G.R. No. 170405.  February 2, 2010.

*
RAYMUNDO S. DE LEON, petitioner, vs. BENITA T.
ONG.1, respondent.

Civil Law; Contracts; Sales; Contract of Sale and Contract to

Sell Distinguished.—In a 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. On the other
hand, a 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.
Same; Same; Same; Seller obliged to transfer title over the
properties and deliver the same to the buyer; Execution of a
notarized deed of sale is equivalent to the delivery of a thing sold.
—Settled is the rule that the seller is obliged to transfer title over
the properties and deliver the same to the buyer. In this regard,
Article 1498 of the Civil Code provides that, as a rule, the
execution of a notarized deed of sale is equivalent to the delivery
of a thing sold.
Same; Same; Same; Condition regarding the approval of the
assumption of mortgage considered fulfilled as petitioner
prevented its fulfillment by paying his outstanding  obligation and
taking back the certificates of title without even notifying
respondent.—Even 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. In this connection, Article
1186 of the Civil Code provides: Article

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* THIRD DIVISION.

1  The Court of Appeals was impleaded as respondent but was excluded

pursuant to Section 4, Rule 45 of the Rules of Court.

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  1186. The condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment.
Same; Same; Same; Definition of a Buyer in Good Faith.—A
purchaser in good faith is one who buys the property of another
without notice that some other person has a right to, or an
interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of some
other person’s claim or interest in the property. The law requires,
on the part of the buyer, lack of notice of a defect in the title of the
seller and payment in full of the fair price at the time of the sale
or prior to having notice of any defect in the seller’s title.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
   The facts are stated in the opinion of the Court.
  The Law Firm of R.P.B. Jurado for petitioner.
  Ploteña & Hernandez Law Offices for respondent.

CORONA,  J.:
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 mortgage3 stating:

“x x x    x x x    x x x
That for and in consideration of the sum of ONE MILLION ONE
HUNDRED THOUSAND PESOS (P1.1 million), Philippine

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2  Covered by TCT Nos. 226469, 226470 and 226471 registered in the

name of petitioner.
3 Rollo, pp. 55-56. There is a marked discrepancy between the total
amount and the sum of the payments to be made by respondent (or
P1,099,500).

383

currency, the receipt whereof is hereby acknowledged from

[RESPONDENT] to the entire satisfaction of [PETITIONER], 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,
Rizal under the following terms and conditions:
1.   That upon full payment of [respondent] of the amount of FOUR
HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000),
[petitioner] shall execute and sign a deed of assumption of
 mortgage in favor of [respondent] without any further cost
whatsoever;
2.  That [respondent] shall assume payment of the outstanding loan
of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE
HUNDRED PESOS (P684,500) with REAL SAVINGS AND
LOAN,4 Cainta, Rizal… (emphasis supplied)
     x x x      x x x      x x x”

Pursuant to this deed, respondent gave petitioner

P415,500 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.
Thereafter, 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.
Subsequently, respondent learned that petitioner again
sold the same properties to one Leona Viloria after March
10, 1993 and changed the locks, rendering the keys he gave
her

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4  The records of this case revealed that petitioner’s outstanding

obligation to RSLAI amounted to P715,000 as of April 1, 1993.
5 Respondent had the properties cleaned and landscaped. She likewise
had the house (built thereon) painted and repaired.

384

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.
On June 18, 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) of Antipolo, Rizal, Branch 74.
She claimed that since 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.
Inasmuch as 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.
Furthermore, he made a counter-claim for damages as
respondent filed the complaint allegedly with gross and
evident bad faith.
Because 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, the RTC held that the sale was
never perfected.
In a decision dated August 27, 1999,7 the RTC dismissed
the complaint for lack of cause of action and ordered
respon-

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6 Docketed as Civil Case No. 93-2739.

7 Penned by Judge Francisco A. Querubin. Id., at pp. 129-151.

385

dent to pay petitioner P100,000 moral damages, P20,000

attorney’s fees and the cost of suit.Aggrieved, respondent
appealed to the Court of Appeals (CA),8 asserting that the
court a quo erred in dismissing the complaint.
The CA found that the March 10, 2003 contract executed
by the parties did not impose any condition on the sale and
held that the 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. Moreover, it found petitioner liable for
moral and exemplary damages for fraudulently depriving
respondent of the properties.
In a decision dated July 22, 2005,9 the CA upheld the
sale to respondent and nullified the sale to Viloria. It
likewise ordered respondent to reimburse petitioner
P715,250 (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 P50,000 moral damages
and P15,000 exemplary damages.
Petitioner moved for reconsideration but it was denied
in a resolution dated November 11, 2005.10 Hence, this
petition,11 with the sole issue being whether the parties
entered into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell
since the validity of the transaction was subject to a
suspensive condition, that is, the approval by RSLAI of
respondent’s assumption of mortgage. Because RSLAI did
not allow re-

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8  Docketed as CA-G.R. CV No. 59748.

9   Penned by Associate Justice Eugenio S. Labitoria and concurred in
by Associate Justices Eliezer R. delos Santos and Arturo D. Brion (now a
member of this Court) of the Third Division of the Court of Appeals. Rollo,
pp. 30-34.
10 Id., at pp. 46-47.
11 Under Rule 45 of the Rules of Court.

