G.R. No. 124242, 21 January 2005, 449 SCRA 99

FACTS:

Respondents Spouses Miguel Lu and Pacita Zavalla Lu, owned two (2) parcels of land situated in Sta. Rosa, Laguna. On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta, Babasanta made a downpayment of fifty thousand pesos (P50,000.00) 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 fifteen pesos (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.

On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court, of San Pedro, Laguna, a Complaint for Specific Performance and Damages against his co-respondents herein, the Spouses Lu. Babasanta alleged that the lands had been sold to him by the spouses. Despite his repeated demands for the execution of a final deed of sale in his favor, respondents allegedly refused.

On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because on 3 May 1989, 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.

After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC.

Respondent Babasanta appealed the trial court’s decision to the Court of Appeals. On 4 October 1995, the Court of Appeals rendered its Decision which set aside the judgment of the trial court. It declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute the necessary deed of conveyance in favor of Babasanta. The appellate court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith.

Hence, this petition.

ISSUE:

The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right over the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu.

RULING:

An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.

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. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract to sell.

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. 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.

On the part of petitioner, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasanta’s claim. Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the latter any title to the property since the registration was attended by bad faith. Specifically, he points out that at the time SLDC registered the sale on 30 June 1990, there was already a notice of lis pendens on the file with the Register of Deeds, the same having been filed one year before on 2 June 1989.

Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and possession in good faith which admittedly had occurred prior to SLDC’s knowledge of the transaction in favor of Babasanta?

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 knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated, from 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.

A purchaser in good faith is one who buys property of another without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of the claim or interest of some other person in the property. Following the foregoing definition, we rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in the records that it had knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors were still the registered owners of the property and were in fact in possession of the lands.

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.

*Case digest by Paul C. Gandola, JD – 4, Andres Bonifacio College, SY 2019 – 2020