CHENG v GENATO & Sps. DA JOSE thus their contract was already perfected.

thus their contract was already perfected. Genato alleged that the agreement was only a
G.R. No. 129760. December 29, 1998 simple receipt of an option-bid deposit subject to the condition that the prior contract with
MARTINEZ, J.: the Da Jose spouses be first cancelled. The Da Jose spouses, in their Answer in
Intervention, asserted that they have a superior right to the property as first buyers. They
FACTS: alleged that the unilateral cancellation of the Contract to Sell was without effect and void
and that Cheng is in bad faith.
Respondent Genato entered into a contract to sell with the Da Jose spouses on
The trial court ruled in favor of Cheng stating that the receipt issued by Genato to
September 6, 1989 over his two parcels of land. The contract was in a public instrument
Cheng unerringly meant a sale. It also opined that there was a valid rescission of the
and was duly annotated at the back of the two certificates of title on the same day. Upon
Contract to Sell even if Genato unilaterally rescind the contract applying Art 1191 and 1161
execution of the contract, 50k was paid as part of downpayment to the vendor. The
(particularly the XPN to demand: time is of the essence)
contract also provides that the VENDEE, thirty (30) DAYS after the execution of the
contract, and only after having satisfactorily verified and confirmed the truth and The CA reversed the ruling of RTC. Hence this petition.
authenticity of documents and that nothing is detrimental to his interest, Vendee shall pay
ISSUES:
the vendor 950k full payment of the agreed downpayment. Thereafter, possession shall
be transferred to vendee. 1. WON the Da Jose spouses Contract to Sell has been validly rescinded or resolved.
Da Jose spouses asked for an extension of another 30 days or until November 5, 2. WON, the rule on double sales under Article 1544 is applicable in the case.
1989 to finish verifying the titles mentioned in clause 3. Pending the effectivity of the
aforesaid extension period, and without due notice to the Da Jose spouses, Genato HELD:
executed an Affidavit to Annul the Contract to Sell, on October 13, 1989. Said affidavit was 1. NO. In a Contract to Sell, the payment of the purchase price is a positive suspensive
not annotated at the back of his TCTs. condition, the failure of which is not a breach but a situation that prevents the obligation
of the vendor to convey title from acquiring an obligatory force. In fact, with this
Thereafter, Cheng sought Genato to inquire about the property and offered to buy
circumstance, there can be no rescission of an obligation that is still non-existent, the
the same. Cheng was made aware of the annotations in the title about the contract to sell suspensive condition not having occurred as yet. Emphasis should be made that the breach
with the Da Jose spouses together with the Affidavit to annul the Contract to sell. Despite contemplated in Article 1191 of the New Civil Code is the obligors failure to comply with an
these, Cheng went ahead and issued a check for P50,000.00 upon the assurance by Genato obligation already extant, not a failure of a condition to render binding that obligation.
that the previous contract with the Da Jose spouses will be annulled. Genato issued a Furthermore, no default can be ascribed to the Da Jose spouses since the 30-day extension
handwritten receipt therefor. period has not yet expired.
On October 26, 1989, Genato caused the registration of the Affidavit to Annul the Moreover, Genato is not relieved from the giving of a notice, verbal or written, to
Contract to Sell in the Registry of Deeds. However, the next day, having an accidental the Da Jose spouses for decision to rescind their contract. The act of a party in treating a
encounter with the Da Jose spouses, Genato was reminded that the additional 30-day contract as cancelled should be made known to the other. For such act is always
period given to the Da Jose spouses was still in effect, and that they were willing and able provisional. It is always subject to scrutiny and review by the courts in case the alleged
to pay the balance of the agreed down payment. He then decided to continue the Contract defaulter brings the matter to the proper courts.
he had with them. Consequently, he returned the check given to him by Cheng.
2. No. Cheng was inconsistent with his claims. In his complaint, Cheng alleged that
Cheng instituted a complaint for specific performance to compel Genato to the P50,000.00 down payment was earnest money. And next, his testimony[32] was
execute a deed of sale to him averring that 50k he gave served as an earnest money and offered to prove that the transaction between him and Genato was actually a perfected
contract to sell. It was correctly held by the lower courts that the receipt which was the
result of their agreement, is a contract to sell. This patent twist only operates against
Chengs posture which is indicative of the weakness of his claim. Even assuming that the
receipt is to be treated as a conditional contract of sale, it did not acquire any obligatory
force since it was subject to suspensive condition that the earlier contract to sell between
Genato and the Da Jose spouses should first be cancelled or rescinded a condition never
met. Also, the receipt alone would not even show that a conditional contract of sale has
