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SPRING HOMES SUBDIVISION CO. v. S

FACTS:

Spouses Pedro L. Lumbres and Rebecca T. Roaring (Spouses Lumbres) entered into a Joint Venture Agreement with Spring Homes Subdivision Co., Inc. for the development of several parcels of land. The Spouses Lumbres transferred the titles to the parcels of land in the name of Spring Homes. On January 9, 1995, Spring Homes entered into a Contract to Sell with Spouses Pedro Tablada, Jr. and Zenaida Tablada (Spouses Tablada) for the sale of a parcel of land. Unaware of a pending lawsuit, the Spouses Tablada began constructing their house on the subject lot and obtained a Certificate of Occupancy. On January 16, 1996, Spring Homes executed a Deed of Absolute Sale in favor of the Spouses Tablada, who paid a higher amount than the purchase price.

The Spouses Tablada discovered that the subject property was mortgaged as security for a loan. The Spouses Lumbres and Spring Homes entered into a Compromise Agreement, approved by the RTC, wherein Spring Homes conveyed the subject property to the Spouses Lumbres. The Spouses Lumbres started collecting deficiency payments from the subdivision lot buyers and cancelled the Contract to Sell previously executed by Spring Homes in favor of the Spouses Tablada. The Spouses Tablada filed a complaint for Nullification of Title, Reconveyance and Damages against Spring Homes and the Spouses Lumbres. The Spouses Lumbres filed a Motion to Dismiss which was denied by the trial court.

The case involves a dispute between the Spouses Tablada and the Spouses Lumbres over a property. The Spouses Tablada claimed that they bought the property from Spring Homes through a Deed of Absolute Sale. However, the Spouses Lumbres disputed this claim and registered their own title over the property. The Municipal Trial Court in Cities (MTCC) dismissed the ejectment suit filed by the Spouses Lumbres, but the decision was reversed by the Regional Trial Court (RTC) and affirmed by the Court of Appeals (CA). In a separate case for nullification and reconveyance of title filed by the Spouses Tablada, it was discovered that Spring Homes' certificate of registration was revoked. The RTC dismissed the case for lack of jurisdiction over Spring Homes, ruling that the corporation was an indispensable party. However, the CA reversed the decision, finding that Spring Homes was not an indispensable party and that the trial court may grant the relief sought by the Spouses Lumbres.

This case involves a dispute over a property sold by Spring Homes to the Spouses Tablada. The Court of Appeals (CA) adopted the findings of the Supreme Court in a previous case, Spouses Lumbres v. Spouses Tablada, which held that the purchase price of P409,500.00 included not only the land but also the house to be constructed on it. However, it was proven that the Spouses Tablada used their own money to construct the house, so there was no balance of the purchase price owed to Spring Homes.

The Spouses Lumbres argued that the legal and binding agreement between Spring Homes and the Spouses Tablada was the Contract to Sell, which mentioned a land area of 42 square meters computed at a rate of P6,000.00 per square meter. The CA agreed with the Supreme Court's previous ruling that the 42 square meters referred only to the land area of the house to be constructed. Since the Spouses Lumbres failed to disprove the Spouses Tablada's claim that they funded the construction of the house, there was no balance of the purchase price to begin with. It was only through the Spouses Tablada's own efforts that the house was constructed on the vacant lot they bought from Spring Homes.

The CA also noted that at the time the Spouses Tablada entered into a contract of sale with Spring Homes, the title over the property was already registered in Spring Homes' name. Thus, the Deed of Absolute Sale between Spring Homes and the Spouses Tablada was valid and had sufficient consideration. The CA upheld the ruling that the Spouses Lumbres, as the second buyer, registered their Deed of Absolute Sale in bad faith because they were already informed that the property was previously sold to the Spouses Tablada.

The CA granted the appeal and directed the Register of Deeds to cancel the title of the Spouses Lumbres and issue a new one in the name of the Spouses Tablada. The Spouses Lumbres filed a petition arguing that the trial court lacked jurisdiction over Spring Homes as an indispensable party and that the Spouses Tablada were not purchasers in good faith.

In this case, the issue to be resolved is the validity of the Deed of Absolute Sale between Spring Homes and the Spouses Lumbres, and the need for their joinder as parties is not necessary for the resolution of the said issue.

Now, going to the factual background of the case, the Spouses Tablada are the registered owners of a parcel of land located in Cavite City. They entered into a Deed of Absolute Sale with Spring Homes, Inc., wherein Spring Homes agreed to buy the subject property for P230,000.00. The Spouses Tablada claimed that they executed the said deed in order to obtain a loan from the PAG-IBIG Fund, and that the proceeds of the sale would be used to pay for the amortization of the loan.

Subsequently, the Spouses Tablada executed another Deed of Absolute Sale, this time in favor of the Spouses Lumbres, wherein the latter agreed to buy the subject property for P1,300,000.00. The said sale was allegedly facilitated by a certain Rodriguez who convinced the Spouses Lumbres to buy the property despite the fact that it was still registered in the name of Spring Homes.

The Spouses Tablada filed a complaint for the annulment of the Deed of Absolute Sale between Spring Homes and the Spouses Lumbres, claiming that the said sale was null and void, and that they were never paid the P230,000.00 by Spring Homes. On the other hand, the Spouses Lumbres argued that they were buyers in good faith, as they were unaware of any defect in the title of the subject property, and that they bought it for the full consideration of P1,300,000.00.

