THIRD DIVISION
RAYMUNDO S. DE LEON, G.R. No. 170405
Petitioner,
Present:
CORONA, J., Chairperson,
CARPIO,*
- v e r s u s
- VELASCO, JR.,
NACHURA and
PERALTA, JJ.
BENITA
T. ONG.[1],
Respondent. Promulgated:
February
2, 2010
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D E C I S
I O N
CORONA, J.:
On March 10, 1993, petitioner
Raymundo S. de Leon sold three parcels of land[2] with
improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these
properties were mortgaged to Real Savings and Loan Association, Incorporated
(RSLAI), petitioner and respondent executed a notarized deed of absolute sale
with assumption of mortgage[3] stating:
x x x x x x x x x
That
for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1
million), Philippine currency, the receipt whereof is hereby acknowledged from
[RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER]
does hereby sell, transfer and convey in a manner absolute and irrevocable,
unto said [RESPONDENT], his heirs and assigns that certain real
estate together with the buildings and other improvements existing thereon,
situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and
conditions:
1.
That upon full payment of [respondent] of the amount of
FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner]
shall execute and sign a deed of assumption of mortgage in favor of
[respondent] without any further cost whatsoever;
2.
That [respondent] shall assume payment of the
outstanding loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500)
with REAL SAVINGS AND LOAN,[4] Cainta,
Rizal… (emphasis supplied)
x x x x x x x x x
Pursuant to this deed, respondent
gave petitioner P415,500 as partial payment. Petitioner, on the other
hand, handed the keys to the properties and wrote a letter informing RSLAI of
the sale and authorizing it to accept payment from respondent and release the
certificates of title.
Thereafter, respondent undertook
repairs and made improvements on the properties.[5] Respondent
likewise informed RSLAI of her agreement with petitioner for her to assume
petitioner’s outstanding loan. RSLAI required her to undergo credit
investigation.
Subsequently, respondent learned that
petitioner again sold the same properties to one Leona Viloria after March 10,
1993 and changed the locks, rendering the keys he gave her useless. Respondent
thus proceeded to RSLAI to inquire about the credit investigation. However, she
was informed that petitioner had already paid the amount due and had taken back
the certificates of title.
Respondent persistently contacted
petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a
complaint for specific performance, declaration of nullity of the second sale
and damages[6]
against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo,
Rizal, Branch 74. She claimed that since petitioner had previously sold the
properties to her on March 10, 1993, he no longer had the right to sell the
same to Viloria. Thus, petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand,
insisted that respondent did not have a cause of action against him and
consequently prayed for the dismissal of the complaint. He claimed that since
the transaction was subject to a condition (i.e., that RSLAI approve the
assumption of mortgage), they only entered into a contract to sell. Inasmuch as
respondent did apply for a loan from RSLAI, the condition did not arise.
Consequently, the sale was not perfected and he could freely dispose of the
properties. Furthermore, he made a counter-claim for damages as respondent
filed the complaint allegedly with gross and evident bad faith.
Because respondent was a licensed
real estate broker, the RTC concluded that she knew that the validity of the
sale was subject to a condition. The perfection of a contract of sale depended
on RSLAI’s approval of the assumption of mortgage. Since RSLAI did not allow
respondent to assume petitioner’s obligation, the RTC held that the sale was
never perfected.
In a decision dated August 27, 1999,[7] the RTC
dismissed the complaint for lack of cause of action and ordered respondent to
pay petitioner P100,000 moral damages, P20,000 attorney’s fees
and the cost of suit.
Aggrieved, respondent appealed to the
Court of Appeals (CA),[8]
asserting that the court a quo erred in dismissing the complaint.
The CA found that the March 10, 2003
contract executed by the parties did not impose any condition on the sale and
held that the parties entered into a contract of sale. Consequently, because
petitioner no longer owned the properties when he sold them to Viloria, it
declared the second sale void. Moreover,
it found petitioner liable for moral and exemplary damages for fraudulently
depriving respondent of the properties.
In a decision dated July 22, 2005,[9] the CA upheld
the sale to respondent and nullified the sale to Viloria. It likewise ordered
respondent to reimburse petitioner P715,250 (or the amount he paid to
RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates
of titles to respondent and pay her P50,000 moral damages and P15,000
exemplary damages.
Petitioner
moved for reconsideration but it was denied in a resolution dated November 11,
2005.[10] Hence,
this petition,[11]
with the sole issue being whether the parties entered into a contract of sale
or a contract to sell.
