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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
The sale of the subject property between Zenaida and the spouses Basas was valid and binding despite the failure to immediately register the sale in the Register of Deeds. Registration is not a recognized mode of acquiring ownership but binds the whole world, especially innocent purchasers for value.
The late Zenaida B. Gonzales purchased from respondents spouses Dominador and Estefania Basas (collectively, spouses Basas), a parcel of land including the house thereon, situated at No. 427 Espinola St., Block 6, Magsaysay Village, Tondo, Manila, with an area of 152.98 square meters and covered by Transfer Certificate of Title No. (TCT) 1878986 (subject property).
Zenaida and the Spouses Basas executed a Contract to Sell, Dead of Absolute Sale (DOAS), and an Agreement to Purchase and to Sell, to reflect their mutual agreement on the sale and purchase of the subject property.
According to petitioners, once the foregoing documents were executed, the spouses Basas requested Zenaida to allow them to stay in the subject property until such time that they can transfer to another place, at an agreed monthly rental rate of ₱3,500.00. However, they have not paid any rental to Zenaida since May 10, 1996.
Petitioners further alleged that the spouses Basas promised to procure the written consent of the NHA for the sale of the subject property. In the meantime, pursuant to their mutual agreement on the sale and purchase of the same, Zenaida paid the Basas couple an aggregate amount of more than Eight Hundred Thousand Pesos (PhP800,000.00), as evidenced by receipts.17 Once the spouses Basas received the said amount, they promised to deliver the title of the subject property to Zenaida as soon as they secured the NHA’s consent. Meanwhile, the spouses Basas borrowed the certificate of title of the property which at that time was already in the possession of Zenaida after she paid them the amount of Six Hundred Fifty Thousand Pesos (PhP650,000.00), so they can work on the cancellation of the mortgage on the subject property.
Petitioners point out that Zenaida has not paid the balance of the selling price because the spouses Basas have not yet obtained NHA’s written consent to the sale.
On January 4, 1997, Zenaida sent a formal written demand to the spouses Basas, requiring them to vacate the house and surrender the title to the property so that she could facilitate its transfer into her name and secure the written consent of the NHA for the sale.
Despite Zenaida’s verbal and written demands for the spouses Basas to comply with their foregoing obligation, the latter failed to do so. In view of this, Zenaida brought the matter to the barangay, but the parties failed to settle. In addition, Zenaida filed an affidavit of adverse claim dated October 29, 1997 on the subject property.
Eventually, Zenaida discovered that the spouses Basas subsequently sold the subject property to respondent Romeo Munda (Munda) who immediately occupied the property. Petitioners asserted that the second sale of the subject property by the Basas to Munda was done maliciously and in bad faith. They averred that the same was done with deliberate disregard of Zenaida’s right over the subject property. As a result, Zenaida caused the annotation of her affidavit of adverse claim on the title of the subject property on October 29, 1997.
When Zenaida learned of the second sale by the Spouses Basas to Munda, she and her son, Andres Rico Gonzales, went to the subject property and found out that the same was already being occupied by Munda. While thereat, they were informed by Munda’s wife that she and her husband already purchased the property, and she further told Zenaida that the latter’s contract was only a contract to sell while their contract was an absolute deed of sale.
In view of the foregoing, Zenaida filed a complaint on May 25, 1998 for nullity of sale, specific performance, and damages against respondents. Zenaida died on April 30, 2012, and was eventually substituted by her heirs, petitioners herein.
On the other hand, the spouses Basas argued that Zenaida did not purchase the subject property. They pointed out that the August 14, 1996 Agreement superseded the two previously signed documents. They asserted that there was a novation of the contracts, and the latter document reflected the final and true intentions of the parties.
The Regional Trial Court (RTC) ruled in favor of petitioners in its October 06, 2008 Decision. Aggrieved with the RTC’s ruling, respondents filed an appeal with the Court of Appeals (CA). However,in its November 5, 2012 Decision, the CA reversed the findings of the RTC and found Munda as a buyer in good faith and or value.
