SALES (Complete)

CIVIL LAW REVIEW 2 | Atty.
Legarda 1
Case Digest 2018
MANUEL LUIS SANCHEZ vs. MAPALAD REALTY CORPORATION, G.R. No. the amount indicated in this deed of sale as total purchase price was
148516, December 27, 2007,REYES, J. ₱7,268,400.00 instead of ₱20,190,000.00 as earlier annotated in the title
per the adverse claim on November 16, 1992. In other words, there were
two deeds of absolute sale, bearing the same dates, involving the same
Specifically, by the contract of sale, one of the contracting parties obligates
parties, the same parcel of land, and notarized by the same Notary Public
himself to transfer ownership of and to deliver a determinate thing and the
under identical notarial entries, with different considerations or purchase
other party to pay therefor a price certain in money or its equivalent.
price.
Facts:
Way back October 13, 1978, A. Magsaysay, Inc., a corporation controlled by
Miguel Magsaysay, acquired ownership of all shares of stock of Mapalad.
Respondent Mapalad was the registered owner of four (4) parcels of land
located along Roxas Boulevard, Baclaran, Parañ aque.
On December 3, 1982, however, A. Magsaysay, Inc. sold all its shares to
Novo Properties, Inc. Miguel Magsaysay also sold his one and only share to
On March 23, 1986, the PCGG issued writs of sequestration for Mapalad and Novo Properties, Inc., thus completely terminating any and all rights or
all its properties. interest he used to have over the properties of Mapalad.
On August 2, 1992, the PCGG appointed Rolando E. Josef as Vice Immediately upon learning of the cancellation of Mapalad’s four TCTs, Josef
President/Treasurer and General Manager of Mapalad. He immediately conferred with Miguel Magsaysay to find out whether the latter indeed
conducted an inventory of the assets of the corporation. This was when it signed the purported deeds of absolute sale both dated November 2, 1989.
was discovered that four (4) TCTs were missing, namely, TCT Nos. S-81403,
S-81404, S-81405, and S-81406.
Magsaysay denied having signed those deeds.
Josef inquired on the whereabouts of these missing TCTs from Luis R.

On January 19, 1993, the PCGG asked the Parañ aque RD to immediately
Narciso, an employee of Port Center Development Corporation, a sister
recall, revoke and cancel the four (4) titles that were issued in favor of
company of Mapalad. Josef was informed that Mapalad’s former director
Nordelak.
and general manager, Felicito L. Manalili (GM Manalili) took the said
missing TCTs sometime in July 1992.
On January 22, 1993, the PCGG issued a writ of injunction, enjoining and
restraining the Parañ aque RD from entertaining and processing any
On September 8, 1992, Narciso executed an affidavit stating that the missing
document or transaction relative to the titles in the name of Nordelak. This
TCTs were taken from him by GM Manalili.
PCGG injunction was annotated on the titles as Entry No. 93-14786.
Josef personally talked to GM Manalili to inquire about what happened to

On January 25, 1993, the RD in turn requested Nordelak to surrender the
the titles he took from Narciso. GM Manalili promised to return the titles as
titles issued in its name, but Nordelak refused to comply.
soon as he found them. He never did, despite repeated demands on him.
On February 3, 1993, Mapalad commenced, before the RTC, Makati City, the
On November 16, 1992, Felimon Oliquiano, Jr., president of Nordelak
present action for annulment of deed of sale and reconveyance of title with
Development Corporation (Nordelak, for brevity), filed a notice of adverse
damages against Nordelak, that is now the subject of this petition.
claim over the subject properties based on a deed of sale purportedly
executed on November 2, 1989 by Miguel Magsaysay in his capacity as
president and board chairman of Mapalad, selling the four lots to Nordelak Mapalad’s complaint alleged that: (a) the deed of sale is falsified and a
for the total purchase price of ₱20,190,000.00. This deed of sale was forgery; (b) defendant Felicito L. Manalili conspired and confederated with
notarized. the other defendants to defraud Mapalad by fabricating a fictitious, spurious
and falsified deed of sale; and (c) there is another deed of absolute sale with
the same date of November 2, 1989 and also bearing the purported
Josef notified the Register of Deeds (RD) of Parañ aque by three successive
signature of Miguel Magsaysay, but the two deeds of sale differ in the
letters dated November 18, December 7 and 8, 1992 that the owner’s
amounts of consideration, one for ₱20,190,000.00 and the other for
duplicate copies of four (4) TCTs in the name of Mapalad were missing, and
₱7,268,400.00, which was used in the transfer of Mapalad’s titles in favor of
requested the RD not to entertain any transaction, particularly any attempt
Nordelak.
to transfer ownership thereof, or annotate any encumbrance or lien of any
kind on these four TCTs.
Issue:
Since Josef’s letters to the RD were not verified, the RD instructed him to
submit a verified petition or cancellation of adverse claim; Josef complied. whether or not there was a valid sale between Mapalad and Nordelak.
Second, whether or not petitioner Sanchez acquired valid title over the
properties as innocent purchaser for value despite a defect in Nordelak’s
On December 22, 1992, Mapalad filed with the RD a verified petition for
title.
cancellation of adverse claim annotated on its titles by Nordelak. The
petition also included a notice of loss of the owners’ duplicate copies of the
TCTs concerned. This was annotated on the titles as Entry No. 154431 on Ruling:
the next day.
There can be no valid contract of sale between Mapalad and Nordelak.
On January 14, 1993, Mapalad discovered, after verification with the
records of the RD, that its titles to the four (4) properties were cancelled as
A contract is defined as a juridical convention manifested in legal form, by
early as December 22, 1992. In lieu of them, TCT Nos. 68493, 68494, 68495,
virtue of which one or more persons bind themselves in favor of another, or
and 68496 in the name of Nordelak were issued by virtue of another deed of
others, or reciprocally, to the fulfillment of a prestation to give, to do, or not
sale also dated November 2, 1989 and purportedly signed by the same
to do. There can be no contract unless the following concur: (a) consent of
Miguel Magsaysay in his capacity as president and chairman of the board of
the contracting parties; (b) object certain which is the subject matter of the
Mapalad.
contract; (c) cause of the obligation which is established.
Although this document was also notarized by the same Elpidio T. Clemente,
bearing the same Document No. 121, Page 26, Book No. 82, Series of 1989,
CIVIL LAW REVIEW 2 | Atty. Legarda 2
Case Digest 2018
Specifically, by the contract of sale, one of the contracting parties obligates As We have said, Nordelak did not acquire ownership or title over the four
himself to transfer ownership of and to deliver a determinate thing and the properties subject of this case because the contract of sale between Mapalad
other party to pay therefor a price certain in money or its equivalent. and Nordelak was not only voidable but also void ab inito. Not having any
title to the property, Nordelak had nothing to transfer to petitioner Sanchez.
The essential requisites of a valid contract of sale are:
Petitioner acquired the property subject of litigation during the pendency of
the case in the trial court. It is undisputed that notices of lis pendens were
(1) Consent of the contracting parties by virtue of which the
annotated on the TCTs in Nordelak’s name covering the subject properties
vendor obligates himself to transfer ownership of and to deliver a
as Entry No. 93-91718.
determinate thing, and the vendee obligates himself to pay
therefor a price certain in money or its equivalent.
By virtue of the notice of lis pendens annotated on the four TCTs in this
case, petitioner had notice that the property he was intending to buy is
(2) Object certain which is the subject matter of the contract. The
under litigation. He is, therefore, a transferee pendente lite who, as held by
object must be licit and at the same time determinate or, at least,
this Court in Voluntad v. Dizon, stands exactly in the shoes of the transferor
capable of being made determinate without the necessity of a
and is bound by any judgment or decree which may be rendered for or
new or further agreement between the parties.
against the transferor.
(3) Cause of the obligation which is established. The cause as far

Under the circumstances petitioner cannot acquire any better right than his
as the vendor is concerned is the acquisition of the price certain
predecessor, Nordelak. No river or stream can rise higher than its
in money or its equivalent, which the cause as far as the vendee is
source. Walang ilog o batis na ang taas ay higit sa kanyang
concerned is the acquisition of the thing which is the object of the
pinagmulan. There is thus no question that a judgment of reconveyance
contract.
can be legally enforced by Mapalad against petitioner as transferee
pendente lite of Nordelak.
Contracts of sale are perfected by mere consent, which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which
The four parcels of land surrendered by former Marcos associate Jose Y.
are to constitute the contract.
Campos and sequestered by the PCGG must eventually be returned to their
rightful owners. If forfeiture proceedings in the Marcos ill-gotten wealth
Consent may be given only by a person with the legal capacity to give cases prosper, and these properties are finally shown to form part of such
consent. In the case of juridical persons such as corporations like Mapalad, ill-gotten wealth, these properties should go to the Filipino people. If they
consent may only be granted through its officers who have been duly are not ill-gotten, they should be turned over to the Marcoses. But definitely,
authorized by its board of directors. these properties cannot be transferred to Nordelak nor to petitioner Manuel
Luis Sanchez.
In the present case, consent was purportedly given by Miguel Magsaysay,
the person who signed for and in behalf of Mapalad in the deed of absolute
sale dated November 2, 1989. However, as he categorically stated on the
witness stand during trial, he was no longer connected with Mapalad on the
said date because he already divested all his interests in said corporation as
early as 1982. Even assuming, for the sake of argument, that the signatures
purporting to be his were genuine, it would still be voidable for lack of
authority resulting in his incapacity to give consent for and in behalf of the
corporation.
On this score, the contract of sale may be annulled for lack of consent on the
part of Mapalad.
The CA also noted that the alleged contract of sale on November 2, 1989 had
no consideration. There was no payment effected by Nordelak for this
transaction. Josef testified that no funds were infused into Mapalad’s coffers
on account of this transaction. This testimony remained uncontroverted. In
fact, the CA further noted that Nordelak could have easily produced the
cancelled check before the trial court, if there was any. Again, Nordelak did
not.
The third element for a valid contract of sale is likewise lacking.
Lack of consideration makes a contract of sale fictitious. A fictitious sale is

void ab initio.
The alleged deed of absolute sale dated November 2, 1989 notwithstanding,

the contract of sale between Mapalad and Nordelak is not only voidable on
account of lack of valid consent on the part of the purported seller, but also
void ab initio for being fictitious on account of lack of consideration.
Despite a void sale between Mapalad and Nordelak, may petitioner still
claim valid title to the subject properties?
Petitioner as transferee pendente lite merely steps into the shoes of

his predecessor-in-interest who had no valid title.
Case Digest 2018
CAROLINA HERNANDEZ-NIEVERA, DEMETRIO P. HERNANDEZ, JR., and had already been conveyed and assigned to the Asset Pool pursuant to the
MARGARITA H. MALVAR vs. WILFREDO HERNANDEZ, HOME March 23, 1998 DAC. In the correspondence that ensued, petitioners
INSURANCE AND GUARANTY CORPORATION, PROJECT MOVERS disowned Demetrio’s signature in the DAC and labeled it a mere forgery.
REALTY AND DEVELOPMENT CORPORATION, MARIO P. VILLAMOR and They explained that Demetrio could not have entered into the said
LAND BANK OF THE PHILIPPINES, G.R. No. 171165, February 14, 2011, agreement as his power of attorney was limited only to selling or
PERALTA, J. mortgaging the properties and not conveying the same to the Asset Pool.
Boldly, they asserted that the fraudulent execution of the DAC was made
possible through the connivance of all the respondents.
Suffice it to say that "price" is understood to mean "the cost at which
something is obtained, or something which one ordinarily accepts voluntarily
in exchange for something else, or the consideration given for the purchase of With that final word, petitioners instituted an action before the RTC of San
a thing." Pablo City, Laguna, Branch 32 for the rescission of the MOA, as well as for
the declaration of nullity of the DAC. They prayed for the issuance of a writ
of preliminary injunction and for the payment of damages.
Facts:
Petitioners insist that the obligation of PMRDC to deliver back the TCTs
Project Movers Realty & Development Corporation (PMRDC), one of the
arises on its failure to exercise the option to purchase the lands according to
respondents herein, is a duly organized domestic corporation engaged in
the terms of the MOA, and that the deliberate refusal of PMRDC to perform
real estate development. Sometime in 1995, it entered through its
such obligation gives ground for the rescission of the MOA. This thesis is
president, respondent Mario Villamor (Villamor), into various agreements
perched on petitioners’ argument that the MOA could not have possibly
with co-respondents Home Insurance & Guaranty Corporation (HIGC) and
been novated by the DAC because first, Demetrio’s signature therein has
Land Bank of the Philippines (LBP), in connection with the construction of
been forged, and second, Demetrio could not have validly assented to the
the Isabel Homes housing project in Batangas and of the Monumento Plaza
DAC in behalf of Carolina and Margarita because his special power was
commercial and recreation complex in Caloocan City. In its Asset Pool
limited only to selling or mortgaging the properties and excludes conveying
Formation Agreement, PMRDC conveyed to HIGC the constituent assets of
and assigning the said properties to the Asset Pool for consideration. They
the two projects, whereas LBP agreed to act as trustee of the resulting Asset
also point out that the DAC itself is infirm insofar as it stipulated to convey
Pool for a consideration. The execution of the projects would be funded
the lands to the Asset Pool as the latter supposedly is neither a registered
largely through securitization, a method of sourcing development funds by
corporation nor a partnership and does not possess a legal personality.
the issuance of participation certificates against the direct backing assets of
the projects, whereby LBP would act as the nominal issuer of such
certificates with the Asset Pool itself acting as the real issuer. HIGC, in turn, Commenting on the petition, PMRDC and Villamor advance that petitioners’
would provide guaranty coverage to these participation certificates in allegation of fraud and forgery are all factual matters that are inappropriate
accordance with its Contract of Guaranty with PMRDC and LBP. in a Rule 45 petition. More importantly, they aver that the novation of the
MOA by the DAC is unmistakable as the DAC itself has made an express
reference to the MOA provisions on the payment of option money and,
On November 13, 1997, PMRDC entered into a Memorandum of Agreement
hence, has expressly modified the pertinent terms thereof.
(MOA) whereby it was given the option to buy pieces of land owned by
petitioners Carolina Hernandez-Nievera (Carolina), Margarita H. Malvar
(Margarita) and Demetrio P. Hernandez, Jr. (Demetrio). Demetrio, under HIGC and its president, Wilfredo Hernandez, both represented by the Office
authority of a Special Power of Attorney to Sell or Mortgage, signed the MOA of the Government Corporate Counsel (OGCC), and LBP are of the same
also in behalf of Carolina and Margarita. In the aggregate, the realty view. In addition, HIGC explains that contrary to petitioners’ belief, the
measured 4,580,451 square meters and was segregated by agreement into transfer of the properties under the DAC is valid as the conveyance has been
Area I and Area II, respectively pertaining to the parcels covered by made to the Asset Pool with LBP, an entity with juridical entity, acting as
Transfer Certificate of Title (TCT) Nos. T-3137, T-3138, T-3139 and T-3140 trustee thereof.
on the one hand, and on the other by TCT Nos. T-3132, T-3133, T-3134, T-
3135 and T-3136, all issued by the Register of Deeds of Laguna.
Issue:
As an implementation of the MOA, the lands within Area I were then

Whether or not the DAC should be declare null and void
mortgaged to Solid Bank for which petitioners received consideration from
PMRDC.
Ruling:
Later on, PMRDC saw the need to convey additional properties to and
augment the value of its Asset Pool to support the collateralization of The Court denies the petition.
additional participation certificates to be issued. Thus, on March 23, 1998, it
entered with LBP and Demetrio – the latter purportedly acting under
Petitioners’ cause stems from the failure of PMRDC to restore to petitioners
authority of the same special power of attorney as in the MOA – into a Deed
the possession of the TCTs of the lands within Area II upon its failure to
of Assignment and Conveyance (DAC) whereby the lands within Area II
exercise the option to purchase within the 12-month period stipulated in
covered by TCT Nos. T-3132, T-3133, T-3134, T-3135 and T-3136 were
the MOA. Respondents maintain, however, that said obligation, dependent
transferred and assigned to the Asset Pool in exchange for a number of
as it is on the exercise of the option to purchase, has altogether been
shares of stock which supposedly had already been issued in the name and
expressly obliterated by the terms of the DAC whereby petitioners, through
in favor of Demetrio. These pieces of land are the subject of the present
Demetrio as attorney-in-fact, have agreed to novate the terms of the MOA
controversy as far as they are affected by the explicit provision in the DAC
by extinguishing the core obligations of PMRDC on the payment of option
which dispensed with the stipulated obligation of PMRDC in the MOA to pay
money. This seems to suggest that with the execution of the DAC, PMRDC
option money should it opt to buy the properties.
has already entered into the exercise of its option except that its obligation
to deliver the option money has, by subsequent agreement embodied in the
PMRDC admittedly did not avail of its option to purchase the lands in Area II DAC, been substituted instead by the obligation to issue participation
in the twelve months that passed after the execution of the MOA. Although certificates in Demetrio’s name but which, likewise, has not yet been
PMRDC delivered to petitioners certain checks representing the money, the performed by PMRDC. But petitioners stand against the validity of the DAC
same however allegedly bounced. Hence, on January 8, 1999, petitioners on the ground that the signature of Demetrio therein was spurious.
demanded the return of the corresponding TCTs. In its January 21, 1999
letter to Demetrio, however, PMRDC, through Villamor, stated that the TCTs
Firmly settled is the jurisprudential rule that forgery cannot be presumed
could no longer be delivered back to petitioners as the covered properties
from a mere allegation but rather must be proved by clear, positive and
Case Digest 2018
convincing evidence by the party alleging the same. The burden to prove the PMRDC. It is likewise within this same context that Demetrio later on
allegation of forgery in this case has not been conclusively discharged by entered into the DAC and accordingly extinguished the previously
petitioners because first, nothing in the records supports the allegation subsisting obligation of PMRDC to deliver the stipulated option money and
except only perhaps Demetrio’s explicit self-serving disavowal of his replaced said obligation with the delivery instead of participation
signature in open court. Second, while in fact Demetrio at the trial of the certificates in favor of Demetrio.
case had committed to have the subject signature examined by an
expert, nevertheless, the trial had terminated without the results of the
The powers conferred on Demetrio were exclusive only to selling and
examination being submitted in evidence. Third, the claim of forgery,
mortgaging the properties. Between these two specific powers, the power
unsubstantiated as it is, becomes even more unremarkable in light of the
to sell is quite controversial because it is the sale transaction which bears
fact that the DAC involved in this case is a notarized deed guaranteed by
close resemblance to the deal contemplated in the DAC. In fact, part of the
public attestation in accordance with law, such that the execution thereof
testimony of Atty. Danilo Javier, counsel for respondent HIGC and head of its
enjoys the legal presumption of regularity in the absence of compelling
legal department at the time, is that in the execution of the DAC,
proof to the contrary.
respondents had relied on Demetrio’s special power of attorney and also on
his supposed agreement to be paid in kind, i.e., in shares of stock, as
Yet the inquiry on the validity of the DAC does not terminate with the consideration for the assignment and conveyance of the subject properties
finding alone of the genuineness of Demetrio’s signature therein, because to the Asset Pool. What petitioners miss, however, is that the power
petitioners also stand against its validity on the ground of Demetrio’s non- conferred on Demetrio to sell "for such price or amount" is broad enough to
authority to execute the same. They claim that the execution of the DAC cover the exchange contemplated in the DAC between the properties and
would be beyond the power of Demetrio to perform as his authority is the corresponding corporate shares in PMRDC, with the latter replacing the
limited only to selling or mortgaging the properties and does not include cash equivalent of the option money initially agreed to be paid by PMRDC
assigning and conveying said properties to the Asset Pool in consideration under the MOA. Suffice it to say that "price" is understood to mean "the cost
of shares of stocks for his lone benefit. For their part, respondents, who at which something is obtained, or something which one ordinarily accepts
believe Demetrio’s power of attorney was broad enough to effectuate a voluntarily in exchange for something else, or the consideration given for
novation of PMRDC’s core obligations in the MOA or, at the least, implement the purchase of a thing."
the provisions thereof through the DAC, invoke the 4th and 5th whereas-
clauses in the DAC which, in relation to each other, supposedly pertain to
Thus, it becomes clear that Demetrio’s special power of attorney to sell is
that certain provision in the MOA which authorizes the conveyance of the
sufficient to enable him to make a binding commitment under the DAC in
properties to the Asset Pool in exchange for corporate shares.
behalf of Carolina and Margarita. In particular, it does include the authority
to extinguish PMRDC’s obligation under the MOA to deliver option money
Petitioners profess, however, that no such request was ever intimated to and agree to a more flexible term by agreeing instead to receive shares of
them at any time during the subsistence of the PMRDC’s right to exercise stock in lieu thereof and in consideration of the assignment and conveyance
the option to buy. But respondents are quick to reason that a request is of the properties to the Asset Pool. Indeed, the terms of his special power of
unnecessary because Demetrio has been legally enabled by his special attorney allow much leeway to accommodate not only the terms of the MOA
power to give such consent and accordingly execute the DAC, effect a but also those of the subsequent agreement in the DAC which, in this case,
novation of the MOA, and extinguish the stipulated obligations of PMRDC necessarily and consequently has resulted in a novation of PMRDC’s integral
therein, or at least that he could assent to the implementation of the MOA obligations.
provisions in the way that transpired. We agree.
It is in the context of this vesture of power that Demetrio, representing his

shared interest with Carolina and Margarita, entered into the MOA with
Case Digest 2018
HEIRS OF GREGORIO LOPEZ, represented by Rogelia Lopez, et al. vs. We have consistently upheld the principle that "no one can give what one
DEVELOPMENT BANK OF THE PHILIPPINES [Now substituted by does not have." A seller can only sell what he or she owns, or that which he
Philippine Investment Two (SPVAMC), Inc.], G.R. No. 193551, or she does not own but has authority to transfer, and a buyer can only
November 19, 2014, LEONEN, J. acquire what the seller can legally transfer.
We have consistently upheld the principle that "no one can give what one does This principle is incorporated in our Civil Code. It provides that in a contract
not have." A seller can only sell what he or she owns, or that which he or she of sale, the seller binds himself to transfer the ownership of the thing sold,
does not own but has authority to transfer, and a buyer can only acquire what thus:
the seller can legally transfer.
Art. 1458. By the contract of sale, one of the contracting parties obligates
Facts: himself to transfer the ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent.
Gregoria Lopez owned a 2,734-square-meter property in Bustos, Bulacan.
She died on March 19, 1922 and was survived by her three sons: Teodoro The seller cannot perform this obligation if he or she does not have a right
Lopez, Francisco Lopez, and Carlos Lopez. to convey ownership of the thing. Hence, Article 1459 of the Civil Code
provides:
Teodoro, Francisco, and Carlos died. Only Teodoro was survived by
children: Gregorio, Enrique, Simplicio, and Severino. Petitioners in this case Art. 1459. The thing must be licit and the vendor must have a right to
are Simplicio substituted by his daughter Eliza Lopez, and the heirs of transfer the ownership thereof at the time it is delivered.
Gregorio and Severino. Enrique is deceased.
Title or rights to a deceased person’s property are immediately passed to
Petitioners discovered that on November 29, 1990, Enrique executed an his or her heirs upon death. The heirs’ rights become vested without need
affidavit of self-adjudication declaring himself to be Gregoria Lopez’s only for them to be declared "heirs." Before the property is partitioned, the heirs
surviving heir, thereby adjudicating upon himself the land in Bulacan. He are co-owners of the property.
sold the property to Marietta Yabut.
In this case, the rights to Gregoria Lopez’s property were automatically
Petitioners demanded from Marietta the nullification of Enrique’s affidavit passed to her sons — Teodoro, Francisco, and Carlos — when she died in
of self-adjudication and the deed of absolute sale. They also sought to 1922. Since only Teodoro was survived by children, the rights to the
redeem Enrique’s one-fourth share. Marietta, who was already in property ultimately passed to them when Gregoria Lopez’s sons died. The
possession of the property, refused. children entitled to the property were Gregorio, Simplicio, Severino, and
Enrique.
Sometime in 1993, Marietta obtained a loan from Development Bank of the
Philippines (DBP) and mortgaged the property to DBP as security. Gregorio, Simplicio, Severino, and Enrique became co-owners of the
property, with each of them entitled to an undivided portion of only a
quarter of the property. Upon their deaths, their children became the co-
Sometime between 1993 and 1994, petitioners filed a complaint and an
owners of the property, who were entitled to their respective shares, such
amended complaint with the Regional Trial Court for the annulment of
that the heirs of Gregorio became entitled to Gregorio’s one-fourth share,
document, recovery of possession, and reconveyance of the property. They
and Simplicio’s and Severino’s respective heirs became entitled to their
prayed that judgment be rendered, ordering the annulment of Enrique’s
corresponding onefourth shares in the property. The heirs cannot alienate
affidavit of self-adjudication, the deed of sale executed by Enrique and
the shares that do not belong to them. Article 493 of the Civil Code provides:
Marietta, and the deed of real estate mortgage executed by Marietta in favor
of DBP. Petitioners also prayed for the reconveyance of their three-fourth
share in the property, their exercise of their right of redemption of Art. 493. Each co-owner shall have the full ownership of his part and of the
Enrique’s one-fourth share, as well as attorney’s fees and costs of suit. fruits and benefits pertaining thereto, and he may therefore alienate, assign
or mortgage it, and even substitute another person in its enjoyment, except
when personal rights are involved. But the effect of the alienation or the
Petitioners caused the annotation of a notice of lis pendens at the back of
mortgage, with respect to the co-owners, shall be limited to the portion
the original certificate of title. The annotation was inscribed on June 27,
which may be allotted to him in the division upon the termination of the co-
1994.
ownership.
Marietta failed to pay her loan to DBP. Marietta failed to redeem the

Since Enrique’s right to the property was limited to his one-fourth share, he
property. The title to the property was "consolidated in favor of DBP."
had no right to sell the undivided portions that belonged to his siblings or
their respective heirs. Any sale by one heir of the rest of the property will
On December 27, 2005, the Regional Trial Court ruled in favor of not affect the rights of the other heirs who did not consent to the sale. Such
petitioners.The Court of Appeals reversed the decision of the Regional Trial sale is void with respect to the shares of the other heirs.
Court in the decision48 promulgated on May 8, 2009.
Regardless of their agreement, Enrique could only convey to Marietta his
Issue: undivided one-fourth share of the property, and Marietta could only acquire
that share. This is because Marietta obtained her rights from Enrique who,
in the first place, had no title or interest over the rest of the property that he
Whether or not the sale to Marietta is valid
could convey.
Ruling:
This is despite Enrique’s execution of the affidavit of self-adjudication
wherein he declared himself to be the only surviving heir of Gregoria Lopez.
Yes but only limited to Enrique’s one-fourth share. Enrique had no right to The affidavit of self-adjudication is invalid for the simple reason that it was
sell the undivided portions that belonged to his siblings or their respective false. At the time of its execution, Enrique’s siblings were still alive and
heirs. Such sale is void with respect to the shares of the other heirs. entitled to the three-fourth undivided share of the property. The affidavit of
Case Digest 2018
self-adjudication did not have the effect of vesting upon Enrique ownership
or rights to the property.
The issuance of the original certificate of title in favor of Marietta does not
cure Enrique’s lack of title or authority to convey his co-owners’ portions of
the property. Issuance of a certificate of title is not a grant of title over
petitioners’ undivided portions of the property. The physical certificate of
title does not vest in a person ownership or right over a property. It is
merely an evidence of such ownership or right.
Marietta could acquire valid title over the whole property if she were an
innocent purchaser for value. An innocent purchaser for value purchases a
property without any notice of defect or irregularity as to the right or
interest of the seller. He or she is without notice that another person holds
claim to the property being purchased.
As a rule, an ordinary buyer may rely on the certificate of title issued in the
name of the seller. He or she need not look "beyond what appears on the
face [of the certificate of title]." However, the ordinary buyer will not be
considered an innocent purchaser for value if there is anything on the
certificate of title that arouses suspicion, and the buyer failed to inquire or
take steps to ensure that there is no cloud on the title, right, or ownership of
the property being sold.
Marietta cannot claim the protection accorded by law to innocent

purchasers for value because the circumstances do not make this available
to her.
In this case, there was no certificate of title to rely on when she purchased
the property from Enrique. At the time of the sale, the property was still
unregistered. What was available was only a tax declaration issued under
the name of "Heirs of Lopez."
"The defense of having purchased the property in good faith may be availed
of only where registered land is involved and the buyer had relied in good
faith on the clear title of the registered owner." It does not apply when the
land is not yet registered with the Registry of Deeds.
At the very least, the unregistered status of the property should have
prompted Marietta to inquire further as to Enrique’s right over the
property. She did not. Hence, she was not an innocent purchaser for value.
She acquired no title over petitioners’ portions of the property.
Case Digest 2018
JUAN P. CABRERA vs. HENRY YSAAC, G.R. No. 166790, November 19, On September 21, 1994, Henry Ysaac’s counsel, Atty. Luis Ruben General,
2014, LEONEN, J. wrote a letter addressed to Atty. Leoncio Clemente, Juan Cabrera’s
counsel. Atty. General informed Atty. Clemente that his client is formally
rescinding the contract of sale because Juan Cabrera failed to pay the
Unless all the co-owners have agreed to partition their property, none of them
balance of the purchase price of the land between May 1990 and May 1992.
may sell a definite portion of the land. The co-owner may only sell his or her
The letter also stated that Juan Cabrera’s initial payment of ₱1,500.00 and
proportionate interest in the co-ownership. A contract of sale which purports
the subsequent payment of ₱6,100.00 were going to be applied as payment
to sell a specific or definite portion of unpartitioned land is null and void ab
for overdue rent of the parcel of land Juan Cabrera was leasing from Henry
initio.
Ysaac. The letter also denied the allegation of Juan Cabrera that Henry Ysaac
agreed to shoulder the costs of the resurveying of the property. Juan
Facts: It appears that the heirs of Luis and Matilde Ysaac co-owned a Cabrera, together with his uncle, Delfin Cabrera, went to Henry Ysaac’s
5,517-square-meter parcel of land located in Sabang, Naga City, covered by house on September 16, 1995 to settle the matter. Henry Ysaac told Juan
Original Certificate of Title (OCT) No. 506. One of the co-owners is Cabrera that he could no longer sell the property because the new
respondent, Henry Ysaac. administrator of the property was his brother, Franklin Ysaac.
Henry Ysaac leased out portions of the property to several lessees. Juan Due to Juan Cabrera’s inability to enforce the contract of sale between him
Cabrera, one of the lessees, leased a 95-square-meter portion of the land and Henry Ysaac, he decided to file a civil case for specific performance on
beginning in 1986. September 20, 1995. Juan Cabrera prayed for the execution of a formal deed
of sale and for the transfer of the title of the property in his name.
On May 6, 1990, Henry Ysaac needed money and offered to sell the 95-
square-meter piece of land to Juan Cabrera. He told Henry Ysaac that the In his answer with counterclaim, Henry Ysaac prayed for the dismissal of
land was too small for his needs because there was no parking space for his Juan Cabrera’s complaint. He also prayed for compensation in the form of
vehicle. moral damages, attorney’s fees, and incidental litigation expenses.
In order to address Juan Cabrera’s concerns, Henry Ysaac expanded his Issue: Whether there was a valid contract of sale between petitioner
offer to include the two adjoining lands that Henry Ysaac was then leasing and respondent;
to the Borbe family and the Espiritu family. Those three parcels of land have
a combined area of 439-square-meters. However, Henry Ysaac warned Juan
Ruling: There was no valid contract of sale between petitioner and
Cabrera that the sale for those two parcels could only proceed if the two
respondent.
families agree to it.
As defined by the Civil Code, "[a] contract is a meeting of minds between

Juan Cabrera accepted the new offer. Henry Ysaac and Juan Cabrera settled
two persons whereby one binds himself, with respect to the other, to give
on the price of ₱250.00 per square meter, but Juan Cabrera stated that he
something or to render some service." For there to be a valid contract, there
could only pay in full after his retirement on June 15, 1992. Henry Ysaac
must be consent of the contracting parties, an object certain which is the
agreed but demanded for an initial payment of ₱1,500.00, which Juan
subject matter of the contract, and cause of the obligation which is
Cabrera paid.
established. Sale is a special contract. The seller obligates himself to deliver
a determinate thing and to transfer its ownership to the buyer. In turn, the
According to Juan Cabrera, Henry Ysaac informed him that the Borbe family buyer pays for a price certain in money or its equivalent. A "contract of sale
and the Espiritu family were no longer interested in purchasing the is perfected at the moment there is a meeting of minds upon the thing
properties they were leasing. Since Mamerta Espiritu of the Espiritu family which is the object of the contract and upon the price." The seller and buyer
initially considered purchasing the property and had made an initial deposit must agree as to the certain thing that will be subject of the sale as well as
for it, Juan Cabrera agreed to reimburse this earlier payment. On June 9, the price in which the thing will be sold. The thing to be sold is the object of
1990, Juan Cabrera paid the amount of ₱6,100.00. Henry Ysaac issued a the contract, while the price is the cause or consideration.
receipt for this amount. ₱3,100.00 of the amount paid was reimbursed to
Mamerta Espiritu and, in turn, she gave Juan Cabrera the receipts issued to
The object of a valid sales contract must be owned by the seller. If the seller
her by Henry Ysaac.
is not the owner, the seller must be authorized by the owner to sell the
object.
On June 15, 1992, Juan Cabrera tried to pay the balance of the purchase
price to Henry Ysaac. However,at that time, Henry Ysaac was in the United
Specific rules attach when the seller co-owns the object of the contract. Sale
States. The only person in Henry Ysaac’s residence was his wife. The wife
of a portion of the property is considered an alteration of the thing owned
refused to accept Juan Cabrera’s payment.
in common. Under the Civil Code, such disposition requires the unanimous
consent of the other co-owners. However, the rules also allow a co-owner to
Sometime in September 1993, Juan Cabrera alleged that Henry Ysaac alienate his or her part in the co-ownership.
approached him, requesting to reduce the area of the land subject of their
transaction. Part of the 439-square-meter land was going to be made into a
These two rules are reconciled through jurisprudence.
barangay walkway, and another part was being occupied by a family that
was difficult to eject. Juan Cabrera agreed to the proposal. The land was
surveyed again. According to Juan Cabrera, Henry Ysaac agreed to shoulder If the alienation precedes the partition, the co-owner cannot sell a definite
the costs of the resurvey, which Juan Cabrera advanced in the amount of portion of the land without consent from his or her co-owners. He or she
₱3,000.00. could only sell the undivided interest of the co-owned property. As
summarized in Lopez v. Ilustre, "[i]f he is the owner of an undivided half of
a tract of land, he has a right to sell and convey an undivided half, but he has
The resurvey shows that the area now covered by the transaction was 321
no right to divide the lot into two parts, and convey the whole of one part by
square meters. Juan Cabrera intended to show the sketch plan and pay the
metes and bounds."
amount due for the payment of the lot. However, on that day, Henry Ysaac
was in Manila. Once more, Henry Ysaac’s wife refused to receive the
payment because of lack of authority from her husband. The undivided interest of a co-owner is also referred to as the "ideal or
abstract quota" or "proportionate share." On the other hand, the definite
portion of the land refers to specific metes and bounds of a co-owned
property.
Case Digest 2018
Hence, prior to partition, a sale of a definite portion of common property

requires the consent of all co-owners because it operates to partition the
land with respect to the co-owner selling his or her share. The co-owner or
seller is already marking which portion should redound to his or her
autonomous ownership upon future partition.
The object of the sales contract between petitioner and respondent was a
definite portion of a co-owned parcel of land. At the time of the alleged sale
between petitioner and respondent, the entire property was still held in
common. This is evidenced by the original certificate of title, which was
under the names of Matilde Ysaac, Priscilla Ysaac, Walter Ysaac, respondent
Henry Ysaac, Elizabeth Ysaac, Norma Ysaac, Luis Ysaac, Jr., George Ysaac,
Franklin Ysaac, Marison Ysaac, Helen Ysaac, Erlinda Ysaac, and Maridel
Ysaac.
The rules allow respondent to sell his undivided interestin the

coownership. However, this was not the object of the sale between him and
petitioner. The object of the sale was a definite portion. Even if it was
respondent who was benefiting from the fruits of the lease contract to
petitioner, respondent has "no right to sell or alienate a concrete, specific or
determinate part of the thing owned in common, because his right over the
thing is represented by quota or ideal portion without any physical
adjudication."
There was no showing that respondent was authorized by his co owners to

sell the portion of land occupied by Juan Cabrera, the Espiritu family, or the
Borbe family. Without the consent of his co-owners, respondent could not
sell a definite portion of the co-owned property.
Respondent had no right to define a 95-square-meter parcel of land, a 439-

square-meter parcel of land, or a 321-square-meter parcel of land for
purposes of selling to petitioner. The determination of those metes and
bounds are not binding to the co-ownership and, hence, cannot be subject to
sale, unless consented to by all the co-owners.
A non-existent contract cannot be a

source of obligations, and it cannot
be enforced by the courts
The absence of a contract of sale means that there is no source of

obligations for respondent, as seller, or petitioner, as buyer. Rescission is
impossible because there is no contract to rescind. The rule in Article 1592
that requires a judicial or notarial act to formalize rescission of a contract of
sale of an immovable property does not apply. This court does not need to
rule whether a letter is a valid method of rescinding a sales contract over an
immovable property because the question is moot and academic.
Even if we assume that respondent had full ownership of the property and
that he agreed to sell a portion of the property to petitioner, the letter was
enough to cancel the contract to sell. Generally, "[t]he power to rescind
obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent on him."
Case Digest 2018
THE DIRECTOR OF LANDS vs. SILVERETRA ABABA, ET AL., claimants, This contention is without merit. Article 1491 prohibits only the sale or
JUAN LARRAZABAL, MARTA C. DE LARRAZABAL, MAXIMO ABAROQUEZ assignment between the lawyer and his client, of property which is the
and ANASTACIA CABIGAS, petitioners-appellants, ALBERTO subject of litigation. As WE have already stated: "The prohibition in said
FERNANDEZ, G.R. No. L-26096 February 27, 1979, MAKASIAR, J. article applies only to a sale or assignment to the lawyer by his client of the
property which is the subject of litigation. In other words, for the
prohibition to operate, the sale or assignment of the property must take
Facts:
place during the pendency of the litigation involving the property"
Litigating as a pauper in the lower court and engaging the services of his
Likewise, under American Law, the prohibition does not apply to "cases
lawyer on a contingent basis, petitioner, unable to compensate his lawyer
where after completion of litigation the lawyer accepts on account of his fee,
whom he also retained for his appeal, executed a document on June 10,
an interest in the assets realized by the litigation". "There is a clear dis -
1961 in the Cebuano-Visayan dialect whereby he obliged himself to give to
tinction between such cases and one in which the lawyer speculates on the
his lawyer one-half (½) of whatever he might recover from Lots 5600 and
outcome of the matter in which he is employed".
5602 should the appeal prosper.
A contract for a contingent fee is not covered by Article 1491 because the
The real property sought to be recovered in Civil Case No. R-6573 was
transfer or assignment of the property in litigation takes effect only after
actually the share of the petitioner in Lots 5600 and 5602, which were part
the finality of a favorable judgment. In the instant case, the attorney's fees
of the estate of his deceased parents and which were partitioned among the
of Atty. Fernandez, consisting of one-half (½) of
heirs which included petitioner Maximo Abarquez and his elder
whatever Maximo Abarquez might recover from his share in the lots in
sister, Agripina Abarquez, the defendant in said civil case.
question, is contingent upon the success of the appeal. Hence, the payment
This partition was made pursuant to a project of partition approved by the of the attorney's fees, that is, the transfer or assignment of one-half (½) of
Court which provided, among others, that Lots Nos. 5600 and 5602 were to the property in litigation will take place only if the appeal
be divided into three equal parts, one third of which shall be given prospers. Therefore, the transfer actually takes effect after the finality of a
to Maximo Abarquez. However, Agripina Abarquez claimed the share of her favorable judgment rendered on appeal and not during the pendency of the
brother, stating that the latter executed an instrument litigation involving the property in question. Consequently, the contract for
of pacto de retro prior to the partition conveying to her any or all rights in a contingent fee is not covered by Article 1491.
the estate of their parents. Petitioner discovered later that the claim of his
In resolving now the issue of the validity or nullity of the registration of the
sister over his share was based on an instrument he was induced to sign
adverse claim, Section 110 of the Land Registration Act (Act 496) should be
prior to the partition, an instrument he believed all along to be a mere
considered. Under said section, an adverse claim may be registered only by:
acknowledgment of the receipt of P700.00 which his sister gave to him as a
consideration for taking care of their father during the latter's illness and "Whoever claims any part or interest in registered land adverse to the
never an instrument of pacto deretro. Hence, he instituted an action to registered owner, arising subsequent to the date of the original
annul the alleged instrument of pacto de retro. registration ... if no other provision is made in this Act for registering the
same x x x."
Petitioner refused to comply with his obligation and instead offered to sell
The contract for a contingent fee, being valid, vested in Atty. Fernandez an
the whole parcels of land covered by TCT No. 31841 to petitioner-spouses
interest or right over the lots in question to the extent of one-half
Juan Larrazabal and Marta C. de Larrazabal. Upon being informed of the
thereof. Said interest became vested in Atty. Fernandez after the case was
intention of the petitioner, adverse claimant immediately took steps to
won on appeal because only then did the assignment of the one-half (½)
protect his interest by filing with the trial court a motion to annotate his
portion of the lots in question became effective and binding. So that when
attorney's lien on TCT No. 31841 on June 10, 1965 and by notifying the
he filed his affidavit of adverse claim his interest was already an existing
prospective buyers of his claim over the one-half portion of the parcels of
one. There was therefore a valid interest in the lots to be registered in favor
land.
of Atty. Fernandez adverse to Maximo Abarquez.
Realizing later that the motion to annotate attorney's lien was a wrong
Moreover, the interest or claim of Atty. Fernandez in the lots in question
remedy, as it was not within the purview of Section 37, Rule 138 of the
arose long after the original registration which took place many years
Revised Rules of Court, but before the same was denied by the trial court,
ago. And, there is no other provision of the Land Registration Act under
adverse claimant filed an affidavit of adverse claim on July 19, 1965 with
which the interest or claim may be registered except as an adverse claim
the Register of Deeds of Cebu (p. 14, ROA; p. 13, rec.). By virtue of the
under Section 110 thereof
registration of said affidavit, the adverse claim for one-half (½) of the lots
covered by the June 10, 1961 document was annotated on TCT No. 31841. The one-half (½) interest of Atty. Fernandez in the lots in question should
therefore be respected. Indeed, he has a better right than petitioner-
Notwithstanding the annotation of the adverse claim, petitioner-
spouses, Juan Larrazabal and Marta C. de Larrazabal. They purchased their
spouses Maximo Abarquez and Anastacia Cabigas conveyed by deed of
two-thirds (2/3) interest in the lots in question with the knowledge of the
absolute sale on July 29, 1965 two-thirds (2/3) of the lands covered by TCT
adverse claim of Atty. Fernandez. The adverse claim was annotated on the
No. 31841 to petitioner-spouses Juan Larrazabal and Marta C.
old transfer certificate of title and was later annotated on the new transfer
de Larrazabal. When the new transfer certificate of title No. 32996 was
certificate of title issued to them
issued, the annotation of adverse claim on TCT No. 31841 necessarily had to
appear on the new transfer certificate of title. This adverse claim on TCT
No. 32996 became the subject of cancellation proceedings filed by herein
petitioner-spouses on March 7, 1966 with the Court of First Instance
of Cebu (p. 2, ROA; p. 13, rec.). The adverse claimant, Atty. Alberto B.
Fernandez, filed his opposition to the petition for cancellation on March 18,
1966 (p. 20, ROA; p. 13, rec.).
Issue:
Whether or not the contract for a contingent fee, basis of the interest of
Atty. Fernandez, is prohibited by Article 1491 of the New Civil Code and
Canon 13 of the Canons of Professional Ethics.- Yes
Ruling:
Petitioners contend that a contract for a contingent fee violates Article 1491
because it involves an assignment of a property subject of litigation.
Case Digest 2018
ROSARIO VDA. DE LAIG, ROMEO, JOSE, NESTOR and BENITO, JR., all 1. At the time of the sale of the land in question by Petre Galero to Atty.
surnamed LAIG, minors, assisted by Rosario Vda. de Laig, Their Benito K. Laig in 1948, the latter was a boarder of Carmen Verzo in her
Guardian Ad Litem vs. COURT OF APPEALS, CARMEN VERZO, PETRE house. As a matter of fact, Atty. Laig maintained his law office, and received
GALERO, THE REGISTER OF DEEDS OF CAMARINES NORTE, THE his clients (among whom was Petre Galero). Atty. Benito K. Laig, as her
DIRECTOR OF LANDS, AND THE SECRETARY OF AGRICULTURE AND boarder, must have mentioned to Carmen Verzo, his landlady, the land sold
NATURAL RESOURCES to him by Galero. By the same token, Carmen Verzo must have known such
sale; because transactions of this sort in the rural areas do not escape the
Bad faith is a state of mind indicated by acts and circumstances and is knowledge of persons living under one roof with a party to the document,
provable by CIRCUMSTANTIAL evidence. Respondent Carmen Verzo was not a more especially when there exists between such persons and party the
purchaser in good faith, she could never have been a registrant in good faith peculiarly intimate relationship of landlady and boarder in a small town.
of the deed of sale of said land in her favor. Consequently, she cannot claim
the protection accorded to a registrant in good faith by paragraph 2, Article
2. One of the witnesses to the deed of sale executed by and between Atty.
1544 of the New Civil Code.
Laig and Petre Galero was Rosario Verzo Villarente, Carmen Verzo's very
own sister who was at that time living with her in her house, where Atty.
Facts: Petre Galero obtained a homestead patent in Camarines Norte. He
Laig then boarded. Rosario Verzo Villarente, being in the household of her
sold the land to Maria Escuta. . Escuta in turn, sold the same land to
sister Carmen Verzo, must have likewise informed the latter about the deed
Florencio Caramoan in December, 1942, Later, however, Petre Galero,
of sale executed by Petre in favor of Atty. Laig which she signed as witness.
through proper court action, and with Atty. Benito K. Laig — the deceased
A formal act, such as witnessing a deed of sale, is not a common daily
husband of herein petitioner Rosario Vda. de Laig — as counsel recovered
experience. Laymen, especially rural folk like Rosario Verzo Villarente, who
the land, the court having been convinced that its alienation violated
participate in the same, ordinarily regard the same as a memorable event. It
Section 118 of the Public Land Act, which reads:
is not therefore unreasonable to assume that her significant role as an
No alienation, transfer, or conveyance of any homestead after five
instrumental witness to the deed of sale between Atty. Laig and Petre
years and before twenty-five years after issuance of title shall be
Galero must have moved Rosario to confide to her sister Carmen the fact of
valid without the approval of the Secretary of Agriculture and
her participation therein.
Commerce, which approval shall not be denied except on
constitutional and legal grounds.
3. Petre Galero was able to procure another copy of the duplicate of Original
Consequently, a deed of sale was executed by and between Petre Galero as Certificate of Title No. 1097 covering the disputed land through the aid of
vendor and Atty. Benito K. Laig as vendee, whereby the former sold to the Atty. Jose Lapak who is the son of the respondent register of deeds,
latter the land in question with its improvements, for P1,500.00 plus Baldomero Lapak, under clearly dubious circumstances. For one, it was
attorney's fees due Atty. Laig for his legal services as counsel for Galero in done without observing the required formalities of notice and hearing (Sec.
the successful reconveyance case. This deed of sale was executed in the 117, Act No. 496). Secondly, it was an over in a record-setting period of
house of Carmen Verzo and witnessed by one Claudio Muratalla and ONLY four [41 days. Add to this the fact that respondent register of deeds
Rosario Verzo Villarente (p. 87, back, rec., People vs. Petre Galero, Baldomero Lapak issued said duplicate of OCT 1097 despite his having
supra), sister of herein respondent Carmen Verzo, who was living with received about eight months earlier and taken note on November 12, 1951
her in the same house at that time. of the letter of petitioner Rosario Vda. de Laig inquiring about the status of
the title to the questioned land which was purchased by her husband from
Unfortunately, vendee Atty. Benito K. Laig failed to solicit the approval of Petre Galero; and the process, indeed, reeks with an unpleasant scent. If
the Secretary of Agriculture and Natural Resources (then Secretary of Atty. Jose Lapak were not the son of respondent Baldomero Lapak, the
Agriculture and Commerce), as required by Section 118 of the Public Land latter as register of deeds would not have facilitated the issuance of the
Act, as amended. It was only after Atty. Laig's death in 1951 that his wife, duplicate copy of the title with such "scandalous haste." He should have
herein petitioner Rosario, noticed the deficiency. It was only in 1952 that informed his son, Atty. Lapak, and Petre Galero about the previous inquiry
the sale between Atty. Laig and Galero was approved by the Office of the of petitioner as early as November 5, 1951, to which he replied on
Director of Lands. November 12, 1951 that OCT No. 1097 was still intact.
Meanwhile, however, on July 15, 1952, Petre Galero, with the assistance of
Moreover, the expeditious disposal of the land in litigation by Petre Galero
Atty. Jose L. Lapak, son of respondent Register of Deeds Baldomero M.
to Carmen Verzo was done immediately after the death of Atty. Benito Laig,
Lapak sought in court the issuance of a second owner's duplicate copy of
and during the time that his wife Rosario Vda. de Laig, who was residing in
OCT No. 1097, claiming that his first duplicate of said OCT was lost during
faraway Manila, was seeking all legal means to have the title over the
World War 2. Upon issuance of the second owner’s duplicate on July 19,
property transferred to her name.
1952, Galero executed in favor of respondent Carmen Verzo a deed of sale
of the land in issue for the sum of P600.00.
On April 13, 1954, petitioner Vda. de Laig, together with her minor children, Such bad faith on the part of respondent Carmen Verzo and Baldomero
filed the present action, docketed as Civil Case No. 577 in the Court of First Lapak is further underscored by the fact that Atty. Jose Lapak himself (a)
Instance of Camarines Norte against respondents Carmen Verzo, Petre was the notary public before whom the deed of sale executed by and
Galero, the Director of Lands, the Register of Deeds of Camarines Norte and between Petre Galero and Carmen Verzo was acknowledged, and (b) was
the Secretary of Agriculture and Natural Resources praying for the the same lawyer who assisted Carmen Verzo in writing the Director of
annulment of the sale in favor of Carmen Verzo and the cancellation of the Lands and the Secretary of Agriculture and Natural Resources, enclosing
second owner's duplicate of Original Certificate of Title No. 1097 and therewith an affidavit also sworn before said Atty. Lapak, praying that the
Transfer Certificate of Title No. T-1055 by declaring the first OCT No. 1097 deed of sale be approved.
valid and effective or in the alternative, by ordering Carmen Verzo to
reconvey the land in question to petitioners, plus P5,000.00 by way of
This conspiracy among Petre Galero, register of deeds Baldomero Lapak, his
damages.
son Atty. Jose Lapak, and Carmen Verzo, could not have been known to
petitioner Rosario Vda. de Laig, who was then as now, residing in Manila.
Issue: Who between petitioner Vda. de Laig and respondent Carmen Verzo
should be considered as the rightful owner of the land in question?
4. Carmen Verzo was familiar with the property in dispute and with the
Ruling: Petitioner Vda. De Laig should be considered as the rightful previous legal battle over the same. In fact in her special defense, she stated
owner of the land. that she gave sums of money to Petre Galero to enable him to institute Civil
Case No. 164-R-14 entitled "Petre Galero vs. Macario Escuta and Florendo
Caramoan," for the recovery of said parcel of land. Knowing that said case
The records reveal that respondent Carmen Verzo was not in good faith
was for the reconveyance from defendants therein of the land in issue and
when she facilitated the registration of her deed of sale. The following
that Atty. Laig was the counsel of Petre Galero, Carmen Verzo must have
indicia of bad faith characterized NOT ONLY her act of registering her deed
known likewise that a torrens title to the same was existing and intact and
of sale, BUT ALSO her purchase of the disputed realty:
Case Digest 2018
the same was delivered by Petre to Atty. Laig as the buyer of the land. And if
she inquired from the wife of Atty. Laig, which was incumbent upon her as
she was aware of the antecedent circumstances, she would have been told
by petitioner Rosario Vda. de Laig that the owner's copy of the original
certificate of title was then in her possession Respondent Carmen Verzo
could not pretend that she believed that said owner's duplicate was lost
during the war because Civil Case No. 164-R-14 involving the land in point
was instituted only AFTER the war and the owner 's duplicate copy of the
title was intact and returned to Petre after he won in 1948 the suit for
reconveyance. She could have also asked about said title the first buyer,
Florencio Caramoan, who was ordered by the court to reconvey the land
and return the owner's duplicate of the to title.
5. Prior to the sale in her favor, Carmen Verzo knew that the disputed
property belongs to Atty. Laig, because whenever Atty. Laig was in Manila,
Carmen Verzo attended to said property and communicated with Atty. Laig
in Manila about his share of the harvest from the land. How can Carmen
Verzo speak of Atty. Laig's share of the harvest without first knowing that
the land from where the crop was harvested was owned by Atty. Benito
Laig? Bad faith can be demonstrated, not ONLY by direct proof, but also by
substantial evidence.
Bad faith is a state of mind indicated by acts and

circumstances and is provable by CIRCUMSTANTIAL ...
evidence.
Logically, therefore, since, as has already been earlier shown, respondent

