Gaite v Fonacier
claims.. and all the other records and documents
FACTS:
 Defendant-appellant Isabelo Fonacier was the owner
and/or holder of 11 iron lode mineral claims, known as
the Dawahan Group, situated in the municipality of
Jose Panganiban, Camarines Norte.
 Sept 29, 1952 – Fonacier , by a “Deed of Assignment”
constituted and appointed plaintiff-appellee Fernando
Gaite as his true and lawful attorney-in-fact to enter
into a contract with any individual for the exploration
and development of the mining claims aforementioned
on a royalty basis of not less than P0.50 per ton of ore
that might be extracted therefrom.
 March 19, 1954 – Gaite in turn executed a general
assignment conveying the development and
exploitation of said mining claims into the Larap Iron
Mines, owned by him, on the same royalty basis.
 Thereafter, Gaite embarked upon the development and
exploitation of the mining claims in question….
Making improvements and installing facilities therein
for use in the development of the mines, and in time
extracted therefrom what he claim and estimated to be
approx.. 24,000 metric tons of iron ore.
 For some reason, Fonacer decided to revoke the
authority granted by him to Gaite to exploit and
develop the mining claims in question.
 December 8, 1954 – as a result of that, a document
entitled “Revocation of Power of Atty and Contract”
was executed, wherein Gaite transferred to Fonacier,
for the consideration of P20,000, plus 10% of the
royalties that Fonacier would receive from the mining
relative to the mines.
 In the same document, Gaite transferred to Fonacier all
his rights and interests over the “24,000 tons of iron
ore, more or less” that the former had already extracted
from the mineral claims, inconsideration of the sum of
P75,000:
- Of which P10000 was paid upon the signing of the
agreement;
- P65,000 will be paid from and out of the first letter
of credit covering the first shipment of iron ores and
of the first amount derived from the sale made by
the Larap Mines & Smelting Co.
 To secure the payment of P65,000 , Fonacier promised
to execute in favor of Gaite a surety bond, and pursuant
to the promise, Fonacier delivered to Gaite a surety
bond (dated Dec 8, 1954)
 Gaite testified, however, that when this bond was
presented to him by Fonacier together with the
"Revocation of Power of Attorney and Contract"
Exhibit "A", on December 8, 1954, he refused to sign
said Exhibit "A" unless another bond under written by a
bonding company was put up by defendants to secure
the payment of the P65,000.00.
 Hence, a second bond “exhibit B” was executed by the
same parties to the first bond, with the Far Eastern
Surety and Insurance Co. as additional surety, but it
provided that the liability of the surety company would
attach only when there had been an actual sale of iron
ore by the Larap Mines & Smelting Co. for an amount
 of not less than P65,000. Furthermore, the liability of
said surety company would automatically expire on
December 8, 1955.
 On the same day , fonacier entered into a “Contract of
Mining Operation”, transferring unto the Larap Mines
& Smelting Co. the right to develop/exploit/explore the
mining claims in question, together with the
improvements therein. Fornacier likewise transferred
the complete time to the complete title to the approx..
24,000 tons of iron ore to the Larap & Smelting Co.
 Up to Dec 8, 1995, when the bond expired, no sale of
the approx.. 24,000 tons of iron ore had been made by
Larap nor had the P65,000 balance been paid to Gaite
by Fonancier and his sureties payment of said amount
automatically expired.
 And when Fonancier and his sureties failed to pay as
demanded by Gaite, the latter filed the present
complaint against them in the CFI of Manila for the
payment of the P65,000 (price of ore, consequential
damages, atty’s fees).
Defense of Fonancier:
 Stated that the obligation sued upon by Gaiete was
subject to a condition that the amount of P65,000 would
be payable out of the first letter of credit covering the
first shipment of iron ore and/or the first amount
derived from the sale of it by the Larap Mines &
Smelting Co.: that up to the time of the filing of the
complaint, no sale of the ore had been made, hence the
condition had not yet been fulfilled; and that
consequently, the obligation was not yet due and
demandable.
