G.R. No. L-29972, January 26, 1976
Rosario Carbonell, petitioner, vs. Honorable Court of Appeals, Jose Poncio, Emma Infante and Ramon Infante, respondents.

FACTS

Petitioner Rosario Carbonell and respondent Jose Poncio, cousins from Batanes, were adjacent neighbors. Poncio, unable to pay his mortgage installments, offered to sell his lot to Carbonell, excluding his house. They agreed on a price of P9.50 per square meter, with Carbonell to assume the mortgage. On January 27, 1955, they executed a handwritten “Contract for One Half Lot” in the Batanes dialect, outlining the sale and a one-year grace period for Poncio to vacate. Carbonell paid the mortgage arrears and prepared a formal deed of sale.
However, before Carbonell could finalize the sale, Poncio informed her he could no longer proceed because he had already agreed to sell the property to respondent Emma Infante, who had improved her offer. Poncio and Infante executed a memorandum of agreement on January 31, 1955, and a formal deed of sale on February 2, 1955. Carbonell registered an adverse claim on February 8, 1955, while Infante’s deed was registered only on February 12, 1955. Infante subsequently took possession, made improvements, and built a house. Carbonell filed an action for specific performance and annulment of the second sale.

ISSUE

The primary issue is whether the first contract between Carbonell and Poncio was a binding contract of sale, giving Carbonell a superior right over the property, and determining the rights and obligations regarding the improvements made by the second buyers, the Infantes.

RULING

The Supreme Court reversed the Court of Appeals and ruled in favor of Carbonell. The handwritten “Contract for One Half Lot” executed on January 27, 1955, constituted a valid and binding contract of sale. It contained the essential elements of a contract: consent (Poncio’s offer and Carbonell’s acceptance), object (the lot), and cause or price (P9.50 per square meter, with assumption of mortgage). The agreement was not a mere contract to sell but a perfected contract of sale, which vested in Carbonell an equitable title to the property. Therefore, Poncio no longer had the right to sell the same property to Infante. The subsequent sale to Infante was void as to Carbonell.
Regarding improvements, the Infantes were deemed possessors in bad faith because they bought the property with knowledge of Carbonell’s prior claim, as evidenced by her timely adverse annotation. Under Article 546 of the Civil Code, a possessor in bad faith is entitled to reimbursement only for necessary expenses, not for useful improvements. However, based on equity, the Court allowed the Infantes the right to remove the useful improvements (the fill, wall, gate, and house) they introduced, unless Carbonell elects to acquire them by paying their value at the time they were made (P1,500 for the 1955 improvements and P11,929 for the 1959 house). Carbonell was ordered to reimburse only the P1,500 for the initial useful improvements to secure possession. The Court directed the cancellation of Infante’s title and the issuance of a new one in Carbonell’s name upon her payment of this sum.