CASE: SAN LORENZO DEV’T CORP VS. CA FACTS: The Spouses Lu purportedly sold the two parcels of land to respondent Babasanta wherein he made a downpayment of fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments totaling two hundred thousand pesos (P200,000.00) were made by Babasanta. Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about having received information that the spouses sold the same property to another without his knowledge and consent. He demanded that the second sale be cancelled and that a final deed of sale be issued in his favor. In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase price became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita added that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya. RTC Respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San Pedro, Laguna, aComplaint for Specific Performance and Damages against his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands covered by TCT No. T- 39022 and T39023 had been sold to him by the spouses at fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution of a final deed of sale in his favor, respondents allegedly refused. Petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention] before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property in litigation. RULING: The RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC. Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of the property. The trial court equated the execution of a public instrument in favor of SLDC as sufficient delivery of the property to the latter. It concluded that symbolic possession could be considered to have been first transferred to SLDC and consequently Page 1 of 4
ownership of the property pertained to SLDC who purchased the property in good faith. CA Both respondent Babasanta and spouses Lu appealed the trial court’s decision to the Court of Appeals RULING: The Court of Appeals rendered its Decision[11] which set aside the judgment of the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in the amount of two hundred sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with legal interest and to pay attorney’s fees to Babasanta. MR: SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court. However, in a Manifestation dated 20 December 1995, the Spouses Lu informed the appellate court that they are no longer contesting the decision. The appellate court denied SLDC’s motion for reconsideration on the ground that no new or substantial arguments were raised therein which would warrant modification or reversal of the court’s decision. ISSUE: 1. WON there was a perfected contract of sale between the spouses Lu and Babasanta. 2. Did the SLDC’s registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and possession in good faith which admittedly had occurred prior to SLDC’s knowledge of the transaction in favor of Babasanta? RULING: 1. An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale. The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. [22] In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Page 2 of 4
While there is no stipulation that the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a contract to sell, the subsequent acts of the parties would tell that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase price. The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the price in court as required by law. Mere sending of a letter by the vendee expressing the intention to pay without the accompanying payment is not considered a valid tender of payment. Consignation of the amounts due in court is essential in order to extinguish Babasanta’s obligation to pay the balance of the purchase price. Glaringly absent from the records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never acquired obligatory force. Even on the assumption that the perfected contract between the parties was a sale, ownership could not have passed to Babasanta in the absence of delivery, since in a contract of sale ownership is transferred to the vendee only upon the delivery of the thing sold. 2.
No. From the time of execution of the first deed up to the moment of transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no effect at all on the consummated sale between SLDC and the Spouses Lu. SLDC qualifies as a buyer in good faith since there is no evidence extant in the records that it had knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors were still the registered owners of the property and were in fact in possession of the lands. Time and again, this Court has ruled that a person dealing with the owner of registered land is not bound to go beyond the certificate of title as he is charged with notice of burdens on the property which are noted on the face of the register or on the certificate of title.[41] In assailing knowledge of the transaction between him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice incorporated in Section 52 of the Property Registration Decree (P.D. No. 1529). The constructive notice of lis pendens was effected at which time the sale in favor of SLDC had long been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the property to SLDC is concerned. Page 3 of 4
Given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice of lis pendens cannot help Babasanta’s position a bit and it is irrelevant to the good or bad faith characterization of SLDC as a purchaser. Assuming ex gratia argumenti that SLDC’s registration of the sale had been tainted by the prior notice of lis pendens and assuming further for the same nonce that this is a case of double sale, still Babasanta’s claim could not prevail over that of SLDC’s. SLDC was in prior possession of the property in good faith. Be it noted that delivery of the property to SLDC was immediately effected after the execution of the deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by the Spouses Lu in favor of Babasanta. The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being no priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is of the date of title, with good faith as the common critical element. Since SLDC acquired possession of the property in good faith in contrast to Babasanta, who neither registered nor possessed the property at any time, SLDC’s right is definitely superior to that of Babasanta’s.
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