Winifreda Ursal vs Court of Appeals, et al

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14 October 2005,  473 SCRA 52

Contract to Sell vs Contract of Sale

In January 1985, Ursal and spouses Monesets entered into a “Contract to Sell Lot & House”. The amount agreed upon was P130,000.00. Ursal is to pay P50k as down payment and will continue to pay P3k monthly starting the next month until the balance is paid off. After 6 months, Ursal stopped paying the Monesets for the latter failed to give her the transfer of certificate title.

In November 1985, the Monesets executed an absolute deed of sale w/ one Dr. Canora. In September 1986, the Monesets mortgaged the same property to the Rural Bank of Larena for P100k. The Monesets failed to pay the P100k hence the bank filed for foreclosure.

Trial ensued and the RTC ruled in favor of Ursal. The trial court ruled that there was fraud on the part of the Monesets for executing multiple sales contracts. That the bank is not liable for fraud but preference to redeem should be given to Ursal. The Monesets are ordered to reimburse Ursal plus to pay damages and fees. Ursal was not satisfied as she believed that the bank was also at fault.

ISSUE: Whether or not the Contract to Sell vested ownership in Ursal.

HELD: No. There should be no special preference granted to Ursal in redeeming the property. What she had with the Monesets was contract to sell in which case ownership was not transferred to her due the suspensive condition of full payment. Further, the property was sold to other properties already.

A 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 said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

In such contract, the prospective seller expressly reserves the transfer of title to the prospective buyer, until the happening of an event, which in this case is the full payment of the purchase price.  What the seller agrees or obligates himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him.  Stated differently, the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer.

Since the contract in this case is a contract to sell, the ownership of the property remained with the Monesets even after petitioner has paid the down payment and took possession of the property.

 

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NOTES

 

What is a conditional contract of sale?

The fulfillment of the suspensive condition, which is the full payment of the purchase price, will not automatically transfer ownership to the buyer although the property may have been previously delivered to him.  The prospective  vendor  still has  to  convey  title to  the prospective buyer by entering into a contract of absolute sale.   While in a conditional contract of sale, the fulfillment of the suspensive condition renders the sale absolute and affects the seller’s title thereto such that if there was previous delivery of the property, the seller’s ownership or title to the property is automatically transferred to the buyer.

 

Read full text here.

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