G.R. No.

144934 January 15, 2004

ADELFA S. RIVERA, CYNTHIA S. RIVERA, and JOSE S. RIVERA, petitioners,

vs.
FIDELA DEL ROSARIO (deceased and substituted by her co-respondents), and her children, OSCAR,
ROSITA, VIOLETA, ENRIQUE JR., CARLOS, JUANITO and ELOISA, all surnamed DEL
ROSARIO, respondents.

FACTS:

 Respondents Fidela (now deceased), and her children (co-respondents) , were the registered owners of a
parcel of land

 The children executed a SPA in favor of their mother, authorizing Fidela to sell, lease, mortgage, transfer
and convey their rights over THAT LOT

 Subsequently, Fidela borrowed P250,000 from Mariano Rivera; to secure the loan, they agreed to execute a
deed of real estate mortgage and an agreement to sell the land. Consequently, Mariano went to his lawyer,
Atty. Efren Barangan, to have three documents drafted: the Deed of Real Estate Mortgage,
a Kasunduan (Agreement to Sell), and a Deed of Absolute Sale.

 The Kasunduan provided that the children of Mariano Rivera, herein petitioners, would purchase the Lot for
a consideration of P2,141,622.50. This purchase price was to be paid in three installments: provided that the
Deed of Absolute Sale would be executed only after the second installment is paid and a postdated check
for the last installment is deposited with Fidela. As previously stated, however, Mariano had already caused
the drafting of the Deed of Absolute Sale. But unlike the Kasunduan, the said deed stipulated a purchase
price of only P601,160, and covered a certain Lot No. 1083-A in addition to Lot No. 1083-C. This deed, as
well as the Kasunduan and the Deed of Real Estate Mortgage, was signed by petitioners, as buyers and
mortgagees.

 In the lawyer’s office; Although Fidela intended to sign only the Kasunduan and the Real Estate Mortgage,
she inadvertently affixed her signature on all the three documents; then 2 payments were made. In the
ensuing months, also, Mariano gave Oscar del Rosario several amounts upon the latter’s demand for the
payment of the balance despite Oscar’s lack of authority to receive payments under the Kasunduan.

 During payments, Fidela entrusted the owner’s copy of TCT No. T-50.668 (M) to Mariano to guarantee
compliance with the Kasunduan.

 When Mariano unreasonably refused to return the TCT, one of the respondents, Carlos del Rosario, caused
the annotation of an Affidavit of Loss of the owner’s duplicate copy of the title. This annotation was offset,
however, when Mariano registered the Deed of Absolute Sale, and afterwards caused the annotation of an
Affidavit of Recovery of Title.

 TCT No. T-50.668 (M) was cancelled, and in its place was issued TCT No. 158443 (M) in the name of
petitioners Adelfa, Cynthia and Jose Rivera.

 Meanwhile, the Riveras, offered to give 4,500 sq. m. of Lot No. 1083-C, Feliciano Nieto, to rid the land of the
latter’s tenurial right; in exchange for the surrender, where he accepted.

 Subdivision Plan was then made.

 To document their agreement with Feliciano Nieto, the Riveras executed a Kasulatan sa Pagtatakwil ng
Karapatan sa Pagmamay-ari ng Bahagi ng Isang Lagay na Lupa (Written Abdication of Rights over a Portion
of a Parcel of Land)

 Four days later, they registered the document with the Registry of Deeds. Two titles were then issued: in the
name of Nieto, for 4,500 sq. m. of land, and in the name of petitioners, over the remaining 10,529 sq. m. of
land.

 respondents filed a complaint in RTC of Malolos, asking that the Kasunduan be rescinded for failure of the
Riveras to comply with its conditions, with damages and the reconveyance to them of the entire property

 Respondents claimed that Fidela never intended to enter into a deed of sale at the time of its execution and
that she signed the said deed on the mistaken belief that she was merely signing copies of the Kasunduan;
that petitioners acquired possession of the TCT through fraud and machination.