Carmen Verzo was not a purchaser in good faith, she could never have been
a registrant in good faith of the deed of sale of said land in her favor.
Consequently, she cannot claim the protection accorded to a registrant in
good faith by paragraph 2, Article 1544 of the New Civil Code.
Finally, since there is no valid inscription to speak of in the present case, the
applicable provision of law is paragraph 3, Article 1544, New Civil Code
(Carbonell vs. Hon. Court of Appeals, supra), which states:
Should there be no insciption, the ownership shall

pertain to the person who in good faith was first in the
possession; and, in the ab thereat to the person who
presents the oldest title, provided there is good faith
(emphasis supplied).
In the present case, the fact of Atty. Benito Laig's having been the first
possessor in good faith of the property in issue was never disputed by
respondent Carmen Verzo.
Moreover, the deed of sale in favor of the late Atty. Benito Laig was executed
on June 1, 1948, over 4 years earlier than the deed of sale executed on July
19, 1952 in favor of respondent Carmen Verzo.
Case Digest 2018
THE HEIRS OF VICTORINO SARILI, NAMELY: ISABEL A. SARILI,* The general rule is that every person dealing with registered land may
MELENCIA** S. MAXIMO, ALBERTO A. SARILI, IMELDA S. HIDALGO, all safely rely on the correctness of the certificate of title issued therefor and
herein represented by CELSO A. SARILI vs. PEDRO F. LAGROSA, the law will in no way oblige him to go beyond the certificate to determine
represented in this act by his Attorney-in-Fact LOURDES LABIOS the condition of the property. Where there is nothing in the certificate of
MOJICA title to indicate any cloud or vice in the ownership of the property, or any
G.R. No. 193517, January 15, 2014 encumbrance thereon, the purchaser is not required to explore further than
what the Torrens Title upon its face indicates in quest for any hidden
The strength of the buyer’s inquiry on the seller’s capacity or legal authority defects or inchoate right that may subsequently defeat his right thereto. 34
to sell depends on the proof of capacity of the seller. If the proof of capacity
consists of a special power of attorney duly notarized, mere inspection of the
However, a higher degree of prudence is required from one who buys from
face of such public document already constitutes sufficient inquiry. If no such
a person who is not the registered owner, although the land object of the
special power of attorney is provided or there is one but there appears to be
transaction is registered. In such a case, the buyer is expected to examine
flaws in its notarial acknowledgment, mere inspection of the document will
not only the certificate of title but all factual circumstances necessary for
not do; the buyer must show that his investigation went beyond the document
him to determine if there are any flaws in the title of the transferor. 35 The
and into the circumstances of its execution.
buyer also has the duty to ascertain the identity of the person with whom
he is dealing with and the latter’s legal authority to convey the property. 36
Facts: Respondent claimed that he is a resident of California, USA, and
that during his vacation in the Philippines, he discovered that a new
certificate of title to the subject property was issued by the RD in the name The strength of the buyer’s inquiry on the seller’s capacity or legal authority
of Victorino married to Isabel Amparo (Isabel) by virtue of a falsified Deed to sell depends on the proof of capacity of the seller. If the proof of capacity
of Absolute Sale purportedly executed by him and his wife, Amelia U. consists of a special power of attorney duly notarized, mere inspection of
Lagrosa (Amelia). He averred that the falsification of the said deed of sale the face of such public document already constitutes sufficient inquiry. If no
was a result of the fraudulent, illegal, and malicious acts committed by Sps. such special power of attorney is provided or there is one but there appears
Sarili and the RD in order to acquire the subject property and, as such, to be flaws in its notarial acknowledgment, mere inspection of the
prayed for the annulment of TCT No. 262218, and that Sps. Sarili deliver to document will not do; the buyer must show that his investigation went
him the possession of the subject property, or, in the alternative, that Sps. beyond the document and into the circumstances of its execution. 37
Sarili and the RD jointly and severally pay him the amount of ₱1,000,000.00,
including moral damages as well as attorney’s fees.10
In the present case, it is undisputed that Sps. Sarili purchased the subject
property from Ramos on the strength of the latter’s ostensible authority to
In their answer, Sps. Sarili maintained that they are innocent purchasers for
sell under the subject SPA. The said document, however, readily indicates
value, having purchased the subject property from Ramon B. Rodriguez
flaws in its notarial acknowledgment since the respondent’s community tax
(Ramon), who possessed and presented a Special Power of Attorney
certificate (CTC) number was not indicated thereon. Under the governing
(subject SPA) to sell/dispose of the same, and, in such capacity, executed a
rule on notarial acknowledgments at that time, 38 i.e., Section 163(a) of
Deed of Absolute Sale dated November 20, 1992 (November 20, 1992 deed
Republic Act No. 7160, otherwise known as the "Local Government Code of
of sale) conveying the said property in their favor. In this relation, they
1991," when an individual subject to the community tax acknowledges any
denied any participation in the preparation of the February 16, 1978 deed
document before a notary public, it shall be the duty of the administering
of sale, which may have been merely devised by the "fixer" they hired to
officer to require such individual to exhibit the community tax
facilitate the issuance of the title in their names. Further, they interposed a
certificate.39 Despite this irregularity, however, Sps. Sarili failed to show that
counterclaim for moral and exemplary damages, as well as attorney’s fees,
they conducted an investigation beyond the subject SPA and into the
for the filing of the baseless suit.
circumstances of its execution as required by prevailing jurisprudence.
Hence, Sps. Sarili cannot be considered as innocent purchasers for value.
During the pendency of the proceedings, Victorino passed away and was
substituted by his heirs, herein petitioners.
The defective notarization of the subject SPA also means that the said
Issue: WON Sps. Sarili can be considered as innocent purchasers for document should be treated as a private document and thus examined
value? under the parameters of Section 20, Rule 132 of the Rules of Court which
provides that "before any private document offered as authentic is received
Ruling: NO. in evidence, its due execution and authenticity must be proved either: (a) by
anyone who saw the document executed or written; or (b) by evidence of
Petitioners essentially argue that regardless of the fictitious February 16, the genuineness of the signature or handwriting of the maker x x x." Settled
1978 deed of sale, there was still a valid conveyance of the subject property is the rule that a defective notarization will strip the document of its public
to Sps. Sarili who relied on the authority of Ramos (as per the subject SPA) character and reduce it to a private instrument, and the evidentiary
to sell the same. They posit that the due execution of the subject SPA standard of its validity shall be based on preponderance of evidence. 40
between respondent and Ramon and, subsequently, the November 20, 1992
deed of sale between Victorino and Ramon were duly established facts and
The due execution and authenticity of the subject SPA are of great
that from the authenticity and genuineness of these documents, a valid
significance in determining the validity of the sale entered into by Victorino
conveyance of the subject land from respondent to Victorino had leaned
and Ramon since the latter only claims to be the agent of the purported
upon.32
seller (i.e., respondent). Article 1874 of the Civil Code provides that "[w]hen
a sale of a piece of land or any interest therein is through an agent, the
The Court is not persuaded. authority of the latter shall be in writing; otherwise, the sale shall be void."
In other words, if the subject SPA was not proven to be duly executed and
authentic, then it cannot be said that the foregoing requirement had been
It is well-settled that even if the procurement of a certificate of title was
complied with; hence, the sale would be void.
tainted with fraud and misrepresentation, such defective title may be the
source of a completely legal and valid title in the hands of an innocent
purchaser for value. Where innocent third persons, relying on the After a judicious review of the case, taking into consideration the divergent
correctness of the certificate of title thus issued, acquire rights over the findings of the RTC and the CA on the matter, 41 the Court holds that the due
property, the court cannot disregard such rights and order the total execution and authenticity of the subject SPA were not sufficiently
cancellation of the certificate. The effect of such an outright cancellation established under Section 20, Rule 132 of the Rules of Court as above-cited.
would be to impair public confidence in the certificate of title, for everyone
dealing with property registered under the Torrens system would have to
While Ramon identified the signature of respondent on the subject SPA
inquire in every instance whether the title has been regularly or irregularly
based on his alleged familiarity with the latter’s signature, 42 he, however,
issued. This is contrary to the evident purpose of the law. 33
stated no basis for his identification of the signatures of respondent’s wife
Amelia and the witness, Evangeline F. Murral, 43 and even failed to identify
Case Digest 2018
the other witness,44 who were also signatories to the said document. In

other words, no evidence was presented to authenticate the signatures of
the other signatories of the subject SPA outside from respondent. 45
Besides, as the CA correctly observed, respondent’s signature appearing on

the subject SPA is not similar46 to his genuine signature appearing in the
November 25, 1999 SPA in favor of Lourdes, 47 especially the signature
appearing on the left margin of the first page.48
Unrebutted too is the testimony of respondent who, during trial, attested to

the fact that he and his wife, Amelia, had immigrated to the USA since 1968
and therefore could not have signed the subject SPA due to their absence. 49
Further, records show that the notary public, Atty. Ramon S. Untalan, failed
to justify why he did not require the presentation of respondent’s CTC or
any other competent proof of the identity of the person who appeared
before him to acknowledge the subject SPA as respondent’s free and
voluntary act and deed despite the fact that he did not personally know the
latter and that he met him for the first time during the notarization. 50 He
merely relied on the representations of the person before him 51 and the
bank officer who accompanied the latter to his office, 52 and further
explained that the reason for the omission of the CTC was "because in [a]
prior document, [respondent] has probably given us already his residence
certificate."53 This "prior document," was not, however, presented during
the proceedings below, nor the CTC number ever identified.
Thus, in light of the totality of evidence at hand, the Court agrees with the
CA’s conclusion that respondent was able to preponderate his claims of
forgery against the subject SPA.54 In view of its invalidity, the November 20,
1992 sale relied on by Sps. Sarili to prove their title to the subject property
is therefore void.1âwphi1
At this juncture, it is well to note that it was, in fact, the February 16, 1978
deed of sale which – as the CA found – was actually the source of the
issuance of TCT No. 262218. Nonetheless, this document was admitted to be
also a forgery.55 Since Sps. Sarili’s claim over the subject property is based
on forged documents, no valid title had been transferred to them (and, in
turn, to petitioners). Verily, when the instrument presented is forged, even
if accompanied by the owner’s duplicate certificate of title, the registered
owner does not thereby lose his title, and neither does the assignee in the
forged deed acquire any right or title to the property. 56 Accordingly, TCT No.
262218 in the name of Victorino married to Isabel should be annulled,
while TCT No. 55979 in the name of respondent should be reinstated.
Anent the award of moral damages, suffice it to say that the dispute over the
subject property had caused respondent serious anxiety, mental anguish
and sleepless nights, thereby justifying the aforesaid award. 57 Likewise,
since respondent was constrained to engage the services of counsel to file
this suit and defend his interests, the awards of attorney’s fees and litigation
expenses are also sustained.58
The Court, however, finds a need to remand the case to the court a quo in
order to determine the rights and obligations of the parties with respect to
the house Sps. Sarili had built 59 on the subject property in bad faith in
accordance with Article 449 in relation to Articles 450, 451, 452, and the
first paragraph of Article 546 of the Civil Code.
Case Digest 2018
Topic: Equitable Mortgage Said Jose A. Arches elected to consolidate without

alternatively opting to foreclose. When he opted to
HEIRS OF JOSE A. ARCHES vs. MARIA B. VDA. DE DIAZ consolidate and prosecuted his option to a final
G.R. No. L-27136 April 30, 1973 determination he was thereby barred from pursuing
the other alternative and inconsistent remedy of
foreclosure of mortgage or collection of debt.
Facts: On July 6, 1966 the heirs of Jose A. Arches filed a complaint
against Maria B. Vda. de Diaz in the court a quo, alleging inter alia: that on
January 21, 1954 the defendant executed in favor of the late Jose A. Arches a
deed of sale with pacto de retro * over a parcel of land known as Lot No. Issue: WON the plaintiffs are barred from constituting any actions
2706 of the Cadastral Survey of Capiz for and in consideration of against the defendant?
P12,500.00 that Jose A. Arches during his lifetime filed a petition on
November 20, 1958 in Cadastral Case No. 6, L.R.C. Record No. 338 of the Ruling: NO.
Court of First Instance of Capiz, to consolidate ownership over the lot; that
the defendant opposed the petition alleging among other things that the Having failed to obtain a reconsideration of the order of dismissal, the
said deed of sale with pacto de retro did not express the true intention of plaintiffs instituted the instant appeal.
the parties, which was merely to constitute a mortgage on the proper
security for a loan; that after hearing the case on the merit trial court, in its We find the appeal well taken. In the first place, res judicata as a ground to
order dated March 8, 1960, denied the petition holding in effect that the dismiss was waived by the appellee when she failed to include it in her
contract was an equitable mortgage; that Jose A. Arches appealed to the motion for that purpose. Rule 15, Section 8, of the Rules of Court provides
Court of Appeals, which on December 29, 1964 rendered judgment that "(A) motion attacking a pleading or proceeding shall include all
affirming the order of the trial court; that Jose A. Arches filed in this Court a objections then available, and all objections not so included shall be deemed
petition for certiorari to review the decision of the appellate court, but in a waived." Secondly, the decision of the cadastral court, holding in effect that
resolution dated March 29, 1965, which became final and executory on May the sale with pacto de retro was an equitable mortgage and consequently
29, 1965, this Court dismissed the petition on the ground that the issues dismissing the petition to consolidate ownership, did not constitute an
involved were factual; that in addition to the sum of P12,500.00, the adjudication of the right to foreclose the mortgage or to collect the
consideration mentioned in the deed of sale a retro, Jose A. Arches spent indebtedness. In the case of Correa vs. Mateo and Icasiano,1 wherein an
P1,543.70 in connection with the reconstitution of the title to Lot No. 2706 unrecorded pacto de retro sale was construed as an equitable mortgage, it
in the name of the vendor and in paying the real estate taxes on said lot for was ruled that the plaintiff had the right "within sixty days after final
the years 1951 to 1960; that Jose A. Arches died on August 18, 1965, before judgment, for a failure to pay the amount due and owing him, to foreclose
he could file an action in court for the collection of the aforestated sums his mortgage in a proper proceeding and sell all or any part of the ten
from the defendant; that on May 31, 1966, the petitioners, as forced heirs of parcels of land to satisfy his debt." In effect this Court recognized the right
the deceased Jose A. Arches, demanded by registered letter from defendant of the plaintiff to enforce his lien in a separate proceeding notwithstanding
the payment of the sum of P12,500.00, the consideration mentioned in the the fact that he had failed to obtain judgment declaring him the sole and
sale a retro, and reimbursement of the sum of P1,543.70; and that the absolute owner of the parcels of land in question.
defendant failed and refused to pay. They, therefore, prayed among things
that the defendant be ordered to pay the aforementioned sums, plus The law abhors injustice. It would be unjust in this case to allow the
damages. defendant to escape payment of his debt and, worse still, to rationalize such
a result by his very claim that he is a debtor and not, as the plaintiff says, a
vendor of property in favor of the latter. Strictly speaking, where the
Instead of answering the complaint the defendant moved to dismiss it on
petition of the vendee in a pacto de retro sale is for a judicial order pursuant
the ground that the first cause of action recovery of the sum of P12,500.00
to Article 1607 of the Civil Code, so that consolidation of ownership by
was barred by the statute limitations and that the second cause of action for
virtue of the failure of the vendor to redeem may be recorded in the
reimbursement of the sum of P1,543.70, standing alone not within the
Registry of Property, the right of action to foreclose the mortgage or to
jurisdiction of the trial court. The plaintiffs filed their opposition. The court
collect the indebtedness arises from the judgment of the court declaring the
overruled the plea of prescription, stating that the ten-year prescriptive
contract as equitable mortgage. Although an alternative prayer to this effect
commenced on August 29, 1965, when the resolution of this Court
may be made in the petition, the same cannot but be conditional, that is,
dismissing the petition for certiorari filed by the late Jose A. Arches became
only in the event such a declaration made, contrary to the plaintiff's claim
final and executory, and not from January 21, 1955, the date the one-year
and the principal relief he seeks. His failure to make that alternative prayer,
period of repurchase expired, as claimed by the defendant. The defendant
and the failure of the court to grant it in the judgment dismissing the
moved to reconsider, alleging res judicata and multiplicity of suits as
petition, should not be considered as a bar to collecting the indebtedness in
additional grounds for dismissal. In an order dated September 8, 1966, the
a proper action for that purpose.
trial court set aside its previous order and dismissed the complaint. Said the
court:
Wherefore, the orders appealed from are hereby reversed and the case
remanded to the trial court for further proceedings. Costs against
When an action is barred by a prior judgment, by res defendant-appellee.
judicata and estoppel, such action in effect is devoid of
cause. Failure to specifically invoke it in the motion to
dismiss does not operate as waiver or abandonment
thereof. This should be more so, inasmuch as the facts
are apparent from the complaint itself.
For it appears that when the late Jose A. Arches, father

and predecessor in interest of plaintiffs herein,
petitioned this Court on November 20, 1958, to
consolidate in his name ownership and title over Lot
2706, Capiz Cadastre, by virtue of the alleged sale a
retro executed by defendant herein in his favor on
January 21, 1954, with reservation of vendor's right to
repurchase in one year, said Jose A. Arches, had two
remedies, inconsistent though they certainly were —
ROCKVILLE EXCEL INTERNATIONAL EXIM CORPORATION vs. SPOUSES
(a) to consolidate title and ownership, and (b) to
OLIGARIO CULLA and BERNARDITA MIRANDA
foreclose in the event the deed of sale a retro be
G.R. No. 155716, October 2, 2009
declared one of equitable mortgage.
Case Digest 2018
For the presumption of an equitable mortgage to arise under Article 1602, (4) When the purchaser retains for
two (2) requisites must concur: (a) that the parties entered into a contract himself a part of the purchase price;
denominated as a contract of sale; and, (b) that their intention was to secure
an existing debt by way of a mortgage. Any of the circumstances laid out in
(5) When the vendor binds himself to pay
Article 1602, not the concurrence nor an overwhelming number of the
the taxes on the thing sold;
enumerated circumstances, is sufficient to support the conclusion that a
contract of sale is in fact an equitable mortgage.
(6) In any other case where it may be
Facts: The spouses Oligario and Bernardita Culla mortgaged their fairly inferred that the real intention of the parties
parcel of land to PS Bank to secure a loan of 1, 400,000.00. . To prevent the is that the transaction shall secure the payment of
foreclosure, Oligario approached Rockville represented by its president and a debt or the performance of any other obligation.
chairman, Diana Young for financial assistance. Rockville accommodated
Oligarios request and extended him a loan of P1,400,000.00. This amount
In any of the foregoing cases, any money,
was increased by P600,000.00 for the cash advances Oligario requested, for
fruits, or other benefit to be received by the vendee as
a total loan amount of P2,000,000.00.
rent or otherwise shall be considered as interest which
shall be subject to the usury laws. [Emphasis
According to Rockville, when Oligario failed to pay the P2,000,000.00 loan
supplied.]
after repeated demands and promises to pay, the Sps. Culla agreed to pay
their indebtedness by selling to Rockville another property the spouses
owned in Brgy. Calicanto, Batangas City (property). Since a survey of the The provisions of Article 1602 shall also apply to a contract
surrounding properties revealed that the property is worth more than the purporting to be an absolute sale.[10]
Sps. Cullas P2,000,000.00 loan, the parties agreed to fix the purchase price
at P3,500,000.00. As narrated by Rockville, it accepted the offer for a dacion For the presumption of an equitable mortgage to arise under
en pago; on June 25, 1994, Rockville and Oligario executed a Deed of Article 1602, two (2) requisites must concur: (a) that the parties entered
Absolute Sale over the property. While the property was a conjugal into a contract denominated as a contract of sale; and, (b) that their
property of the Sps. Culla, only Oligario signed the Deed of Absolute Sale. intention was to secure an existing debt by way of a mortgage. Any of the
Rockville asserted that, by agreement with the Sps. Culla, Rockvillewould circumstances laid out in Article 1602, not the concurrence nor an
pay the additional P1,500,000.00 after Bernardita affixes her signature to overwhelming number of the enumerated circumstances, is sufficient to
the Deed of Absolute Sale. support the conclusion that a contract of sale is in fact an equitable
mortgage.[11] In several cases, we have not hesitated to declare a purported
However, when Bernardita continued to refuse to sign the Deed of Absolute contract of sale to be an equitable mortgage based solely on one of the
Sale, Rockville caused the annotation of an adverse claim on TCT No. T- enumerated circumstances under Article 1602. [12] This approach follows
19538 in order to protect its interest in the property. Furthermore, the rule that when doubt exists on the nature of the parties transaction, the
Rockvilletried to transfer the title of the property in its name but the law favors the least transmission of property rights. [13]
Registry of Deeds refused to carry out the transfer, given the absence of
Bernarditas signature in the Deed of Absolute Sale. Indicators of equitable mortgage

Then, Rockville filed a complaint for Specific Performance and Damages In the present case, three attendant circumstances indicate that
before the Regional Trial Court (RTC) of Batangas City, Branch 2 against the the purported sale was in fact an equitable mortgage. First, the Sps. Culla
Sps. Culla, praying that the lower court order Bernardita to sign the Deed of retained possession of the property. Second, Rockville kept a part of the
Absolute Sale or, in the alternative, to authorize the sale even without purchase price. Third, as previously discussed, Rockville continued to give
Bernarditas signature. the Sps. Culla extensions on the period to repay their loan even after the
parties allegedly agreed to a dacion en pago. These circumstances, coupled
Issue: WON the deed of absolute sale is really an absolute sale of real with the clear and unequivocal testimonies of Oligario and Bernardita that
property or an equitable mortgage? the purpose of the Deed of Absolute Sale was merely to guarantee their
loan, clearly reveal the parties true intention to execute an equitable
Ruling: Equitable mortgage mortgage and not a contract of sale.

An equitable mortgage has been defined as one which although That a contract where the vendor remains in physical possession
lacking in some formality, or form or words, or other requisites demanded of the land, as lessee or otherwise, is an equitable mortgage is well-settled.
by a statute, nevertheless reveals the intention of the parties to charge real [14]
The reason for this rule lies in the legal reality that in a contract of sale,
property as security for a debt, there being no impossibility nor the legal title to the property is immediately transferred to the vendee;
anything contrary to law in this intent.[9] retention by the vendor of the possession of the property is inconsistent
with the vendees acquisition of ownership under a true sale. [15] It discloses,
A contract of sale is presumed to be an equitable mortgage when in the alleged vendee, a lack of interest in the property that belies the
any of the following circumstances, enumerated in Article 1602 of the Civil truthfulness of the sale.[16]
Code, is present:
According to Rockville, it took possession of the property, albeit
Art. 1602. The contract shall be presumed constructively and not through actual occupation. Rockville contends, too,
to be an equitable mortgage, in any of the following that its possession of the title to the property and its subsequent attempt to
cases: register the property in its name are clear indicators of its intent to enforce
the contract of sale.
(1) When the price of a sale with right to We cannot agree with these positions. In the first place, the Sps. Culla
repurchase is unusually inadequate; retained actual possession of the property and this was never
disputed. Rockville itself admits this in its petition, but claims in
(2) When the vendor remains in justification that since the property is contiguous to the site of the Sps.
possession as lessee or otherwise; Cullas family home, it would have been impossible for Rockville to obtain
actual possession of the property. Regardless of where the property is
located, however, if the transaction had really been a sale
(3) When upon or after the expiration of the as Rockville claimed, it should have asserted its rights for the immediate
right to repurchase another instrument extending the delivery and possession of the lot instead of allowing the Sps. Culla to freely
period of redemption or granting a new period is stay in the premises. Its failure to do so suggests that Rockville did not truly
executed; intend to enforce the contract of sale.
Case Digest 2018
Moreover, we observe that while Rockville did take steps to register the

property in its name, it did so more than two years after the Deed of
Absolute Sale was executed, and only after Oligarios continued failure to
pay the P2,000,000.00 loan.

In addition, Rockville admitted that it never paid
the P1,500,000.00 balance to the Sps. Culla. As found by the RTC,
while Rockville claims that it deposited this amount with May Bank of
Malaysia and notified Oligario of the deposit, no evidence was presented to
support this claim. Besides, even if this contention had been true, the
deposit in a foreign bank was neither a valid tender of payment nor an
effective consignation.

Lastly, the numerous extensions granted by Rockville to Oligario to pay his
debt after the execution of the Deed of Sale convince us that the parties
never intended to enter into a contract of sale; instead, the intent was
merely to secure the payment of Oligarios loan.
All told, we see no reason to depart from the findings and

conclusions of both the trial court and the Court of Appeals.
Case Digest 2018
DOLORES ADORA MACASLANG vs. RENATO AND MELBA ZAMORA

G.R. No. 156375, May 30, 2011 Exhibit E, which is a letter dated January 21, 1999, shows the real
transaction between the parties in their case. To reiterate, the consideration
Article 1602 of the Civil Code enumerates the instances when a contract, in the deed of sale (Exhibit A) is P100,000.00 but in their letter (Exhibit E)
regardless of its nomenclature, may be presumed to be an equitable she is already demanding the sum of P1,600,000.00 because somebody was
mortgage, namely: going to buy it for P2,000,000.00.
(a) When the price of a sale with right to repurchase is unusually
inadequate; There are indications that point out that the real transaction between the
(b) When the vendor remains in possession as lessee or otherwise; parties is one of equitable mortgage and not sale.
(c) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or Despite holding herein that the respondents demand to vacate sufficed, we
granting a new period is executed; uphold the result of the RTC decision in favor of the petitioner. This we do
(d)When the purchaser retains for himself a part of the purchase ,because the respondents Exhibit Cand Exhibit E, by demanding payment
price; from the petitioner, respectively,of P1,101,089.90 and P1,600,000.00,
(e)When the vendor binds himself to pay the taxes on the thing revealed the true nature of the transaction involving the property in
sold; and, question as one of equitable mortgage, not a sale.
(f) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the Our upholding of the result reached by the RTC rests on the following
payment of a debt or the performance of any other obligation. circumstances that tended to show that the petitioner had not really sold
the property to the respondents, contrary to the latters averments, namely:
Facts: the respondents filed a complaint for unlawful detainer in the MTCC,
alleging that the [petitioner] sold to [respondents] a residential land located (a)The petitioner, as the vendor, was paid the amount of only
in Sabang, DanaoCity and that the [petitioner] requested to be allowed to P100,000.00,[26] a price too inadequate in comparison with the
live in the house with a promise to vacate as soon as she would be able to sum of P1,600,000.00 demanded in Exhibit E;
find a new residence. They further alleged that despite their demand after a (b) The petitioner retained possession of the property despite
year, the petitioner failed or refused to vacate the premises. the supposed sale; and
(c) The deed of sale was executed as a result or by reason of the
Despite the due service of the summons and copy of the complaint, the loan the respondents extended to the petitioner, because they
petitioner did not file heranswer. The MTCC declared her in default upon still allowed the petitioner to redeem the property by paying her
the respondents motion to declare her in default, and proceeded to receive obligation under the loan.
the respondents oral testimony and documentary evidence. The MTCC
ruled against the petitioner. The RTC dismissed the action for failure to
Submissions of the petitioner further supported the findings of the RTC on
state a cause of action.
the equitable mortgage. Firstly, there was the earlier dated instrument
(deed of pacto de retro)involving the same property, albeit the
Issue: WON the transaction is a deed of sale or equitable mortgage?
consideration was only P480,000.00, executed between the petitioner as
vendor a retro and the respondent Renato Zamora as vendee a retro.[29]
Ruling: Equitable mortgage.
Secondly, there were two receipts for the payments the petitioner had made
to the respondents totaling P300,000.00. And, thirdly, the former secretary
The respondents cause of action for unlawful detainer was based on their
of respondent Melba Zamora executed an affidavit acknowledging that the
supposed right to possession resulting from their having acquired it
petitioner had already paid a total of P500,000.00 to the respondents. All
through sale.
these confirmed the petitioners claim that she remained the owner of the
property and was still entitled to its possession.
The RTCdismissed the complaint based on its following findings, to wit:
Article 1602 of the Civil Code enumerates the instances when a contract,
regardless of its nomenclature, may be presumed to be an equitable
In the case at bench, there is conflict between the allegation of the
mortgage, namely:
complaint and the document attached thereto.
Simply stated, plaintiff alleged that she bought the house of the defendant (a) When the price of a sale with right to repurchase is unusually
for P100,000.00 on September 10, 1997 as stated in an alleged Deed of inadequate;
Absolute Sale marked as Exhibit A to the complaint. Insofar as plaintiff is (b) When the vendor remains in possession as lessee or
concerned, the best evidence is the said Deed of Absolute Sale. otherwise;
(c) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or
The Court is surprised why in plaintiffs letter dated February 11, 1998,
granting a new period is executed;
marked as Exhibit C and attached to the same complaint, she demanded
(d)When the purchaser retains for himself a part of the purchase
from the defendant the whooping sum of P1,101,089.90. It must be
price;
remembered that this letter was written five (5) months after the deed of
(e)When the vendor binds himself to pay the taxes on the thing
absolute sale was executed.
sold; and,
(f) In any other case where it may be fairly inferred that the real
The same letter (Exhibit C) is not a letter of demand as contemplated by
intention of the parties is that the transaction shall secure the
law and jurisprudence. The plaintiff simply said that she will appreciate
payment of a debt or the performance of any other obligation.
payment per notarized document. There is no explanation what this
document is.
The circumstances earlier mentioned were, indeed, badges of an equitable
Plaintiffs letter dated April 28, 1998 (Exhibit D) contradicts her allegation mortgage within the context of Article 1602 of the Civil Code.
that she purchased the house and lot mentioned in the complaint. Exhibit D,
which is part of the pleading and a judicial admission clearly shows that the Nonetheless, the findings favorable to the petitioners ownership are
house and lot of the defendant was not sold but mortgaged. neitherfinally determinative of the title in the property, nor conclusive in
any other proceeding where ownership of the property involved herein
Again, for purposes of emphasis and clarity, a portion of the letter (Exhibit may be more fittingly adjudicated.Verily, where the cause of action in an
D) reads: ejectment suit is based on ownership of the property, the defense that the
This is to give notice that since the mortgage to your property defendantretainedtitle or ownership is a proper subject for determination
has long expired and that since the property is already in my by the MTC but only for the purpose of adjudicating the rightful possessor
name, I will be taking over the occupancy of said property two of the property. This is based on Rule 70 of the Rules of Court, viz:
(2) months from date of this letter.
Case Digest 2018
Section 16. Resolving defense of ownership. When the defendant raises the
defense of ownership in his pleadings and the question of possession
cannot be resolved without deciding the issue of ownership, the issue of
ownership shall be resolved only to determine the issue of possession.
Case Digest 2018
LOMISES ALUDOS, deceased, substituted by FLORA ALUDOS vs. (4) When the purchaser retains for himself a part of the
JOHNNY M. SUERTE purchase price;
G.R. No. 165285, June 18, 2012 (5) When the vendor binds himself to pay the taxes on the thing
sold;
An equitable mortgage has been defined as one which although lacking in (6) In any other case where it may be fairly inferred that the real
some formality, or form or words, or other requisites demanded by a statute, intention of the parties is that the transaction shall secure the
nevertheless reveals the intention of the parties to charge real property as payment of a debt or the performance of any other obligation.
security for a debt, there being no impossibility nor anything contrary to law
in this intent. In any of the foregoing cases, any money, fruits, or other benefit to be
received by the vendee as rent or otherwise shall be considered as interest
Facts: Lomises acquired from the Baguio City Government the right to which shall be subject to the usury laws.
occupy two stalls in the Hangar Market in Baguio City. Lomises entered into
an agreement with respondent Johnny M. Suerte for the transfer of all Based on Lomises allegations in his pleadings, we consider three
improvements and rights over the two market stalls (Stall Nos. 9 and 10) circumstances to determine whether his claim is well-supported. First,
for the amount of P260,000.00. Johnny gave a down payment of P45,000.00 Johnny was a mere college student dependent on his parents for support
to Lomises, who acknowledged receipt of the amount in a document. when the agreement was executed, and it was Johnnys mother, Domes, who
was the party actually interested in acquiring the market stalls.Second,
Johnny made a subsequent payment of P23,000.00; hence, a total of Lomises received only P48,000.00 of the P68,000.00 that Johnny claimed he
P68,000.00 of the P260,000.00 purchase price had been made as of 1984. gave as down payment; Lomises said that the P20,000.00 represented
Before full payment could be made, however, Lomises backed out of the interests on the loan. Third, Lomises retained possession of the market
agreement and returned the P68,000.00 to Domes and Jaime Suerte, the stalls even after the execution of the agreement.
mother and the father of Johnny, respectively.
Whether separately or taken together, these circumstances do not support
Johnny protested the return of his money, and insisted on the continuation a conclusion that the parties only intended to enter into a contract of loan.
and enforcement of his agreement with Lomises. When Lomises refused That Johnny was a mere student when the agreement was executed does
Johnnys protest, Johnny filed a complaint against Lomises before the not indicate that he had no financial capacity to pay the purchase price of
Regional Trial Court (RTC), Branch 7, Baguio City, for specific performance P260,000.00. At that time, Johnny was a 26-year old third year engineering
with damages, docketed as Civil Case No. 720-R. Johnny prayed that, after student who operated as a businessman as a sideline activity and who
due proceedings, judgment be rendered ordering Lomises to (1) accept the helped his family sell goods in the Hangar Market.[12]During trial, Johnny
payment of the balance of P192,000.00; and (2) execute a final deed of sale was asked where he was to get the funds to pay the P260,000.00 purchase
and/or transfer the improvements and rights over the two market stalls in price, and he said he would get a loan from his grandfather.[13] That he did
his favor. not have the full amount at the time the agreement was executed does not
necessarily negate his capacity to pay the purchase price, since he had 16
The RTC nullified the agreement between Johnny and Lomises for failure to months to complete the payment.Apart from Lomises bare claim that it was
secure the consent of the Baguio City Government to the agreement. The Johnnys mother, Domes, who was interested in acquiring his market stalls,
RTC found that Lomises was a mere lessee of the market stalls, and the we find no other evidence supporting the claim that Johnny was merely
Baguio City Government was the owner-lessor of the stalls. The CA rejected acting as a dummy for his mother.
Lomises claim that the true agreement was one of loan. The CA found that
there were two agreements entered into between Johnny and Lomises: one Lomises contends that of the P68,000.00 given by Johnny, he only received
was for the assignment of leasehold rights and the other was for the sale of P48,000.00, with the remaining P20,000.00 retained by Johnny as interest
the improvements on the market stalls. The CA agreed with the RTC that the on the loan. However, the testimonies of the witnesses presented during
assignment of the leasehold rights was void for lack of consent of the lessor, trial, including Lomises himself, negate this claim. Judge Rodolfo Rodrigo
the Baguio City Government. The sale of the improvements, however, was (RTC of Baguio City, Branch VII) asked Lomises lawyer, Atty. Lockey, if they
valid because these were Lomises private properties. For this reason, the CA deny receipt of the P68,000.00; Atty. Lockey said that they were not
remanded the case to the RTC to determine the value of the improvements denying receipt, and added that they had in fact returned the same amount.
on the two market stalls, existing at the time of the execution of the [14]Judge Rodrigo accurately summarized their point by stating that there
agreement. is no need to dispute whether the P68,000.00 was given, because if
[Lomises] tried to return that x x x he had received that.[15] Witness Atty.
Issue: WON the agreement was a contract of loan or an assignment of Albert Umaming said he counted the money before he drafted the October
leasehold rights and sale? 9, 1985 receipt evidencing the return; he said that Lomises returned
P68,000.00 in total.[16] Thus, if the transaction was indeed a loan and the
Ruling: Assignment of leasehold rights and sale of improvements. P20,000.00 interest was already prepaid by Lomises, the return of the full
amount of P68,000.00 by Lomises to Johnny (through his mother, Domes)
Lomises questions the nature of the agreement between him and Johnny, would not make sense.
insisting that it was a contract of loan, not an assignment of leasehold rights
and sale of improvements.In other words, what existed was an equitable That Lomises retained possession of the market stalls even after the
mortgage, as contemplated in Article 1602, in relation with Article 1604, of execution of his agreement with Johnny is also not an indication that the
the Civil Code. An equitable mortgage has been defined as one which true transaction between them was one of loan. Johnny had yet to complete
although lacking in some formality, or form or words, or other requisites his payment and, until Lomises decided to forego with their agreement, had
demanded by a statute, nevertheless reveals the intention of the parties to four more months to pay; until then, Lomises retained ownership and
charge real property as security for a debt, there being no impossibility nor possession of the market stalls.
anything contrary to law in this intent. Article 1602 of the Civil Code lists Lomises cannot feign ignorance of the import of the terms of the receipt of
down the circumstances that may indicate that a contract is an equitable September 8, 1984 by claiming that he was an illiterate old man. A witness
mortgage: (Ana Comnad) testified not only of the fact of the sale, but also that Lomises
daughter, Dolores, translated the terms of the agreement from English to
Ilocano for Lomises benefit;[18] Lomises himself admitted this fact.[19] If
Art. 1602. The contract shall be presumed to be an equitable mortgage, in
Lomises believed that the receipt of September 8, 1984 did not express the
any of the following cases:
parties true intent, he could have refused to sign it or subsequently
(1) When the price of a sale with right to repurchase is unusually
requested for a reformation of its terms. Lomises rejected the agreement
inadequate;
only after Johnny sought to enforce it.
(2) When the vendor remains in possession as lessee or
otherwise;
Hence, the CA was correct in characterizing the agreement between Johnny
(3) When upon or after the expiration of the right to repurchase
and Lomises as a sale of improvements and assignment of leasehold rights.
another instrument extending the period of redemption or
granting a new period is executed;
Case Digest 2018
Case Digest 2018
PABLO P. GARCIA vs. YOLANDA VALDEZ VILLAR pay their loan. Nowhere was it stated in the Deed that Galas could not opt to
G.R. No. 158891, June 27, 2012 sell the subject property to Villar, or to any other person. Such stipulation
would have been void anyway, as it is not allowed under Article 2130 of the
a mortgage is a real right, which follows the property, even after subsequent Civil Code, to wit:
transfers by the mortgagor. A registered mortgage lien is considered Art. 2130. A stipulation forbidding the owner from
inseparable from the property inasmuch as it is a right in rem. The sale or alienating the immovable mortgaged shall be void.
transfer of the mortgaged property cannot affect or release the mortgage;
thus the purchaser or transferee is necessarily bound to acknowledge and Prohibition on pactum commissorium
respect the encumbrance.In fact, under Article 2129 of the Civil Code, the Garcia claims that the stipulation appointing Villar, the mortgagee, as the
mortgage on the property may still be foreclosed despite the transfer mortgagors attorney-in-fact, to sell the property in case of default in the
payment of the loan, is in violation of the prohibition on pactum
Facts: commissorium, as stated under Article 2088 of the Civil Code, viz:
Galas, with her daughter, Ophelia G. Pingol (Pingol), as co-maker, Art. 2088. The creditor cannot appropriate the things
mortgaged the subject property to Yolanda Valdez Villar (Villar) as security given by way of pledge or mortgage, or dispose of
for a loan in the amount of Two Million Two Hundred Thousand Pesos them. Any stipulation to the contrary is null and void.
(P2,200,000.00). Galas, again with Pingol as her co-maker, mortgaged the
same subject property to Pablo P. Garcia (Garcia) to secure her loan of One The following are the elements of pactum commissorium:
Million Eight Hundred Thousand Pesos (P1,800,000.00) (1) There should be a property mortgaged by way of security for
the payment of the principal obligation; and
Galas sold the subject property to Villar for One Million Five Hundred (2) There should be a stipulation for automatic appropriation by
Thousand Pesos (P1,500,000.00), and declared in the Deed of Sale[9] that the creditor of the thing mortgaged in case of non-payment of the
such property was free and clear of all liens and encumbrances of any kind principal obligation within the stipulated period.[39]
whatsoever.
Villars purchase of the subject property did not violate the
Garcia filed a Petition for Mandamus with Damages[13] against Villar before prohibition on pactum commissorium. The power of attorney provision
the RTC, Branch 92 of Quezon City. Garcia subsequently amended his above did not provide that the ownership over the subject property would
petition to a Complaint for Foreclosure of Real Estate Mortgage with automatically pass to Villar upon Galass failure to pay the loan on
Damages.[14] Garcia alleged that when Villar purchased the subject time. What it granted was the mere appointment of Villar as attorney-in-
property, she acted in bad faith and with malice as she knowingly and fact, with authority to sell or otherwise dispose of the subject property, and
willfully disregarded the provisions on laws on judicial and extrajudicial to apply the proceeds to the payment of the loan. [40] This provision is
foreclosure of mortgaged property. Garcia further claimed that when Villar customary in mortgage contracts, and is in conformity with Article 2087 of
purchased the subject property, Galas was relieved of her contractual the Civil Code, which reads:
obligation and the characters of creditor and debtor were merged in the Art. 2087. It is also of the essence of these contracts
person of Villar. Therefore, Garcia argued, he, as the second mortgagee, was that when the principal obligation becomes due, the
subrogated to Villars original status as first mortgagee, which is the creditor things in which the pledge or mortgage consists may
with the right to foreclose. Garcia further asserted that he had demanded be alienated for the payment to the creditor.
payment from Villar, whose refusal compelled him to incur expenses in
filing an action in court. Galass decision to eventually sell the subject property to Villar for an
additional P1,500,000.00 was well within the scope of her rights as the
Villar, in her Answer, claimed that the complaint stated no cause of action owner of the subject property.The subject property was transferred to
and that the second mortgage was done in bad faith as it was without her Villar by virtue of another and separate contract, which is the Deed of
consent and knowledge. Villar alleged that she only discovered the second Sale. Garcia never alleged that the transfer of the subject property to Villar
mortgage when she had the Deed of Sale registered was automatic upon Galass failure to discharge her debt, or that the sale
was simulated to cover up such automatic transfer.
Issues: Propriety of Garcias action for foreclosure of mortgage
1. Whether or not the second mortgage to Garcia was valid; - YES
2. Whether or not the sale of the subject property to Villar was valid; -YES The real nature of a mortgage is described in Article 2126 of the Civil Code,
3. Whether or not the sale of the subject property to Villar was in to wit:
violation of the prohibition on pactum commissorium; - NO Art. 2126. The mortgage directly and
4. Whether or not Garcias action for foreclosure of mortgage on the immediately subjects the property upon which it is
subject property can prosper. - NO imposed, whoever the possessor may be, to the
fulfillment of the obligation for whose security it was
Ruling: Validity of second mortgage to Garcia and sale of subject constituted.
property to Villar
Simply put, a mortgage is a real right, which follows the property,
At the onset, this Court would like to address the validity of the even after subsequent transfers by the mortgagor. A registered mortgage
second mortgage to Garcia and the sale of the subject property to Villar. We lien is considered inseparable from the property inasmuch as it is a right
agree with the Court of Appeals that both are valid under the terms and in rem.[41]
conditions of the Deed of Real Estate Mortgage executed by Galas and Villar. The sale or transfer of the mortgaged property cannot affect or
release the mortgage; thus the purchaser or transferee is necessarily bound
While it is true that the annotation of the first mortgage to Villar to acknowledge and respect the encumbrance. [42] In fact, under Article 2129
on Galass TCT contained a restriction on further encumbrances without the of the Civil Code, the mortgage on the property may still be foreclosed
mortgagees prior consent, this restriction was nowhere to be found in the despite the transfer, viz:
Deed of Real Estate Mortgage. As this Deed became the basis for the
annotation on Galass title, its terms and conditions take precedence over Art. 2129. The creditor may claim from a
the standard, stamped annotation placed on her title. If it were the intention third person in possession of the mortgaged property,
of the parties to impose such restriction, they would have and should have the payment of the part of the credit secured by the
stipulated such in the Deed of Real Estate Mortgage itself. property which said third person possesses, in terms
and with the formalities which the law establishes.
Neither did this Deed proscribe the sale or alienation of the While we agree with Garcia that since the second mortgage, of which he is
subject property during the life of the mortgages. Garcias insistence that the mortgagee, has not yet been discharged, we find that said mortgage
Villar should have judicially or extrajudicially foreclosed the mortgage to subsists and is still enforceable. However, Villar, in buying the subject
satisfy Galass debt is misplaced. The Deed of Real Estate Mortgage merely property with notice that it was mortgaged, only undertook to pay such
provided for the options Villar may undertake in case Galas or Pingol fail to mortgage or allow the subject property to be sold upon failure of the
Case Digest 2018
mortgage creditor to obtain payment from the principal debtor once the
debt matures. Villar did not obligate herself to replace the debtor in the
principal obligation, and could not do so in law without the creditors
consent.[43] Article 1293 of the Civil Code provides:

Art. 1293. Novation which consists in
substituting a new debtor in the place of the original
one, may be made even without the knowledge or
against the will of the latter, but not without the
consent of the creditor. Payment by the new debtor
gives him the rights mentioned in articles 1236 and
1237.

