San Lorenzo Development Corporation vs. CA G.R. No. 124242.

January 21, 2005 Ponente: Justice Tinga FACTS: The Spouses Lu allegedly sold the two parcels of land to respondent Babasanta. Babasanta made a down payment of P50,000 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. Sometime in May 1989, 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 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. Babasanta filed Complaint for Specific Performance and Damages. Petitioner San SLDC filed a Motion for Intervention. SLDC alleged that it had legal interest in the subject matter under litigation because the two parcels of land involved 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. Issues: (1) Whether or not there was a transfer of ownership through the issuance of memorandum receipt. (2) Whether or not the petitioner has a better right over the parcels of land in the case of double sale.

Held:

(1) No. Respondent Babasanta did not acquire ownership by the mere execution of the receipt by Pacita
Lu acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and the Spouses Lu, though valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands could have been effected. For another, Babasanta had not taken possession of the property at any time after the perfection of the sale in his favor or exercised acts of dominion over it despite his assertions that he was the rightful owner of the lands. Simply stated, there was no delivery to Babasanta, whether actual or constructive, which is essential to transfer ownership of the property. Thus, 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) Yes.

As stated in Article 1544, if the same thing should have been sold to different vendees, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of double sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the Registry of Property, both made in good faith, shall be deemed the owner. Verily, the act of registration must be coupled with good faith that is, the registrant must have no knowledge of the defect or lack of title of his vendor or must not

have been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no 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. 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. At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell.

Other info: Contract of sale vs. Contract to sell The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. 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 convince us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment of the purchase price. Babasanta's letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him until such time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer title, they could have easily executed the document of sale in its required form simultaneously with their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell. 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. 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. 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.

Ways of effecting delivery In relation to the acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or ownership. Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same. Therefore, sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership. Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Article 1497 to 1501. The word "delivered" should not be taken restrictively to mean transfer of actual physical possession of the property. The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery. Actual delivery consists in placing the thing sold in the control and possession of the vendee. Legal or constructive delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument evidencing the sale; symbolical tradition such as the delivery of the keys of the place where the movable sold is being kept; traditio longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the possession of the buyer at the time of the sale; traditio brevi manu if the buyer already had possession of the object even before the sale; and traditio constitutum possessorium, where the seller remains in possession of the property in a different capacity.