 Petitioners likewise argued that respondents’ cause of action had been barred by laches or estoppel since
more than four years has lapsed from the time the parties executed the Deed of Absolute Sale
  the RTC ruled in favor of respondents:

 This notwithstanding, the trial court sustained the validity of TCT No. T-161784 (M) in the name of Feliciano
Nieto since there was no fraud proven on Nieto’s part.

 On the foregoing, the trial court rescinded the Kasunduan but ruled that the P450,000 paid by petitioners be
retained by respondents as payment for the 4,500 sq. m. portion of Lot No. 1083-C that petitioners gave to
Nieto.

 C.A affirmed w/ modification; that the DOS is declared null and void only insofar as Lot No. 1083-C is
concerned, but valid insofar as it conveyed Lot No. 1083-A, that TCT No. 158443 (M) is valid insofar as Lot
No. 1083-C Costs against the defendants-appellants.

 Hence, this petition.

While this petition was pending, respondent Fidela del Rosario died. She was substituted by her children, herein
respondents.

ISSUE: V WoN respondents[’] main cause of action [is] for rescission of contract which is subsidiary in nature[,] and
annulment of sale[,] HAVE ALREADY PRESCRIBED UNDER ARTICLES 1389 AND 1391 OF THE CIVIL CODE.

RULING: The Deed of Absolute Sale in question is declared NULL and VOID in its entirety

we find that the said deed is void in its entirety. Noteworthy is that during the oral arguments before the Court of
Appeals, both petitioners and respondents admitted that Lot No. 1083-A had been expropriated by the government
long before the Deed of Absolute Sale was entered into. What’s more, this case involves only Lot No. 1083-C

Article 1383 of the New Civil Code applies only to rescissible contracts enumerated under Article 1381 of the
same Code, while the cause of action in this case is for rescission of a reciprocal obligation, to which Article
1191 of the Code applies.

Rescission of reciprocal obligations under Article 1191 is different from rescissible contracts under Chapter 6 of
the law on contracts under the Civil Code. While Article 1191 uses the term rescission, the original term
was resolution. Resolution is a principal action that is based on breach of a party, while rescission under Article
1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code, which
expressly enumerates the following rescissible contracts:

ART. 1381. The following contracts are rescissible:

(1) Those which are entered into by guardians whenever the wards whom they represent suffer
lesion by more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the
preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the
claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant
without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.

Obviously, the Kasunduan does not fall under any of those situations mentioned in Article 1381.
Consequently, Article 1383 is inapplicable. Hence, we rule in favor of the respondents.

May the contract entered into between the parties, however, be rescinded based on Article 1191?

A careful reading of the Kasunduan reveals that it is in the nature of a contract to sell, as distinguished from a
contract of sale. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing
sold; while in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the
vendee until full payment of the purchase price. In a contract to sell, the payment of the purchase price is a
positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an obligatory force.

Respondents in this case bound themselves to deliver a deed of absolute sale and clean title covering Lot No. 1083-
C after petitioners have made the second installment. This promise to sell was subject to the fulfillment of the
suspensive condition that petitioners pay P750,000 on August 31, 1987, and deposit a postdated check for the third
installment of P1,141,622.50.51 Petitioners, however, failed to complete payment of the second installment. The non-
fulfillment of the condition rendered the contract to sell ineffective and without force and effect. It must be stressed
that the breach contemplated in Article 1191 of the New Civil Code is the obligor’s failure to comply with an
obligation already extant (in existence), not a failure of a condition to render binding that obligation. Failure to pay, in
this instance, is not even a breach but an event that prevents the vendor’s obligation to convey title from acquiring
binding force. Hence, the agreement of the parties in the instant case may be set aside, but not because of a
breach on the part of petitioners for failure to complete payment of the second installment. Rather, their failure to do
so prevented the obligation of respondents to convey title from acquiring an obligatory force.

COMING NOW TO THE MATTER OF PRESCRIPTION. Contrary to petitioners’ assertion, WE FIND THAT
PRESCRIPTION HAS NOT YET SET IN. Article 1391 states that the action for annulment of void contracts shall be
brought within four years. This period shall begin from the time the fraud or mistake is discovered. Here, the
fraud was discovered in 1992 and the complaint filed in 1993. Thus, the case is well within the prescriptive
period.