Case Digest (G.R. No. 124242)
Facts:
In San Lorenzo Development Corporation v. Court of Appeals (G.R. No. 124242, January 21, 2005), respondents Spouses Miguel and Pacita Zavalla Lu owned two parcels of land in Barangay Pulong, Sta. Rosa, Laguna, covered by TCT Nos. T-39022 and T-39023, aggregating 3.1616 hectares. On August 20, 1986, the Spouses Lu purportedly entered into a sale with respondent Pablo S. Babasanta at ₱15.00 per square meter, evidenced by a memorandum receipt for a ₱50,000 downpayment and subsequent payments totaling ₱200,000. In May 1989, Babasanta demanded execution of the final deed of sale and alleged a second sale to another party, prompting Pacita Lu to reply that Babasanta had backed out and received back his downpayment. On June 2, 1989, Babasanta sued the Spouses Lu for specific performance and damages in the RTC of San Pedro, Laguna. They answered that their transaction was a loan converted into a contract to sell, that Babasanta defaulted on the ₱260,000 balance, and that they had issuedCase Digest (G.R. No. 124242)
Facts:
- Ownership and First Transaction
- Respondents Miguel Lu and Pacita Zavalla Lu (Spouses Lu) owned two parcels in Sta. Rosa, Laguna (TCT Nos. T-39022 and T-39023; total 3.1616 ha).
- On August 20, 1986, the Spouses Lu purportedly sold both lots to Pablo Babasanta at P15.00 per sqm. Babasanta paid P50,000 down (receipt by Pacita) and later P200,000.
- In May 1989, Babasanta demanded execution of a final deed and learned of a second sale; Pacita Lu responded that Babasanta had requested a price reduction, backed out, and that P50,000 was returned.
- Babasanta’s Suit for Specific Performance
- June 2, 1989: Babasanta filed a Complaint for Specific Performance and Damages against the Spouses Lu (RTC San Pedro, Laguna).
- The Spouses Lu answered, characterizing the arrangement as a loan converted into a contract to sell (P50,000 down; P260,000 balance), unpaid by Babasanta.
- January 17, 1990: Babasanta amended his complaint, sought preliminary injunction with TRO, and added the Register of Deeds as defendant.
- Intervention by San Lorenzo Development Corp. (SLDC)
- January 19, 1990: SLDC moved to intervene, claiming it purchased the same lots via Deed of Absolute Sale with Mortgage on May 3, 1989 for P1,264,640 (paid P632,320).
- SLDC asserted status as a good-faith purchaser; titles delivered free of encumbrances; lis pendens not yet annotated.
- RTC granted intervention; SLDC filed its complaint-in-intervention; Babasanta was granted a preliminary injunction upon bond.
- RTC Decision
- July 30, 1993: The RTC upheld SLDC’s purchase under Art. 1544 (Civil Code)—neither sale was registered, but SLDC first acquired possession in good faith.
- Ordered Spouses Lu to pay Babasanta P200,000 + legal interest and P50,000 attorney’s fees; directed cancellation of lis pendens.
- Court of Appeals Decision
- October 4, 1995: CA reversed the RTC: declared the sale to Babasanta valid and subsisting; voided SLDC’s sale (bad faith); ordered conveyance to Babasanta and return of SLDC’s payments with interest plus attorney’s fees.
- SLDC’s motion for reconsideration denied; Spouses Lu withdrew theirs.
- Contentions before the Supreme Court
- SLDC argued it was in good faith, first in possession, without notice of Babasanta’s claim; lis pendens post-dates its possession and does not defeat its rights.
- Babasanta contended SLDC’s registration was in bad faith due to prior lis pendens (annotated June 2, 1989) and constructive notice of his claim.
Issues:
- Nature of the Spouses Lu–Babasanta Transaction
- Was the August 1986 deal a contract of sale or merely a contract to sell?
- Did ownership pass to Babasanta?
- Superior Right to the Property
- Between Babasanta and SLDC, who holds the better right under Article 1544, PD 1529?
- What is the effect of SLDC’s possession, registration timing, and lis pendens annotation?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)