CASE: SAN LORENZO DEVT CORP VS.

CA
FACTS:
The Spouses Lu purportedly sold the two parcels of land to respondent
Babasanta wherein he 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.
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.
RTC
Respondent Babasanta, as plaintiff, filed before the Regional Trial Court
(RTC), Branch 31, of San Pedro, Laguna, aComplaint for Specific
Performance and Damages against his co-respondents herein, the Spouses
Lu. Babasanta alleged that the lands covered by TCT No. T- 39022 and T39023 had been sold to him by the spouses at fifteen pesos (P15.00) per
square meter. Despite his repeated demands for the execution of a final deed
of sale in his favor, respondents allegedly refused.
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 the two parcels of land involved,
namely Lot 1764-A and 1764-B, 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.
RULING: The RTC rendered its Decision on 30 July 1993 upholding the sale
of the property to SLDC. Applying Article 1544 of the Civil Code, the trial court
ruled that since both Babasanta and SLDC did not register the respective
sales in their favor, ownership of the property should pertain to the buyer who
first acquired possession of the property. The trial court equated the
execution of a public instrument in favor of SLDC as sufficient delivery of the
property to the latter. It concluded that symbolic possession could be
considered to have been first transferred to SLDC and consequently
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ownership of the property pertained to SLDC who purchased the property in

good faith.
CA
Both respondent Babasanta and spouses Lu appealed the trial courts
decision to the Court of Appeals
RULING: The Court of Appeals rendered its Decision[11] 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, and the latter to pay
the balance of the purchase price in the amount of two hundred sixty thousand
pesos (P260,000.00). 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. The Spouses Lu were further ordered to
return all payments made by SLDC with legal interest and to pay attorneys
fees to Babasanta.
MR: SLDC and the Spouses Lu filed separate motions for reconsideration with
the appellate court. However, in a Manifestation dated 20 December 1995, the
Spouses Lu informed the appellate court that they are no longer contesting
the decision. The appellate court denied SLDCs motion for reconsideration on
the ground that no new or substantial arguments were raised therein which
would warrant modification or reversal of the courts decision.
ISSUE:
1. WON there was a perfected contract of sale between the spouses Lu and
Babasanta.
2. Did the SLDCs 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 SLDCs knowledge of the transaction in favor of
Babasanta?
RULING:
1. 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 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. [22] 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.
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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 would tell that the Spouses Lu never
intended to transfer ownership to Babasanta except upon full payment of the
purchase price.
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 Babasantas 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.
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.

No. 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.
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. Time and
again, this Court has ruled that a person dealing with the owner of registered
land is not bound to go beyond the certificate of title as he is charged with notice
of burdens on the property which are noted on the face of the register or on the
certificate of title.[41] In assailing knowledge of the transaction between him and
the Spouses Lu, Babasanta apparently relies on the principle of constructive
notice incorporated in Section 52 of the Property Registration Decree (P.D. No.
1529).
The constructive notice of lis pendens was effected at which time the sale in
favor of SLDC had long been consummated insofar as the obligation of the
Spouses Lu to transfer ownership over the property to SLDC is concerned.
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Given the superiority of the right of SLDC to the claim of Babasanta the
annotation of the notice of lis pendens cannot help Babasantas position a bit and
it is irrelevant to the good or bad faith characterization of SLDC as a purchaser.
Assuming ex gratia argumenti that SLDCs registration of the sale had been
tainted by the prior notice of lis pendens and assuming further for the same
nonce that this is a case of double sale, still Babasantas claim could not prevail
over that of SLDCs. SLDC was in prior possession of the property in good faith.
Be it noted that delivery of the property to SLDC was immediately effected after
the execution of the deed in its favor, at which time SLDC had no knowledge at
all of the prior transaction by the Spouses Lu in favor of Babasanta.
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, SLDCs right is
definitely superior to that of Babasantas.

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