2014 Case Digest: Spouses Roque v. Aguado

SPOUSES ROQUE, Petitioner,

vs.

AGUADO, et.al, Respondent.

G.R. No. 193787               April 7, 2014

PONENTE: Perlas-Bernabe, J.

TOPIC: Contract of conditional sale, contract to sell, double sale

FACTS:

                On July 21, 1977, petitioners-spouses Roque and the original owners of the then unregistered Lot 18089 – namely, Rivero, et al. executed the 1977 Deed of Conditional Sale over a 1,231-sq. m. portion of Lot 18089 for a consideration of P30,775.00. The parties agreed that Sps. Roque shall make an initial payment of P15,387.50 upon signing, while the remaining balance of the purchase price shall be payable upon the registration of Lot 18089, as well as the segregation and the concomitant issuance of a separate title over the subject portion in their names. After the deed’s execution, Sps. Roque took possession and introduced improvements on the subject portion which they utilized as a balut factory.

                Pertinent provision of the 1977 Deed of Conditional Sale:

DEED OF CONDITIONAL SALE OF REAL PROPERTY

KNOW ALL MEN BY THESE PRESENTS:

x x x

That for and in consideration of the sum of THIRTY THOUSAND SEVEN HUNDRED SEVENTY FIVE PESOS (P30,775.00), Philippine Currency, payable in the manner hereinbelow specified, the VENDORS do hereby sell, transfer and convey unto the VENDEE, or their heirs, executors, administrators, or assignors, that unsegregated portion of the above lot, x x x.

That the aforesaid amount shall be paid in two installments, the first installment which is in the amount of __________ (P15,387.50) and the balance in the amount of __________ (P15,387.50), shall be paid as soon as the described portion of the property shall have been registered under the Land Registration Act and a Certificate of Title issued accordingly;

That as soon as the total amount of the property has been paid and the Certificate of Title has been issued, an absolute deed of sale shall be executed accordingly;

x x x

                On August 12, 1991, Sabug, Jr, applied for a free patent over the entire Lot 18089 and was eventually issued OCT No. M-59558 in his name on October 21, 1991. On June 24, 1993, Sabug, Jr. and Rivero, in her personal capacity and in representation of Rivero, et al., executed the 1993 Joint Affidavit, acknowledging that the subject portion belongs to Sps. Roque and expressed their willingness to segregate the same from the entire area of Lot 18089.

                On December 8, 1999, however, Sabug, Jr., through the 1999 Deed of Absolute Sale, sold Lot 18089 to Aguado for P2,500,000.00, who, in turn, caused the cancellation of OCT No. M-5955 and the issuance of TCT No. M-96692 dated December 17, 199911 in her name.

                Thereafter, Aguado obtained an P8,000,000.00 loan from the Land Bank secured by a mortgage over Lot 18089. When she failed to pay her loan obligation, Land Bank commenced extra-judicial foreclosure proceedings and eventually tendered the highest bid in the auction sale. Upon Aguado’s failure to redeem the subject property, Land Bank consolidated its ownership, and TCT No. M-11589513 was issued in its name on July 21, 2003.

                On June 16, 2003, Sps. Roque filed a complaint for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure, and certificate of sale, and damages before the RTC.

ISSUE:

                Whether or not the 1977 Deed of Conditional Sale is a conditional contract of sale or a contract to sell.

HELD:

                It is a CONTRACT TO SELL. The Court held that where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the purchase price, the contract is only a contract to sell even if their agreement is denominated as a Deed of Conditional Sale, as in this case. This treatment stems from the legal characterization of a contract to sell, that is, a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the subject property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such as, the full payment of the purchase price. Elsewise stated, in a contract to sell, ownership is retained by the vendor and is not to pass to the vendee until full payment of the purchase price.

                In contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if there is a contract to sell between them.

Final installment not paid thus no perfected contract of sale

                Here, it is undisputed that Sps. Roque have not paid the final installment of the purchase price. As such, the condition which would have triggered the parties’ obligation to enter into and thereby perfect a contract of sale in order to effectively transfer the ownership of the subject portion from the sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be deemed to have been fulfilled. Consequently, the latter cannot validly claim ownership over the subject portion even if they had made an initial payment and even took possession of the same.

Conditional contract of sale and contract to sell in relation to double sale

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench.

                 In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property.

There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller’s title per se, but the latter, of course, may be sued for damages by the intending buyer.

                The action for reconveyance shall fail.