It was contend that when buyers bought the property they knew that the same property was previously sold to them. Therefore, since they are buyers in bad faith, ownership of the property must pertain to the buyers, who, in good faith, were first in possession. Is the contention correct? Why?
Held: No. The argument is misplaced.
Petitioners invoke Article 1544 of the Civil Code which reads:
Article 1544. If the same things 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 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 possession; and in the absence thereof, to the person who presents the oldest title, provided there is good faith. (Emphasis ours)
The above provision does not apply to the instant case considering that the transaction between petitioners and spouses Belmes is a mere contract to sell, not a contract of sale.
Along the same vein, in Sps. Serrano v. Caguiat, G.R. No. 139173, February 26, 2007, there was a contract where a partial payment was made. The balance was to be paid on an agreed date and after payment, the owners will execute the final deed of sale.
The SC held it be a contract to sell.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer title is subordinate to the happening of a future and uncertain event, so that if the suspensive condition does take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly the full payment of the purchase price. (Philippine National Bank v. Court of Appeals and Lapaz Kaw Ngo, G.R. No. 119580, September 26, 1996, citing Rose Packing Co., Inc. v. Court of Appeals, 167 SCRA 309, 318 (1988) and Lim v. Court of Appeals, 182 SCRA 564, 670 (1990)).
The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, in Sing Yee v. Santos, 47 O.G. 6372 (1951), it was held:
“x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing sold and a contract to sell x x x where by agreement the ownership is reserved in the seller and is not to pass until the full payment, of the purchase price is made. In the first case, non-payment of the price is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale itself is resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract.
In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of the price.(Jacinto v. Kaparaz, 209 SCRA 246 (1992).
In this case, the “Receipt for Partial Payment” shows that the true agreement between the parties is a contract to sell.
First, ownership over the property was retained by sellers and was not to pass to buyer until full payment of the purchase price. Thus, owners need not push through with the sale should buyer fail to remit the balance of the purchase price before the deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay within the fixed period. (Chua v. CA, G.R. No. 119255, April 9, 2003, 401 SCRA 54).
Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price.
Third, seller/owners retained possession of the certificate of title of the lot. This is an additional indication that the agreement did not transfer to the buyer, either by actual or constructive delivery, ownership of the property.
It is true that Article 1482 of the Civil Code provides that “Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract.” However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase price. Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.