Agustin vs. De Vera

A contract is a contract of sale, not a contract to sell, when there is no express or implied stipulation reserving ownership in the seller until full payment of the price or granting the seller a unilateral right to rescind upon non-payment.

Gregorio B. De Vera owned a 180-square-meter residential lot in Dagupan City covered by TCT No. 36897. On January 6, 1986, he executed a "Contract to Purchase and Sale" with spouses Hipolito and Lolita Agustin, agreeing to sell the property for ₱30,000.00. The Agustins paid ₱15,000.00 upfront, took possession, and built improvements. Gregorio later sold the same property to Romana de Vera in 2007, prompting the dispute over who has a better right to the property.

Gregorio B. De Vera owned a parcel of residential land in Dagupan City covered by TCT No. 36897. On January 6, 1986, Gregorio and spouses Hipolito and Lolita Agustin executed a "Contract to Purchase and Sale" for ₱30,000.00. The Agustins paid ₱15,000.00 upon execution and agreed to pay the balance upon the release of the land from mortgage, while Gregorio obligated himself to release the title within one month. The Agustins immediately took possession, built a residential house, and paid real estate taxes. On May 17, 2001, Hipolito sold one-half of the land to his sister, Imelda Agustin, who also introduced improvements. Because Gregorio had not delivered the title, Hipolito and Imelda annotated an adverse claim on TCT No. 36897 on August 22, 2007.

On September 3, 2007, Gregorio sold the same property to Romana de Vera for ₱500,000.00 via a Deed of Absolute Sale, which was registered on September 6, 2010. Gregorio died on September 17, 2007. Romana knew that Hipolito and Imelda were already in possession of the property and had built houses there, and she transacted with Gregorio despite the prior annotation of the adverse claim.

Hipolito initially filed a case for specific performance against Gregorio's heirs in 2007, but it was dismissed for invalid service of summons. In 2010, Hipolito and Imelda filed the present action against Romana, seeking to annul the 2007 sale and uphold their ownership. The RTC ruled in their favor, finding the 1986 contract to be a contract of sale and Romana a buyer in bad faith. The CA reversed, holding the 1986 contract was a mere contract to sell, precluding the application of double sale rules.

• Nature of the Contract: Petitioners argued that the 1986 Contract to Purchase and Sale was a contract of sale, transferring ownership upon delivery, as there was no reservation of ownership by Gregorio.
• Bad Faith of Respondent: Petitioners asserted that Romana was a buyer in bad faith who had knowledge of their prior ownership claim, actual possession for over 20 years, and the adverse claim annotated on the title.
• Preference in Double Sale: Assuming a double sale, petitioners claimed they should be preferred as first buyers and first in possession in good faith and for value.
• Void 2007 Sale: Petitioners contended that the 2007 sale was void because Gregorio had nothing more to sell after the 1986 contract of sale.

• Nature of the Contract: Respondent argued that the Contract to Purchase and Sale did not ripen into a legal conveyance of real property and was merely a contract to sell.
• Lack of Consent for Possession: Respondent asserted that the petitioners' construction of their house was without Gregorio's consent and was made through a fraudulent scheme.

• Nature of the Contract: Whether the Contract to Purchase and Sale entered into by Hipolito and Gregorio is a contract of sale or a contract to sell.
• Double Sale and Good Faith: Whether Romana was a buyer in bad faith, making petitioners' right superior in case of a double sale.

• Nature of the Contract: Yes, it is a contract of sale. The absence of any stipulation reserving ownership in the seller or granting a unilateral right to rescind upon non-payment makes it a contract of sale, transferring ownership upon delivery.
• Double Sale and Good Faith: Yes, Romana was a buyer in bad faith. Having knowledge of the prior sale and the petitioners' actual possession, she cannot claim good faith, giving petitioners the better right under Article 1544.

