G.R. No. 115158 September 5, 1997
EMMILA M. URACA, CONCORDIA D. CHING and ONG SENG, represented by ENEDINO H. FERRER, petitioners, vs. COURT OF APPEALS, JACINTO VELEZ, JR., CARMEN VELEZ TING, AVENUE MERCHANDISING, INC., FELIX TING AND ALFREDO GO, respondents.

FACTS

The Velezes (private respondents) owned a lot and commercial building in Cebu City, which were leased by petitioners. On July 8, 1985, the Velezes offered in writing to sell the property to petitioners for P1,050,000.00, requesting a reply within three days. On July 10, 1985, petitioners accepted the offer in writing without qualification. On July 11, 1985, petitioner Emilia Uraca met with Carmen Velez Ting, who stated the price was P1,400,000.00, not P1,050,000.00. Uraca agreed to the P1,400,000.00 price but counter-proposed payment by installments (P1,000,000.00 down payment, balance in 30 days). Carmen Velez Ting did not accept this counter-offer. No payment was made by petitioners on July 12 or 13, 1985. On July 13, 1985, the Velezes sold the property to the Avenue Group (Avenue Merchandising Inc., Felix Ting, and Alfredo Go) for P1,050,000.00. At that time, the certificate of title was clean. On July 31, 1985, petitioners filed a complaint against the Velezes. On August 1, 1985, petitioners registered a notice of lis pendens at 10:45 A.M., while the Avenue Group registered their deeds of sale at 3:30 P.M. The trial court declared the deeds of sale to the Avenue Group null and void, ordered the Velezes to execute a deed of absolute sale to petitioners for P1,400,000.00, and ordered the defendants to pay attorney’s fees. The Court of Appeals reversed, holding that the original perfected contract of sale for P1,050,000.00 was novated when the price was raised to P1,400,000.00, and since no agreement was reached on the new price, no contract was perfected.

ISSUE

1. Whether the original perfected contract of sale for P1,050,000.00 was extinguished by novation.
2. In the context of a double sale, which buyer has a better right to the property.

RULING

1. No, there was no extinctive novation. Novation is never presumed and requires proof that a new valid obligation extinguished the old one. The elements are: a previous valid obligation; agreement of all parties to the new contract; extinguishment of the old obligation; and validity of the new one. Here, a contract of sale was perfected on July 10, 1985, when petitioners accepted the Velezes’ offer for P1,050,000.00. The subsequent negotiation for a price of P1,400,000.00 did not result in a new perfected contract because the parties did not agree on the terms of payment (petitioners’ qualified acceptance via a counter-offer for installment payment was not accepted by the Velezes). Since no new contract was perfected, there was no novation. The original contract of sale for P1,050,000.00 remained valid and existing.
2. In a double sale of immovable property, ownership belongs to the person acquiring it who in good faith first recorded it in the Registry of Property. The trial court found that the Avenue Group purchased the property in bad faith, as they were aware of the prior sale to petitioners. The registration of the later sale must be done in good faith to entitle the registrant to priority. Since the Avenue Group registered their deeds of sale after petitioners registered their notice of lis pendens, and given the finding of bad faith, petitioners have a better right to the property. The Supreme Court reinstated the trial court’s decision with modification, ordering the Velezes to execute a deed of absolute sale to petitioners for P1,050,000.00 (the original perfected price), not P1,400,000.00.