Petitioners moved for reconsideration but it was denied by the CA in its April 18, 2013 Resolution. Hence, this petition.
The issue in the instant case is who between Zenaida, as petitioner’s predecessor-in-interest, and Munda, is the rightful owner of the subject property.
The Supreme Court Decides
The Supreme Court granted the Petition.
The Court held that the Petitioners sufficiently proved that the spouses Basas sold the subject property to their predecessor-in-interest, Zenaida, and that ownership of the same was constructively delivered to the latter pursuant to said sale upon execution of the May 13, 1996 DOAS, and later reinforced by the August 14, 1996 Agreement, subject to the resolutory conditions stated therein.
The Supreme Court found that the Agreement reinforced the DOAS executed between the spouses Basas and Zenaida, since both contracts are actually not in conflict with each other, but actually reflect the intention of the parties during their execution. Although the Agreement indicates that it was Zenaida, as buyer, who was tasked to secure a permit to sell the subject property from the NHA, the Court found that this obligation likewise requires the active participation of the Basas couple. Thus, the Court gave credence to petitioners’ claim that the true intention of the parties was for the spouses Basas to procure the consent of the NHA such that Zenaida withheld payment of the balance of the purchase price until the spouses Basas obtained the same.
Undoubtedly, the DOAS transferred the ownership of the subject property from the spouses Basas to Zenaida. The RTC aptly pointed out that the right to repossess the ownership of the subject property could not have been conferred upon the spouses Basas if the ownership of said property had not been transferred to and consequently constructively possessed by Zenaida. Since there is no showing that the spouses Basas availed of any legal remedies to repossess the subject property, ownership of the same was retained by Zenaida pursuant to both the DOAS and the Agreement. Thus, despite the nomenclature of the Agreement, it is actually a contract of sale wherein ownership of the subject property was transferred to Zenaida upon the execution of said contract, subject to the negative resolutory conditions stated therein.
The sale of the subject property between Zenaida and the spouses Basas was valid and binding despite the failure to immediately register the sale in the Register of Deeds. Registration is not a recognized mode of acquiring ownership but binds the whole world, especially innocent purchasers for value. It bears emphasis that the nature of a sale 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.
The Supreme Court held that both the DOAS and Agreement contain all the three requisites of a contract of sale. Moreover, by virtue of the Agreement being a contract of sale, the subject property was constructively delivered to Zenaida subject to the resolutory conditions stated therein, even though the spouses Basas remained in possession of the subject property, albeit in a different capacity.
A contract “is the law between the contracting parties and obligations arising therefrom have the force of law between them and should be complied with in good faith.” As a rule, the courts will refrain from interfering with the rights of the consenting parties unless it is clearly shown that there existed fraud, mistake, or any other vice vitiating consent on either or both parties, or that a contract includes any stipulation that is contrary to law, morals, good customs, public order or public policy.
Moreover, the provisions of Article 1544 of the Civil Code on double sale is inapplicable because the spouses Basas were no longer the owners of the subject property when they transferred the same to Munda. In order for the foregoing provision on double sale to apply, the following circumstances must concur: (a) the two (or more) sales transactions in the 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 very same seller. Thus, the rule on double sales applies when the same thing is sold to multiple buyers by one seller but not to sales of the same thing by multiple sellers.
In the instant case, the spouses Basas sold the subject property to Zenaida in 1996, and sold the same as well to Munda on August 25, 1997. However, the foregoing requisites of a double sale are absent because the sale of the subject property by the Basas to Munda was not a valid sale transaction since by that time, the spouses Basas were no longer the owners of the property, and thus, they had no right to transfer the same.
In the case at bar, since ownership of the subject property had already been transferred by the spouses Basas to Zenaida, then no right could be transmitted on to Munda on the second sale.
