Uraca v. CA

Facts:

The Velezes were the owners of the lot and commercial building in Cebu while the petitioners were lessees of the said building. The Velezes through Ting wrote a letter offering to sell the subject property for P1,050,000.00 and at the same time requesting the petitioners to reply in three days. Such sale was accepted.

Uraca went to see Ting about the offer to sell but she was told by the latter that the price was P1,400,000.00 in cash or managers check and not P1,050,000.00 as erroneously stated in their letter-offer after some haggling. Emilia Uraca agreed to the price of P1,400,000.00 but counter- proposed that payment be paid in installments with a down payment of P1,000,000.00 and the balance of P400,000 to be paid in 30 days. Carmen Velez Ting did not accept the said counter offer of Emilia Uraca although this fact is disputed by Uraca. However, no payment was made.

The Velezes sold the lot and commercial building to the Avenue Group for P1,050,000.00 net of taxes, registration fees, and expenses of the sale. At the time the Avenue Group purchased the subject property on July 13, 1985 from the Velezes, the certificate of title of the said property was clean and free of any annotation of adverse claims or lis pendens.

Issues:

I.                              Whether or not the contract of sale was perfected; and

II.                           Whether or not the CA erred in not ruling that petitioners have better rights to buy and own the Velezes property for registering their notice of lis pendens ahead of the Avenue Groups registration of their deeds of sale.

Held:

Novation is never presumed; it must be sufficiently established that a valid new agreement or obligation has extinguished or changed an existing one. The registration of a later sale must be done in good faith to entitle the registrant to priority in ownership over the vendee in an earlier sale.

On the first issue: no extinctive novation.

The lynchpin of the assailed Decision is the public respondents conclusion that the sale of the real property in controversy. The Court noted that the petitioners accepted in writing and without qualification the Velezes written offer to sell at P1,050,000.00 within the three-day period stipulated therein. Hence, from the moment of acceptance on July 10, 1985, a contract of sale was perfected since undisputedly the contractual elements of consent, object certain and cause concurred.

Article 1600 of the Civil Code provides that (s)ales are extinguished by the same causes as all other obligations, x x x. Article 1231 of the same Code states that novation is one of the ways to wipe out an obligation. Extinctive novation requires: (1) the existence of a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old obligation or contract; and (4) the validity of the new one.

On the second issue: double sale of an immovable.

Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property.Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that (t)he governing principle is primus tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyers rights except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout.