Sps Jose vs. Aguado

G.R. No. 193787               April 7, 2014

SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with deceased Jose C. Roque represented by his substitute heir JOVETTE ROQUE-LIBREA, Petitioners,
vs.
MA. PAMELA P. AGUADO, FRUCTUOSO C. SABUG, JR., NATIONAL COUNCIL OF CHURCHES IN THE PHILIPPINES (NCCP), represented by its Secretary General SHARON ROSE JOY RUIZ-DUREMDES, LAND BANK OF THE PHILIPPINES (LBP), represented by Branch Manager EVELYN M. MONTERO, ATTY. MARIO S.P. DIAZ, in his Official Capacity as Register of Deeds for Rizal, Morong Branch, and CECILIO U. PULAN, in his Official Capacity as Sheriff, Office of the Clerk of Court, Regional Trial Court, Binangonan, Rizal, Respondents.

On July 21, 1977, petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque (Sps. Roque) and the original owners of the then unregistered Lot 18089 – namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela Gonzales, Herminia R. Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R. Topacio, and Augusto Rivero (Rivero, et al.) – executed a Deed of Conditional Sale of Real Property (1977 Deed of Conditional Sale) over a 1,231-sq. m. portion of Lot 18089 (subject portion) 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.

On August 12, 1991, Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National Council of Churches in the Philippines (NCCP), applied for a free patent over the entire Lot 18089 and was eventually issued OCT No. M-5955 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 a Joint Affidavit (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 a Deed of Absolute Sale (1999 Deed of Absolute Sale), sold Lot 18089 to one Ma. Pamela P. Aguado (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, 1999 in her name. 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, docketed as Civil Case No. 03-022, against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal, and Sheriff Cecilio U. Pulan, seeking to be declared as the true owners of the subject portion which had been erroneously included in the sale between Aguado and Sabug, Jr., and, subsequently, the mortgage to Land Bank, both covering Lot 18089 in its entirety.

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-115895 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, docketed as Civil Case No. 03-022, against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal, and Sheriff Cecilio U. Pulan, seeking to be declared as the true owners of the subject portion which had been erroneously included in the sale between Aguado and Sabug, Jr., and, subsequently, the mortgage to Land Bank, both covering Lot 18089 in its entirety.

Issue:  WON the CA erred in not ordering the reconveyance of the subject portion in Sps. Roque’s favor.

Held:

The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or erroneously registered in another person’s name to its rightful owner or to one with a better right. Thus, it is incumbent upon the aggrieved party to show that he has a legal claim on the property superior to that of the registered owner and that the property has not yet passed to the hands of an innocent purchaser for value.

Examining its provisions, the Court finds that the stipulation above-highlighted shows that the 1977 Deed of Conditional Sale is actually in the nature of a contract to sell and not one of sale contrary to Sps. Roque’s belief. In this relation, it has been consistently ruled 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. Likewise 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. Explaining the subject matter further, the Court, in Ursal v. CA, held that:

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.

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 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.

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.

On the matter of double sales, suffice it to state that Sps. Roque’s reliance on Article 1544 of the Civil Code has been misplaced since the contract they base their claim of ownership on is, as earlier stated, a contract to sell, and not one of sale. In Cheng v. Genato, the Court stated the circumstances which must concur in order to determine the applicability of Article 1544, none of which are obtaining in this case, viz.:

(a) The two (or more) sales transactions in issue must pertain to exactly the same subject matter, and must be valid sales transactions;

(b) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent conflicting interests; and

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the same seller.