VOL.

449, JANUARY 21, 2005 99

San Lorenzo Development Corporation vs. Court of Appeals
*
G.R. No. 124242. January 21, 2005.

SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, PABLO S.

BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA LU, respondents.

Civil Law; Contracts; Contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.—Contracts, in general, are perfected by mere consent, which is manifested
by the meeting of the offer and the acceptance upon the thing which are to constitute the contract. The offer must be certain
and the acceptance absolute. Moreover, contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.

_______________

* SECOND DIVISION.

100

100 SUPREME COURT REPORTS

ANNOTATED

San Lorenzo Development Corporation vs. Court of

Appeals

Same; Same; Distinction between a contract to sell and a contract of sale.—The distinction between a contract to sell
and a contract of sale is quite germane. In a contract of sale, title passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of
the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or
rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being
a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to
convey title from becoming effective.
Same; Same; Being a consensual contract, a sale is perfected by mere consent and from that moment, the parties may
reciprocally demand performance; Essential elements of a contract of sale.—Sale, being a consensual contract, is perfected
by mere consent and from that moment, the parties may reciprocally demand performance. The essential elements of a
contract of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership in exchange for the price; (2) object
certain which is the subject matter of the contract; (3) cause of the obligation which is established.
Same; Same; Perfection of a contract of sale should not, however, be confused with its consummation; Sale by itself
does not transfer or affect ownership; the most that sale does is to create the obligation to transfer ownership.—The
perfection of a contract of sale should not, however, be confused with its consummation. In relation to the acquisition and
transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means by which
dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect dominion or
ownership. Under Article 712 of the Civil Code, “ownership and other real rights over property are acquired and transmitted
by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition.” Contracts only
constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing
the same. Therefore, sale by itself does not transfer or affect ownership; the most that sale does is to create the obligation to
transfer ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership.
 101

VOL. 449, JANUARY 21, 2005 101

San Lorenzo Development Corporation vs. Court of

Appeals

Same; Same; The word “delivered” should not be taken restrictively to mean transfer of actual physical possession of
the property; The law recognizes two principal modes of delivery, to wit: (1) actual delivery; and (2) legal or constructive
delivery.—Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Article 1497 to 1501. The word “delivered” should not be taken restrictively
to mean transfer of actual physical possession of the property. The law recognizes two principal modes of delivery, to wit: (1)
actual delivery; and (2) legal or constructive delivery.
Same; Same; Double Sales; When the thing sold twice is an immovable, the one who acquires it and first records it in
the Registry of Property, both made in good faith, shall be deemed the owner.—The principle of primus tempore, potior
jure (first in time, stronger in right) gains greater significance in case of double sale of immovable property. When the thing
sold twice is an immovable, the one who acquires it and first records it in the Registry of Property, both made in good faith,
shall be deemed the owner. Verily, the act of registration must be coupled with good faith—that is, the registrant must have
no knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should have put him
upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.
Same; Same; Same; Definition of a purchaser in good faith.—A purchaser in good faith is one who buys property of
another without notice that some other person has a right to, or interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of the claim or interest of some other person in the property.
Following the foregoing definition, we rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in
the records that it had knowledge of the prior transaction in favor of Babasanta.
Same; Same; Same; If a vendee in a double sale registers the sale after he has acquired knowledge of a previous sale,
the registration constitutes a registration in bad faith and does not confer upon him any right.—Assuming ex gratia
argumenti that SLDC’s registration of the sale had been tainted by the prior notice of lis pendens and assuming further for the
same nonce that this is a case of double sale, still Babasanta’s claim could not prevail over that of SLDC’s. In

102

102 SUPREME COURT REPORTS

ANNOTATED

San Lorenzo Development Corporation vs. Court of

Appeals

Abarquez v. Court of Appeals, this Court had the occasion to rule that if a vendee in a double sale registers the sale after
he has acquired knowledge of a previous sale, the registration constitutes a registration in bad faith and does not confer upon
him any right. If the registration is done in bad faith, it is as if there is no registration at all, and the buyer who has taken
possession first of the property in good faith shall be preferred.
Same; Same; Same; Article 1544 does not apply to a case where there was a sale to one party of the land itself while the
other contract was a mere promise to sell the land or at most an actual assignment of the right to repurchase the same land.
—At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this
decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell.
In Dichoso v. Roxas, we had the occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the
right to repurchase the same land. Accordingly, there was no double sale of the same land in that case.
PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Enrique M. Belo and Gener Asuncion for petitioner.
Froilan M. Bacungan for respondent P.S. Babasanta.
Pano, Gonzales, Relova & Associates co-counsel for respondent P. Babasanta.