Petitioner
insists that he entered into a contract to sell since the validity of the
transaction was subject to a suspensive condition, that is, the approval
by RSLAI of respondent’s assumption of mortgage. Because RSLAI did not allow
respondent to assume his (petitioner’s) obligation, the condition never
materialized. Consequently, there was no sale.
Respondent,
on the other hand, asserts that they entered into a contract of sale as
petitioner already conveyed full ownership of the subject properties upon the
execution of the deed.
We
modify the decision of the CA.
Contract of Sale or Contract to
Sell?
The
RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC
ruled that it was a contract to sell while the CA held that it was a contract
of sale.
In a contract of sale, the seller
conveys ownership of the property to the buyer upon the perfection of the
contract. Should the buyer default in the payment of the purchase price, the
seller may either sue for the collection thereof or have the contract
judicially resolved and set aside. The non-payment of the price is therefore a
negative resolutory condition.[12]
On
the other hand, a contract to sell is subject to a positive suspensive
condition. The buyer does not acquire ownership of the property until he fully
pays the purchase price. For this reason, if the buyer defaults in the payment
thereof, the seller can only sue for damages.[13]
The
deed executed by the parties (as previously quoted) stated that petitioner sold
the properties to respondent “in a manner absolute and irrevocable” for
a sum of P1.1 million.[14] With
regard to the manner of payment, it required respondent to pay P415,500
in cash to petitioner upon the execution of the deed, with the balance[15] payable
directly to RSLAI (on behalf of petitioner) within a reasonable time.[16] Nothing
in said instrument implied that petitioner reserved ownership of the properties
until the full payment of the purchase price.[17] On
the contrary, the terms and conditions of the deed only affected the manner of
payment, not the immediate transfer of ownership (upon the execution of the
notarized contract) from petitioner as seller to respondent as buyer. Otherwise
stated, the said terms and conditions pertained to the performance of the contract,
not the perfection thereof nor the transfer of ownership.
Settled
is the rule that the seller is obliged to transfer title over the properties
and deliver the same to the buyer.[18] In this
regard, Article 1498 of the Civil Code[19]
provides that, as a rule, the execution of a notarized deed of sale is
equivalent to the delivery of a thing sold.
In this instance, petitioner executed
a notarized deed of absolute sale in favor of respondent. Moreover, not only
did petitioner turn over the keys to the properties to respondent, he also
authorized RSLAI to receive payment from respondent and release his
certificates of title to her. The totality of petitioner’s acts clearly
indicates that he had unqualifiedly delivered and transferred ownership of the
properties to respondent. Clearly, it was a contract of sale the parties
entered into.
Furthermore, even assuming arguendo
that the agreement of the parties was subject to the condition that RSLAI had
to approve the assumption of mortgage, the said condition was considered
fulfilled as petitioner prevented its fulfillment by paying his outstanding
obligation and taking back the certificates of title without even notifying
respondent. In this connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties
to two buyers, first to respondent and then to Viloria on two separate occasions.[20] However, the second sale was not void for
the sole reason that petitioner had previously sold the same properties to respondent.
On this account, the CA erred.
This case involves a double sale
as the disputed properties were sold validly on two separate occasions by the
same seller to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 1544. If the same thing should have been sold
to different vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be movable
property.
Should
it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property.
Should
there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith. (emphasis supplied)
This provision clearly states that the
rules on double or multiple sales apply only to purchasers in good faith. Needless
to say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who
buys the property of another without notice that some other person has a right
to, or an interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of some other person’s
claim or interest in the property.[21] The law
requires, on the part of the buyer, lack of notice of a defect in the title of
the seller and payment in full of the fair price at the time of the sale or
prior to having notice of any defect in the seller’s title.
Was respondent a purchaser in good
faith? Yes.
Respondent purchased the properties, knowing
they were encumbered only by the mortgage to RSLAI. According to her agreement
with petitioner, respondent had the obligation to assume the balance of petitioner’s
outstanding obligation to RSLAI. Consequently, respondent informed RSLAI of the
sale and of her assumption of petitioner’s obligation. However, because
petitioner surreptitiously paid his outstanding obligation and took back her
certificates of title, petitioner himself rendered respondent’s obligation to
assume petitioner’s indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically impossible without the fault of the obligor.
