Case Summary (G.R. No. 177807)
Factual Background
On September 25, 1992, the Church entered into a written contract with Pante (described in the record as a Contract to Sell and to Buy) fixing the purchase price at P11,200.00 with a down payment of P1,120.00 and the balance payable within three years. On June 28, 1994 the Church executed an absolute sale to spouses Nestor and Fidela Rubi covering a 215-square-meter lot that included the 32-square-meter strip previously sold to Pante. After the Rubis erected a concrete fence which impeded Pante’s access along the strip, Pante filed suit seeking annulment of the sale to the Rubis insofar as it included the strip; the Church counterclaimed seeking annulment of its contract with Pante on grounds that its consent was vitiated by Pante’s misrepresentation that he was an actual occupant of the lot.
Procedural History
The Regional Trial Court (RTC), Branch 24, Naga City, dated July 30, 1999, annulled the contract between the Church and Pante on the ground that the Church’s consent was obtained by Pante’s misrepresentation and upheld the sale to the Rubis. The RTC also found Pante’s delay in completing payment (full payment only consigned September 23, 1995) fatal to his claim. The Court of Appeals (CA), in a May 18, 2006 decision, reversed: it characterized the instrument as a contract of sale, held that Pante complied by consigning the balance within the three-year period, and, because neither sale was registered, applied Article 1544 to award ownership to Pante as the first possessor in good faith. The Church filed a Rule 45 petition for review on certiorari to the Supreme Court; the Supreme Court denied the petition and affirmed the CA.
Parties’ Primary Contentions
The Church asserted that Pante fraudulently misrepresented himself as an occupant to induce the Church’s consent, rendering the contract voidable under Article 1390 of the Civil Code. It argued the tribunals should have resolved the issue of fraudulent inducement in its favor and declared the sale null. Pante maintained that he used the strip as a passageway since 1963, that he fulfilled the payment obligation (by consignment), and that the contract was effectively a sale transferring ownership, entitling him to prevail over the later sale to the Rubis.
Legal Issues Presented
- Whether the Church’s consent to the sale to Pante was vitiated by mistake or fraud such that the contract is voidable under Article 1390 and Article 1331 of the Civil Code.
- Whether the instrument is a contract of sale or merely a contract to sell with retention of ownership.
- In the event both sales are valid and unregistered, which purchaser prevails under Article 1544 of the Civil Code.
Supreme Court’s Analysis on Consent and Misrepresentation
The Court reaffirmed that consent is essential to contract formation (Arts. 1318, 1319) and that contracts are voidable when consent is vitiated by mistake, violence, undue influence, or fraud (Art. 1390). However, Article 1331 delimits when mistake invalidates consent: it must refer to the substance of the thing or to conditions which principally moved a party to contract; mistake as to a party’s qualification vitiates consent only if that qualification was the principal cause of the contract. The Court observed that the 2x16-meter strip could not reasonably be regarded as a residence and that the Church’s own documents and conduct (a sketch plan attached to the contract labeling the parcel a “RIGHT OF WAY” bearing Pante’s name, the parish priest’s knowledge, and the Oeconomous’ approval) demonstrated awareness or acquiescence that Pante used the strip as a passageway. The Court concluded that actual occupancy was not the indispensable qualification for sale, that the Church either knew or waived any such requirement, and that there was therefore no deliberate, willful, or fraudulent misrepresentation by Pante that vitiated the Church’s consent.
Imputation of Bad Faith to the Church
The Court emphasized that the Church, having sold the same lot to the Rubis without first obtaining a judicial annulment of the contract with Pante or returning his down payment, manifested conduct inconsistent with a claim of immediate vitiation of consent. Article 1390 treats voidable contracts as binding unless annulled by proper court action; by reselling without rescission, the Church’s conduct gave rise to imputable bad faith which negated its claim for damages and undercut its assertion that its consent was vitiated.
Contract Characterization and Effect of Delay in Payment
The CA characterized the written instrument as a contract of sale rather than a mere contract to sell with reservation of ownership. The Court noted that the instrument contained a right to repurchase, which would have been unnecessary had ownership not already passed to Pante. The Court accepted that Pante consigned the remaining balance within the agreed period (three years) and that consigning the balance satisfied the condition for full payment. Consequently, any alleged delay could not nullify a bona fide contract of sale where ownership had already passed.
Application of the Rule on Double Sales (Arti
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Procedural History
- Petition for review on certiorari filed under Rule 45 of the Rules of Court by the Roman Catholic Church, represented by the Archbishop of Caceres, seeking to set aside decisions of the Court of Appeals (CA) dated May 18, 2006 and its resolution dated August 11, 2006 in CA-G.R.-CV No. 65069.
