FACTS:

The case involves a dispute over a piece of land in Benguet. Respondents Joaquin and Julia Pacson entered into a Deed of Conditional Sale with the Spouses Nabus for a 1,000-square-meter lot. The consideration was P170,000, to be paid through various installments. The transfer documents were to be executed once the full consideration was received. Respondents made partial payments to the Philippine National Bank (PNB), which held a mortgage on the property, and to the spouses Nabus directly. They took possession of the property and made improvements on it.

After the death of Bate Nabus, his widow and daughter executed an extrajudicial settlement of the land. TCT No. T-17718 was issued in their names. Respondents continued to make payments on the balance, although not in the agreed installments, but in various amounts over a span of seven years. Receipts of payment were signed by Julie Nabus, who also signed as Julie Quan after she remarried. There were a total of 364 receipts.

The trial court ruled in favor of the respondents, ordering the petitioner Betty Tolero to execute a deed of absolute sale and surrender the owner's duplicate copy of the TCTs. The Court of Appeals affirmed the decision with modification.

The Pacsons claimed that the Deed of Conditional Sale was not converted into a lease agreement, as evidenced by the signed pages of the original contract and the payment receipts. Betty Tolero, the defendant, bought the property from Julie Nabus after verifying the documents and finding the title to be clean. She paid the agreed price and the Deed of Absolute Sale was executed and registered. However, after becoming the new owner, Tolero received a complaint filed by the Pacsons. She claimed that she was not aware of the Deed of Conditional Sale executed in favor of the Pacsons and saw the document for the first time after she had already bought the property. The trial court ruled in favor of the Pacsons, stating that the Deed of Conditional Sale was not converted into a lease agreement and that Tolero was not a buyer in good faith, as she had actual knowledge of the conditional sale to the Pacsons.

ISSUES:

1. Whether or not the Deed of Conditional Sale was converted into a contract of lease.

2. Whether the Deed of Conditional Sale was a contract to sell or a contract of sale.

3. Whether the contract entered into by the parties was a contract of sale or a contract to sell.

4. Whether the subsequent deed of absolute sale executed in favor of another buyer is valid.

5. Whether the contract entered into between the parties is a contract of sale or a contract to sell.

6. Whether the non-fulfillment of the suspensive condition of full payment of the purchase price is a breach of contract.

7. Whether the non-payment of the purchase price renders the contract to sell ineffective and without force and effect.

8. Whether the respondents are entitled to reimbursement of their payments and nominal damages.

RULING:

1. Regarding the first issue, the Deed of Conditional Sale entered into by the Spouses Pacson and the Spouses Nabus was not converted into a contract of lease. The receipts issued to the Spouses Pacson indicated that the payments made were for the purchase of the property, not for rental. The trial court deemed Joaquin Pacson's failure to sign the second page of one carbon copy of the contract as a mere inadvertence, and it was of no consequence as the original contract and the other copies were duly signed by all parties.

2. On the second issue, the contract was determined to be a contract of sale. The fact that the contract was subject to a suspensive condition of full payment of the consideration does not make it a contract to sell. The reciprocal obligations stated in the contract, specifically the obligation of the vendors to execute the transfer documents upon full payment by the vendees, make it a contract of sale.

3. The contract entered into by the parties was a contract to sell, not a contract of sale. In a contract to sell, ownership remains with the seller and does not pass to the buyer until full payment of the purchase price. Non-fulfillment of the suspensive condition, which is the full payment of the purchase price, prevents the obligation to sell from arising and ownership is retained by the seller.

4. The subsequent deed of absolute sale executed in favor of another buyer is valid since the initial contract to sell was not fulfilled due to non-payment of the purchase price.

5. The contract entered into between the parties is a contract to sell. The contract stipulated that the vendors reserved title to the subject property until full payment of the purchase price. The vendors promised to execute a deed of absolute sale upon completion of the payment by the vendee, indicating that ownership will not automatically transfer to the buyer upon full payment but requires a separate conveyance of title.

6. The non-fulfillment of the suspensive condition of full payment of the purchase price is not a breach of contract. In a contract to sell, the payment of the price is a positive suspensive condition, the failure of which prevents the obligation of the vendor to convey title from becoming effective. Therefore, there can be no rescission or fulfillment of an obligation that does not exist yet due to the non-fulfillment of the suspensive condition.

7. Yes, the non-payment of the purchase price renders the contract to sell ineffective and without force and effect. The payment of the purchase price is a positive suspensive condition, the non-fulfillment of which prevents the seller from conveying title to the purchaser. Consequently, a cause of action for specific performance does not arise.

8. The respondents are entitled to reimbursement of their payments and nominal damages. Under the Deed of Conditional Sale, the respondents had the right to demand that the sellers execute a deed of absolute sale when they were ready to pay the remaining balance of the purchase price. Since the sellers violated this right by selling the property to another buyer, the respondents are entitled to reimbursement of their payments and to nominal damages.

PRINCIPLES:

• The presumption of regularity applies when all the pages of a contract are signed by all parties, and the failure to sign a page in a carbon copy is deemed a mere inadvertence.

• The nature of a contract is determined by its essential elements and the intention of the parties, rather than the presence of suspensive conditions.

• A contract of sale is a consensual contract whereby one party obligates himself to transfer ownership of a determinate thing upon payment of a price certain in money or its equivalent.

• A contract to sell is a bilateral contract where ownership is retained by the seller until the fulfillment of a suspensive condition, which is usually the full payment of the purchase price.

• In a contract to sell, the seller is bound to sell the property exclusively to the buyer upon fulfillment of the agreed condition, while in a contract of sale, ownership passes to the buyer upon delivery of the thing sold.

• Non-fulfillment of the suspensive condition in a contract to sell prevents the obligation to sell from arising and ownership remains with the seller.

• A subsequent deed of absolute sale executed in favor of another buyer is valid if the original contract to sell was not fulfilled.

• In a contract of sale, the title to the property passes to the buyer upon delivery of the thing sold. In a contract to sell, ownership is reserved in the vendor until full payment of the purchase price. Payment of the price in a contract to sell is a positive suspensive condition, the non-fulfillment of which prevents the obligation of the vendor to convey title.

• The nature of the contract is determined by the express terms and stipulations of the parties, not by its title.

• Before the remedy of specific performance may be availed of, there must be a breach of the contract.

• Article 1191 of the Civil Code pertains to the failure to comply with an existing obligation, not the failure of a condition to render binding that obligation.

• The non-payment of the purchase price renders the contract to sell ineffective and without force and effect.

• The payment of the purchase price is a positive suspensive condition, the non-fulfillment of which prevents the seller from conveying title to the purchaser.

• In a contract to sell, the non-payment of the purchase price is not a breach of contract but an event that prevents the seller from conveying title to the purchaser.

• Nominal damages may be awarded to vindicate or recognize the right of the plaintiff that has been violated or invaded by the defendant.

• Moral damages cannot be awarded for breaches of contract unless there is fraudulent or bad faith on the part of the defendant.

• Exemplary damages cannot be granted in the absence of moral, temperate, liquidated, or compensatory damages.