TINGA, J.:

From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla,
(hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No.
T-39022 and TCT No. T-39023 both measuring 15,808 square meters or a total of 3.1616 hectares.
103

VOL. 449, JANUARY 21, 2005 103

San Lorenzo Development Corporation vs. Court of Appeals

On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta,
(hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a
downpayment of fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu
of the same date. Several other payments totaling two hundred thousand pesos (P200,000.00) were made by
Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale
in his favor so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the
spouses about having received information that the spouses sold the same property to another without his
knowledge and consent. He demanded that the second sale be cancelled and that a final deed of sale be issued in
his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the
property to him at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the
balance of the purchase price became due, he requested for a reduction of the price and when she refused,
Babasanta backed out of the sale. Pacita added that she returned the sum of fifty thousand pesos (P50,000.00) to
Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional
1
Trial Court (RTC), Branch 31,
of San Pedro, Laguna, a Complaint for Specific Performance and Damages against his co-respondents herein,
the Spouses Lu. Babasanta alleged that the lands covered by TCT No. T-39022 and T-39023 had been sold to
him by the spouses at fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution of
a final deed of sale in his favor, respondents allegedly refused.

_______________
1 RTC Records, pp. 1-11.

104

104 SUPREME COURT REPORTS ANNOTATED

San Lorenzo Development Corporation vs. Court of Appeals
2
In their Answer, the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total
advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge
and consent of Miguel Lu, had verbally agreed to transform the transaction into a contract to sell the two parcels
of land to Babasanta with the fifty thousand pesos (P50,000.00) to be considered as the downpayment for the
property and the balance to be paid on or before 31 December 1987. Respondents Lu added that as of November
1987, total payments made by Babasanta amounted to only two hundred thousand pesos (P200,000.00) and the
latter allegedly failed to pay the balance of two hundred sixty thousand pesos (P260,000.00) despite repeated
demands. Babasanta had purportedly asked Pacita for a reduction of the price from fifteen pesos (P15.00) to
twelve pesos (P12.00) per square meter and when the Spouses Lu refused to grant Babasanta’s request, the latter
rescinded the contract to sell and declared that the original loan transaction just be carried out in that the spouses
would be indebted to him in the amount of two hundred thousand pesos (P200,000.00). Accordingly, on 6 July
1989, they purchased Interbank Manager’s Check No. 05020269 in the amount of two hundred thousand pesos
(P200,000.00) in the name of Babasanta to show that she was able and willing to pay the balance of her loan
obligation. 3
Babasanta later filed an Amended Complaint dated 17 January 1990 wherein he prayed for the issuance of a
writ of preliminary injunction with temporary restraining order and the inclusion of the Register of Deeds of
Calamba, Laguna as party defendant. He contended that the issuance of a preliminary injunction was necessary
to restrain the transfer or conveyance by the Spouses Lu of the subject property to other persons.