 Fonancier also contended that only 7,573 tons of the
24,000 tons of iron ore sold to him by Gaite was
actually delivered, and counterclaimed for more than
P200,0000 damages.
 Lower Court: judgement was rendered in favor of
plaintidd Gaite ordering defendants to pay him, jointly
and severally, P65,000 with interest at 6% per annum…
 For this judgement, defendants jointly appealed to this
Court.
ISSUES:
1.) WON the lower court erred in holding that the
obligation of appellant Fonacier to pay appellee Gaite
the P65,000 is one with a period or term and not one
with a suspensive condition, and that the term expired
on Dec 8, 1955. – NO, they were correct. It is a
period/term condition, not a suspensive one.
2.) WON the lower court erred in not holding that there
were only 10,954.5 tons in the stockpiles of iron ore
sold by appellee Gaite to appellant. – NO, they were
correct.
RULING:
SC affirmed the decision of the lower court, with costs against
appellants.
RATIO:
 1.) The obligation is one with a period or term condition.
What characterizes a conditional obligation is the fact that its
efficacy or obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future and
uncertain event; so that if the suspensive condition does not
take place, the parties would stand as if the conditional
obligation had never existed. That the parties to the contract
Exhibit "A" did not intend any such state of things to prevail is
supported by several circumstances:
1) The words of the contract express no contingency in the
buyer's obligation to pay: "The balance of Sixty-Five Thousand
Pesos (P65,000.00) will be paid out of the first letter of credit
covering the first shipment of iron ores . . ." etc. There is no
uncertainty that the payment will have to be made sooner or
later; what is undetermined is merely the exact date at which it
will be made. By the very terms of the contract, therefore, the
existence of the obligation to pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not
only does each one of the parties assume a correlative
obligation (the seller to deliver and transfer ownership of the
thing sold and the buyer to pay the price),but each party
anticipates performance by the other from the very start. While
in a sale the obligation of one party can be lawfully
subordinated to an uncertain event, so that the other
understands that he assumes the risk of receiving nothing for
what he gives (as in the case of a sale of hopes or
expectations, emptio spei), it is not in the usual course of
business to do so; hence, the contingent character of the
obligation must clearly appear. Nothing is found in the record
to evidence that Gaite desired or assumed to run the risk of
losing his right over the ore without getting paid for it, or that
Fonacier understood that Gaite assumed any such risk. This is
proved by the fact that Gaite insisted on a bond a to guarantee
payment of the P65,000.00, an not only upon a bond by
Fonacier, the Larap Mines & Smelting Co., and the company's
stockholders, but also on one by a surety company; and the fact
that appellants did put up such bonds indicates that they
admitted the definite existence of their obligation to pay the
balance of P65,000.00.
3) To subordinate the obligation to pay the remaining
P65,000.00 to the sale or shipment of the ore as a condition
precedent, would be tantamount to leaving the payment at the
discretion of the debtor, for the sale or shipment could not be
made unless the appellants took steps to sell the ore. Appellants
would thus be able to postpone payment indefinitely. The
desireability of avoiding such a construction of the contract
Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording
of the contract the parties indented a suspensive condition or a
suspensive period (dies ad quem) for the payment of the
P65,000.00, the rules of interpretation would incline the scales
in favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article
1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in
favor of the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains if
the buyer' obligation is deemed to be actually existing, with
only its maturity (due date) postponed or deferred, that if such
obligation were viewed as non-existent or not binding until the
ore was sold.
2.)
The sale between the parties is a sale of a specific mass or iron
ore because no provision was made in their contract for the
measuring or weighing of the ore sold in order to complete or
perfect the sale, nor was the price of P75,000,00 agreed upon
by the parties based upon any such measurement.(see Art.