Therefore, the obligation to pay the mortgage
indebtedness remains with the original debtors Galas and Pingol.
[44]
In view of the foregoing, Garcia has no cause of action against
Villar in the absence of evidence to show that the second
mortgage executed in favor of Garcia has been violated by his
debtors, Galas and Pingol, i.e., specifically that Garcia has made a
demand on said debtors for the payment of the obligation
secured by the second mortgage and they have failed to pay.
Case Digest 2018
SPS. FELIPE SOLITARIOS and JULIA TORDA vs. SPS. GASTON JAQUE and This Court had held that a purportedcontract of sale where the vendor
LILIA JAQUE remains in physical possession of the land, as lessee or otherwise, is an
G.R. No. 199852, November 12, 2014 indiciumof an equitable mortgage.15 In Rockville v. Sps. Culla,16 We
explained that the reason for this rule lies in the legal reality that in a
Facts: contract of sale, the legal title to the property is immediately transferred to
In a Complaint for Ownership and Recovery of Possession with the RTC of the vendee. Thus, retention by the vendor of the possession of the property
Calbayog City, the respondents spouses Jaque alleged that they purchased is inconsistent with the vendee’s acquisition of ownership under a true sale.
Lot 4089 from the petitioners, spouses Solitarios in stages. According to It discloses, in the alleged vendee, a lack of interest in the property that
respondents, they initially bought one-half of Lot No. 4089 for ₱7,000.00. belies the truthfulness of the sale.
This sale is allegedly evidenced by a notarized Deed of Sale dated May 8,
1981. Two months later, the spouses Solitarios supposedly mortgaged the
During the period material to the present controversy, the petitioners,
remaining half of Lot 4089 to the Jaques via a Real Estate Mortgage (REM)
spouses Solitarios, retained actual possession of the property. This was
dated July 15, 1981, to securea loan amounting to ₱3,000.00.
never disputed. If the transaction had really been one of sale, as the Jaques
claim, they should have asserted their rights for the immediate delivery and
After almost two (2) years, the spouses Solitarios finally agreed to sell the
possession of the lot instead of allowing the spouses Solitarios to freely stay
mortgaged half. However, instead of executing a separate deed of sale for
in the premises for almost seventeen (17) years from the time of the
the second half, they executed a Deed of Sale dated April 26, 1983 for the
purported sale until their filing ofthe complaint. Human conduct and
whole lot to save on taxes, by making it appear that the consideration for
experience reveal that an actual owner of a productive land will not allow
the sale of the entire lot was only ₱12,000.00 when the Jaques actually paid
the passage of a long period of time, as in this case, without asserting his
₱19,000.00 in cash and condoned the spouses Solitarios’ ₱3,000.00 loan.
rights of ownership.
On the basis of this second notarized deed, the Jaques had OCT No. 1249
cancelled and registered Lot 4089 in their name under Transfer Certificate
of Title (TCT) No. 745. Further, Gaston Jaque first claimed possession of the subject property
through his mother-in-law, and then through hired workers when the latter
In spite of the sale, the Jaques, supposedly out of pity for the spouses passed away;17 not personally. It is also undisputed that the Jaques never
Solitarios, allowed the latter to retain possession of Lot 4089, subject only installed a tenant on Lot 4089 and did not disturb the Solitarios’ possession
to the condition that the spouses Solitarioswill regularly deliver a portion of of the same.18 On this note, We agree with the finding of the RTC that the
the property’s produce. In an alleged breach of their agreement, however, Jaques’ alleged possession of the subject property is suspect and
the spouses Solitarios stopped delivering any produce sometime in 2000. unsubstantial, and they never possessed the same in the concept of owners.
Worse, the spouses Solitarios even claimed ownership over Lot 4089. Thus,
the Jaques filed the adverted complaint with the RTC.
Third, the fact that defendants’ witness Leonora Solitarios [Felipe’s sister]
resides and has a house in the land in question without having been
For their part, the spouses Solitarios denied selling Lot 4089 and explained
disturbed by the plaintiffs and the fact that the plaintiffs never have a tenant
that they merely mortgaged the same to the Jaques after the latter helped
in the land even if they reside in Cebu City also show in some manner that
them redeem the land from the Philippine National Bank (PNB).
they are not really the owners of the land, but the defendants. 19
The spouses Solitarios narrated that, way back in 1975, they obtained a loan
from PNB secured by a mortgage over Lot 4089. They were able to pay this Not only is there a presumption that the deeds of sale are an equitable
loan and redeem their property with their own funds. Shortly thereafter, in mortgage, it has been amply demonstrated by petitioners that the deed of
1976, they again mortgaged their property to PNB to secure a ₱5,000.00 sale is intended to be one of mortgage based on the proof presented by
loan. This time, the Jaques volunteered to pay the mortgage indebtedness, petitioners and propped up even by the admissions of respondents. The
including interests and charges and so gave the spouses Solitarios intention of the parties was for the transaction to secure the payment of a
₱7,000.00 for this purpose. However, this accommodation was made, so the debt
spouses Solitarios add, with the understanding that they would pay back
the Jaques by delivering to them a portion of the produce of Lot 4089, in
To stress, Article 1602(6) of the Civil Code provides that a transaction is
particular, onehalf of the produce of the rice land and one-fourth of the
presumed to be an equitable mortgage:
produce of the coconut land. The spouses Solitarios contended that this
agreement was observed by the parties until May 2000, when Gaston Jaque
informed them that he was taking possession of Lot 4089 as owner. And to (6) In any other case where it may be fairly inferred that the real
their surprise, Gaston Jaque showed them the Deeds of Sale dated May 8, intention of the parties is that the transaction shall secure the
1981 and April 26, 1983, the REM contract dated July 15, 1981, and TCT No. payment of a debt or the performance of any other obligation.
745 to prove his claim. The spouses Solitarios contended that these deeds of
sale were fictitious and their signatures therein forged. Further, the spouses This provision may very well be applied in this case. There is sufficient basis
Solitarios challenge the validity of TCT No. 745, alleging thatthe Jaques to indulge in the presumption that the transaction between the parties was
acquired it through fraud and machinations and by taking advantage of that of an equitable mortgage and that the spouses Solitarios never wanted
their ignorance and educational deficiency. to sell the same to the Jaques.
Issue: whether or o the parties effectively entered into a contract of
absolute sale or anequitable mortgage of Lot 4089? The foregoing presumption finds support in the following: First, the very
testimony of Gaston Jaque and the documents he presented establish the
Ruling: Equitable Mortgage existence of two loans, which the Jaques extended to the spouses Solitarios,
that were secured by the subject property; and, second, the testimonies of
As evident from Article 1602 itself, the presence of anyof the circumstances the parties reveal that they came to an agreement as to how these loans
set forth therein suffices for a contract to be deemed an equitable mortgage. would be paid.
No concurrence or an overwhelming number is needed. 12
Petitioner’s Possession of the Subject Property after the Purported The first loan was contracted when Gaston Jaque gave the spouses
Sale Solitarios ₱7,000.00 to help them redeem the subject property from
PNB.20 In effect, by extending the ₱7,000.00 financial assistance to the
During pre-trial, the Jaques admitted that the spouses Solitarios were in spouses Solitarios, Gaston Jaque took over the loan, became the lender and
possession of the subject property. 13Gaston Jaque likewise confirmed that assumed the role of mortgagee in place of PNB.
petitioners were allowed to produce copra and till the rice field, which
comprise one-half of the lot that was previously covered by the real estate
mortgage, after said portion was allegedly sold to them.14 Thereafter, the spouses Solitarios obtained a second loan from the Jaques
amounting to ₱3,000.00. This is evidenced by an REM dated July 15, 1981
Case Digest 2018
by virtue of which the spouses Solitarios mortgaged one-half of the subject auction sale after the spouses Solitarios failed to pay their debt obligation.
property to the Jaques to secure the payment of said loan. What seems clear is that the Jaques took advantage of the spouses
Solitarios’ intellectual and educational deficiency and urgent need of money
and made it appear that the latter executed in their favor the questioned
The parties testified that they entered into a verbal agreement on the
Deeds of Sale, thereby automatically appropriating unto themselves the
sharing of the produce of the subject property. For his part, it seemed that
subject property upon their debtors’ default. The amount reflected in the
Gaston Jaque wanted to impress upon the lower court that this sharing
1981 Deed of Sale is telling. The sum of ₱7,000.00 representing the alleged
agreement was fixed as a condition for his allowing the Solitarios’ continued
purchase price of one-half of the subject property in the 1981 Deed of Sale
possession and cultivation of the subject property. However, there is a
is actually the amount advanced to the spouses Solitarios by way of loan.
strong reason to believe that this arrangement was, in fact, a payment
Other than the testimony of Gaston Jaque, there is no evidence showing that
scheme for the debts that the spouses Solitarios incurred.
this purchase price was actually paid or that the subject property was
bought in a foreclosure sale.
During his testimony, Felipe Solitarios explained that after the Jaques gave
him funds to redeemthe property from PNB, they entered into an
Further, it can be gleaned from the testimony of Gaston Jaque that when the
agreement on the sharing of the produce and that this arrangement would
spouses Solitarios failed to pay their loan of ₱3,000.00, reflected in the July
last until they shall have redeemed the land from the Jaques.
15, 1981 REM covering the remaining half of the subject property, 41 the
Jaques did not foreclose the mortgage and purchase the said lot in an
It is, thus, clear from the foregoing that the Jaques extended two loans to the auction sale. Rather, they supposedly bought the lot directly from the
spouses Solitarios, who in exchange, offered tothe former the subject spouses Solitarios and offset the loan amount against a portion of the
property, not to transfer ownership thereto, but to merely secure the supposed purchase price they agreed upon.42
payment of their debts. This may be deduced from the testimonies of both
Felipe Solitarios and Gaston Jaque, revealing the fact that they agreed upon
Indubitably, the subject property was transferred to the Jaques in a
terms for the payment of the loans, in particular, the sharing in the produce
prohibited pactum commisorium manner and, therefore, void. Thus, the
of the lot.
foregoing transaction and the registration of the deeds of sale, by virtue of
which the Jaques were able to obtain the impugned TCT No. 745 must be
Verily, the fact that the parties agreed on payment terms is inconsistent declared void.43
with the claim of the Jaques that when the spouses Solitarios executed the
questioned deeds of sale they had no other intention but to transfer
Furthermore, given that the transaction between the parties is an equitable
ownership over the subject property.
mortgage, this means that the title to the subject property actually
remained with Felipe Solitarios, as owner-mortgagor, conformably with the
Thus, there is ground to presume that the transaction between the parties well-established doctrine that the mortgagee does not become the owner of
was an equitable mortgage and not a sale. There is nothing in the records the mortgaged property because the ownership remains with the
sufficient enough to overturn this presumption. mortgagor.44 Thus, Felipe Solitarios’ ownership over the subject property is
not affected by the fact that the same was already registered in the name of
the Jaques. The pronouncement in Montevirgen v. Court of Appeals is
The transfer of the subject property is a pactum commissorium
instructive:
Further, We cannot allow the transfer of ownership ofLot 4098 to the

x x x Equity looks through the form and considers the substance,
Jaques as it would amount to condoning the prohibited practice of pactum
and no kind of engagement can be allowed which will enable the
comissorium. Article 2088 of the Civil Code clearly provides that a creditor
parties to escape from the equitable doctrine adverted to. In
cannot appropriate or consolidate ownership over a mortgaged property
other words, a conveyance of land, accompanied by registration
merely upon failure of the mortgagor to pay a debt obligation, 36 viz.:
in the name of the transferee and the issuance of a new
certificate, is no more secured from the operation of this
Art. 2088. The creditor cannot appropriate the things given by equitable doctrine than the most informal conveyance that could
way of pledge or mortgage, or dispose of them. Any stipulation to be devised.
the contrary is null and void.
Finally, the circumstance that the original transaction was subsequently
The essence of pactum commissorium is that ownership of the security will declared to be an equitable mortgage must mean that the title to the subject
pass to the creditor by the mere default of the debtor. This Court has land which had been transferred to private respondents actually remained
repeatedly declared such arrangements as contrary to morals and public or is transferred back to petitioners herein as owners mortgagors,
policy.37 conformably to the well-established doctrine that the mortgagee does not
become the owner of the mortgaged property because the ownership
remains with the mortgagor (Art. 2088, New Civil Code). 45
As We have repeatedly held, the only right of a mortgagee in case of non-
payment of debt secured by mortgage would be to foreclose the mortgage
and have the encumbered property sold to satisfy the outstanding
indebtedness. The mortgagor’s default does not operate to automatically
vest on the mortgagee the ownership of the encumbered property, for any
such effect is against public policy, as earlier indicated. 38
Applying the principle of pactum commissorium to equitable mortgages, the HEIRS OF ANTERO SOLIVA v. SEVERINO, JOEL, GRACE, CENON, JR.,
Court, in Montevirgen vs. CA,39enunciated that the consolidation of RENATO, EDUARDO, HILARIO, ALL SURNAMED SOLIVA, ROGELIO V.
ownership in the person of the mortgagee in equity, merely upon failure of ROLEDA, AND SANVIC ENTERPRISES, INC., REPRESENTED BY ITS
the mortgagor in equity to pay the obligation, would amount to a pactum MANAGER, SANTOS PORAQUE
commissorium.The Court further articulated that if a mortgagee in equity G.R. No. 159611, April 22, 2015
desires to obtain title to a mortgaged property, the mortgagee’s proper
remedy is to cause the foreclosure of the mortgage in equity and buy it at a Of course, we did not fail to notice the clause in the 1970 Deed stating that
foreclosure sale. "after the lapse of said period the parties may execute another document for
any extension of the right of repurchase."39 Antero equates this with Article
1602 (3) of the Civil Code which states that "[w]hen upon or after the
It does not appear, under the premises, that the Jaques availed themselves
expiration of the right to repurchase, another instrument extending the
of the remedy of foreclosure, or that they bought the subject property in an
period of redemption or granting a new period is executed."
Case Digest 2018
This clause alone, however, did not and cannot sufficiently give the 1970 an equitable mortgage because it found nothing which supports his theory
Pacto de Retro sale the character of an equitable mortgage. Note that the that the "sale with right to repurchase was executed to secure a
clause used the word "may" in allowing the parties to execute another debt."35 Moreover, it pointed out that Cenon's administration of the
contract to extend the right of repurchase. "May" is a permissive word which property from 1962 up to his death in 1987 indubitably shows that he had,
simply provides for a situational possibility - of extending Juana's exercise of all the while, been in constructive possession of the property.
her repurchase right - that, in this case did not even materialize.
We uphold these findings of the CA as we equally find nothing on the
Facts: records that supports a contrary conclusion.36 More than this, we uphold
the CA's ruling on this issue for the following reasons:
The Spouses Ceferino (also known as Rufino) Soliva and Juana Endeza
possessed and owned, during their lifetime, three parcels of land in First, Cenon immediately declared in his name the property sold and had
Calbayog City, specifically: continuously paid taxes for it, sourced from the property's income. As an
(1) a 1.436-hectare lot (Parcel 1) under Tax Declaration owner, Cenon has the right to the property's fruits and income which he
(TD) No. 42753; could freely dispose of according to his discretion. Thus, contrary to
Antero's claim, Cenon's payment of the taxes from the property's income is
in fact consistent with his exercise of ownership rights over the property.
(2) a 9,447-square meter lot (Parcel 2) under TD No.
24419, (a 1,600-square meter portion of this lot, however, was
Second, Cenon and his children benefited from the property's produce.
owned by Brigida Mancol which the spouses held for Mancol as
her tenants); and
Third, Juana, as the vendor a retro, never questioned the nature of the 1970
Pacto de Retro sale as a mortgage, nor argued that in reality it was intended
(3) a 5,136-square meter Riceland under TD No. 14298. to secure a debt.
Ceferino died in 1954, while Juana died in 1972. They had five children, Fourth, other than his bare allegation, Antero (with the plaintiffs a quo) did
namely: Dorotea (deceased), Cenon, Severino, Victoriano and Antero. not present any evidence to prove that what the parties to the 1970 Sale a
Dorotea is survived by Romeo and Sergio. Retro actually intended was to secure a debt, instead of a true sale. Neither
did they prove that she entered into the Pacto de Retro sale believing in
On November 13, 1970, Juana sold to Cenon Parcel 2 through a Deed of good faith that it was one of mortgage.
Conditional Sale with Pacto A Retro (1970 Pacto de Retro Sale).]
Meanwhile, Cenon died in 1987; he was survived by his children, namely: Further, the records show that Cenon entered into the Pacto de Retro sale
Joel, Grace, Cenon, Renato, Eduardo and Hilario. to prevent Juana from continuously mortgaging and encumbering the
property.37 Antero never controverted this fact.
Antero instituted the Complaint for Partition and Accounting. Antero, et al.
prayed the RTC to declare the 1970 Pacto de Retro Sale as an equitable And fifth, Antero (or the plaintiffs a quo) failed to prove bad faith on
mortgage. Antero contends that the 1970 Pacto de Retro sale is in fact an Cenon's part in entering into the Pacto de Retro sale with Juana. Absent
equitable mortgage, because: (1) from the time of the alleged sale in 1970 factual and legal basis, we cannot simply accept Antero's bad faith
up to her death in 1972, Juana remained in possession of Parcel 2; (2) the argument. Bad faith is never presumed, while good faith is always
evidence on record, i.e., the various TD's and testimony of the witnesses, presumed; on Antero rested the burden of proving bad faith on Cenon's
shows that Cenon resided in Manila, and thus, was never in possession of part, a burden which he failed to discharge. 38
the property; (3) the taxes for Parcel 2 was paid from its income and fruits;
and (4) the 1970 Deed of Pacto de Retro sale states that, after the lapse of Of course, we did not fail to notice the clause in the 1970 Deed stating that
the repurchase period, the parties may execute another document to extend "after the lapse of said period the parties may execute another document for
it. any extension of the right of repurchase."39 Antero equates this with Article
1602 (3) of the Civil Code which states that "[w]hen upon or after the
Moreover, by claiming that he purchased the property from Juana in 1970, expiration of the right to repurchase, another instrument extending the
Cenon contradicts his theory that he purchased this same property from period of redemption or granting a new period is executed."
Mancol in 1949.
This clause alone, however, did not and cannot sufficiently give the 1970
Even assuming, however, that the sale had been a true one, it affects only Pacto de Retro sale the character of an equitable mortgage. Note that the
the extent of Juana's rights and interests over Parcel 2. clause used the word "may" in allowing the parties to execute another
contract to extend the right of repurchase. "May" is a permissive word
In any case, they, as Juana's heirs, still have the right to repurchase the which simply provides for a situational possibility - of extending Juana's
property within 30 days from finality of judgment pursuant to Article 1606 exercise of her repurchase right - that, in this case did not even materialize.
of the Civil Code.
Thus, in the absence of any evidence which shows intent, on the part of
Issue: WON the 1970 Conditional Sale with Pacto de Retro is a true sale Juana and Cenon, to enter into a mortgage or to use the property sold to
or an equitable mortgage? secure a debt; or of any fact or circumstance which may reasonably lead this
Court to conclude the existence of such intent, we cannot but be convinced
Ruling: The 1970 Conditional Sale with Pacto de Retro is a true sale, not that the transaction covered by the 1970 Deed is a true and valid sale, not
an equitable mortgage under Article 1602 of the Civil Code an equitable mortgage.
An equitable mortgage is one which, although lacking the proper Finally, we are not unaware of the equitable-mortgage presumption that the
formalities, form or words, or other requisites prescribed by law for a law accords in situations when doubt exists as to the true intent of the
mortgage, nonetheless shows the real intention of the parties to make the parties to the contract.40 This legal presumption, however, applies only
property subject of the contract as security for debt and contains nothing when doubt, in fact, exists as to the nature of the agreement of the parties.
impossible or anything contrary to law in this intent. 31
When no doubt exists from the facts and the evidence, and the parties to the
For the presumption of an equitable mortgage to arise under any of the transaction (specifically Juana as the vendor a retro in this case), never
circumstances enumerated in Article 1602, however, two requisites must questioned the nature of their agreement as one of mortgage, then this legal
concur: (a) that the parties entered into a contract denominated as a presumption shall not and cannot apply. After all, the contract is the law
contract of sale; and (b) that their intention was to secure an existing between them and where its terms are clear and leaves no doubt on their
debt by way of mortgage.34 intention, the courts would have no choice but to uphold them. 41
The CA debunked Antero's argument that the 1970 Pacto de Retro Sale was The Pacto de Retro Sale covered only Juana's 6/10 portion-share over
Case Digest 2018
Parcel 2 reform the contract - known to him to be in truth a sale

with pacto de retro - into an equitable mortgage, x x x The rule
While the 1970 Pacto de Retro sale is a true sale, its validity affects only the would thus be made a tool to spawn, protect and even reward
6/10 portion of Parcel 2 that rightfully belongs to Juana. This conclusion fraud and bad faith, a situation surely never contemplated or
follows the rule that a person can convey only such property (or right or intended by the law.
interest over property) which, at the time it is to be delivered, he or she has
such right to convey it.42 x x x where the proofs established that there could be no
honest doubt as to the parties' intention, that the transaction
Interestingly, Antero faults the CA for "not holding that the deed of was clearly and definitely a sale with pacto de retro, the
conditional sale with Pacto de retro dated November 30, 1970 executed by Court adjudged the vendor a retro not to be entitled to the
Juana Endeza covered only her 6/10 share in parcel 2."43 Antero obviously benefit of the third paragraph of Article 1606. (Emphases and
failed to appreciate the import of the CA's ruling as the 7,805.4 square underscoring supplied.)
meters which the CA declared as Juana's share represents exactly her 6/10
share in Parcel 2. Clearly, the CA did not commit any error in its
As we have established and explained above, the real intention of Juana and
determination.
Cenon in this case was to enter into a Pacto de Retro sale, not an equitable
mortgage. Obviously, therefore, Antero's reliance on paragraph 3, Article
Thus, we find no reason to disturb the CA's findings that the 1970 Pacto de
1606 of the Civil Code is misplaced and his argument on this point cannot
Retro is valid but only as regards Juana's 7,805.4-square meter share — or
prosper.
6/10 share — over Parcel 2.
Antero (including the other heirs) has already lost the right to redeem
the portion sold; the 30-day redemption period granted under Article
1606 of the Civil Code does not apply
The Pacto de Retro sale states that Juana, as vendor a retro, reserves for
"herself, her heirs, or assigns the right of repurchase the property described
above within a period of TEN (10) YEARS, from and after the date of this
instrument, x x x."
This Deed was executed in 1970, while Antero filed the complaint in 1991.
Between these dates - 1970 and 1991 - none of the heirs exercised, or at the
least attempted to exercise, this right of repurchase granted to them under
the contract. Obviously, at the time Antero, et al. filed the complaint in 1991,
the 10-year repurchase period under the contract had already lapsed.
Thus, we agree with the CA that Antero, with the other heirs, had already
lost whatever right they may have had to redeem the portion which Juana
sold to Cenon by virtue of the 1970 Pacto de Retro sale.
In this regard, we likewise agree with the CA that paragraph 3, Article 1606
of the Civil Code cannot apply to Antero's case. This is because paragraph 3
of Article 1606 covers only a situation where the alleged vendor a
retro claims, in good faith, that their (the vendor and the vendee) real
intention (to the contract) was a loan with mortgage.
In Claravall v. Lim,44 the Court explained:
Article 1606 is intended to cover suits where the seller claims

that the real intention was a loan with equitable
mortgage but decides otherwise. The seller, however, must
entertain a good faith belief that the contract is an equitable
mortgage. In Felicen, Sr., et al. v. Orias, et al., cited by petitioner,
the Court explained The application of the third paragraph of
Article 1606 is predicated upon the bona fides of the vendor a
retro. It must appear that there was a belief on his part,
founded on facts attendant upon the execution of the sale
with pacto de retro, honestly and sincerely entertained, that
the agreement was in reality a mortgage, one not intended to
affect the title to the property ostensibly sold, but merely to
Marcelino Repuela and Cipriano Repuela Vs. Estate of the Spouses
give it as security for a loan or obligation. In that event, if the
Otillo Larawan and Juliana Bacus
matter of the reed nature of the contract is submitted for judicial
G.R. No. 219638; December 7, 2016
resolution, the application of the rule is meet and proper: that the
vendor a retro be allowed to repurchase the property sold within
The fact of registration in the name of Spouses Larawan does not change the
30 days from rendition of final judgment declaring the contract
picture. A conveyance of land, accompanied by registration in the name of the
to be a true sale with right to repurchase. Conversely, if it
transferee and the issuance of a new certificate, is no more secured from the
should appear that the parties' agreement was really one of
operation of this equitable doctrine than the most informal conveyance that
sale - transferring ownership to the vendee, but accompanied by
could be devised. In an equitable mortgage, title to the property in issue,
a reservation to the vendor of the right to repurchase the
which has been transferred to the respondents actually remains or is
property - and there are no circumstances that may
transferred back to the petitioner as owner-mortgagor, conformably to the
reasonably be accepted as generating some honest doubt as
well-established doctrine that the mortgagee does not become the owner of
to the parties' intention, the proviso is inapplicable. x x x If
the mortgaged property because the ownership remains with the mortgagor
the rule were otherwise, it would be within the power of every
pursuant to Article 2088, of the Civil Code.
vendor a retro to set at naught a pacto de retro, or resurrect an
expired right of repurchase, by simply instituting an action to
Facts:
Case Digest 2018
Spouses Lorenzo and Magdalena Repuela owned a parcel of land in Cebu. a contract, purporting to be, and in fact styled as, an absolute sale, is
After they had passed away, their children Marcelino Repuela (Marcelino) presumed to be an equitable mortgage.
and Cipriano Repuela (Cipriano) succeeded them as owners of the subject
property.
In this case, it appears that two (2) instances enumerated in Article 1602 —
Cipriano and Marcelino (Repuela brothers) claimed that sometime in July possession of the subject property and inference that the transaction was in
1963, after the death of their parents, they went to the house of Otillo fact a mortgage attended the assailed transaction.
Larawan (Otillo) to borrow P200.00 for Marcelino’s fare to Iligan City; that
to secure the loan, the spouses Otillo and Juliana Larawan (Spouses
Larawan) required them to turn over the certificate of title for Lot No. 3357; Possession as Lessee or otherwise
that they were made to sign a purported mortgage contract but they were
not given a copy of the said document; that Cipriano affixed his signature
while Marcelino, being illiterate, just placed his thumb mark on the Article 1602 (2) of the Civil Code provides that when the supposed vendor
document; that they remained in possession of the land despite the remains in possession of the property even after the conclusion of the
mortgage and had been planting bamboos, corn, bananas, and papayas transaction, the purported contract of sale is presumed to be an equitable
thereon and sharing the produce between them; and that they also paid the mortgage. In general terms, possession is the holding of a thing or the
taxes due on the property. enjoyment of a right, whether by material occupation or by the fact that the
right is subjected to the will of the claimant. The gathering of the products
In October 2002, as recalled by Cipriano’s daughter, Cristina Repuela Ramos of and the act of planting on the land constitute occupation, possession and
(Cristina), she went to the City Treasurer’s Office of Talisay City, upon the cultivation.[25]
request of her father, to verify whether Spouses Larawan were paying the
realty taxes on the mortgaged property. She learned that Spouses Larawan
did not pay the taxes and the tax declaration on the subject property was In this case, petitioners insist that the Repuela brothers remained in
already in their names as early as 1964; that in the Registry of Deeds of possession of the subject property after the transaction, as was
Cebu, TCT No. 5154 was already cancelled and a new certificate of title, TCT corroborated by a disinterested person, Burlas, who lived in the adjoining
No. 10506, had been issued to Otillo; that Spouses Larawan were able to lot from the time she was a child. According to her, it was only the Repuela
transfer the certificate of title to their names by virtue of the Extajudicial brothers who tilled the land and planted corn, bananas and camote. She
Declaration of Heirs and Sale bearing the signature of her father Cipriano never saw Otillo, whom she also knew, till or work on the land.
and the thumb mark of her uncle Marcelino; and that her father and uncle
remembered that they were made to sign a blank document.
The respondent’s claim of possession, as supported by a transfer certificate
On January 17, 2003, Cipriano and Marcelino, on account of this
of title and tax declaration of the subject property, both in the name of
predicament, were compelled to file a complaint before the RTC for the
Spouses Larawan is, to the Court’s mind, not persuasive. These documents
annulment of the Extrajudicial Declaration of Heirs and Sale and the
do not prove actual possession. They do not rebut the overwhelming
cancellation of TCT No. 10506. During the trial, Catalina Burlas (Burlas),
evidence of the Repuela brothers that they were in actual possession. The
who lived next to the subject property, and Alma Abellanosa (Abellanosa),
fact of registration in the name of Spouses Larawan does not change the
City Assessor of Talisay City, were also presented as witnesses for the
picture. A conveyance of land, accompanied by registration in the name of
Repuela brothers.
the transferee and the issuance of a new certificate, is no more secured from
the operation of this equitable doctrine than the most informal conveyance
For the Estate of Spouses Larawan, on the other hand, the transaction
that could be devised. In an equitable mortgage, title to the property in
between the Repuela brothers and Otillo was a sale and not a mortgage of a
issue, which has been transferred to the respondents actually remains or is
parcel of land. The Estate also invoked laches on the part of the Repuela
transferred back to the petitioner as owner-mortgagor, conformably to the
brothers for failing to file a complaint during the lifetime of Spouses
well-established doctrine that the mortgagee does not become the owner of
Larawan. Galileo Larawan (Galileo), son of Spouses Larawan and the sole
the mortgaged property because the ownership remains with the
witness for the Estate, testified that he knew of the transaction between his
mortgagor pursuant to Article 2088, of the Civil Code. [26]
father and the Repuela brothers because his father brought him along to the
office of Atty. Celestino Bacalso (Atty. Bacalso), where the document
entitled Extrajudicial Declaration of Heirs and Sale was prepared; that the
Inference can be made
said document was signed by Cipriano and thumbmarked by Marcelino
that the transaction was
which was witnessed by Hilario Bacalso and Fernando Abellanosa; that he
an equitable mortgage
witnessed the Repuela brothers affix their signature and thumbmark after
Atty. Bacalso read and explained to them the contents of the document in
the Cebuano dialect; that after the document was notarized, his father From the attending circumstances of the case, it can be inferred that the real
handed P2,000.00 to the Repuela brothers as consideration for the sale; and intention of the Repuela brothers was to secure their indebtedness from
that he was only six (6) years old when these all happened. Spouses Larawan. They needed money for Marcelino’s fare so they went to
the house of Otillo to borrow P200.00. Considering that Spouses Larawan
Issue: Whether the Extrajudicial Declaration of Heirs and Sale would only agree to extend the loan if they would surrender their certificate
amounted to an equitable mortgage. of title over the subject property, they obliged in the belief that its purpose
was only to secure their loan. In other words, they surrendered the title to
Ruling: Equitable Mortgage Spouses Larawan as security to obtain the much needed loan. It was never
their intention to sell the subject property.As held in Banga v. Sps. Bello,
An equitable mortgage is one which, although lacking in some formality, or [27]
in determining whether a deed, absolute in form, is a mortgage, the court
form, or words, or other requisites demanded by a statute, reveals the is not limited to the written memorials of the transaction. “The decisive
intention of the parties to charge real property as security for a debt, and factor in evaluating such agreement is the intention of the parties, as shown
contains nothing impossible or contrary to law.[22] not necessarily by the terminology used in the contract but by all the
surrounding circumstances, such as the relative situation of the parties at
that time, the attitude, acts, conduct, declarations of the parties, the
For a presumption of an equitable mortgage to arise, two requisites must
negotiations between them leading to the deed, and generally, all pertinent
first be satisfied, namely: that the parties entered into a contract
facts having a tendency to fix and determine the real nature of their design
denominated as a contract of sale and that their intention was to secure an
and understanding.”[28]
existing debt by way of mortgage. [23] There is no single conclusive test to
determine whether a deed of sale, absolute on its face, is really a simple
loan accommodation secured by a mortgage. Article 1602, in relation to There is a presumption of mistake
Article 1604 of the Civil Code, however, enumerates several instances when
Case Digest 2018
Granting that indeed Cipriano and Marcelino, signed and thumbmarked,

respectively, the Extrajudicial Declaration of Heirs and Sale, there is still
reason to believe that they did so without understanding the real nature,
effects and consequences of what they did as they were never explained to
them. Cipriano, who only finished Grade One, and Marcelino, an illiterate,
were in dire need of money. As such, the possibility that they affixed their
conformity to the onerous contract to their detriment just to get the loan
was not remote. In dire need as they were, they signed a document despite
knowing that it did not express their real intention. “Necessitous men are
not, truly speaking, free men; but to answer a present emergency, will submit
to any terms that the crafty may impose upon them.” [29] For this reason, the
Repuela brothers should be given the protection afforded by the Civil Code
provisions on equitable mortgage.
Besides, where a party is unable to read or when the contract is in a

language not understood by a party and mistake or fraud is alleged, the
obligation to show that the terms of the contract had been fully explained to
the said party who is unable to read or understand the language of the
contract devolves on the party seeking to enforce it. Indeed, that burden to
show that the other party fully understood the contents of the document
rests upon the party who seeks to enforce the contract. If he fails to
discharge this burden, the presumption of mistake, if not, fraud, stands
unrebutted and controlling.[32] Respondent failed to overcome this burden.
In the case at bench, Galileo’s testimony that he had witnessed the Repuela
brothers affix their conformity after Atty. Bacalso read and explained to
them the contents of the document in the Cebuano dialect, fails to convince
this Court. As keenly observed by the RTC, Galileo was just six (6) years old
when he witnessed the transaction in the office of Atty. Bacalso. To the
Court’s mind, Galileo could not have possibly known the nature of the
purported contract, much less, perceived with certainty if the Repuela
brothers were indeed apprised of the true nature of the said contract before
they were made to sign and thumbmark it. For this reason, the presumption
of mistake, if not fraud, shall remain.Furthermore, it must be pointed out
that the law accords the equitable mortgage presumption in situations
when doubt exists as to the true intent of the parties to the contract, [33] as in
this case. Courts are generally inclined to construe one purporting to be a
sale as an equitable mortgage, which involves a lesser transmission of rights
and interests over the property in controversy.[34]
There was no prescription

or laches
Contrary to the findings of the CA that petitioners’ cause of action was

already barred by laches because of the 39 years that had already lapsed
before they asserted their rights over the property, the Court holds
otherwise. InInamarga v. Alano,[35] the Court considered the deed of sale as
equitable mortgage and wrote:
xxx Where there is no consent given by one party in a purported

contract, such contract was not perfected; therefore, there is no
contract to speak of. The deed of sale relied upon by petitioner is
deemed a void contract. This being so, the action based on said
deed of sale shall not prescribe in accordance with Article 1410
of the Civil Code.[36] [Emphasis supplied]
Case Digest 2018
ROBERTO Z. LAFORTEZA, GONZALO Z. LAFORTEZA, MICHAEL Z. Thereafter, plaintiff reiterated his request to tender payment of the balance
LAFORTEZA, DENNIS Z. LAFORTEZA, and LEA Z. LAFORTEZA vs. of SIX HUNDRED THOUSAND PESOS (P600,000.00). Defendants, however,
ALONZO MACHUCA insisted on the rescission of the Memorandum of Agreement. Thereafter,
G.R. No. 137552. June 16, 2000 plaintiff filed the instant action for specific performance. Petitioner adds
that at most, the Memorandum of Agreement (Contract to Sell) is a mere
There is nothing contained in the Memorandum Agreement from which it can contract to sell, as indicated in its title. The obligation of the petitioners to
reasonably be deduced that the parties intended to enter into a contract to sell the property to the respondent was conditioned upon the issuance of a
sell, i.e. one whereby the prospective seller would explicitly reserve the new certificate of title and the execution of the extrajudicial partition with
transfer of title to the prospective buyer, meaning, the prospective seller does sale and payment of the P600,000.00. This is why possession of the subject
not as yet agree or consent to transfer ownership of the property subject of property was not delivered to the respondent as the owner of the property
the contract to sell until the full payment of the price, such payment being a but only as the lessee thereof. And the failure of the respondent to pay the
positive suspensive condition, the failure of which is not considered a breach, purchase price in full prevented the petitioners obligation to convey title
casual or serious, but simply an event which prevented the obligation from from acquiring obligatory force.
acquiring any obligatory force. There is clearly no express reservation of title
made by the petitioners over the property, or any provision which would Issue: WON the Memorandum of Agreement is a contract of sale or
impose non-payment of the price as a condition for the contracts entering contract to sell?
into force.
Ruling: The Memorandum of Agreement is a contract of sale.
Facts: A parcel of land is registered in the name of the late Francisco Q.
Laforteza, although it is conjugal in nature.
In the case at bench, there was a perfected agreement between the
petitioners and the respondent whereby the petitioners obligated
On January 20, 1989, the heirs of the late Francisco Q. Laforteza
themselves to transfer the ownership of and deliver the house and lot
represented by Roberto Z. Laforteza and Gonzalo Z. Laforteza, Jr. entered
located at 7757 Sherwood St., Marcelo Green Village, Paraaque and the
into a Memorandum of Agreement (Contract to Sell) with the plaintiff over
respondent to pay the price amounting to six hundred thousand pesos
the subject property for the sum of SIX HUNDRED THIRTY THOUSAND
(P600,000.00). All the elements of a contract of sale were thus present.
PESOS (P630,000.00) payable as follows:
However, the balance of the purchase price was to be paid only upon the
(a) P30,000.00 as earnest money, to be forfeited in favor of the
issuance of the new certificate of title in lieu of the one in the name of the
defendants if the sale is not effected due to the fault of the
late Francisco Laforteza and upon the execution of an extrajudicial
plaintiff;
settlement of his estate. Prior to the issuance of the "reconstituted" title, the
(b) P600,000.00 upon issuance of the new certificate of title in
respondent was already placed in possession of the house and lot as lessee
the name of the late Francisco Q. Laforteza and upon execution of
thereof for six months at a monthly rate of three thousand five hundred
an extra-judicial settlement of the decedents estate with sale in
pesos (P3,500.00). It was stipulated that should the issuance of the new title
favor of the plaintiff (Par. 2, Exh. "E", record, pp. 335-336).
and the execution of the extrajudicial settlement be completed prior to
Significantly, the fourth paragraph of the Memorandum of
expiration of the six-month period, the respondent would be liable only for
Agreement (Contract to Sell) dated January 20, 1989 (Exh. "E",
the rentals pertaining to the period commencing from the date of the
supra.) contained a provision as follows:
execution of the agreement up to the execution of the extrajudicial
xxx. Upon issuance by the proper Court of the new title, the
settlement. It was also expressly stipulated that if after the expiration of the
BUYER-LESSEE shall be notified in writing and said BUYER-
six month period, the lost title was not yet replaced and the extrajudicial
LESSEE shall have thirty (30) days to produce the balance of
partition was not yet executed, the respondent would no longer be required
P600,000.00 which shall be paid to the SELLER-LESSORS upon
to pay rentals and would continue to occupy and use the premises until the
the execution of the Extrajudicial Settlement with sale.
subject condition was complied with by the petitioners.
On January 20, 1989, plaintiff paid the earnest money of THIRTY
THOUSAND PESOS (P30,000.00), plus rentals for the subject property. On The six-month period during which the respondent would be in possession
September 18, 1998[3], defendant heirs, through their counsel wrote a of the property as lessee, was clearly not a period within which to exercise
letter (Exh. 1, Defendants, record, p. 370) to the plaintiff furnishing the an option. An option is a contract granting a privilege to buy or sell within
latter a copy of the reconstituted title to the subject property, advising him an agreed time and at a determined price. An option contract is a separate
that he had thirty (3) days to produce the balance of SIX HUNDRED PESOS and distinct contract from that which the parties may enter into upon the
(sic) (P600,000.00) under the Memorandum of Agreement which plaintiff consummation of the option.[13] An option must be supported by
received on the same date. consideration.[14] An option contract is governed by the second paragraph of
Article 1479 of the Civil Code[15], which reads:
On October 18, 1989, plaintiff sent the defendant heirs a letter requesting
for an extension of the THIRTY (30) DAYS deadline up to November 15,
"Article 1479. xxx
1989 within which to produce the balance of SIX HUNDRED THOUSAND
PESOS (P600,000.00). Defendant Roberto Z. Laforteza, assisted by his
counsel Atty. Romeo L. Gutierrez, signed his conformity to the plaintiffs An accepted unilateral promise to buy or to sell a
letter request. The extension, however, does not appear to have been determinate thing for a price certain is binding upon
approved by Gonzalo Z. Laforteza, the second attorney-in-fact as his the promissor if the promise is supported by a
conformity does not appear to have been secured. consideration distinct from the price."
On November 15, 1989, plaintiff informed the defendant heirs, through

In the present case, the six-month period merely delayed the demandability
defendant Roberto Z. Laforteza, that he already had the balance of SIX
of the contract of sale and did not determine its perfection for after the
HUNDRED THOUSAND PESOS (P600,000.00) covered by United Coconut
expiration of the six-month period, there was an absolute obligation on the
Planters Bank Managers Check No. 000814 dated November 15, 1989 (TSN,
part of the petitioners and the respondent to comply with the terms of the
August 25, 1992, p. 11; Exhs. "H", record, pp. 343-344; "M", records p. 350;
sale. The parties made a "reasonable estimate" that the reconstitution of the
and "N", record, p. 351). However, the defendants, refused to accept the
lost title of the house and lot would take approximately six months and thus
balance. Defendant Roberto Z. Laforteza had told him that the subject
presumed that after six months, both parties would be able to comply with
property was no longer for sale.
what was reciprocally incumbent upon them. The fact that after the
expiration of the six-month period, the respondent would retain possession
On November 20, 1998, defendants informed the plaintiff that they were
of the house and lot without need of paying rentals for the use therefor,
canceling the Memorandum of Agreement (Contract to Sell) in view of the
clearly indicated that the parties contemplated that ownership over the
plaintiffs failure to comply with his contractual obligations.
property would already be transferred by that time.
Case Digest 2018
The issuance of the new certificate of title in the name of the late Francisco Issue: whether or not the failure of the respondent to pay the balance
Laforteza and the execution of an extrajudicial settlement of his estate was of the purchase price within the period allowed is fatal to his right to
not a condition which determined the perfection of the contract of sale. enforce the agreement?
Petitioners contention that since the condition was not met, they no longer
had an obligation to proceed with the sale of the house and lot is
Ruling: NO.
unconvincing. The petitioners fail to distinguish between a condition
imposed upon the perfection of the contract and a condition imposed on the
performance of an obligation. Failure to comply with the first condition Admittedly, the failure of the respondent to pay the balance of the purchase
results in the failure of a contract, while the failure to comply with the price was a breach of the contract and was a ground for rescission thereof.
second condition only gives the other party the option either to refuse to The extension of thirty (30) days allegedly granted to the respondent by
proceed with the sale or to waive the condition. Thus, Art. 1545 of the Civil Roberto Z. Laforteza (assisted by his counsel Attorney Romeo Gutierrez)
Code states: was correctly found by the Court of Appeals to be ineffective inasmuch as
the signature of Gonzalo Z. Laforteza did not appear thereon as required by
the Special Powers of Attorney. [23] However, the evidence reveals that after
"Art. 1545. Where the obligation of either party to a
the expiration of the six-month period provided for in the contract, the
contract of sale is subject to any condition which is not
petitioners were not ready to comply with what was incumbent upon them,
performed, such party may refuse to proceed with the
i.e. the delivery of the reconstituted title of the house and lot. It was only on
contract or he may waive performance of the
September 18, 1989 or nearly eight months after the execution of the
condition. If the other party has promised that the
Memorandum of Agreement when the petitioners informed the respondent
condition should happen or be performed, such first
that they already had a copy of the reconstituted title and demanded the
mentioned party may also treat the nonperformance of
payment of the balance of the purchase price. The respondent could not
the condition as a breach of warranty.
therefore be considered in delay for in reciprocal obligations, neither party
incurs in delay if the other party does not comply or is not ready to comply
Where the ownership in the things has not passed, the in a proper manner with what was incumbent upon him.[24]
buyer may treat the fulfillment by the seller of his
obligation to deliver the same as described and as
Even assuming for the sake of argument that the petitioners were ready to
warranted expressly or by implication in the contract
comply with their obligation, we find that rescission of the contract will still
of sale as a condition of the obligation of the buyer to
not prosper. The rescission of a sale of an immovable property is
perform his promise to accept and pay for the
specifically governed by Article 1592 of the New Civil Code, which reads:
thing."[16]
"In the sale of immovable property, even though it may

In the case at bar, there was already a perfected contract. The condition was
have been stipulated that upon failure to pay the price
imposed only on the performance of the obligations contained therein.
at the time agreed upon the rescission of the contract
Considering however that the title was eventually "reconstituted" and that
shall of right take place, the vendee may pay, even
the petitioners admit their ability to execute the extrajudicial settlement of
after the expiration of the period, as long as no
their fathers estate, the respondent had a right to demand fulfillment of the
demand for rescission of the contract has been made
petitioners obligation to deliver and transfer ownership of the house and
upon him either judicially or by a notarial act. After the
lot.
demand, the court may not grant him a new term."[25]
What further militates against petitioners argument that they did not enter
It is not disputed that the petitioners did not make a judicial or notarial
into a contract of sale is the fact that the respondent paid thirty thousand
demand for rescission. The November 20, 1989 letter of the petitioners
pesos (P30,000.00) as earnest money. Earnest money is something of value
informing the respondent of the automatic rescission of the agreement did
to show that the buyer was really in earnest, and given to the seller to bind
not amount to a demand for rescission, as it was not notarized. [26] It was also
the bargain.[17] Whenever earnest money is given in a contract of sale, it is
made five days after the respondents attempt to make the payment of the
considered as part of the purchase price and proof of the perfection of the
purchase price. This offer to pay prior to the demand for rescission is
contract.[18]
sufficient to defeat the petitioners right under article 1592 of the Civil Code.
[27]
Besides, the Memorandum Agreement between the parties did not
We do not subscribe to the petitioners view that the Memorandum contain a clause expressly authorizing the automatic cancellation of the
Agreement was a contract to sell. There is nothing contained in the contract without court intervention in the event that the terms thereof were
Memorandum Agreement from which it can reasonably be deduced that the violated. A seller cannot unilaterally and extrajudicially rescind a contract of
parties intended to enter into a contract to sell, i.e. one whereby the sale where there is no express stipulation authorizing him to extrajudicially
prospective seller would explicitly reserve the transfer of title to the rescind.[28] Neither was there a judicial demand for the rescission thereof.
prospective buyer, meaning, the prospective seller does not as yet agree or Thus, when the respondent filed his complaint for specific performance, the
consent to transfer ownership of the property subject of the contract to sell agreement was still in force inasmuch as the contract was not yet rescinded.
until the full payment of the price, such payment being a positive At any rate, considering that the six-month period was merely an
suspensive condition, the failure of which is not considered a breach, casual approximation of the time it would take to reconstitute the lost title and
or serious, but simply an event which prevented the obligation from was not a condition imposed on the perfection of the contract and
acquiring any obligatory force. [19]There is clearly no express reservation of considering further that the delay in payment was only thirty days which
title made by the petitioners over the property, or any provision which was caused by the respondents justified but mistaken belief that an
would impose non-payment of the price as a condition for the contracts extension to pay was granted to him, we agree with the Court of Appeals
entering into force. Although the memorandum agreement was also that the delay of one month in payment was a mere casual breach that
denominated as a "Contract to Sell", we hold that the parties contemplated a would not entitle the respondents to rescind the contract. Rescission of a
contract of sale. A deed of sale is absolute in nature although denominated a contract will not be permitted for a slight or casual breach, but only such
conditional sale in the absence of a stipulation reserving title in the substantial and fundamental breach as would defeat the very object of the
petitioners until full payment of the purchase price. [20] In such cases, parties in making the agreement.[29]
ownership of the thing sold passes to the vendee upon actual or
constructive delivery thereof. [21] The mere fact that the obligation of the
Petitioners insistence that the respondent should have consignated the
respondent to pay the balance of the purchase price was made subject to
amount is not determinative of whether respondents action for specific
the condition that the petitioners first deliver the reconstituted title of the
performance will lie. Petitioners themselves point out that the effect of
house and lot does not make the contract a contract to sell for such
consignation is to extinguish the obligation. It releases the debtor from
condition is not inconsistent with a contract of sale. [22]
responsibility therefor.[30] The failure of the respondent to consignate the
Case Digest 2018
P600,000.00 is not tantamount to a breach of the contract for by the fact of

tendering payment, he was willing and able to comply with his obligation.
The Court of Appeals correctly found the petitioners guilty of bad faith and
awarded moral damages to the respondent. As found by the said Court, the
petitioners refused to comply with their obligation for the reason that they
were offered a higher price therefor and the respondent was even offered
P100,000.00 by the petitioners lawyer, Attorney Gutierrez, to relinquish his
rights over the property. The award of moral damages is in accordance with
Article 1191[31] of the Civil Code pursuant to Article 2220 which provides
that moral damages may be awarded in case of a breach of contract where
the defendant acted in bad faith. The amount awarded depends on the
discretion of the court based on the circumstances of each case. [32] Under
the circumstances, the award given by the Court of Appeals amounting to
P50,000.00 appears to us to be fair and reasonable.
Case Digest 2018
SPOUSES JOSE T. VALENZUELA and GLORIA VALENZUELA vs. suspensive condition, failure ofwhich is not a breach but an event that
KALAYAAN DEVELOPMENT & INDUSTRIAL CORPORATION prevents the obligation of the vendor to convey title from becoming
G.R. No. 163244, June 22, 2009 effective.[24]

