8/31/22, 2:05 PM [ G.R. No.

233455, April 03, 2019 ]

SECOND DIVISION
[ G.R. No. 233455, April 03, 2019 ]
HIPOLITO AGUSTIN AND IMELDA AGUSTIN, PETITIONERS, VS.
ROMANA DE VERA, RESPONDENT.

DECISION

CAGUIOA, J:

Before the Court is a Petition for Review on Certiorari[1] (Petition) under Rule 45 of the Rules
of Court filed by petitioners Hipolito Agustin (Hipolito) and Imelda Agustin (Imelda), assailing
the Decision[2] dated March 28, 2017 (assailed Decision) and Resolution[3] dated July 14, 2017
(assailed Resolution) of the Court of Appeals (CA) in CA-G.R. CV No. 107860.

The Facts and Antecedent Proceedings

As narrated by the CA in its assailed Decision and as culled from the records of the instant case,
the essential facts and antecedent proceedings of the case are as follows:

During his lifetime, Gregorio B. De Vera (Gregorio) owned a parcel of residential

land with an area of one hundred eighty (180) square meters, located at Tondaligan,
Bonuan Gueset, Dagupan City [(subject property)], and covered by Transfer
Certificate of Title (TCT) No. 36897 of the Registry of Deeds for the City of
Dagupan, Province of Pangasinan.

On January 6, 1986, Gregorio and spouses Hipolito and Lolita Agustin executed a
document entitled "Contract to Purchase and Sale" whereby the former agreed to sell
to the latter the aforementioned property under the following terms and conditions:

"a. The Contract price of the land is P30,000.00 Philippine Currency;

b. The amount of P15,000.00 will be paid to the Vendor upon the

execution of this contract and the balance to be paid upon the release of
the land from the Pangasinan Savings and Loan Association to which
parcel of land is currently mortgaged;

c. That the Vendor obligates himself to have the said title of the land
released from mortgage from the bank within a period of one (1) month
from the day [of] the execution of this contract;

d. That immediately upon the payment of PI5,000.00 and after the

execution of this contract[,] the Vendee can take possession of the land
and may introduce improvements and [sic] they may desire;
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e. That upon release of the title from the bank and upon payments of the
balance of P15,000.00 by the Vendee to the Vendor, the corresponding
Deed of Sale will be executed;

f. That the costs of documentation and other expenses in the transfer of

said Title to the Vendee will be borne by the Vendee."

As agreed, the Agustin spouses paid the partial payment of P15,000.00 and
immediately took possession of the land. They had since constructed thereon their
residential house and paid the real estate taxes. On May 17, 2001, Hipolito Agustin
sold one-half portion of the land to his sister, Imelda Agustin, who also introduced
improvements on the property and constructed a sari-sari store.

Considering that Gregorio had not yet delivered the title, Hipolito and Imelda caused
the annotation of an adverse claim on TCT No. 36897 on August 22, 2007.

Under [a] Deed of Absolute Sale dated September 3, 2007, Gregorio sold the
[subject property] to Romana M. [d]e Vera [(Romana)] for the price of
Php500,000.00. Said document was registered on September 6, 2010.

Gregorio died on September 17, 2007.

On November 15, 2007, Hipolito filed Civil Case No. 2007-0367-D entitled
"Hipolito S. Agustin vs. Heirs of the Late Gregorio B. De Vera" for Specific
Performance, Acknowledgement of the Contract of Purchase and Sale and Judicial
Declaration of Ownership" [sic] in the RTC of Dagupan City, Branch 42. The
amended complaint alleged that despite receipt of the balance of the purchase price,
Gregorio failed to deliver the title as promised by him. Upon verification with the
Office of the Register of Deeds, Hipolito was surprised to discover that Gregorio
already redeemed the [subject] property in April 1997. Hipolito thus prayed for
judgment ordering the heirs of Gregorio to execute the corresponding deed of sale in
his favor.

A Notice of Lis Pendens was likewise duly annotated on TCT No. 36897 on
November 16, 2007.