1480, second par., New Civil Code). The subject matter of the
sale is, therefore, a determinate object, the mass, and not the
actual number of units or tons contained therein, so that all that
was required of the seller Gaite was to deliver in good faith to
his buyer all of the ore found in the mass, notwithstanding that
the quantity delivered is less than the amount estimated by
them (Mobile Machinery & Supply Co., Inc. vs. York Oilfield
Salvage Co., Inc. 171 So. 872, applying art. 2459 of the
Louisiana Civil Code). There is no charge in this case that
Gaite did not deliver to appellants all the ore found in the
stockpiles in the mining claims in questions; Gaite had,
therefore, complied with his promise to deliver, and appellants
in turn are bound to pay the lump price.
Even granting, then, that the estimate of 6,609 cubic meters of
ore in the stockpiles made by appellant's witness Cipriano
Manlañgit is correct, if we multiply it by the average tonnage
factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons,
which is not very far from the estimate of 24,000 tons made by
appellee Gaite, considering that actual weighing of each unit of
the mass was practically impossible, so that a reasonable
percentage of error should be allowed anyone making an
estimate of the exact quantity in tons found in the mass. It must
not be forgotten that the contract Exhibit "A" expressly stated
the amount to be 24,000 tons, more or less. (ch. Pine River
Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
Province of Cebu vs. Heirs of Rufina Morales
FACTS:
 Sept 27, 1961 – petitioner Province of Cebu leased in
favor of Rufina Morales a 210-sq meter lot which
formed part of Lot No. 646-A of the Banilad Estate.
 Sometime in 1964, petitioner donated several parcels of
land to the City of Cebu, inclufing the are occupied my
Morales.
 The area occupied by Morales was thereafter
denominated as Lot No 646-A-3, for which TCT No.
30883 was issued in favor of the City of Cebu.
 July 19, 1965- the city sold Lot 646-A-3 as well as
other donated lots at public auction in order to raise
money for infrastructure. The highest bidder of Lot
646-A-3 was Bascon but Morales was allowed to match
the highest bid since she had preferential right to the lot
as actual occupant thereof.
 Morales thus paid the required deposit and partial
payment for the lot.
 In the meantime, petitioner filed an action for reversion
of donation against City of Cebu. The petitioner and the
City of Cebu entered into a compromise agreement
which the court approved. The agreement provided for
the return of the donated lots to petitioner except those
that have already utilized by City of Cebu. Lot 646-A-3
was then returned to petitioner.
 On Feb 20, 1969 – Morales died. Apart form the
deposit and down payment, she was not able to make
any other payments on the balance of the purchase price
of the lot.
 March 11, 1983 – one of the nieces of Morales,
respondent Catalina Quesada, wrote to the Cebu
Governor Eduardo Gullas asking for the formal
conveyance of Lot 646-A-3 to Morales’ surviving
heirs…
 The request remained unheeded thus, Quesada, together
with the other nieces of Morales (Nenita Villanueva and
Erlinda Adriano), as well as Morales’ sister (Felomina
Panopio), filed an action for specific performance and
reconveyance of property against petitioner.
 They also consigned with the court the amount of
P13,450 representing the bal. of the purchase price
which petitioner allegedly refused to accept.
 Panopio died shortly after the complained was filed.
 Respondents averred that the award at public auction of
the lot to Morales was a valid and binding contract
entered into by the City of Cebu and that the lot was
inadvertently returned to petitioner under the
compromise judgment in Civil Case No. 238-BC. They
alleged that they could not pay the balance of the
purchase price during the pendency of said case due to
confusion as to whom and where payment should be
made.
 Petitioner filed its answer but failed to present evidence
despite several opportunities given. His right to present
evidence was waived.
 TC: judgement is rendered in favor of the plaintiffs and
against the defendant Province of Cebu…
 CA: AFFIRMED the decision of the trial court.
 Hence, this decision.
ISSUES:
WON the TC and CA erred in rendering its decision in favor of
the Heirs of Rufina Morales. – NO
WON there was already a consummated sale between the City
of Cebu and Ruffina Morales.- YES
WON the heirs of Rufina Morales have vested right over the
property. - YES
RULING:
The SC DENIED the petition and the AFFIRMED the CA’s
decision and resolution.
