G.R. No. 206310-11 - Dichaves vs. Office of the Ombudsman

Case Summary (G.R. No. 206310-11)

Factual Background: the March 10, 1993 Transaction

On March 10, 1993 petitioner executed a notarized deed of absolute sale purportedly conveying the three parcels and improvements to respondent for a total price stated as P1,100,000. Under its terms respondent paid P415,500 to petitioner at execution; she was to assume and pay the outstanding mortgage obligation to RSLAI (P684,500 as stated in the deed; records later reflected P715,000 outstanding as of April 1, 1993). The deed described the sale as made “in a manner absolute and irrevocable” and required, among other things, that upon full payment by respondent of P415,500, petitioner would execute a deed of assumption of mortgage in respondent’s favor, and that respondent would assume payment of the outstanding loan with RSLAI “without any further cost whatsoever.”

Subsequent Acts by the Parties and Mortgagee

After the March 10 deed respondent took possession: she received keys, undertook repairs, improvements and maintenance, and notified RSLAI of the sale and her willingness to assume the mortgage. RSLAI required a credit investigation. Petitioner wrote RSLAI informing it of the sale and authorizing RSLAI to accept payment from respondent and release the titles. Sometime after March 10, 1993 petitioner purportedly sold the same properties to Leona Viloria and changed the locks, depriving respondent of access. RSLAI later informed respondent that petitioner had paid the mortgage and had retrieved the certificates of title.

Procedural History

Respondent filed suit on June 18, 1993 in RTC (Civil Case No. 93-2739) for specific performance, declaration of nullity of the second sale, and damages against petitioner and Viloria. Petitioner contended the March 10 instrument was only a contract to sell because the sale’s perfection depended on RSLAI’s approval of the mortgage assumption, a suspensive condition that never occurred; he counterclaimed for damages alleging respondent acted in bad faith. The RTC dismissed respondent’s complaint for lack of cause of action, concluding the transaction was a contract to sell and RSLAI did not permit assumption; it awarded damages and fees to petitioner. The CA reversed in material respects, holding the March 10 deed to be a contract of sale, declared the second sale void, ordered titles delivered to respondent, required respondent to reimburse petitioner P715,250 (amount petitioner paid RSLAI), and awarded damages to respondent. Petitioner sought review to the Supreme Court.

Issue Presented

Whether the March 10, 1993 instrument constituted a contract of sale or merely a contract to sell (i.e., whether ownership passed to respondent upon execution or was suspended pending fulfillment of a condition), and the consequences of petitioner’s subsequent sale of the same properties to a third party.

Legal Standards Applied: contract of sale vs. contract to sell

The decision applies settled distinctions: in a contract of sale ownership is conveyed upon perfection of the contract and the unpaid price constitutes a negative resolutory condition entitling the seller to collection or rescission; in a contract to sell the transfer is subject to a positive suspensive condition and the buyer acquires ownership only upon fulfillment of that condition, with the seller’s remedy for nonpayment generally limited to damages. The Court relied on the literal terms of the deed, Civil Code Art. 1370 (literal meaning controls if terms are clear), and Art. 1498 (execution of a public instrument of sale is, as a rule, equivalent to delivery if the deed does not show the contrary).

Court’s Analysis on Perfection and Delivery of Sale

The Court emphasized that the March 10 deed expressly stated the sale was “absolute and irrevocable” and that the payment terms affected only the manner and timing of payment, not the immediate transfer of ownership. Petitioner’s acts — executing a notarized deed, handing over keys, authorizing RSLAI to accept respondent’s payment and release the titles — were treated as unqualified delivery and transfer of ownership. Under Article 1498, the notarized sale equated to delivery in the absence of contrary indication in the deed. Thus, the Court concluded the parties entered into a contract of sale and ownership passed to respondent upon execution and delivery.

Effect of Petitioner’s Interference with the Condition (Article 1186)

The Court addressed the alternative argument that the sale was subject to a suspensive condition (RSLAI’s approval of assumption). Even assuming the agreement was conditional, the Court found petitioner had prevented fulfillment of that condition by secretly paying the mortgage and retrieving the titles without notifying respondent. Pursuant to Article 1186 of the Civil Code, a condition is deemed fulfilled when the obligor voluntarily prevents its fulfillment. Therefore, petitioner’s conduct rendered the condition satisfied by operation of law, and the sale’s perfection to respondent stood.

Double Sale Doctrine and Article 1544

Given that petitioner sold the same property twice, the Court treated the case as a double sale governed by Article 1544. That provision allocates ownership among competing vendees according to good faith and priority of either registration (for immovables) or possession if no registration exists. The provision applies only to purchasers in good faith; a purchaser in bad faith is disqualified.