Civil Case No. 2007-0367-D was dismissed without prejudice on October 14, 2008
for lack of jurisdiction over the person of the defendants due to invalid service of
summons.

On September 28, 2010, [petitioners Hipolito and Imelda] filed the present case
[before the Regional Trial Court of Dagupan City, Branch 40 (RTC)]. [Hipolito and
Imelda] alleged that they were surprised to discover a deed of absolute sale over the
same property purportedly executed by Gregorio, then already eighty (80) years old,
fourteen (14) days prior to his death, in favor of [respondent Romana]. Romana
caused the registration of the conveyance in her favor, resulting in the issuance of
TCT No. 90114 in her name. [Petitioners Hipolito and Imelda] argued that Romana
is a buyer in bad faith who had knowledge of Hipolito's ownership of the subject
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land by virtue of sale which was annotated on the title, and of [petitioners Hipolito
and Imelda's] actual possession for more than twenty [(20)] years already. Assuming
there was a double sale, [petitioners Hipolito and Imelda] asserted that they are to be
preferred as first buyers and first in possession in good faith and for value. They
further contended that the 2007 sale is void as Gregorio had nothing more to sell
after the execution of the Contract to Purchase and Sale in 1986.

[Petitioners Hipolito and Imelda] thus prayed that after trial, judgment be rendered:
1) annulling the Deed of Absolute Sale executed by Gregorio in favor of Romana; 2)
ordering the Register of Deeds to cancel TCT No. 90114; 3) upholding the rights of
ownership and possession of [petitioners Hipolito and Imelda] over the subject
property under the Contract to Purchase and Sale; 4) ordering the Register of Deeds
to issue a new certificate of title in the name of the [petitioners Hipolito and Imelda];
5) ordering [respondent Romana] to pay [petitioners Hipolito and Imelda] the sums
of Php50,000.00 as moral damages, Php50,000.00 as exemplary damages,
Php30,000.00 [as] attorney's fees plus Php1,500.00 appearance fee per hearing and
Php20,000.00 as litigation expenses.

In her Answer, Romana denied the [petitioners Hipolito and Imelda's] claim that they
already acquired the subject property, asserting that the construction of [petitioners
Hipolito and Imelda's] house was without the consent of Gregorio and made thru
fraudulent scheme. She argued that the alleged Contract to Purchase and Sale did not
ripen into legal conveyance of real property from Gregorio to [petitioners Hipolito
and Imelda]. x x x

After trial, the RTC rendered [its Decision[4] dated June 23, 2014], the dispositive
portion of which states:

"WHEREFORE, premises considered, judgment is hereby rendered in

favor of the Plaintiffs and against the Defendant as follows:

1. Annulling the Deed of Absolute Sale dated September 3, 2007

purportedly executed by the late Gregorio de Vera in favor [of] Romana
de Vera;

2. Ordering the Register of Deeds of Dagupan City to cancel Transfer

Certificate of Title No. 90114;

3. Upholding the rights and ownership and possession of the Plaintiffs

over the subject parcel of land under the Contract to Purchase and Sale;

4. Ordering the Register of Deeds to reinstate the Transfer Certificate of

Title No. 36897 under the name of Gregorio B. de Vera; and

5. Ordering the Defendant Romana de Vera to pay the Plaintiffs the sum
of Twenty-Five Thousand Pesos (Php25,000.00) as moral damages and
another Twenty-Five Thousand Pesos (Php25,000.00) as exemplary
damages.

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SO ORDERED."[5]

The RTC found that the sale of the subject lot to Hipolito was absolute
notwithstanding the title of their agreement. It also found that the contract did not
contain an express reservation of ownership pending full payment of the purchase
price. There being a contract of sale, and not mere contract to sell, the RTC applied
the provision on double sale of real property, Article 1544 of the Civil Code. Romana
was declared a buyer in bad faith, having bought the land from Gregorio despite
being charged with the knowledge of [petitioners Hipolito and Imelda's] ownership
claim through the adverse claim and notice of lis pendens annotated on TCT No.
36897, and having found [petitioners Hipolito and Imelda] in actual possession of the
property.