_______________
2 Id., at pp. 30-37.
3 Id., at pp. 73-90.

105

VOL. 449, JANUARY 21, 2005 105

San Lorenzo Development Corporation vs. Court of Appeals
4
The Spouses Lu filed their Opposition to the amended complaint contending that it raised new matters which
seriously affect their
5
substantive rights under the original complaint. However, the trial court in its Order dated
17 January 1990 admitted the amended complaint.
On 19 January
6
1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for
Intervention before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation
because on 3 May 1989, the two parcels7 of land involved, namely Lot 1764-A and 1764-B, had been sold to it in
a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good faith and for value and therefore it
had a better right over the property in litigation. 8
In his Opposition to SLDC’s motion for intervention, respondent Babasanta demurred and argued that the
latter had no legal interest in the case because the two parcels of land involved herein had already been conveyed
to him by the Spouses Lu and hence, the vendors were without legal capacity to transfer or dispose of the two
parcels of land to the in-tervenor.
Meanwhile, the trial court in its Order dated 921 March 1990 allowed SLDC to intervene. SLDC filed
its Complaint-in-Intervention on 19 April 1990. Respondent Babasanta’s motion for the issuance 10
of a
preliminary injunction was likewise granted by the trial court in its Order dated 11 January 1991 conditioned
upon his filing of a bond in the amount of fifty thousand pesos (P50,000.00).

_______________
4 Id., at pp. 104-106.
5 Id., at p. 96.
6 Id., at pp. 98-100.
7 Id., at pp. 116-119.
8 Id., at pp. 120-121.
9 Id., at pp. 162-168.
10 Id., at pp. 287-288.

106
106 SUPREME COURT REPORTS ANNOTATED
San Lorenzo Development Corporation vs. Court of Appeals

SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor
an Option to Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three
hundred sixteen thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase
of the two lots of one million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After
the Spouses Lu received a total amount of six hundred thirty-two thousand three hundred twenty pesos
(P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its favor. SLDC added
that the certificates of title over the property were delivered to it by the spouses clean and free from any adverse
claims and/or notice of lis pendens. SLDC further alleged that it only learned of the filing of the complaint
sometime in the early part of January 1990 which prompted it to file the motion to intervene without delay.
Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to look beyond the titles
submitted to it by the Spouses Lu particularly because Babasanta’s claims were not annotated on the certificates
of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to
SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with
legal interest plus the further sum of fifty thousand pesos (P50,000.00) as and for attorney’s fees. On the
complaint-in-intervention, the trial court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the
notice of lis pendens annotated on the original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not
register the respective sales in their favor, ownership of the property should pertain to the buyer who first
acquired possession of the property. The trial court equated the execution of a public instrument in favor of
SLDC as sufficient delivery of the
107

VOL. 449, JANUARY 21, 2005 107

San Lorenzo Development Corporation vs. Court of Appeals

property to the latter. It concluded that symbolic possession could be considered to have been first transferred to
SLDC and consequently ownership of the property pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial court’s decision to the Court of Appeals alleging in the main that the
trial court erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale
made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court
erred in failing to consider that the contract to sell between them and Babasanta had been novated when the
latter abandoned the verbal contract of sale and declared that the original loan transaction just be carried out. The
Spouses Lu argued that since the properties involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta null and void ab initiofor lack of knowledge and
consent of Miguel Lu. They further averred that the trial court erred in not dismissing the complaint filed by
Babasanta; in awarding damages in his favor and in refusing to grant the11
reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision which set aside the judgment of the trial
court. It declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the
spouses to execute the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of
the purchase price in the amount of two hundred sixty thousand pesos (P260,000.00). The appellate court ruled
that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and void on the ground that SLDC was
a purchaser in bad faith. The Spouses Lu

_______________
 11 Penned by Justice Cesar D. Francisco, concurred in by Justices Eubulo G. Verzola and Oswaldo D. Agcaoili.

108

108 SUPREME COURT REPORTS ANNOTATED

San Lorenzo Development Corporation vs. Court of Appeals

were further ordered to return all payments made by SLDC with legal interest and to pay attorney’s fees to
Babasanta. 12
SLDC and the Spouses Lu filed separate 13
motions for reconsideration with the appellate court. However, in
a Manifestation dated 20 December 1995, the Spouses Lu informed the appellate court that they are no longer
contesting the decision dated 4 October 1995. 14
In its Resolution dated 11 March 1996, the appellate court considered as withdrawn the motion for
reconsideration filed by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court
denied SLDC’s motion for reconsideration on the ground that no new or substantial arguments were raised
therein which would warrant modification or reversal of the court’s decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH
BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF
P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE
ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED
PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE
CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.

_______________
12 CA Rollo, pp. 204-220 for SLDC and pp. 224-230 for Spouses Lu.
13 Id., at p. 251.
14 Id., at pp. 261-262.

