G.R. No.

131784 September 16, 1999 Both the trial court: and the Court of Appeals (CA) interpreted this provision to mean that the
respondents had obliged themselves to obtain a TCT in the name of petitioner-lessee. The trial
court held that this obligation was a condition precedent to petitioner's purchase of the property.
FELIX I. GONZALES, petitioner, [LESSEE]
Since respondents had not performed their obligation, they could not compel petitioner to buy
vs.
the parcel of land. The CA took the opposite view, holding that the property should be purchased
THE HEIRS OF THOMAS and PAULA CRUZ, herein represented by ELENA C.
first before respondents may be obliged to obtain a TCT in the name of petitioner-lessee-buyer.
TALENS, respondents. [on behalf of the LESSOR]

Issue/s:
If a stipulation in a contract admits of several meanings, it shall be understood as bearing that
import most adequate to render it effectual. An obligation cannot be enforced unless the plaintiff
has fulfilled the condition upon which it is premised. Hence, an obligation to purchase cannot be The parties limited the issues to be resolved to:
implemented unless and until the sellers have shown their title to the specific portion of the
property being sold.
(1) Whether or not paragraph 9 of the contract is a condition precedent before the defendant is
to pay the down payment; [YES]
Facts:
(2) Whether or not plaintiffs can rescind the Contract of Lease/Purchase; [NO] and
On December 1, 1983, Paula Año Cruz together with the plaintiffs heirs of Thomas and Paula
Cruz, namely Ricardo A. Cruz, Carmelita M. Cruz, Salome A Cruz, Irenea C. Victoria, Leticia C.
Salvador and Elena C. Talens, entered into a Contract of Lease/Purchase with the defendant, (3) Whether or not plaintiffs can terminate the Contract of Lease. [NO]
Felix L. Gonzales, the sole proprietor and manager of Felgon Farms, of a half-portion of a
"parcel of land containing an area 12 hectares, more or less, and an accretion of 2 hectares,
Held:
more or less, situated in Rodriguez Town, Province of Rizal" and covered by Transfer Certificate
of Title No. 12111 (Exhibit A, p. 157, Records).
In sum, the plaintiffs cannot terminate the Contract of Lease due to their failure to notify the
defendant in due time of their intention to that effect. Nor can they rescind the Contract of
In its first paragraph, the disputed agreement provides that petitioner shall lease the property for Purchase in view of the fact that there is a condition precedent which the plaintiffs have not
fulfilled. It is the defendant now who has the option to either rescind or demand the performance
one year, after which he "shall purchase" it. Paragraph nine, on the other hand, requires herein
respondents to obtain a separate and distinct Transfer Certificate of Title (TCT) over the of the contract. Moreover, according to Article 1654 of the New Civil Code, the lessor is obliged
property, viz.: to deliver the thing which is the object of the contract in such condition as to render it fit for the
use intended. Considering that the lessors-plaintiffs have not delivered the property in whole
over the protest of the defendant, the latter suffered damages therefor. (p. 4-6, Decision; pp.
9. The LESSORS hereby commit themselves and shall undertake to obtain 262-264, Records)
a separate and distinct T.C.T. over the lease portion to the LESSEE within a
reasonable period of time which shall not in any case exceed four (4) years,
after which a new Contract shall be executed by the herein parties which In holding that clause nine was not a condition precedent to the purchase of the property, the CA
shall be the same in all respects with this Contract of Lease/Purchase relied on a literal interpretation to the effect that the TCT should be obtained in the name of the
insofar as the terms and conditions are concerned. petitioner-vendee. It reasoned that the title could be transferred to the name of the buyer only
after the completion of the purchase. Thus, petitioner should first purchase the property before
respondents could be obliged to transfer the TCT to his name.
Alleging that petitioner has not purchased the property after the lapse of one year, respondents
seek to rescind the Contract and to recover the property. Petitioner, on the other hand, argues
that he could not be compelled to purchase the property, because respondents have not We disagree. The literal interpretation not only ignores the factual backdrop of the case; it also
utilizes a faulty parsing of paragraph nine, which should purportedly read as follows: "The
complied with paragraph nine, which obligates them to obtain a separate and distinct title
in their names. He contends that paragraph nine was a condition precedent to the purchase of lessors . . . shall undertake to obtain a separate and distinct TCT . . . to the LESSEE within a
the property. reasonable period of time which shall not in any case exceed four (4) years . . .. " Read in its
entirety, however, paragraph nine does not say that the TCT should be obtain in the name of the
lessee. In fact, paragraph nine requires respondents to obtain a "TCT over the herein leased
To be sure, this paragraph — and the entire agreement, for that matter — is not a model of how portion to the LESSEE," thereby showing that the crucial phrase "to the LESSEE" adverts to "the
a contract should be worded. It is an invitation to a litigation, as in fact the parties had to go all to leased portion" and not to the name which should appear in the new TCT.
way up to this Court to plead for a resolution of their conflict which is rooted in their failure to
express themselves clearly. Small wonder, even the two lower courts gave contradictory
understanding of this provision, thereby necessitating the intervention of the highest court of the
land.