The Regional Trial Court (RTC) ruled in favor of the Spouses Tablada, declaring the Deed of Absolute Sale between Spring Homes and the Spouses Lumbres null and void. The RTC held that there was no valuable consideration in the said sale, as the P230,000.00 was not actually paid to the Spouses Tablada. The Spouses Lumbres filed an appeal before the Court of Appeals (CA), but their appeal was denied and the decision of the RTC was affirmed. Hence, the present petition for review on certiorari before the Supreme Court.

ISSUES:

  1. Whether Spring Homes is an indispensable party in the case.

  2. Whether the trial court had jurisdiction to proceed with the case despite the non-summons of Spring Homes.

  3. Whether defendants Andres Evangelista and Bienvenido Mangubat are indispensable parties.

  4. Whether Spring Homes is an indispensable party in the suit.

  5. Whether the Contract to Sell includes the cost of the house to be constructed on the subject lot.

  6. Whether the amount of P409,500 stated in the Contract to Sell is the total selling price.

  7. Whether the first sale to the respondents was valid and had sufficient consideration.

  8. Who between the Spouses Tablada and the Spouses Lumbres properly acquired ownership over the subject property.

RULING:

  1. Spring Homes is not an indispensable party. An indispensable party is someone without whom there can be no final determination of the action. In this case, Spring Homes' presence is not necessary for a complete and equitable determination of the controversy. Their interest in the subject matter is distinct and divisible from the other parties and their absence will not prejudice the judgment. The Spouses Lumbres, as assignees of the subject property, are the indispensable parties.

  2. The trial court had jurisdiction to proceed with the case even without summoning Spring Homes. The trial court's reliance on Uy v. CA, et al. was incorrect as it actually supports the finding that the Spouses Lumbres are the indispensable parties. In Uy v. CA, it was held that the assignee of an interest should have been impleaded in a case involving the subject matter. Therefore, the trial court erred in dismissing the complaint for lack of jurisdiction.

  3. Defendants Andres Evangelista and Bienvenido Mangubat are not indispensable parties as they no longer have any interest in the subject property. Their presence is only necessary to settle all possible issues of the controversy.

  4. Spring Homes is not considered an indispensable party as it has already sold its interests in the subject land and a new title has been issued in the names of the Spouses Lumbres. Its presence is necessary to adjudicate the whole controversy, but its interests are separable and a final decree can be made without affecting it.

  5. Yes, the Contract to Sell includes the cost of the house to be constructed on the subject lot. The Court found that the 42 square meters mentioned in the Contract to Sell and computed at a rate of P6,000 per square meter refer to the cost of the house to be constructed by the respondents on the subject lot through a Pag-Ibig loan. The land area of the house to be constructed was pegged at 42 square meters based on the restrictions in the Contract to Sell. Therefore, the total selling price includes both the price of the lot and the cost of the house.

  6. No, the amount of P409,500 stated in the Contract to Sell is not the total selling price. The Court held that the P409,500 amount actually pertains to the cost of the land area of the lot at 105 square meters priced at P1,500 per square meter, and the cost of the house to be constructed on the land at 42 square meters priced at P6,000 per square meter. Therefore, the Spouses Tablada should only be held liable for the cost of the land area, which is P157,500.

  7. The first sale to the respondents was valid and had sufficient consideration. The petitioners failed to present concrete evidence to prove that the Deeds of Absolute Sale were executed solely for the purpose of obtaining a loan. On the other hand, the respondents presented clear and convincing evidence that they had already paid an amount greater than the actual purchase price for the subject land.

  8. The Spouses Tablada properly acquired ownership over the subject property. The principle of "primus tempore, potior jure" (first in time, stronger in right) applies in case of a double sale of immovable property. The ownership of the property transfers to the person who, in good faith, first recorded it in the Registry of Property, or in the absence of registration, to the person who, in good faith, was first in possession. In this case, the Spouses Lumbres registered the property in their names, but they were in bad faith as they were already aware of the first sale to the Spouses Tablada. Therefore, the Spouses Tablada, who were in possession of the property, properly acquired ownership.

PRINCIPLES:

  • An indispensable party is someone without whom there can be no final determination of the action. Their absence disallows the court from making an effective, complete, or equitable determination of the controversy.

  • A party is not indispensable if their interest in the controversy or subject matter is distinct and divisible from the other parties and their presence will only permit complete relief or avoid multiple litigation.

  • The trial court has jurisdiction to proceed with a case even without summoning an indispensable party if their presence is not necessary for a complete and equitable determination of the controversy.

  • The presence of indispensable parties is necessary in order to settle all possible issues of the controversy. (Sec. 7, Rule 3, Revised Rules of Court)

  • Registered owners of parcels of land whose title is sought to be nullified should be impleaded as indispensable parties. (Doctrine)

  • Contracts are to be interpreted according to the intention of the parties, as manifested by their words, conduct, and surrounding circumstances.

  • It is unjust to require a buyer to pay for the cost of a house when a loan application did not materialize due to the fault of the seller.

  • The terms and conditions of a contract may not explicitly state the inclusion of certain costs, but the typewritten entries in the document can reveal the intentions of the parties.

  • The requirement for ownership transfer in a double sale of immovable property is two-fold: acquisition in good faith and registration in good faith.

  • Knowledge of the first buyer regarding the second sale does not defeat the first buyer's rights, except in cases where the second buyer registers the second sale in good faith ahead of the first buyer's registration.

  • Knowledge of the second buyer regarding the first sale defeats their rights, even if they are the first to register the second sale, as such knowledge taints their prior registration with bad faith.

  • A continuing good faith and innocence or lack of knowledge of the first sale is required for a subsequent sale to ripen into full ownership through prior registration.

  • The moment the buyer is aware that the property has already been sold to another, the buyer is in bad faith.

  • A buyer in bad faith cannot be considered the true and valid owner of the disputed property.