[Hence, Romana appealed before the CA[6] seeking a reversal of the above judgment
x x x.[7]

The Ruling of the CA

In its assailed Decision, the CA granted Romana's appeal and reversed the RTC's Decision. The
dispositive portion of the assailed Decision reads:

WHEREFORE, the appeal is GRANTED. The Decision dated June 23, 2014 of the
Regional Trial Court of Dagupan City, Branch 40 in Civil Case No. 2010-0258-D is
REVERSED and SET ASIDE. The Complaint dated September 27, 2010 filed by
Hipolito and Imelda Agustin with said court is hereby DISMISSED.

SO ORDERED.[8]

The CA held that "[s]ince the Contract to Purchase and Sale is not a contract of sale but a mere
contract to sell, there was no automatic transfer of ownership even if Gregorio failed to deliver
the title to Hipolito after securing the release of the [subject] property from bank mortgage.
Consequently, the RTC erred in applying Article 1544 of the Civil Code, which contemplates a
double sale of the same real property."[9]

In finding the Contract to Purchase and Sale a contract to sell instead of a contract of sale, the
CA focused its attention on the provision of the said Contract to Purchase and Sale which
obligated Gregorio to execute a Deed of Sale in favor of Hipolito. According to the CA, "the
need to execute a deed of absolute sale upon completion of payment of the price generally
indicates that it is a contract to sell, as it implies the reservation of title in the vendor until the
vendee has completed the payment of the price"[10] and that "[w]here the seller promises to
execute a deed of absolute sale upon the completion by the buyer of the payment of the price,
the contract is only a contract to sell."[11]

Hipolito and Imelda filed their Motion for Reconsideration[12] on April 18, 2017, which was
subsequently denied by the CA in its assailed Resolution.

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Hence, the instant Petition.

Romana filed her Comment[13] on December 18, 2017, to which Hipolito and Imelda responded
with a Reply to Comment[14] filed on January 24, 2018.

Issue

Stripped to its core, the critical issue presented before the Court is whether the Contract to
Purchase and Sale entered into by Hipolito and Gregorio is a contract of sale or a contract to
sell.

The Court's Ruling

The instant Petition is meritorious. The CA erred in finding that the Contract to Purchase and
Sale is a mere contract to sell; it is a contract of sale.

The Essential Elements of a Contract of Sale

According to Article 1458 of the Civil Code, by a contract of sale, one of the contracting parties
obligates himself to transfer the ownership and to deliver a determinate thing, and the other to
pay therefor a price certain in money or its equivalent.

Accordingly, 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.[15]

In the instant case, the Court finds that all the aforesaid elements are present in the instant case.
By entering into the agreement entitled "Contract to Purchase and Sale," both parties had arrived
at a meeting of the minds that the seller, i.e., Gregorio, transferred the ownership and possession
of the subject property to the buyer, i.e., Hipolito, with the latter obliged to pay a price certain in
money, i.e., P30,000.00.

In appreciating the evidence on record, the RTC arrived at a similar conclusion, holding that the
parties had a clear meeting of the mind that the ownership and possession over the subject
property should be transferred to Hipolito upon the execution of the Contract to Purchase and
Sale:

On the Third Paragraph of the said Contract, it clearly provides as follows:

"WHEREFORE, for and consideration of the sum of FIFTEEN

THOUSAND PESOS (P15,000.00) and further consideration of the
above premises the Vendor hereby agrees to sell the above parcel of land
to the Vendee and the Vendee hereby obligated themselves to buy the said
parcel of land under the above terms and conditions."

