Atty. De Guzman v. Spouses Santos

 

Atty. De Guzman v. Spouses Santos

G.R. No. 222957

March 29, 2023

 

FACTS:

                Petitioner Rogelio B. De Guzman (De Guzman) owned a house and lot located at Lot 1, Block II, New York Street, Cresdaville II Subdivision, Bangiad, San Juan, Taytay, Rizal (Subject Property). In November 2000, De Guzman accepted the offer of respondents Bartolome and Susan Santos (collectively, spouses Santos) to purchase the Subject Property. They executed a Contract to Sell which stipulated the purchase price of P1,500,000.00. The terms of payment included a down payment of P250,000.00 upon signing of the contract, and succeeding monthly installments of P15,000.00 until full payment. The unpaid balance of the principal would earn interest at the rate of 9% per annum. In return, the spouses Santos were given permission to take immediate possession of the Subject Property and use it as their residence. The spouses Santos paid De Guzman the down payment on November 15, 2000 and moved in. They lived there but did not pay the monthly installments agreed upon. In February 2001, they unilaterally decided to vacate the Subject Property and return to their old residence at Angono, Rizal. On June 21, 2001, the spouses Santos filed a complaint for rescission of the Contract to Sell, recovery of down payment, and damages against De Guzman. They deducted a reasonable rental rate of P10,000.00 per month for the period they lived there and demanded the return of the balance of their down payment in the total amount of P208,500.00.

 

ISSUE:

                Whether or not De Guzman is liable to reimburse the spouses Santos their down payment.

 

HELD:

                The seller has no obligation to transfer ownership over the property to the intending buyer until they execute a contract of sale after full payment of the purchase price, even if they already entered into a contract to sell. It was thus recognized in Spouses Roque v. Aguado that the seller retains the freedom and legal right to sell the property to a third party before the intending buyer's full payment of the purchase price. It was explained in Coronel v. CA (Coronel) that such sale to third party is legal because prior to full payment of the purchase price, there is no defect in the seller's title per se. In such an event, the intending buyer under the contract to sell is not even entitled to reconveyance of the property sold to the third party and can at most seek damages against the seller. It is clear from the evidence on record that the spouses Santos were the parties first in bad faith in complying with their obligations under the Contract to Sell. However, it is also undeniable that De Guzman committed a grave fault and was guilty of bad faith when he sold the Subject Property to Algoso during the trial stage without any judicial authorization. This made the enforcement of the Contract to Sell moot and academic, and constituted a violation of his duties to the court. It is apparent from the foregoing that the parties in this case are in pari delicto, or "in equal fault." In such cases, the parties shall have no action against each other and the courts shall leave them where it finds them. The CA therefore gravely erred in ordering De Guzman to reimburse the down payment in the interest of justice and equity for lack of legal and factual basis.