G.R. No. L-63745, June 8, 1990
Rodolfo Alfonso and Norma G. Alfonso, petitioners, vs. Court of Appeals, Roberto Chanco and Myrna Garcia Chanco, respondents.

FACTS

Spouses Roberto and Myrna Chanco, registered owners of a lot in Laguna, entered into an oral agreement with spouses Rodolfo and Norma Alfonso. The Alfonsos paid P2,000.00, evidenced by a private receipt signed by the Chancos describing the amount as an advance payment for the lot. The Alfonsos claimed the agreement was an absolute sale, with the P4,000.00 balance payable upon their securing a loan. They alleged they later obtained the loan and tendered payment in October 1973, but the Chancos refused. The Chancos countered that due to urgent need for money, they gave the Alfonsos only one week to pay the balance. Upon the Alfonsos’ failure, the Chancos cancelled the agreement, attempted to return the P2,000.00, and subsequently sold the property to spouses Serafin and Clarita Namit for P6,000.00. The Alfonsos sued to annul the second sale and compel reconveyance.

ISSUE

Whether the contract between the Chancos and the Alfonsos was a contract of absolute sale or a contract to sell, and consequently, whether Article 1592 of the Civil Code on rescission applies.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The legal logic hinges on the distinction between a contract of sale and a contract to sell. The Court of Appeals’ factual findings, which are binding, established that the agreement was a contract to sell. Critical indicia included: the parties’ understanding that time was of the essence due to the Chancos’ urgent financial need; the absence of a formal deed of absolute sale, with the only writing being a receipt for an advance payment; and the Alfonsos’ inability to pay the full price promptly. In a contract to sell, ownership is retained by the vendor until the suspensive condition of full payment is met. Article 1592 of the Civil Code, which requires a judicial or notarial demand for rescission in a sale of immovable property upon failure to pay, applies only to contracts of absolute sale. It does not govern a contract to sell, where the vendor may extrajudicially cancel the agreement upon the vendee’s failure to fulfill the positive condition of full payment. The Court cited precedent, notably Manuel v. Rodriguez, holding that the absence of a formal deed of conveyance indicates the parties intended a transfer of title only after full payment. Therefore, the Chancos’ extrajudicial cancellation and subsequent sale to the Namits were valid.