The parties contract to sell explicitly provides that Kalayaan shall execute and Since the obligation of respondent did not arise because of the
deliver the corresponding deed of absolute sale over the subject property to failure of petitioners to fully pay the purchase price, Article 1191 [25] of the
the petitioners upon full payment of the total purchase price. Since petitioners Civil Code would have no application.
failed to fully pay the purchase price for the entire property, Kalayaans
obligation to convey title to the property did not arise. Thus, Kalayaan may Rayos v. Court of Appeals[26] elucidates:
validly cancel the contract to sell its land to petitioner, not because it had the
power to rescind the contract, but because their obligation thereunder did not Construing the contracts together, it is
arise. evident that the parties executed a contract to sell and
Facts: When Kalayaan discovered that their lot was being illegally occupied not a contract of sale. The petitioners retained
by the petitioners, it demanded that they immediately vacate the premises ownership without further remedies by the
and surrender possession thereof. Petitioners then negotiated with respondents until the payment of the purchase price of
Kalayaan to purchase the portion of the lot they were occupying. On August the property in full. Such payment is a positive
5, 1994, the parties executed a Contract to Sell wherein they stipulated that suspensive condition, failure of which is not really
petitioners would purchase 236 square meters of the subject property for a breach, serious or otherwise, but an event that
P1,416,000.00. Petitioners initially gave P500,000.00 upon signing the prevents the obligation of the petitioners to
contract and agreed to pay the balance of P916,000.00 in twelve (12) equal convey title from arising, in accordance with
monthly installments, or P76,333.75 a month until fully paid. The parties Article 1184 of the Civil Code. x x x
also agreed that, in case petitioners failed to pay any of the installments,
they would be liable for liquidated penalty at the rate of 3% a month xxxx
compounded monthly until fully paid. It was also stipulated that Kalayaan
shall execute the corresponding deed of absolute sale over the subject The non-fulfillment by the respondent of
property only upon full payment of the total purchase price. his obligation to pay, which is a suspensive
Thereafter, petitioners made the following payments: P70,000.00 on condition to the obligation of the petitioners to sell
October 20, 1994; P70,000.00 on November 23, 1994; and P68,000.00 on and deliver the title to the property, rendered the
December 20, 1994, or a total of P208,000.00. After these payments, contract to sell ineffective and without force and
petitioners failed to pay the agreed monthly installments. effect. The parties stand as if the conditional
In a letter dated September 6, 1995, petitioners requested Kalayaan that obligation had never existed. Article 1191 of the New
they be issued a deed of sale for the 118 sq. m. portion of the lot where their Civil Code will not apply because it presupposes an
house was standing, considering that they no longer had the resources to obligation already extant. There can be no
pay the remaining balance. They reasoned that, since they had already paid rescission of an obligation that is still non-existing,
one-half of the purchase price, or a total of P708,000.00 representing 118 the suspensive condition not having happened.
sq. m. of the subject property, they should be issued a deed of sale for the
said portion of the property.
In a letter dated December 15, 1995, Kalayaan reminded petitioners of The parties contract to sell explicitly provides that Kalayaan shall
their unpaid balance and asked that they settle it within the next few days. execute and deliver the corresponding deed of absolute sale over the
In a demand letter[9]dated January 30, 1996, Kalayaan, through counsel, subject property to the petitioners upon full payment of the total purchase
demanded that petitioners pay their outstanding obligation, including the price. Since petitioners failed to fully pay the purchase price for the entire
agreed penalties, within ten (10) days from receipt of the letter, or they property, Kalayaans obligation to convey title to the property did not
would be constrained to file the necessary actions against them. Again, in a arise. Thus, Kalayaan may validly cancel the contract to sell its land to
letter[10] dated March 30, 1996, Kalayaan gave petitioners another petitioner, not because it had the power to rescind the contract, but because
opportunity to settle their obligation within a period of ten (10) days from their obligation thereunder did not arise.
receipt thereof.
Thereafter, Kalayaans in-house counsel, Atty. Reynaldo Romero, demanded Petitioners failed to pay the balance of the purchase price. Such
that petitioners pay their outstanding obligation. However, his demands payment is a positive suspensive condition, failure of which is not a breach,
remained unheeded.Thus, on June 19, 1998, Kalayaan filed a Complaint for serious or otherwise, but an event that prevents the obligation of the seller
Rescission of Contract and Damages against petitioners. RTC, affirmed by to convey title from arising.[27] The non-fulfillment by petitioners of their
the CA, ruled in favour of Kalayaan. obligation to pay, which is a suspensive condition for the obligation of
Kalayaan to sell and deliver the title to the property, rendered the Contract
Issue: WON Sps. Valenzuela are entitled to get at least one-half of the to Sell ineffective and without force and effect. The parties stand as if the
subject property? conditional obligation had never existed.[28] Inasmuch as the suspensive
condition did not take place, Kalayaan cannot be compelled to transfer
Ruling: NO. ownership of the property to petitioners.
In the present case, the nature and characteristics of a contract to
sell is determinative of the propriety of the remedy of rescission and the As to the partial payments made by petitioners from September 16,
award of attorneys fees. 1994 to December 20, 1997, amounting to P788,000.00, this Court resolves
that the said amount be returned to the petitioners, there being no
Under a contract to sell, the seller retains title to the thing to be provision regarding forfeiture of payments made in the Contract to Sell. To
sold until the purchaser fully pays the agreed purchase price. The full rule otherwise will be unjust enrichment on the part of Kalayaan at the
payment is a positive suspensive condition, the non-fulfillment of which is expense of the petitioners
not a breach of contract, but merely an event that prevents the seller from
conveying title to the purchaser. The non-payment of the purchase price
renders the contract to sell ineffective and without force and effect.
[23]
Unlike a contract of sale, where the title to the property passes to the
vendee upon the delivery of the thing sold, in a contract to sell, ownership
is, by agreement, reserved to the vendor and is not to pass to the vendee
until full payment of the purchase price.Otherwise stated, in a
contract of sale, the vendor loses ownership over the property and cannot SPS. NONILON (MANOY) and IRENE MONTECALVO vs. HEIRS
recover it until and unless the contract is resolved or rescinded; whereas, in (Substitutes) OF EUGENIA T. PRIMERO, represented by their Attorney-
a contract to sell, title is retained by the vendor until full payment of the in-Fact, ALFREDO T. PRIMERO, JR.
purchase price. In the latter contract, payment of the price is a positive G.R. No. 165168, July 9, 2010
Case Digest 2018
In a contract to sell, the prospective seller explicitly reserves the transfer of WITNESSETH:
title to the prospective buyer, meaning, the prospective seller does not as yet
agree or consent to transfer ownership of the property subject of the contract 1. That the OWNER is the true and absolute owner of a
to sell until the happening of an event, which for present purposes we shall parcel of land located at Sabayle St. immediately
take as the full payment of the purchase price.30 What the seller agrees or fronting the St. Peter's College which is presently
obliges himself to do is to fulfill his promise to sell the subject property when leased to the INTERESTED PARTY;
the entire amount of the purchase price is delivered to him. 31 In other words,
the full payment of the purchase price partakes of a suspensive condition, the 2. That the property referred to contains an area of
non-fulfillment of which prevents the obligation to sell from arising and thus, EIGHT HUNDRED SIXTY SQUARE METERS at the value
ownership is retained by the prospective seller without further remedies by of One Thousand Pesos (₱1,000.00) per square
the prospective buyer.32 A contract to sell is commonly entered into in order to meters;
protect the seller against a buyer who intends to buy the property in
installment by withholding ownership over the property until the buyer 3. That this agreement is entered into for the purpose
effects full payment therefor.33 of negotiating the sale of the above referred property
between the same parties herein under the following
Facts: A parcel of land is registered in the name of Eugenia Primero terms and conditions, to wit:
(Eugenia), married to Alfredo Primero, Sr. (Alfredo).
a) That the term of this negotiation is for a
In the early 1980s, Eugenia leased the lot to petitioner Irene Montecalvo period of Thirty to Forty Five (30-45) days
(Irene) for a monthly rental of ₱500.00. On January 13, 1985, Eugenia from receipt of a deposit;
entered into an un-notarized Agreement3 with Irene, where the former
offered to sell the property to the latter for ₱1,000.00 per square meter. b) That Forty Thousand Pesos (₱40,000.00)
They agreed that Irene would deposit the amount of ₱40,000.00 which shall shall be deposited to demonstrate the
form part of the down payment equivalent to 50% of the purchase price. interest of the Interested Party to acquire
They also stipulated that during the term of negotiation of 30 to 45 days the property referred to above, which
from receipt of said deposit, Irene would pay the balance of ₱410,000.00 on deposit shall not earn any interest;
the down payment. In case Irene defaulted in the payment of the down
payment, the deposit would be returned within 10 days from the lapse of c) That should the contract or agreement
said negotiation period and the Agreement deemed terminated. However, if push through the deposit shall form part of
the negotiations pushed through, the balance of the full value of the down payment of Fifty percent (50%) of
₱860,000.00 or the net amount of ₱410,000.00 would be paid in 10 equal the total or full value. Otherwise the deposit
monthly installments from receipt of the down payment, with interest at the shall be returned within TEN (10) days from
prevailing rate. the lapse of the period of negotiation;
Irene failed to pay the full down payment within the stipulated 30-45-day 4. That should this push through, the balance of Four
negotiation period. Nonetheless, she continued to stay on the disputed Hundred Ten Thousand on the down payment shall be
property, and still made several payments with an aggregate amount of made upon execution of the Agreement to Sell and the
₱293,000.00. On the other hand, Eugenia did not return the ₱40,000.00 balance of the full value of Eight Hundred Sixty
deposit to Irene, and refused to accept further payments only in 1992. Thousand or Four Hundred Ten Thousand Pesos shall
be paid in equal monthly installment within Ten (10)
Thereafter, Irene caused a survey of Lot No. 263 and the segregation of a months from receipt of the down payment with [sic]
portion equivalent to 293 square meters in her favor. However, Eugenia according to prevailing interest.
opposed her claim and asked her to vacate the property. Then on May 13,
1996, Eugenia and the heirs of her deceased husband Alfredo filed a
In the Agreement, Eugenia, as owner, did not convey her title to the
complaint for unlawful detainer against Irene and her husband, herein
disputed property to Irene since the Agreement was made for the purpose
petitioner Nonilon Montecalvo (Nonilon) before the Municipal Trial Court
of negotiating the sale of the 860-square meter property. 28
(MTC) of Iligan City. During the preliminary conference, the parties
stipulated that the issue to be resolved was whether their Agreement had
been rescinded and novated. Hence, the MTC dismissed the case for lack of On this basis, we are more inclined to characterize the agreement as a
jurisdiction since the issue is not susceptible of pecuniary estimation. The contract to sell rather than a contract of sale. Although not by itself
MTC's Decision dismissing the ejectment case became final as Eugenia and controlling, the absence of a provision in the Agreement transferring title
her children did not appeal therefrom.4 from the owner to the buyer is taken as a strong indication that the
Agreement is a contract to sell.29
On June 18, 1996, Irene and Nonilon retaliated by instituting Civil Case No.
II-3588 with the RTC of Lanao del Norte for specific performance, to compel
In a contract to sell, the prospective seller explicitly reserves the transfer of
Eugenia to convey the 293-square meter portion of Lot No. 263.5
title to the prospective buyer, meaning, the prospective seller does not as
yet agree or consent to transfer ownership of the property subject of the
Issue: WON the Agreement dated January 13, 1985 is a contract to sell
contract to sell until the happening of an event, which for present purposes
we shall take as the full payment of the purchase price. 30 What the seller
Ruling: Contract to Sell
agrees or obliges himself to do is to fulfill his promise to sell the subject
property when the entire amount of the purchase price is delivered to
There is no dispute as to the due execution and existence of the Agreement.
him.31 In other words, the full payment of the purchase price partakes of a
The issue thus presented is whether the said Agreement is a contract of sale
suspensive condition, the non-fulfillment of which prevents the obligation
or a contract to sell. For a better understanding and resolution of the issue
to sell from arising and thus, ownership is retained by the prospective seller
at hand, it is apropos to reproduce herein the Agreement in haec verba:
without further remedies by the prospective buyer. 32 A contract to sell is
commonly entered into in order to protect the seller against a buyer who
A g r e e m e n t
intends to buy the property in installment by withholding ownership over
This Agreement, made and executed by and between:
the property until the buyer effects full payment therefor. 33
EUGENIA T. PRIMERO, a Filipino of legal age and residing in Camague, Iligan
City (hereinafter called the OWNER)
- and - In this case, the Agreement expressly provided that it was "entered into for
IRENE P. MONTECALVO, Filipino of legal age and presently residing at the purpose of negotiating the sale of the above referred property between
Sabayle St., Iligan City (hereinafter [called] the INTERESTED PARTY); the same parties herein x x x." The term of the negotiation shall be for a
Case Digest 2018
period of 30-45 days from receipt of the ₱40,000.00 deposit and the buyer
has to pay the balance of the 50% down payment amounting to
₱410,000.00 within the said period of negotiation. Thereafter, an
Agreement to Sell shall be executed by the parties and the remainder of the
purchase price amounting to another ₱410,000.00 shall be paid in 10 equal
monthly installments from receipt of the down payment. The assumption of
both parties that the purpose of the Agreement was for negotiating the sale
of Lot No. 263, in its entirety, for a definite price, with a specific period for
payment of a specified down payment, and the execution of a subsequent
contract for the sale of the same on installment payments leads to no other
conclusion than that the predecessor-in-interest of the herein respondents
and the herein petitioner Irene entered into a contract to sell.
As stated in the Agreement, the payment of the purchase price, in

installments within the period stipulated, constituted a positive suspensive
condition, the failure of which is not really a breach but an event that
prevents the obligation of the seller to convey title in accordance with
Article 1184 of the Civil Code. 34 Hence, for petitioners' failure to comply
with the terms and conditions laid down in the Agreement, the obligation of
the predecessor-in-interest of the respondents to deliver and execute the
corresponding deed of sale never arose.
The fact that the predecessor-in-interest of the respondents failed to return

the ₱40,000.00 deposit subsequent to the expiration of the period of
negotiation did not prevent the respondents from repudiating the
Agreement. The obligation of the respondent to convey the property never
came to pass as the petitioners did not comply with the positive suspensive
condition of full payment of the purchase price within the period as
stipulated.
The alleged oral contract of sale for the 293-square meter portion of the
property was not proved by preponderant evidence. Hence, petitioners
cannot compel the successors-in-interest of the deceased Eugenia to
execute a deed of absolute sale in their favor.
Petitioners alleged in their Complaint that in 1992, Eugenia refused to

accept further payments and suggested that she will convey to petitioners
293 square meters of her 860-square meter property, in proportion to
payments already made. Thus, Eugenia caused the segregation of the area
where the petitioners' building now stands, consisting of 293 square
meters.
In support of their contention, petitioners presented the testimony of Irene,

who testified that Eugenia segregated for them an area of 293 square
meters for the agreed price of ₱1,000.00 per square meter. 35 The total
purchase price allegedly agreed upon by the parties, amounting to
₱293,000.00, corresponded to the amount of payments already made by
Irene.36 They likewise presented (1) 82 receipts covering the period
October 13, 1986 to July 10, 1994;37(2) the testimony of the surveyor, Engr.
Ravacio, to show that the segregation survey of the 293-square meter
portion of the property was made with the knowledge and consent of
Eugenia; and (3) the resulting subdivision plan.
Case Digest 2018
VIRGILIO S. DAVID vs. MISAMIS OCCIDENTAL II ELECTRIC previous delivery of the property subject of the sale to the buyer, ownership
COOPERATIVE, INC. thereto automatically transfers to the buyer by operation of law without
G.R. No. 194785, July 11, 2012, MENDOZA, J. any further act having to be performed by the seller. The vendor loses
ownership over the property and cannot recover it until and unless the
contract is resolved or rescinded.11
Facts: Petitioner David was engaged in the business of supplying
electrical hardware including transformers for rural electric cooperatives
like respondent Misamis Occidental II Electric Cooperative, Inc. (MOELCI). An examination of the alleged contract to sell, "Exhibit A," despite its
unconventional form, would show that said document, with all the
stipulations therein and with the attendant circumstances surrounding it,
MOELCI expressed its intention to purchase 10 MVA power transformer
was actually a Contract of Sale. The rule is that it is not the title of the
from David. David agreed to supply the power transformer provided that
contract, but its express terms or stipulations that determine the kind of
MOELCI would secure a board resolution because the item would still have
contract entered into by the parties. 12 First, there was meeting of minds as
to be imported.
to the transfer of ownership of the subject matter. The letter (Exhibit A),
though appearing to be a mere price quotation/proposal, was not what it
On June 8, 1992, Engr. Rada and Director Jose Jimenez (Jimenez), who was seemed. It contained terms and conditions, so that, by the fact that Jimenez,
in-charge of procurement, returned to Manila and presented to David the Chairman of the Committee on Management, and Engr. Rada, General
requested board resolution which authorized the purchase of one 10 MVA Manager of MOELCI, had signed their names under the word "CONFORME,"
power transformer. In turn, David presented his proposal for the they, in effect, agreed with the terms and conditions with respect to the
acquisition of said transformer. This proposal was the same proposal that purchase of the subject 10 MVA Power Transformer. As correctly argued by
he would usually give to his clients. David, if their purpose was merely to acknowledge the receipt of the
proposal, they would not have signed their name under the word
"CONFORME."
After the reading of the proposal and the discussion of terms, David
instructed his then secretary and bookkeeper, Ellen M. Wong, to type the
names of Engr. Rada and Jimenez at the end of the proposal. Both signed the Besides, the uncontroverted attending circumstances bolster the fact that
document under the word "conforme." The board resolution was thereafter there was consent or meeting of minds in the transfer of ownership. To
attached to the proposal. begin with, a board resolution was issued authorizing the purchase of the
subject power transformer. Next, armed with the said resolution, top
officials of MOELCI visited David’s office in Quezon City three times to
The transformers having been delivered, David demanded for the payment
discuss the terms of the purchase. Then, when the loan that MOELCI was
of the same. MOELCI, however, failed to pay. Hence, David filed an action for
relying upon to finance the purchase was not forthcoming, MOELCI, through
specific performance with against MOELCI. MOECLI moved for its dismissal
Engr. Rada, convinced David to do away with the 50% downpayment and
on the ground that there was lack of cause of action as there was no
deliver the unit so that it could already address its acute power shortage
contract of sale, to begin with, or in the alternative, the said contract was
predicament, to which David acceded when it made the delivery, through
unenforceable under the Statute of Frauds. MOELCI argued that the
the carrier William
quotation letter could not be considered a binding contract because there
was nothing in the said document from which consent, on its part, to the
terms and conditions proposed by David could be inferred. Lines, as evidenced by a bill of lading.
Issue: (1) WHETHER OR NOT THERE WAS A PERFECTED CONTRACT Second, the document specified a determinate subject matter which was
OF SALE. one (1) Unit of 10 MVA Power Transformer with corresponding KV Line
Accessories. And third, the document stated categorically the price certain
in money which was P5,200,000.00 for one (1) unit of 10 MVA Power
(2) WHETHER OR NOT THERE WAS A DELIVERY THAT CONSUMMATED
Transformer and P2,169,500.00 for the KV Line Accessories.
THE CONTRACT.
In sum, since there was a meeting of the minds, there was consent on the
Ruling: (1) YES
part of David to transfer ownership of the power transformer to MOELCI in
exchange for the price, thereby complying with the first element. Thus, the
The elements of a contract of sale are, to wit: a) Consent or meeting of the said document cannot just be considered a contract to sell but rather a
minds, that is, consent to transfer ownership in exchange for the price; b) perfected contract of sale.
Determinate subject matter; and c) Price certain in money or its
equivalent.9It is the absence of the first element which distinguishes a
(2) YES
contract of sale from that of a contract to sell.
MOELCI, in denying that the power transformer was delivered to it, argued
In a contract to sell, the prospective seller explicitly reserves the transfer of
that the Bill of Lading which David was relying upon was not conclusive. It
title to the prospective buyer, meaning, the prospective seller does not as
argued that although the bill of lading was stamped "Released," there was
yet agree or consent to transfer ownership of the property subject of the
nothing in it that indicated that said power transformer was indeed
contract to sell until the happening of an event, such as, in most cases, the
released to it or delivered to its possession. For this reason, it is its position
full payment of the purchase price. What the seller agrees or obliges himself
that it is not liable to pay the purchase price of the 10 MVA power
to do is to fulfill his promise to sell the subject property when the entire
transformer.
amount of the purchase price is delivered to him. In other words, the full
payment of the purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising and, thus, This Court is unable to agree with the CA that there was no delivery of the
ownership is retained by the prospective seller without further remedies by items. On the contrary, there was delivery and release.
the prospective buyer.10
To begin with, among the terms and conditions of the proposal to which
In a contract of sale, on the other hand, the title to the property passes to MOELCI agreed stated:
the vendee upon the delivery of the thing sold. Unlike in a contract to sell,
the first element of consent is present, although it is conditioned upon the
2. Delivery – Ninety (90) working days upon receipt of your purchase order
happening of a contingent event which may or may not occur. If the
and downpayment.
suspensive condition is not fulfilled, the perfection of the contract of sale is
completely abated. However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been
Case Digest 2018
C&F Manila, freight, handling, insurance, custom duties and incidental

expenses shall be for the account of MOELCI II. 13 (Emphasis supplied)
On this score, it is clear that MOELCI agreed that the power transformer
would be delivered and that the freight, handling, insurance, custom duties,
and incidental expenses shall be shouldered by it.
On the basis of this express agreement, Article 1523 of the Civil Code
becomes applicable.1âwphi1 It provides:
Where, in pursuance of a contract of sale, the seller is authorized or

required to send the goods to the buyer delivery of the goods to a carrier,
whether named by the buyer or not, for the purpose of transmission to the
buyer is deemed to be a delivery of the goods to the buyer, except in the
cases provided for in Article 1503, first, second and third paragraphs, or
unless a contrary intent appears. (Emphasis supplied)
Thus, the delivery made by David to William Lines, Inc., as evidenced by the
Bill of Lading, was deemed to be a delivery to MOELCI. David was
authorized to send the power transformer to the buyer pursuant to their
agreement. When David sent the item through the carrier, it amounted to a
delivery to MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v. Yangco, 14 it was
pointed out that a specification in a contract relative to the payment of
freight can be taken to indicate the intention of the parties with regard to
the place of delivery. So that, if the buyer is to pay the freight, as in this case,
it is reasonable to suppose that the subject of the sale is transferred to the
buyer at the point of shipment. In other words, the title to the goods
transfers to the buyer upon shipment or delivery to the carrier.
Of course, Article 1523 provides a mere presumption and in order to

overcome said presumption, MOELCI should have presented evidence to the
contrary. The burden of proof was shifted to MOELCI, who had to show that
the rule under Article 1523 was not applicable. In this regard, however,
MOELCI failed.
There being delivery and release, said fact constitutes partial performance
which takes the case out of the protection of the Statute of Frauds. It is
elementary that the partial execution of a contract of sale takes the
transaction out of the provisions of the Statute of Frauds so long as the
essential requisites of consent of the contracting parties, object and cause of
the obligation concur and are clearly established to be present.
Case Digest 2018
NICOLAS P. DIEGO vs. RODOLFO P. DIEGO and EDUARDO P. DIEGO The Court further held that "[j]urisprudence has established that where
G.R. No. 179965, February 20, 2013, DEL CASTILLO, J. the seller promises to execute a deed of absolute sale upon the
completion by the buyer of the payment of the price, the contract is
only a contract to sell."
Facts: In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother
Rodolfo, respondent herein, entered into an oral contract to sell covering
Nicolas’s share, fixed at ₱500,000.00, as co-owner of the family’s Diego b) The acknowledgement receipt signed by Nicolas as well as the
Building situated in Dagupan City. Rodolfo made a downpayment of contemporaneous acts of the parties show that they agreed on a
₱250,000.00. It was agreed that the deed of sale shall be executed upon contract to sell, not of sale. The absence of a formal deed of
payment of the remaining balance of ₱250,000.00. However, Rodolfo failed conveyance is indicative of a contract to sell.
to pay the remaining balance.
In San Lorenzo Development Corporation v. Court of Appeals, the court held
Meanwhile, the building was leased out to third parties, but Nicolas’s share that the receipt signed by Pacita Lu merely states that she accepted the sum
in the rents were not remitted to him by herein respondent Eduardo, of fifty thousand pesos (₱50,000.00) from Babasanta as partial payment of
another brother of Nicolas and designated administrator of the Diego 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no
Building. Instead, Eduardo gave Nicolas’s monthly share in the rents to stipulation that the seller reserves the ownership of the property until full
Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and payment of the price which is a distinguishing feature of a contract to sell,
Eduardo failed to render an accounting and remit his share in the rents and the subsequent acts of the parties convince us that the Spouses Lu never
fruits of the building, and Eduardo continued to hand them over to Rodolfo. intended to transfer ownership to Babasanta except upon full
payment of the purchase price.
Thus, on May 17, 1999, Nicolas filed a Complaint 6 against Rodolfo and
Eduardo. Nicolas prayed that Eduardo be ordered to render an accounting Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein
of all the transactions over the Diego Building; that Eduardo and Rodolfo be that despite his repeated requests for the execution of the final deed of sale
ordered to deliver to Nicolas his share in the rents; and that Eduardo and in his favor so that he could effect full payment of the price, Pacita Lu
Rodolfo be held solidarily liable for attorney’s fees and litigation expenses. allegedly refused to do so. In effect, Babasanta himself recognized that
ownership of the property would not be transferred to him until such
time as he shall have effected full payment of the price. Moreover, had
Rodolfo and Eduardo filed their Answer with Counterclaim 7 for damages
the sellers intended to transfer title, they could have easily executed
and attorney’s fees. They argued that Nicolas had no more claim in the rents
the document of sale in its required form simultaneously with their
in the Diego Building since he had already sold his share to Rodolfo. Rodolfo
acceptance of the partial payment, but they did not. Doubtlessly, the
admitted having remitted only ₱250,000.00 to Nicolas. He asserted that he
receipt signed by Pacita Lu should legally be considered as a perfected
would pay the balance of the purchase price to Nicolas only after the latter
contract to sell.
shall have executed a deed of absolute sale.
In the instant case, records show that Nicolas signed a mere

Issue: WON there was a perfected contract of sale among the parties.
receipt24 acknowledging partial payment of ₱250,000.00 from Rodolfo. It
states:
Ruling: NO. The contract entered into by Nicolas and Rodolfo was a
contract to sell.
July 8, 1993
a) The stipulation to execute a deed of sale upon full payment of the

Received the amount of [₱250,000.00] for 1 share of Diego Building as
purchase price is a unique and distinguishing characteristic of a
partial payment for Nicolas Diego.
contract to sell. It also shows that the vendor reserved title to the
property until full payment.
(signed)
Nicolas Diego25
There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in
the Diego Building for the price of ₱500,000.00. There is also no dispute
that of the total purchase price, Rodolfo paid, and Nicolas received, As we ruled in San Lorenzo Development Corporation v. Court of
₱250,000.00. Significantly, it is also not disputed that the parties agreed Appeals,26 the parties could have executed a document of sale upon receipt
that the remaining amount of ₱250,000.00 would be paid after Nicolas shall of the partial payment but they did not. This is thus an indication that
have executed a deed of sale. Nicolas did not intend to immediately transfer title over his share but only
upon full payment of the purchase price. Having thus reserved title over the
property, the contract entered into by Nicolas is a contract to sell. In
This stipulation, i.e., to execute a deed of absolute sale upon full payment of
addition, Eduardo admitted that he and Rodolfo repeatedly asked Nicolas to
the purchase price, is a unique and distinguishing characteristic of
sign the deed of sale 27 but the latter refused because he was not yet paid the
a contract to sell. In Reyes v. Tuparan,15 this Court ruled that a stipulation
full amount. As we have ruled in San Lorenzo Development Corporation v.
in the contract, "[w]here the vendor promises to execute a deed of
Court of Appeals,28the fact that Eduardo and Rodolfo asked Nicolas to
absolute sale upon the completion by the vendee of the payment of the
execute a deed of sale is a clear recognition on their part that the ownership
price," indicates that the parties entered into a contract to sell. According
over the property still remains with Nicolas. In fine, the totality of the
to this Court, this particular provision is tantamount to a reservation of
parties’ acts convinces us that Nicolas never intended to transfer the
ownership on the part of the vendor. Explicitly stated, the Court ruled that
ownership over his share in the Diego Building until the full payment of the
the agreement to execute a deed of sale upon full payment of the purchase
purchase price. Without doubt, the transaction agreed upon by the parties
price "shows that the vendors reserved title to the subject property
was a contract to sell, not of sale.
until full payment of the purchase price."16
In Chua v. Court of Appeals,29 the Court, speaking through Justice Carpio,

In Tan v. Benolirao,17 this Court, speaking through Justice Brion, ruled that
held that "[a] perusal of the Receipt shows that the true agreement between
the parties entered into a contract to sell as revealed by the following
the parties was a contract to sell."31 The Court noted that "the agreement x x
stipulation:
x was embodied in a receipt rather than in a deed of sale, ownership not
having passed between them."32 The Court thus concluded that "[t]he
d) That in case, BUYER has complied with the terms and conditions of this absence of a formal deed of conveyance is a strong indication that the
contract, then the SELLERS shall execute and deliver to the BUYER the parties did not intend immediate transfer of ownership, but only a
appropriate Deed of Absolute Sale;18 transfer after full payment of the purchase price." 33 Thus, the "true
agreement between the parties was a contract to sell."34
Case Digest 2018
In the instant case, the parties were similarly embroiled in an impasse. The
parties’ agreement was likewise embodied only in a receipt. Also, Nicolas
did not want to sign the deed of sale unless he is fully paid. On the other
hand, Rodolfo did not want to pay unless a deed of sale is duly executed in
his favor. We thus say, pursuant to our ruling in Chua v. Court of
Appeals35 that the agreement between Nicolas and Rodolfo is a contract to
sell.
In fine, "the need to execute a deed of absolute sale upon completion of

payment of the price generally indicates that it is a contract to sell, as
it implies the reservation of title in the vendor until the vendee has
completed the payment of the price."36 In addition, "[a] stipulation
reserving ownership in the vendor until full payment of the price is x x x
typical in a contract to sell." 37 Thus, contrary to the pronouncements of the
trial and appellate courts, the parties to this case only entered into a
contract to sell; as such title cannot legally pass to Rodolfo until he makes
full payment of the agreed purchase price.
Case Digest 2018
SPOUSES DELFIN O. TUMIBAY and AURORA T. TUMIBAY-deceased; The Court is, thus, inclined to rule that there was, indeed, a
GRACE JULIE ANN TUMIBAY MANUEL, legal representative v. SPOUSES contractual agreement between the parties for the purchase of the subject
MELVIN A. LOPEZ and ROWENA GAY T. VISITACION LOPEZ land and that this agreement partook of an oral contract to sell for the sum
G.R. No.171692, 3 June 2013, SECOND DIVISION (Del Castillo, J.) of ₱800,000.00. A contract to sell has been defined as “a bilateral contract
whereby the prospective seller, while expressly reserving the ownership of
A contract to sell has been defined as “a bilateral contract whereby the subject property despite delivery thereof to the prospective buyer,
the prospective seller, while expressly reserving the ownership of the subject binds himself to sell the said property exclusively to the prospective buyer
property despite delivery thereof to the prospective buyer, binds himself to sell upon fulfillment of the condition agreed upon, that is, full payment of the
the said property exclusively to the prospective buyer upon fulfillment of the purchase price.” In a contract to sell, “ownership is retained by the seller
condition agreed upon, that is, full payment of the purchase price.” In a and is not to pass until the full payment of the price x x x.” It is “commonly
contract to sell, “ownership is retained by the seller and is not to pass until the entered into so as to protect the seller against a buyer who intends to buy
full payment of the price.” It is “commonly entered into so as to protect the the property in installments by withholding ownership over the property
seller against a buyer who intends to buy the property in installments by until the buyer effects full payment therefor.”
withholding ownership over the property until the buyer effects full payment
therefor.” In the case at bar, while there was no written agreement evincing
the intention of the parties to enter into a contract to sell, its existence and
FACTS: partial execution were sufficiently established by, and may be reasonably
inferred from the actuations of the parties, to wit: (1) the title to the subject
Petitioners were the owners of the subject land covered by a TCT land was not immediately transferred, through a formal deed of
in the name of petitioner Aurora. On December 12, 1990, petitioners, as conveyance, in the name of respondent Rowena prior to or at the time of the
principals and sellers, executed an SPA in favor of Reynalda, as agent, to, first payment of $1,000.00 by respondent Rowena to petitioner Aurora on
among others, offer for sale the subject land provided that the purchase January 25, 1995; (2) after this initial payment, petitioners received 22
price thereof should be approved by the former. Sometime in 1994, intermittent monthly installments from respondent Rowena in the sum of
petitioners and respondent Rowena agreed to enter into an oral contract to $500.00; and, (3) in her testimony, respondent Rowena admitted that she
sell over the subject land for the price of ₱800,000.00 to be paid in 10 years had the title to the subject land transferred in her name only later on or on
through monthly installments. July 23, 1997, through a deed of sale, because she believed that she had
substantially paid the purchase price thereof, and that she was entitled
On January 25, 1995, respondent Rowena paid the first monthly thereto as a form of security for the installments she had already paid.
installment of $1,000.00 to petitioner Aurora which was followed by 22
intermittent monthly installments of $500.00 spanning almost three years. (2) WON respondent Rowena breached the contract. – YES
Sometime in 1997, after having paid a total of $10,000.00, respondent
Rowena called her mother, Reynalda, claiming that she had already bought Respondent Rowena was in breach of the contract to sell.
the subject land from petitioners. Using the aforesaid SPA, Reynalda then Although the Court rules that there was a contract to sell over the subject
transferred the title to the subject land in respondent Rowena’s name land between petitioners and respondent Rowena, the Court finds that
through a deed of sale dated July 23, 1997 without the knowledge and respondent Rowena was in breach thereof because, at the time the
consent of petitioners. In the aforesaid deed, Reynalda appeared and signed aforesaid deed of sale was executed on July 23, 1997, the full price of the
as attorney-in-fact of petitioner Aurora, as seller, while respondent Rowena subject land was yet to be paid. In arriving at this conclusion, the Court
appeared as buyer. After which, a new title to the subject land was issued in takes judicial notice of the prevailing exchange rates at the time, as
the name of respondent Rowena. Thus, Complaint for declaration of nullity published by the Bangko Sentral ng Pilipinas, and multiply the same with
ab initio of sale, and recovery of ownership and possession of land was filed the monthly installments respondent Rowena paid to petitioners, as
by petitioners. supported by the evidence on record. As of July 19, 1997 or prior to the
execution of the deed of sale dated July 23, 1997, the total amount of
ISSUES & RULING: monthly installments paid by respondent Rowena to petitioners was only
₱260,626.50 or 32.58% of the ₱800,000.00 purchase price. That the full
(1) WON there was a contract of sale or contract to sell. price was yet to be paid at the time of the subject transfer of title was
admitted by respondent Rowena on cross-examination. Respondent
Petitioners and respondent Rowena entered into a contract to Rowena tried to justify the premature transfer of title by stating that she
sell over the subject land. Petitioners deny that they agreed to sell the had substantially paid the full amount of the purchase price and that this
subject land to respondent Rowena for the price of ₱800,000.00 payable in was necessary as a security for the installments she had already paid.
10 years through monthly installments. They claim that the payments However, her own evidence clearly showed that she had, by that time, paid
received from respondent Rowena were for safekeeping purposes only only 32.58% thereof. Neither can the Court accept her justification that the
pending the final agreement as to the purchase price of the subject land. premature transfer of title was necessary as a security for the installments
The Court is inclined to give credence to the claim of the respondents for she had already paid absent proof that petitioners agreed to this new
the following reasons. arrangement. Verily, she failed to prove that petitioners agreed to amend or
novate the contract to sell in order to allow her to acquire title over the
First, the payment of monthly installments was duly established subject land even if she had not paid the price in full.
by the evidence on record consisting of money orders and checks payable to
petitioner Aurora. Petitioners do not deny that they received 23 monthly Significantly, the evidence on record indicates that the premature
installments over the span of almost three years. As of November 30, 1997 transfer of title in the name of respondent Rowena was done without the
(i.e., the date of the last monthly installment), the payments already totaled knowledge and consent of petitioners. In particular, respondent Rowena’s
$12,000.00. Second, in her testimony, petitioner Aurora claimed that the narration of the events leading to the transfer of title showed that she and
$1,000.00 in cash that she received from respondent Rowena on January 25, her mother, Reynalda, never sought the consent of petitioners prior to said
1995 was a mere deposit until the purchase price of the subject land would transfer of title.
have been finally agreed upon by both parties. However, petitioner Aurora
failed to explain why, after receiving this initial sum of $1,000.00, she Respondent Rowena’s reliance on the SPA as the authority or
thereafter accepted from respondent Rowena 22 intermittent monthly consent to effect the premature transfer of title in her name is plainly
installments in the amount of $500.00. No attempt was made on the part of misplaced. The terms of the SPA are clear. It merely authorized Reynalda to
petitioners to return these amounts and it is fair to assume that petitioners sell the subject land at a price approved by petitioners. The SPA could not
benefited therefrom. Third, it strains credulity that respondent Rowena have amended or novated the contract to sell to allow respondent Rowena
would make such monthly installments for a substantial amount of money to acquire the title over the subject land despite non-payment of the price in
and for a long period of time had there been no agreement between the full for the reason that the SPA was executed four years prior to the contract
parties as to the purchase price of the subject land. to sell. In fine, the tenor of her testimony indicates that respondent Rowena
made a unilateral determination that she had substantially paid the
Case Digest 2018
purchase price and that she is entitled to the transfer of title as a form of purchase price. In a contract to sell, it would be unusual for the seller to
security for the installments she had already paid, reasons, we previously consent to the transfer of ownership of the property to the buyer prior to
noted, as unjustified. the full payment of the purchase price because the reservation of the
ownership in the seller is precisely intended to protect the seller from the
(3) WON the contract is rescissible under Article 1191 of the Civil buyer. The Court, therefore, finds that petitioners’ claim that they did not
Code. – YES. ratify the subject sale, which was done without their knowledge and
consent, and that the subsequent discovery of the aforesaid fraudulent sale
As a general rule, “rescission will not be permitted for a slight or led them to promptly file this case with the courts to be more credible and
casual breach of the contract, but only for such breaches as are substantial in accord with the evidence on record. To rule otherwise would be to
and fundamental as to defeat the object of the parties in making the reward respondent Rowena for the fraud that she committed on
agreement.” In the case at bar, the Court finds that respondent Rowena’s petitioners.
act of transferring the title to the subject land in her name, without the
knowledge and consent of petitioners and despite non-payment of the full Based on the foregoing, the Court rules that (1) Reynalda, as
price thereof, constitutes a substantial and fundamental breach of the agent, acted beyond the scope of her authority under the SPA when she
contract to sell. As previously noted, the main object or purpose of a seller executed the deed of sale dated July 23, 1997 in favor of respondent
in entering into a contract to sell is to protect himself against a buyer who Rowena, as buyer, without the knowledge and consent of petitioners, and
intends to buy the property in installments by withholding ownership over conveyed the subject land to respondent Rowena at a price not approved by
the property until the buyer effects full payment therefor. As a result, the petitioners, as principals and sellers, (2) respondent Rowena was aware of
seller’s obligation to convey and the buyer’s right to conveyance of the the limits of the authority of Reynalda under the SPA, and (3) petitioners
property arise only upon full payment of the price. Thus, a buyer who did not ratify, impliedly or expressly, the acts of Reynalda. Under Article
willfully contravenes this fundamental object or purpose of the contract, by 1898 of the Civil Code, the sale is void and petitioners are, thus, entitled to
covertly transferring the ownership of the property in his name at a time the reconveyance of the subject land.
when the full purchase price has yet to be paid, commits a substantial and
fundamental breach which entitles the seller to rescission of the contract.
Indeed, it would be highly iniquitous for the Court to rule that

petitioners, as sellers, should continue with the contract to sell even after
the discovery of the aforesaid breach committed by respondent Rowena, as
buyer, considering that these acts betrayed in no small measure the trust
reposed by petitioners in her and her mother, Reynalda. Put simply,
respondent Rowena took advantage of the SPA, in the name of her mother
and executed four years prior to the contract to sell, to effect the transfer of
title to the subject land in her (Rowena’s) name without the knowledge and
consent of petitioners and despite non-payment of the full price. The Court,
thus, rules that petitioners are entitled to the rescission of the subject
contract to sell.
(4) WON the subject sale is valid. – NO
The sale of the subject land, effected through the deed of sale
dated July 23, 1997, is void. The SPA gave Reynalda the power and duty to,
among others, (1) offer for sale the subject land to prospective buyers, (2)
seek the approval of petitioners as to the selling price thereof, and (3) sign
the contract of sale on behalf of petitioners upon locating a buyer willing
and able to purchase the subject land at the price approved by petitioners.
Although the SPA was executed four years prior to the contract to sell, there
would have been no obstacle to its use by Reynalda had the ensuing sale
been consummated according to its terms. However, as previously
discussed, when Reynalda, as attorney-in-fact of petitioner Aurora, signed
the subject deed of sale dated July 23, 1997, the agreed price of ₱800,000.00
(which may be treated as the approved price) was not yet fully paid because
respondent Rowena at the time had paid only ₱260,262.50. Reynalda,
therefore, acted beyond the scope of her authority because she signed the
subject deed of sale, on behalf of petitioners, at a price of ₱95,000.00 which
was not approved by the latter. For her part, respondent Rowena cannot
deny that she was aware of the limits of Reynalda’s power under the SPA
because she (Rowena) was the one who testified that the agreed price for
the subject land was ₱800,000.00.
That petitioners continued to receive four monthly installments

even after the premature titling of the subject land in the name of
respondent Rowena, through the deed of sale dated July 23, 1997, did not,
by itself, establish that petitioners ratified such sale. On the contrary, the
fact that petitioners continued to receive the aforesaid monthly
installments tended to establish that they had yet to discover the covert
transfer of title in the name of respondent Rowena. As stated earlier, the
evidence on record established that the subject sale was done without
petitioners’ knowledge and consent which would explain why receipt or
acceptance by petitioners of the aforementioned four monthly installments
still occurred. Further, it runs contrary to common human experience and
reason that petitioners, as sellers, would forego the reservation or retention
of the ownership over the subject land, which was intended to guarantee
the full payment of the price under the contract to sell, especially so in this
case where respondent Rowena, as buyer, had paid only 32.58% of the
Case Digest 2018
FREDERICK VENTURA, et al. v. HEIRS OF SPOUSES EUSTACIO T. the subject properties. As such, it ordered Sps. Endaya to execute a deed of
ENDAYA and TRINIDAD L. ENDAYA absolute sale covering the sale of the subject properties in petitioners’
G.R. No. 190016, 2 October 2013, SECOND DIVISION (Perlas-Bernabe, favor. The CA reversed and set aside the RTC ruling. It found that
J.) petitioners were not able to show that they fully complied with their
obligations under the contract to sell. It observed that aside from the
While the quality of contingency inheres in a contract to sell, the payment of the purchase price and 12% interest p.a. on the outstanding
same should not be confused with a conditional contract of sale. In a contract balance, the contract to sell imposed upon petitioners the obligations to pay
to sell, the fulfillment of the suspensive condition will not automatically 12% interest p.a. on the arrears and to reimburse Sps. Endaya the amount
transfer ownership to the buyer although the property may have been of the pertinent real estate taxes due on the subject properties, which the
previously delivered to him. In a conditional contract of sale, the fulfillment of former, however, totally disregarded as shown in their summary of
the suspensive condition renders the sale absolute and the previous delivery of payments.
the property has the effect of automatically transferring the seller’s
ownership or title to the property to the buyer. ISSUE: WON respondents should execute a deed of sale over the subject
properties in favor of petitioners.
FACTS:
RULING:
Dolores Ventura (Dolores) entered into a Contract to Sell with
spouses Eustacio and Trinidad Endaya (Sps. Endaya) for the purchase of NO. A thorough review of the records reveals no sufficient
two parcels of land. The Contract to Sell provides that the purchase price of reason to warrant the reversal of the CA’s August 18, 2006 Decision
₱347,760.00 shall be paid by Dolores in the following manner: (a) down dismissing petitioners’ complaint for specific performance which sought to
payment of ₱103,284.00 upon execution of the contract; and (b) the balance enforce the contract to sell and to compel respondents to execute a deed of
of ₱244,476.00 within a 15-year period (payment period), plus 12% sale over the subject properties.
interest per annum (p.a.) on the outstanding balance and 12% interest p.a.
on arrearages. It further provides that all payments made shall be applied in A contract to sell is defined as a bilateral contract whereby the
the following order: first, to the reimbursement of real estate taxes and prospective seller, while expressly reserving the ownership of the subject
other charges; second, to the interest accrued to the date of payment; third, property despite delivery thereof to the prospective buyer, binds himself to
to the amortization of the principal obligation; and fourth, to the payment of sell the said property exclusively to the latter upon his fulfillment of the
any other accessory obligation subsequently incurred by the owner in favor conditions agreed upon, i.e., the full payment of the purchase price and/or
of the buyer. It likewise imposed upon Dolores the obligation to pay the compliance with the other obligations stated in the contract to sell. Given its
real property taxes over the subject properties, or to reimburse Sps. Endaya contingent nature, the failure of the prospective buyer to make full
for any tax payments made by them, plus 1% interest per month. Upon full payment and/or abide by his commitments stated in the contract to sell
payment of the stipulated consideration, Sps. Endaya undertook to execute prevents the obligation of the prospective seller to execute the
a final deed of sale and transfer ownership over the same in favor of corresponding deed of sale to effect the transfer of ownership to the buyer
Dolores. from arising. As discussed in Sps. Serrano and Herrera v. Caguiat: “A
contract to sell is akin to a conditional sale where the efficacy or obligatory
Meanwhile, Dolores was placed in possession of the subject force of the vendor’s obligation to transfer title is subordinated to the
properties and allowed to erect a building thereon. However, before the happening of a future and uncertain event, so that if the suspensive
payment period expired, Dolores passed away. Thereafter, Dolores’ condition does not take place, the parties would stand as if the conditional
children, Frederick Ventura, Marites Ventura-Roxas, and Philip Ventura obligation had never existed. x x x.”
(petitioners), filed before the RTC a Complaint, which was later
amended, for specific performance, seeking to compel Sps. Endaya to To note, while the quality of contingency inheres in a contract to
execute a deed of sale over the subject properties. They averred that due to sell, the same should not be confused with a conditional contract of sale. In
the close friendship between their parents and Sps. Endaya, the latter did a contract to sell, the fulfillment of the suspensive condition will not
not require the then widowed Dolores to pay the down payment stated in automatically transfer ownership to the buyer although the property may
the contract to sell and, instead, allowed her to pay amounts as her means have been previously delivered to him. The prospective seller still has to
would permit. The payments were made in cash as well as in kind, and the convey title to the prospective buyer by entering into a contract of absolute
same were recorded by respondent Trinidad herself in a passbook given to sale. On the other hand, in a conditional contract of sale, the fulfillment of
Dolores to evidence the receipt of said payments. The total payments made the suspensive condition renders the sale absolute and the previous
by Dolores and petitioners amounted to ₱952,152.00, which is more than delivery of the property has the effect of automatically transferring the
the agreed purchase price of ₱347,760.00, including the 12%interest p.a. seller’s ownership or title to the property to the buyer.
thereon computed on the outstanding balance. However, when petitioners
demanded the execution of the corresponding deed of sale, Sps. Endaya Keeping with these principles, the Court finds that respondents
refused. had no obligation to petitioners to execute a deed of sale over the subject
properties. As aptly pointed out by the CA, aside from the payment of the
For their part, Sps. Endaya filed their Answer, admitting the purchase price and 12% interest p.a. on the outstanding balance, the
execution and genuineness of the contract to sell and the passbook. contract to sell likewise imposed upon petitioners the obligation to pay the
However, they countered that Dolores did not pay the stipulated down real property taxes over the subject properties as well as 12% interest p.a.
payment and remitted only a total of 22 installments. After her death on the arrears. However, the summary of payments as well as the
in1992, petitioners no longer remitted any installment. Sps. Endaya also statement of account submitted by petitioners clearly show that only the
averred that prior to Dolores’ death, the parties agreed to a restructuring of payments corresponding to the principal obligation and the 12% interest
the contract to sell whereby Dolores agreed to give a “bonus” of p.a. on the outstanding balance were considered in arriving at the amount
₱265,673.93 and to pay interest at the increased rate of 24% p.a. on the of ₱952,152.00. The Court has examined the petition as well as petitioners’
outstanding balance. They further claimed that when the balance of the memorandum and found no justifiable reason for the said omission. Hence,
purchase price stood at ₱1,699,671.69, a final restructuring of the contract the reasonable conclusion would therefore be that petitioners indeed failed
to sell was agreed with petitioners, fixing the obligation at ₱3,000,000.00. to comply with all their obligations under the contract to sell and, as such,
Thereafter, the latter paid a total of ₱380,000.00 on two separate have no right to enforce the same. Consequently, there lies no error on the
occasions, leaving a balance of ₱2,620,000.00. In any event, Sps. Endaya part of the CA in reversing the RTC Decision and dismissing petitioners’
pointed out that the automatic cancellation clause under the foregoing complaint for specific performance seeking to compel respondents to
contract rendered the same cancelled as early as 1981 with Dolores’ failure execute a deed of sale over the subject properties.
to make a down payment and to faithfully pay the installments.
The RTC found that petitioners were able to prove by a

preponderance of evidence the fact of full payment of the purchase price for
Case Digest 2018
ACE FOODS, INC. v. MICRO PACIFIC TECHNOLOGIES CO., LTD the parties may reciprocally demand performance, i.e., the vendee may
G.R. No. 200602, 11 December 2013, SECOND DIVISION (Perlas- compel transfer of ownership of the object of the sale, and the vendor may
Bernabe, J.) require the vendee to pay the thing sold.
The very essence of a contract of sale is the transfer of ownership In contrast, a contract to sell is defined as a bilateral contract
in exchange for a price paid or promised. It is classified as a consensual whereby the prospective seller, while expressly reserving the ownership of
contract, which means that the sale is perfected by mere consent. the property despite delivery thereof to the prospective buyer, binds
himself to sell the property exclusively to the prospective buyer upon
FACTS: fulfillment of the condition agreed upon, i.e., the full payment of the
purchase price. A contract to sell may not even be considered as
MTCL sent a letter-proposal for the delivery and sale of the a conditional contract of sale where the seller may likewise reserve title
subject products to be installed at various offices of ACE Foods. ACE Foods to the property subject of the sale until the fulfillment of a suspensive
accepted MTCL’s proposal and accordingly issued a Purchase Order for the condition, because in a conditional contract of sale, the first element of
subject products. Thereafter, MTCL delivered the said products to ACE consent is present, although it is conditioned upon the happening of a
Foods as reflected in an Invoice Receipt containing a title reservation contingent event which may or may not occur.
stipulation. MTCL’s demands against ACE Foods to pay the purchase price,
however, remained unheeded. Instead of paying the purchase price, ACE In this case, the Court concurs with the CA that the parties
Foods sent MTCL a Letter stating that it will be returning the subject have agreed to a contract of sale and not to a contract to sell as
products. adjudged by the RTC. Bearing in mind its consensual nature, a contract of
sale had been perfected at the precise moment ACE Foods, as evinced by its
Subsequently, ACE Foods flied a Complaint against MTCL before act of sending MTCL the Purchase Order, accepted the latter’s proposal to
the RTC, praying that the latter pull out from its premises the subject sell the subject products in consideration of the purchase price of
products since MTCL breached its “after delivery services” obligations to it. ₱646,464.00. From that point in time, the reciprocal obligations of the
For its part, MTCL, in its Answer with Counterclaim, maintained that it had parties – i.e., on the one hand, of MTCL to deliver the said products to ACE
duly complied with its obligations to ACE Foods and that the subject Foods, and, on the other hand, of ACE Foods to pay the purchase price
products were in good working condition when they were delivered, therefor within thirty (30) days from delivery – already arose and
installed and configured in ACE Foods’s premises. Further, MTCL posited consequently may be demanded. Article 1475 of the Civil Code makes this
that ACE Foods refused and failed to pay the purchase price for the subject clear: “The contract of sale is perfected at the moment there is a meeting of
products despite the latter’s use of the same for a period of nine (9) months. minds upon the thing which is the object of the contract and upon the price.
As such, MTCL prayed that ACE Foods be compelled to pay the purchase From that moment, the parties may reciprocally demand performance,
price, as well as damages related to the transaction. subject to the provisions of the law governing the form of contracts.”
The RTC held that the agreement between ACE Foods and MTCL The Court must dispel the notion that the stipulation anent
is in the nature of a contract to sell. Its conclusion was based on the fine MTCL’s reservation of ownership of the subject products as reflected in the
print of the Invoice Receipt containing the title reservation stipulation. Invoice Receipt, i.e., the title reservation stipulation, changed the
Thus, notwithstanding the execution of the Purchase Order and the delivery complexion of the transaction from a contract of sale into a contract to sell.
and installation of the subject products at the offices of ACE Foods, by Records are bereft of any showing that the said stipulation novated the
express stipulation stated in the Invoice Receipt issued by MTCL and signed contract of sale between the parties which, to repeat, already existed at the
by ACE Foods, it is still the former who holds title to the products until full precise moment ACE Foods accepted MTCL’s proposal.
payment of the purchase price therefor. Since title remained with MTCL, the
RTC therefore directed it to withdraw the subject products from ACE
Foods’s premises. The CA reversed and set aside the RTC’s ruling, ordering
ACE Foods to pay MTCL the amount of the purchase price plus legal interest
and attorney’s fees. It found that the agreement between the parties is in
the nature of a contract of sale, observing that the said contract had been
perfected from the time ACE Foods sent the Purchase Order to MTCL.
ISSUE: WON ACE Foods should pay MTCL the purchase price for the subject
products.
RULING: YES. ACE Foods should pay MTCL the purchase price for the
subject products as the case involves a contract of sale.
A contract is what the law defines it to be, taking into

consideration its essential elements, and not what the contracting parties
call it. The real nature of a contract may be determined from the express
terms of the written agreement and from the contemporaneous and
subsequent acts of the contracting parties. However, in the construction or
interpretation of an instrument, the intention of the parties is primordial
and is to be pursued. The denomination or title given by the parties in
their contract is not conclusive of the nature of its contents.
The very essence of a contract of sale is the transfer of

ownership in exchange for a price paid or promised. This may be
gleaned from Article 1458 of the Civil Code which defines a contract of sale
as follows: “By the contract of sale one of the contracting parties obligates
himself to transfer the ownership and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent. A
contract of sale may be absolute or conditional.”
Corollary thereto, a contract of sale is classified as a consensual

contract, which means that the sale is perfected by mere consent. No
particular form is required for its validity. Upon perfection of the contract,
Case Digest 2018
OPTIMUM DEVELOPMENT BANK v. SPOUSES BENIGNO V. JOVELLANOS on which the claim of possession is premised, the inferior court may
and LOURDES R. JOVELLANOS likewise pass upon these issues. The MeTC’s ruling on the rights of the
G.R. No. 189145, 4 December 2013, SECOND DIVISION (Perlas- parties based on its interpretation of their contract is, of course, not
Bernabe, J.) conclusive, but is merely provisional and is binding only with respect to the
issue of possession.
In a contract to sell, the prospective seller binds himself to sell the
property subject of the agreement exclusively to the prospective buyer upon In the case at bar, the unlawful detainer suit filed by Optimum
fulfillment of the condition agreed upon which is the full payment of the against Sps. Jovellanos for illegally withholding possession of the subject
purchase price but reserving to himself the ownership of the subject property property is similarly premised upon the cancellation or termination of the
despite delivery thereof to the prospective buyer. Contract to Sell between them. Indeed, it was well within the jurisdiction of
the MeTC to consider the terms of the parties’ agreement in order to
FACTS: ultimately determine the factual bases of Optimum’s possessory claims over
the subject property. Proceeding accordingly, the MeTC held that Sps.
Sps. Jovellanos entered into a Contract to Sell with Palmera Jovellanos’s non-payment of the installments due had rendered the Contract
Homes, Inc. (Palmera Homes) for the purchase of a residential house and to Sell without force and effect, thus depriving the latter of their right to
lot. Pursuant to the contract, Sps. Jovellanos took possession of the subject possess the property subject of said contract. The foregoing disposition
property upon payment of down payment, undertaking to pay the aptly squares with existing jurisprudence. As the Court similarly held in the
remaining balance of the contract price in equal monthly installments for a Union Bank case, the seller’s cancellation of the contract to sell necessarily
period of 10 years. Later, Palmera Homes assigned all its rights, title and extinguished the buyer’s right of possession over the property that was the
interest in the Contract to Sell in favor of petitioner Optimum Development subject of the terminated agreement.
Bank (Optimum). Subsequently, Optimum issued a Notice of Delinquency
and Cancellation of Contract to Sell for Sps. Jovellanos’s failure to pay their Verily, in a contract to sell, the prospective seller binds himself to
monthly installments despite several written and verbal notices. In its final sell the property subject of the agreement exclusively to the prospective
Demand Letter, Optimum required Sps. Jovellanos to vacate and deliver buyer upon fulfillment of the condition agreed upon which is the full
possession of the subject property within seven (7) days which, however, payment of the purchase price but reserving to himself the ownership of the
remained unheeded. Hence, Optimum filed a complaint for unlawful subject property despite delivery thereof to the prospective buyer.
detainer before the MeTC. For failure of Sps. Jovellanos to file their answer
within the prescribed reglementary period, Optimum moved for the The full payment of the purchase price in a contract to sell is a
rendition of judgment. Thereafter, Sps. Jovellanos filed their opposition suspensive condition, the non-fulfillment of which prevents the prospective
with motion to admit answer, questioning the jurisdiction of the court, seller’s obligation to convey title from becoming effective, as in this case.
among others. Further, they filed a Motion to Reopen and Set the Case for Further, it is significant to note that given that the Contract to Sell in this
Preliminary Conference, which the MeTC denied. case is one which has for its object real property to be sold on an
installment basis, the said contract is especially governed by – and thus,
The MeTC ordered Sps. Jovellanos to vacate the subject property must be examined under the provisions of – RA 6552, or the “Realty
and pay Optimum reasonable compensation in the amount of ₱5,000.00 for Installment Buyer Protection Act”, which provides for the rights of the
its use and occupation until possession has been surrendered. It held that buyer in case of his default in the payment of succeeding installments.
Sps. Jovellanos’s possession of the said property was by virtue of a Contract
to Sell which had already been cancelled for non-payment of the stipulated Pertinently, since Sps. Jovellanos failed to pay their stipulated
monthly installment payments. As such, their “rights of possession over the monthly installments as found by the MeTC, the Court examines Optimum’s
subject property necessarily terminated or expired and hence, their compliance with Section 4 of RA 6552, which is the provision applicable to
continued possession thereof constitute[d] unlawful detainer.” The RTC buyers who have paid less than two (2) years-worth of installments.
affirmed the MeTC’s ruling. However, the CA reversed and set aside the Essentially, the said provision provides for three (3) requisites before the
RTC’s decision, ruling to dismiss the complaint for lack of jurisdiction. It seller may actually cancel the subject contract: first, the seller shall give the
found that the controversy does not only involve the issue of possession but buyer a 60-day grace period to be reckoned from the date the installment
also the validity of the cancellation of the Contract to Sell and the became due; second, the seller must give the buyer a notice of
determination of the rights of the parties thereunder as well as the cancellation/demand for rescission by notarial act if the buyer fails to
governing law, among others, Republic Act (RA) No. 6552. It concluded that pay the installments due at the expiration of the said grace period;
the subject matter is one which is incapable of pecuniary estimation and and third, the seller may actually cancel the contract only after thirty (30)
thus, within the jurisdiction of the RTC. days from the buyer’s receipt of the said notice of cancellation/demand for
rescission by notarial act. In the present case, the 60-day grace period
ISSUE: WON the subject Contract to Sell was validly and effectively automatically operated in favor of the buyers, Sps. Jovellanos, and took
cancelled. effect from the time that the maturity dates of the installment payments
lapsed. With the said grace period having expired bereft of any installment
RULING: payment on the part of Sps. Jovellanos, Optimum then issued a notarized
Notice of Delinquency and Cancellation of Contract on April 10, 2006.
YES. The authority granted to the MeTC to preliminarily resolve Finally, in proceeding with the actual cancellation of the contract to sell,
the issue of ownership to determine the issue of possession ultimately Optimum gave Sps. Jovellanos an additional thirty (30) days within which to
allows it to interpret and enforce the contract or agreement between the settle their arrears and reinstate the contract, or sell or assign their rights to
plaintiff and the defendant. To deny the MeTC jurisdiction over a complaint another.
merely because the issue of possession requires the interpretation of a
contract will effectively rule out unlawful detainer as a remedy. In an action It was only after the expiration of the thirty day (30) period did
for unlawful detainer, the defendant’s right to possess the property may be Optimum treat the contract to sell as effectively cancelled – making as it did
by virtue of a contract, express or implied; corollarily, the termination of the a final demand upon Sps. Jovellanos to vacate the subject property only on
defendant’s right to possess would be governed by the terms of the same May 25, 2006. Thus, based on the foregoing, the Court finds that there was a
contract. valid and effective cancellation of the Contract to Sell in accordance with
Section 4 of RA 6552 and since Sps. Jovellanos had already lost their right to
Interpretation of the contract between the plaintiff and the retain possession of the subject property as a consequence of such
defendant is inevitable because it is the contract that initially granted the cancellation, their refusal to vacate and turn over possession to Optimum
defendant the right to possess the property; it is this same contract that the makes out a valid case for unlawful detainer as properly adjudged by the
plaintiff subsequently claims was violated or extinguished, terminating the MeTC.
defendant’s right to possess. The Court ruled in Sps. Refugia v. CA that –
where the resolution of the issue of possession hinges on a determination of
the validity and interpretation of the document of title or any other contract
Case Digest 2018
SPOUSES JOSE C. ROQUE AND BEATRIZ DELA CRUZ ROQUE, with

deceased Jose C. Roque represented by his substitute heir JOVETTE ISSUE: WON the 1977 Deed of Conditional Sale is a contract of sale, thus,
ROQUE-LIBREA v. MA. PAMELA P. AGUADO, et al. Spouses Roque can claim ownership over the subject portion of Lot 18089.
G.R. No. 193787, 7 April 2014, SECOND DIVISION (Perlas-Bernabe, J.)
RULING:
Where the seller promises to execute a deed of absolute sale upon
the completion by the buyer of the payment of the purchase price, the NO. Sps. Roque claim that the subject portion covered by the
contract is only a contract to sell even if their agreement is denominated as a 1977 Deed of Conditional Sale between them and Rivero, et al. was
Deed of Conditional Sale. wrongfully included in the certificates of title covering Lot 18089, and,
hence, must be segregated therefrom and their ownership thereof be
FACTS: confirmed. The salient portions of the said deed state:
Petitioners-spouses Jose C. Roque and Beatriz dela Cruz Roque DEED OF CONDITIONAL SALE OF REAL PROPERTY
(Sps. Roque) and the original owners of the then unregistered Lot 18089 –
namely, Velia R. Rivero (Rivero), Magdalena Aguilar, Angela Gonzales, KNOW ALL MEN BY THESE PRESENTS:
Herminia R. Bernardo, Antonio Rivero, Araceli R. Victa, Leonor R. Topacio,
and Augusto Rivero (Rivero, et al.) – executed a Deed of Conditional Sale of xxxx
Real Property (1977 Deed of Conditional Sale) over the subject portion of
Lot 18089. The parties agreed that Sps. Roque shall make an initial payment That for and in consideration of the sum of THIRTY THOUSAND SEVEN
upon signing, while the remaining balance of the purchase price shall be HUNDRED SEVENTY FIVE PESOS (₱30,775.00), Philippine Currency,
payable upon the registration of Lot 18089, as well as the segregation and payable in the manner herein below specified, the VENDORS do hereby sell,
the concomitant issuance of a separate title over the subject portion in their transfer and convey unto the VENDEE, or their heirs, executors,
names. After the deed’s execution, Sps. Roque took possession and administrators, or assignors, that unsegregated portion of the above lot, x x
introduced improvements on the subject portion which they utilized as a x.
balut factory.
That the aforesaid amount shall be paid in two installments, the first
Fructuoso Sabug, Jr. (Sabug, Jr.), former Treasurer of the National installment which is in the amount of __________ (₱15,387.50) and the
Council of Churches in the Philippines (NCCP), applied for a free patent over balance in the amount of __________ (₱15,387.50), shall be paid as soon as the
the entire Lot 18089 and was eventually issued Original Certificate of Title described portion of the property shall have been registered under the Land
(OCT) No. M-5955 in his name. Thereafter, Sabug, Jr. and Rivero, in her Registration Act and a Certificate of Title issued accordingly;
personal capacity and in representation of Rivero, et al., executed a Joint
Affidavit (1993 Joint Affidavit), acknowledging that the subject portion That as soon as the total amount of the property has been paid and the
belongs to Sps. Roque and expressed their willingness to segregate the Certificate of Title has been issued, an absolute deed of sale shall be
same from the entire area of Lot 18089. However, Sabug, Jr., through a executed accordingly;
Deed of Absolute Sale (1999 Deed of Absolute Sale), sold Lot 18089 to one
Ma. Pamela P. Aguado (Aguado), who, in turn, caused the cancellation of xxxx
OCT No. M-5955 and the issuance of Transfer Certificate of Title (TCT) No.
M-96692 in her name. Examining its provisions, the Court finds that the stipulation
above-highlighted shows that the 1977 Deed of Conditional Sale is actually
Thereafter, Aguado obtained an ₱8,000,000.00 loan from the in the nature of a contract to sell and not one of sale contrary to Sps.
Land Bank of the Philippines (Land Bank) secured by a mortgage over Lot Roque’s belief. In this relation, it has been consistently ruled that where the
18089. When she failed to pay her loan obligation, Land Bank commenced seller promises to execute a deed of absolute sale upon the completion by
extra-judicial foreclosure proceedings and eventually tendered the highest the buyer of the payment of the purchase price, the contract is only a
bid in the auction sale. Upon Aguado’s failure to redeem the subject contract to sell even if their agreement is denominated as a Deed of
property, Land Bank consolidated its ownership, and TCT No. M- Conditional Sale, as in this case. This treatment stems from the legal
115895 was issued in its name. characterization of a contract to sell, that is, a bilateral contract whereby the
prospective seller, while expressly reserving the ownership of the subject
Sps. Roque filed a complaint for reconveyance, annulment of sale, property despite delivery thereof to the prospective buyer, binds himself to
deed of real estate mortgage, foreclosure, and certificate of sale, and sell the subject property exclusively to the prospective buyer upon
damages before the RTC seeking to be declared as the true owners of the fulfillment of the condition agreed upon, such as, the full payment of the
subject portion which had been erroneously included in the sale between purchase price. Elsewise stated, in a contract to sell, ownership is retained
Aguado and Sabug, Jr., and, subsequently, the mortgage to Land Bank, both by the vendor and is not to pass to the vendee until full payment of the
covering Lot 18089 in its entirety. In defense, NCCP and Sabug, Jr. denied purchase price. Explaining the subject matter further, the Court, in Ursal v.
any knowledge of the 1977 Deed of Conditional Sale through which the CA, held that:
subject portion had been purportedly conveyed to Sps. Roque.
“[I]n contracts to sell the obligation of the seller to sell becomes
For her part, Aguado raised the defense of an innocent purchaser demandable only upon the happening of the suspensive condition, that is,
for value as she allegedly derived her title (through the 1999 Deed of the full payment of the purchase price by the buyer. It is only upon the
Absolute Sale) from Sabug, Jr., the registered owner in OCT No. M-5955, existence of the contract of sale that the seller becomes obligated to transfer
covering Lot 18089, which certificate of title at the time of sale was free the ownership of the thing sold to the buyer. Prior to the existence of the
from any lien and/or encumbrances. On the other hand, Land Bank averred contract of sale, the seller is not obligated to transfer the ownership to the
that it had no knowledge of Sps. Roque’s claim relative to the subject buyer, even if there is a contract to sell between them.”
portion, considering that at the time the loan was taken out, Lot 18089 in its
entirety was registered in Aguado’s name and no lien and/or encumbrance Here, it is undisputed that Sps. Roque have not paid the final
was annotated on her certificate of title. Meanwhile, NCCP filed a separate installment of the purchase price. As such, the condition which would have
complaint also for declaration of nullity of documents and certificates of triggered the parties’ obligation to enter into and thereby perfect a contract
title and damages. It claimed to be the real owner of Lot 18089 which it of sale in order to effectively transfer the ownership of the subject portion
supposedly acquired from Sabug, Jr. through an oral contract of sale in the from the sellers (i.e., Rivero et al.) to the buyers (Sps. Roque) cannot be
early part of 1998, followed by the execution of a Deed of Absolute Sale deemed to have been fulfilled. Consequently, the latter cannot validly claim
(1998 Deed of Absolute Sale). ownership over the subject portion even if they had made an initial
payment and even took possession of the same.
The RTC dismissed the complaints of Sps. Roque and NCCP. The
CA affirmed.
Case Digest 2018
The Court further notes that Sps. Roque did not even take any
active steps to protect their claim over the disputed portion. This remains
evident from the following circumstances appearing on record: (a) the 1977
Deed of Conditional Sale was never registered; (b) they did not seek the
actual/physical segregation of the disputed portion despite their knowledge
of the fact that, as early as 1993, the entire Lot 18089 was registered in
Sabug, Jr.’s name under OCT No. M-5955; and (c) while they signified their
willingness to pay the balance of the purchase price, Sps. Roque neither
compelled Rivero et al., and/or Sabug, Jr. to accept the same nor did they
consign any amount to the court, the proper application of which would
have effectively fulfilled their obligation to pay the purchase price. Instead,
Sps. Roque waited 26 years, reckoned from the execution of the 1977 Deed
of Conditional Sale, to institute an action for reconveyance (in 2003), and
only after Lot 18089 was sold to Land Bank in the foreclosure sale and title
thereto was consolidated in its name. Thus, in view of the foregoing, Sabug,
Jr. – as the registered owner of Lot 18089 borne by the grant of his free
patent application – could validly convey said property in its entirety to
Aguado who, in turn, mortgaged the same to Land Bank. Besides, as aptly
observed by the RTC, Sps. Roque failed to establish that the parties who
sold the property to them, i.e., Rivero, et al., were indeed its true and lawful
owners. In fine, Sps. Roque failed to establish any superior right over the
subject portion as against the registered owner of Lot 18089, i.e., Land
Bank, thereby warranting the dismissal of their reconveyance action,
without prejudice to their right to seek damages against the vendors, i.e.,
Rivero et al. As applied in the case of Coronel v. CA:
“It is essential to distinguish between a contract to sell and a

conditional contract of sale specially in cases where the subject property is
sold by the owner not to the party the seller contracted with, but to a third
person, as in the case at bench. In a contract to sell, there being no previous
sale of the property, a third person buying such property despite the
fulfilment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the property.
There is no double sale in such case. Title to the property will

transfer to the buyer after registration because there is no defect in the
owner-seller’s title per se, but the latter, of course, may be sued for damages
by the intending buyer.”
On the matter of double sales, suffice it to state that Sps. Roque’s

reliance on Article 1544 of the Civil Code has been misplaced since the
contract they base their claim of ownership on is, as earlier stated, a
contract to sell, and not one of sale. In Cheng v. Genato, the Court stated the
circumstances which must concur in order to determine the applicability of
Article 1544, none of which are obtaining in this case, viz.:
(a) The two (or more) sales transactions in issue must pertain to
exactly the same subject matter, and must be valid sales
transactions;
(b) The two (or more) buyers at odds over the rightful ownership
of the subject matter must each represent conflicting interests;
and
(c) The two (or more) buyers at odds over the rightful ownership
of the subject matter must each have bought from the same
seller.
Case Digest 2018
Option to Buy/Sell - Articles 1479, 1324 WON Buen Realty can be held bound by the writ of execution by
virtue of the notice of lis pendens, carried over on the TCT issued in the
ANG YU ASUNCION, et al. v. THE HON. COURT OF APPEALS and BUEN name of Buen Realty, at the time of the latter’s purchase of the property
REALTY DEVELOPMENT CORPORATION from the Cu Unjiengs. – NO
G.R. No. 109125, 2 December 1994, EN BANC (Vitug, J.)
RULING:
If the period is not itself founded upon or supported by a
consideration, the offeror is still free and has the right to withdraw the offer An obligation is a juridical necessity to give, to do or not to do
before its acceptance, or, if an acceptance has been made, before the offeror’s (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of
coming to know of such fact, by communicating that withdrawal to the the essential elements thereof, viz: (a) The vinculum juris or juridical
offeree. If the period has a separate consideration, a contract of “option” is tie which is the efficient cause established by the various sources of
deemed perfected, and it would be a breach of that contract to withdraw the obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b)
offer during the agreed period. the object which is the prestation or conduct; required to be observed (to
give, to do or not to do); and (c) the subject-persons who, viewed from the
The right of first refusal cannot be deemed a perfected contract of demandability of the obligation, are the active (obligee) and the passive
sale under Article 1458 of the Civil Code. In a right of first refusal, while the (obligor) subjects.
object might be made determinate, the exercise of the right, however, would
be dependent not only on the grantor’s eventual intention to enter into a Among the sources of an obligation is a contract (Art. 1157, Civil
binding juridical relation with another but also on terms, including the price, Code), which is a meeting of minds between two persons whereby one
that obviously are yet to be later firmed up. binds himself, with respect to the other, to give something or to render
some service (Art. 1305, Civil Code). A contract undergoes various stages
FACTS: that include its negotiation or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time the
A Complaint for Specific Performance was filed by Ang Yu prospective contracting parties indicate interest in the contract to the time
Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng the contract is concluded (perfected). The perfection of the contract takes
and Jose Tan before the RTC. Plaintiffs are tenants or lessees of residential place upon the concurrence of the essential elements thereof. A contract
and commercial spaces owned by defendants. They have occupied said which is consensual as to perfection is so established upon a mere meeting
spaces since 1935 and have been religiously paying the rental and of minds, i.e., the concurrence of offer and acceptance, on the object and on
complying with all the conditions of the lease contract. On several the cause thereof. A contract which requires, in addition to the above, the
occasions, defendants informed plaintiffs that they are offering to sell the delivery of the object of the agreement, as in a pledge or commodatum, is
premises and are giving them priority to acquire the same. During the commonly referred to as a real contract. In a solemn contract, compliance
negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs with certain formalities prescribed by law, such as in a donation of real
made a counter offer of P5-million. Plaintiffs thereafter asked the property, is essential in order to make the act valid, the prescribed form
defendants to put their offer in writing to which request defendants being thereby an essential element thereof. The stage
acceded. In reply to defendant's letter, plaintiffs wrote them asking that of consummation begins when the parties perform their respective
they specify the terms and conditions of the offer to sell. When plaintiffs did undertakings under the contract culminating in the extinguishment thereof.
not receive any reply, they sent another letter with the same request. Since
defendants failed to specify the terms and conditions of the offer to sell and Until the contract is perfected, it cannot, as an independent
because of information received that defendants were about to sell the source of obligation, serve as a binding juridical relation. In sales,
property, plaintiffs were compelled to file the complaint to compel particularly, to which the topic for discussion about the case at bench
defendants to sell the property to them. belongs, the contract is perfected when a person, called the seller, obligates
himself, for a price certain, to deliver and to transfer ownership of a thing or
The trial court found that defendants’ offer to sell was never right to another, called the buyer, over which the latter agrees. Article 1458
accepted by the plaintiffs for the reason that the parties did not agree upon of the Civil Code provides: “By the contract of sale one of the contracting
the terms and conditions of the proposed sale, hence, there was no contract parties obligates himself to transfer the ownership of and to deliver a
of sale at all. Nonetheless, the lower court ruled that should the defendants determinate thing, and the other to pay therefor a price certain in money or
subsequently offer their property for sale at a price of P11-million or below, its equivalent. A contract of sale may be absolute or conditional.”
plaintiffs will have the right of first refusal. The SC affirmed with
modification the trial court’s decision. The SC held that there was no When the sale is not absolute but conditional, such as in a
meeting of the minds between the parties concerning the sale of the “Contract to Sell” where invariably the ownership of the thing sold is
property. Absent such requirement, the claim for specific performance will retained until the fulfillment of a positive suspensive condition (normally,
not lie. It held that the plaintiffs-appellants are given the right of first the full payment of the purchase price), the breach of the condition will
refusal only if the property is sold for a purchase price of Eleven Million prevent the obligation to convey title from acquiring an obligatory force.
pesos or lower; however, considering the mercurial and uncertain forces in In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although
the market economy then prevailing, the Court found no reason not to grant denominated a “Deed of Conditional Sale,” a sale is still absolute where the
the same right of first refusal to appellants in the event that the subject contract is devoid of any proviso that title is reserved or the right to
property is sold for a price in excess of Eleven Million pesos. unilaterally rescind is stipulated, e.g., until or unless the price is paid.
Ownership will then be transferred to the buyer upon actual or constructive
While the case was pending in the Supreme Court, the Cu Unjieng delivery (e.g., by the execution of a public document) of the property sold.
spouses sold the property in question to petitioner Buen Realty and Where the condition is imposed upon the perfection of the contract itself,
Development Corporation for fifteen million pesos (P15M). As a the failure of the condition would prevent such perfection. If the condition
consequence of the sale, a new TCT was issued in the name of the is imposed on the obligation of a party which is not fulfilled, the other party
corporation. A writ of execution was issued by the trial court ordering the may either waive the condition or refuse to proceed with the sale (Art.
defendants to execute the necessary Deed of Sale of the property in 1545, Civil Code).
litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for
the consideration of P15 Million pesos in recognition of plaintiffs’ right of An unconditional mutual promise to buy and sell, as long as the
first refusal and that a new TCT be issued in favor of the buyer. All previous object is made determinate and the price is fixed, can be obligatory on the
transactions involving the same property notwithstanding the issuance of parties, and compliance therewith may accordingly be exacted.
another title to Buen Realty Corporation, was set aside as having been
executed in bad faith. On appeal, the CA set aside the writ of execution. An accepted unilateral promise which specifies the thing to be
sold and the price to be paid, when coupled with a valuable consideration
ISSUE: distinct and separate from the price, is what may properly be termed a
Case Digest 2018
perfected contract of option. This contract is legally binding, and in sales, it by contracts (since the essential elements to establish the vinculum
conforms with the second paragraph of Article 1479 of the Civil Code, viz: juris would still be indefinite and inconclusive) but by, among other laws of
general application, the pertinent scattered provisions of the Civil Code on
Art. 1479. . . . human conduct.
An accepted unilateral promise to buy or to sell a Even on the premise that such right of first refusal has been
determinate thing for a price certain is binding upon decreed under a final judgment, like here, its breach cannot justify
the promissor if the promise is supported by a correspondingly an issuance of a writ of execution under a judgment that
consideration distinct from the price. (1451a) merely recognizes its existence, nor would it sanction an action for specific
performance without thereby negating the indispensable element of
Observe, however, that the option is not the contract of sale consensuality in the perfection of contracts. It is not to say, however, that
itself. The optionee has the right, but not the obligation, to buy. Once the the right of first refusal would be inconsequential for, such as already
option is exercised timely, i.e., the offer is accepted before a breach of the intimated above, an unjustified disregard thereof, given, for instance, the
option, a bilateral promise to sell and to buy ensues and both parties are circumstances expressed in Article 19 of the Civil Code, can warrant a
then reciprocally bound to comply with their respective undertakings. recovery for damages.
Let us elucidate a little. A negotiation is formally initiated by an The final judgment in Civil Case No. 87-41058, it must be
offer. An imperfect promise (policitacion) is merely an offer. Public stressed, has merely accorded a “right of first refusal” in favor of
advertisements or solicitations and the like are ordinarily construed as petitioners. The consequence of such a declaration entails no more than
mere invitations to make offers or only as proposals. These relations, until a what has heretofore been said. In fine, if, as it is here so conveyed to us,
contract is perfected, are not considered binding commitments. Thus, at petitioners are aggrieved by the failure of private respondents to honor the
any time prior to the perfection of the contract, either negotiating party may right of first refusal, the remedy is not a writ of execution on the judgment,
stop the negotiation. The offer, at this stage, may be withdrawn; the since there is none to execute, but an action for damages in a proper forum
withdrawal is effective immediately after its manifestation, such as by its for the purpose.
mailing and not necessarily when the offeree learns of the withdrawal
(Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree Furthermore, whether private respondent Buen Realty
within which to accept the offer, the following rules generally govern: Development Corporation, the alleged purchaser of the property, has acted
in good faith or bad faith and whether or not it should, in any case, be
(1) If the period is not itself founded upon or supported by a consideration, considered bound to respect the registration of the lis pendens in Civil Case
the offeror is still free and has the right to withdraw the offer before its No. 87-41058 are matters that must be independently addressed in
acceptance, or, if an acceptance has been made, before the offeror’s coming appropriate proceedings. Buen Realty, not having been impleaded in Civil
to know of such fact, by communicating that withdrawal to the offeree Case No. 87-41058, cannot be held subject to the writ of execution issued by
(see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948 , respondent Judge, let alone ousted from the ownership and possession of
holding that this rule is applicable to a unilateral promise to sell under Art. the property, without first being duly afforded its day in court.
1479, modifying the previous decision in South Western Sugar vs. Atlantic
Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Parañaque,
Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368 ). The right
to withdraw, however, must not be exercised whimsically or arbitrarily;
otherwise, it could give rise to a damage claim under Article 19 of the Civil
Code which ordains that “every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith.”
(2) If the period has a separate consideration, a contract of “option” is

deemed perfected, and it would be a breach of that contract to withdraw the
offer during the agreed period. The option, however, is an independent
contract by itself, and it is to be distinguished from the projected main
agreement (subject matter of the option) which is obviously yet to be
concluded. If, in fact, the optioner-offeror withdraws the offer before its
acceptance (exercise of the option) by the optionee-offeree, the latter may
not sue for specific performance on the proposed contract (“object” of the
option) since it has failed to reach its own stage of perfection. The optioner-
offeror, however, renders himself liable for damages for breach of the
option. In these cases, care should be taken of the real nature of
the consideration given, for if, in fact, it has been intended to be part of the
consideration for the main contract with a right of withdrawal on the part of
the optionee, the main contract could be deemed perfected; a similar
instance would be an "earnest money" in a contract of sale that can
evidence its perfection (Art. 1482, Civil Code).
In the law on sales, the so-called “right of first refusal” is an

innovative juridical relation. Needless to point out, it cannot be deemed a
perfected contract of sale under Article 1458 of the Civil Code. Neither can
the right of first refusal, understood in its normal concept, per se be brought
within the purview of an option under the second paragraph of Article
1479, aforequoted, or possibly of an offer under Article 1319 of the same
Code. An option or an offer would require, among other things, a clear
certainty on both the object and the cause or consideration of the
envisioned contract. In a right of first refusal, while the object might be
made determinate, the exercise of the right, however, would be dependent
not only on the grantor’s eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that obviously
are yet to be later firmed up. Prior thereto, it can at best be so described as
merely belonging to a class of preparatory juridical relations governed not
Case Digest 2018
SPS. REYNALDO K. LITONJUA and ERLINDA P. LITONJUA and PHIL. should be made to them, and that new lease contracts will be executed with
WHITE HOUSE AUTO SUPPLY, INC. v. L & R CORPORATION, et al. interested tenants before the end of August, 1981. Upon learning of this
G.R. No. 130722, 9 December 1999, EN BANC (Ynares-Santiago, J.) incident from their tenants, the spouses Litonjua filed an adverse claim and
a notice of lis pendens with the Register of Deeds. In the process, they
The right of first refusal has long been recognized as valid in our learned that the prior sale of the properties in favor of PWHAS was not
jurisdiction. The consideration for the loan-mortgage includes the annotated on the titles issued to L & R.
consideration for the right of first refusal.
A complaint for Quieting of Title, Annulment of Title and
FACTS: Damages with preliminary injunction was filed by the spouses Litonjua and
PWHAS against respondents. The lower court dismissed the Complaint
The controversy stems from loans obtained by the spouses upon its finding that the sale between the spouses Litonjua and PWHAS was
Litonjua from L & R Corporation in the aggregate sum of P400,000.00. The null and void and unenforceable against L & R Corporation and that the
loans were secured by a mortgage constituted by the spouses upon their redemption made was also null and void. On appeal, the decision of the trial
two parcels of land. The mortgage was duly registered with the Register of court was set aside by the CA on the ground that the sale made to PWHAS as
Deeds of Quezon City. The spouses Litonjua sold to Philippine White House well as the redemption effected by the spouses Litonjua were valid.
Auto Supply, Inc. (PWHAS) the parcels of land they had previously However, the same was subsequently reconsidered and set aside in an
mortgaged to L & R Corporation. The sale was annotated at the back of the Amended Decision.
respective certificates of title of the properties.
ISSUE:
Meanwhile, with the spouses Litonjua having defaulted in the
payment of their loans, L & R Corporation initiated extrajudicial foreclosure WON there was a valid and enforceable stipulation granting the
proceedings. The mortgaged properties were sold at public auction to L & R mortgagee the right of first refusal.
Corporation as the only bidder. When L & R Corporation presented its
corresponding Certificate of Sale issued by the Deputy Sheriff to the Quezon RULING:
City Register of Deeds for registration, it learned for the first time of the
prior sale of the properties made by the spouses Litonjua to PWHAS upon YES. While petitioners question the validity of paragraph 8 of
seeing the inscription at the back of the certificates of title. Thus, it wrote a their mortgage contract, they appear to be silent insofar as paragraph 9
letter to the Register of Deeds of Quezon City requesting for the cancellation thereof is concerned. Said paragraph 9 grants upon L & R Corporation the
of the annotation regarding the sale to PWHAS. L & R Corporation invoked right of first refusal over the mortgaged property in the event the
a provision in its mortgage contract with the spouses Litonjua stating that mortgagor decides to sell the same. We see nothing wrong in this provision.
the mortgagee’s prior written consent was necessary in case of subsequent The right of first refusal has long been recognized as valid in our
encumbrance or alienation of the subject properties. Thus, it argued that jurisdiction. The consideration for the loan-mortgage includes the
since the sale to PWHAS was made without its prior written consent, the consideration for the right of first refusal. L & R Corporation is in effect
same should not have been registered and/or annotated. stating that it consents to lend out money to the spouses Litonjua provided
that in case they decide to sell the property mortgaged to it, then L & R
Seven months after the foreclosure sale, PWHAS, for the account Corporation shall be given the right to match the offered purchase price and
of the spouses Litonjua, tendered payment of the full redemption price to L to buy the property at that price. Thus, while the spouses Litonjua had
& R Corporation. L & R Corporation, however, refused to accept the every right to sell their mortgaged property to PWHAS without securing the
payment, hence, PWHAS was compelled to redeem the mortgaged prior written consent of L & R Corporation, they had the obligation under
properties through the Ex-Oficio Sheriff of Quezon City. It tendered paragraph 9, which is a perfectly valid provision, to notify the latter of their
payment of the redemption price to the Deputy Sheriff through a check intention to sell the property and give it priority over other buyers. It is
which was deposited with the Branch Clerk of Court. Accordingly, the only upon failure of L & R Corporation to exercise its right of first refusal
Deputy Sheriff issued a Certificate of Redemption in favor of the spouses could the spouses Litonjua validly sell the subject properties to others,
Litonjua. The Deputy Sheriff then informed L & R Corporation of the under the same terms and conditions offered to L & R Corporation.
payment by PWHAS of the full redemption price and advised it that it can
claim the payment upon surrender of its owner’s duplicate certificates of What then is the status of the sale made to PWHAS in violation of
title. L & R Corporation's contractual right of first refusal? On this score, the
Court agrees with the Amended Decision of the Court of Appeals that the
The spouses Litonjua presented for registration the Certificate of sale made to PWHAS is rescissible. The case of Guzman, Bocaling &
Redemption issued in their favor to the Register of Deeds of Quezon City. Co. v. Bonnevie is instructive on this point —
The Certificate also informed L & R Corporation of the fact of redemption
and directed the latter to surrender the owner’s duplicate certificates of The respondent court correctly held that the Contract of Sale was
title within five days. Thereafter, L & R Corporation wrote a letter to the not voidable but rescissible. Under Article 1380 to 1381(3) of the
Sheriff, copy furnished to the Register of Deeds, stating: (1) that the sale of Civil Code, a contract otherwise valid may nonetheless be
the mortgaged properties to PWHAS was without its consent, in subsequently rescinded by reason of injury to third persons, like
contravention of paragraphs 8 and 9 of their Deed of Real Estate Mortgage; creditors. The status of creditors could be validly accorded by the
and (2) that it was not the spouses Litonjua, but PWHAS, who was seeking Bonnevies for they had substantial interest that were prejudiced by
to redeem the foreclosed properties, when under Articles 1236 and 1237 of the sale of the subject property to the Contract of Lease.
the New Civil Code, the latter had no legal personality or capacity to redeem
the same. According to Tolentino, rescission is a remedy granted by law to
the contracting parties and even to third persons, to secure
On the other hand, the spouses Litonjua asked the Register of reparation for damages caused to them by a contract, even if this
Deeds to annotate their Certificate of Redemption as an adverse claim on should be valid, by means of the restoration of things to their
the titles of the subject properties on account of the refusal of L & R condition at the moment prior to the celebration of said contract.
Corporation to surrender the owner’s duplicate copies of the titles to the It is a relief allowed for one of the contracting parties and even
subject properties. With the refusal of the Register of Deeds to annotate third persons from all injury and damage the contract may cause,
their Certificate of Redemption, the Litonjua spouses filed a Petition against or to protect some incompatible and preferential right created by
L & R Corporation for the surrender of the owner’s duplicate certificates of the contract. Rescission implies a contract which, even if initially
title. While the said case was pending, L & R Corporation executed an valid, produces a lesion or pecuniary damage to someone that
Affidavit of Consolidation of Ownership. Thereafter, the Register of Deeds justifies its invalidation for reasons of equity.
issued a TCT in favor of L & R Corporation. With titles issued in its name, L
& R Corporation advised the tenants of the apartments situated in the It was then held that the Contract of Sale there, which violated
subject parcels of land that being the new owner, the rental payments the right of first refusal, was rescissible. In the case at bar, PWHAS cannot
Case Digest 2018
claim ignorance of the right of first refusal granted to L & R Corporation

over the subject properties since the Deed of Real Estate Mortgage
containing such a provision was duly registered with the Register of Deeds.
As such, PWHAS is presumed to have been notified thereof by registration,
which equates to notice to the whole world.
We note that L & R Corporation had always expressed its

