G.R. No. 132709; September 4, 2001
SPOUSES CAMILO L. SABIO and MA. MARLENE A. LEDONIO-SABIO, petitioners, vs. THE INTERNATIONAL CORPORATE BANK, INC. (now UNION BANK OF THE PHILIPPINES), et al., respondents.

FACTS

The case involves a dispute over a 58,000-square-meter portion of land in Las Piñas City, originally part of a larger estate owned by Las Piñas Ventures, Inc. (LPVI). Petitioners Spouses Sabio acquired rights to a portion of this land from the Spouses Ledonio in 1973. Respondent International Corporate Bank (Interbank) later acquired rights to the same property from another entity. To settle their conflicting claims, the Sabios and Interbank entered into a Memorandum of Agreement (MOA) on March 6, 1985. Under the MOA, the Sabios assigned their rights over the larger lot to Interbank. In return, Interbank agreed to pay them P750,000 and, crucially, to “complete and perfect” its ownership over the entire property and subsequently “assign, convey and transfer” a specific, contiguous 58,000-square-meter portion back to the Sabios. The MOA also granted the Sabios a perpetual right of way and was annotated on the titles.
Interbank later transferred its rights to LPVI, which subsequently merged with respondent Ayala Land, Inc. (ALI). The entire property was developed into the Ayala Southvale subdivision. The Sabios demanded the conveyance of the 58,000-square-meter portion and the right of way, but the Ayala respondents refused, arguing the MOA was merely a contract to sell, not a conveyance, and that the obligation was conditional upon Interbank first perfecting its title. The Sabios filed an action for specific performance and damages.

ISSUE

The core issue is whether the MOA obligated Interbank (and its successors-in-interest, the Ayala respondents) to convey the 58,000-square-meter lot to the Sabios, or if it merely created a conditional contract to sell dependent on Interbank first obtaining perfect title.

RULING

The Supreme Court ruled in favor of the Sabios, ordering specific performance. The Court held that the MOA constituted a definitive agreement of conveyance, not a mere contract to sell. The legal logic centered on the interpretation of the contract’s terms and the parties’ contemporaneous and subsequent acts. The stipulation for Interbank to “complete and perfect” its title was interpreted as a description of its obligation to clear the property of liens and legal impediments for the benefit of all parties, including the Sabios as future owners. It was not a suspensive condition that had to be fulfilled before the obligation to convey arose. The Court emphasized that the MOA used absolute terms like “assign, convey and transfer,” and the immediate annotation of the agreement on the titles indicated it was meant to bind the world and affect the land itself.
Furthermore, the subsequent acts of the parties showed they treated the MOA as a present conveyance. Interbank paid the P750,000 consideration in full, and the Sabios, in turn, surrendered their duplicate certificates of title. The Ayala Group, as successors-in-interest, were bound by the annotated MOA under the principle that a purchaser of registered land is charged with notice of all encumbrances on the title. Therefore, the obligation to segregate and deliver the 58,000-square-meter lot, and to provide the stipulated right of way, was immediately demandable and binding upon the respondents. The Court affirmed the appellate decision ordering the respondents to execute the necessary deed of conveyance in favor of the Sabios.