Case Summary (G.R. No. 161318)
Property Titles and Transfers
• Original title (TCT 9697) in Nabus names; mortgaged to PNB.
• February 1977 Conditional Sale covering 1,000 sqm.
• February 1984 TCT T-17718 in names of Julie and Michelle Nabus.
• March 1984 Deed of Absolute Sale to Tolero; cancellation of TCT T-17718; issuance of TCTs T-18650 to T-18653 to Tolero.
Essential Terms of the Conditional-Sale Instrument
The contract stipulated:
- ₱13,000 to PNB on or before February 21, 1977 (part of purchase price).
- Balance of mortgage (~₱17,500) paid by Pacsons to PNB at not less than ₱3,000 per month from March 1977.
- Upon mortgage liquidation, Pacsons to pay the Nabus heirs at least ₱2,000 monthly until total ₱170,000 is paid.
- Vendor to execute transfer documents upon full payment.
- Vendee to cause segregation survey at own expense.
- Vendor to return amounts paid if title is lost in pending litigation.
- Vendor to assist in removing third-party occupants.
Pacsons’ Performance under the Contract
Respondents Pacson paid PNB ₱12,038.86 (February 22, 1977) and ₱20,744.30 (July 17, 1978), fully retiring the mortgage. From March 1977 to January 1984 they made 364 payments directly to the Nabuses totaling ₱112,455.16, leaving an unpaid balance of ₱57,544.84. They took possession, constructed a repair shop, and displayed “No Trespassing” signs.
Extra-Judicial Settlement and Subsequent Sale to Tolero
After Bate Nabus’s death, Julie and Michelle Nabus executed an extrajudicial settlement (August 17, 1978) leading to TCT T-17718 (February 17, 1984). On March 5, 1984, they sold the entire 1,665 sqm to Betty Tolero for ₱200,000 via Deed of Absolute Sale, duly registered. Tolero, advised by counsel, claimed to be a purchaser in good faith.
Trial Court Ruling
The Regional Trial Court (September 30, 1993) held:
- The “Deed of Conditional Sale” was a valid contract of sale, not lease, because receipts bore payment-of-lot labels.
- Pacsons had fully performed enough to demand specific performance under Art. 1191, New Civil Code.
- Tolero was not a buyer in good faith, having actual knowledge of the conditional sale.
- Ordered Tolero to execute an absolute sale in favor of Pacsons upon payment of ₱57,544.84 and to surrender TCTs T-18650 and T-18651; awarded Pacsons moral (₱50,000), exemplary (₱20,000) damages and attorney’s fees (₱10,000).
Court of Appeals Decision
On November 28, 2003, the Court of Appeals affirmed the trial court, deleting only the award of attorney’s fees.
Issues before the Supreme Court
- Whether the Deed of Conditional Sale converted into a contract of lease.
- Whether the instrument was a contract of sale or merely a contract to sell.
- Whether Betty Tolero qualified as a purchaser in good faith.
- Appropriate remedies for the Pacsons if the conditional sale was merely a contract to sell.
Contract of Sale Versus Contract to Sell
Under Art. 1458, New Civil Code, a sale is absolute if title passes upon delivery and conditional if ownership remains with the vendor until fulfillment of a suspensive condition. Jurisprudence (Ramos v. Heruela; Coronel v. CA; Chua v. CA) clarifies that a “contract to sell” reserves title indefinitely until full payment and requires a subsequent absolute-sale deed. A true conditional sale automatically transfers title upon fulfillment of the condition.
Supreme Court’s Findings on the Nature of the Instrument
The instrument expressly provided that title would transfer only after full payment and required the vendor’s execution of transfer documents. This structure rendered it a contract to sell, not a contract of sale. Full payment remained a positive suspensive condition; its non-fulfillment prevented any binding obligation to convey title. Pacsons did not tender the remaining balance formally or seek consignment.
Effect of Suspensive Condition Non-Fulfillment
Because the condition (full payment) neve
Case Syllabus (G.R. No. 161318)
Facts of the Case
- Spouses Bate and Julie Nabus owned a 1,665 sqm parcel in Pico, La Trinidad, Benguet, registered under TCT No. T-9697 and mortgaged for ₱30,000 to Philippine National Bank (PNB).
- On February 19, 1977, they executed a Deed of Conditional Sale covering 1,000 sqm in favor of spouses Joaquin and Julia Pacson for ₱170,000, with staggered payments (₱13,000 to PNB on closing, monthly ₱3,000 to PNB until mortgage liquidated, then monthly ≥₱2,000 to the Nabuses).
- Respondents paid PNB ₱12,038.86 (Feb 22, 1977) and ₱20,744.30 (Jul 17, 1978) to redeem the mortgage, took possession, ousted occupants, and built a trucking-body shop.
- Bate Nabus died Dec 24, 1977; Julie and minor Michelle Nabus executed an extrajudicial settlement (Aug 17, 1978), giving rise to TCT No. T-17718 (Feb 17, 1984).
- From March 1977 to Jan 1984, respondents made 364 payments totaling ₱112,455.16, leaving a balance of ₱57,544.84; payments ranged from ₱10 to ₱15,566.
- In early 1984, inquiries into final payment led respondents to discover that Julie and Michelle Nabus had sold the entire 1,665 sqm to Betty Tolero by Deed of Absolute Sale (Mar 5, 1984), and new titles (T-18650 to T-18653) were issued.
- Tolero padlocked the Pacsons’ shop and displayed “No Trespassing”; respondents filed a complaint for annulment of deeds and titles, damages, and injunctive relief.
Contractual Terms and Payment History
- Deed of Conditional Sale expressly:
• Initial ₱13,000 paid directly to PNB;
• Balance of mortgage (≈₱17,500) at ≥₱3,000/month to PNB;
• Thereafter ≥₱2,000/month to the Nabuses until total ₱170,000 is paid;
• Vendor to execute transfer documents upon full payment;
• Buyer to bear segregation survey expenses;
• Vendor to refund payments if title is lost in pending litigation;
• Vendor to help oust third-party occupant. - Respondents complied with PNB payments, occupied property, and paid varying sums to the Nabuses over nearly seven years.
- Receipts unifo