Philippines – Not Once, But Twice.

6 January 2021
 

Buying a property for whatever purposes is supposed to give some measure of security for the buyer, whether it be for investment, for inheritance for passing down to their the next of kin, or for immediate use such as for one’s family home or a small business.
 

But as with all transactions, buying a property is not headache-proof. It is indeed lamentable when the security expected of the sale turns into an insecurity due to legal issues.
 

One of the more common ways a sale of property reaches the courts and ties the party to many years of litigation is the case of double sales.
 

Double sales are governed by Article 1544 of the New Civil Code. Under this Article, if the same personal or movable property is sold to different buyers, the first buyer to take possession of the movable or personal property in good faith.
 

However, if it involves real or immovable property such as a piece of land, ownership of an immovable property which is the subject of a double sale shall be deemed vested and ownership will be transferred:

 

(1) to the buyer acquiring it who in good faith first recorded it in the Registry of Property;

(2) in default thereof, the buyer who in good faith was first in possession; and (3) in default thereof, the buyer who presents the oldest title, provided there is good faith on his/her end.
 

The requirement of the law is two-fold: acquisition in good faith and registration in good faith.
 

Good faith must concur with the registration. If it would be shown that a buyer was in bad faith, the alleged registration they have made amounted to no registration at all. (Rosaroso vs. Soria, G.R. No. 194846, June 19, 2013)
 

Good faith means that registrant must have no knowledge of the defect or lack of title of the seller, 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 seller.
 

This rule on double sales rule likewise makes reference to the familiar principle of primus tempore, potior jure (first in time, stronger in right).
 

Hence, for immovable property, the one who acquires it and first records it in the Registry of Property, both made in good faith, shall be deemed the owner.
 

But before these rules apply, one must check first if there is a double sale in the first place. There is a double sale if the following are met:
 

• There are two or more sales transactions pertaining to exactly the same subject matter
   
• The sales transactions are valid
   
• There are two (or more) buyers at odds over the rightful ownership of the subject matter must, and each represent conflicting interests; and
   
• The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought from the very same seller.
   

Article 1544 only applies to instances of double sales, and not where one contract is some other transaction, such as a contract to sell, even if the latter concurs with a contract of sale over the same realty. For instance, in the 2016 case of Desiderio vs. Manzano (G.R. No. 201883, November 16, 2016),  the Supreme Court ruled that if the contract between parties therein is a contract of sale, then Article 1544 of the Civil Code applies, for there is an apparent case of double sale.
 

However,  if the contract is merely a contract to sell, the propriety of applying Art. 1544 falters.
 

In Desiderio, the contract was a mere contract to sell because the same is conditioned upon full payment of the agreed purchase price.
 

Since petitioners failed to pay the purchase price in full, while the subsequent buyer did and thereafter she was able to register her purchase and obtain a new certificate of title in her name, clearly there is only one sale – and that is, the one in the subsequent buyer’s favor.
 

Since failure to pay the price in full in a contract to sell renders the same ineffective and without force and effect, then there is no prior sale to speak of. There is only one valid sale, hence the rule on double sales under Article 1544 of the Civil Code does not apply.
 

First published on The Daily Tribune.
 

 

For further information, please contact:

 

nilo.divina@divinalaw.com