RATIO:
The City of Cebu was the owner of the lot when it awarded the
same to respondents' predecessor-in-interest, Morales, who
later became its owner before the same was erroneously
returned to petitioner under the compromise judgment. The
award is tantamount to a perfected contract of sale between
Morales and the City of Cebu, while partial payment of the
purchase price and actual occupation of the property by
Morales and respondents effectively transferred ownership of
the lot to the latter. This is true notwithstanding the failure of
Morales and respondents to pay the balance of the purchase
price.
Petitioner can no longer assail the award of the lot to Morales
on the ground that she had no right to match the highest bid
during the public auction. When the City of Cebu awarded the
lot to Morales, it is assumed that she met all qualifications to
match the highest bid. The subject lot was auctioned in 1965 or
more than four decades ago and was never questioned. Thus, it
is safe to assume, as the appellate court did, that all
requirements for a valid public auction sale were complied
with.
A sale by public auction is perfected "when the auctioneer
announces its perfection by the fall of the hammer or in
other customary manner".21 It does not matter that
Morales merely matched the bid of the highest bidder at
the said auction sale. The contract of sale was nevertheless
perfected as to Morales, since she merely stepped into the
shoes of the highest bidder.
Consequently, there was a meeting of minds between the City
of Cebu and Morales as to the lot sold and its price.22 A
contract of sale is a consensual contract and is perfected at the
moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price. From that moment,
the parties may reciprocally demand performance subject to the
provisions of the law governing the form of contracts. The
elements of a valid contract of sale under Article 1458 of the
Civil Code are: (1) consent or meeting of the minds; (2)
determinate subject matter; and (3) price certain in money or its
equivalent.23 All these elements were present in the transaction
between the City of Cebu and Morales.
There is no merit in petitioner's assertion that there was no
perfected contract of sale because no "Contract of Purchase and
Sale" was ever executed by the parties. The Statute of Frauds, a
formal document is not necessary for the sale transaction to
acquire binding effect.24 For as long as the essential elements of
a contract of sale are proved to exist in a given transaction, the
contract is deemed perfected regardless of the absence of a
formal deed evidencing the same.
Also, the fact that there was an agreed price for the lot proves
that a contract of sale was indeed perfected between the parties.
Failure to pay the balance of the purchase price did not render
the sale inexistent or invalid, but merely gave rise to a right in
favor of the vendor to either demand specific performance or
rescission of the contract of sale.25 It did not abolish the
contract of sale or result in its automatic invalidation.
As correctly found by the appellate court, the contract of sale
between the City of Cebu and Morales was also partially
consummated. The latter had paid the deposit and
downpayment for the lot in accordance with the terms of the
bid award. She first occupied the property as a lessee in 1961,
built a house thereon and was continuously in possession of the
lot as its owner until her death in 1969. Respondents, on the
other hand, who are all surviving heirs of Morales, likewise
occupied the property during the latter's lifetime and continue
to reside on the property to this day.26
The stages of a contract of sale are as follows: (1) negotiation,
covering the period from the time the prospective contracting
parties indicate interest in the contract to the time the contract
is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale which are the
meeting of the minds of the parties as to the object of the
contract and upon the price; and (3) consummation, which
begins when the parties perform their respective undertakings
under the contract of sale, culminating in the extinguishment
thereof.27 In this case, respondents' predecessor had
undoubtedly commenced performing her obligation by making
a down payment on the purchase price. Unfortunately,
however, she was not able to complete the payments due to
legal complications between petitioner and the city.
Article 1592 of the Civil Code pertinently provides:
Article 1592. In the sale of immovable property, even though it
may have been stipulated that upon failure to pay the price at
the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the
period, as long as no demand for rescission of the contract has
been made upon him either judicially or by notarial act. After
the demand, the court may not grant him a new term.
(Underscoring supplied)cralawlibrary
Thus, respondents could still tender payment of the full
purchase price as no demand for rescission had been made
upon them, either judicially or through notarial act.