109

VOL. 449, JANUARY 21, 2005 109

San Lorenzo Development Corporation vs. Court of Appeals

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT BABASANTA
HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS RIGHTS OR
INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON
THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE TRIAL
15
COURT UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH.

SLDC contended that the appellate court erred in concluding that it had prior notice of Babasanta’s claim over
the property merely on the basis of its having advanced the amount of two hundred thousand pesos
(P200,000.00) to Pacita Lu upon the latter’s representation that she needed the money to pay her obligation to
Babasanta. It argued that it had no reason to suspect that Pacita was not telling the truth that the money would be
used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the amount of two hundred thousand
pesos (P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the purchase price
still due from it and should not be construed as notice of the prior sale of the land to Babasanta. It added that at
no instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.
 Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the
property and asserted its rights as new owner as opposed to Babasanta who has never exercised acts of
ownership. Since the titles bore no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC
argued that it had every reason to rely on the correctness of the certificate of title and it was not obliged to go
beyond the certificate to determine the condition of the property. Invoking the presumption of good faith, it
added

_______________
15 Rollo, pp. 19-20.

110

110 SUPREME COURT REPORTS ANNOTATED

San Lorenzo Development Corporation vs. Court of Appeals

that the burden rests on Babasanta to prove that it was aware of the prior sale to him but the latter failed to do so.
SLDC pointed out that the notice of lis pendens was annotated only on 2 June 1989 long after the sale of the
property to it was consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu informed the Court
that due to financial constraints they have no more16 interest to pursue their rights in the instant case and submit
themselves to the decision of the Court of Appeals.
On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the
property because it failed to comply with the requirement of registration of the sale in good faith. He emphasized
that at the time SLDC registered the sale in its favor on 30 June 1990, there was already a notice of lis
pendensannotated on the titles of the property made as early as 2 June 1989. Hence, petitioner’s registration of
the sale did not confer upon it any right. Babasanta further asserted that petitioner’s bad faith in the acquisition
of the property is evident from the fact that it failed to make necessary inquiry regarding the purpose of the
issuance of the two hundred thousand pesos (P200,000.00) manager’s check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a
better right over the two parcels of land subject of the instant case in view of the successive transactions
executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita
Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00)
17
as partial payment for 3.6 hectares of
farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna. While the receipt signed by Pacita did not
mention the price

_______________
16 Id., at pp. 347-348.
17 RTC Records, p. 9.

111

VOL. 449, JANUARY 21, 2005 111

San Lorenzo Development Corporation vs. Court of Appeals

for which
18
the property was being sold, this deficiency was supplied by Pacita Lu’s letter dated 29 May
1989 wherein she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos
(P15.00) per square meter.
 An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly
leads to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a
contract of sale. 19
Contracts, in general, are perfected by mere consent, which is manifested by the meeting of the offer and the
acceptance20
upon the thing which are to constitute the contract. The offer must be certain and the acceptance
absolute. Moreover, contracts shall be obligatory in whatever21
form they may have been entered into, provided
all the essential requisites for their validity are present.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00)
from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no
stipulation that the seller reserves the ownership of the property until full payment of the price which is a
distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu
never intended to transfer ownership to Babasanta except upon full payment of the purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests
for the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu
allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be
transferred to him until such

_______________
18 Rollo, p. 11.
19 Art. 1315, Civil Code.
20 Art. 1319, Civil Code.
21 Tan v. Lim, 357 Phil. 452; 296 SCRA 455 (1998); Cenido v. Apacionado, 376 Phil. 801; 318 SCRA 688 (1999).

112

112 SUPREME COURT REPORTS ANNOTATED

San Lorenzo Development Corporation vs. Court of Appeals

time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer title, they
could have easily executed the document of sale in its required form simultaneously with their acceptance of the
partial payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a
perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title
passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, 22
by agreement the
ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale,
the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas
in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a
positive suspensive condition and failure of which23
is not a breach but an event that prevents the obligation of the
vendor to convey title from becoming effective.
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase
price. There being an obligation to pay the price, Babasanta should have made the proper tender of payment and
consignation of the price in court as required by law. Mere sending of a letter by the vendee 24expressing the
intention to pay without the accompanying payment is not considered a valid tender of payment. Consignation
of the amounts due in court is essential in order to extinguish Babasanta’s obligation to pay the balance of the
purchase price. Glaringly absent from the records is any indication that Babasanta even attempted to make the
proper consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never
acquired obligatory force.

