G.R. No. 193787 (April 7, 2014)
Topics: Action for reconveyance; Contract to sell
Summary:
Beatriz dela Cruz Roque and Jose C. Roque signed a Real estate conditional sale deed from 1977 covering a 1,231 square meter portion of Lot 18089 (the subject portion) for P30,775.00. Fructuoso Sabug, Jr., a former treasurer for the National Council of Churches in the Philippines (NCCP), submitted an application for a free patent on Lot 18088 in 1991. Sps Roque filed a complaint for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure, and certificate of sale along with damages against Aguado, Sabug, Jr., NCCP, Land Bank, and Sheriff Cecilio U Pulan.
An action for reconveyance seeks the transfer of property which was wrongfully or erroneously registered in another person’s name to its rightful owner. The Court concludes that the 1977 Deed of Conditional Sale between Sps Roque and Rivero, et al. has the characteristics of a contract to sell rather than one of sale. The Court notes that Sps. Roque did not even take any active steps to protect their claim over the disputed portion. This remains evident from the circumstances appearing on record. Sps Roque’s reconveyance action should be dismissed without affecting their ability to pursue damages against the vendors.
Doctrines:
The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or erroneously registered in another person’s name to its rightful owner or to one with a better right. Thus, it is incumbent upon the aggrieved party to show that he has a legal claim on the property superior to that of the registered owner and that the property has not yet passed to the hands of an innocent purchaser for value.
Contract to sell is a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the subject property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such as, the full payment of the purchase price.
Facts:
The petitioners, Beatriz dela Cruz Roque and Jose C. Roque (Sps. Roque) and the original proprietors of Lot 18089 Rivero, et al., which was then unregistered, signed a Real estate conditional sale deed from 1977 covering a 1,231 square meter portion of Lot 18089 (the subject portion) for P30,775.00 in payment.
The two sides concurred that Sps. When signing the contract, Roque must pay a deposit of P15,387.50. The final balance of the purchase price is due when Lot 18089 is registered, the subject section is segregated, and a separate title is issued in their names. After the actions were completed, Sps. Roque took over and made renovations to the area, which they then used as a factory for balut.
Fructuoso Sabug, Jr. (Sabug, Jr.), a former treasurer for the National Council of Churches in the Philippines (NCCP), submitted an application for a free patent on Lot 18089 on August 12, 1991. On October 21, 1991, he received the Original Certificate of Title (OCT) No. M-5955 in his name. On June 24, 1993, Sabug, Jr. and Rivero signed a Joint Affidavit (the “1993 Joint Affidavit”) confirming that Sps is the rightful owner of the subject portion in her individual capacity and on behalf of Rivero, et al. Roque and stated that they were willing to keep the same area separate from Lot 18089 as a whole.
However, on December 8, 1999, Sabug, Jr. sold Lot 18089 to a person named Ma through a Deed of Absolute Sale (1999 Deed of Absolute Sale). OCT No. was canceled as a result of Pamela P. Aguado (Aguado) being sued for P2,500,000.00. issuing of Transfer Certificate of Title (TCT) No. M-5955 and M-96692 in her name, dated December 17, 1999.
The Land Bank of the Philippines (Land Bank) subsequently granted Aguado a P8,000,000.00 loan, which was backed by a mortgage over Lot 18089. Land Bank started extra-judicial foreclosure proceedings after she didn’t fulfill her loan requirement, and eventually made the highest bid at the auction sale. Land Bank consolidated its ownership when Aguados failed to redeem the subject property, and TCT No. M-115895 was issued in its name on July 21, 2003.
Sps Roque filed a complaint for reconveyance, annulment of sale, deed of real estate mortgage, foreclosure, and certificate of sale along with damages against Aguado, Sabug, Jr., NCCP, Land Bank, the Register of Deeds of Morong, Rizal, and Sheriff Cecilio U Pulan before the RTC on June 16, 2003, docketed as Civil Case No. 03-022. Sps Roque sought to be recognized as the rightful owners.
