G.R. No. 118203




Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 118203 July 5, 1996 EMILIO A. SALAZAR and TERESITA DIZON, petitioners, vs. COURT OF APPEALS and JONETTE BORRES, respondents. DAVIDE, JR., J.:p Petitioners seek to set aside the decision 1 of 29 November 1994 of the Court of Appeals in CA-G.R. CV No. 40197, which reversed the decision 2 of 3 September 1992 of Branch 66 of the Regional Trial Court (RTC) of Makati, Metro Manila, in Civil Case No. 89-4468. The primary issues presented for our resolution are whether (a) the so-called Deed of Absolute Sale executed by petitioner Emilio A. Salazar in favor of private respondent Jonette Borres is a perfected contract of sale or a mere contract to sell, and (b) the action for specific performance which the latter filed will lie to compel the former to deliver the Deed of Absolute Sale, the Transfer Certificates of Title, and other documents relative to the property in question. The factual antecedents of this case, as summarized by the trial court, are as follows: That defendant Dr. Salazar is the owner of the two (2) parcels of land with improvements thereon located at 2914 Finlandia Street, Makati, Metro Manila and covered by Transfer Certificate of Title Nos. 31038 and 31039 of the Registry of Deeds of Makati; that Dr. Salazar offered to sell his properties to Jonette Borres for One Million pesos (P1,000,000.00) (TSN pp. 7 and 8, November 5, 1991). The initial proposal took place at the Dimsum Restaurant, Makati, whereby it was proposed that the payment of the consideration was to be made within six (6) months but was objected to by Dr. Salazar and he reduced it to a three (3) months period (TSN Direct Examination on Jonette Borres p. 22, November 12, 1991); that sometime on [May] 28, 1989, Jonette Borres together with a certain Emilio T. Salazar went to see Dr. Salazar at the latter's residence in Bataan bearing a copy of a Deed of Absolute Sale (Exhibit ("C") and Deed of Warranty (Exhibit "D") but Dr. Salazar refused to sign because Jonette Borres did not have the money ready then. In said occasion Dr. Salazar further reduced the period within which plaintiff may purchase the lots, to one (1) month or up to June 30, 1989 (TSN Direct Examination on Jonette Borres November 5, [1991], pp. 10 and 11). Jonette Borres then met again Dr. Salazar on June 2, 1989 at the Ninoy International Airport who was about to leave for the United States of America where he is a resident. Jonette Borres had with her the Deed of Absolute Sale and asked Dr. Salazar to sign said document. Dr. Salazar reluctantly agreed to sign the document provided that Jonette Borres pays one half (1/2) of the consideration or P500,000.00 in "cash" by June 15, 1989 and the balance was payable on June 30, 1989 (TSN Direct Examination on Emilio A. Salazar, May 21, [1991], p. 9; TSN Cross Examination on Jonette Borres, November 12, [1991], pp. 29 and 30). It was during this occasion that Dr. Salazar again emphasized to Jonette Borres that he needed the money because he was then buying a property in the United States (TSN pp. 15-20, November 5, 1991; pp. 22 and 23, May 21, 1991; and pp. 56-57, May 21, 1991). Plaintiff agreed to the above conditions (TSN Cross Examination on Jonette Borres November 12, 1989, p. 32) and Dr. Salazar constituted co-defendant Teresa Dizon as custodian at the Deed of Absolute Sale (Exhibit "C") together with the Titles of the Land in question with the instruction to Teresa Dizon not to surrender said documents to Jonette Borres until upon payment of the full price in "cash" (TSN Direct Examination on Emilio A. Salazar, May 21, [1991], p. 11). On June 14, 1989 Jonette Borres informed defendant Dizon that she will be able to pay the full amount of P1,000,000.00 on June 15, 1989 (TSN Direct Examination Jonette Borres, November 5, [1991], p. 25) and on the next day, she then went to the house of Teresa Dizon to see and get the documents entrusted to her by Dr. Salazar. The documents not being in Dizon's possession, they agreed to meet at Metro Bank West Avenue Branch to get the documents and then to proceed to Makati to meet the plaintiff's business partner a certain Balao who allegedly gave plaintiff a Far East Bank and Trust Company check for the amount of P1,500,000.00 (Exhibit "F") with which to buy the property (TSN Direct Examination on Jonette Borres November 5, [1991], pp. 30, 32 and 33). For some reason or