From the tenor of the said Contract to Purchase and Sale (Exhibit "B") it is
understood that Gregorio and Hipolito and his (sic) wife had meetings of mind that

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ownership and possession over the subject parcel of land shall be transferred to
the latter upon the execution of the said contract.[16]

It must be stressed that upon the execution of the Contract to Purchase and Sale, Gregorio
ceded the possession of the subject property to petitioner Hipolito. It is not disputed that
petitioner Hipolito immediately took possession of the subject property, had constructed
thereon their residential house, and paid the real estate taxes upon the subject property.

Transfer of Ownership through Delivery

In connection with the fact that Hipolito gained possession over the subject property upon the
execution of the Contract to Purchase and Sale, Article 1477 of the Civil Code states that the
ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. Further, under Article 1478, the parties may stipulate that
ownership in the thing shall not pass to the purchaser until he has fully paid the price.

In accordance with Articles 1477 and 1478 of the Civil Code, the general rule states that
ownership of property passes on to the buyer ipso jure when its possession is transferred in the
latter's favor if no reservation to the contrary has been made.[17] In the absence of stipulation
to the contrary, the ownership of the thing sold passes to the vendee upon actual or
constructive delivery thereof.[18]

Applying the foregoing to the instant case, striking is the fact that actual and physical delivery of
the subject property was made to Hipolito immediately upon the execution of the Contract to
Purchase and Sale without any express or implied stipulation by Gregorio reserving ownership
of the subject property.

Gregorio did not make any express or implied reservation whatsoever withholding
ownership of the subject property from Hipolito. If Gregorio really intended that the transfer
of ownership over the subject property was dependent on the fulfilment of other conditions, then
he would have expressed words to that effect in the Contract to Purchase and Sale. Nor would he
have willingly transferred the physical possession of the subject property to Hipolito. With
possession being the natural consequence and effect of ownership, it would be unnatural for a
property owner to just let go and cede possession of the property, without even a whimper, under
an agreement selling the said property and, at the same time, allege the retention of ownership
over the property.

In fact, aside from the delivery of the subject property to Hipolito, the intention of the parties to
cede ownership of the subject property to Hipolito is further buttressed by the fact that after the
delivery of the subject property to Hipolito, the obligation of paying real estate taxes was
immediately assumed by Hipolito. The fact that Hipolito had already assumed the obligation of
paying real property taxes on the subject property has not been disputed by Romana.

Contract of Sale vis-a-vis Contract to Sell

Despite the foregoing, the CA maintained its position that the Contract to Purchase and Sale is a
contract to sell and not a contract of sale.

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In the recent case of Spouses Beltran v. Spouses Cangayda,[19] citing Platinum Plans Phil. Inc.
v. Cucueco,[20] the Court explained that a contract to sell is defined as a bilateral contract
whereby the prospective seller, while expressly reserving the ownership of the subject
property despite its delivery to the prospective buyer, commits to sell the property
exclusively to the prospective buyer upon full payment of the purchase price.

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. 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.[21]

In Coronel v. CA,[22] the Court held that the agreement subject of the aforesaid case, even if it
was denominated as a mere Receipt of Down Payment, was a contract of sale. The Court held
therein that it could not have been a contract to sell "because the sellers herein made no
express reservation of ownership or title to the subject parcel of land."[23] Similarly, in Sps.
Castillo v. Sps. Reyes,[24] the Court held that "[t]he November 8, 1997 Agreement herein cannot
be characterized as a contract to sell because the seller made no express reservation of
ownership or title to the subject house and lot. Instead, the Agreement contains all the
requisites of a contract of sale."[25]

In Platinum Plans Phil. Inc. v. Cucueco, the Court explained that "a contract to sell may not be
considered as a contract of sale because the first essential element of consent to a transfer of
ownership is lacking in the former. Since the prospective seller in a contract to sell explicitly
reserves the transfer of title to the prospective buyer, the prospective seller does not as yet
unequivocally agree or consent to a transfer ownership of the property subject of the
contract to sell."[26]