- The CA reversed the Regional Trial Court (RTC), Naga City, Branch 24, decision dated July 30, 1999 in Civil Case No. 94-3286.
- RTC decision (July 30, 1999) was penned by Judge Corazon A. Tordilla; CA decision (May 18, 2006) was penned by Associate Justice Vicente Q. Roxas with the concurrence of Associate Justices Godardo A. Jacinto and Juan Q. Enriquez, Jr.
- Supreme Court decision authored by Justice Brion, announced April 11, 2012 (G.R. No. 174118); concurring Justices: Carpio (Chairperson), Perez, Sereno, and Reyes.
- Costs were imposed against the Roman Catholic Church by the Supreme Court.
Factual Background
- Property: A 32-square meter lot described as Lot 3, Block 2, part of Original Certificate of Title No. 206; dimensions 2 x 16 meters; located in Barangay Dinaga, Canaman, Camarines Sur.
- On September 25, 1992, the Church contracted with respondent Regino Pante for the sale of the 2x16 lot by a Contract to Sell and to Buy; purchase price set at P11,200.00 with down payment P1,120.00 and the balance payable within three years (until September 25, 1995).
- On June 28, 1994, the Church sold a 215-square meter lot to spouses Nestor and Fidela Rubi; that sale included the 32-square meter strip previously sold to Pante.
- After the Rubi sale, the spouses erected a concrete fence over the 32-square meter strip, effectively blocking Pante and his family’s access from their family home to the municipal road.
- Pante instituted an action in the RTC to annul the sale to the spouses Rubi insofar as it included the lot previously sold to him (docketed Civil Case No. 94-3286).
- The Church answered and filed a counterclaim seeking annulment of its contract with Pante, alleging its consent was obtained by fraud: Pante misrepresented that he was an actual occupant when, in truth, he used the strip as a passageway.
- The Church asserted a policy of selling lots only to actual occupants and claimed the spouses Rubi and their predecessors had long occupied the larger 215-square meter lot that included the strip.
- Pre-trial admissions and stipulations included: (a) the lot in question is a 2 x 16 meter strip; (b) the lot was sold to Pante on September 25, 1992; (c) the lot was included in the sale to the spouses Rubi; and (d) Pante expressly manifested and represented to the Church that he had been actually occupying the lot he offered to buy.
- Pante claimed he had used the lot as a passageway with the Church’s permission since 1963, placed electric connections and water pipes on the lot even before purchase, and continued to use the lot as passageway after the 1992 sale until blocked by the Rubis’ fence in 1994.
- The contract between the Church and Pante included an attached sketch plan labeled “RIGHT OF WAY” with “Mr. Regino Pante” written under it; Pante testified the sketch was from the Archbishop’s Palace, and neither the Church nor the Rubis contradicted this.
- Sales of Church lots were made after conferences with occupants; the parish priest (Fr. Marcaida) was apparently aware that Pante was not an actual occupant but allowed the sale subject to the Archdiocese’s Oeconomous approval; Fr. Ragay (Oeconomous) approved the sale.
RTC Ruling (July 30, 1999)
- RTC found the Church’s consent to the sale to Pante was secured through Pante’s misrepresentation that he was an actual occupant of the 32-square meter lot; in truth, he used it as a passageway.
- The Church’s policy to sell only to actual occupants rendered Pante’s representation material; consent was vitiated by mistake/fraud under Article 1390 of the Civil Code.
- RTC annulled the contract between the Church and Pante pursuant to Article 1390.
- RTC noted full payment of the purchase price was made only on September 23, 1995, when Pante consigned the balance of P10,905.00 with the RTC after the Church refused the tendered amount; the three-year delay in completing payment was considered fatal to Pante’s claim and ground for upholding the sale to the spouses Rubi.
- RTC ordered the return of the down payment P1,120.00 to Pante with 12% per annum interest and allowed Pante to withdraw his consigned deposit after finality of the decision.
Court of Appeals Ruling (May 18, 2006; Aug 11, 2006 Resolution)
- The CA granted Pante’s appeal, reversing the RTC.
- CA characterized the contract between Pante and the Church as a contract of sale, noting the contract contained no express reservation of ownership until full payment and that the cash-conversion features (e.g., right to repurchase) are unnecessary if ownership had not been transferred.
- Even if characterized as a contract to sell, the CA held Pante fulfilled the condition precedent by consigning the balance within the three-year period agreed upon; thus, Pante fully complied upon full payment.
- Applying Article 1544 on double sales, the CA found neither sale to Pante nor sale to the Rubis was registered; since the property is immovable and unregis