Domingo v. Manzano
REITERATIONFacts
The Antecedents: Petitioners negotiated and executed a written agreement with the registered owners covering a parcel of land and improvements. Petitioners paid a reservation fee and subsequent installment payments aggregating Php345,000 but failed to make full payment by the stated deadline; the owners retained possession and, after petitioners' attempts to pay the balance, sold and caused the issuance of a new title in favor of a third-party purchaser. Petitioners annotated an adverse claim and later discovered the issuance of the new title in the third-party purchaser's name. Procedural History: Petitioners filed a Complaint for specific performance and damages with injunctive relief in the Regional Trial Court (Civil Case No. C-20102). The RTC ruled for petitioners, treating the agreement as a contract of sale and declaring the third-party purchaser a buyer in bad faith, ordering reconveyance and cancellation of the subsequent title. The Court of Appeals reversed, holding the agreement to be a contract to sell, finding Article 1544 of the Civil Code inapplicable, and awarding reimbursement and damages to petitioners; the CA denied a Motion for Reconsideration. Petitioners brought the present Petition for Review on Certiorari before the Supreme Court. The Petition: Petitioners challenged the CA's ruling principally on the ground that Article 1544 should apply and that the third-party purchaser was a buyer in bad faith; petitioners also argued that the CA erred in entertaining Article 1544 for the first time on appeal and in reversing the RTC.
Issue(s)
Whether respondent Aquino may properly raise for the first time on appeal that Article 1544 of the Civil Code is inapplicable. Whether Article 1544 of the Civil Code is applicable to the agreement between petitioners and the registered owners. Whether the Court of Appeals erred in reversing the Regional Trial Court and in holding that petitioners are not entitled to reconveyance and cancellation of the subsequent title.
Ruling
The Petition is DENIED. The January 4, 2012 Decision and May 18, 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 93662 are AFFIRMED with MODIFICATION: the monetary awards shall earn interest at 12% per annum up to June 30, 2013 and 6% per annum thereafter until fully paid.
Ratio Decidendi
On Whether respondent Aquino may properly raise Article 1544 for the first time on appeal: The Court held that respondent Aquino was not precluded from arguing the inapplicability of Article 1544 on appeal because the RTC itself introduced the applicability of Article 1544 in its Decision; consequently, the issue became material only upon issuance of the RTC Decision and it was reasonable and procedurally proper for Aquino to raise the point on appeal. The Court emphasized that issues may be argued on appeal when they become relevant due to the trial court's disposition. The appellate court is tasked to correct errors of law and fact apparent from the record and may consider defenses properly raised in the appellate briefs. Preventing a party from addressing an issue that only emerged in the trial court's final disposition would unfairly deprive that party of the opportunity to contest a theory on which liability or relief is premised. Thus, the Court found no procedural bar to Aquino's contention on appeal. On Whether Article 1544 is applicable to the agreement (contract to sell vs. contract of sale): Applying established jurisprudence, the Court determined that the agreement between the petitioners and the registered owners was a contract to sell, not a contract of sale, because the parties expressly reserved transfer of title until full payment and the owners retained possession. The Court relied on prior decisions such as Cheng v. Genato and Spouses Nabus and Tolero v. Spouses Pacson in explaining that Article 1544 applies only to completed and valid sales (double sales), which presuppose a transfer of ownership; since a contract to sell contains a suspensive condition (full payment) and thus does not effect transfer of ownership until satisfied, there was no double sale to which Article 1544 could apply. The Court further explained that, as a consequence, a subsequent purchaser who registers title after full payment is not a buyer in bad faith with respect to the prior prospective vendee under a contract to sell, and the disappointed prospective vendee's remedies are for reimbursement and damages rather than reconveyance under Article 1544. The Court therefore concluded Article 1544 was inapplicable to the facts at bar. On Whether the Court of Appeals erred in reversing the RTC and denying reconveyance: The Court upheld the CA's reversal because the CA correctly characterized the contract as a contract to sell and correctly applied precedent holding that specific performance to compel reconveyance is not available where the prospective vendee failed to satisfy the suspensive condition of full payment or consigned the price. The Court noted that petitioners did not tender full payment or consign the balance so as to fulfill the suspensive condition; accordingly, petitioners could not compel transfer of title and the RTC's grant of reconveyance and cancellation of the subsequent title was unsustainable. The Court affirmed that petitioners were entitled to reimbursement of the installments paid and to nominal damages and attorney's fees, consistent with CA's judgment, and modified the interest rates on the monetary awards in accordance with Nacar v. Gallery Frames. The Court thus found no reversible error in the CA's legal conclusions or reliefs awarded.
Main Doctrine
Article 1544 of the Civil Code does not apply to a prior contract to sell because a contract to sell does not effect a transfer of ownership; consequently, a subsequent purchaser who registers the title is not a buyer in bad faith and the proper remedies of the disappointed vendees under a contract to sell are reimbursement and damages rather than specific performance.