another Jonette Borres and defendant Dizon failed to proceed to Makati. In the meantime or on June 16, 1992, Dr. Salazar made an overseas call to co-defendant Dizon to inquire if Jonette Borres had already paid the down payment of P500,000.00 and Teresa Dizon replied to Dr. Salazar that Jonette Borres had not paid the down payment. Dr. Salazar then ordered Dizon to stop the sale (TSN Direct Examination on Emilio A. Salazar, May 21, [1991], pp. 12 and 13). As maybe seen from the evidence presented by the plaintiff and the defendants, the terms and conditions of the agreement for the sale of the two (2) parcels of land owned by Dr. Salazar in favor of the plaintiff Jonette Borres, are that the purchase price is in the amount of P1,000,000.00, fifty percent (50%) of which or P500,000.00 was to paid on or before June 15, 1989 while the balance thereof was to be paid on or before June 30, 1989 (TSN May 21, 1991, p. 27); that the payment was to be made in "cash" (TSN May 21, 1991, p. 55); that the place of payment is at defendant's bank, Metropolitan Bank Quezon City Branch (TSN October 21, 1991, p. 23). 3 The trial court held that the Deed of Absolute Sale was in reality a contract to sell, and that since Borres failed to pay Salazar the downpayment of P500,000.00 on the agreed date, 15 June 1989, the complaint for specific performance cannot prosper. It then dismissed the complaint and ordered Borres to pay the petitioners P5,000.00 each as attorney's fees and litigation expenses. 4 In ruling that the Deed of Absolute Sale was a contract to sell, the trial court considered pertinent the circumstances attending its execution. First, that the Deed of Absolute Sale was "reluctantly signed" by Dr. Salazar, who was then about to leave for the United States of America, in order that if Borres would comply with the terms and conditions of their agreement, he need not come to the Philippines just to sign it; hence, it does not bind Dr. Salazar until the suspensive condition, i.e., the downpayment of P500,000.00 to be effected on or before 15 June 1989 and the balance to be paid on or before 30 June 1989, is complied with. Second, Borres was not, in fact, financially prepared to buy the parcels of land on or before 15 June 1989 considering that [s]he was just looking for possible buyers or business partners. First, she requested that the pertinent documents like the Deed of Sale (Exhibit "C") and the corresponding Transfer Certificates of Titles Nos. 31038 and 31039 of the Register of Deeds of Rizal (Exhibits "A" and "B") be entrusted to her even before making the downpayment of P500,000.00 purposely to raise the amount needed. When Dr. Salazar refused her request, Jonette Borres approached a certain businessman P.D. Dionisio for loan and was turned down when Jonette Borres cannot [sic] produce the Deed of Absolute Sale and the Titles of the parcels of land in question (TSN November 5, 1991, pp. 20-25). Then she approached a certain Benjamin Balao a realtor developer. Although Balao had issued to her his check in the amount of P1,500,000.00 (Exhibit "F") he instructed his bank not to honor his check without his presence (TSN November 14, 1991, pp. 81 to 84). Jonette Borres admitted that she was not in a position to encash the check (Exhibit "F") although it was payable to "cash" (TSN November 21, 1991, pp. 41 and 44). 5 Salazar's victory was short-lived. On Borre's appeal from the decision of the trial court, the Court of Appeals, in its challenged decision of 29 November 1994, ruled that the Deed of Absolute Sale, whose existence and due execution was undisputed, is perfected contract of sale, with a definite object and a specific consideration which the parties had agreed upon. As proof that it is a contract of sale and not a contract to sell, the Court of Appeals stressed the absence of a proviso that the title to the property is reserved in the vendor until full payment of the purchase price or that the vendor may unilaterally rescind the contract the moment the vendee fails to pay within the fixed period. 