_______________
22 Ong v. Court of Appeals, 361 Phil. 228; 310 SCRA 1 (1999).
23 Odyssey Park, Inc. v. Court of Appeals, 345 Phil. 475; 280 SCRA 253 (1997).
24 Vda. de Zulueta v. Octaviano, 205 Phil. 247; 121 SCRA 314 (1983).
 113

VOL. 449, JANUARY 21, 2005 113

San Lorenzo Development Corporation vs. Court of Appeals

On the assumption that the transaction between the parties is a contract of sale and not a contract to sell,
Babasanta’s claim of ownership should nevertheless fail. 25
Sale, being a consensual contract,
26
is perfected by mere consent and from that moment, the parties may
reciprocally demand performance. The essential elements of a contract of sale, to wit: (1) consent or meeting of
the minds, that is, to transfer ownership in exchange for the price;
27
(2) object certain which is the subject matter
of the contract; (3) cause of the obligation which is established.
The perfection of a contract of sale should not, however, be confused with its consummation. In relation to
the acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is
the legal means by which dominion or ownership28 is created, transferred or destroyed, but title is only the legal
basis by which to affect dominion or ownership. Under Article 712 of the Civil Code, “ownership and other
real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession,
and in consequence of certain contracts, by tradition.” Contracts only constitute titles or rights
29
to the transfer or
acquisition of ownership, while delivery or tradition is the mode of accomplishing the same. Therefore, sale by
itself does not transfer or affect ownership; the most that sale does

_______________
25 Co v. Court of Appeals, 349 Phil. 745; 286 SCRA 76 (1998); Fule v. Court of Appeals, 350 Phil. 349; 286 SCRA 698 (1998).
26 Xentrex Automotive, Inc. v. Court of Appeals, 353 Phil. 258; 291 SCRA 66(1998).
27 San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 357 Phil. 631; 296 SCRA 631 (1998); Archipelago Management

and Marketing Corporation v. Court of Appeals, 359 Phil. 363; 299 SCRA 43 (1998).
28 VILLANUEVA, PHILIPPINE LAW ON SALES, 1995 Edition, at p. 5.
29 Gonzales v. Rojas, 16 Phil. 51 (1910); Ocejo, Perez and Co. v. International Bank, 37 Phil. 631 (1917-18); Fidelity and Deposit Co. v.

Wilson, 8 Phil. 51 (1907).

114

114 SUPREME COURT REPORTS ANNOTATED

San Lorenzo Development Corporation vs. Court of Appeals

is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually
transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired
30
by the vendee from the moment it
is delivered to him in any of the ways specified in Article 1497 to 1501. The word “delivered” should not be
taken restrictively to mean transfer of actual physical possession of the property. The law recognizes two
principal modes of delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery. 31
Actual delivery consists in placing the thing sold in the control and possession of the vendee. Legal or
constructive delivery, on the other hand,32
may be had through any of the following ways: the execution of a
public instrument evidencing the33sale; symbolical tradition such as the delivery of the keys of the place where
the movable sold is being kept; traditio longa manu or by mere consent or34 agreement if the movable sold
cannot yet be transferred to the possession of the buyer at the 35
time of the sale; traditio brevi manuif the buyer
already had possession of the object even before the sale; and 36traditio constitutum possessorium, where the
seller remains in possession of the property in a different capacity.
Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of
the receipt by Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement
between Babasanta and the Spouses Lu, though valid, was not embodied in a public instrument. Hence, no
constructive delivery of the lands could have been effected. For another, Babasanta had not taken
_______________
30 Art. 1495, Civil Code.
31 Art. 1497, Civil Code.
32 Art. 1498, Civil Code.
33 Art. 1498, par. 2, Civil Code.
34 Art. 1499, Civil Code.
35 Ibid.
36 Art. 1500, Civil Code.