willingness to buy the mortgaged properties on equal terms as PWHAS.
Indeed, in its Answer to the Complaint filed, L & R Corporation expressed
that it was ready, willing and able to purchase the subject properties at the
same purchase price of P430,000.00, and was agreeable to pay the
difference between such purchase price and the redemption price of
P249,918.77, computed as of August 13, 1981, the expiration of the one-
year period to redeem. That it did not duly exercise its right of first refusal
at the opportune time cannot be taken against it, precisely because it was
not notified by the spouses Litonjua of their intention to sell the subject
property and thereby, to give it priority over other buyers.
All things considered, what then are the relative rights and
obligations of the parties? To recapitulate: the sale between the spouses
Litonjua and PWHAS is valid, notwithstanding the absence of L & R
Corporation’s prior written consent thereto. Inasmuch as the sale to
PWHAS was valid, its offer to redeem and its tender of the redemption
price, as successor-in-interest of the spouses Litonjua, within the one-year
period should have been accepted as valid by the L & R Corporation.
However, while the sale is, indeed, valid, the same is rescissible because it
ignored L & R Corporation’s right of first refusal.
Case Digest 2018
NICOLAS SANCHEZ v. SEVERINA RIGOS the promise be “supported by a consideration distinct from the price.”
G.R. No. L-25494, 14 June 1972, EN BANC (Concepcion, C.J.) Accordingly, the promisee can not compel the promisor to comply with the
promise, unless the former establishes the existence of said distinct
Since there may be no valid contract without a cause or consideration. In other words, the promisee has the burden of proving such
consideration, the promisor is not bound by his promise and may, accordingly, consideration. Plaintiff herein has not even alleged the existence thereof in
withdraw it. Pending notice of its withdrawal, his accepted promise partakes, his complaint.
however, of the nature of an offer to sell which, if accepted, results in a
perfected contract of sale. (3) Upon the other hand, defendant explicitly averred in her answer, and
pleaded as a special defense, the absence of said consideration for her
FACTS: promise to sell and, by joining in the petition for a judgment on the
pleadings, plaintiff has impliedly admitted the truth of said averment in
Nicolas Sanchez and Severina Rigos executed an instrument defendant's answer.
entitled “Option to Purchase,” whereby Rigos “agreed, promised and
committed to sell” to Sanchez a parcel of land with the understanding that Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic
said option shall be deemed “terminated and elapsed,” if “Sanchez shall fail Gulf & Pacific Co., from which the Court quotes:
to exercise his right to buy the property” within two years. Sanchez made
several tenders of payment within said period, but all were rejected by The main contention of appellant is that the option granted to
Rigos. So, he commenced the present action for specific performance. He appellee to sell to it barge No. 10 for the sum of P30,000 under
maintains that by virtue of the option under consideration, Rigos agreed the terms stated above has no legal effect because it is not
and committed to sell the land, and may be compelled therefore. On the supported by any consideration and in support thereof it invokes
other hand, Rigos argued that that the contract between them is a unilateral article 1479 of the new Civil Code. x x x
promise to sell, and the same being unsupported by any valuable
consideration is null and void. On the other hand, Appellee contends that, even granting that the
“offer of option” is not supported by any consideration, that
ISSUE: option became binding on appellant when the appellee gave
notice to it of its acceptance, and that having accepted it within
WON an accepted unilateral promise to sell without the period of option, the offer can no longer be withdrawn and in
consideration distinct from the price may be enforced pending withdrawal. any event such withdrawal is ineffective. In support this
contention, appellee invokes article 1324 of the Civil Code which
RULING: provides:
YES. This case admittedly hinges on the proper application of “ART. 1324. When the offerer has allowed the offeree a
Article 1479 of our Civil Code, which provides: certain period to accept, the offer may be withdrawn
any time before acceptance by communicating such
ART. 1479. A promise to buy and sell a determinate thing for a withdrawal, except when the option is founded upon
price certain is reciprocally demandable. consideration as something paid or promised."
An accepted unilateral promise to buy or to sell a determinate There is no question that under article 1479 of the new Civil
thing for a price certain is binding upon the promissor if the Code “an option to sell,” or “a promise to buy or to sell,” as used
promise is supported by a consideration distinct from the price. in said article, to be valid must be “supported by a consideration
distinct from the price.” This is clearly inferred from the context
In his complaint, plaintiff alleges that, by virtue of the option of said article that a unilateral promise to buy or to sell, even if
under consideration, “defendant agreed and committed to sell” and “the accepted, is only binding if supported by consideration. In other
plaintiff agreed and committed to buy” the land described in the option. words, “an accepted unilateral promise can only have a binding
Plaintiff maintains that the promise contained in the contract is effect if supported by a consideration which means that the
“reciprocally demandable,” pursuant to the first paragraph of said Article option can still be withdrawn, even if accepted, if the same is not
1479. Although defendant had really “agreed, promised and committed” supported by any consideration. It is not disputed that the option
herself to sell the land to the plaintiff, it is not true that the latter had, in is without consideration. It can therefore be withdrawn
turn, “agreed and committed himself” to buy said property. notwithstanding the acceptance of it by appellee.
The option did not impose upon plaintiff the obligation to It is true that under article 1324 of the new Civil Code, the
purchase defendant’s property. The subject instrument is not a “contract to general rule regarding offer and acceptance is that, when the
buy and sell.” It merely granted plaintiff an “option” to buy. And both parties offerer gives to the offeree a certain period to accept, “the offer
so understood it, as indicated by the caption, “Option to Purchase,” given by may be withdrawn at any time before acceptance” except when
them to said instrument. Under the provisions thereof, the defendant the option is founded upon consideration, but this general rule
“agreed, promised and committed” herself to sell the land therein described must be interpreted as modified by the provision of article 1479
to the plaintiff for P1,510.00, but there is nothing in the contract to indicate above referred to, which applies to “a promise to buy and
that her aforementioned agreement, promise and undertaking is supported sell” specifically. As already stated, this rule requires that a
by a consideration “distinct from the price” stipulated for the sale of the promise to sell to be valid must be supported by a consideration
land. distinct from the price.
Relying upon Article 1354 of our Civil Code, the lower We are not oblivious of the existence of American authorities
court presumed the existence of said consideration, and this would seem to which hold that an offer, once accepted, cannot be withdrawn,
be the main factor that influenced its decision in plaintiff’s favor. It should regardless of whether it is supported or not by a consideration
be noted, however, that: (12 Am. Jur. 528). These authorities, we note, uphold the general
rule applicable to offer and acceptance as contained in our new
(1) Article 1354 applies to contracts in general, whereas the second Civil Code. But we are prevented from applying them in view of
paragraph of Article 1479 refers to “sales” in particular, and, more the specific provision embodied in article 1479. While under the
specifically, to “an accepted unilateral promise to buy or to sell.” In other “offer of option” in question appellant has assumed a clear
words, Article 1479 is controlling in the case at bar. obligation to sell its barge to appellee and the option has been
exercised in accordance with its terms, and there appears to be
(2) In order that said unilateral promise may be “binding upon the no valid or justifiable reason for appellant to withdraw its
promisor, Article 1479 requires the concurrence of a condition, namely, that offer, this Court cannot adopt a different attitude because the law
Case Digest 2018
on the matter is clear. Our imperative duty is to apply it unless ENRICO S. EULOGIO v. SPOUSES CLEMENTE APELES AND LUZ APELES
modified by Congress. G.R. No. 167884, 20 January 2009, THIRD DIVISION (Chico-Nazario, J.)
However, this Court itself, in the case of Atkins, Kroll and Co., Inc. For an option contract to be valid and enforceable against the
v. Cua Hian Tek, decided later that Southwestern Sugar & Molasses Co. v. promisor, there must be a separate and distinct consideration that supports
Atlantic Gulf & Pacific Co., saw no distinction between Articles 1324 and it. Without such consideration, an option contract cannot be enforced. In
1479 of the Civil Code and applied the former where a unilateral promise to other words, the option can still be withdrawn, even if accepted, if the same is
sell similar to the one sued upon here was involved, treating such promise not supported by any consideration. It can therefore be withdrawn
as an option which, although not binding as a contract in itself for lack of a notwithstanding the promisee’s decision to exercise his option.
separate consideration, nevertheless generated a bilateral contract of
purchase and sale upon acceptance. Speaking through Associate Justice, FACTS:
later Chief Justice, Cesar Bengzon, this Court said:
The spouses Apeles and Enrico allegedly entered into a Contract
Furthermore, an option is unilateral: a promise to sell at the price of Lease with Option to Purchase involving the subject property. According
fixed whenever the offeree should decide to exercise his option to the said lease contract, Luz Apeles was authorized to enter into the same
within the specified time. After accepting the promise and before as the attorney-in-fact of her husband, Clemente, pursuant to a Special
he exercises his option, the holder of the option is not bound to Power of Attorney executed by the latter in favor of the former. The
buy. He is free either to buy or not to buy later. In this case, contract purportedly afforded Enrico, before the expiration of the three-
however, upon accepting herein petitioner's offer a bilateral year lease period, the option to purchase the subject property for a price
promise to sell and to buy ensued, and the respondent ipso not exceeding ₱1.5 Million.
facto assumed the obligation of a purchaser. He did not just get
the right subsequently to buy or not to buy. It was not a mere Before the expiration of the three-year lease period provided in
option then; it was a bilateral contract of sale. the lease contract, Enrico exercised his option to purchase the subject
property by communicating verbally and in writing to Luz his willingness to
Lastly, even supposing that Exh. A granted an option which is not pay the agreed purchase price, but the spouses Apeles supposedly ignored
binding for lack of consideration, the authorities hold that: Enrico’s manifestation. Barangay conciliation proceedings took place, but
the spouses Apeles failed to appear. Hence, the barangay issued to Enrico a
“If the option is given without a consideration, it is a Certificate to File Action.
mere offer of a contract of sale, which is not binding
until accepted. If, however, acceptance is made before The spouses Apeles demanded from Enrico to pay his rental
a withdrawal, it constitutes a binding contract of sale, arrears and to vacate the subject property since it would be needed by the
even though the option was not supported by a spouses Apeles themselves. Without heeding the demand of the spouses
sufficient consideration. ... . Apeles, Enrico filed a Complaint for Specific Performance with Damages
against the spouses Apeles before the RTC. Enrico’s cause of action is
“It can be taken for granted, as contended by the founded on paragraph 5 of the Contract of Lease with Option to Purchase
defendant, that the option contract was not valid for vesting him with the right to acquire ownership of the subject property
lack of consideration. But it was, at least, an offer to after paying the agreed amount of consideration.
sell, which was accepted by letter, and of the
acceptance the offerer had knowledge before said offer Trial on the merits ensued. The spouses Apeles denied that Luz
was withdrawn. The concurrence of both acts — the signed the Contract of Lease with Option to Purchase, and posited that Luz’s
offer and the acceptance — could at all events have signature thereon was a forgery. The spouses Apeles offered as evidence
generated a contract, if none there was before (arts. Luz’s Philippine Passport which showed that she was in the United States of
1254 and 1262 of the Civil Code).” America on the date when Luz allegedly signed the said Contract. After the
spouses Apeles established by documentary evidence that Luz was not in
In other words, since there may be no valid contract without a the country at the time the Contract of Lease with Option to Purchase was
cause or consideration, the promisor is not bound by his promise and may, executed, Enrico retracted his prior declaration that the said Contract was
accordingly, withdraw it. Pending notice of its withdrawal, his accepted signed by Luz. Instead, Enrico averred that Luz signed the Contract after
promise partakes, however, of the nature of an offer to sell which, if she arrived in the Philippines. Enrico further related that after Luz signed
accepted, results in a perfected contract of sale. the lease contract, she took it with her for notarization, and by the time the
document was returned to him, it was already notarized.
This view has the advantage of avoiding a conflict between
Articles 1324 — on the general principles on contracts — and 1479 — on The RTC ruled in favor of Enrico. Since none of the parties
sales — of the Civil Code, in line with the cardinal rule of statutory presented a handwriting expert, the RTC relied on its own examination of
construction that, in construing different provisions of one and the same the specimen signatures submitted to resolve the issue of forgery. The RTC
law or code, such interpretation should be favored as will reconcile or found striking similarity between Luz’s genuine signatures in the
harmonize said provisions and avoid a conflict between the same. Indeed, documents presented by the spouses Apeles themselves and her
the presumption is that, in the process of drafting the Code, its author has purportedly forged signature in the Contract of Lease with Option to
maintained a consistent philosophy or position. Moreover, the decision Purchase. Absent any finding of forgery, the RTC bound the parties to the
in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., holding clear and unequivocal stipulations they made in the lease contract.
that Art. 1324 is modified by Art. 1479 of the Civil Code, in effect, considers Accordingly, the RTC ordered the spouses Apeles to execute a Deed of Sale
the latter as an exception to the former, and exceptions are not favored, in favor of Enrico upon the latter’s payment of the agreed amount of
unless the intention to the contrary is clear, and it is not so, insofar as said consideration. The CA reversed and noted that the Notary Public did not
two (2) articles are concerned. What is more, the reference, in both the observe utmost care in certifying the due execution of the Contract of Lease
second paragraph of Art. 1479 and Art. 1324, to an option or promise with Option to Purchase. The CA chose not to accord the disputed Contract
supported by or founded upon a consideration, strongly suggests that the full faith and credence.
two (2) provisions intended to enforce or implement the same principle.
ISSUE: WON the subject Contract of Lease with Option to Repurchase is
Upon mature deliberation, the Court is of the considered opinion supported by a consideration separate and distinct from the price.
that it should, as it hereby reiterates the doctrine laid down in the Atkins,
Kroll & Co. case, and that, insofar as inconsistent therewith, the view RULING:
adhered to in the Southwestern Sugar & Molasses Co. case should be deemed
abandoned or modified.
NO. Enrico assiduously prays before the Court to sustain the
validity of the Contract of Lease with Option to Purchase. Enrico asserts
that the said Contract was voluntarily entered into and signed by Luz who
Case Digest 2018
had it notarized herself. The spouses Apeles should be obliged to respect

the terms of the agreement, and not be allowed to renege on their The second paragraph of Article 1479 provides for the definition
commitment thereunder and frustrate the sanctity of contracts. and consequent rights and obligations under an option contract. For an
option contract to be valid and enforceable against the promissor, there
The Court is not persuaded. The Court agrees with the Court of must be a separate and distinct consideration that supports it.
Appeals that in ruling out forgery, the RTC heavily relied on the testimony
proffered by Enrico during the trial, ignoring blatant contradictions that In the landmark case of Southwestern Sugar and Molasses
destroy his credibility and the veracity of his claims. On direct examination, Company v. Atlantic Gulf and Pacific Co., the Court declared that for an
Enrico testified that Luz signed the Contract of Lease with Option to option contract to bind the promissor, it must be supported by
Purchase on 26 January 1987 in his presence, but he recanted his testimony consideration:
on the matter after the spouses Apeles established by clear and convincing
evidence that Luz was not in the Philippines on that date. In rebuttal, There is no question that under Article 1479 of the new Civil Code “an
Enrico made a complete turnabout and claimed that Luz signed the Contract option to sell,” or “a promise to buy or to sell,” as used in said article, to be
in question on 30 May 1987 after her arrival in the country. The valid must be “supported by a consideration distinct from the price.” This is
inconsistencies in Enrico’s version of events have seriously impaired the clearly inferred from the context of said article that a unilateral promise to
probative value of his testimony and cast serious doubt on his credibility. buy or to sell, even if accepted, is only binding if supported by a
His contradictory statements on important details simply eroded the consideration. In other words, “an accepted unilateral promise” can
integrity of his testimony. only have a binding effect if supported by a consideration, which
means that the option can still be withdrawn, even if accepted, if the
While it is true that a notarized document carries the evidentiary same is not supported by any consideration. Here it is not disputed
weight conferred upon it with respect to its due execution, and has in its that the option is without consideration. It can therefore be
favor the presumption of regularity, this presumption, however, is not withdrawn notwithstanding the acceptance made of it by
absolute. It may be rebutted by clear and convincing evidence to the appellee. (Emphasis supplied.)
contrary. Enrico himself admitted that Luz took the document and had it
notarized without his presence. Such fact alone overcomes the presumption The doctrine requiring the payment of consideration in an option
of regularity since a notary public is enjoined not to notarize a document contract enunciated in Southwestern Sugar is resonated in subsequent
unless the persons who signed the same are the very same persons who cases and remains controlling to this day. Without consideration that is
executed and personally appeared before the said notary public to attest to separate and distinct from the purchase price, an option contract cannot be
the contents and truth of what are stated therein. Although there is no enforced; that holds true even if the unilateral promise is already accepted
direct evidence to prove forgery, preponderance of evidence inarguably by the optionee.
favors the spouses Apeles. In the case at bar, the spouses Apeles were able
to overcome the burden of proof and prove by preponderant evidence in The consideration is “the why of the contracts, the essential
disputing the authenticity and due execution of the Contract of Lease with reason which moves the contracting parties to enter into the contract.” This
Option to Purchase. In contrast, Enrico seemed to rely only on his own self- definition illustrates that the consideration contemplated to support an
serving declarations, without asserting any proof of corroborating option contract need not be monetary. Actual cash need not be exchanged
testimony or circumstantial evidence to buttress his claim. for the option. However, by the very nature of an option contract, as defined
in Article 1479, the same is an onerous contract for which the consideration
Even assuming for the sake of argument that the Court agrees must be something of value, although its kind may vary.
with Enrico that Luz voluntarily entered into the Contract of Lease with
Option to Purchase and personally affixed her signature to the said The Court has painstakingly examined the Contract of Lease with
document, the provision on the option to purchase the subject property Option to Purchase, as well as the pleadings submitted by the parties, and
incorporated in said Contract still remains unenforceable. There is no their testimonies in open court, for any direct evidence or evidence aliunde
dispute that what Enrico sought to enforce in Civil Case No. Q-99-36834 to prove the existence of consideration for the option contract, but we have
was his purported right to acquire ownership of the subject property in the found none. The only consideration agreed upon by the parties in the said
exercise of his option to purchase the same under the Contract of Lease Contract is the supposed purchase price for the subject property in the
with Option to Purchase. He ultimately wants to compel the spouses Apeles amount not exceeding ₱1.5 Million, which could not be deemed to be the
to already execute the Deed of Sale over the subject property in his favor. same consideration for the option contract since the law and jurisprudence
explicitly dictate that for the option contract to be valid, it must be
An option is a contract by which the owner of the property supported by a consideration separate and distinct from the price.
agrees with another person that the latter shall have the right to buy the
former’s property at a fixed price within a certain time. It is a condition In Bible Baptist Church v. Court of Appeals, the Court stressed
offered or contract by which the owner stipulates with another that the that an option contract needs to be supported by a separate consideration.
latter shall have the right to buy the property at a fixed price within a The consideration need not be monetary but could consist of other things or
certain time, or under, or in compliance with certain terms and conditions; undertakings. However, if the consideration is not monetary, these must be
or which gives to the owner of the property the right to sell or demand a things or undertakings of value, in view of the onerous nature of the option
sale. An option is not of itself a purchase, but merely secures the privilege to contract. Furthermore, when a consideration for an option contract is not
buy. It is not a sale of property but a sale of the right to purchase. It is monetary, said consideration must be clearly specified as such in the option
simply a contract by which the owner of the property agrees with another contract or clause.
person that he shall have the right to buy his property at a fixed price within
a certain time. He does not sell his land; he does not then agree to sell it; but In the present case, it is indubitable that no consideration was
he does sell something, i.e., the right or privilege to buy at the election or given by Enrico to the spouses Apeles for the option contract. The absence
option of the other party. Its distinguishing characteristic is that it imposes of monetary or any material consideration keeps this Court from enforcing
no binding obligation on the person holding the option, aside from the the rights of the parties under said option contract.
consideration for the offer.
NOTE: The court upheld and reiterated the ruling in Southwestern
It is also sometimes called an “unaccepted offer” and is
Sugar & Molasses Co. case. This case, being later in time than the case of
sanctioned by Article 1479 of the Civil Code:
Sanchez vs. Rigos, is controlling to this day.
Art. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate

thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
Case Digest 2018
ROBERTO D. TUAZON v. LOURDES Q. DEL ROSARIO-SUAREZ, et al. securities or properties within a limited time at a specified price. (Story vs.
G.R. No. 168325, 8 December 2010, FIRST DIVISION (Del Castillo, J.) Salamon, 71 N. Y., 420.)’
An option contract is entirely different and distinct from a right of From Vol. 6, page 5001, of the work “Words and Phrases,” citing the case of
first refusal in that in the former, the option granted to the offeree is for Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the following
a fixed period and at a determined price. Lacking these two essential quotation has been taken:
requisites, what is involved is only a right of first refusal.
‘An agreement in writing to give a person the ‘option’ to purchase lands
FACTS: within a given time at a named price is neither a sale nor an agreement to
sell. It is simply a contract by which the owner of property agrees with
Petitioner Roberto D. Tuazon (Roberto) and Respondent Lourdes another person that he shall have the right to buy his property at a
Q. Del Rosario-Suarez (Lourdes) executed a Contract of Lease over the fixed price within a certain time. He does not sell his land; he does not
subject parcel of land owned by Lourdes for a period of three years. During then agree to sell it; but he does sell something; that is, the right or privilege
the effectivity of the lease, Lourdes sent a letter to Roberto where she to buy at the election or option of the other party. The second party gets in
offered to sell to the latter the subject parcel of land for ₱37,541,000.00 and praesenti, not lands, nor an agreement that he shall have lands, but he does
gave him two years to decide on the said offer. get something of value; that is, the right to call for and receive lands if he
elects. The owner parts with his right to sell his lands, except to the second
More than four months after the expiration of the Contract of party, for a limited period. The second party receives this right, or rather,
Lease, Lourdes sold subject parcel of land to her only child, Catalina Suarez- from his point of view, he receives the right to elect to buy.
De Leon, her son-in-law Wilfredo De Leon, and her two grandsons, Miguel
Luis S. De Leon and Rommel S. De Leon (the De Leons). The new owners But the two definitions above cited refer to the contract of option, or, what
through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate amounts to the same thing, to the case where there was cause or
the premises. Roberto refused hence, the De Leons filed a complaint for consideration for the obligation x x x. (Emphasis supplied.)
Unlawful Detainer before the MeTC. The MeTC ordered Roberto to vacate
the property for non-payment of rentals and expiration of the contract. On the other hand, in Ang Yu Asuncion v. Court of Appeals, an
elucidation on the “right of first refusal” was made thus:
While the ejectment case was on appeal, Roberto filed with the
RTC a Complaint for Annulment of Deed of Absolute Sale, Reconveyance, In the law on sales, the so-called ‘right of first refusal’ is an innovative
Damages and Application for Preliminary Injunction against Lourdes and juridical relation. Needless to point out, it cannot be deemed a perfected
the De Leons. Roberto filed a Notice of Lis Pendens with the Registry of contract of sale under Article 1458 of the Civil Code. Neither can the right of
Deeds. After trial, the RTC dismissed the complaint and declared the Deed first refusal, understood in its normal concept, per se be brought within the
of Absolute Sale made by Lourdes in favor of the De Leons as valid and purview of an option under the second paragraph of Article 1479,
binding. The offer made by Lourdes to Roberto did not ripen into a contract aforequoted, or possibly of an offer under Article 1319 of the same Code. An
to sell because the price offered by the former was not acceptable to the option or an offer would require, among other things, a clear certainty on
latter. The offer made by Lourdes is no longer binding and effective at the both the object and the cause or consideration of the envisioned contract. In
time she decided to sell the subject lot to the De Leons because the same a right of first refusal, while the object might be made determinate, the
was not accepted by Roberto. The CA dismissed the appeal and affirmed the exercise of the right, however, would be dependent not only on the
RTC. grantor's eventual intention to enter into a binding juridical relation
with another but also on terms, including the price, that obviously are
Roberto now claims that Lourdes violated his right to buy subject yet to be later firmed up. Prior thereto, it can at best be so described as
property under the principle of “right of first refusal” by not giving him merely belonging to a class of preparatory juridical relations governed not
“notice” and the opportunity to buy the property under the same terms and by contracts (since the essential elements to establish the vinculum
conditions or specifically based on the much lower price paid by the De juris would still be indefinite and inconclusive) but by, among other laws of
Leons. Roberto further contends that he is enforcing his “right of first general application, the pertinent scattered provisions of the Civil Code on
refusal” based on Equatorial Realty Development, Inc. v. Mayfair Theater, human conduct.
Inc. which is the leading case on the “right of first refusal.” On the other
hand, respondents posit that this case is not covered by the principle of Even on the premise that such right of first refusal has been decreed under
“right of first refusal” but an unaccepted unilateral promise to sell or, at a final judgment, like here, its breach cannot justify correspondingly an
best, a contract of option which was not perfected. The letter of Lourdes to issuance of a writ of execution under a judgment that merely recognizes its
Roberto clearly embodies an option contract as it grants the latter only two existence, nor would it sanction an action for specific performance without
years to exercise the option to buy the subject property at a price certain of thereby negating the indispensable element of consensuality in the
₱37,541,000.00. As an option contract, the said letter would have been perfection of contracts. It is not to say, however, that the right of first
binding upon Lourdes without need of any consideration, had Roberto refusal would be inconsequential for, such as already intimated above, an
accepted the offer. But in this case there was no acceptance made neither unjustified disregard thereof, given, for instance, the circumstances
was there a distinct consideration for the option contract. expressed in Article 19 of the Civil Code, can warrant a recovery for
damages. (Emphasis supplied.)
ISSUE:
From the foregoing, it is thus clear that an option contract is
WON the present case involves an option contract and not a entirely different and distinct from a right of first refusal in that in the
contract of a right of first refusal. former, the option granted to the offeree is for a fixed period and at
a determined price. Lacking these two essential requisites, what is
RULING: involved is only a right of first refusal.
This case involves an option contract and not a contract of a right

In this case, the controversy is whether the letter of Lourdes to
of first refusal. In Beaumont v. Prieto, the nature of an option contract is
Roberto dated January 2, 1995 involved an option contract or a contract of a
explained thus:
right of first refusal. Part of the said letter-offer reads:
In his Law Dictionary, edition of 1897, Bouvier defines an option as a
Dear Mr. Tuazon,
contract, in the following language:
I received with great joy and happiness the big box of sweet
‘A contract by virtue of which A, in consideration of the payment of a certain grapes and ham, fit for a king’s party. Thanks very much. I am getting very
sum to B, acquires the privilege of buying from, or selling to, B certain old (79 going 80 yrs. old) and wish to live in the U.S.A. with my only family. I
Case Digest 2018
need money to buy a house and lot and a farm with a little cash to start. I had offered for sale. Even if the promise was accepted, private
am offering you to buy my 1211 square meter at ₱37,541,000.00 you can respondent was not bound thereby in the absence of a distinct
pay me in dollars in the name of my daughter. I never offered it to anyone. consideration. (Emphasis ours.)
Please shoulder the expenses for the transfer. I wish the Lord God will help
you buy my lot easily and you will be very lucky forever in this place. You In this case, it is undisputed that Roberto did not accept the
have all the time to decide when you can, but not for 2 years or more. terms stated in the letter of Lourdes as he negotiated for a much lower
I wish you long life, happiness, health, wealth and great fortune always! I price. Roberto’s act of negotiating for a much lower price was a counter-
hope the Lord God will help you be the recipient of multi-billion projects aid offer and is therefore not an acceptance of the offer of Lourdes. Article 1319
from other countries. of the Civil Code provides:
Thank you, Consent is manifested by the meeting of the offer and the acceptance upon
Lourdes Q. del Rosario vda de Suarez the thing and the cause which are to constitute the contract. The offer must
be certain and the acceptance absolute. A qualified
It is clear that the above letter embodies an option contract as it acceptanceconstitutes a counter-offer. (Emphasis supplied.)
grants Roberto a fixed period of only two years to buy the subject property
at a price certain of ₱37,541,000.00. It being an option contract, the rules The counter-offer of Roberto for a much lower price was not
applicable are found in Articles 1324 and 1479 of the Civil Code which accepted by Lourdes. There is therefore no contract that was perfected
provide: between them with regard to the sale of subject property. Roberto, thus,
does not have any right to demand that the property be sold to him at the
Art. 1324. When the offerer has allowed the offeree a certain price for which it was sold to the De Leons neither does he have the right to
period to accept, the offer may be withdrawn at any time before demand that said sale to the De Leons be annulled.
acceptance by communicating such withdrawal, except when the
option is founded upon a consideration, as something paid or Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is not
promised. applicable here. It is the position of Roberto that the facts of this case and
that of Equatorial are similar in nearly all aspects. Roberto is a lessee of the
Art. 1479. A promise to buy and sell a determinate thing for a property like Mayfair Theater in Equatorial. There was an offer made to
price certain is reciprocally demandable. Roberto by Lourdes during the effectivity of the contract of lease which was
also the case in Equatorial. There were negotiations as to the price which
An accepted unilateral promise to buy or to sell a determinate did not bear fruit because Lourdes sold the property to the De Leons which
thing for a price certain is binding upon the promissor if the was also the case in Equatorial wherein Carmelo and Bauermann sold the
promise is supported by a consideration distinct from the price. property to Equatorial. The existence of the lease of the property is known
to the De Leons as they are related to Lourdes while in Equatorial, the
It is clear from the provision of Article 1324 that there is a great lawyers of Equatorial studied the lease contract of Mayfair over the
difference between the effect of an option which is without a consideration property. The property in this case was sold by Lourdes to the De Leons at a
from one which is founded upon a consideration. If the option is without much lower price which is also the case in Equatorial where Carmelo and
any consideration, the offeror may withdraw his offer by communicating Bauerman sold to Equatorial at a lesser price. It is Roberto’s conclusion that
such withdrawal to the offeree at anytime before acceptance; if it is founded as in the case of Equatorial, there was a violation of his right of first refusal
upon a consideration, the offeror cannot withdraw his offer before the lapse and hence annulment or rescission of the Deed of Absolute Sale is the
of the period agreed upon. The second paragraph of Article 1479 declares proper remedy.
that “an accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is supported by Roberto’s reliance in Equatorial is misplaced. Despite his claims,
a consideration distinct from the price.” Sanchez v. Rigos provided an the facts in Equatorial radically differ from the facts of this case. Roberto
interpretation of the said second paragraph of Article 1479 in relation to overlooked the fact that in Equatorial, there was an express provision in the
Article 1324. Thus: Contract of Lease that “(i)f the LESSOR should desire to sell the leased
properties, the LESSEE shall be given 30-days exclusive option to purchase
There is no question that under Article 1479 of the new Civil Code “an the same.” There is no such similar provision in the Contract of Lease
option to sell,” or “a promise to buy or to sell,” as used in said article, to be between Roberto and Lourdes. What is involved here is a separate and
valid must be “supported by a consideration distinct from the price.” This is distinct offer made by Lourdes through a letter dated January 2, 1995
clearly inferred from the context of said article that a unilateral promise to wherein she is selling the leased property to Roberto for a definite price and
buy or to sell, even if accepted, is only binding if supported by consideration. which gave the latter a definite period for acceptance. Roberto was not
In other words, “an accepted unilateral promise can only have a binding given a right of first refusal. The letter-offer of Lourdes did not form part of
effect if supported by a consideration, which means that the option can still the Lease Contract because it was made more than six months after the
be withdrawn, even if accepted, if the same is not supported by any commencement of the lease. It is also very clear that in Equatorial, the
consideration. Hence, it is not disputed that the option is without property was sold within the lease period. In this case, the subject property
consideration. It can therefore be withdrawn notwithstanding the was sold not only after the expiration of the period provided in the letter-
acceptance made of it by appellee. offer of Lourdes but also after the effectivity of the Contract of Lease.
It is true that under Article 1324 of the new Civil Code, the general rule
regarding offer and acceptance is that, when the offerer gives to the offeree Moreover, even if the offer of Lourdes was accepted by Roberto,
a certain period to accept, “the offer may be withdrawn at any time before still the former is not bound thereby because of the absence of a
acceptance” except when the option is founded upon consideration, but this consideration distinct and separate from the price. The argument of
general rule must be interpreted as modified by the provision of Article Roberto that the separate consideration was the liberality on the part of
1479 above referred to, which applies to “a promise to buy and Lourdes cannot stand. A perusal of the letter-offer of Lourdes would show
sell” specifically. As already stated, this rule requires that a promise to sell that what drove her to offer the property to Roberto was her immediate
to be valid must be supported by a consideration distinct from the price. need for funds as she was already very old. Offering the property to
Roberto was not an act of liberality on the part of Lourdes but was a simple
In Diamante v. Court of Appeals, the Court further declared that: matter of convenience and practicality as he was the one most likely to buy
the property at that time as he was then leasing the same.
A unilateral promise to buy or sell is a mere offer, which is not converted
into a contract except at the moment it is accepted. Acceptance is the act All told, the facts of the case, as found by the RTC and the CA, do
that gives life to a juridical obligation, because, before the promise is not support Roberto’s claims that the letter of Lourdes gave him a right of
accepted, the promissor may withdraw it at any time. Upon acceptance, first refusal which is similar to the one given to Mayfair Theater in the case
however, a bilateral contract to sell and to buy is created, and the of Equatorial. Therefore, there is no justification to annul the deed of sale
offeree ipso facto assumes the obligations of a purchaser; the offeror, on the validly entered into by Lourdes with the De Leons.
other hand, would be liable for damages if he fails to deliver the thing he
Case Digest 2018
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES v. GOLDEN HORIZON considering that GHRC is similarly situated as a lessee of NDC whose right of
REALTY CORPORATION first refusal under the lease contract was violated by the sale of the
G.R. Nos. 183612 & 184260, 15 March 2010, FIRST DIVISION property to PUP without NDC having first offered to sell the same to GHRC
(Villarama, Jr., J.) despite the latter’s request for the renewal of the lease and/or to purchase
the leased premises prior to the expiration of the second lease contract.
An option is a contract by which the owner of the property agrees The CA further agreed with the RTC’s finding that there was an implied
with another person that the latter shall have the right to buy the former’s renewal of the lease upon the failure of NDC to act on GHRC’s repeated
property at a fixed price within a certain time. Upon the other hand, a right of requests for renewal of the lease contract, both verbal and written, and
first refusal is a contractual grant, not of the sale of a property, but of the first continuing to accept monthly rental payments from GHRC which was
priority to buy the property in the event the owner sells the same. allowed to continue in possession of the leased premises.
FACTS: ISSUE: WON the SC’s ruling in Polytechnic University of the Philippines v.
Court of Appeals applies in this case involving another lessee of NDC who
In the early sixties, National Development Company (NDC) had in claimed that the option to purchase the portion leased to it was similarly
its disposal a ten (10)-hectare property located along Pureza St., Sta. Mesa, violated by the sale of the NDC Compound in favor of PUP pursuant to
Manila. The estate was popularly known as the NDC Compound. On Memorandum Order No. 214. - YES
September 7, 1977, NDC entered into a Contract of Lease with Golden
Horizon Realty Corporation (GHRC) over a portion of the property for a (WON the option to purchase the portion leased to GHRC was violated by
period of ten (10) years, renewable for another ten (10) years with mutual the sale of the NDC Compound in favor of PUP pursuant to Memorandum
consent of the parties. On May 4, 1978, a second Contract of Lease was Order No. 214. – YES)
executed between NDC and GHRC also renewable upon mutual consent
after the expiration of the ten (10)-year lease period. In addition, GHRC as RULING:
lessee was granted the “option to purchase the area leased, the price to be
negotiated and determined at the time the option to purchase is exercised.” An option is a contract by which the owner of the property
agrees with another person that the latter shall have the right to buy the
Before the expiration of the ten (10)-year period under the former’s property at a fixed price within a certain time. It is a condition
second lease contract, GHRC informed NDC of its exercise of the option to offered or contract by which the owner stipulates with another that the
renew the lease for another ten (10) years. GHRC sent another letter latter shall have the right to buy the property at a fixed price within a
reiterating its desire to renew the contract and also requesting for priority certain time, or under, or in compliance with certain terms and conditions;
to negotiate for its purchase should NDC opt to sell the leased or which gives to the owner of the property the right to sell or demand a
premises. NDC still did not reply but continued to accept rental payments sale. It binds the party, who has given the option, not to enter into the
from GHRC and allowed the latter to remain in possession of the property. principal contract with any other person during the period designated, and,
within that period, to enter into such contract with the one to whom the
GHRC discovered that NDC had decided to secretly dispose the option was granted, if the latter should decide to use the option.
property to a third party. This prompted GHRC to file a complaint for
specific performance, damages with preliminary injunction and temporary Upon the other hand, a right of first refusal is a contractual grant,
restraining order. In the meantime, then President Corazon C. Aquino not of the sale of a property, but of the first priority to buy the property in
issued Memorandum Order No. 214 dated January 6, 1989, ordering the the event the owner sells the same. As distinguished from an option
transfer of the whole NDC Compound to the National Government, which in contract, in a right of first refusal, while the object might be made
turn would convey the said property in favor of PUP at acquisition cost. The determinate, the exercise of the right of first refusal would be dependent
order of conveyance of the property would automatically result in the not only on the owner’s eventual intention to enter into a binding juridical
cancellation of NDC’s total obligation in favor of the National Government in relation with another but also on terms, including the price, that are yet to
the amount of ₱57,193,201.64. be firmed up.
A writ of preliminary injunction was issued enjoining NDC and its As the option to purchase clause in the second lease contract has
attorneys, representatives, agents and any other persons assisting it from no definite period within which the leased premises will be offered for sale
proceeding with the sale and disposition of the leased premises. PUP to respondent lessee and the price is made subject to negotiation and
intervened in the proceedings as a purchaser pendente lite of the property determined only at the time the option to buy is exercised, it is obviously a
subject of litigation. PUP also demanded that GHRC vacate the premises, mere right of refusal, usually inserted in lease contracts to give the lessee
insisting that the latter’s lease contract had already expired. Its demand the first crack to buy the property in case the lessor decides to sell the same.
letter unheeded by GHRC, PUP filed an ejectment case (Civil Case No. That respondent was granted a right of first refusal under the second lease
134416) before the MeTC. contract appears not to have been disputed by petitioners. What
petitioners assail is the CA’s erroneous conclusion that such right of refusal
GHRC argued that Memorandum Order No. 214 is a nullity, for subsisted even after the expiration of the original lease period, when
being violative of the writ of injunction issued by the trial court, apart from respondent was allowed to continue staying in the leased premises under
being an infringement of the Constitutional prohibition against impairment an implied renewal of the lease and without the right of refusal carried over
of obligation of contracts, an encroachment on legislative functions and a to such month-to-month lease. Petitioners thus maintain that no right of
bill of attainder. In the alternative, should the trial court adjudge the refusal was violated by the sale of the property in favor of PUP pursuant to
memorandum order as valid, GHRC contended that its existing right must Memorandum Order No. 214.
still be respected by allowing it to purchase the leased premises.
Petitioners’ position is untenable. When a lease contract
Meanwhile, the SC, in G.R. Nos. 143513 (Polytechnic University of contains a right of first refusal, the lessor has the legal duty to the lessee not
the Philippines v. Court of Appeals) and 143590 (National Development to sell the leased property to anyone at any price until after the lessor has
Corporation v. Firestone Ceramics, Inc.), declared that the sale to PUP by NDC made an offer to sell the property to the lessee and the lessee has failed to
of the portion leased by Firestone pursuant to Memorandum Order No. 214 accept it. Only after the lessee has failed to exercise his right of first priority
violated the right of first refusal granted to Firestone under its third lease could the lessor sell the property to other buyers under the same terms and
contract with NDC. conditions offered to the lessee, or under terms and conditions more
favorable to the lessor.
Thereafter, the RTC rendered its decision upholding the right of
first refusal granted to GHRC under its lease contract with NDC and Respondent timely exercised its option to purchase on August 12,
ordering PUP to reconvey the said portion of the property in favor of GHRC. 1988. However, considering that NDC had been negotiating through the
The CA affirmed. Both the RTC and the CA applied the Court’s ruling National Government for the sale of the property in favor of PUP as early as
in Polytechnic University of the Philippines v. Court of Appeals (supra), July 15, 1988 without first offering to sell it to respondent and even when
Case Digest 2018
respondent communicated its desire to exercise the option to purchase inasmuch as the stipulation is part and parcel of the contract of lease
granted to it under the lease contract, it is clear that NDC violated making the consideration for the lease the same as that for the option.
respondent’s right of first refusal. Under the premises, the matter of the
right of refusal not having been carried over to the impliedly renewed It is a settled principle in civil law that when a lease contract contains a
month-to-month lease after the expiration of the second lease contract on right of first refusal, the lessor is under a legal duty to the lessee not to sell
October 21, 1988 becomes irrelevant since at the time of the negotiations of to anybody at any price until after he has made an offer to sell to the latter
the sale to a third party, petitioner PUP, respondent’s right of first refusal at a certain price and the lessee has failed to accept it. The lessee has a right
was still subsisting. that the lessor’s first offer shall be in his favor.
Petitioner NDC in its memorandum contended that the CA erred The option in this case was incorporated in the contracts of lease by
in applying the ruling in Polytechnic University of the Philippines v. Court of NDC for the benefit of FIRESTONE which, in view of the total amount of
Appeals pointing out that the case of lessee Firestone Ceramics, Inc. is its investments in the property, wanted to be assured that it would be
different because the lease contract therein had not yet expired while in this given the first opportunity to buy the property at a price for which it
case respondent’s lease contracts have already expired and never renewed. would be offered. Consistent with their agreement, it was then implicit
Such contention does not hold water. The reckoning point of the offer of for NDC to have first offered the leased premises of 2.60 hectares to
sale to a third party was not the issuance of Memorandum Order No. 214 on FIRESTONE prior to the sale in favor of PUP. Only if FIRESTONE failed
January 6, 1989 but the commencement of such negotiations as early as July to exercise its right of first priority could NDC lawfully sell the
1988 when respondent’s right of first refusal was still subsisting and the property to petitioner PUP. [emphasis supplied]
lease contracts still in force. Petitioner NDC did not bother to respond to
respondent’s letter of June 13, 1988 informing it of respondent’s exercise of As the Court further ruled in the afore-cited case, the contractual
the option to renew and requesting to discuss further the matter with NDC, grant of a right of first refusal is enforceable, and following an earlier ruling
nor to the subsequent letter of August 12, 1988 reiterating the request for in Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., the execution
renewing the lease for another ten (10) years and also the exercise of the of such right consists in directing the grantor to comply with his obligation
option to purchase under the lease contract. Petitioner NDC had dismissed according to the terms at which he should have offered the property in
these letters as “mere informative in nature, and a request at its best.” favor of the grantee and at that price when the offer should have been
made. The Court then determined the proper rate at which the leased
As to petitioners’ argument that respondent’s right of first refusal portion should be reconveyed to respondent by PUP, to whom the lessor
can be invoked only with respect to the second lease contract which NDC sold it in violation of respondent lessee’s right of first refusal, as
expressly provided for the option to purchase by the lessee, and not in the follows:
first lease contract which contained no such clause, the Court sustains the
RTC and CA in finding that the second contract, covering an area of 3,222.80 It now becomes apropos to ask whether the courts a quo were correct in
square meters, is interrelated to and inseparable from the first contract fixing the proper consideration of the sale at ₱1,500.00 per square meter. In
over 2,407 square meters. The structures built on the leased premises, contracts of sale, the basis of the right of first refusal must be the current
which are adjacent to each other, form part of an integrated system of a offer of the seller to sell or the offer to purchase of the prospective buyer.
commercial complex leased out to manufacturers, fabricators and other Only after the lessee-grantee fails to exercise its right under the same terms
businesses. Petitioners submitted a sketch plan and pictures taken of the and within the period contemplated can the owner validly offer to sell the
driveways, in an effort to show that the leased premises can be used property to a third person, again, under the same terms as offered to the
separately by respondent, and that the two (2) lease contracts are distinct grantee. It appearing that the whole NDC compound was sold to PUP for
from each other. Such was a desperate attempt to downplay the commercial ₱554.74 per square meter, it would have been more proper for the courts
purpose of respondent’s substantial improvements which greatly below to have ordered the sale of the property also at the same price.
contributed to the increased value of the leased premises. However, since FIRESTONE never raised this as an issue, while on the
other hand it admitted that the value of the property stood at
In fine, the CA was correct in declaring that there exists no ₱1,500.00 per square meter, then we see no compelling reason to
justifiable reason not to apply the same rationale in Polytechnic University modify the holdings of the courts a quo that the leased premises be
of the Philippines v. Court of Appeals in the case of respondent who was sold at that price. [emphasis supplied]
similarly prejudiced by petitioner NDC’s sale of the property to PUP, as to
entitle the respondent to exercise its option to purchase until October 1988 In the light of the foregoing, the Court holds that respondent,
inasmuch as the May 4, 1978 contract embodied the option to renew the which did not offer any amount to petitioner NDC, and neither disputed the
lease for another ten (10) years upon mutual consent and giving ₱1,500.00 per square meter actual value of NDC’s property at that time it was
respondent the option to purchase the leased premises for a price to be sold to PUP at ₱554.74 per square meter, as duly considered by this Court in
negotiated and determined at the time such option was exercised by the Firestone case, should be bound by such determination. Accordingly, the
respondent. It is to be noted that Memorandum Order No. 214 itself price at which the leased premises should be sold to respondent in the
declared that the transfer is “subject to such liens/leases existing [on the exercise of its right of first refusal under the lease contract with petitioner
subject property].” Thus: NDC, which was pegged by the RTC at ₱554.74 per square meter, should be
adjusted to ₱1,500.00 per square meter, which more accurately reflects its
...we now proceed to determine whether FIRESTONE should be allowed to true value at that time of the sale in favor of petitioner PUP.
exercise its right of first refusal over the property. Such right
was expressly stated by NDC and FIRESTONE in par. XV of their third Indeed, basic is the rule that a party to a contract cannot
contract denominated as A-10-78 executed on 22 December unilaterally withdraw a right of first refusal that stands upon valuable
1978 which, as found by the courts a quo, was interrelated to and consideration. The Court has categorically ruled that it is not correct to say
inseparable from their first contract denominated as C-30-65 executed that there is no consideration for the grant of the right of first refusal if such
on 24 August 1965 and their second contract denominated as C-26-68 grant is embodied in the same contract of lease. Since the stipulation forms
executed on 8 January 1969. Thus– part of the entire lease contract, the consideration for the lease includes the
consideration for the grant of the right of first refusal. In entering into the
Should the LESSOR desire to sell the leased premises during the term of this contract, the lessee is in effect stating that it consents to lease the premises
Agreement, or any extension thereof, the LESSOR shall first give to the and to pay the price agreed upon provided the lessor also consents that,
LESSEE, which shall have the right of first option to purchase the leased should it sell the leased property, then, the lessee shall be given the right to
premises subject to mutual agreement of both parties. match the offered purchase price and to buy the property at that price.
In the instant case, the right of first refusal is an integral and indivisible part The Court has further stressed that not even the avowed public
of the contract of lease and is inseparable from the whole contract. The welfare or the constitutional priority accorded to education, invoked by
consideration for the right is built into the reciprocal obligations of the petitioner PUP in the Firestone case, would serve as license for the Court,
parties. Thus, it is not correct for petitioners to insist that there was no and any party for that matter, to destroy the sanctity of binding obligations.
consideration paid by FIRESTONE to entitle it to the exercise of the right, While education may be prioritized for legislative and budgetary purposes,
Case Digest 2018
it is doubtful if such importance can be used to confiscate private property

such as the right of first refusal granted to a lessee of petitioner NDC.
Clearly, no reversible error was committed by the CA in sustaining
respondent’s contractual right of first refusal and ordering the
reconveyance of the leased portion of petitioner NDC’s property in its favor.
Case Digest 2018
ARCHBISHOP FERNANDO R. CAPALLA, et al. v. THE HONORABLE Smartmatic-TIM unilaterally extend the option period? Can the Comelec
COMMISSION ON ELECTIONS accept the extension? The Court answers in the affirmative.
G.R. Nos. 201112, 201121, 201127 & 201413, 13 June 2012, EN BANC
(Peralta, J.) It is a basic rule in the interpretation of contracts that an
instrument must be construed so as to give effect to all the provisions of the
An option is only a preparatory contract and a continuing offer to contract. In essence, the contract must be read and taken as a whole. While
enter into a principal contract. the contract indeed specifically required the Comelec to notify Smartmatic-
TIM of its OTP the subject goods until December 31, 2010, a reading of the
FACTS: other provisions of the AES contract would show that the parties are given
the right to amend the contract which may include the period within which
The Comelec and Smartmatic-TIM entered into a Contract for the to exercise the option. There is, likewise, no prohibition on the extension of
Provision of an Automated Election System for the May 10, 2010 the period, provided that the contract is still effective.
Synchronized National and Local Elections (AES Contract). The contract
between the Comelec and Smartmatic-TIM was one of lease of the AES with Obviously, the contract took effect even prior to the 2010
option to purchase (OTP) the goods listed in the contract. In said contract, elections. The only question now is whether its existence already ceased. It
the Comelec was given until December 31, 2010 within which to exercise is important to determine whether or not the performance security had
the option. In a letter dated December 18, 2010, Smartmatic-TIM, through already been released to Smartmatic-TIM. In Article 8 of the AES contract,
its Chairman Cesar Flores (Flores), proposed a temporary extension of the performance security was defined and the rules in releasing said security
option period on the remaining 81,280 PCOS machines until March 31, were laid down. Smartmatic-TIM categorically stated in its Consolidated
2011, waiving the storage costs and covering the maintenance costs. The Comment to the petitions that the Comelec still retains P50M of the amount
Comelec did not exercise the option within the extended period. Several due Smartmatic-TIM as performance security. In short, the performance
extensions were given for the Comelec to exercise the OTP until its final security had not yet been released to Smartmatic-TIM which indicates that
extension on March 31, 2012. the AES contract is still effective and not yet terminated. Consequently,
pursuant to Article 19 of the contract, the provisions thereof may still be
On March 29, 2012, the Comelec issued Resolution No. 9377 amended by mutual agreement of the parties provided said amendment is
resolving to accept Smartmatic-TIMs offer to extend the period to exercise in writing and signed by the parties. In light of the provisions of the AES
the OTP until March 31, 2012 and to authorize Chairman Brillantes to sign contract, there is, therefore, nothing wrong with the execution of the
for and on behalf of the Comelec the Agreement on the Extension of the OTP Extension Agreement.
Under the AES Contract (Extension Agreement). The aforesaid Extension
Agreement was signed on March 30, 2012. On even date, the Comelec The Court also ruled that the amendment of the AES contract is
issued Resolution No. 9378 resolving to approve the Deed of Sale between more advantageous to the Comelec and the public. The nature of an option
the Comelec and Smartmatic-TIM to purchase the latter’s PCOS machines contract was thoroughly explained in Eulogio v. Apeles, to wit:
(hardware and software) to be used in the upcoming May 2013 elections
and to authorize Chairman Brillantes to sign the Deed of Sale for and on An option is a contract by which the owner
behalf of the Comelec. The Deed of Sale was forthwith executed. of the property agrees with another person that the
latter shall have the right to buy the former's property
Petitioners assail the validity and constitutionality of the Comelec at a fixed price within a certain time. It is a condition
Resolutions for the purchase of the subject PCOS machines as well as the offered or contract by which the owner stipulates with
Extension Agreement and the Deed of Sale covering said goods mainly on another that the latter shall have the right to buy the
three grounds: (1) the option period provided for in the AES contract property at a fixed price within a certain time, or
between the Comelec and Smartmatic-TIM had already lapsed and, thus, under, or in compliance with certain terms and
could no longer be extended, such extension being prohibited by the conditions; or which gives to the owner of the
contract; (2) the extension of the option period and the exercise of the property the right to sell or demand a sale. An option
option without competitive public bidding contravene the provisions of RA is not of itself a purchase, but merely secures the
9184; and, (3) despite the palpable infirmities and defects of the PCOS privilege to buy. It is not a sale of property but a sale of
machines, the Comelec purchased the same in contravention of the the right to purchase. It is simply a contract by which
standards laid down in RA 9369. the owner of the property agrees with another person
that he shall have the right to buy his property at a
ISSUE: WON the exercise of the option in the lease contract with option to fixed price within a certain time. He does not sell his
purchase is more advantageous to the Comelec and the public. – YES land; he does not then agree to sell it; but he does sell
(Can Smartmatic-TIM unilaterally extend the option period? Can the something, i.e., the right or privilege to buy at the
Comelec accept the extension? - YES) election or option of the other party. Its distinguishing
characteristic is that it imposes no binding obligation
RULING: on the person holding the option, aside from the
consideration for the offer.
In order to achieve the modernization program of the Philippine
Electoral System, which includes the automation of the counting, Also in Carceller v. Court of Appeals, the Court described an option in this
transmission and canvassing of votes for the May 2010 national and local wise:
elections with systems integration and over-all project management in a
comprehensive and well-managed manner, the Comelec entered into an An option is a preparatory contract in which one party
AES contract with Smartmatic-TIM for the lease of goods and purchase of grants to the other, for a fixed period and under
services under the contract, with option to purchase the goods. The option specified conditions, the power to decide, whether or
contract between the Comelec and Smartmatic-TIM is embodied in Article not to enter into a principal contract. It binds the party
4.3 of the AES contract. Article 6.6 thereof, in turn provides for the period who has given the option, not to enter into the
within which the Comelec could exercise the option. principal contract with any other person during the
period designated and, within that period, to enter into
The Comelec did not exercise the option within the period stated such contract with the one to whom the option was
in the contract. Smartmatic, however, unilaterally extended the same until granted, if the latter should decide to use the option. It
its final extension on March 31, 2012. The Comelec, thereafter, accepted the is a separate agreement distinct from the contract
option and eventually executed a Deed of Sale involving said goods. Now, which the parties may enter into upon the
petitioners come before the Court assailing the validity of the extension, the consummation of the option.
exercise of the option and the Deed of Sale. In light of the AES contract, can
In Adelfa Properties, Inc. v. CA, the Court described an option as:
Case Digest 2018
While the contract indeed specifically required the Comelec to

An option, as used in the law on sales, is a continuing notify Smartmatic-TIM of its OTP the subject goods until December 31,
offer or contract by which the owner stipulates with 2010, a reading of the other provisions of the AES contract would show that
another that the latter shall have the right to buy the the parties are given the right to amend the contract which may include the
property at a fixed price within a certain time, or period within which to exercise the option. There is, likewise, no
under, or in compliance with, certain terms and prohibition on the extension of the period, provided that the contract is still
conditions, or which gives to the owner of the property effective.
the right to sell or demand a sale. It is sometimes
called an unaccepted offer. x x x In this case, the contract is still effective because the performance
security has not been released. Thus, not only the option and warranty
From the foregoing jurisprudential pronouncements, an option is provisions survive but the entire contract as well. In light of the contractual
only a preparatory contract and a continuing offer to enter into a principal provisions, we, therefore, sustain the amendment of the option period. The
contract. Under the set-up, the owner of the property, which is Smartmatic- amendment of a previously bidded contract is not per se invalid. For it to be
TIM, gives the optionee, which is the Comelec, the right to accept the nullified, the amendment must be substantial such that the other bidders
formers offer to purchase the goods listed in the contract for a specified were deprived of the terms and opportunities granted to the winning
amount, and within a specified period. Thus, the Comelec is given the right bidder after it won the same and that it is prejudicial to public interest. In
to decide whether or not it wants to purchase the subject goods. It is, our assailed decision, we found the amendment not substantial because no
therefore, uncertain whether or not the principal contract would be entered additional right was made available to Smartmatic-TIM that was not
into. The owner of the property would then have to wait for the optionee to previously available to the other bidders; except for the extension of the
make a decision. A longer option period would mean that more time would option period, the exercise of the option was still subject to same terms and
be given to the optionee to consider circumstances affecting its decision conditions such as the purchase price and the warranty provisions; and the
whether to purchase the goods or not. On the part of Smartmatic-TIM, it amendment is more advantageous to the Comelec and the public.
would have to wait for a longer period to determine whether the subject
goods will be sold to the Comelec or not, instead of freely selling or leasing In this case, the extension of the option period means that the
them to other persons or governments possibly at a higher price. This is Comelec had more time to determine the propriety of exercising the option.
especially true in this case as the terms and conditions for the exercise of With the extension, the Comelec could acquire the subject PCOS machines
the option including the purchase price, had been included in the AES under the same terms and conditions as earlier agreed upon. The end result
contract previously bidded upon. The parties are bound to observe the is that the Comelec acquired the subject PCOS machines with its meager
limitations embodied therein, otherwise, a new public bidding would be budget and was able to utilize the rentals paid for the 2010 elections as part
needed. of the purchase price. We maintain the view that the extension of the
option period is an amendment to the AES Contract authorized by Article 19
The Court agrees with respondents that the exercise of the option thereof.
is more advantageous to the Comelec, because the P7,191,484,739.48
rentals paid for the lease of goods and purchase of services under the AES
contract was considered part of the purchase price. For the Comelec to own
the subject goods, it was required to pay only P2,130,635,048.15. If the
Comelec did not exercise the option, the rentals already paid would just be
one of the government expenses for the past election and would be of no
use to future elections. Assuming that the exercise of the option is nullified,
the Comelec would again conduct another public bidding for the AES for the
2013 elections with its available budget of P7 billion. Considering that the
said amount is the available fund for the whole election process, the amount
for the purchase or lease of new AES will definitely be less than P7 billion.
Moreover, it is possible that Smartmatic-TIM would again participate in the
public bidding and could win at a possibly higher price. The Comelec might
end up acquiring the same PCOS machines but now at a higher price.
October 23, 2012: Resolution:
We find no reason to disturb our June 13, 2012 Decision. Clearly,

under the AES Contract, the Comelec was given until December 31, 2010
within which to exercise the OTP the subject goods listed therein including
the PCOS machines. The option was, however, not exercised within said
period. But the parties later entered into an extension agreement giving the
Comelec until March 31, 2012 within which to exercise it. With the
extension of the period, the Comelec validly exercised the option and
eventually entered into a contract of sale of the subject goods. The
extension of the option period, the subsequent exercise thereof, and the
eventual execution of the Deed of Sale became the subjects of the petitions
challenging their validity in light of the contractual stipulations of
respondents and the provisions of RA 9184.
In our June 13, 2012 Decision, we decided in favor of

respondents and placed a stamp of validity on the assailed resolutions and
transactions entered into. Based on the AES Contract, we sustained the
parties’ right to amend the same by extending the option period.
Considering that the performance security had not been released to
Smartmatic-TIM, the contract was still effective which can still be amended
by the mutual agreement of the parties, such amendment being reduced in
writing. To be sure, the option contract is embodied in the AES Contract
whereby the Comelec was given the right to decide whether or not to buy
the subject goods listed therein under the terms and conditions also agreed
upon by the parties.
Case Digest 2018
Right of First Refusal
ANG YU ASUNCION, et al. v. THE HON. COURT OF APPEALS and BUEN

REALTY DEVELOPMENT CORPORATION
G.R. No. 109125, 2 December 1994, EN BANC (Vitug, J.)
If the period is not itself founded upon or supported by a

consideration, the offeror is still free and has the right to withdraw the offer
before its acceptance, or, if an acceptance has been made, before the offeror’s
coming to know of such fact, by communicating that withdrawal to the
offeree. If the period has a separate consideration, a contract of “option” is
deemed perfected, and it would be a breach of that contract to withdraw the
offer during the agreed period.
The right of first refusal cannot be deemed a perfected contract of

sale under Article 1458 of the Civil Code. In a right of first refusal, while the
object might be made determinate, the exercise of the right, however, would
be dependent not only on the grantor’s eventual intention to enter into a
binding juridical relation with another but also on terms, including the price,
that obviously are yet to be later firmed up.
*Please see the previous digest. I included there the discussion of both the
option contract and the right of first refusal. Thanks!
SPS. REYNALDO K. LITONJUA and ERLINDA P. LITONJUA and PHIL.