6 Salazar's reluctance to sign it is of no moment, since there is no allegation of fraud, forgery, or duress. And even assuming that Borres failed to pay the contract price, such failure did not convert the contract into one without cause or consideration as to vitiate the validity of the contract, it not being essential for the existence of cause that payment or full payment be made at the time of the contract. Neither did such failure ipso facto resolve the contract in question. The remedy of the vendor, Dr. Emilio A. Salazar, is to demand specific performance or rescission, with damages in either case. On the other hand, the vendee, Jonette Borres, may demand specific performance, i.e., compel the vendor to accept the price and deliver the title of the land object of the contract. The Court of Appeals disagreed with the trial court's finding that Borres was not in a position to pay the downpayment because [o]n June 15, 1989, plaintiff-appellant had a Far East Bank check payable to her order, in the amount of P1,500,000.00 — more than the whole agreed purchase price of P1,000,000.00. Defendant-appellee Teresa Dizon agreed (on June 14, 1989) to meet her on June 15, 1989, at Metro Bank West and thereafter to proceed to Makati in order to encash the Far East Bank check. Defendant-appellee Teresa Dizon somehow managed to manipulate things by making herself unavailable so that the payment could not be made on June 15, 1989. (TSN, Nov. 5, 1991, pp. 27-41). On the next day, June 16, 1989, defendant-appellee Teresa Dizon informed plaintiff-appellant that defendant-appellee Dr. Emilio A. Salazar called up in the evening of June 15, 1989 asking whether plaintiff-appellant paid on that day and upon being answered in the negative, said vendor said that he is revoking the contract. (TSN, Nov. 5, 1991, pp. 41-42). Defendant-appellee Teresa Dizon having her own interested buyer, evidently acted in bad faith, tried and indeed succeeded to frustrate the efforts of plaintiff-appellant to comply with her reciprocal obligation to pay the agreed purchase price. The fact that the Far East Bank check was payable to the Order of plaintiff-appellant, and it covers the amount of P1,500,000.00 — which is much more than the agreed purchase price of P1,000,000.00 — reveals that plaintiff-appellant was financially prepared to comply with her reciprocal obligation. That plaintiff-appellant filed the present suit for specific performance on July 6, 1989, bolsters the fact that she is really willing and able to pay the agreed purchase price. How and from whom she borrowed/obtained the said amount, is of no consequence. 7 Accordingly, the respondent Court reversed the decision of the trial court and handed down a new judgment ordering Emilio A. Salazar to accept from Jonette Borres the payment representing the purchase price in the amount of P1 million and thereafter to comply with his reciprocal obligation to surrender the original copies of the deed of absolute sale and torrens title covering the parcels of land subject of the contract. Finding petitioner Teresita Dizon to have "acted in bad faith in frustrating the efforts" of Borres to comply with her obligation to pay the purchase price, the appellate court ordered her to pay Borres the amounts of P80,000.00 as moral damages; P50,000.00 as exemplary damages; and P100,000.00 as attorney's fees. Unable to accept the reversal of the trial court's decision, the petitioners filed the instant petition wherein they submit that the Court of Appeals committed grave and serious errors: A. . . . in relying on the Deed of Absolute Sale dated May 30, 1989 notwithstanding the fact that: 1. BORRES EXECUTED A DEED OF WARRANTY (EXHS. "D" AND "2") STATING THEREIN THAT UNTIL AND UNLESS THE AMOUNT OF P1,000,000.00 REPRESENTING THE PURCHASE PRICE FOR THAT PARCELS OF LAND COVERED BY TCT NOS. S-31038 AND S-31039 BE PAID BY HER TO SALAZAR, SHE HAS NO RIGHT WHATSOEVER TO THE ORIGINAL COPIES OF THE DEED OF ABSOLUTE SALE AND THAT SHE HAS NO LEGAL RIGHT WHATSOEVER TO ANY AND ALL PERTINENT RECORDS OF THE ABOVE-MENTIONED LOTS; 2. UPON HERE BEHEST, BORRES WAS GIVEN A PHOTOCOPY OF THE DEED OF ABSOLUTE SALE BY DIZON BUT ONLY AFTER THE LATTER ERASED THE SIGNATURE OF SALAZAR AS THE VENDEE THEREIN. 