115

VOL. 449, JANUARY 21, 2005 115

San Lorenzo Development Corporation vs. Court of Appeals

possession of the property at any time after the perfection of the sale in his favor or exercised acts of dominion
over it despite his assertions that he was the rightful owner of the lands. Simply stated, there was no delivery to
Babasanta, whether actual or constructive, which is essential to transfer ownership of the property. Thus, even
on the assumption that the perfected contract between the parties was a sale, ownership could not have passed to
Babasanta in the absence of delivery,
37
since in a contract of sale ownership is transferred to the vendee only upon
the delivery of the thing sold.
However, it must be stressed that the juridical relationship between the parties in a double sale is primarily
governed by
Article 1544 which lays down the rules of preference between the two purchasers of the same property. It provides: Art.
1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may
have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it
in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of
double sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first
records it in the Registry of Property, both made in good faith, shall be deemed

_______________
37 Dawson v. Register of Deeds of Quezon City, 356 Phil. 1037; 295 SCRA 733(1998).

116

116 SUPREME COURT REPORTS ANNOTATED

San Lorenzo Development Corporation vs. Court of Appeals
38
the owner. Verily, the act of registration must be coupled with good faith—that is, the registrant must have no
knowledge of the defect or lack of title of his vendor or must not have been aware of facts which should have
put him upon39
such inquiry and investigation as might be necessary to acquaint him with the defects in the title of
his vendor.
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of
Babasanta’s claim. Babasanta, however, strongly argues that the registration of the sale by SLDC was not
sufficient to confer upon the latter any title to the property since the registration was attended by bad faith.
Specifically, he points out that at the time SLDC registered the sale on 30 June 1990, there was already a notice
of lis pendens on the file with the Register of Deeds, the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of
delivery and possession in good faith which admittedly had occurred prior to SLDC’s knowledge of the
transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of
SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of
the agreed purchase price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of
Absolute Sale in favor of SLDC. At the time both deeds were executed, SLDC had no knowledge of the prior
transaction of the Spouses Lu with Babasanta. Simply stated, from the time of execution of the first deed up

_______________
38 Nuguid v. Court of Appeals, G.R. No. 77423, 13 March 1989, 171 SCRA 213; Bautista v. Court of Appeals, G.R. No. 106042, 28
February 1994, 230 SCRA 446.
39 Balatbat v. Court of Appeals, 329 Phil. 858; 261 SCRA 128 (1996).

117

VOL. 449, JANUARY 21, 2005 117

San Lorenzo Development Corporation vs. Court of Appeals

to the moment of transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the consummated sale between SLDC and the
Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that some other person has a
right to, or interest in, such property and pays a full and fair price for the same at the 40
time of such purchase,
or before he has notice of the claim or interest of some other person in the property. Following the foregoing
definition, we rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in the records
that it had knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property to
SLDC, the vendors were still the registered owners of the property and were in fact in possession of the lands.
Time and again, this Court has ruled that a person dealing with the owner of registered land is not bound to go
beyond the certificate of title as he is charged41 with notice of burdens on the property which are noted on the face
of the register or on the certificate of title. In assailing knowledge of the transaction between him and the
Spouses Lu, Babasanta apparently relies on the principle of constructive notice incorporated in Section 52 of the
Property Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration.—Every conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for the
province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering,
filing, or entering.

_______________
40Bautista v. Court of Appeals, supra note 39.
41 Viray v. Court of Appeals, 350 Phil. 107; 286 SCRA 468 (1998); Heirs of Leopoldo Vencilao, Sr. v. Court of Appeals, 351 Phil.
815; 288 SCRA 574 (1998); Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, 353 Phil. 686; 291 SCRA 495 (1998).

