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ROMULO A. CORONEL v. CA

## FACTS:

The case involves a complaint for specific performance filed by Ramona Patricia Alcaraz and Concepcion D. Alcaraz against Romulo Coronel and other defendants. In January 1985, Ramona agreed to purchase a parcel of land and made a down payment of P50,000. The defendants transferred the title of the property to their names upon receipt of the down payment. However, they sold the property to Catalina Mabanag for a higher price, canceled the contract with Ramona, and deposited the down payment in the bank in trust for her. Ramona and Concepcion filed a complaint for specific performance. The trial court ruled in their favor and ordered the defendants to execute a deed of absolute sale in favor of Ramona, cancel Catalina's title, and deliver possession of the property to Ramona.

The issue in the case is whether the document entitled "Receipt of Down Payment" represented a perfected contract of sale or an executory contract to sell. The trial court and Court of Appeals held that it was a perfected contract of sale, while the petitioners argued that it was an executory contract to sell due to the absence of Ramona Alcaraz. The case was brought before the Supreme Court for final adjudication.

The Supreme Court explains that a contract to sell is a bilateral contract where ownership of the property is reserved by the seller until the full payment of the purchase price. The seller only becomes obligated to sell when the suspensive condition of full payment is fulfilled. On the other hand, a conditional contract of sale is one where the seller sells the property and reserves title to it until the fulfillment of a suspensive condition. If the condition is not fulfilled, the contract is completely abated, but if it is fulfilled, ownership automatically transfers to the buyer. The Court also clarifies that if a third person buys the property in a contract to sell, despite the fulfillment of the suspensive condition, it cannot be considered a double sale, and the buyer in such a situation is not a buyer in bad faith. However, in a conditional contract of sale, if a second buyer acquires the property with knowledge of the defect in the seller's title, or if the second buyer should have been aware of the defect, the first buyer's title cannot be defeated.

## ISSUES:

  1. Whether the "Receipt of Down Payment" signifies a perfected contract of sale or merely an executory contract to sell subject to certain suspensive conditions.

  2. Whether the petitioners have validly rescinded the contract of sale due to the alleged breach by private respondent Ramona P. Alcaraz.

  3. Whether the transfer of the property to a third party (Catalina B. Mabanag) can be upheld over the claim of Ramona P. Alcaraz.

## RULING:

  1. The Supreme Court determined that the "Receipt of Down Payment" represented a perfected contract of sale subject to a suspensive condition—specifically, the transfer of the property title into the names of the Coronels (petitioners) from their deceased father. The condition being fulfilled (the transfer of the title to the Coronels), the contract became obligatory, requiring the Coronels to execute the deed of absolute sale upon receipt of full payment from Ramona P. Alcaraz.

  2. The Court ruled that there was no valid rescission of the contract by the petitioners. The Court found insufficient evidence to support the petitioners' claim that Ramona's departure to the USA and absence of further contact constituted a valid reason for rescission. Notably, the petitioners failed to prove that they had ever made the title available to Ramona or demanded the balance payment under conditions ready for her to comply with.

  3. Regarding the subsequent sale to Catalina B. Mabanag, the Court applied Article 1544 of the Civil Code, which addresses double sales. Since the sale to Catalina B. Mabanag was registered after a notice of lis pendens had been annotated on the title due to the existing dispute with Ramona P. Alcaraz, Catalina could not be considered a buyer in good faith. Consequently, the prior sale to Ramona P. Alcaraz holds.

## PRINCIPLES:

  • A perfected contract of sale is subject to the Civil Code provisions, particularly where a suspensive condition exists that affects the obligation of parties.

  • Rescission of a contract requires a substantial breach, and any claim of rescission must be adequately supported by evidence.

  • In cases of double sales, the ownership of immovable property will belong to the buyer who registered the property first in good faith or, in absence of registration, the one who possesses in good faith or, if none, the one with the oldest title provided there is good faith. Registration in bad faith does not confer ownership or rights over the property against the interest of a party with a prior perfected and valid claim.