3. BORRES HAD NOT PAID ANY PORTION OF THE AGREED PURCHASE PRICE AND THUS RENDERS THE DEED OF ABSOLUTE SALE VOID AB INITIO. B. . . . in concluding that the agreement between SALAZAR and BORRES is a contract of sale and thus, perfected upon agreement on the subject matter and consideration, notwithstanding the fact that: 1. THE AGREEMENT BETWEEN THE PARTIES IS ESSENTIALLY A CONTRACT TO SELL SUBJECT TO A SUSPENSIVE CONDITION, THE BIRTH OR EFFECTIVITY OF WHICH SHOULD TAKE PLACE ONLY IF AND WHEN THE EVENT WHICH CONSTITUTES THE CONDITION HAPPENS OR IS FULFILLED. SINCE BORRES FAILED TO COMPLY WITH HER OBLIGATION, THE AGREEMENT TO SELL BECAME STILLBORN; 2. THERE WAS AN EXPRESS AGREEMENT BETWEEN THE PARTIES THAT BORRES SHALL BE ENTITLED TO THE PROPERTY OR ANY RECORDS PERTAINING THERETO OR ORIGINAL COPIES OF THE DEED OF ABSOLUTE SALE ONLY UPON FULL PAYMENT OF THE PURCHASE PRICE. C. . . . in holding that DIZON acted in bad faith and succeeded to frustrate the efforts of BORRES to comply with her reciprocal obligation to pay the purchase price notwithstanding the fact that: 1. AT THE TIME THAT BORRES WAS OBLIGED TO PAY AT LEAST 50% OF THE PURCHASE PRICE OR ON JUNE 15, 1989, SHE WAS NOT READY, WILLING AND ABLE TO DO SO. EVEN ASSUMING FOR THE SAKE OF ARGUMENT THAT THE LATTER HAD THE FINANCIAL CAPABILITY TO MEET HER OBLIGATION, THE FACT REMAINS THAT SHE FAILED TO PROPERLY TENDER PAYMENT OF HER OBLIGATION AND IN CASE TENDER OF PAYMENT WAS REFUSED, TO CONSIGN THE SAME IN COURT; 2. DIZON HAD NO REASON TO FRUSTRATE THE EFFORTS OF BORRES TO COMPLY WITH HER OBLIGATION TO PAY THE AGREED PURCHASE PRICE SINCE SHE WAS MERELY CONSTITUTED AS CUSTODIAN OF THE DEED OF ABSOLUTE SALE AND TITLES OF THE PROPERTY WITH SPECIFIC INSTRUCTIONS TO RELEASE THE SAME TO BORRES ONLY UPON RECEIPT OF THE PURCHASE PRICE IN FULL AND IN CASH WITHIN THE AGREED PERIOD. D. . . . in ordering Dizon to pay Borres the amount of P80,000.00 moral damages; P50,000.00 exemplary damages and P100,000.00 as attorney's fees by way of damages notwithstanding the fact that the evidence adduced before the trial court clearly shows that BORRES had no cause of action against the former. 8 We shall first the issue of whether the agreement between petitioner Salazar and private respondent Borres is a contract of sale or a contract to sell. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; 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. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event prevents the obligation of the vendor to convey title from becoming effective. 9 If we are to consider only the Deed of Absolute Sale, 10 we can easily say that the contract between Salazar and Borres is one of sale. However, the Deed of Warranty 11 and the oral testimony on the circumstances surrounding the execution of the Deed of Absolute Sale, as well as the other pieces of evidence submitted by Borres, sustain the finding and conclusion of the trial court that the true agreement between the parties was a contract to sell in that the true intent of Salazar was to transfer ownership of the property to Borres only after the latter pays the full consideration. From the beginning to the end, such intention of Salazar was unequivocal and manifest. He rejected Borre's offer to pay the consideration within six months to give her time to secure a loan. When Borres proposed that he lend her the certificates of title of the lots so that she could secure a loan from the banks in Manila and be able to pay, within three months, 12 the consideration out of the proceeds of the loan, Salazar agreed provided that she would assure him that the title would not pass to her until he is fully paid. Borres forthwith promised to execute a warranty. She then prepared a Deed of Absolute Sale for Salazar's signature and a Deed of Warranty for her signature. When finally she presented to him the Deed of Absolute Sale, Salazar did not sign it and insisted that he be paid the purchase price at the end of June 1989; he further told her that he would not lend her the certificates of title until he is so paid. He signed it only after Borres agreed to pay by the end of June 1989 at a bank in Makati. But he did not give the Deed of Absolute Sale to her; instead, he told her to just meet him at the Ninoy Aquino International Airport on 2 June 1989, when he would leave for the United States of America, so she would know to whom he would entrust the document and other papers relative to the property. We quote verbatim Borre's own testimony on direct examination upon these points: Q Have you met the owner of the lot mentioned a while ago? A Yes, your Honor, I met Dr. Salazar, the owner, sometime last week of April, 1989 at Dimsum Restaurant. Q You met at Dimsum, in what particular place was that? A We met at Dimsum Restaurant in Makati after I was called by Emilio T. Salazar to meet at Dimsum because Dr. Salazar wanted to sell the property and he wanted to talk to you [sic]. COURT: Talk to you? A To discuss the matter