Balatbat v CA
FACTS:
Aurelio Roque field a complaint for partition against his
children Corazon, Feliciano, Severa and Osmundo Roque, and
Alberto de los Santos before the CFI. The Roque children were
declared in default and Aurelio presented evidence ex-parte.
Eventually, the trial court rendered a decision in favor of
Aurelio; holding that Aurelio and his wife Maria Mesina
acquired the lot (TCT 51330) during their conjugal union, as
well as the house that was constructed thereon; that when
Maria Mesina died, leaving no debt, Aurelio (as surviving
spouse) was entitled to ½ share pro-indiviso of the conjugal
property (i.e. house and lot) and that Aurelio and his 4 children
were entitled to 1/5 share pro-indiviso each of the ½ share pro-
indiviso forming the estate of Maria Mesina; ordering the
partition of the properties;
On 5 October 1979, the Register of Deeds of Manila issued
TCT 135671 (with Aurelio Roque having 6/10 share; and the
Roque children with 1/10 share each). On 1 April 1980,
Aurelio sold his 6/10 share in TCT 135671 to respondent
spouses Repuyan. Repuyan caused the annotation of her
affidavit of adverse claim on the TCT 135671, “claiming that
she bought 6/10 portion of the property from Aurelio Roque for
the amount of P50,000.00 with a downpayment of P5,000.00
and the balance of P45,000.00 to be paid after the partition and
subdivision of the property.”
On 20 August 1980, Aurelio Roque filed a complaint for
“Rescission of Contract” against spouses Repuyan before the
then CFI Manila (Branch IV, Civil Case 134131). The
complaint is grounded on spouses Repuyan’s failure to pay the
balance of P45,000.00 of the purchase price. On 5 September
1980, spouses Repuyan filed their answer with counterclaim.
In the meantime, the trial court issued an order in Civil Case
109032 (Partition case) dated 2 February 1982,ordering the
Deputy Clerk of the court to sign the deed of absolute sale for
and in behalf of Roque children, in order to effect the partition
of the property involved in the case.  A deed of absolute sale
was executed on 4 February 1982 between Aurelio, Corazon,
Feliciano, Severa and Osmundo Roque and petitioner Clara
Balatbat, married to Alejandro Balatbat. On 14 April 1982,
Clara Balatbat filed a motion for the issuance of a writ of
possession which was granted by the trial court on 14
September 1982, subject, however, to valid rights and interest
of third persons over the same portion thereof, other than
vendor or any other person or persons privy to or claiming any
rights or interest under it. The corresponding writ of possession
was issued on 20 September 1982.
On 20 May 1982, Clara Balatbat filed a motion to intervene in
Civil Case 134131 which was granted as per court’s resolution
of 21 October 1982. However, Clara Balatbat failed to file her
complaint in intervention.
On 15 April 1986, the trial court rendered a decision
dismissing the complaint, and declaring the Deed of Absolute
Sale dated 1 April 1980 as valid and enforceable and Aurelio
is, as he is hereby ordered, to partition and subdivide the land
covered by TCT 135671, and to aggregate therefrom a portion
equivalent to 6/10 thereof, and cause the same to be titled in
the name of spouses Repuyan, and after which, the latter to pay
Aurelio the sum of P45,000.00.
On 9 December 1988, Balatbat and her husband filed a
complaint for delivery of the owners duplicate copy of TCT
135671 before the RTC against Jose and Aurora Repuyan. On
27 January 1989, spouses Repuyan filed their answer with
affirmative defenses and compulsory counterclaim. On 2
August 1990, the RTC Manila rendered a decision dismissing
the complaint, finding that the Balatbats were not able to
establish their cause of action against the Repuyans and have
no right to the reliefs demanded in the complaint.
Dissatisfied, Balatbat filed an appeal before the Court of
Appeals (CA-GR CV 29994) which rendered decision on 12
August 1992, affirming the judgment appealed.