Good Faith of the Purchasers: Respondent vs. Viloria

The Court found respondent to be a purchaser in good faith: she knew only of the RSLAI mortgage (which she agreed to assume), notified RSLAI and undertook requisite steps for assumption, and took possession by receiving keys and making improvements. Petitioner’s clandestine repayment and re

Case Syllabus (G.R. No. 206310-11)

Citation and Court

Reported at 625 Phil. 221, Third Division, G.R. No. 170405, decision dated February 02, 2010.
Decision authored by Justice Corona. Concurring: Carpio*, Velasco, Jr., Nachura, and Peralta, JJ. (Per Special Order No. 818 dated January 18, 2010 as to Carpio, J.).
The Court of Appeals was impleaded as respondent but was excluded pursuant to Section 4, Rule 45 of the Rules of Court.

Parties and Procedural Posture

Petitioner: Raymundo S. de Leon.
Respondent: Benita T. Ong.
Original complaint docketed as Civil Case No. 93-2739 filed in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74.
RTC rendered decision dated August 27, 1999 (Judge Francisco A. Querubin) dismissing respondent’s complaint and awarding damages to petitioner.
Respondent appealed to the Court of Appeals, docketed as CA-G.R. CV No. 59748.
Court of Appeals rendered decision dated July 22, 2005 (Authored by Associate Justice Eugenio S. Labitoria; concurred by Associate Justices Eliezer R. delos Santos and Arturo D. Brion), reversing the RTC in part, upholding sale to respondent and nullifying sale to Viloria, with monetary adjustments.
Petitioner filed for reconsideration with the CA; reconsideration denied in resolution dated November 11, 2005.
Petition for review under Rule 45 of the Rules of Court brought to the Supreme Court; sole issue framed as whether the parties entered into a contract of sale or a contract to sell.

Properties and Encumbrance

Three parcels of land with improvements located in Antipolo, Rizal, covered by Transfer Certificate of Title Nos. 226469, 226470 and 226471, registered in the name of petitioner.
The properties were mortgaged to Real Savings and Loan Association, Inc. (RSLAI), Cainta, Rizal.

Primary Instrument: March 10, 1993 Deed of Absolute Sale with Assumption of Mortgage

The parties executed a notarized deed described in the record as a deed of absolute sale with assumption of mortgage, dated March 10, 1993.
The deed recited sale “in a manner absolute and irrevocable” for the total consideration of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million), Philippine currency.
Stipulated manner of payment in the deed:
- Respondent to pay petitioner P415,500 in cash upon execution of the deed (partial payment).
- Respondent to assume and pay the outstanding loan to RSLAI of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500), the balance payable directly to RSLAI on behalf of petitioner, “within a reasonable time.”
The deed contained an express provision that upon full payment of the P415,500 by respondent, petitioner would execute and sign a deed of assumption of mortgage in favor of respondent “without any further cost whatsoever.”
The records reflect a marked discrepancy between the total amount recited (P1.1 million) and the sum of the payments specified (P415,500 + P684,500 = P1,099,500).
The records further reveal petitioner’s outstanding obligation to RSLAI amounted to P715,000 as of April 1, 1993, a figure appearing in the case record distinct from the P684,500 stated in the deed.

Facts Relevant to Possession, Performance and Subsequent Acts

Pursuant to the deed:
- Respondent gave petitioner P415,500 as partial payment.
- Petitioner handed respondent the keys to the properties.
- Petitioner wrote a letter to RSLAI informing it of the sale and authorizing RSLAI to accept payment from respondent and to release the certificates of title.
Respondent undertook repairs and improvements on the properties: cleaning and landscaping; painting and repair of the house built thereon.
Respondent informed RSLAI of her agreement with petitioner and her intention to assume petitioner’s outstanding loan; RSLAI required respondent to undergo credit investigation.
Respondent later learned that petitioner again sold the same properties to a third party, Leona Viloria, after March 10, 1993, and changed the locks, rendering the keys he had given respondent useless.
When respondent inquired at RSLAI about the credit investigation, she was informed that petitioner had already paid the amount due and had taken back the certificates of title.
Respondent’s persistent attempts to contact petitioner proved futile, prompting the filing of the complaint on June 18, 1993.

Claims and Counterclaims

Respondent’s complaint (RTC): For specific performance, declaration of nullity of the second sale to Viloria, and damages, alleging that petitioner, having previously sold the properties to her on March 10, 1993, no longer had the right to sell them to Viloria and that petitioner fraudulently deprived her of the properties.
Petitioner’s defense: Argued that the transaction was subject to a condition (RSLAI approval of the assumption of mortgage) and that the parties entered into a contract to sell rather than a perfected sale; since respondent applied for a loan and RSLAI did not approve the assumption, the condition did not arise and the sale was not perfected. Petitioner sought dismissal of the complaint and counterclaimed for damages, alleging respondent filed the complaint in bad faith.
RTC finding: Because respondent was a licensed real estate broker and knew validity of sale was subject to condition (RSLAI approval), the RTC treated the deed as a contract to sell. Because RSLAI did not permit respondent to assume petitioner’s obligation, the sale was never perfected. RTC dismissed the complaint for lack of cause of action and ordered respondent to pay petitioner P100,000 moral damages, P20,000 attorney’s fees, and costs of suit.

Court of Appeals Decision (July 22, 2005)

The CA concluded that the March 10, 1993 contract did not i