of sale to me at Dimsum Sir ATTY. BORRES: Q And so you really met at Dimsum. A Yes, Ma'am. Q What transpired at Dimsum? A Dr. Salazar offered me to buy the properties for a total of ONE MILLION PESOS (P1,000,000.00) excluding all and any other expenses that may be involved in the transfer of the properties in case I am interested to by [sic], in case Atty. Borres wanted to buy. Q What then was your reply? A I am interested to buy. Q Dr. Salazar. . . I asked . . . what did Dr. Salazar say after that? A I answered Dr. Salazar that I could buy or able to buy the properties within six (6) months because I have to go home to the province to secure a loan. Q What did Dr. Salazar say regarding your proposal? A I told Dr. Salazar. Dr. Salazar said that he could not wait for that six (6) months is a very long time. Q What else did you say? A I told Dr. Salazar that "it is possible I can pay within three (3) months' time if your can lend me the title of your property because banks here in Manila usually release loans in three months' time and I will have less problem to complete the payment of ONE MILLION PESOS (P1,000,000.00)." Q So, what did Dr. Salazar say? A Dr. Salazar said that "if it is the best for our transaction I can lend you the title provided I can be assured that the title will not pass on you until you are fully paid. Q What was your answer then? A I told Dr. Salazar that I can execute a warranty to the effect that the property could not be transferred to me until I have fully paid him. Q What did Dr. Salazar say? A Dr. Salazar said "I will agree to that" COURT: Dr. Salazar told you that he is agreeable to the proposal. A Yes, Dr. Salazar said "you prepare a craft, the necessary document and bring it to Bataan. ATTY. BORRES: Q And what was your answer to Dr. Salazar A I answered Dr. Salazar that "I will be ever willing to go to Bataan any time you wanted me to go. Q And you really did go to Bataan. A Yes, I did. x x x x x x x x x ATTY BORRES: Q And what happened while there in Bataan? x x x x x x x x x Q And what happened while you got all seated in the sala of Dr. Salazar. A I showed him a document which he instructed me to prepare and he has read it and agreed to the Deed of Absolute Sale and the warranty I made. He gave me back the documents for signing. Q And you did sign the document? A Yes, I did sign it and passed it on to Dr. Salazar. Q After you passed it to Dr. Salazar, what happened? A Dr. Salazar did not sign the document and told me that he is only going to sign it if I am going to pay by the end of June and that he could not lend me the title and he said he is going to sign it and not to give me a copy until the purchase price is fully paid. Q And what was your reaction with the statement? A I said "what about the loan that we have a greed at Dimsum if you will not lend me the title and the document that we have signed new?" Dr. Salazar said "I could not lend you the title and I care less how your are going to loan the property and raise the money you are going to pay me, what is important to me is you pay me the whole amount of One Million Pesos (P1,000,000.00) not late than June 30, 1989." Q And what did you say? A Since I could not do anything and I really wanted to buy the property, I agreed to Dr. Salazar's condition that I pay the property by the end of June and I will pay only at the bank in Makati. Q And what did Dr. Salazar say? A Dr. Salazar said "okey I will sign this and have this notarized but I could not lend you and never have a [copy] of the title as well as the Deed of Sale and you just wait oat NAIA and wait if you could have this document because I am leaving on June 2 for the US. You meet me there". Q And after that what did Dr. Salazar do? A It was only when that he signed the document after I have agreed to his proposal but he was very much stand [sic] to the payments and he was no longer the same when I met him at Dimsum. 