386

spondent to assume his (petitioner’s) obligation, the

condition never materialized. Consequently, there was no
sale.
Respondent, on the other hand, asserts that they
entered into a contract of sale as petitioner already
conveyed full ownership of the subject properties upon the
execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of
the March 10, 1993 deed. The RTC ruled that it was a
contract to sell while the CA held that it was a contract of
sale.
In a 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
On the other hand, a 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 (as previously quoted)
stated that petitioner sold the properties to respondent “in
a manner absolute and irrevocable” for a sum of P1.1
million.14 With regard to the manner of payment, it
required respondent to pay P415,500 in cash to petitioner
upon the execution

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12 Dijamco v. Court of Appeals, G.R. No. 113665, 7 October 2004, 440

SCRA 190, 197. See also J.B.L. Reyes, 5 Outline of Philippine Civil Law,
2-3 (1957).
 13 Id.
14 Supra note 3.

387

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. Otherwise stated, 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

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15 Supra note 4.
16 Paragraph 2 of the deed did not prescribe a period within which
respondent should settle petitioner’s obligation to RSLAI.
17 See Civil Code, Art. 1370 which provides:
Article   1370.  If the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of the
stipulations shall control.
If the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former.
18 Civil Code, Art. 1495 provides:
Article   1495.  The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the sale.
19 Civil Code, Art. 1498 provides:
Article  1498.  When a sale is made through a public instrument,
the execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed, the
contrary does not appear or cannot be clearly inferred.
With regard to movable property, its delivery may also be made by the
delivery of the keys of the place or depository where it is stored or kept.
(emphasis supplied)

388

rule, the execution of a notarized deed of sale is equivalent

to the delivery of a thing sold.
In this instance, 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.
Furthermore, even 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. In this connection, Article 1186
of the Civil Code provides:

“Article  1186.  The condition shall be deemed fulfilled when

the obligor voluntarily prevents its fulfillment.”

Void Sale Or Double Sale?

Petitioner sold the same properties to two buyers, first
to respondent and then to Viloria on two separate
occasions.20 However, the second sale was not void for the
sole reason that petitioner had previously sold the same
properties to respondent. On this account, the CA erred.
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 of the Civil Code provides:

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20 See Delfin v. Lagon, G.R. No. 132262, 15 September 2006, 502 SCRA
24, 31.

389

“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.”
(emphasis supplied)

This provision clearly states that the rules on double or

multiple sales apply only to purchasers in good faith.
Needless to say, it disqualifies any purchaser in bad faith.
 A purchaser in good faith is one who buys the property
of another without notice that some other person has a
right to, or an interest in, such property and pays a full and
fair price for the same at the time of such purchase, or
before he has notice of some other person’s claim or interest
in the property.21 The law requires, on the part of the
buyer, lack of notice of a defect in the title of the seller and
payment in full of the fair price at the time of the sale or
prior to having notice of any defect in the seller’s title.
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 him-

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21  Centeno v. Spouses Viray, 440 Phil. 881, 885; 392 SCRA 349, 352
(2002).

390

self rendered respondent’s obligation to assume petitioner’s

indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:

“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. Moreover, because petitioner himself willfully
prevented the condition vis-à-vis the payment of the
remainder of the purchase price, the said condition is
considered fulfilled pursuant to Article 1186 of the Civil
Code. For purposes, therefore, of determining whether
respondent was a purchaser in good faith, she is deemed to
have fully complied with the condition of the payment of
the remainder of the purchase price.
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. Moreover, Viloria bought the
properties from petitioner after the latter sold them to
respondent. Respondent was therefore a purchaser in good
faith. Hence, the rules on double sale are applicable.
 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.
In this instance, petitioner delivered the properties to
respondent when he executed the notarized deed22 and
handed over to respondent the keys to the properties. For
this reason, respondent took actual possession and
exercised control thereof by making repairs and
improvements thereon. Clearly, the sale was perfected and
consummated on March

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22 See Civil Code, Art. 1498.

391

10, 1993. Thus, respondent became the lawful owner of the

properties.
Nonetheless, while the condition as to the payment of
the balance of the purchase price was deemed fulfilled,
respondent’s obligation to pay it subsisted. Otherwise, she
would be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, 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, the July 22, 2005 decision and
November 11, 2005 resolution of the Court of Appeals in
CA-G.R. CV No. 59748 are hereby AFFIRMED with
MODIFICATION insofar as respondent Benita T. Ong is
ordered to pay petitioner Raymundo De Leon P684,500
representing the balance of the purchase price as provided
in their March 10, 1993 agreement.
Costs against petitioner.
SO ORDERED.

Carpio,** Velasco, Jr., Nachura and Peralta, JJ.,

concur.

Judgment and resolution affirmed with modification.

Note.—In a contract of sale, the title to the property

passes to the vendee upon the delivery of the thing sold,
while in a contract to sell, ownership is, by agreement,
reserved to the vendor and is not passed until full payment
 of the purchase price. (Castillo vs. Reyes,   539 SCRA 193
[2007])
——o0o—— 

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**  Per Special Order No. 818 dated January 18, 2010.

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