G.R. No. 139047 & G.R. No. 139365 September 11, 2008
SPOUSES EMMA H. VER REYES and RAMON REYES, Petitioners, versus DOMINADOR SALVADOR, SR., EMILIO FUERTE, FELIZA LOZADA, ROSALINA PADLAN, AURORA TOLENTINO, TRINIDAD L. CASTILLO, ROSARIO BONDOC, MARIA Q. CRISTOBAL and DULOS REALTY & DEVELOPMENT CORPORATION, TRINIDAD LOZADA, JOHN DOE and RICHARD DOE, Respondents. / MARIA Q. CRISTOBAL and DULOS REALTY & DEVELOPMENT CORPORATION, Petitioners, versus DOMINADOR SALVADOR, SR., EMILIO FUERTE, FELIZA LOZADA, TRINIDAD LOZADA, ROSALINA PADLAN, AURORA TOLENTINO, TRINIDAD L. CASTILLO, ROSARIO BONDOC, SPOUSES EMMA H. VER REYES and RAMON REYES, Respondents.

FACTS

The core of the controversy is an unregistered parcel of land in Tungtong, Las Piñas, designated as Lot 1 of Plan Psu-205035, with an area of 19,545 square meters. It originally formed part of an agricultural land declared in 1916 in the name of Domingo Lozada. Domingo was married twice: first to Hisberta Guevarra (with children Bernardo and Anatalia) and, after her death, to Graciana San Jose (with children Nicomedes and Pablo). Domingo died in 1930 and Graciana in 1941. On March 18, 1965, Nicomedes and the heirs of his brother Pablo entered into an Extrajudicial Settlement of the Estate of their parents, adjudicating Lot 1 to Nicomedes and Lot 2 to Pablo’s heirs. Nicomedes then declared Lot 1 in his name under Tax Declaration No. 2050 in 1965.
Nicomedes subsequently entered into three separate contracts involving the subject property:
1. On June 23, 1965, he executed a Deed of Conditional Sale in favor of Emma Ver Reyes for P4.50 per square meter, payable in installments. The contract stipulated that it would become null and void if Emma failed to pay the subsequent installments, and Nicomedes would have the right to sell the property to another. Emma paid only the first 25% installment. This deed was registered in August 1965.
2. On June 14, 1968, Nicomedes entered into an Agreement of Purchase and Sale with Rosario Bondoc for P175,905.00, payable in installments. The agreement was conditioned upon Nicomedes delivering a valid title free from encumbrances. Rosario paid only the first installment of P15,000. This agreement was registered on March 10, 1969.
3. On August 10, 1969, Nicomedes executed a Deed of Absolute Sale of Unregistered Land covering a 2,000-square-meter portion of the subject property in favor of Maria Q. Cristobal for P25,000. This deed was registered on February 8, 1973, after Nicomedes’s death on June 29, 1972.
On August 10, 1979, Nicomedes’s heirs executed a Deed of Extrajudicial Settlement of his Estate, ratifying the sale to Maria Cristobal. Maria later assigned her rights to Dulos Realty & Development Corporation.
Two main judicial proceedings were initiated concerning the property:
– LRC Case No. LP-553-P: An application for registration of title filed by Emma Reyes and her husband.
– Civil Case No. 6914-P: An action for declaration of ownership filed by Rosario Bondoc.
These cases were consolidated before the Regional Trial Court (RTC) of Pasay City, Branch 119.
The RTC, in a Decision dated November 25, 1991, dismissed both applications, finding that neither Emma Reyes nor Rosario Bondoc had registrable title. However, it recognized Maria Cristobal and Dulos Realty as having a registrable title, based on the ratified deed. The Court of Appeals, in a Decision dated June 17, 1999, reversed the RTC. It upheld Rosario Bondoc’s title to the disputed property, overturning the RTC’s finding in favor of Maria Cristobal and Dulos Realty. The Court of Appeals held that the Agreement of Purchase and Sale between Nicomedes and Rosario Bondoc was a contract to sell, not a contract of sale, and since Nicomedes failed to deliver a valid title as required, Rosario was not in default. The appellate court also found that the subsequent sale to Maria Cristobal was in bad faith, as Maria was aware of the prior sale to Rosario. Hence, these Petitions for Review were filed.

ISSUE

The primary issue revolves around the nature and validity of the successive contracts executed by Nicomedes Lozada over the same unregistered property and which among the subsequent buyers (Emma Ver Reyes, Rosario Bondoc, or Maria Q. Cristobal/Dulos Realty) has a superior right or registrable title to the subject property.

RULING

The Supreme Court denied the petitions and affirmed the Decision of the Court of Appeals. The Court held that Rosario Bondoc has a superior right to the subject property.
The Court analyzed the contracts:
1. The Deed of Conditional Sale (1965) in favor of Emma Reyes was a contract to sell. Ownership would not pass until full payment of the price. Since Emma failed to pay the subsequent installments, the contract became null and void per its own terms, and Nicomedes regained the right to dispose of the property.
2. The Agreement of Purchase and Sale (1968) with Rosario Bondoc was also a contract to sell, contingent upon Nicomedes delivering a valid title. Rosario was not in default because the suspensive condition (delivery of title by Nicomedes) never occurred. Nicomedes’s failure to secure a title was a breach of his obligation. Rosario’s payment of the first installment and registration of the agreement vested her with a preferential right.
3. The Deed of Absolute Sale (1969) to Maria Cristobal was a contract of sale, where ownership passed upon delivery of the deed, even for unregistered land. However, Maria was a buyer in bad faith. The prior registered Agreement with Rosario Bondoc constituted constructive notice. Maria’s knowledge of the pending litigation and her registration of the deed only after Nicomedes’s death further indicated bad faith. Therefore, her rights are subordinate to those of Rosario Bondoc.
The Court emphasized that in a contract to sell, the vendor retains ownership until full payment. The vendor’s failure to comply with a suspensive condition (like delivering title) prevents the obligation of the buyer to pay the balance from arising. Since Nicomedes failed to deliver title to Rosario, she was not in default, and her rights under the prior registered agreement must be respected. The subsequent sale to Maria, being in bad faith, did not defeat Rosario’s preferential right. Thus, Rosario Bondoc’s title was upheld.