Jurisprudence has then established that the hallmark of a contract to sell is the existence of a
clear agreement by the parties that the transfer of ownership is conditioned upon the full
payment of the purchase price, such that, by agreement of the parties, ownership is reserved to
the seller until the purchase price has been fully paid. The nomenclature of the subject contract
as a "Contract to Purchase and Sale" is of no moment, considering that "[t]he Court looks
beyond the title of said document, since the denomination or title given by the parties in their
contract is not conclusive of the nature of its contents."[27]

According to some authorities on the law of sales, the existing school of thought "holds that
what determines whether a sale contract is a 'contract to sell' is that there must exist an
agreement, whether express or implied, at the time of perfection of the sale contract, that the
obligation of the seller to transfer ownership to the buyer pursuant to a sale (even when physical
possession may have been effected) is conditioned upon the full payment by the buyer of the
purchase price."[28] Further, "[t]he prevailing doctrine therefore is that absent any stipulation in
the deed or in the meeting of [the] minds reserving title (meaning, ownership) over the property
to the seller until full payment of the purchase price and giving the seller the right to unilaterally
rescind the contract i[n] case of non-payment, makes the contract one of sale rather than a

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contract to sell."[29]

To reiterate, in the instant case, it is not disputed that there is absolutely no stipulation in the
Contract to Purchase and Sale to the effect that ownership over the subject property is reserved
in favor of Gregorio pending the complete payment of the purchase price by Hipolito. Neither is
there a provision granting Gregorio the unilateral right to rescind the Contract to Purchase and
Sale in case of non-payment. Therefore, bearing in mind the foregoing, the Contract to Purchase
and Sale is a contract of sale, and not a contract to sell.

Citing Spouses Reyes v. Salvador, Sr.,[30] the CA held that "[w]here the seller promises to
execute a deed of absolute sale upon the completion by the buyer of the payment of the price,
the contract is only a contract to sell."[31]

This statement of the Court in Spouses Reyes v. Salvador, Sr. was based on the 1996 case of PNB
v. CA,[32] which held that "no less revealing is the fact that the letter-agreements are not deeds of
sale, thereunder no title having been passed from petitioner to private respondent."[33]

However, upon closer reading of the aforementioned case, the Court therein held that the subject
agreement therein was a contract to sell and not a contract of sale primarily because there was
a clear stipulation in the subject contract therein "reserving title in the vendor until full
payment of the purchase price or giving the vendor the right to unilaterally rescind the contract
the moment the vendee fails to pay within a fixed period."[34]

Moreover, in Spouses Reyes v. Salvador, Sr., the subject contract therein actually "provide[d] for
the automatic [unilateral] cancellation of the contract should Emma fail to pay the purchase
price as required therein; and, in such an event, it grants Nicomedes the exclusive right to
thereafter sell the subject property to a third person."[35] This provision in the subject contract
therein which, as already discussed, is one of the hallmarks of a contract to sell, is not found in
the subject Contract to Purchase and Sale.

In fact, in Spouses Reyes v. Salvador, Sr., there was no evidence that the buyer "took actual and
physical possession of the subject property at any given time."[36] To the contrary, it is not
disputed in the instant case that Hipolito possessed and occupied the subject property after the
execution of the Contract to Purchase and Sale.

Furthermore, in Coronel v. CA, even if the subject contract therein similarly indicated that the
seller made a promise in the agreement "to cause the issuance of a new certificate of title in their
names from that of their father, after which, they promised to present said title, now in their
names, to the latter and to execute the deed of absolute sale whereupon, the latter shall in turn,
pay the entire balance of the purchase price,"[37] it still remained true that the agreement was
a contract of sale because of the lack of any express or implied reservation of ownership on
the part of the seller.