been entered by Genato and Cheng. When the requisites of a valid contract of sale are
lacking in said receipt, therefore the sale is neither valid or enforceable.[36]
Also, Article 1544 (rules on double sales) can be applied tin the present case. In view
that the governing principle of Article 1544, Civil Code is PRIMUS TEMPORE, PORTIOR
JURE (first in time, stronger in right). For not only was the contract between herein
respondents first in time; it was also registered long before petitioners intrusion as a
second buyer. This principle only applies when the special rules provided in the aforcited
article of Civil Code do not apply or fit the specific circumstances mandated under said law
or by jurisprudence interpreting the article.
The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to
displace the first buyer are:
(1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the first
sale and of the first buyers rights) from the time of acquisition until title is transferred to him by
registration or failing registration, by delivery of possession; [39]
(2) the second buyer must show continuing good faith and innocence or lack of knowledge of
the first sale until his contract ripens into full ownership through prior registration as provided by
law.[40]
Thus, knowledge gained by Cheng of the first transaction between the Da Jose
spouses and Genato defeats his rights even if he is first to register the second transaction,
since such knowledge taints his prior registration with bad faith.
CHENG v GENATO & Sps. DA JOSE 1. NO. In a Contract to Sell, the payment of the purchase price is a positive suspensive
G.R. No. 129760. December 29, 1998 condition, the failure of which is not a breach but a situation that prevents the obligation
MARTINEZ, J.: of the vendor to convey title from acquiring an obligatory force. In fact, with this
circumstance, there can be no rescission of an obligation that is still non-existent, the
FACTS: suspensive condition not having occurred as yet. Also, no default can be ascribed to the
Da Jose spouses since the 30-day extension period has not yet expired.
Respondent Genato entered into a contract to sell with the Da Jose spouseso over his
two parcels of land. The contract was in a public instrument and was duly annotated at the Moreover, Genato is not relieved from the giving of a notice, verbal or written, to the
back of the two certificates of title. In the terms of their contract, the vendee shall pay 50k Da Jose spouses for decision to rescind their contract. The act of a party in treating a
as part of downpayment and the balance shall be pai 30 days efter the execution of the contract as cancelled should be made known to the other.
contract and upon verification and confirmation of the authenticity of the documents.
Thereafter, the Da Jose spouses asked for another extension of 30 days to finish verifying 2. YES. The governing principle is PRIMUS TEMPORE, PORTIOR JURE (first in time,
the documents. stronger in right). For not only was the contract between herein respondents first in time;
it was also registered long before petitioners intrusion as a second buyer.
Pending the effectivity of the aforesaid extension period, and without due notice to
the Da Jose spouses, Genato executed an Affidavit to Annul the Contract to Sell. Said The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to displace
affidavit was not annotated at the back of his TCTs. Within this period, Cheng sought to the first buyer are:
buy the property despite knowledge of the annotations in the title about the contract to
sell with the Da Jose spouses together with the Affidavit to annul the Contract to sell. He (1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the first
issued a check which he claims as earnest money and Genato issued a handwritten receipt sale and of the first buyers rights) from the time of acquisition until title is transferred to
therefor. him by registration or failing registration, by delivery of possession;
(2) the second buyer must show continuing good faith and innocence or lack of knowledge
Subsequently, Genato accidentally encountered the Da Jose spouses. The latter of the first sale until his contract ripens into full ownership through prior registration as
reminded Genato that their extension period has not yet expired and that they are willing provided by law.
and able to pay the balance of the agreed down payment. He then decided to continue the
Contract he had with them. Consequently, he returned the check given to him by Cheng. Thus, knowledge gained by Cheng of the first transaction between the Da Jose spouses
and Genato defeats his rights even if he is first to register the second transaction, since
Cheng then instituted a case for specific performance averring that his contract with such knowledge taints his prior registration with bad faith.
Genato is already perfected and that the contract of the Da Jose spouses with Genato is
already cancelled. The trial court ruled in favor of Cheng stating that the receipt issued by
Genato to Cheng unerringly meant a sale. It also opined that there was a valid rescission of
the Contract to Sell even if Genato unilaterally rescind the contract. The CA reversed the
ruling of RTC. Hence this petition.

ISSUES:
1. WON the Da Jose spouses Contract to Sell has been validly rescinded or resolved.
2. WON, the rule on double sales under Article 1544 is applicable in the case.

HELD: