Alice agreed to sell a parcel of land with an area of 500 square meters registered in her name and covered by TCT No. 12345 in favor of Bernadette for the amount of ₱900,000.00. Their agreement dated October 15, 2015 reads as follows:
I, Bernadette, agree to buy the lot owned by Alice covered by TCT No. 12345 for the amount of ₱900,000.00 subject to the following schedule of payment:
Upon signing of agreement – ₱100,000.00
November 15, 2015 – ₱200,000.00
December 15, 2015 – ₱200,000.00
January 15, 2016 – ₱200,000.00
February 15, 2016 – ₱200,000.00
Title to the property shall be transferred upon full payment of ₱900,000.00 on or before February 15, 2016.
After making the initial payment of ₱100,000.00 on October 15, 2015, and the second instalment of ₱200,000.00 on November 15, 2015, Bernadette defaulted despite repeated demands from Alice.
In December 2016, Bernadette offered to pay her balance but Alice refused and told her that the land was no longer for sale. Due to the refusal, Bernadette caused the annotation of her adverse claim upon TCT No. 12345 on December 19, 2016. Later on, Bernadette discovered that Alice had sold the property to Chona on February 5, 2016, and that TCT No. 12345 had been cancelled and another one issued (TCT No. 67891) in favor of Chona as the new owner.
Bernadette sued Alice and Chona for specific performance, annulment of sale and cancellation of TCT No. 67891. Bernadette insisted that she had entered into a contract of sale with Alice; and that because Alice had engaged in double sale, TCT No. 67891 should be cancelled and another title be issued in Bernadette’s favor.
(a) Did Alice and Bernadette enter into a contract of sale of the lot covered by TCT No. 12345? Explain your answer. (4%)
(b)Did Alice engage in double sale of the property? Explain your answer. (4%)
Suggested answer only. Not an official answer and not legal advice.
(a) No, Alice and Bernadette entered into a contract to sell, not a contract of sale. (b) No, Alice did not engage in a double sale. Under jurisprudence, a contract to sell is one where ownership is reserved in the vendor
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Quick check
What distinguishes a contract to sell from a contract of sale under Philippine civil law?
A contract to sell reserves title in the vendor until the buyer fulfills the positive suspensive condition of full payment.
Why is Article 1544 of the Civil Code on double sale inapplicable to a contract to sell where the buyer defaults?
Article 1544 requires two or more valid contracts of sale, which does not exist when a contract to sell fails due to non-payment.
What is the legal effect of a buyer defaulting on installment payments in a contract to sell?
In a contract to sell, non-payment of the full price prevents the vendor's obligation to convey title from acquiring binding force.
Why did Alice not engage in a double sale when she sold the land to Chona after Bernadette defaulted?
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Under a contract to sell real property, when does the vendor's obligation to transfer title acquire binding force?
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Learn more about these topics
1. Contract to Sell
Under Philippine civil law, a contract to sell is distinguished from a contract of sale by the reservation of title in the vendor until full payment of the purchase price. In a contract to sell, full payment operates as a positive suspensive condition. Failure to pay the price in full is not a breach, but an event that prevents the vendor's obligation to convey title from acquiring binding force. Title remains with the vendor until the suspensive condition is fulfilled.
2. Double Sale Rules
Under Article 1544 of the Civil Code, the rules on double sale apply exclusively when the same property is validly sold to two or more different vendees by the same vendor. For Article 1544 to apply, there must be two or more valid contracts of sale. Where one contract is merely a contract to sell and the suspensive condition of full payment was never fulfilled, title never passed to the first buyer, rendering Article 1544 inapplicable to a subsequent sale to a third party.
3. Suspensive Condition Effect
In a contract to sell, the buyer's failure to pay the full purchase price prevents the obligation of the seller to execute a final deed of sale from arising. Consequently, if the buyer defaults and fails to complete payment, the contract to sell is rendered ineffective, and the seller is free to alienate the property to another buyer. The second buyer who acquires title under a valid contract of sale is protected, while the defaulting first buyer acquires no real right over the property.