Coronel v. CA
A contract to sell may thus be defined as a bilateral contract
Facts:
The case arose from a complaint for specific performance filed by private
respondent Alcaraz against petitioners to consummate the sale of a parcel of land
in Quezon City.
On January 19, 1985, petitioners executed a “Receipt of Down Payment” of
P50,000 in favor of plaintiff Ramona Alcaraz, binding themselves to transfer the
ownership of the land in their name from their deceased father, afterwhich the
balance of P1,190,000 shall be paid in full by Alcaraz. On February 6, 1985, the
property was transferred to petitioners. On February 18, 1985, petitioners sold the
property to Mabanag. For this reason, Concepcion, Ramona’s mother, filed an
action for specific performance.
Issue:
Whether the contract between petitioners and private respondent was that of a
conditional sale or a mere contract to sell
Held:
Sale, by its very nature, is a consensual contract because it is perfected by mere
consent. The essential elements of a contract of sale are the following: a) Consent
or meeting of the minds, that is, consent to transfer ownership in exchange for the
price; b) Determinate subject matter; and c) Price certain in money or its
equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective
seller explicity reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is delivered to him. In other
words the full payment of the purchase price partakes of a suspensive condition,
the non-fulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further remedies by the
prospective buyer.
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 said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.
A contract to sell may not even be considered as a conditional contract of sale
where the seller may likewise reserve title to the property subject of the sale until
the fulfillment of a suspensive condition, because in a conditional contract of sale,
the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is completely abated.
However, if the suspensive condition is fulfilled, the contract of sale is thereby
perfected, such that if there had already been previous delivery of the property
subject of the sale to the buyer, ownership thereto automatically transfers to the
buyer by operation of law without any further act having to be performed by the
seller. In a contract to sell, upon the fulfillment of the suspensive condition which is
the full payment of the purchase price, ownership will not automatically transfer to
the buyer although the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering into
a contract of absolute 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 used for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the seller's title
thereto. In fact, if there had been previous delivery of the subject property, the
seller's ownership or title to the property is automatically transferred to the buyer
such that, the seller will no longer have any title to transfer to any third person.
Such second buyer of the property who may have had actual or constructive
knowledge of such defect in the seller's title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyer's title. In case a title is issued to the second
buyer, the first buyer may seek reconveyance of the property subject of the sale.
The agreement could not have been a contract to sell because the sellers herein
made no express reservation of ownership or title to the subject parcel of land.
Furthermore, the circumstance which prevented the parties from entering into an
absolute contract of sale pertained to the sellers themselves (the certificate of title
was not in their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court may safely presume
that, had the certificate of title been in the names of petitioners-sellers at that
time, there would have been no reason why an absolute contract of sale could not
have been executed and consummated right there and then.
What is clearly established by the plain language of the subject document is that
when the said "Receipt of Down Payment" was prepared and signed by petitioners
Romeo A. Coronel, et al., the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate
of title from the name of petitioners' father, Constancio P. Coronel, to their names.
The provision on double sale presumes title or ownership to pass to the first buyer,
the exceptions being: (a) when the second buyer, in good faith, registers the sale
ahead of the first buyer, and (b) should there be no inscription by either of the two
buyers, when the second buyer, in good faith, acquires possession of the property
ahead of the first buyer. Unless, the second buyer satisfies these requirements, title
or ownership will not transfer to him to the prejudice of the first buyer. In a case of
double sale, what finds relevance and materiality is not whether or not the second
buyer was a buyer in good faith but whether or not said second buyer registers
such second sale in good faith, that is, without knowledge of any defect in the title
of the property sold. If a vendee in a double sale registers that sale after he has
acquired knowledge that there was a previous sale of the same property to a third
party or that another person claims said property in a pervious sale, the
registration will constitute a registration in bad faith and will not confer upon him
any right.
G.R. No. 196251 July 9, 2014
OLIVAREZ REALTY CORPORATION and DR. PABLO R. OLIVAREZ,Petitioner,
vs.
BENJAMIN CASTILLO, Respondent.
Facts:
Castillo was the owner of a parcel of land covered by TCT 19972. The Philippine
Tourism Authority allegedly claimed ownership of the same parcel of land based on
TCT 18493.
Castillo and Olivarez Realty Corporation, represented by Dr. Pablo Olivarez, entered
into a contract of conditional sale over the property.  The details were as follows:
1. Under the deed of conditional sale, Castillo agreed to sell his property to Olivarez
Realty; with Olivarez Realty delivering the downpayment and the rest to be paid in
30 equal monthly installments every 8th of the month beginning in the month that
the parties would receive a decision voiding the PTA’s title to the property.
2. Under the same deed, Olivarez Realty will file the action against PTA with full
assistance of Castillo; and that should the petition be denied, Castillo shall
reimburse all the amounts paid by Olivarez Realty.
3. Under the same contract, Olivarez Realty undertook to pay the legitimate
tenants of the land disturbance compensation, while Castillo undertook to clear the
land of the tenants within 6 months from the signing of the deed; that should
Castillo fail to clear the land within 6 months, Olivarez Realty may suspend its
monthly downpayment until the tenants vacate the property.
4. The parties agreed that Olivarez Realty Corporation may immediately occupy the
property upon signing of the deed. Should the contract be cancelled, Olivarez
Realty Corporation agreed to return the property’s possession to Castillo and forfeit
all the improvements it may have introduced on the property.
Olivarez Realty failed to comply with the conditions, to wit: a) pay the full purchase
price; b) failed to file any action against PTA; c) failed to clear the land of the
tenants nor paying them disturbance compensation. For breaching the contract,
Castillo prayed for rescission of contract under Art. 1191 of Civil Code, plus
damages.
In their defense, Olivarez Realty alleged that Castillo failed to fully assist in filing the
action against PTA; that Castillo failed to clear the property of the tenants within 6
months from the signing of the deed. Thus, they had all the legal right to withhold
the subsequent payments to fully pay the purchase price.
Both RTC and CA ruled that Olivarez Realty breached the contract and ordered the
rescission of the sale plus damages.
Issue #1:
What is the nature of obligations undertaken by both parties?
Held #1:
Olivarez Realty’s obligation to pay the disturbance compensation is a pure
obligation, and hence, demandable at once. With respect to Castillo’s obligation to
clear the land of the tenants within six months from the signing of the contract, his
obligation was an obligation with a resolutory period. The obligation to clear the
land of the tenants took effect at once, specifically, upon the parties’ signing of the
deed of conditional sale. Castillo had until October 2, 2000, six months from April 5,
2000 when the parties signed the deed of conditional sale, to clear the land of the
tenants. Olivarez Realty Corporation, therefore, had no right to withhold payments
of the purchase price. As the trial court ruled, Olivarez Realty Corporation “can only
claim non-compliance of the obligation to clear the land of the tenants in October
2000.
Issue #2:
Whether or not rescission of the contract is proper.
Held #2: NO.
SC characterized the contract as a contract to sell, not a contract of conditional
sale. In a contract of conditional sale, the buyer automatically acquires title to the
property upon full payment of the purchase price. This transfer of title is “by
operation of law without any further act having to be performed by the seller.” In a
contract to sell, transfer of title to the prospective buyer is not automatic. “The
prospective seller must convey title to the property through a deed of conditional
sale.” The distinction is important to determine the applicable laws and remedies in
case a party does not fulfill his or her obligations under the contract. In contracts of
conditional sale, our laws on sales under the Civil Code of the Philippines apply. On
the other hand, contracts to sell are not governed by our law on sales but by the
Civil Code provisions on conditional obligations.
Specifically, Article 1191 of the Civil Code on the right to rescind reciprocal
obligations does not apply to contracts to sell. Failure to fully pay the purchase
price in contracts to sell is not the breach of contract under Art. 1191. Failure to
fully pay the purchase price is merely an event which prevents the seller’s
obligation to convey title from acquiring binding force. This is because there can be
no rescission of an obligation that is still nonexistent, the suspensive condition (the
condition of having the buyer pay the full purchase price) having not happened.
In this case, Castillo reserved his title to the property and undertook to execute a
deed of absolute sale upon Olivarez Realty Corporation’s full payment of the
purchase price. Since Castillo still has to execute a deed of absolute sale to Olivarez
Realty Corporation upon full payment of the purchase price, the transfer of title is
not automatic. As this case involves a contract to sell, Article 1191 of the Civil Code
of the Philippines does not apply. The contract to sell is instead cancelled, and the
parties shall stand as if the obligation to sell never existed.
SC cancelled the deed of conditional sale. Olivarez Realty was ordered to return to
Castillo the possession of property, together with all improvements that it
introduced. Olivarez Realty was also ordered to pay moral damages, exemplary
damages, and attorney’s fees to Castillo.