Similarly, in Dignos v. Court of Appeals,[38] the Court held that the contract therein was still a
contract of sale and not a contract to sell despite the existence of an express stipulation that the
sellers would execute a final deed of absolute sale only upon the payment of the balance of the
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purchase price as there was "no such stipulation reserving the title of the property on the
vendors nor does it give them the right to unilaterally rescind the contract upon non-
payment of the balance thereof within a fixed period."[39]

Having an ironclad dependence on the existence of a deed of absolute sale to determine the
existence of a contract of sale is unwarranted, considering that a contract of sale is a consensual
contract, which means that the sale is perfected by mere consent. No particular form is required
for its validity.[40] Formalities intended for greater efficacy or convenience or to bind third
persons, if not done, would not adversely affect the validity or enforceability of the contract
between the contracting parties themselves.[41]

Therefore, while a stipulation or promise to the effect that a seller shall execute a deed of sale
upon the completion of payment of the purchase price by the buyer may be considered a factor
or a sign that a contract might possibly be a contract to sell, such stipulation in itself, taken in
isolation, is by no means determinative and conclusive as to the contract being a contract to sell.

Still controlling are (1) the lack of any stipulation in the sale contract reserving the title of the
property on the vendors and (2) the lack of any stipulation giving the sellers the right to
unilaterally rescind the contract upon non-payment of the balance thereof within a fixed period.
The absence of such stipulations in a sale contract makes the said contract a contract of sale.
Hence, the Contract to Purchase and Sale entered into by Gregorio and Hipolito is a contract of
sale.

Hence, considering that the subject Contract to Purchase and Sale is indeed a contract of sale,
and that the subject property has been actually delivered to Hipolito and Imelda, in accordance
with Article 1477, the ownership of the subject property has been transferred to Hipolito and
Imelda.

The Rule on Double Sales

Even if the rule on double sales is applied to the instant case, the result remains the same.
Hipolito and Imelda would still have a better right of ownership over the subject property.

According to Article 1544 of the Civil Code, if the same thing should have been sold to different
vendees, in the case of immovable property, the ownership shall belong to the person acquiring
it who in good faith first recorded it in the Registry of Property:

Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person

acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.[42]

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Applying the foregoing in the instant case, it is indisputable that Romana was a buyer in bad
faith. Hence, Hipolito and Imelda have the better right of ownership over the subject property.

In the instant case, it is not disputed that on August 22, 2007, Hipolito and Imelda caused the
annotation on TCT No. 36897 of an adverse claim indicating the fact that they had entered into a
sale contract with Gregorio. This annotation was made prior to the execution of the Deed of
Absolute Sale between Gregorio and Romana on September 3, 2007. Confirmed by Romana's
own witness, Rafael M. de Vera, Romana transacted with Gregorio over the subject property
even with the prior annotation of Hipolito's adverse claim on the TCT and with full knowledge
that there was a prior sale transaction between Gregorio and Hipolito.[43] In fact, Romana
herself testified that prior to purchasing the subject property from Gregorio, she knew that
Hipolito and Imelda were already in possession of the subject property and that the latter have
built their houses therein.[44]

Hence, with Romana indubitably being a buyer in bad faith, Hipolito and Imelda have a better
right of ownership over Romana.

WHEREFORE, the instant petition is GRANTED. The Decision dated March 28, 2017 and
Resolution dated July 14, 2017 of the Court of Appeals in CA-G.R. CV No. 107860 are hereby
REVERSED AND SET ASIDE. The Decision dated June 23, 2014 rendered by the Regional
Trial Court of Dagupan City, Branch 40 is hereby REINSTATED.

SO ORDERED.

Carpio, (Chairperson), Perlas-Bernabe, and Lazaro-Javier, JJ., concur.

Jardeleza,* J., on offiical business.

* Designated as additional member per Raffle dated March 27,2019, on official business.

[1] Rollo, pp. 3-21.

[2]Id. at 22-31. Penned by Associate Justice Jose C. Reyes, Jr. (now a member of this Court)
with Associate Justices Stephen C. Cruz and Nina G. Antonio-Valenzuela, concurring.

[3] Id. at 39.

[4] Id. at 41-55. Penned by Judge Mervin Jovito S. Samadan.

[5] Id. at 54-55.

[6] The records do not reveal if Romana filed a Motion for Reconsideration before the RTC.

[7] Rollo, pp. 22-26; citations omitted.

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