Portic v. Cristobal
REITERATIONFacts
The Antecedents: Spouses Clodualdo Alcantara and Candelaria Edrosalam were the registered owners of a parcel of land with a three-door apartment. They sold the property to Spouses Ricardo and Ferma Portic (petitioners) with the condition that petitioners would assume the mortgage over the property in favor of the Social Security System (SSS). Petitioners defaulted on the mortgage payments, leading to foreclosure by SSS. Before the redemption period expired, petitioners sold the property to Anastacia Cristobal (respondent) for ₱200,025.89. The agreement stipulated a down payment of ₱45,025.89 and a balance of ₱155,000.00 payable on or before May 22, 1985. It was further agreed that if respondent failed to pay, the sale would be void, and petitioners would reimburse respondent for payments made. Concurrently, petitioners and respondent executed a 'Deed of Sale with Assumption of Mortgage' for ₱80,000.00, with ₱45,000.00 to be paid to SSS. On the same date, the original owners, the Alcantara spouses, sold the property to respondent for ₱50,000.00. Respondent then executed a 'Deed of Mortgage' for ₱150,000.00 in favor of petitioners. Respondent paid the SSS indebtedness. Subsequently, the title was transferred to respondent's name. On May 20, 1996, petitioners demanded the alleged unpaid balance of ₱55,000.00, which respondent refused to pay. Procedural History: Petitioners filed a civil case against respondent to remove the cloud on their title, alleging that respondent failed to pay the balance of the purchase price, rendering the sale void. They sought reconveyance of the title. The Regional Trial Court (RTC) ruled in favor of petitioners, ordering the quieting of title and reconveyance upon reimbursement of amounts paid by respondent. The Court of Appeals (CA) reversed the RTC decision, ordering respondent to pay the unpaid balance with legal interest and confirming respondent's ownership, opining that the action had prescribed. The CA denied petitioners' motion for reconsideration. The Petition: Petitioners filed a Petition for Review, arguing that their action was for quieting of title, which is imprescriptible if they are in possession, and that their cause of action had not prescribed.
Issue(s)
Whether the petitioners' cause of action is for quieting of title and whether the respondent's title is valid. Whether the petitioners' cause of action has prescribed.
Ruling
The Petition is GRANTED. The challenged Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The Decision of the RTC of Valenzuela City in Civil Case No. 4935-V-96, dated September 23, 1999, is hereby REINSTATED.
Ratio Decidendi
On the Nature of the Action and Validity of Title: The Court held that the agreement between the parties was a contract to sell, not a contract of sale, due to the stipulation that ownership would be retained by the vendors (petitioners) until full payment of the purchase price. This stipulation constituted a positive suspensive condition. Failure to pay the full price meant that the obligation to convey title never became effective, and it was not a breach of contract. The Court found that the petitioners had retained their title to the property, as they had not turned it over to the respondent. Therefore, the action filed was indeed for quieting of title, which is a proceeding quasi in rem. The Court found that the respondent's title was not valid because the suspensive condition of full payment of the purchase price had not been met. The contract was clearly a contract to sell, as evidenced by the provision in the Memorandum of Agreement (MOA) stating that the vendors (petitioners) would retain ownership until the balance was fully paid. This retention of ownership meant that the transfer of title was contingent upon full payment. Consequently, the respondent could not claim ownership based on the title issued in her name, as it was obtained without fulfilling the essential condition of payment. The Court emphasized that registration does not cure the defect of a void title or a title acquired in bad faith. Since the respondent had not fully paid the purchase price, her claim of ownership was unsustainable, and the CA's ruling confirming her title was set aside. On Prescription: The Court reiterated that an action to quiet title, when the plaintiff is in possession of the property, is imprescriptible. The CA's finding that the action had prescribed was therefore erroneous. The Court also noted that the mere issuance of a Certificate of Title in the respondent's name did not vest ownership, as registration merely serves as evidence of title and does not grant better rights than what the holder actually possessed prior to registration. Furthermore, Article 1544 of the Civil Code requires good faith to concur with registration for a new title to be acquired, and respondent could not claim good faith as the purchase price was not fully paid.
Main Doctrine
A contract to sell, where ownership is reserved in the vendor until full payment of the purchase price, is characterized by a suspensive condition. Failure to pay the price is not a breach but an event that prevents the vendor's obligation to convey title from becoming effective. Registration of title does not vest ownership but merely serves as evidence thereof, and does not grant better title than what the holder actually had prior to registration. An action to quiet title, if the plaintiff is in possession, is imprescriptible.