13 Clearly then, the original intention in the execution of the Deed of Absolute Sale was to implement the proposal of Borres that Salazar "lend" her the transfer certificates of title so that she could secure a loan from a bank in Manila whose proceeds would be applied to the payment of the purchase price of the property, and the original purpose of the Deed of Warranty was to assure Salazar that, as demanded by him, title to the lots will not pass to her until she pays the full consideration. The lending of the certificates of title for the above purpose could have been accomplished through a special power of attorney under which Salazar will authorize her to obtain a loan and to mortgage the property as security therefor. But, perhaps anticipating Salazar's departure to the United States of America where he resides, Borres, who is a lawyer, prepared instead a Deed of Absolute Sale and Deed of Warranty. Notwithstanding Borre's deliberate characterizations of the documents, we are convinced that they were prepared in connection with and in the implementation of the agreement regarding the lending of the certificates of title. They do not weaken the adamantine position of Salazar not to part with his title to the two lots until full payment of the agreed price therefor. Borre's execution of the Deed of Warranty was in fact a recognition of Salazar's position. Despite its careful wordings and phraseology to make some sort of distinction between Borre's right to the ownership or title over the lots on the one hand, and her right to possess or keep the Deed of Absolute Sale and the other documents relative to the lots, the totality of the Deed of Warranty manifests an indubitable recognition by Borres of the aforementioned intention of Salazar. She declares therein as follows: 1. That until and unless the amount of ONE MILLION (P1,000,000.00) PESOS representing the purchase price for that parcels of land covered by Transfer Certificate of Title Nos. S-31038 and S-31039 be paid by the undersigned unto Dr. Emilio A. Salazar, the undersigned has no absolute right whatsoever to the original copies of the Deed of Absolute Sale executed by said Dr. Emilio A. Salazar date May ____, 1989; 2. That she has no legal right whatsoever to any and all pertinent records of the aforementioned lots; 3. That upon payment of the aforementioned amount, Dr. Emilio A. Salazar or his representative is obliged to surrender the original of these presents together with all the original documents and titles covering the sale of the aforementioned lots unto the undersigned. 14 Then, too, in her Memorandum of Agreement with Monteland Realty Corporation, 15 dated 15 June 1989, Borres explicitly mentioned only her "rights and interests" under the Deed of Absolute Sale signed by Salazar and therein conveyed, transferred, and assigned to the said corporation only such "rights and interest." Also worth noting is the statement in the second whereas clause of the Memorandum of Agreement that Monteland Realty Corporation has full knowledge of the sales [sic] and conditions of the SELLER-OWNER of the property . . . that the buyer [Borres] has an obligation to pay DR. EMILIO SALAZAR the amount of ONE MILLION PESOS (P1,000,000.00) and that there is already a Deed of Absolute Deed of [sic] Sale in favor of [Borres] of which both copies of the titles of the properties for sale and all documents including the Deed of Absolute Sale aforementioned are including the Deed of Absolute Sale aforementioned are under the custody of MS. TERESA DIZON who will only release the Title and the Deed of Absolute Sale after the obligation of [Borres] is fully paid. 16 The withholding by Salazar through Dizon of the Deed of Absolute Sale, the certificates of title, and all other documents relative to the lots is an additional indubitable proof that Salazar did not transfer to Borres either by actual or constructive delivery the ownership of the two lots. While generally the execution of a deed of absolute sale constitutes constructive delivery of ownership, the withholding by the vendor of that deed under explicit agreement that it be delivered together with the certificates of titles to the vendee only upon the latter's full payment of the consideration amounts to a suspension of the effectivity of the deed of sale as a binding contract. Undoubtedly, Salazar and Borres mutually agreed that despite the Deed of Absolute Sale title to the two lots in question was not to pass to the latter until full payment of the consideration of P1 million. The form of the instrument cannot prevail over the true intent of the parties as established by the evidence. Accordingly, since Borres was unable to pay the consideration, which was a suspensive condition, Salazar cannot be compelled to deliver to her the deed of sale, certificates of title, and other documents concerning the two lots. In other words, no right in her favor and no corresponding