WHITE HOUSE AUTO SUPPLY, INC. v. L & R CORPORATION, et al.
G.R. No. 130722, 9 December 1999, EN BANC (Ynares-Santiago, J.)
The right of first refusal has long been recognized as valid in our
jurisdiction. The consideration for the loan-mortgage includes the
consideration for the right of first refusal.
*Also see the previous digest. The discussion for the right of first refusal
was likewise included. Thanks!
Case Digest 2018
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & vests in Mayfair the right of first refusal as to which the requirement of
BAUERMANN, INC. v. MAYFAIR THEATER, INC. distinct consideration indispensable in an option contract, has no
G.R. No. 106063, 21 November 1996, EN BANC (Hermosisima, Jr., J.) application, the CA also addressed the claim of Carmelo and Equatorial that
assuming arguendo that the option is valid and effective, it is impossible of
The deed of option or the option clause in a contract, in order to be performance because it covered only the leased premises and not the entire
valid and enforceable, must, among other things, indicate the definite price at Claro M. Recto property, while Carmelo’s offer to sell pertained to the entire
which the person granting the option, is willing to sell. property in question.
FACTS: ISSUE:
Carmelo & Bauermann, Inc. (Carmelo) entered into a contract of WON the paragraph 8 stipulated in the two contracts of lease
lease with Mayfair Theater, Inc. (Mayfair) for the latter’s lease of a portion between Carmelo and Mayfair is an option contract or a grant of the right of
of Carmelo’s property located at Claro M Recto Avenue, Manila for use by first refusal.
Mayfair as a motion picture theater and for a term of twenty (20) years.
Mayfair thereafter constructed on the leased property a movie house RULING:
known as “Maxim Theatre.” Two years later, Mayfair entered into a second
contract of lease with Carmelo for the lease of another portion of Carmelo’s The Court agrees with the respondent Court of Appeals that the
property for similar use as a movie theater and for a similar term of twenty aforecited contractual stipulation provides for a right of first refusal in favor
(20) years. Mayfair put up another movie house known as “Miramar of Mayfair. It is not an option clause or an option contract. It is a contract of a
Theatre” on this leased property. Both contracts of lease provides right of first refusal.
identically worded paragraph 8, which reads:
As early as 1916, in the case of Beaumont vs. Prieto, unequivocal
“That if the LESSOR should desire to sell the leased premises, the LESSEE was our characterization of an option contract as one necessarily involving
shall be given 30-days exclusive option to purchase the same. the choice granted to another for a distinct and separate consideration as to
whether or not to purchase a determinate thing at a predetermined fixed
In the event, however, that the leased premises is sold to someone other price.
than the LESSEE, the LESSOR is bound and obligated, as it hereby binds and
obligates itself, to stipulate in the Deed of Sale hereof that the purchaser In his Law Dictionary, edition of 1897, Bouvier defines an option
shall recognize this lease and be bound by all the terms and conditions as a contract, in the following language: A contract by virtue of which A, in
thereof.” consideration of the payment of a certain sum to B, acquires the privilege of
buying from, or selling to B, certain securities or properties within a limited
Mr. Henry Pascal of Carmelo informed Mr. Henry Yang, President time at a specified price. (Story vs. Salamon, 71 N.Y., 420.)
of Mayfair, through a telephone conversation that Carmelo was desirous of
selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a From vol. 6, page 5001, of the work “Words and Phrases,” citing
certain Jose Araneta was offering to buy the whole property for US Dollars the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the
1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the following quotation has been taken:
property for Six to Seven Million Pesos. Mr. Yang replied that he would let
Mr. Pascal know of his decision. Mayfair replied through a letter reminding An agreement in writing to give a person the option to purchase
Carmelo of the stipulated paragraph 8 of the lease contracts. However, lands within a given time at a named price is neither a sale nor an
Carmelo did not reply to the letter. agreement to sell. It is simply a contract by which the owner of property
agrees with another person that he shall have the right to buy his
Mayfair sent another letter to Carmelo purporting to express property at a fixed price within a certain time. He does not sell his land; he
interest in acquiring not only the leased premises but “the entire building does not then agree to sell it; but he does sell something; that is, the right or
and other improvements if the price is reasonable.” However, both Carmelo privilege to buy at the election or option of the other party. The second
and Equatorial questioned the authenticity of the second letter. Four years party gets in praesenti, not lands, nor an agreement that he shall have lands,
later, Carmelo sold its entire C.M. Recto Avenue land and building, which but he does get something of value; that is, the right to call for and receive
included the leased premises housing the “Maxim” and “Miramar” theatres, lands if he elects. The owner parts with his right to sell his lands, except to
to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of the second party, for a limited period. The second party receives this right,
P11,300,000.00. or, rather, from his point of view, he receives the right to elect to buy.
Thus, Mayfair filed an action for specific performance and But the two definitions above cited refer to the contract of option,
annulment of the sale of the leased premises to Equatorial. In its Answer, or, what amounts to the same thing, to the case where there was cause or
Carmelo alleged (a) that it had informed Mayfair of its desire to sell the consideration for the obligation, the subject of the agreement made by the
entire C.M. Recto Avenue property and offered the same to Mayfair, but the parties; while in the case at bar there was no such cause or
latter answered that it was interested only in buying the areas under lease, consideration. (Emphasis ours.)
which was impossible since the property was not a condominium; and (b)
that the option to purchase invoked by Mayfair is null and void for lack of The rule so early established in this jurisdiction is that the deed
consideration. Equatorial, in its Answer, pleaded that the option is void for of option or the option clause in a contract, in order to be valid and
lack of consideration and is unenforceable by reason of its impossibility of enforceable, must, among other things, indicate the definite price at which
performance because the leased premises could not be sold separately from the person granting the option, is willing to sell.
the other portions of the land and building.
In the light of the foregoing disquisition and in view of the
The trial court dismissed the complaint and ruled that the wording of the questioned provision in the two lease contracts involved in
identically worded paragraph 8 found in both lease contracts to be an the instant case, we so hold that no option to purchase in contemplation of
option clause which however cannot be deemed to be binding on Carmelo the second paragraph of Article 1479 of the Civil Code, has been granted to
because of lack of distinct consideration therefor. The CA, however, Mayfair under the said lease contracts.
reversed. Rereading the law on the matter of sales and option contracts, the
CA differentiated between Article 1324 and Article 1479 of the Civil Code, Respondent Court of Appeals correctly ruled that the said
analyzed their application to the facts of this case, and concluded that since paragraph 8 grants the right of first refusal to Mayfair and is not an option
paragraph 8 of the two lease contracts does not state a fixed price for the contract. It also correctly reasoned that as such, the requirement of a
purchase of the leased premises, which is an essential element for a separate consideration for the option, has no applicability in the instant
contract of sale to be perfected, what paragraph 8 is, must be a right of first case.
refusal and not an option contract. Besides the ruling that paragraph 8
Case Digest 2018
There is nothing in the identical Paragraphs “8” of the June 1,

1967 and March 31, 1969 contracts which would bring them into the ambit
of the usual offer or option requiring an independent consideration.
An option is a contract granting a privilege to buy or sell within

an agreed time and at a determined price. It is a separate and distinct
contract from that which the parties may enter into upon the
consummation of the option. It must be supported by consideration. In the
instant case, the right of first refusal is an integral part of the contracts of
lease. The consideration is built into the reciprocal obligations of the
parties.
To rule that a contractual stipulation such as that found in

paragraph 8 of the contracts is governed by Article 1324 on withdrawal of
the offer or Article 1479 on promise to buy and sell would render in
effectual or “inutile” the provisions on right of first refusal so commonly
inserted in leases of real estate nowadays. The Court of Appeals is correct in
stating that Paragraph 8 was incorporated into the contracts of lease for the
benefit of Mayfair which wanted to be assured that it shall be given the first
crack or the first option to buy the property at the price which Carmelo is
willing to accept. It is not also correct to say that there is no consideration in
an agreement of right of first refusal. The stipulation is part and parcel of
the entire contract of lease. The consideration for the lease includes the
consideration for the right of first refusal. Thus, Mayfair is in effect stating
that it consents to lease the premises and to pay the price agreed upon
provided the lessor also consents that, should it sell the leased property,
then, Mayfair shall be given the right to match the offered purchase price
and to buy the property at that price. As stated in Vda. De Quirino
vs. Palarca, in reciprocal contract, the obligation or promise of each party is
the consideration for that of the other.
Case Digest 2018
PARAÑAQUE KINGS ENTERPRISES, INCORPORATED v. COURT OF sell the property to a third person, again, under the same terms as offered
APPEALS to the optionee.
February 26, 1997 (PANGANIBAN, J.) This principle was reiterated in the very recent case of Equatorial Realty vs.
Mayfair Theater, Inc. which was decided en banc.
Doctrine
The basis of the right of first refusal must be the current offer to sell of the Petitioner also invokes Presidential Decree No. 1517, or the Urban Land
seller or offer to purchase of any prospective buyer. Reform Law, as another source of its right of first refusal. It claims to be
covered under said law, being the "rightful occupant of the land and its
Facts structures" since it is the lawful lessee thereof by reason of contract. Under
Catalina L. Santos is the owner of 8 parcels of land located at Parañ aque, the lease contract, petitioner would have occupied the property for fourteen
Metro Manila. On November 28, 1977, a certain Frederick Chua leased the (14) years at the end of the contractual period.
subject property from defendant Catalina L. Santos, the said lease was Without probing into whether petitioner is rightfully a beneficiary under
registered in the Register of Deeds. On February 12, 1979, Frederick Chua said law, suffice it to say that this Court has previously ruled that under
assigned all his rights and interest and participation in the leased property Section 6 18 of P.D. 1517, "the terms and conditions of the sale in the
to Lee Ching Bing, by virtue of a deed of assignment and with the exercise of the lessee's right of first refusal to purchase shall be determined
conformity of defendant Santos, the said assignment was also registered. by the Urban Zone Expropriation and Land Management Committee.
Hence, . . . . certain prerequisites must be complied with by anyone who
On August 6, 1979, Lee Ching Bing also assigned all his rights and interest in wishes to avail himself of the benefits of the decree." 19There being no
the leased property to Parañ aque Kings Enterprises, Incorporated by virtue allegation in its complaint that the prerequisites were complied with, it is
of a deed of assignment and with the conformity of defendant Santos. Their clear that the complaint did fail to state a cause of action on this ground.
contract provided that:
"9. That in case the properties subject of the lease agreement are Neither do we find merit in the contention of respondent Santos that the
sold or encumbered, Lessors shall impose as a condition that the buyer or assignment of the lease contract to petitioner did not include the option to
mortgagee thereof shall recognize and be bound by all the terms and purchase. The provisions of the deeds of assignment with regard to matters
conditions of this lease agreement and shall respect this Contract of Lease assigned were very clear. One of such rights included in the contract of lease
as if they are the LESSORS thereof and in case of sale, LESSEE shall have the and, therefore, in the assignments of rights was the lessee's right of first
first option or priority to buy the properties subject of the lease;" option or priority to buy the properties subject of the lease, as provided in
paragraph 9 of the assigned lease contract. The deed of assignment need
On September 21, 1988, Catalina Santos sold the eight parcels of land not be very specific as to which rights and obligations were passed on to the
subject of the lease to defendant David Raymundo for a consideration of assignee. It is understood in the general provision aforequoted that all
P5,000,000. Upon learning of this fact, the representative of Paranaque King specific rights and obligations contained in the contract of lease are those
wrote a letter to defendant Santos, requesting her to rectify the error and referred to as being assigned. Needless to state, respondent Santos gave her
consequently realizing the error, she had it reconveyed to her for the same unqualified conformity to both assignments of rights.
consideration of P5M. Only 2 days after Catalina Santos sold her properties
did she reply to Paranaque Kings’ letter saying period has lapsed. On July 6, With respect to the contention of respondent Raymundo that he is not privy
1989, counsel for defendant Santos informed the petitioners Paranaque to the lease contract, not being the lessor nor the lessee referred to therein,
Kings that the new owner is RAYMUNDO. he could thus not have violated its provisions, but he is nevertheless a
proper party. Clearly, he stepped into the shoes of the owner-lessor of the
From the preceding facts, it is clear that the sale was simulated and that land as, by virtue of his purchase, he assumed all the obligations of the
there was a collusion between the respondents Santos and Raymundo in the lessor under the lease contract. Moreover, he received benefits in the form
sales of the leased properties (defendants SANTOS and RAYMUNDO have of rental payments. Furthermore, the complaint, as well as the petition,
the same counsel who represented both of them in their exchange of prayed for the annulment of the sale of the properties to him. Both
communication with PK’s counsel, a fact that led to the conclusion that a pleadings also alleged collusion between him and respondent Santos which
collusion exist between them, among others) defeated the exercise by petitioner of its right of first refusal.
Petitioner Paranaque demanded from the defendants to rectify their In order then to accord complete relief to petitioner, respondent Raymundo
unlawful acts that they committed, but defendants refused and failed to was a necessary, if not indispensable, party to the case. A favorable
comply with plaintiffs just and valid demands. RTC issued the order judgment for the petitioner will necessarily affect the rights of respondent
dismissing the complaint for lack of a valid cause of action. CA affirmed in Raymundo as the buyer of the property over which petitioner would like to
toto. assert its right of first option to buy
Issue: Is such right of first refusal enforceable by an action for specific

performance?
Held: YES
A careful examination of the complaint reveals that it sufficiently alleges an
actionable contractual breach on the part of private respondents. Under
paragraph 9 of the contract of lease between respondent Santos and
petitioner, the latter was granted the "first option or priority" to purchase
the leased properties in case Santos decided to sell. If Santos never decided
to sell at all, there can never be a breach, much less an enforcement of such
"right." But on September 21, 1988, Santos sold said properties to
Respondent Raymundo without first offering these to petitioner.
The Court ruled that in order to have full compliance with the contractual
right granting petitioner the first option to purchase, the sale of the
properties for the amount of P9 million, the price for which they were
finally sold to respondent Raymundo, should have likewise been first
offered to petitioner.
From the foregoing, the basis of the right of first refusal must be the current
offer to sell of the seller or offer to purchase of any prospective buyer. Only
after the optionee fails to exercise its right of first priority under the same
terms and within the period contemplated, could the owner validly offer to
Case Digest 2018
SPOUSES LEONCIO G. CIFRA and AURORA R. JONGCO-CIFRA v. COURT The provisions of Articles 1370 to 1375 of the Civil Code on the
OF APPEALS and MANUEL G. YU CHUA interpretation of contracts are squarely applicable to this case:
June 3, 1991 (GANCAYCO, J.) Art. 1370. If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulations
FACTS shall control.
On December 27, 1985, petitioners spouses, represented by Benedicto If the words appear to be contrary to the evident intention of the parties,
Catalan, received from Dr. Manuel G. Yu Chua the cash as earnest money for the latter shall prevail over the former.
the house and lot owned by the spouses. The property was presently Art. 1371. In order to judge the intention of the contracting parties, their
mortgaged with SSS. A reading of the subject contract which the parties contemporaneous and subsequent acts shall be principally considered.
labeled as "Earnest money" shows that it is an agreement to sell the real Art. 1372. However generally the terms of a contract may be, they shall not
property described therein for the amount of P1.1 M with assumption of the be understood to comprehend things that are distinct and cases that are
P40,000.00 mortgage, by which P5,000.00 was paid upon signing of the different from those upon which the parties intended to agree.
agreement by private respondent to petitioner as earnest money, which is Art. 1373. If some stipulation of any contract should admit of several
part of the consideration. The balance of the consideration shall be paid meanings, it shall be understood as bearing that import which is most
upon the removal of the tenant or occupant from the premises and upon the adequate to render it effectual.
execution of the deed of absolute sale. Art. 1374. The various stipulations of a contract shall be interpreted
Also included in the agreement is “the understanding of the parties that the together, attributing to the doubtful ones that sense which may result from
buyer shall assume the mortgage or obligation of the seller with the SSS and all of them taken jointly.
Seller promises to secure at the at the shortest possible time the Art. 1375. Words which may have different significations shall be
certification of balance or up to date statement of account from the SSS and understood in that which is most in keeping with the nature and object of
deliver the same to the buyer. the contract.
If and when the buyer purchases the property according to the terms and
conditions above specified, the herein earnest money shall form a part of The agreement labeled as “Earnest Money” is the literal and clear
the purchase price otherwise the same shall be forfeited in favor of the agreement of the parties. From their contemporaneous and subsequent acts
seller. it also appears that the proceeds of the sale of the property by petitioners
were intended to apply to a proposed business venture of petitioners
In the addendum to the agreement it is stipulated that in case the buyer fails abroad. As said proposed business did not prosper and the
to purchase the property after the seller formally notified him of the tenants/occupants of the premises have not yet vacated the premises,
surrender of the premises by the tenant or occupant, in addition to the petitioners decided to rescind the contract of sale in accordance with the
forfeiture of the earnest money, the buyer must pay the seller P20,000.00 agreement.
plus attorney's fees and other costs in case of litigation. On the other hand, if
the seller does not make good his promise to sell the property even after the Under the addendum to the same agreement, both parties are given the
present tenant shall have surrendered the premises, the seller binds himself freedom to back out of the transaction provided that, in tie case of the seller,
to return the earnest money and in addition pay the buyer P20,000.00 plus he must return the earnest money in addition to being liable to the buyer
the attorney's fees and other costs in case of litigation. for P20,000.00, plus attorney's fees and other costs in case of litigation; and
in case of the buyer, the earnest money is forfeited, and he is liable to pay
the seller P20,000.00 in damages plus attorneys fees and other costs in case
of litigation to the seller. This right which is afforded to both parties may be
On May 25, 1986, Catalan informed private respondent of the desire of availed of by them, irrespective of whether or not the occupant of the
petitioners to rescind the contract. Respondents refused and insist on his premises had vacated the same. This stipulation is the law between the
right over the premises. After several letters without reaching an parties.
understanding, Respondent filed an action for specific performance of their
agreement. Consequently, the action for specific performance must fail. For the
rescission of the contract, petitioners must return the P5,000.00 earnest
RTC decide in favor of Manuel Yu Chua and ordered to execute the deed of money and pay P20,000.00 to the private respondent. However, they are
absolute sale. CA affirmed. not liable for attorneys fees, for it was private respondent who brought the
case to court as a result of which petitioners unnecessarily incurred
ISSUE: Whether or not the buyer have the right to demand specific expenses of litigation.
performance from petitioners to sell the house and lot despite the fact that
he had agreed to a waiver of such right when he consented to the The Court dismissed the complaint and rescinded the subject contract to
addendum stipulation recognizing the right of the petitioners to cancel or sell upon the petitioners reimbursing to private respondent the P5,000.00
abrogate the sale for any reason by paying the liquidated damages earnest money and paying them P20,000.00 as damages according to the
stipulated therein. same agreement.
HELD: NO
SPOUSES ONNIE SERRANO AND AMPARO HERRERA v. GODOFREDO

CAGUIAT On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter to
February 28, 2007 (SANDOVAL-GUTIERREZ, J.) respondent stating that petitioner Amparo Herrera is leaving for abroad on
or before April 15, 1990 and that they are canceling the transaction.
FACTS Petitioners also informed respondent that he can recover the earnest
money of ₱100,000.00 anytime.
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners
of a lot located in Las Piñ as, Metro Manila. Sometime in March 1990, Again, on April 6, 1990, petitioners wrote respondent stating that they
Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to delivered to his counsel Philippine National Bank Manager’s Check dated
sell it at ₱1,500.00 per square meter. Respondent then gave petitioners April 6, 1990 in the amount of ₱100,000.00 payable to him.
₱100,000.00 as partial payment. In turn, petitioners gave respondent the
corresponding receipt stating that respondent promised to pay the balance In view of the cancellation of the contract by petitioners, respondent filed
of the purchase price on or before March 23, 1990. with the Regional Trial Court a complaint against them for specific
performance and damages
On March 28, 1990, respondent, through his counsel Atty. Ponciano
Espiritu, wrote petitioners informing them of his readiness to pay the RTC rendered its Decision finding there was a perfected contract of sale
balance of the contract price and requesting them to prepare the final deed between the parties and ordering petitioners to execute a final deed of sale
of sale.
Case Digest 2018
in favor of respondent. On appeal, the Court of Appeals affirmed the trial The differences between a contract to sell and a contract of sale are well-
court’s judgment. settled in jurisprudence. As early as 1951, in Sing Yee v. Santos,16 we held
that:
In holding that there is a perfected contract of sale, both courts mainly x x x [a] distinction must be made between a contract of sale in which title
relied on the earnest money given by respondent to petitioners. They passes to the buyer upon delivery of the thing sold and a contract to sell x x
invoked Article 1482 of the Civil Code which provides that "Whenever x where by agreement the ownership is reserved in the seller and is not to
earnest money is given in a contract of sale, it shall be considered as part of pass until the full payment, of the purchase price is made. In the first case,
the price and as proof of the perfection of the contract." non-payment of the price is a negative resolutory condition; in the second
case, full payment is a positive suspensive condition. Being contraries, their
ISSUE: Whether the document entitled "Receipt for Partial Payment" signed effect in law cannot be identical. In the first case, the vendor has lost and
by both parties earlier mentioned is a contract to sell or a contract of sale. cannot recover the ownership of the land sold until and unless the contract
of sale is itself resolved and set aside. In the second case, however, the title
HELD: NO remains in the vendor if the vendee does not comply with the condition
precedent of making payment at the time specified in the contract.
In San Miguel Properties Philippines, Inc. v. Spouses Huang,13 we held that
the stages of a contract of sale are: (1) negotiation, covering the period from In other words, in a contract to sell, ownership is retained by the seller and
the time the prospective contracting parties indicate interest in the contract is not to pass to the buyer until full payment of the price.
to the time the contract is perfected; (2) perfection, which takes place upon
the concurrence of the essential elements of the sale, which is the meeting In this case, the "Receipt for Partial Payment" shows that the true
of the minds of the parties as to the object of the contract and upon the agreement between the parties is a contract to sell.
price; and (3) consummation, which begins when the parties perform their
respective undertakings under the contract of sale, culminating in the First, ownership over the property was retained by petitioners and was not
extinguishment thereof. to pass to respondent until full payment of the purchase price. Thus,
petitioners need not push through with the sale should respondent fail to
With the above postulates as guidelines, we now proceed to determine the remit the balance of the purchase price before the deadline on March 23,
real nature of the contract entered into by the parties. 1990. In effect, petitioners have the right to rescind unilaterally the contract
the moment respondent fails to pay within the fixed period.
It is a canon in the interpretation of contracts that the words used therein
should be given their natural and ordinary meaning unless a technical Second, the agreement between the parties was not embodied in a deed of
meaning was intended. Thus, when petitioners declared in the said "Receipt sale. The absence of a formal deed of conveyance is a strong indication that
for Partial Payment" that they – the parties did not intend immediate transfer of ownership, but only a
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF transfer after full payment of the purchase price.
ONE HUNDRED THOUSAND PESOS (₱100,000.00) AS PARTIAL
PAYMENT OF OUR LOT SITUATED IN LAS PIÑ AS, M.M. COVERED Third, petitioners retained possession of the certificate of title of the lot.
BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE This is an additional indication that the agreement did not transfer to
METERS. respondent, either by actual or constructive delivery, ownership of the
property.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE
PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT It is true that Article 1482 of the Civil Code provides that "Whenever
WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON earnest money is given in a contract of sale, it shall be considered as part of
THIS DATE. the price and proof of the perfection of the contract." However, this article
speaks of earnest money given in a contract of sale. In this case, the earnest
--there can be no other interpretation than that they agreed to a conditional money was given in a contract to sell. The earnest money forms part of the
contract of sale, consummation of which is subject only to the full payment consideration only if the sale is consummated upon full payment of the
of the purchase price. purchase price. Now, since the earnest money was given in a contract to
sell, Article 1482, which speaks of a contract of sale, does not apply.
A contract to sell is akin to a conditional sale where the efficacy or
obligatory force of the vendor's obligation to transfer title is subordinated As previously discussed, the suspensive condition (payment of the balance
to the happening of a future and uncertain event, so that if the suspensive by respondent) did not take place. Clearly, respondent cannot compel
condition does not take place, the parties would stand as if the conditional petitioners to transfer ownership of the property to him.
obligation had never existed. The suspensive condition is commonly full
payment of the purchase price.
FIRST OPTIMA REALTY CORPORATION v. SECURITRON SECURITY The fact shows that the respondent through its General Manager Eleazar
SERVICES, INC. offred to purchase the subject property of the petitioner through a letter
January 28, 2015 (DEL CASTILLO, J.) addressed to its Vice President Young. Eleazar offered the purchase of the
property in cash. Young declined to accept the payment and informed
Doctrine Eleazar that prior approval of petitioner’s Board of Directors was required
Where the parties merely exchanged offers and counter-offers, no contract is for the transaction.
perfected since they did not yet give their consent to such offers. Earnest
money applies to a perfected sale. Respondent sent a Letter to the petitioner accompanied by a check in the
amount of P100,000.00 made payable to petitioner, which serve as earnest
FACTS money for the property. Despite the delicate nature of the matter and large
Petitioner First Optima Realty Corporation is a domestic corporation amount involved, respondent did not deliver the letter and check directly to
engaged in the real estate business. It is the registered owner of a parcel of Young or her office; instead, they were coursed through an ordinary
land with improvements located in Pasay City, covered by Transfer receiving clerk/receptionist of the petitioner, who issued a provisional
Certificate of Title (the subject property). Respondent Securitron Security receipt.The check was eventually deposited with and credited to
Services, Inc., a domestic corporation with offices located beside the subject petitioner’s bank account.
property, claimed that the said parcel of land is subject of the alleged
perfected contract of sale through the latter’s payment of an earnest money. Thereafter, respondent through counsel demanded in writing that
petitioner proceed with the sale of the property. It averred that since a
perfected contract of sale arose between the parties after negotiations were
Case Digest 2018
conducted and respondent paid the earnest money, which petitioner of the minds of the parties; (2) object or subject matter of the contract; and
accepted, the latter should be compelled to sell the subject property to the (3) price or consideration of the sale.
former. It contended that the failure to return of its payment amounts to
estoppel and retification of sale. The Supreme Court ruled that when there is merely an offer by one party
without the acceptance of the other, there is no contract. As contemplated
Petitioner argued that it never agreed to sell the subject property; that its under Art. 1482 of the Civil Code, “there must first be a perfected contract of
board of directors did not authorize the sale thereof to respondent, as no sale before we can speak of earnest money.” “Where the parties merely
corresponding board resolution to such effect was issued; that the exchanged offers and counter-offers, no contract is perfected since they did
respondent’s P100,000.00 check payment cannot be considered as earnest not yet give their consent to such offers. Earnest money applies to a
money since the payment constitutes merely an offer which requires perfected sale.”
acceptance in order to give rise to a contract of sale.
In a potential sale transaction, the prior payment of earnest money even
The RTC and Court of Appeals found the existence of the perfected contract before the property owner can agree to sell his property is irregular, and
of sale. Hence, the petitioner corporation filed a petition for review on cannot be used to bind the owner to the obligations of a seller under an
Certiorari. otherwise perfected contract of sale; to cite a well-worn cliché , the carriage
cannot be placed before the horse. The property owner-prospective seller
ISSUE: Is there a perfected contract of sale upon payment of earnest money may not be legally obliged to enter into a sale with a prospective buyer
prior to the acceptance of the offer by the seller? through the latter’s employment of questionable practices which prevent
the owner from freely giving his consent to the transaction; this constitutes
HELD: NO. a palpable transgression of the prospective seller’s rights of ownership over
his property, an anomaly which the Court will certainly not condone.
The stages of a contract of sale are: (1) negotiation, starting from the time
the prospective contracting parties indicate interest in the contract to the In this case, respondent’s subsequent sending of the letter and check to
time the contract is perfected; (2) perfection, which takes place upon the petitioner – without awaiting the approval of petitioner’s board of directors
concurrence of the essential elements of the sale; and (3) consummation, and Young’s decision, or without making a new offer – constitutes a mere
which commences when the parties perform their respective undertakings reiteration of its original offer which was already rejected previously; thus,
under the contract of sale, culminating in the extinguishment of the petitioner was under no obligation to reply to the letter. Thus, said letter
contract. cannot be considered as evidence of a perfected sale, which does not exist in
the first place; no binding obligation on the part of the petitioner to sell its
In the present case, the parties never got past the negotiation stage. Nothing property arose as a consequence. The letter made no new offer replacing
shows that the parties had agreed on any final arrangement containing the the first which was rejected.
essential elements of a contract of sale, namely, (1) consent or the meeting
RAYMUNDO S. DE LEON v. BENITA T. ONG
February 2, 2010 (CORONA, J.) This case involves a double sale as the disputed properties were sold validly
on two separate occasions by the same seller to the two different buyers in
Doctrine good faith.
Article 1544 clearly states that the rules on double or multiple sales apply
only to purchasers in good faith. Needless to say, it disqualifies any purchaser Article 1544 of the Civil Code provides:
in bad faith. Article 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
FACTS possession thereof in good faith, if it should be movable property.
On March 10, 1993, Raymundo S. De Leon (petitioner) sold 3 parcels of land Should it be immovable property, the ownership shall belong to the person
to Benita T. Ong(respondent). The said properties were mortgaged to a acquiring it who in good faith first recorded it in the Registry of Property.
financial institution; Real Savings & Loan Association Inc. (RSLAI). The Should there be no inscription, the ownership shall pertain to the person who
parties then executed a notarized deed of absolute sale with assumption of in good faith was first in the possession; and, in the absence thereof, to the
mortgage. As indicated in the deed of mortgage, the parties stipulated that person who presents the oldest title, provided there is good faith.
the petitioner (de Leon) shall execute a deed of assumption of mortgage in
favor of Ong (respondent)after full payment of the P415,000. They also This provision clearly states that the rules on double or multiple sales apply
agreed that the respondent (Ong) shall assume the mortgage. The only to purchasers in good faith. Needless to say, it disqualifies any
respondent then subsequently gave petitioner P415,000 as partial payment. purchaser in bad faith.
On the other hand, de Leon handed the keys to Ong and de Leon wrote a
letter to inform RSLAI that the mortgage will be assumed by Ong. A purchaser in good faith is one who buys the property of another without
Thereafter, the respondent took repairs and made improvements in the notice that some other person has a right to, or an interest in, such property
properties. Subsequently, respondent learned that the same properties and pays a full and fair price for the same at the time of such purchase, or
were sold to a certain Viloria after March 10, 1993 and changed the locks, before he has notice of some other person’s claim or interest in the
rendering the keys given to her useless. Respondent proceeded to RSLAI property. The law requires, on the part of the buyer, lack of notice of a
but she was informed that the mortgage has been fully paid and that the defect in the title of the seller and payment in full of the fair price at the
titles have been given to the said person. Respondent then filed a complaint time of the sale or prior to having notice of any defect in the seller’s title.
for specific performance and declaration of nullity of the second sale and
damages. The petitioner contended that respondent does not have a cause Was respondent a purchaser in good faith? Yes.
of action against him because the sale was subject to a condition which Respondent purchased the properties, knowing they were encumbered only
requires the approval of RSLAI of the mortgage. Petitioner reiterated that by the mortgage to RSLAI. According to her agreement with petitioner,
they only entered into a contract to sell. The RTC dismissed the case. On respondent had the obligation to assume the balance of petitioner’s
appeal, the CA upheld the sale to respondent and nullified the sale to Viloria. outstanding obligation to RSLAI. Consequently, respondent informed RSLAI
Petitioner moved for reconsideration to the SC. of the sale and of her assumption of petitioner’s obligation. However,
because petitioner surreptitiously paid his outstanding obligation and took
ISSUE: Void Sale Or Double Sale? back her certificates of title, petitioner himself rendered respondent’s
obligation to assume petitioner’s indebtedness to RSLAI impossible to
HELD: DOUBLE SALE perform.
Article 1266 of the Civil Code provides:
Petitioner sold the same properties to two buyers, first to respondent and Article 1266. The debtor in obligations to do shall be released when the
then to Viloria on two separate occasions. However, the second sale was not prestation become legally or physically impossible without the fault of the
void for the sole reason that petitioner had previously sold the same obligor.
properties to respondent.
Case Digest 2018
Since respondent’s obligation to assume petitioner’s outstanding balance properties. For this reason, respondent took actual possession and
with RSLAI became impossible without her fault, she was released from the exercised control thereof by making repairs and improvements thereon.
said obligation. Moreover, because petitioner himself willfully prevented Clearly, the sale was perfected and consummated on March 10, 1993. Thus,
the condition vis-à -vis the payment of the remainder of the purchase price, respondent became the lawful owner of the properties.
the said condition is considered fulfilled pursuant to Article 1186 of the
Civil Code. For purposes, therefore, of determining whether respondent was Nonetheless, while the condition as to the payment of the balance of the
a purchaser in good faith, she is deemed to have fully complied with the purchase price was deemed fulfilled, respondent’s obligation to pay it
condition of the payment of the remainder of the purchase price. subsisted. Otherwise, she would be unjustly enriched at the expense of
petitioner.
Respondent was not aware of any interest in or a claim on the properties
other than the mortgage to RSLAI which she undertook to assume. Therefore, respondent must pay petitioner ₱684,500, the amount stated in
Moreover, Viloria bought the properties from petitioner after the latter sold the deed. This is because the provisions, terms and conditions of the
them to respondent. Respondent was therefore a purchaser in good faith. contract constitute the law between the parties. Moreover, the deed itself
Hence, the rules on double sale are applicable. provided that the assumption of mortgage "was without any further cost
whatsoever." Petitioner, on the other hand, must deliver the certificates of
Article 1544 of the Civil Code provides that when neither buyer registered title to respondent.
the sale of the properties with the registrar of deeds, the one who took prior
possession of the properties shall be the lawful owner thereof. Benita T. Ong is ordered to pay petitioner Raymundo de Leon ₱684,500
representing the balance of the purchase price as provided in their March
In this instance, petitioner delivered the properties to respondent when he 10, 1993 agreement.
executed the notarized deed and handed over to respondent the keys to the
THE ROMAN CATHOLIC CHURCH, represented by the Archbishop of Note: There is no misrepresentation to vitiate consent and to invalidate the
Caceres v. REGINO PANTE contract.
April 11, 2012 (BRION, J.)
The sale of the lot to Pante and later to the spouses Rubi resulted in a
Doctrine double sale that called for the application of the rules in Article 1544 of the
Jurisprudence has interpreted possession in Article 1544 of the Civil Code to Civil Code:
mean both actual physical delivery and constructive delivery. Actual delivery Article 1544. If the same thing should have been sold to different
of a thing sold occurs when it is placed under the control and possession of the vendees, the ownership shall be transferred to the person who may have
vendee. first taken possession thereof in good faith, if it should be movable
property.
FACT
The Church, represented by the Archbishop of Caceres, owned a 32-square Should it be immovable property, the ownership shall belong to
meter lot that measured 2x16 meters located in Barangay Dinaga, Canaman, the person acquiring it who in good faith first recorded it in the Registry of
Camarines Sur. On September 25, 1992, the Church contracted with Property.
respondent Regino Pante for the sale of the lot (thru a Contract to Sell and
to Buy ) on the belief that the latter was an actual occupant of the lot. The Should there be no inscription, the ownership shall pertain to the
contract between them fixed the purchase price at ₱11,200.00, with the person who in good faith was first in the possession; and, in the absence
initial ₱1,120.00 payable as down payment, and the remaining balance thereof, to the person who presents the oldest title, provided there is good
payable in three years or until September 25, 1995. faith.
On June 28, 1994, the Church sold in favor of the spouses Nestor and Fidela As neither Pante nor the spouses Rubi registered the sale in their favor, the
Rubi (spouses Rubi) a 215-square meter lot that included the lot previously question now is who, between the two, was first in possession of the
sold to Pante. The spouses Rubi asserted their ownership by erecting a property in good faith.
concrete fence over the lot sold to Pante, effectively blocking Pante and his
family’s access from their family home to the municipal road. As no Jurisprudence has interpreted possession in Article 1544 of the Civil Code
settlement could be reached between the parties, Pante instituted with the to mean both actual physical delivery and constructive delivery. Under
RTC an action to annul the sale between the Church and the spouses Rubi, either mode of delivery, the facts show that Pante was the first to acquire
insofar as it included the lot previously sold to him. possession of the lot.
The Church filed its answer with a counterclaim, seeking the annulment of Actual delivery of a thing sold occurs when it is placed under the control
its contract with Pante. The Church alleged that its consent to the contract and possession of the vendee. Pante claimed that he had been using the lot
was obtained by fraud when Pante, in bad faith, misrepresented that he had as a passageway, with the Church’s permission, since 1963. After
been an actual occupant of the lot sold to him, when in truth, he was merely purchasing the lot in 1992, he continued using it as a passageway until he
using the 32-square meter lot as a passageway from his house to the town was prevented by the spouses Rubi’s concrete fence over the lot in 1994.
proper. It contended that it was its policy to sell its lots only to actual Pante’s use of the lot as a passageway after the 1992 sale in his favor was a
occupants. Since the spouses Rubi and their predecessors-in-interest have clear assertion of his right of ownership that preceded the spouses Rubi’s
long been occupying the 215-square meter lot that included the 32-square claim of ownership.
meter lot sold to Pante, the Church claimed that the spouses Rubi were the
rightful buyers. Pante also stated that he had placed electric connections and water pipes on
the lot, even before he purchased it in 1992, and the existence of these
connections and pipes was known to the spouses Rubi. Thus, any assertion
RTC ruled in favor of the Church, finding that the Church’s consent to the
of possession over the lot by the spouses Rubi (e.g., the construction of a
sale was secured through Pante’s misrepresentation that he was an
concrete fence) would be considered as made in bad faith because works
occupant of the 32-square meter lot.
had already existed on the lot indicating possession by another. "[A] buyer
CA granted Pante’s appeal and reversed the RTC’s ruling. The CA
of real property in the possession of persons other than the seller must be
characterized the contract between Pante and the Church as a contract of
wary and should investigate the rights of those in possession. Without such
sale, since the Church made no express reservation of ownership until full
inquiry, the buyer can hardly be regarded as a buyer in good faith and
payment of the price is made.
cannot have any right over the property."
ISSUE: Who has a better right over the property?
Delivery of a thing sold may also be made constructively. Article 1498 of the
Civil Code states that:
HELD: REGINO PANTE
Article 1498. When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which is the
Case Digest 2018
object of the contract, if from the deed the contrary does not appear or cannot takes material possession of the thing, he does it as mere
clearly be inferred. detainer, and it would be unjust to protect this detention against
the rights of the thing lawfully acquired by the first vendee.
Under this provision, the sale in favor of Pante would have to be upheld
since the contract executed between the Church and Pante was duly Thus, under either mode of delivery, Pante acquired prior possession of the
notarized, converting the deed into a public instrument. In Navera v. Court lot.
of Appeals,28 the Court ruled that:
[A]fter the sale of a realty by means of a public instrument, the
vendor, who resells it to another, does not transmit anything to
the second vendee, and if the latter, by virtue of this second sale,
SPOUSES CLEMENCIO C. SABITSANA, JR. and MA. ROSARIO M.
SABITSANA v. JUANITO F. MUERTEGUI, represented by his Attorney-in- Both the trial court and the CA are wrong in applying Article 1544 of the
Fact DOMINGO A. MUERTEGUI, JR. Civil Code. The provision does not apply to sales involving unregistered
August 5, 2013 (DEL CASTILLO, J.) land. Suffice it to state that the issue of the buyer’s good or bad faith is
relevant only where the subject of the sale is registered land, and the
Doctrine purchaser is buying the same from the registered owner whose title to the
Article 1544 does not apply to sales involving unregistered land. What applies land is clean. In such case, the purchaser who relies on the clean title of the
in this case is Act No. 3344, as amended, which provides for the system of registered owner is protected if he is a purchaser in good faith for value.
recording of transactions over unregistered real estate which expressly
declares that any registration made shall be without prejudice to a third What applies in this case is Act No. 3344, as amended, which provides for
party with a better right. the system of recording of transactions over unregistered real estate. Act
No. 3344 expressly declares that any registration made shall be without
FACT prejudice to a third party with a better right. The question to be resolved
On September 2, 1981, Alberto Garcia (Garcia) executed an unnotarized therefore is: who between petitioners and respondent has a better right to
Deed of Sale in favor of respondent Juanito Muertegui (Juanito) over a the disputed lot?
7,500-square meter parcel of unregistered land (the lot) located in Dalutan
Island, Talahid, Almeira, Biliran, Leyte del Norte. Respondent has a better right to the lot. The sale to respondent Juanito was
executed on September 2, 1981 via an unnotarized deed of sale, while the
Juanito’s father Domingo Muertegui, Sr. (Domingo Sr.) and brother Domingo sale to petitioners was made via a notarized document only on October 17,
Jr. took actual possession of the lot and planted thereon coconut and ipil-ipil 1991, or ten years thereafter. Thus, Juanito who was the first buyer has a
trees. They also paid the real property taxes on the lot for the years 1980 up better right to the lot, while the subsequent sale to petitioners is null and
to 1998. void, because when it was made, the seller Garcia was no longer the owner
of the lot. Nemo dat quod non habet.
On October 17, 1991, Garcia sold the lot to the Muertegui family lawyer,
petitioner Atty. Clemencio C. Sabitsana, Jr. (Atty. Sabitsana), through a The fact that the sale to Juanito was not notarized does not alter anything,
notarized deed of absolute sale. The sale was registered with the Register of since the sale between him and Garcia remains valid nonetheless.
Deeds on February 6, 1992, the original Tax Declaration was cancelled and Notarization, or the requirement of a public document under the Civil Code,
a new one was issued in Atty. Sabitsana’s name. Although Domingo Jr. and is only for convenience, and not for validity or enforceability. And because it
Sr. paid the real estate taxes, Atty. Sabitsana also paid real property taxes in remained valid as between Juanito and Garcia, the latter no longer had the
1992, 1993, and 1999. In 1996, he introduced concrete improvements on right to sell the lot to petitioners, for his ownership thereof had ceased.
the property, which shortly thereafter were destroyed by a typhoon.
Nor can petitioners’ registration of their purchase have any effect on
When Domingo Sr. passed away, his heirs applied for registration and Juanito’s rights. The mere registration of a sale in one’s favor does not give
coverage of the lot under the Public Land Act or Commonwealth Act No. him any right over the land if the vendor was no longer the owner of the
141. Atty. Sabitsana, in a letter dated August 24, 1998 addressed to the land, having previously sold the same to another even if the earlier sale was
Department of Environment and Natural Resources’ CENRO/PENRO office unrecorded. Neither could it validate the purchase thereof by petitioners,
in Naval, Biliran, opposed the application, claiming that he was the true which is null and void. Registration does not vest title; it is merely the
owner of the lot. He asked that the application for registration be held in evidence of such title. Our land registration laws do not give the holder any
abeyance until the issue of conflicting ownership has been resolved. better title than what he actually has.
Juanito, through his attorney-in-fact Domingo Jr., filed a case for quieting of Petitioners’ defense of prescription, laches and estoppel are unavailing
title and preliminary injunction, against herein petitioners Atty. Sabitsana since their claim is based on a null and void deed of sale. The fact that the
and his wife, Rosario, claiming that they bought the lot in bad faith and are Muerteguis failed to interpose any objection to the sale in petitioners’ favor
exercising acts of possession and ownership over the same, which acts thus does not change anything, nor could it give rise to a right in their favor;
constitute a cloud over his title. The Complaint prayed, among others, that their purchase remains void and ineffective as far as the Muerteguis are
the Sabitsana Deed of Sale, the August 24, 1998 letter, and the Tax concerned.
Declaration be declared null and void and of no effect; that petitioners be
ordered to respect and recognize Juanito’s title over the lot; and that moral The award of attorney’s fees and litigation expenses is proper because of
and exemplary damages, attorney’s fees, and litigation expenses be petitioners’ bad faith. Petitioners’ actual and prior knowledge of the first
awarded to him. sale to Juanito makes them purchasers in bad faith. It also appears that
petitioner Atty. Sabitsana was remiss in his duties as counsel to the
The evidence and testimonies of the respondent’s witnesses during trial Muertegui family. Instead of advising the Muerteguis to register their
reveal that petitioner Atty. Sabitsana was the Muertegui family’s lawyer at purchase as soon as possible to forestall any legal complications that
the time Garcia sold the lot to Juanito, and that as such, he was consulted by accompany unregistered sales of real property, he did exactly the opposite:
the family before the sale was executed; that after the sale to Juanito, taking advantage of the situation and the information he gathered from his
Domingo Sr. entered into actual, public, adverse and continuous possession inquiries and investigation, he bought the very same lot and immediately
of the lot, and planted the same to coconut and ipil-ipil; and that after caused the registration thereof ahead of his clients, thinking that his
Domingo Sr.’s death, his wife Caseldita, succeeded him in the possession purchase and prior registration would prevail.
and exercise of rights over the lot.
ISSUE: Who has a better right over the land?
HELD: JUANITO MUERTEGUI