--------------------------------------------------------------------------------------------------------------------------------
Basic is the rule in the interpretation of contracts that if some stipulation therein should admit of the new contract evidencing the sale? Why should the petitioner still be required to pay rentals
several meanings, it shall be understood as bearing that import most adequate to render it after it purchases and pays for the property? The Contract could not have envisioned this absurd
effectual. 9 Considering the antecedents of the ownership of the disputed lot, it appears that scenario.
petitioner's interpretation renders clause nine most effectual.
Clearly, the appellate court's literal interpretation of the first portion of paragraph nine renders
The record shows that at the time the contract was executed, the land in question was still the latter portion thereof ineffectual. In other words, that portion can only mean that the
registered in the name of Bernardina Calixto and Severo Cruz, respondents' predecessors-in- respondents should first obtain a TCT in their names, after which petitioner is given time to
interest. There is no showing whether respondents were the only heirs of Severo Cruz or purchase and pay for the property.
whether the other half of the land in the name of Bernardina Calixto was adjudicated to them by
any means. In fact, they admit that extrajudicial proceedings were still ongoing. Hence, when the
Respondents insist that "the obligation of petitioner to buy the disputed land immediately after
Contract of Lease/Purchase was executed, there was no assurance that the respondents were
the termination of the one year lease period is
indeed the owners of the specific portion of the lot that petitioner wanted to buy, and if so, in
explicit." 12 However, it is more reasonable to state that the first paragraph was effectively
what concept and to what extent.
modified by the ninth. To repeat, petitioner can be compelled to perform his obligation under the
first paragraph, only after respondents have complied with the ninth. Unless and until
Thus, the clear intent of the ninth paragraph was for respondents to obtain a separate and respondents have done so, the first paragraph cannot be enforced against the petitioner.
distinct TCT in their names. This was necessary to enable them to show their ownership of the
stipulated portion of the land and their concomitant right to dispose of it. Absent any title in their
In sum, we hold that the ninth provision was intended to ensure that respondents would have a
names, they could not have sold the disputed parcel of land.
valid title over the specific portion they were selling to petitioner. Only after the title is assured
may the obligation to buy the land and to pay the sums stated in the Contract be enforced within
It is well-settled principle in law that no one can five what one does not have — nemo dat quod the period stipulated. Verily, the petitioner's obligation to purchase has not yet ripened and
non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer cannot be enforced until and unless respondents can prove their title to the property subject of
can acquire no more than what the seller can transfer legally. 10 the Contract.

Because the property remained registered in the names of their predecessors-in-interest, private In this case, the obligation of the petitioner to buy the land cannot be enforced unless
respondents could validly sell only their undivided interest in the estate of Severo Cruz, the respondents comply with the suspensive condition that they acquire first a separate and distinct
extent of which was however not shown in the records. There being no partition of the estate TCT in their names. The suspensive condition not having been fulfilled, then the obligation of the
thus, far, there was no guarantee as to how much and which portion would be adjudicated to petitioner to purchase the land has not arisen.
respondents.
In the same vein, respondents cannot rescind the contract, they have not caused the transfer of
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing the TCT to their names, which is a condition precedent to petitioner's obligation. This Court has
sold. 11 In this case, the respondent could not deliver ownership or title to a specific portion of the held that "there can be no rescission (or more properly, resolution) of an obligation as yet non-
yet undivided property. True, they could have intended to sell their hereditary interest, but in the existent, because the suspensive condition has not happened." 18
context of the Contract of Lease/Purchase, the parties under paragraph nine wanted the specific
portion of the land to be segregated, identified and specifically titled. Hence, by the said
WHEREFORE, the petition is GRANTED and the appealed Decision is REVERSED and SET
Contract, the respondents as sellers were given a maximum of four years within which to acquire
ASIDE. The Decision of the trial court is REINSTATED, but the award of moral damages and
a separate TCT in their names, preparatory to the execution of the deed of sale and the payment
attorney's fees is DELETED for lack of basis. No costs.
of the agreed price in the manner described in paragraph nine.

This interpretation is bolstered by the P50,000 petitioner advanced to respondents in order to

The CA interpretation ignores the other part of paragraph nine, stating that after a separate TCT
had been obtained, "a new contract shall be executed by the herein parties which shall be the
same in all respects with this Contract of Lease/Purchase insofar as the terms and conditions
are concerned."

If, as the CA held, petitioner should purchase the property first before the title can be transferred
to his name, why should there be a waiting period of four years before the parties can execute