obligation on the part of Salazar were created. Article 1181 of the Civil Code provides: In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired shall depend upon the happening of the event which constitutes the condition. Even granting for the sake of argument that, as ruled by the court of Appeals, the agreement of Salazar and Borres as evidenced by the Deed of Absolute Sale was a perfected contract of sale, Borre's action for specific performance must likewise fail. We are in full accord with the trial court and, perforce, disagree with the Court of Appeals, that Borres was not ready to pay P500,000.00 on or before 15 June 1989. That Borres had a check of P1.5 million, or of more than the full consideration of the two lots, is of no moment. The check, 17 dated 15 June 1989, is a crossed check payable to "Atty. Jonette Borres," or herein private respondent. The crossing is of simple type — two parallel lines at the upper left hand corner without the words "and company" between the lines. Accordingly, it cannot be paid to anyone except Borres, or it can be deposited with a bank where she keeps an account. 18 There is absolutely no evidence that Borres encashed the check and tendered to Salazar thru Dizon the sum of P500,000.00 on 15 June 1989. On the contrary, the check itself was cancelled as shown by the word cancelled handwritten across it. Moreover, the delivery of the check by Monteland Realty Corporation through Balao was not unconditional. Per the receipt 19 Borres signed on 15 June 1989, encashment of the check "it subject to the verifications as to the authenticity of documents pertaining to the subject property." Neither is there evidence that Borres paid the downpayment on 15 June 1989 with money she got from other sources. No payment appears to have been made thereafter or during the pendency of the case before the trial court or the Court of Appeals. She should have consigned the payment in court pursuant to Article 1256 of the Civil Code for her to be released from her obligation and, consequently, exact fulfillment by Salazar of his corresponding obligation. The challenged decision of the Court of Appeals must then be reversed. That of the trial court must be affirmed, with the modification consisting in the deletion of the award of attorney's fees in favor of the petitioners which we find to be without basis. The award of attorney's fees as damages is the exception rather than the rule; it is not to be given to the defendant every time the latter prevails. The right to litigate is so precious that a penalty should not be charged on those who may exercise it erroneously, unless, of course such party acted in bad faith. 20 WHEREFORE, the instant petition is hereby GRANTED. The challenged decision of 29 November 1994 of the Court of Appeals in CA-G.R. CV No. 40197 is REVERSED and SET ASIDE, and the decision of 3 September 1992 of Branch 66 of the Regional Trial Court of Manila in Civil Case No. 89-4468 is AFFIRMED, subject to the modification that the award for attorney's fees is deleted. No pronouncement as to costs. SO ORDERED. Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur. Footnotes 1 Rollo, 40-46. Per Ishani, A., J., with Ibay-Somera, C., and Lipana-Revs, C., JJ., concurring. 2 Original Records (OR) 286-295. Per Judge Eriberto U. Rosario, Jr. 3 OR, 287-291. 4 Id., 294-295. 5 OR, 293-294. 6 Citing Visayan Sawmill Co., Inc. vs. Court of Appeals, 219 SCRA 378 [1993]. 7 Rollo, 44-45. 8 Rollo, 16-18. 9 Luzon Brokerage Co. Inc. vs. Maritime Building Co., Inc. 46 SCRA 381, 387 [1972]; Jacinto vs. Kaparaz, 209 SCRA 246 254 [1992]; Visayan Sawmill Co., Inc. vs. Court of Appeals, supra note 6, at 389; Pingol vs. Court of Appeals, 226 SCRA 118, 126 [1993]. 10 Exhibits "C" and "1," Folder of Exhibits, 6 and 22. 11 Exhibit "2," Id., 24. 12 TSN, 5 November 1991, 8. 13 TSN, 5 November 1991, 6-14. 14 Exhibit "2," Folder of Exhibits, 24. 15 Exhibit "6," Id., 16-17. 16 Exhibit "G," Folder of Exhibits, 16. 17 Exhibit "F," Folder of Exhibits, 15. 18 AGUEDO F. AGBAYANI, Commentaries and Jurisprudence on the Commercial laws of the Philippines, vol. 1 [1987 ed.], 449. 19 Exhibit "D," Folder of Exhibits, 8. 20 Tierra International Construction Corp. vs. NLRC, 211 SCRA 73, 81 [1992]; Albenson Enterprises Corp. vs. Court of Appeals, 217 SCRA 16, 31 [1993]; De La Peña vs. Court of Appeals, 231 SCRA 456, 462 [1994]. The Lawphil Project - Arellano Law Foundation