Even if the provision on double sale were applicable, Zenaida had a better right to the subject property since Munda was a buyer and registrant in bad faith.
Although Munda may not have had knowledge of the defect at the time of execution of the deed of sale on August 25, 1997. However, there are other circumstances that established Munda’s bad faith. Records show that Munda already had knowledge of the defect in the sellers’ title: (a) when he procured the NHA’s approval dated December 1, 1997; (b) when he paid the transfer fee on January 30, 1998, and (c) subsequently upon submission of the foregoing documents to the Register of Deeds.
Thus, upon submission of Munda’s documentary requirements with the Register of Deeds on September 22, 1997 in order to register the sale, he was not yet apprised of the defect in the title since Zenaida’s adverse claim was not yet annotated therein. However, Munda’s submission of the requirements on said day was merely a partial compliance of the documentary requirements for the registration of the sale because as per the Referral Slip dated on the same day, he was still required to submit the NHA’s approval. Thus, as of September 22, 1997, Munda did not yet fully comply with all the requirements for the registration of the sale. But when he returned to the Register of Deeds to complete his application for registration after payment of the transfer fee on January 30, 1998, and after securing the NHA’s December 1, 1997 approval to transfer ownership of the subject property, he was already aware of the defect in the title in view of the annotation of Zenaida’s adverse claim on October 29, 1997. Thus, Munda was not a registrant in good faith.
One is considered a purchaser in good faith if he or she buys the property of another without notice that some other person has a right to or interest in such property, and pays its full and fair price before he or she has notice of the adverse claims and interest of another person in the same property. Conversely, one is considered a buyer in bad faith when he or she purchases a property despite knowledge of a defect or lack of title in his or her seller or when he or she has knowledge of facts which should have cautioned him or her to conduct further inquiry or investigation.
Every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige the buyer to go beyond the certificate to determine the condition of the property. When a certificate of title is clean and free from any encumbrance, potential purchasers have every right to rely on such certificate in making their purchase of real property. Therefore, where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore further than what the Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that may subsequently defeat his or her right thereto.
In the instant case, Munda failed to show that he continuously possessed his status as a buyer and registrant in good faith. Thus, he unsuccessfully convinced Us that he acted in good faith all throughout, from the time of his acquisition of the subject property until the title is transferred to him for registration. Firstly, Munda failed to refute petitioners’ claim that Zenaida and her son went to his house and informed him and his wife that Zenaida had earlier purchased the subject property, but that Munda’s wife replied that Zenaida’s contract was merely a contract to sell while theirs was a contract of sale. This in itself should have prompted Munda to further inquire about the status of the subject property and the title of the spouses Basas as sellers. Secondly, on or before October 8, 1997, Zenaida and the spouses Basas had a mediation conference before the Punong Barangay and Pangkat ng Tagapagsundo in relation to the subject property, but settlement failed which caused the Barangay to issue a certification to file action dated October 8, 1997. Since Munda himself was living on the subject property and on the same barangay where the mediation occurred, he could have further investigated on the status of the subject property even before he took steps to procure the consent of the NHA, and before he paid the transfer fee thereof. Lastly and most importantly, when Munda procured NHA’s December 1, 1997 consent/approval and paid on January 30, 1998 the transfer fee thereof, and submitted the foregoing documents to the Register of Deeds to fully comply with his application for registration, he already had knowledge of the defect of the title of the spouses Basas as sellers in view of the annotation on October 29, 1997 of the adverse claim of Zenaida, which certainly would have prompted him to further inquire or investigate. Since Munda proceeded to register his title despite knowledge of Zenaida’s adverse claim, he is deemed a buyer and registrant in bad faith.
Therefore, even if the provision on double sales were to be applied in the instant case, it remains that Zenaida, the predecessor-in-interest of petitioners, had a better right of ownership over the subject property since Munda failed to acquire the property and register his title in good faith.
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