute sale upon Olivarez Realty Corporation’s full
payment of the purchase price. Since Castillo still has to execute a deed of
absolute sale to Olivarez Realty Corporation upon full payment of the
purchase price, the transfer of title is not automatic. The contract in this
case is a contract to sell.
As this case involves a contract to sell, Article 1191 of the Civil Code of
the Philippines does not apply. The contract to sell is instead cancelled,
and the parties shall stand as if the obligation to sell never existed.
Olivarez Realty Corporation shall return the possession of the property to
Castillo. Any improvement that Olivarez Realty Corporation may have
introduced on the property shall be forfeited in favor of Castillo per
paragraph I of the deed of conditional sale:
Immediately upon signing this Contract, [Olivarez Realty Corporation] shall
be entitled to occupy, possess and develop the subject property. In case
this Contract is cancelled, any improvement introduced by [Olivarez Realty
Corporation] on the property shall be forfeited in favor of [Castillo.
As for prospective sellers, this court generally orders the reimbursement of
the installments paid for the property when setting aside contracts to sell.
This is true especially if the property’s possession has not been delivered
to the prospective buyer prior to the transfer of title.
In this case, however, Castillo delivered the possession of the property to
Olivarez Realty Corporation prior to the transfer of title. We cannot order
the reimbursement of the installments paid.
In Gomez v. Court of Appeals, the City of Manila and Luisa Gomez
entered into a contract to sell over a parcel of land. The city delivered the
property’s possession to Gomez. She fully paid the purchase price for the
property but violated the terms of the contract to sell by renting out the
property to other persons. This court set aside the contract to sell for her
violation of the terms of the contract to sell. It ordered the installments paid
forfeited in favor of the City of Manila “as reasonable compensation for
[Gomez’s] use of the [property]” for eight years.
In this case, Olivarez Realty Corporation failed to fully pay the purchase
price for the property. It only paid P2,500,000.00 out of the
P19,080,490.00 agreed purchase price. Worse, petitioner corporation has
been in possession of Castillo’s property for 14 years since May 5, 2000
and has not paid for its use of the property.
Similar to the ruling in Gomez, we order the P2,500,000.00 forfeited in
favor of Castillo as reasonable compensation for Olivarez Realty
Corporation’s use of the property.”
 Solicitor General v Metro Manila Authority to punish violations of traffic rules elsewhere in the country with the sanction
Cruz, 1991 therein prescribed, including those here questioned.

FACTS:
 In Metropolitan Traffic Command, West Traffic District vs. Hon.
Arsenio M. Gonong, the SC ruled that (1) the confiscation of the
license plates of motor vehicles for traffic violations was not
among the sanctions that could be imposed by the Metro Manila
Commission under PD 1605; and, that (2) even the confiscation
of driver's licenses for traffic violations was not directly
prescribed by the decree nor was it allowed by the decree to be
imposed by the Commission.
 Several complaints were filed in the SC against the confiscation
by police authorities of driver's licenses and removal of license
plates for alleged traffic violations. These sanctions were not
among those that may be imposed under PD 1605.
 The Metropolitan Manila Authority issued Ordinance No. 11,
Series of 1991, authorizing itself "to detach the license plate/tow
and impound attended/ unattended/ abandoned motor vehicles
illegally parked or obstructing the flow of traffic in Metro Manila."
o The Metropolitan Manila Authority defended the said
ordinance on the ground that it was adopted pursuant
to the powers conferred upon it by EO 392. There
was no conflict between the decision and the
ordinance because the latter was meant to
supplement and not supplant the latter.
o The Solicitor General expressed the view that the
ordinance was null and void because it represented
an invalid exercise of a delegated legislative power.
It violated PD 1605 which does not permit, and so
impliedly prohibits, the removal of license plates and
the confiscation of driver's licenses for traffic
violations in Metropolitan Manila.

ISSUE & HELD: WON Ordinance No. 11 is valid (NO)

RATIO:
 The problem before the Court is not the validity of the delegation
of legislative power. The question the SC must resolve is the
validity of the exercise of such delegated power.
o A municipal ordinance, to be valid: 1) must not
contravene the Constitution or any statute; 2) must
not be unfair or oppressive; 3) must not be partial or
discriminatory; 4) must not prohibit but may regulate
trade; 5) must not be unreasonable; and 6) must be
general and consistent with public policy.
 PD 1605 does not allow either the removal of license plates or
the confiscation of driver's licenses for traffic violations
committed in Metropolitan Manila. There is nothing in the decree
authorizing the Metropolitan Manila Commission, now the
Metropolitan Manila Authority, to impose such sanctions.
 Local political subdivisions are able to legislate only by virtue of
a valid delegation of legislative power from the national
legislature (except only that the power to create their own
sources of revenue and to levy taxes is conferred by the
Constitution itself). They are mere agents vested with what is
called the power of subordinate legislation. As delegates of the
Congress, the local government unit cannot contravene but must
obey at all times the will of their principal. Here, the enactments
in question, which are merely local in origin, cannot prevail
against the decree, which has the force and effect of a statute.
 The measures in question do not merely add to the requirement
of PD 1605 but, worse, impose sanctions the decree does not
allow and in fact actually prohibits.
 There is no statutory authority for — and indeed there is a
statutory prohibition against — the imposition of such penalties
in the Metropolitan Manila area. Hence, regardless of their
merits, they cannot be imposed by the challenged enactments
by virtue only of the delegated legislative powers.

NOTE: SC emphasized that the ruling in the Gonong case that PD 1605
applies only to the Metropolitan Manila area. It is an exception to the general
authority conferred by RA 413 on the Commissioner of Land Transportation