G.R. No.

170405               February 2, 2010

RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG.1 Respondent.

CORONA, J.:

FACTS:

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with improvements situated in Antipolo,
Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association,
Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage

 sum of ₱1.1 million pesos

 said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable,
unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and
other improvements existing thereon,

 situated in [Barrio] Mayamot, Antipolo,

o 1. That upon full payment of 415,000, petitioner shall execute and sign a deed of assumption of
mortgage in favor of respondent without any further cost whatsoever;

o respondent shall assume payment of the outstanding loan of ₱684,500 with RSLAI,

 Pursuant to this deed, respondent gave petitioner ₱415,500 as partial payment. Petitioner, on the other hand,
handed the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept
payment from respondent and release the certificates of title.

 Respondent undertook repairs and made improvements on the properties.5 Respondent likewise informed RSLAI
of her agreement with petitioner for her to assume petitioner’s outstanding loan. RSLAI required her to undergo
credit investigation.

 Respondent learned that petitioner again sold the same properties to one Leona Viloria and changed the locks,
rendering the keys he gave her useless.

 Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was informed that
petitioner had already paid the amount due and had taken back the certificates of title.

 Respondent persistently contacted petitioner but her efforts proved futile.

 June 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and
damages6 against petitioner and Viloria in the Regional Trial Court (RTC petitioner had previously sold the
properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus, petitioner
fraudulently deprived her of the properties.

 Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and
consequently prayed for the dismissal of the complaint.

 He claimed that since the transaction was subject to a condition (i.e., that RSLAI approve the assumption of
mortgage), they only entered into a contract to sell.

 respondent did apply for a loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected
and he could freely dispose of the properties.

 respondent filed the complaint allegedly with gross and evident bad faith.

RTC: sale was never perfected; Respondent was a licensed real estate broker, the RTC concluded that she knew that the
validity of the sale was subject to a condition. The perfection of a contract of sale depended on RSLAI’s approval of the
assumption of mortgage. Since RSLAI did not allow respondent to assume petitioner’s obligation

 RTC dismissed the complaint for lack of cause of action and ordered respondent to pay petitioner ₱100,000 moral
damages, ₱20,000 attorney’s fees and the cost of suit.
Court of Appeals: parties entered into a contract of sale. Consequently, because petitioner no longer owned the
properties when he sold them to Viloria, it declared the second sale void. Petitioner liable for moral and exemplary
damages for fraudulently depriving respondent of the properties.

 CA upheld the sale to respondent and nullified the sale to Viloria. It likewise ordered respondent to reimburse
petitioner ₱715,250 (or the amount he paid to RSLAI).

 Petitioner, on the other hand, was ordered to deliver the certificates of titles to respondent and pay her moral
damages and exemplary damages.

ISSUE:

sole issue being whether the parties entered into a contract of sale or a contract to sell.

PETITIONER RESPONDENT
Petitioner insists that he entered into a contract to sell Respondent, on the other hand, asserts that they entered
since the validity of the transaction was subject to a into a contract of sale as petitioner already conveyed full
suspensive condition, that is, the approval by RSLAI of ownership of the subject properties upon the execution of
respondent’s assumption of mortgage. Because RSLAI did the deed.
not allow respondent to assume his (petitioner’s)
obligation, the condition never materialized. Consequently,
there was no sale.

RULING:

We modify the decision of the CA.

Contract of Sale or Contract to Sell?

RTC ruled that it was a contract to sell while the

CA held that it was a contract of sale.

contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should
the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.12

contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership of the property until
he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the seller can only sue for
damages.13

The deed executed by the parties stated that-

 "in a manner absolute and irrevocable" , 

 With regard to the manner of payment, it required respondent to pay ₱415,500 in cash to petitioner upon the
execution of the deed, with the balance15 payable directly to RSLAI (on behalf of petitioner) within a reasonable
time.16 

 Nothing in said instrument implied that petitioner reserved ownership of the properties until the full payment of
the purchase price.17

  On the contrary, the terms and conditions of the deed only affected the manner of payment, not the immediate
transfer of ownership (upon the execution of the notarized contract) from petitioner as seller to respondent as
buyer.

 The said terms and conditions pertained to the performance of the contract, not the perfection thereof nor the
transfer of ownership.

Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the
buyer.18 In this regard, Article 1498 of the Civil Code19 provides that, as a rule, the execution of a notarized deed of sale
is equivalent to the delivery of a thing sold.

 Petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did petitioner
turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from respondent
and release his certificates of title to her.

 The totality of petitioner’s acts clearly indicates that he had unqualifiedly delivered and transferred ownership of
the properties to respondent. Clearly, it was a contract of sale the parties entered into.
Assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to approve the
assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by paying his
outstanding obligation and taking back the certificates of title without even notifying respondent.

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

Void Sale Or Double Sale?

 This case involves a double sale as the disputed properties were sold validly on two separate occasions by the
same seller to the two different buyers in good faith.

Article 1544. If the same thing 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
first 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 the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith. 

Rules on double or multiple sales apply only to purchasers in good faith. Needless to say, it disqualifies any purchaser in
bad faith.

Was respondent a purchaser in good faith? Yes.

Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her
agreement with petitioner, respondent had the obligation to assume the balance of petitioner’s outstanding obligation to
RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioner’s obligation. However,
because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner
himself rendered respondent’s obligation to assume petitioner’s indebtedness to RSLAI impossible to
perform.

Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically impossible
without the fault of the obligor.

Since respondent’s obligation to assume petitioner’s outstanding balance with RSLAI became impossible without her fault,
she was released from the said obligation.

Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which
she  undertook to assume.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of
deeds, the one who took prior possession of the properties shall be the lawful owner thereof.

Respondent took actual possession and exercised control thereof by making repairs and improvements thereon. Clearly,
the sale was perfected and consummated

Respondent must pay petitioner ₱684,500, the amount stated in the deed. This is because the provisions, terms and
conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the assumption
of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the certificates of title
to respondent. We likewise affirm the award of damages.

WHEREFORE, resolution of the Court of Appeals are hereby AFFIRMED with MODIFICATION insofar as respondent