G.R. No. 201883. November 16, 2016.
MAIN TOPIC – Suspensive Condition
Respondents Emmanuel and Tita Manzano (the Manzanos) were the registered owners of a 35,281-square-meter parcel of land with improvements in Bagong Barrio, Caloocan City , through their duly appointed attorney-in-fact Franklin Estabillo (Estabillo), executed a notarized agreement of contract to sell with petitioners Desiderio and Teresa Domingo. However, they failed to tender full payment of the balance when the March 2001 deadline came. In December 2001, petitioners offered to pay the remaining P555,000.00 balance, but Estabillo refused to accept payment; instead, he advised petitioners to await respondent Tita Manzano’s (Tita) arrival from abroad.
When Tita arrived, petitioners tendered payment of the balance, but the former refused to accept it. Instead, she told them that the property was no longer for sale and she was forfeiting their payments. Soon thereafter, petitioners discovered that respondent Carmelita Aquino (Aquino) bought the subject property on May 7, 2002, and a new title — TCT No. C-359293 — had been issued in her name.
Petitioners filed a Complaint for specific performance and accept payment of the remaining balance, execute a deed of sale over the subject property in their favor, and restrain the sale in favor of Aquino.
Aquino and Estabillo alleged essentially that there was no sale between petitioners and the Manzanos, but a mere offer to buy from petitioners, which was refused due to late payment.
RTC issued a Decision declaring that, petitioners have a prior right over the subject property. Applying Article 1544 of the Civil Code ,Aquino was a buyer in bad faith, as she knew of petitioners’ prior purchase and registered adverse claim — and such knowledge was equivalent to registration, and thus, the registration of her sale was done in bad faith.
CA decided differently, it upheld the validity of the sale between Manzano and Aquino. The nonpayment of the purchase price renders the contract to sell ineffective and without force and effect. Thus, a cause of action, for specific performance does not arise.
Art. 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
W/N Manzanos while their agreement is a mere contract to sell where title is retained by the latter until full payment of the price have a superior right over the subject property, as against Aquino, by virtue of the applicability of Article 1544.
NO. In a contract to sell, payment of the price is a positive suspensive condition, failure of which is not a breach of contract warranting rescission but rather just an event that prevents the prospective buyer from compelling the prospective seller to convey title. In other words, the nonfulfillment of the condition of full payment renders the contract to sell ineffective and without force and effect. Since failure to pay the price in full in a contract to sell renders the same ineffective and without force and effect, then there is no sale to speak of.
Thus, as between the parties to the instant case, there could be no double sale which would justify the application of Article 1544. Petitioners failed to pay the purchase price in full, while Aquino did, and thereafter she was able to register her purchase and obtain a new certificate of title in her name. As far as this Court is concerned, there is only one sale — and that is, the one in Aquino’s favor. “Since there is only one valid sale, the rule on double sales under Article 1544 of the Civil Code does not apply.”
WHEREFORE, the Petition is DENIED. The January 4, 2012 Decision and May 18, 2012 Resolution of the Court of Appeals in C.A.-G.R. CV No. 93662 are AFFIRMED with MODIFICATION, in that the monetary awards shall earn interest at the rate of 12% per annum up to June 30, 2013; thereafter, the rate of interest shall be 6% per annum until judgment is fully satisfied.
The execution of a contract of conditional sale does not immediately transfer title to the property to be sold from seller to buyer. In such contract, ownership or title to the property is retained by the seller until the fulfillment of a positive suspensive condition which is normally the payment of the purchase price in the manner agreed upon.
NOTES: A contract to sell is one where the prospective seller reserves the transfer of title to the prospective buyer until the happening of an event, such as full payment of the purchase price.