Since respondent’s obligation to
assume petitioner’s outstanding balance with RSLAI became impossible without
her fault, she was released from the said obligation. Moreover, because
petitioner himself willfully prevented
the condition vis-à-vis the payment of the remainder of the purchase
price, the said condition is considered fulfilled pursuant to Article 1186 of
the Civil Code. For purposes, therefore, of determining whether respondent was
a purchaser in good faith, she is deemed to have fully complied with the
condition of the payment of the remainder of the purchase price.
Respondent was not aware of any
interest in or a claim on the properties other than the mortgage to RSLAI which
she undertook to assume. Moreover, Viloria bought the properties from
petitioner after the latter sold them to respondent. Respondent was therefore a
purchaser in good faith. Hence, the
rules on double sale are applicable.
Article 1544 of the Civil Code
provides that when neither buyer registered the sale of the properties with the
registrar of deeds, the one who took prior possession of the properties shall
be the lawful owner thereof.
In this instance, petitioner
delivered the properties to respondent when he executed the notarized deed[22] and
handed over to respondent the keys to the properties. For this reason,
respondent took actual possession and exercised control thereof by making
repairs and improvements thereon. Clearly, the sale was perfected and
consummated on March 10, 1993. Thus, respondent became the lawful owner of the
properties.
Nonetheless, while the condition as
to the payment of the balance of the purchase price was deemed fulfilled,
respondent’s obligation to pay it subsisted. Otherwise, she would be unjustly
enriched at the expense of petitioner.
Therefore, respondent must pay
petitioner P684,500, the amount stated in the deed. This is because the
provisions, terms and conditions of the contract constitute the law between the
parties. Moreover, the deed itself provided that the assumption of mortgage
“was without any further cost whatsoever.” Petitioner, on the other hand, must
deliver the certificates of title to respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and
November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No. 59748 are
hereby AFFIRMED with MODIFICATION insofar as respondent Benita T.
Ong is ordered to pay petitioner Raymundo de Leon P684,500 representing the
balance of the purchase price as provided in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.
Associate Justice
Chairperson
WE CONCUR:
Associate
Justice Associate Justice
Associate
Justice Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.
RENATO C. CORONA
Associate Justice
Chairperson
Pursuant
to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been reached
in consultation before the case was assigned to the writer of the opinion of
the Court’s Division.
Chief Justice
* Per Special Order No. 818 dated January 18, 2010.
[1] The Court of Appeals was impleaded as respondent but was excluded pursuant to Section 4, Rule 45 of the Rules of Court.
[2] Covered by TCT Nos. 226469, 226470 and 226471 registered in the name of petitioner.
[3] Rollo, pp. 55-56. There is
a marked discrepancy between the total amount and the sum of the payments to be
made by respondent (or P1,099,500).
[4] The records of this case revealed
that petitioner’s outstanding obligation to RSLAI amounted to P715,000
as of April 1, 1993.
[5] Respondent had the properties cleaned and landscaped. She likewise had the house (built thereon) painted and repaired.
[6] Docketed as Civil Case No. 93-2739.
[7] Penned by Judge Francisco A. Querubin. Id., pp. 129-151.
[8] Docketed as CA-G.R. CV No. 59748.
[9] Penned by Associate Justice Eugenio S. Labitoria and concurred in by Associate Justices Eliezer R. delos Santos and Arturo D. Brion (now a member of this Court) of the Third Division of the Court of Appeals. Rollo, pp. 30-34.
[10] Id., pp. 46-47.
[11] Under Rule 45 of the Rules of Court.
[12] Dijamco v. Court of Appeals. G.R. No. 113665, 7 October 2004, 440 SCRA 190, 197. See also J.B.L. Reyes, 5 Outline of Philippine Civil Law, 2-3 (1957).
[13] Id.
[14] Supra note 3.
[15] Supra note 4.
[16] Paragraph 2 of the deed did not prescribe a period within which respondent should settle petitioner’s obligation to RSLAI.
[17] See Civil Code, Art. 1370 which provides:
Article 1370. If the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal meaning
of the stipulations shall control.
If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.
[18] Civil Code, Art. 1495 provides:
Article 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.
[19] Civil Code, Art. 1498 provides:
Article 1498. When a sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed. the contrary does not appear or cannot be clearly inferred.
With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. (emphasis supplied)
[20] See Delfin v. Lagon, G.R. No. 132262, 15 September 2006, 502 SCRA 24, 31.
[21] Centeno v. Spouses Viray, 440 Phil. 881, 885 (2002).
[22] See Civil Code, Art. 1498.