• Nature of the Contract: The elements of a valid contract of sale under Article 1458 are present: consent, determinate subject matter, and price certain. The Court looked beyond the title of the document and found that the parties intended to transfer ownership upon execution. Under Articles 1477 and 1478, ownership passes to the vendee upon actual or constructive delivery unless there is a stipulation reserving ownership until full payment. The contract contained no such reservation, nor did it grant Gregorio a unilateral right to rescind for non-payment. The promise to execute a deed of absolute sale upon full payment is not conclusive of a contract to sell, as a contract of sale is consensual and perfected by mere consent. Thus, ownership transferred to Hipolito upon delivery.
• Double Sale and Good Faith: Even if Article 1544 on double sales were applied, petitioners have the better right. For immovable property, ownership belongs to the person who in good faith first recorded it. However, if the buyer is in bad faith, they cannot benefit from this rule. Romana transacted with Gregorio despite the prior annotation of an adverse claim on August 22, 2007, and with full knowledge that petitioners were in actual possession and had built houses on the property. Her bad faith negates any claim of priority under Article 1544, making petitioners' right superior.

• Contract of Sale vs. Contract to Sell — A contract of sale is perfected by mere consent and transfers ownership upon delivery unless there is a stipulation reserving title in the seller until full payment. A contract to sell, on the other hand, is characterized by an express or implied reservation of ownership by the seller until the full payment of the purchase price, often coupled with a unilateral right to rescind upon non-payment. The presence of a stipulation requiring the execution of a deed of absolute sale upon full payment does not automatically make it a contract to sell if there is no reservation of title or right to unilaterally rescind.
• Transfer of Ownership by Delivery — Under Articles 1477 and 1478 of the Civil Code, ownership of the thing sold is transferred to the vendee upon actual or constructive delivery thereof, unless the parties stipulate that ownership shall not pass until full payment of the price. In the absence of such a stipulation, ownership passes ipso jure upon delivery.
• Double Sale and Bad Faith — Under Article 1544 of the Civil Code, if the same immovable property is sold to different vendees, ownership belongs to the person who in good faith first recorded it. A buyer who purchases property with knowledge of a prior sale and actual possession by another, or with an adverse claim annotated on the title, is a buyer in bad faith and cannot claim priority under this article.

• "The 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 contract to sell." — This passage articulates the controlling test for distinguishing a contract of sale from a contract to sell.
• "In the absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof." — This states the rule on the transfer of ownership upon delivery under Article 1477 of the Civil Code.

• Spouses Beltran vs. Spouses Cangayda, G.R. No. 225033, August 15, 2018 — Cited to define a contract to sell as one where the prospective seller expressly reserves ownership despite delivery, and to distinguish it from a contract of sale where title passes upon delivery.
• Coronel vs. CA, 331 Phil. 294 (1996) — Cited to support the ruling that an agreement is a contract of sale if there is no express reservation of ownership by the seller, even if it promises to execute a deed of absolute sale upon full payment.
• Sps. Castillo vs. Sps. Reyes, 564 Phil. 176 (2007) — Followed to show that the absence of an express reservation of ownership makes the contract a contract of sale.
• Dignos vs. Court of Appeals, 242 Phil. 114 (1988) — Cited to demonstrate that a stipulation to execute a final deed of sale upon payment of the balance does not make it a contract to sell if there is no reservation of title or right to unilaterally rescind.
• Spouses Reyes vs. Salvador, Sr., 586 Phil. 391 (2008) — Distinguished; the Court clarified that while it stated that a promise to execute a deed of absolute sale upon full payment indicates a contract to sell, the actual holding in that case relied on the presence of a stipulation for automatic cancellation and reservation of title, which are absent here.

• Article 1458, Civil Code — Defines a contract of sale, requiring the obligation to transfer ownership and deliver a determinate thing in exchange for a price certain. The Court found all elements present in the 1986 contract.
• Article 1477, Civil Code — States that ownership of the thing sold is transferred to the vendee upon actual or constructive delivery. The Court applied this to hold that ownership passed to Hipolito when Gregorio delivered the property.
• Article 1478, Civil Code — Allows parties to stipulate that ownership shall not pass until full payment. The Court noted the absence of such a stipulation in the 1986 contract.
• Article 1544, Civil Code — Governs double sales of immovable property, giving ownership to the first registrant in good faith. The Court applied this alternatively, holding that Romana's bad faith precluded her from claiming ownership despite her registration.

Carpio (Chairperson), Perlas-Bernabe, and Lazaro-Javier, JJ., concurred. Jardeleza, J., on official business.