In their defense, NCCP and Sabug, Jr. denied having any knowledge of the 1977 Deed of Conditional Sale, which reportedly transferred the relevant area to Sps Roque.
Aguado asserted the defense of an innocent purchaser for value on her part because she claimed to have acquired her title (through the 1999 Deed of Absolute Sale) from Sabug, Jr., the registered owner in OCT No M-5955, covering Lot 18089, whose certificate of title was clear at the time of the sale of any liens and/or encumbrances. Additionally, she asserted that Sps Roques’ cause of action had already run its course because their complaint wasn’t filed until April 21, 2003, which is four years after Sabug, Jr. ‘s name was given to OCT No. M-5955 on December 17, 1999.
Land Bank, on the other hand, asserted that it was unaware of Sps. Regarding Roques’ claim in relation to the relevant portion, it should be noted that at the time the loan was obtained, Lot 18089 in its entirety was registered in Aguados’ name, and her certificate of ownership did not list any liens or other encumbrances.
Issue:
Whether Sps. Roque is the rightful owner of the subject property hence can claim action for reconveyance.
Ruling:
The essence of an action for reconveyance is to seek the transfer of the property which was wrongfully or erroneously registered in another person’s name to its rightful owner or to one with a better right. Thus, it is incumbent upon the aggrieved party to show that he has a legal claim on the property superior to that of the registered owner and that the property has not yet passed to the hands of an innocent purchaser for value.
According to Sps Roque, the parcel covered by the 1977 Deed of Conditional Sale between them and Rivero, et al. was inadvertently included in the certificates of title for Lot 18089 and must, therefore, be separated from it and their ownership of it must be established.
In light of the 1977 Deed of Conditional Sale’s provisions, the Court determines that the stipulation previously emphasized demonstrates that, in contrast to Sps Roques’s assumption, the document actually has the characteristics of a contract to sell rather than one of sale.
It has been consistently ruled in this case that even if the parties’ agreement is referred to as a “Deed of Conditional Sale,” as it is in this instance, the contract is only a contract to sell when the seller agrees to execute a deed of absolute sale upon the buyer’s completion of the payment of the purchase price.
This treatment stems from the legal characterization of a contract to sell, that is, a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the subject property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, such as, the full payment of the purchase price. Elsewise stated, in a contract to sell, ownership is retained by the vendor and is not to pass to the vendee until full payment of the purchase price.
There is no question that Sps. Roque still owes the last payment of the purchasing price. As a result, it is impossible to determine whether the requirement that would have required the parties to enter into and consequently perfect a contract of sale in order to properly transfer the ownership of the relevant section from the sellers (Rivero et al.) to the buyers (Sps. Roque) has been met. Therefore, the latter cannot properly assert ownership over even if they had paid the original payment and even taken ownership of the subject component.
The Court further notes that Sps. Roque did not even take any active steps to protect their claim over the disputed portion. This remains evident from the following circumstances appearing on record: (a) the 1977 Deed of Conditional Sale was never registered; (b) they did not seek the actual/physical segregation of the disputed portion despite their knowledge of the fact that, as early as 1993, the entire Lot 18089 was registered in Sabug, Jr.s name under OCT No. M-5955; and (c) while they signified their willingness to pay the balance of the purchase price, Sps. Roque neither compelled Rivero et al., and/or Sabug, Jr. to accept the same nor did they consign any amount to the court, the proper application of which would have effectively fulfilled their obligation to pay the purchase price.
Instead, Sps Roque did not file a reconveyance action until 2003, 26 years after the execution of the 1977 Deed of Conditional Sale, and only after Lot 18089 had been purchased by Land Bank at the foreclosure sale and the title thereto had been consolidated in Sps Roque’s name.
In light of the aforementioned, Sabug, Jr., who was granted free patent ownership of Lot 18089, was able to legally transmit the entire property to Aguado, who then mortgaged it to Land Bank.
Overall, Sps Roque’s reconveyance action should be dismissed without affecting their ability to pursue damages against the vendors, namely Rivero et al., because they were unable to prove any superior right over the subject section as against the registered owner of Lot 18089, i.e., Land Bank.