118

118 SUPREME COURT REPORTS ANNOTATED

San Lorenzo Development Corporation vs. Court of Appeals
However, the constructive notice operates as such—by theexpress wording of Section 52—from the time of the
registrationof the notice of lis pendens which in this case was effectedonly on 2 June 1989, at which time the
sale in favor of SLDChad long been consummated insofar as the obligation of theSpouses Lu to transfer
ownership over the property to SLDCis concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of
the notice of lis pendenscannot help Babasanta’s position a bit and it is irrelevant to the good or bad 42
faith
characterization of SLDC as a purchaser. A notice of lis pendens, as the Court held in Nataño v. Esteban, serves
as a warning to a prospective purchaser or incumbrancer that the particular property is in litigation; and that he
should keep his hands off the same, unless he intends to gamble on the results of the litigation.” Precisely, in this
case SLDC has intervened in the pending litigation to protect its rights. Obviously, SLDC’s faith in the merit of
its cause has been vindicated with the Court’s present decision which is the ultimate denouement on the
controversy. 43 44
The Court of Appeals has made capital of SLDC’s averment in its Complaint-in-Intervention that at the
instance of Pacita Lu it issued a check for
45
P200,000.00 payable to Babasanta and the confirmatory testimony of
Pacita Lu herself on cross-examination. However, there is nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the Spouses Lu and Babasanta for what they attest to is
that the amount was supposed to pay off the advances made by Babasanta to Pacita Lu. In any event, the incident
took place after the Spouses Lu had already executed the Deed of Absolute Sale with Mortgage

_______________
42 124 Phil. 1067, 1072; 18 SCRA 481 (1966); citation omitted.
43 Rollo, pp. 25-29.
44 RTC Records, p. 165.
45 TSN, September 19, 1991, pp. 11-12, 14-15, 19.

119

VOL. 449, JANUARY 21, 2005 119

San Lorenzo Development Corporation vs. Court of Appeals

in favor of SLDC and therefore, as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDC’s registration of the sale had been tainted by the prior notice of lis
pendens and assuming further for the same nonce that this is a case46 of double sale, still Babasanta’s claim could
not prevail over that of SLDC’s. In Abarquez v. Court of Appeals, this Court had the occasion to rule that if a
vendee in a double sale registers the sale after he has acquired knowledge of a previous sale, the registration
constitutes a registration in bad faith and does not confer upon him any right. If the registration is done in bad
faith, it is as if there is no registration at all, and the buyer who has taken possession first of the property in good
faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee,
Abarquez, registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This
Court awarded the property to the Israels because registration of the property by Abarquez lacked the element of
good faith. While the facts in the instant case substantially differ from that in Abarquez, we would not hesitate to
rule in favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted that delivery
of the property to SLDC was immediately effected after the execution of the deed in its favor, at which time
SLDC had no knowledge at all of the prior transaction by the Spouses Lu in favor of Babasanta.
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property;
there being no priority of such entry, the second is priority of possession; and, in the absence of the two
priorities, the third priority is of the date of title, with good faith as the common critical

_______________
 46 G.R. No. 95843, 2 September 1992, 213 SCRA 415 citing Palanca v. Director of Lands, 43 Phil. 146 (1922); Cagaoan v. Cagaoan, 43
Phil. 554 (1922); Fernandez v. Mercader, 43 Phil. 581 (1922).

120

120 SUPREME COURT REPORTS ANNOTATED

San Lorenzo Development Corporation vs. Court of Appeals

element. Since SLDC acquired possession of the property in good faith in contrast to Babasanta, who neither
registered nor possessed the property at any time, SLDC’s right is definitely superior to that of Babasanta’s.
At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in
this decision, the contract between
47
Babasanta and the Spouses Lu is not a contract of sale but merely a contract
to sell. In Dichoso v. Roxas, we had the occasion to rule that Article 1544 does not apply to a case where there
was a sale to one party of the land itself while the other contract was a mere promise to sell the land or at most
an actual assignment of the right to repurchase the same land. Accordingly, there was no double sale of the same
land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed
from is REVERSED and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro,
Laguna is REINSTATED. No costs.
SO ORDERED.

Puno (Chairman), Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.

Petition granted, judgment reversed and set aside. That of the trial court reinstated.

Note.—Between two purchasers, the one who registered the sale in his favor has a preferred right over the
other who has not registered his title even if the latter is in actual possession of the immovable property. (Liao
vs. Court of Appeals, 323 SCRA 430[2000])

——o0o——

_______________
47 11 Phil. 768 (1908).

121