De Leon v. Ong
REITERATIONFacts
The Antecedents: Petitioner Raymundo S. de Leon sold three parcels of land with improvements to respondent Benita T. Ong via a notarized deed of absolute sale with assumption of mortgage. The sale was for ₱1.1 million, with respondent paying ₱415,500 as partial payment and assuming the outstanding mortgage loan of ₱684,500 with Real Savings and Loan Association, Inc. (RSLAI). Respondent took possession, made improvements, and informed RSLAI of the agreement. Subsequently, respondent discovered that petitioner had resold the same properties to Leona Viloria and had paid off the mortgage, retaking the titles. Respondent filed a complaint for specific performance, declaration of nullity of the second sale, and damages. Procedural History: The Regional Trial Court (RTC) dismissed the complaint, ruling that the sale was a contract to sell subject to the suspensive condition of RSLAI's approval, which did not materialize. The RTC ordered respondent to pay petitioner moral damages and attorney's fees. The Court of Appeals (CA) reversed the RTC, holding that the parties entered into a contract of sale, declared the second sale void, and ordered petitioner to deliver titles and pay damages, while respondent was to reimburse petitioner for the mortgage payment. The Petition: Petitioner elevated the case to the Supreme Court, questioning whether the parties entered into a contract of sale or a contract to sell.
Issue(s)
Whether the March 10, 1993 deed executed by the parties constituted a contract of sale or a contract to sell. Whether the sale to respondent was perfected and consummated. Whether the subsequent sale to Leona Viloria was void or constituted a double sale. Whether respondent was a purchaser in good faith. Whether respondent is still obligated to pay the balance of the purchase price.
Ruling
The Supreme Court modified the decision of the Court of Appeals. It affirmed the CA's ruling that the parties entered into a contract of sale and that the sale to Viloria was a double sale. However, it modified the monetary award, ordering respondent Benita T. Ong to pay petitioner Raymundo de Leon ₱684,500 representing the balance of the purchase price, while petitioner must deliver the certificates of title to respondent. The award of damages was affirmed.
Ratio Decidendi
On whether the March 10, 1993 deed constituted a contract of sale or a contract to sell: The Court held that the deed executed by the parties was a contract of sale. The deed stated that petitioner sold the properties to respondent "in a manner absolute and irrevocable" for ₱1.1 million. The terms regarding payment, specifically the assumption of the mortgage, pertained to the performance of the contract, not the perfection thereof nor the immediate transfer of ownership. Article 1498 of the Civil Code provides that the execution of a notarized deed of sale is equivalent to the delivery of the thing sold. Petitioner's acts of executing the notarized deed, handing over the keys, and authorizing RSLAI to accept payment and release titles clearly indicated an unqualified transfer of ownership. The Court distinguished this from a contract to sell, where ownership is not acquired until full payment and is subject to a positive suspensive condition. On whether the sale to respondent was perfected and consummated: The Court found that the sale was perfected and consummated on March 10, 1993. The execution of the notarized deed of absolute sale, the transfer of possession through the keys, and the authorization given to RSLAI demonstrated the transfer of ownership. The Court also applied Article 1186 of the Civil Code, stating that the condition (RSLAI's approval of the mortgage assumption) was deemed fulfilled because petitioner voluntarily prevented its fulfillment by paying off the mortgage and retaking the titles without notifying respondent. This act by petitioner rendered respondent's obligation to assume the mortgage impossible without her fault, releasing her from that specific obligation under Article 1266 of the Civil Code. On whether the subsequent sale to Leona Viloria was void or constituted a double sale: The Court ruled that the second sale to Viloria did not make the second sale void but rather constituted a double sale. Article 1544 of the Civil Code governs double sales of immovable property. Ownership belongs to the person who first recorded the sale in good faith in the Registry of Property. If there is no inscription, ownership belongs to the one who first took possession in good faith. In this case, neither sale was registered. The Court found that respondent was a purchaser in good faith, having no notice of any other claim or defect in title beyond the mortgage she agreed to assume. Therefore, the rules on double sale were applicable. On whether respondent was a purchaser in good faith: The Court affirmed that respondent was a purchaser in good faith. She purchased the properties knowing they were encumbered only by the mortgage to RSLAI, which she agreed to assume. Petitioner's actions in paying off the mortgage and retaking the titles prevented her from fulfilling her obligation to assume the loan. The Court considered her obligation impossible to perform without her fault and, applying Article 1186, deemed the condition of payment fulfilled for the purpose of determining her good faith. She was not aware of any other interest or claim on the properties, and Viloria purchased the properties after respondent had already acquired ownership. On whether respondent is still obligated to pay the balance of the purchase price: Despite the condition being deemed fulfilled and respondent being released from the obligation to assume the mortgage, the Court held that respondent's obligation to pay the balance of the purchase price subsisted to prevent unjust enrichment. The deed stipulated that the assumption of mortgage was "without any further cost whatsoever" to respondent, but this referred to the assumption itself, not the total purchase price. The Court ordered respondent to pay petitioner ₱684,500, the amount representing the balance of the purchase price as stated in their agreement, to fully satisfy the contract of sale.
Main Doctrine
In a contract of sale, ownership is transferred upon perfection, while in a contract to sell, ownership is transferred upon full payment. The execution of a notarized deed of sale, coupled with delivery of possession and authorization to deal with the mortgagee, signifies a contract of sale. Furthermore, if the obligor voluntarily prevents the fulfillment of a suspensive condition, it is deemed fulfilled.