ISSUES:
(1) Whether the alleged sale to private respondents was merely
executory and not a consummated transaction.
(2) Whether there was double sale as contemplated under Art.
1544 of CC.
(3) Whether petitioner was a buyer in good faith and for value.
RULING:
Petition for review is DISMISSED for lack of merit.
RATIO:
(1) NO. Contrary to petitioner’s contention that the sale dated
April 1, 1980 in favor of private respondents Repuyan was
merely executory for the reason that there was no delivery of
the subject property and that consideration/price was not fully
paid, SC find the sale as consummated, hence, valid and
enforceable. The Court dismissed vendor’s Aurelio Roque
complaint for rescission of the deed of sale and declared that
the Sale dated April 1, 1980, as valid and enforceable. No
appeal having been made, the decision became final and
executory.
The execution of the public instrument, without actual
delivery of the thing, transfers the ownership from the
vendor to the vendee, who may thereafter exercise the
rights of an owner over the same. In the instant case,
vendor Roque delivered the owner’s certificate of title to
herein private respondent. The provision of Article 1358 on
the necessity of a public document is only for convenience,
not for validity or enforceability. It is not a requirement for
the validity of a contract of sale of a parcel of land that this
be embodied in a public instrument. A contract of sale
being consensual, it is perfected by the mere consent of the
parties. Delivery of the thing bought or payment of the
price is not necessary for the perfection of the contract; and
failure of the vendee to pay the price after the execution of
the contract does not make the sale null and void for lack of
consideration but results at most in default on the part of
the vendee, for which the vendor may exercise his legal
remedies.
(2) Article 1544 of the Civil Code provides that in case of
double sale of an immovable property, ownership shall be
transferred (1) to the person acquiring it who in good faith
first recorded it in the Registry of Property; (2) in default
thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who
presents the oldest title, provided there is good faith.
In the case at bar, vendor Aurelio Roque sold 6/10 portion of
his share to private respondents Repuyan on April 1, 1980.
Subsequently, the same lot was sold again by vendor Aurelio
Roque (6/10) and his children (4/10), represented by the Clerk
of Court pursuant to Section 10, Rule 39 of the Rules of Court,
on February 4, 1982. Undoubtedly, this is a case of double sale
contemplated under Article 1544 of the New Civil Code.
Evidently, private respondents Repuyan’s caused the
annotation of an adverse claim on the title of the subject
property on July 21, 1980. The annotation of the adverse claim
in the Registry of Property is sufficient compliance as
mandated by law and serves notice to the whole world. On the
other hand, petitioner filed a notice of lis pendens only on
February 2, 1982. Accordingly, private respondents who first
caused the annotation of the adverse claim in good faith shall
have a better right over herein petitioner. As between two
purchasers, the one who has registered the sale in his favor, has
a preferred right over the other who has not registered his title
even if the latter is in actual possession of the immovable
property. Further, even in default of the first registrant or first
in possession, private respondents have presented the oldest
title. Thus, private respondents who acquired the subject
property in good faith and for valuable consideration
established a superior right as against the petitioner.
(3) Petitioner cannot be considered as a buyer in good faith. If
petitioner did investigate before buying the land on February 4,
1982, she should have known that there was a pending case and
an annotation of adverse claim was made in the title of the
property before the Register of Deeds and she could have
discovered that the subject property was already sold to the
private respondents. It is incumbent upon the vendee of the
property to ask for the delivery of the owner’s duplicate copy
of the title from the vendor. One who purchases real estate with
knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith as against
the true owner of the land or of an interest therein; and the
same rule must be applied to one who has knowledge 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. Good faith, or the want of it is not a
visible, tangible fact that can be seen or touched, but rather
a state or condition of mind which can only be judged of by
actual or fancied tokens or signs.
SAN LORENZO DEVELOPMENT
CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS.
MIGUEL LU and PACITA ZAVALLA LU, respondents.
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.
ISSUES:
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:
Petition is GRANTED.
RATIO:
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?
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.

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