Case Digest 2018
PEBLIA ALFARO AND THE HEIRS OF PROSPEROUS ALFARO v. SPOUSES and how or under whom acquired, a reference to the number of certificates of
EDITHO AND HERA DUMALAGAN, SPOUSES CRISPIN and EDITHA title of the registered owner, the name of the registered owner, and a
DALOGDOG, ET. AL. description of the land in which the right or interest is claimed.
January 22, 2014 (PEREZ, J.)
The statement shall be signed and sworn to, and shall state the adverse
On 14 June 1995, Bagano sold the subject property (Lot No. 1710 located claimant’s residence, and a place at which all notices may be served upon him.
Talisay City) to petitioner Spouses Prosperous and Peblia Alfaro (Spouses This statement shall be entitled to registration as an adverse claim on the
Alfaro) through a Deed of Absolute Sale. certificate of title. The adverse claim shall be effective for a period of thirty
days from the date of registration. After the lapse of the said period, the
Petitioners caused the immediate transfer of the title in their names on 20 annotation of adverse claim may be cancelled upon filing of a verified petition
June 1995, now TCT No. T-92783, and at the same time, paid the real therefore by the party in interest: Provided, however, that after cancellation,
property tax, and constructed a perimeter fence around the subject no second adverse claim based on the same ground shall be registered by the
property. same claimant.
In preservation of their right as occupants of the subject property, The above provision would seem to restrict the effectivity of adverse claims
respondents filed the instant case. According to respondent Spouses Editho to 30 days. However, the same should not be read separately, but should be
and Hera Dumalagan (Spouses Dumalagan), they are the real owners of Lot read together. The law, taken together, simply means that the cancellation
No. 1710-H, a portion of the subject property, based on a notarized Deed of of the adverse claim is still necessary to render it ineffective, otherwise, the
Absolute Sale dated 6 December 1993. To prove ownership and possession, inscription will remain annotated and shall continue as a lien upon the
respondents offered in evidence a Certificate of Completion and a Certificate property; for if the adverse claim already ceased to be effective upon the
of Occupancy, both dated 10 August 19935 and Visayan Electric Company lapse of the said period, its cancellation is no longer necessary and the
Inc. electric bills. Right after their purchase from Bagano, respondent process of cancellation would be a useless ceremony.
Spouses Dumalagan immediately took possession of the subject property
and constructed a nipa hut therein, which they later on leased to Ramil Therefore, petitioners cannot claim good faith on the basis of the supposed
Quiñ ineza, who then occupied the subject property until the end of 1997. ineffectivity of the annotated adverse claims as the same have not been
Since then, several tenants have occupied the subject property, paying cancelled at the time of purchase. Assuming arguendo that the annotated
monthly rentals to respondent Spouses Dumalagan: Spouses Crispin and adverse claims expired on 23 March 1995, petitioners still cannot claim
Editha Dalogdog, Spouses Alberto and Lucy Boncales, and Spouses Mariano good faith as they were fully aware that there were occupants in the subject
and Constancia Castañ ares. property other than the seller. Worse, they were also fully aware that an
occupant in the subject property bought the same; that aside from the nipa
Meanwhile, Spouses Bagano filed a complaint for Declaration of Nullity of hut, there were also other structures in the subject property, one of which
Sale with Damages and Preliminary Injunction against petitioners on 15 was built by Epifanio Pesarillo.
April 1996 entitled, "Spouses Olegario P. Bagano and Cecilia C. Bagano v.
Spouses Peblia and Prosperous Alfaro" ("Bagano case" for brevity), in the As culled from the records, Mr. Pesarillo constructed a building in the
Cebu City RTC. In the Bagano case, this Court sustained the validity of the subject property and occupied the same as evidenced by official receipts for
Deed of Absolute Sale executed on 14 June 1995 between petitioners and construction materials and various electrical bills and receipts. In fact, it
Spouses Bagano. was no less than petitioner Peblia Alfaro, who admitted that there were
In the case at bar, the trial court dismissed the complaint for lack of cause of other occupants in the subject property
action on 7 August 2006. The plaintiffs failed to establish that defendants
were in bad faith when they bought Lot No. 1710 in 1995.10 As correctly held by the appellate court: xxx by the very fact that the title of
Bagano was not clean on its face, the defendants-appellees [petitioners]
CA reversed and set aside the trial court decision. According to the appellate were more than obliged to look beyond the former’s title and make further
court, petitioners cannot claim good faith. It referred to annotations written inquiries about the extent of the latter’s right and authority over the subject
at the back of Bagano’s title. It noted that the annotated adverse claims, lot. Obviously, the defendants-appellees failed to take this precaution and
even if not in the names of respondents, have the effect of charging instead proceeded with the purchase in haste.xxx
petitioners as subsequent buyers with constructive notice of the defect of
the seller’s title. Moreover, as shown by the records, petitioners had prior Article 1544 of the Civil Code clearly states that the rule on double or
knowledge that portions of the subject property have been sold to third multiple sales applies only when all the purchasers are in good faith. In
persons. detail, Art. 1544 requires that before the second buyer can obtain priority
over the first, he must show that he acted in good faith throughout, i.e., in
ISSUE: Whether or not the petitioner acted in bad faith, thus, the rule on ignorance of the first sale and of the first buyer’s rights, from the time of
double sales does not apply. acquisition until the title is transferred to him by registration or failing
registration, by delivery of possession.
HELD: YES, rule on double sales does not apply.
A purchaser in good faith is one who buys the property of another without
A simple perusal of the records will reveal that there were two adverse notice that some other person has a right to, or an interest in such property,
claims annotated in the title: (1) 22 February 1995, executed by Maria and pays a full and fair price for the same at the time of such purchase, or
Theresa Dimaguila and Andrew D. Sepe, and (2) 6 April 1995, executed by before he has notice of some other person’s claim or interest in the
Spouses Lorenzo and Milagros Belandres. However, petitioners contend property. The petitioners are not such purchaser.
that the annotated adverse claims have already expired pursuant to Section
70 of Presidential Decree No. 1529, which provides that an adverse claim Petitioners had prior knowledge of the previous sales by installment of
shall be effective only for a period of 30 days from the date of its portions of the property to several purchasers. Moreover, petitioners had
registration. Petitioners claim that the "constructive notice" ended 30 days prior knowledge of respondents’ possession over the subject property.
from 22 February 1995 or on 23 March 1995. Consequently, petitioners Hence, the rule on double sale is inapplicable in the case at bar. As correctly
claim that because they purchased the subject property after 23 March held by the appellate court, petitioners’ prior registration of the subject
1995, they were, therefore, buyers in good faith. property, with prior knowledge of respondents’ claim of ownership and
possession, cannot confer ownership or better right over the subject
Section 70 of P.D. 152922 provides: property.
Whoever claims any part or interest in registered land adverse to the
registered owner, arising subsequent to the date of the original registration,
may, if no other provision is made in this decree for registering the same,
make a statement in writing setting forth fully his alleged right or interest,
SPOUSES CARLOS J. SUNTAY and ROSARIO R. SUNTAY v. KEYSER December 10, 2014 (MENDOZA, J.)
MERCANTILE, INC.
Case Digest 2018
Doctrine thereto by giving the public the right to rely upon the face of a Torrens
The doctrine is well settled that a levy on execution duly registered takes certificate of title and to dispense with the need of inquiring further, except
preference over a prior unregistered sale. when the party concerned has actual knowledge of facts and circumstances
that should impel a reasonably cautious man to make such further inquiry.
Fact Every person dealing with a registered land may safely rely on the
Eugenia Gocolay, chairperson and president of respondent Keyser correctness of the certificate of title issued therefor and the law will in no
Mercantile, Inc. (Keyser), entered into a contract to sell with Bayfront way oblige him to go beyond the certificate to determine the condition of
Development Corporation (Baxfront) for the purchase on installment basis the property. Again to stress, any buyer or mortgagee of realty covered by a
of a condominium unit in Bayfront Tower Condominium located at A. Torrens certificate of title, in the absence of any suspicion, is not obligated
Mabini Street, Malate, Manila. The subject of the sale was Unit G of the said to look beyond the certificate to investigate the title of the seller appearing
condominium project with the privilege to use two (2) parking slots on the face of the certificate. And, heis charged with notice only of such
covered by Condominium Certificate of Title (CCT)No. 15802. This Contract burdens and claims as are annotated on the title.
to Sell was not registered with the Register of Deeds of Manila. Thus, the
subject unit remained in the name of Bayfront with a clean title. In the case at bench, the subject property was registered land under the
Torrens System covered by CCT No. 15802 with Bayfront as the registered
On July 7, 1990, petitioner spouses Carlos and Rosario Suntay (Spouses owner. At the time that the Notice of Levy was annotated on January 18,
Suntay) also purchased several condominium units on the 4th floor of 1995, the title had no previous encumbrances and liens. Evidently, it was a
Bayfront Tower Condominium through another contract to sell. Despite clean title. The Certificate of Sale, pursuant to an auction sale, was also
payment of the full purchase price, however, Bayfront failed to deliver the annotated on April 7,1995, with Bayfront still as the registered owner.
condominium units. When Bayfront failed to reimburse the full purchase
price, Spouses Suntay filed an action against it before the Housing and Land It was only on March 12, 1996, almost a year later, that Keyser was able to
Use Regulatory Board (HLURB) for violation of Presidential Decree (P.D.) register its Deed of Absolute Sale with Bayfront. Prior to such date, Spouses
No. 957 and P.D. No. 1344, rescission of contract, sum of money, and Suntay appropriately relied on the Torrens title of Bayfront to enforce the
damages. latter’s judgment debt. Because "the act of registration is the operative act
to convey or affect the land insofar as third persons are concerned," it
HLURB rescinded the Contract to Sell between Bayfront and Spouses Suntay follows that where there is nothing in the certificate of title to indicate any
and ordered Bayfront to pay Spouses Suntay the total amount of cloud or vice in the ownership of the property, or any encumbrance
2,752,068.60 as purchase price with interest. Consequently, HLURB issued a thereon, the purchaser is not required to explore farther than what the
writ of execution. Torrens title upon its face indicates in quest for any hidden defect or
inchoate right that may subsequently defeat his right thereto. If the rule
Upon the application of Spouses Suntay, the Sheriffs of the Regional Trial were otherwise, the efficacy and conclusiveness of the certificate of title
Court (RTC) of Manila levied Bayfront’s titled properties, including the which the Torrens system seeks to insure would entirely be futile and
subject condominium Unit G and the two parking slots. Considering that nugatory. The public shall then be denied of its foremost motivation for
CCT No. 15802 was still registered under Bayfront with a clean title, the respecting and observing the Torrens system of registration.
sheriffs deemed it proper to be levied. The levy on execution in favor of
Spouses Suntay was duly recorded in the Register of Deeds of Manila on When the notice of levy and certificate of sale were annotated on the title,
January 18, 1995. the subject property was unoccupied and no circumstance existed that
might suggest to Spouses Suntay that it was owned by another individual.
The auction sale was conducted and Spouses Suntay were the highest Records reveal that it was only later, on January 6, 1999, that the subject
bidder. Consequently, Certificate of Sale in favor of Spouses Suntay was property was discovered by the sheriffs to be padlocked. The administrator
issued. This was duly annotated at the back of CCT No. 15802. Meanwhile, of the condominium did not even know the whereabouts of the alleged
the Deed of Absolute Sale between Bayfront and Keyser involving the owner. To reiterate, absent any peculiar circumstance, Spouses Suntay
subject property was finally executed. The latter allegedly paid the full could not be required to disregard the clean title of Bayfront and invest
purchase price sometime in 1991. When Keyser was about to register the their time, effort and resources to scrutinize every square feet of the subject
said deed of absolute sale when it discovered the Notice of Levy and the property. This Court is convinced that Spouses Suntay properly relied on
Certificate of Sale annotated at the back of CCT No. 15802 in favor of the genuineness and legitimacy of Bayfront’s Torrens certificate of title
Spouses Suntay. Nevertheless, on March 12, 1996, the Register of Deeds when they had their liens annotated thereon.
cancelled the title of Bayfront and issued CCT No. 264748 in the name of
Keyser but carried over the annotation of the Suntays. The doctrine is well settled that a levy on execution duly registered takes
preference over a prior unregistered sale. Even if the prior sale was
Subsequently, the sheriff’s Final Deed of Sale was executed in favor of the subsequently registered before the sale in execution but after the levy was
Suntays upon the expiration of the one (1) year period of redemption from duly made, the validity of the execution sale should be maintained because
the earlier auction sale. CCT No. 26474 of Keyser was cancelled and, it retroacts to the date of the levy. Otherwise, the preference created by the
thereafter, CCT No. 34250-A11 was issued in the name of Spouses Suntay. levy would be meaningless and illusory.
Keyser then filed a complaint for annulment of auction sale and cancellation In this case, the contract to sell between Keyser and Bayfront was executed
of notice of levy before the HLURB. HLURB ruled in favor of Keyser. Spouses on October 20, 1989, but the deed of absolute sale was only made on
Suntay appealed the decision to the Office of the Presidentand later to the November 9, 1995 and registered on March 12, 1996. The Notice of Levy in
CA but both affirmed the HLURB judgment. favor of Spouses Suntay was registered on January 18, 1995, while the
Certificate of Sale on April 7, 1995, both dates clearly ahead of Keyser’s
ISSUE: Who has a better right? registration of its Deed of Absolute Sale. Evidently, applying the doctrine of
primus tempore, potior jure(first in time, stronger in right), Spouses Suntay
HELD: SPOUSES SUNTAY have a better right than Keyser.
Spouses Suntay properly relied on the Certificate of Title of Bayfront. This Court declares the auction sale as valid and binding on Keyser Mercantile,
Court finds that the petition is meritorious applying the Torrens System of Inc. and all other subsequent registrants.
Land Registration. The main purpose of the Torrens system is to avoid
possible conflicts of title to real estate and to facilitate transactions relative
SPOUSES MAGDALINO AND CLEOFE BADILLA v. FE BRAGAT operated to divest the vendor of title to the property which may not be
April 22, 2015 (PERALTA, J.) regained or recovered until and unless the contract is resolved or rescinded in
accordance with law.
Doctrine
Payment of the purchase price is not essential to the transfer of ownership as FACTS
long as the property sold has been delivered; and such delivery (traditio)
Case Digest 2018
Spouses Pastrano were the original owners of Lot No. 19986(subject then the contract was partially executed and the Statute of Frauds does not
property) with OCT, consisting of 1,015 sq m. The OCT was in the name of apply.
Azur Pastrano. Before the issuance of OCT, however, the spouses Pastrano,
on November 18, 1968, sold the lot to Eustacio P. Ladesma, Jr. The Therefore, with the Spouses Badilla owning and occupying the said 152-
petitioners, the spouses Badilla claimed that in 1970, Ladesma sold to them, square-meter portion since 1970, it may be concluded that TCT No. T-
“on installment” basis, a portion amounting to 200 sq m. of Lot No. 19986 47759 (which canceled OCT No. P-2035) covering the said portion has been
(subject property). The sale was not reduced in writing, however, wrongfully issued.
possession of th eportion sold was transferred to the Badillas, which
portion the Badillas claim was designated as Lot No. 19986-B. In addition, TCT No. T-47759 was issued to Fe Bragat on the strength of a
Deed of Sale of Registered Land dated October 2, 1987.41 This deed of sale,
On April 18, 1978, the Spouses Bragat bought 991 sq m of th eproperty from however, is void for being simulated, since both the vendor (Pastrano) and
Ledesma and his wife, via a Deed of Absolute Sale of Residential Lot. On the vendee (Bragat) knew at the time of its execution of the vendor's lack of
May 5, 1984, the Spouses Pastrano executed another Deed of Absolute Sale ownership over Lot No. 19986, the property being sold. At that time, it was
of Registered Land in favor of herein petitioner Fe Bragat, covered by OCT not Pastrano but Ledesma who was absolute owner of the property by
No P-2035 and with an area of 1,015 sq m. On th esmae date, Azur Pastrano virtue of the latter's earlier purchase of Lot No. 19986 from the Spouses
executed an Affidavit of Loss reporting the loss of th eowner’s duplicate Pastrano on November 18, 1968, via a Deed of Definite Sale of Unregistered
copy of OCT No. P-2035. Bragat filed her Complaint for Recovery of Coconut and Residential Land. Bragat herself knew this, as she and her
Possession and Damages against the Spouses Badilla alleging that she is the husband themselves first bought the property from Ledesma through a
absolute owner of the subject property. She claimed to have purchased the Deed of Absolute Sale of Residential Land dated April 18, 1978.
property first, from Eustaquio Ledesma, Jr., but later, when she found out
that Ladesma was “unauthorized” to sell, she again allegedly made another Pastrano could no longer sell any part of the property to Bragat on such
purchase of the same property from Azur Pastrano, on May 5, 1984. later dates since he had already sold the same as early as November 18,
1968 to Ledesma. Well-settled is the rule that no one can give what one
RTC found for Bragat and the CA affirmed the lower court’s decision. does not have - nemodat quod non habet –and, accordingly, one can sell
only what one owns or is authorized to sell, and the buyer acquires no
ISSUE: Whether or not Bragat is the owner of the subject property better title than the seller. Thus, the sales made on the dates May 5, 1984
and October 2, 1987 are void for being simulated and for lack of a subject
HELD: NO matter. On these sales, Bragat cannot claim good faith as she herself knew of
Pastrano's lack of ownership.
It is not disputed that the spouses Azur and Profitiza Pastrano had
previously sold on November 18, 1968,via a Deed of Definite Sale of It needs emphasis, however, that Bragat's property bought from Ledesma in
Unregistered Coconut and Residential Land, the property to Eustaquio 1978 does not include the 152-sq.-m. portion that was already bought by
Ledesma. Therefore, as early as such date, it is established that the the Badillas. Therefore, Fe Bragat is entitled to a new transfer certificate of
Pastranos no longer had ownership over the property. title issued in her name, but on the basis of the Deed of Absolute Sale dated
April 18, 1978, and excluding the 152 sq. m. in area that the Spouses Badilla
Then, as Ledesma subsequently sold, in 1970, a portion of the property to have already bought and have been occupying since 1970, but which are
the petitioner Spouses Badilla, who immediately took delivery and currently covered by Bragat's existing title, TCT No. T-47759. Hence,
possession, ownership of this portion had also been transferred to the said Bragat's TCT No. T-47759 (which canceled OCT No. P-2035), covering 1,015
spouses. Although that sale appears to be merely verbal, and payment sq. m., should be declared void and cancelled and, in its place, two (2) new
therefor was to be made on installment, it is a partially consummated sale, ones should be issued: (1) in the name of the spouses Magdalino and Cleofe
with the Badillas paying the initial purchase price and Ledesma Badilla, covering the 152 sq. m. that they are occupying, and (2) in the name
surrendering possession. That the parties intended for ownership to be of Fe Bragat, covering the remaining 863 sq. m.
transferred may be inferred from their lack of any agreement stipulating
that ownership of the property is reserved by the seller and shall not pass This ruling is compelled by the involvement in this case of not just one
to the buyer until the latter has fully paid the purchase price. The fact is, instance of double sales but a series of such sales made by two different
Ledesma even delivered to the Badillas the owner's duplicate copy of OCT vendors. First, it is admitted that Pastrano sold the property to Ledesma in
No. P-2035. 1968; then, Pastrano sold it again to Bragat in 1984 and 1987. But Ledesma,
too, sold part of the property to the Spouses Badilla in 1970 and then the
The Civil Code states that ownership of the thing sold is transferred to the entire lot to the Spouses Bragat in 1978. In such a situation of multiple
vendee upon the actual or constructive delivery of the same. And the thing sales, Article 1544 of the Civil Code relates that ownership shall belong to
is understood as delivered when it is placed in the control and possession of the person acquiring the property who, in good faith, first recorded such
the vendee. Payment of the purchase price is not essential to the transfer of acquisition. Presently, however, it cannot be said that Bragat's recording of
ownership as long as the property sold has been delivered; and such her 1987 purchase was in good faith because that sale was simulated and
delivery (traditio) operated to divest the vendor of title to the property Bragat was aware of other persons who have an interest on the property.
which may not be regained or recovered until and unless the contract is That the 1987 sale is void is further revealed by evidence to show that one
resolved or rescinded in accordance with law. of its signatories, Profitiza Pastrano was already dead when it was executed.
Bragat herself also admitted that she knew of the Spouses Badillas'
The same is true even if the sale is a verbal one, because it is held that when occupation prior to her purchase. In that case, the same Article 1544 of the
a verbal contract has been completed, executed or partially consummated, Civil Code provides that when neither buyer registered, in good faith, the
its enforceability will not be barred by the Statute of Frauds, which applies sale of the properties with the register of deeds, the one who took prior
only to an executory agreement. Thus, where a party has performed his possession of the properties shall be the lawful owner thereof. Such prior
obligation, oral evidence will be admitted to prove the agreement. And, possessors, at least with respect to the 152-sq.-m. portion, are indisputably
where it was proven that one party had delivered the thing sold to another, the Spouses Badilla.
HERMINIA L. MENDOZA, IN HER CAPACITY AS OIC OF THE REGISTER 72029, T-72030, T-72031, T-72032, and T-72033, which were the subject
OF DEEDS OF LUCENA CITY v. SPOUSES ARMANDO AND ANGELA of an action for specific performance with damages that the heirs of Manuel
GARANA AND FAR EAST BANK & TRUST CO., INC. Uy filed, to compel the owners to sell these properties to them.
August 05, 2015 (BRION, J.)
That afternoon, after paying the required fees, the notice of lis pendens for
Facts all these titles was entered as Entry No. 56142 in Volume VI, page 241 of
On October 6, 1993, the heirs of Manuel Uy, (represented by Belen Uy), RD Lucena's primary entry book or day book. Atty. Marquez, then
sought the registration of a notice of lis pendens with the Register of Deeds registrar of RD Lucena, also wrote a letter to the properties' respective
of Lucena City (RD Lucena). This notice of lis pendens intended to bind the owners, asking them to surrender their owner's duplicate copies of the
properties covered by the following titles: TCT Nos. T-72027, T-72028, T- titles so the annotation of the notice of lis pendens could be made. However,
Case Digest 2018
Leovina Jalbuena (Jalbuena), the registered owner of the subject property sought to be registered is the wilful act of the owner, he is expected to
(TCT No. T-72029), did not surrender her duplicate copy for annotation. produce all the necessary documents that will facilitate its registration.
Even before the notice of lis pendens was sought, Belen Uy already caused On the other hand, an involuntary instrument such as an attachment, a lien,
the annotation of an adverse claim on all the titles on August 16, 1993, a notice of lis pendens, and the like, are adverse to the claims of the
which was subsequently cancelled on October 4, 1994, upon the filing of an registered owner. Thus, he cannot be expected to provide all the necessary
affidavit with RD Lucena by one Bienaflor C. Umali. documents such as his owner's duplicate copy of the title.
Meanwhile, RD Lucena annotated the notice of lis pendens on all the For this reason, the law does not require the presentation as well as the
affected titles except for the subject land, whose original at that time was annotation of the involuntary instrument on the owner's duplicate
missing from RD Lucena's vault. Added to this was Jalbuena's failure to title, or even on the original title. The mere recording of the involuntary
surrender her owner's duplicate copy for annotation. As it turned out, the instrument in the primary entry book or day book is sufficient to bind the
original of TCT No. T-72029 was in the custody of one Carmelina Rodriguez registered land and affect third persons dealing with it.
(Rodriguez), a clerk at RD Lucena. She processed another transaction
involving this title but, after this transaction, totally forgot the annotation The Court consistently ruled that entry or notation of an involuntary
on TCT No. T-72029 of the notice of lis pendens of the heirs of Manuel Uy. instrument in the primary entry book or day book amounts to a valid
registration. In accordance with Section 56 in relation to Section 52 of PD
Sometime in 1994, the Spouses Garana started inquiries about Jalbuena's No. 1529, such registration constitutes notice to all persons dealing with the
land for a possible purchase. They found out that it was then the subject of registered land from the date of entry or notation.
Belen Uy's adverse claim annotated on August 16, 1993Upon learning that
this annotation had been cancelled by Bienaflor C. Umali on October 4, However, the Court held in Caviles that the person who first registered
1994, the Spouses Garana immediately proceeded to buy the land from his instrument had a superior right over the other. The Court thus
Jalbuena on November 7, 1994. upheld in this case the better right of the registrant of the notice of
attachment despite its non-annotation on the title, since in involuntary
In accordance with the sale, RD Lucena cancelled TCT No. T-72029, and instruments, entry in the primary entry book or day book is deemed
issued TCT No. T-77739 under the names of the Spouses Garana. Since the registration. However, the Spouses Garana did not entirely act in good faith
October 6, 1993 notice of lis pendens of the heirs of Manuel Uy did not when they bought the land from Jalbuena.
appear in the cancelled title, it was also not reflected in the new title of the
Spouses Garana. A thorough examination of TCT No. T-72029 reveals that even before the
heirs of Manuel Uy sought the registration of their notice of lis pendens,
Subsequently, the Spouses Garana mortgaged the subject property with they already annotated on August 16, 1993, an adverse claim over the same
respondent Far East Bank and Trust Company (now BPI) as security for title through their representative, Belen Uy. However, this inscription was
their loan. later (on October 4, 1994) cancelled through an affidavit executed by one
Bienaflor C. Umali.
Meanwhile, the heirs of Manuel Uy asked for the annotation of the notice of
lis pendens on the Spouses Garana's new title. To remedy its oversight, RD These circumstances dispute the Spouses Garana's assertion that they were
Lucena, filed a petition with the trial court to allow RD Lucena to annotate totally unaware of any claim that the heirs of Manuel Uy had over the
the notice of lis pendens on the Spouses Garana's new title. subject land.
The Spouses Garana and BPI opposed this petition and argued that the The same is true with BPI which should have exercised a higher degree of
annotation was too late and would prejudice them. The Spouses Garana diligence when it dealt with TCT No. T-77739 and its antecedent title, TCT
argued that their reliance on the clean title of TCT No. T-72029 should not No. T-72029. If BPI had conducted proper due diligence, it would have
diminish their status as innocent purchasers for value. For its part, BPI discovered that Belen Uy's adverse claim was cancelled by a different
submitted that when the land was mortgaged to them, there was no person. This is an irregularity that it should have easily noticed since under
indication that it was the subject of a pending litigation. Section 7043 of PD No. 1529, an adverse claim may only be cancelled at
the instance of the trial court or the claimant. As a banking institution,
The trial court ruled in favor of RD Lucena and ordered the annotation of BPI is expected to exert a higher degree of diligence, care, and prudence
the notice of lis pendens on the Spouses Garana's new title. CA reversed and than ordinary individuals in handling its real estate transactions.
ruled that the Spouses Garana were innocent purchasers for value.
In these lights, the Court rules that the notice of lis pendens of the heirs of
ISSUE: Whether the entry of a notice of lis pendens in the primary entry Manuel Uy should be annotated on TCT No. T-77739 to uphold their
book or day book of the Register of Deeds serves as notice to third persons registered right to subject the disputed land to the result of their pending
of the existence of such claim against a registered land. (Thus, even in the litigation, and to make the entry in RD Lucena's primary entry book
absence of an annotation on the title, the notice of lis pendens is still consistent with the inscription on TCT No. T-77739 (which was only
binding on all persons dealing with the land.) derived from TCT No. T-72029). The recording of the notice of lis pendens
in RD Lucena's primary entry book amounted to a valid registration; thus
HELD: GR: YES notice was thereby served to all persons, including the Spouses Garana and
BPI. In addition, the Court notes that the Spouses Garana and BPI should not
The Court noted that in the registration of a voluntary instrument such as a be allowed to raise the defense of the doctrine of indefeasibility of title as
sale, a mortgage, or a lease, the owner's production of his duplicate they did not act in good faith. They disregarded glaring facts and
certificate of title is necessary before registration. Since the instrument circumstances that should have prompted them to inquire beyond the four
corners of TCT No. T-72029.
SPOUSES DESIDERIO and TERESA DOMINGO, v. On June 1, 2001, the Manzanos, through their duly appointed attorney-in-
SPOUSES EMMANUEL and TITA MANZANO, FRANKLIN ESTABILLO, and fact and herein co-respondent Franklin Estabillo (Estabillo), executed a
CARMELITA AQUINO, notarized agreement with petitioners Desiderio and Teresa Domingo which
November 16, 2016 (DEL CASTILLO, J.) provided for the sale of the property (owned by Tita) for P900,000;
payment of P100,000 for reservation fee. It is also provided that the title of
Facts the house and lot will be transferred after full payment by March 2001.
Respondents Emmanuel and Tita Manzano (the Manzanos) were the
registered owners of a 35,281-square meter parcel of land with Petitioners paid the ₱100,000.00 reservation fee upon the execution of the
improvements in Bagong Barrio, Caloocan City (subject property), covered agreement. Thereafter, they also made payments on several occasions,
by Transfer Certificate of Title (TCT) No. 160752. amounting to ₱160,000.00. However, they failed to tender full payment of
the balance when the March 2001 deadline came. Even then, Estabillo
advised petitioners to continue their payments; thus, they made additional
Case Digest 2018
payments totaling ₱85,000.00. All in all, as of November 2001, petitioners payment of the purchase price partakes of a suspensive condition, the non-
had made payment in the amount of ₱345,000.00. fulfillment of which prevents the obligation to sell from arising and thus,
ownership is retained by the prospective seller without further remedies by
All this time, the Manzanos remained in possession of the subject property. the prospective buyer'. x x x
In December 2001, petitioners offered to pay the remaining ₱555,000.00
balance, but Estabillo refused to accept payment; instead, he advised And it is precisely for the above reason that Article 1544 of the Civil Code
petitioners to await respondent Tita Manzano' s (Tita) arrival from abroad. cannot apply. 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
When Tita arrived, petitioners tendered payment of the balance, but the sale to speak of. Even petitioners' posture that their annotation of an
former refused to accept it. Instead, she told them that the property was no adverse claim on TCT No. 160752 is equivalent to registration or claim of
longer for sale and she was forfeiting their payments. For this reason, ownership necessarily fails, on account of the fact that there was never a
petitioners caused the annotation of an affidavit of adverse claim upon TCT sale in their favor - and without a sale in their favor, they could not register
No. 160752. or claim ownership of the subject property. Thus, as between the parties to
the instant case, there could be no double sale which would justify the
Soon thereafter, petitioners discovered that respondent Carmelita Aquino application of Article 1544. Petitioners failed to pay the purchase price in
(Aquino) bought the subject property on May 7, 2002, and a new title – TCT full, while Aquino did, and thereafter she was able to register her purchase
No. C-359293 – had been issued in her name. Their adverse claim was and obtain a new certificate of title in her name. As far as this Court is
nevertheless carried over to Aquino's new title. concerned, there is only one sale - and that is, the one in Aquino's favor.
"Since there is only one valid sale, the rule on double sales under Article
RTC decided declaring that, as against Aquino, petitioners have a prior right 1544 of the Civil Code does not apply."
over the subject property. It held that the agreement between petitioners
and the Manzanos was a contract of sale. CA reveresed the decision. With regard to the cases cited by petitioners, Abarquez v. Court of Appeals
and Filinvest Development Corporation v. Golden Haven Memorial Park,
ISSUE: Whether or not there was double sale? Inc., suffice it to state that they do not apply, In Abarquez, while the
agreement entered into was a contract to sell, the land subject of the sale
HELD: NONE was nonetheless delivered to the buyer, who took possession thereof and
even constructed a house thereon. In the present case, the subject property
In a contract to sell, payment of the price is a positive suspensive condition, was never surrendered to petitioners and they were never in possession
failure of which is not a breach of contract warranting rescission but rather thereof. There is a difference in the factual milieu. On the other hand, the
just an event that prevents the prospective buyer from compelling the Filinvest case is not one involving Article 1544; and while the Court therein
prospective seller to convey title. In other words, the non-fulfillment of the held that a notice of adverse claim is a "warning to third parties dealing
condition of full payment renders the contract to sell ineffective and with the property that someone claims an interest in it or asserts a better
without force and effect. right than the registered owner,"33 this is not true as regards petitioners,
As already stated, petitioners' failure to pay the price in full rendered their
x x x A contract to sell is one where the prospective seller reserves the contract to sell ineffective and without force and effect, thus nullifying any
transfer of title to the prospective buyer until the happening of an event, claim or better right they may have had.
such as full payment of the purchase price. What the seller obliges himself
to do is to sell the subject property only when the entire amount of the
purchase price has already been delivered to him. 'In other words, the full
BIGNA Y EX-IM PHILIPPINES, INC. v. the CA again dismissed the Petition for failure to comply with Supreme
UNION BANK OF THE PHILIPPINES Court Circular No. 28-91. The bank’s Motion for Reconsideration was once
February 12, 2014 (DEL CASTILLO, J.) more denied.
This time, Bignay filed a Petition for annulment of the December 12, 1991
Fact Decision, docketed as CA-G.R. SP No. 33901. In a July 15, 1994 Decision, the
In 1988, Rosario filed against Alfonso and Union Bank, Civil Case No. Q- CA dismissed the Petition. Bignay’s resultant Petition for Certiorari with
52702 for annulment of the 1984 mortgage, claiming that Alfonso this Court suffered the same fate.
mortgaged the property without her consent, and for reconveyance. In a
September 6, 1989 Letter-Proposal, Bignay Ex-Im Philippines, Inc. (Bignay), Meanwhile, as a result of the December 12, 1991 Decision in Civil Case No.
through its President, Milagros Ong Siy (Siy), offered to purchase the Q-52702, Bignay was evicted from the property; by then, it had demolished
property. the existing structure on the lot and begun construction of a new building.
On December 20, 1989, a Deed of Absolute Sale6 was executed by and ISSUE: Whether or not Union Bank was grossly negligent in this case.
between Union Bank and Bignay whereby the property was conveyed to
Bignay for P4 million. The deed of sale was executed by the parties through HELD: YES.
Bignay’s Siy and Union Bank’s Senior Vice President Anthony Robles
(Robles). One of the terms of the deed of sale is quoted below: The Court held that the gross negligence of the seller in defending its title
to the property subject matter of the sale – thereby contravening the
Section 1. The VENDEE hereby recognizes that the Parcel/s of Land express undertaking under the deed of sale to protect its title against the
with improvements thereon is acquired through foreclosure proceedings claims of third persons resulting in the buyer’s eviction from the property,
and agrees to buy the Parcel/s of Land with improvements thereon in its amounts to bad faith, and the buyer is entitled to the remedies afforded
present state and condition. The VENDOR therefore does not make any x x x under Article 1555 of the Civil Code.
representations or warranty with respect to the Parcel/s of Land but that it
will defend its title to the Parcel/s of Land with improvements thereon The record reveals that Union Bank was grossly negligent in the handling
against the claims of any person whomsoever. and prosecution of Civil Case No. Q-52702. Its appeal of the December 12,
1991 Decision in said case was dismissed by the CA for failure to file the
On December 12, 1991, a Decisionwas rendered in Civil Case No. Q-52702 in required appellant’s brief. Next, the ensuing Petition for Review on
favor of Alfonso. Union Bank appealed the above Decision with the CA. It Certiorari filed with this Court was likewise denied due to late filing and
likewise sought a new trial of the case, which the trial court denied. The CA payment of legal fees. Finally, the bank sought the annulment of the
appeal was dismissed for failure to file appellant’s brief; the ensuing December 12, 1991 judgment, yet again, the CA dismissed the petition for
Petition for Review with this Court was similarly denied for late filing and its failure to comply with Supreme Court Circular No. 28-91. As a result, the
payment of legal fees. December 12, 1991 Decision became final and executory, and Bignay was
evicted from the property. Such negligence in the handling of the case is far
Union Bank next filed with the CA an action to annul the trial court’s from coincidental; it is decidedly glaring, and amounts to bad faith.
December 12, 1991 judgment. In a September 9, 1993 Resolution, however, “Negligence may be occasionally so gross as to amount to malice [or bad
Case Digest 2018
faith].” Indeed, in culpa contractual or breach of contract, gross negligence

of a party amounting to bad faith is a ground for the recovery of damages by
the injured party.
JOSE V. TOLEDO v. COURT OF APPEALS filed a complaint for reconveyance and damages to Regional Trial Court of
August 5, 2015 (JARDELEZA, J.) Quezon City.
On May 5, 1958, Del Rosario Realty (represented by Pedro D Rosario) RTC ruled that petitioners’ action is really one for annulment of the
entered into a Contract to Sell with spouses Leonardo Faustino an Angelina judgment (of the Judicially approved Compromise Agreement) in Civil Case
Lim ("Faustino spouses"). Del Rosario Realty agreed to sell Lot Block 2, No. Q-22850 and ordered the dismissal of petitioners' complaint for lack of
Ilang-Ilang Street, Sunrise Hills Subdivision, Quezon City ("property"), for jurisdiction. CA affirmed.
the amount of ₱13 572.00, with an initial payment of ₱4, 200.00 and the
balance to be paid in consecutive quarterly installments. ISSUE: whether the action filed by petitioners before the RTC is one for
reconveyance or for annulment of judgment.
Faustino spouses sold their rights over the property to spouses Vicente
Padiemos and Concordia Garcia, and the latter agreed to assume the HELD:
former's obligations under the May 5, 1958 contract the sell. This transfer
was registered and annotated on the property's TCT as an adverse claim as Court rule for the petitioners. An action for annulment of judgment is a
early as October 20, 1960. remedy in equity so Exceptional in nature that it may be availed of only
when other remedies are wanting, and only if the judgment, final order or
Meanwhile, on May 7, 1959, Pedro Del Rosario executed a deed assigning all final resolution sought to be annulled was rendered by a court lacking
of his rights and interests in the May 5, 1958 contract to sell t Socorro A. jurisdiction or through extrinsic fraud.
Ramos. In the same deed, Socorro Ramos acknowledged an "approved the
transfer or assignment of rights made by spouses Leonard Faustino and An action for reconveyance, on the other hand, is a legal and equitable
Angelina Lim in favor of Vicente Padiemos" over the property including "all remedy granted to the rightful owner of land which has been wrongfully or
the incidental rights, interests and obligations inherent thereto." erroneously registered in the name of another for the purpose of
compelling the latter to transfer or reconvene the land to him. The Court of
On January 9, 1962, Vicente Padiemos sold one-half of the property to Appeals has exclusive original jurisdiction over actions for annulment of
petitioner Jose Toledo and his wife Elisa Padiemo (Sps Toledo). The deed judgments of Regional Trial Courts whereas actions for reconveyance of
embodying the Partial Assignment of Rights noted that the spouses Toledo real property may be filed before the Regional Trial Courts or the Municipal
had already commenced payment of the installment since August 5, 1961. It Trial Courts, depending on the assessed value of the property involved.
further provided that the spouses Toledo shall "continue payments until
fully paid," with said payments to be made in the name of Vicente Padiemos Action filed by petitioners is one for reconveyance. It is axiomatic that
as the purchaser on record. After completion o payment, the Toledo spouses what determines the nature of the action and which court has jurisdiction
shall own one-half of the property. over it are the allegations in the complaint and the character of the relief
sought. For one, and as correctly pointed out by petitioners, the complaint
On March 21, 1967, Vicente Padiemos sold the remaining half of the they filed before the Regional Trial Court shows that they never prayed for
property to spouses Virgilio and Leticia Padiemos. Later on, Virgilio and the annulment of the compromise judgment in Civil Case No. Q-22850. What
Leticia Padiemos assigned their rights over the property to their children, petitioners sought was the cancellation of the title issued in ARC
petitioners Glenn and Danilo Padiemos. Consequently, spouses Toledo and Marketing’s name and the issuance of a new one in their favor . This is
spouses Virgilio and Leticia Padiemos paid quarterly installments on the characteristic of an action for reconveyance which respects the decree of
property until full payment sometime in 1971. When petitioners requested registration as incontrovertible but seeks the transfer of property, which
for the release of the owner's duplicate certificate of title, respondent has been wrongfully or erroneously registered in other persons' names, to
Antonio A. Ramos, representing the heirs of Socorro Ramos, issued a its rightful and legal owners, or to those who claim to have a better right.
Certification stating that while the property "has been paid in full by Mr. There is no special ground for an action for reconveyance. It is enough that
Vicente Padiemos ... Title #44436 could not be released pending final the aggrieved party has a legal claim on the property superior to that of the
decision of the Supreme Court." registered owner and that the property has not yet passed to the hands of
an innocent purchaser for value.
In 1974, Virgilio Padiemos and petitioner Jose Toledo constructed their
houses on the property, resided therein, and paid the corresponding real Petitioners allege that: first, they are the owners of the land by virtue of a
property taxes. sale between their and respondents’ predecessors-in-interest; and second,
that respondents Ramoses and ARC Marketing illegally dispossessed them
In the meantime, it appears that execution proceedings were taken against by having the same property registered in respondents’ names. Thus, far
the estate of Socorro Ramos. As a consequence, eighteen (18) parcels of from establishing a case for annulment of judgment, the foregoing
land belonging to the estate, including the property, were sold in auction to allegations clearly show a case for reconveyance.
Guillermo N. Pablo and Primitiva C. Cruz, who thereafter sold said
properties to ARC Marketing. Petitoners are not barred by laches. Article 1456 of the Civil Code provides
that a person acquiring property through fraud becomes, by operation of
On March 14, 1977, Enrique A. Ramos with all heirs of Socorro A. Ramos, law, a trustee of an implied trust for the benefit of the real owner of the
filed a Complaint for Nullity of Execution Sale (docketed as Civil Case No. Q- property. The presence of fraud in this case, as shown by the disposition of
22850) against auction sale winners Guillermo N. Pablo and Primitiva C. the property to ARC Marketing by Lourdes Ramos despite knowledge of
Cruz, and their transferee ARC Marketing. Sometime in 1990, Enrique A. petitioners' title over the same, created an implied trust in favor of
Ramos, Antonio A. Ramos, Milagros Ramos Samo and Angelita Ramos, by petitioners Toledo, et al. This gives petitioners the right to seek
way of a Deed of Assignment, assigned all their rights and interests in the reconveyance of the property from the subsequent buyers.
case (and the properties it covered) to Lourdes A. Ramos.
An action for reconveyance based on an implied trust prescribes in ten
On January 13, 1993, Civil Case No. Q-22850 was settled, and the parties years, the reckoning point of which is the date of registration of the deed or
entered into a Final Compromise Agreement ("Compromise Agreement"). the date of issuance of the certificate of title over the property. However, if
Under the Compromise Agreement, then sole plaintiff Lourdes A. Ramos the plaintiff also remains in possession of the same, as in this case, the
agreed to settle the case for the total compromise amount of Two Million prescriptive period to recover title and possession of the property does not
Pesos (₱2, 000,000.00) to be paid by ARC Marketing to the former in run against him. In such a case, an action for reconveyance, if nonetheless
installments. Upon joint motion by the parties, the Compromise Agreement filed, would be in the nature of a suit for quieting of title, an action that is
was approved by the trial court in a Decision dated January 13, 1993. On imprescriptible:
April 8, 1997, petitioners Jose Toledo, Glenn Padiemos and Danilo Padiemos Prescription does not run against the plaintiff in actual
possession of the disputed land because such plaintiff has a right to wait
Case Digest 2018
until his possession is disturbed or his title is questioned before initiating In this case, it does not appear that ARC Marketing (nor its predecessors-in-
an action to vindicate his right. His undisturbed possession gives him the interest) took any steps to cancel the contract and/or eject petitioners from
continuing right to seek the aid of a court of equity to determine the nature the premises (much less notify petitioners about said cancellation) prior to
of the adverse claim of a third party and its effect on his title. Here, the latter's institution of the action for reconveyance. ARC Marketing's
petitioners’ undisturbed possession of the property is uncontroverted. predecessors-in-interest also seemed to have continued to accept payments
Petitioners have alleged that they have been in "continued, open and for the property without protest or qualification. Respondent Antonio A.
uninterrupted possession of the property for over forty (40) years," as Ramos, representing the heirs of Socorro A. Ramos, even issued a
evidenced not only by their payment of real property taxes but also the certification acknowledging full payment for the property on March 20,
construction of their house thereon. This was notably never disputed by 1973, long before the same was allegedly adjudged in ARC Marketing’s
ARC Marketing. As plaintiffs in possession of the disputed property, favor in 1993. ARC Marketing is thus estopped from invoking cancellation of
petitioners are not barred from seeking relief from the court via an action the contract to defeat petitioners' rights over the property.
for reconveyance.
ARC Marketing is not an innocent purchaser for value. An action for
Neither can petitioners be considered to have slept on their rights for laches reconveyance is always available as a remedy for a rightful owner to
to operate against them. Petitioners have clearly taken steps to protect their retrieve his property for as long as the same has not passed to an innocent
interests in the property. While respondents correctly point out that the purchaser for value. An innocent purchaser for value is one who buys the
sale of the property between the predecessors-in-interest of petitioners and property of another without notice that some other person has a right to or
respondents was not registered, the records show that petitioners (and/or interest in it, and who pays a full and fair price at the time of the purchase
their predecessors-in-interest) have registered their adverse claim over the or before receiving any notice of another person's claim.
property as early as October 20, 1960. Petitioners also previously requested
for the release of the owner’s duplicate certificate of title sometime in 1973 In Spouses Ching v. Spouses Adolfo and Arsenia Enrile, we held that one
but was given a Certification/ Acknowledgment of Full Payment instead as who purchases real estate with knowledge of a defect or lack of title in his
the title then could not be released due to a pending case Involving the vendor cannot claim that he has acquired title thereto in good faith as
property. against the true owner of the land or of an interest therein. The same rule
must be applied to one whom has knowledge of facts which should have put
Petitioners have alleged a legal right over the property and presented him upon such inquiry and investigation as might be necessary to acquaint
ample documentary evidence to support their claim. In fact, the complete him with the defects in the title of his vendor.
payment of the purchase price by petitioners (and/or their predecessors-in
interest) is not disputed. ARC Marketing, however, claims that certain In this case, Vicente Padiemos (petitioners' predecessor-in-interest) caused
provisions of the original contract to sell in relation to the disposal of the the annotation on the title of his adverse claim over the property as early as
property were not complied with and so petitioners (and/or their October 20, 1960. 69 Thus, when ARC Marketing agreed, by way of the
predecessors-in-interest) did not acquire ownership of the property. judicially approved Compromise Agreement, to purchase the property on
January 13, 1993, it already had constructive notice of the adverse claim
According to ARC Marketing, the subsequent transfers made by the registered earlier. It is also beyond dispute that petitioners have been in
Faustino spouses (from which petitioners derive their title) were made possession of the property even prior to the time of the Compromise
without the written consent or approval of Del Rosario (and/or his Agreement in Civil Case No. Q-22850. These circumstances should have put
assignees). This caused the ipso facto cancellation of the contract to sell. ARC Marketing on guard and required it to ascertain whether one of the
properties subject of the Compromise Agreement it is entering into has
The Court was no tpersuaded. While the contract to sell indeed provided for already been sold to another. ARC Marketing cannot thus be considered an
the ipso facto cancellation of the contract "without need of notification or innocent purchaser for value. It cannot rely on the indefensibility of its title
judicial action," jurisprudence requires, for cancellation to be effective, as such defense does not extend to a transferee who takes the certificate of
that written notice be sent to the defaulter informing him of said title with notice of a flaw in his title.
cancellation/rescission.
Judgment is hereby rendered declaring petitioners the owners of Lot 4,
Well-settled is the rule, as held in previous jurisprudence, that judicial Block 2, Ilang Ilang Street, Sunrise Hills Subdivision, Quezon City.
action for rescission of a contract is not necessary where the contract
provides that it may be revoked and cancelled for violation of any of its
terms and conditions. However, even in the cited cases, there was at least a
written notice to the defaulter informing him of the rescission.
PHILIPPINE STEEL COATING CORP. PhilSteel claiming that the damage to the vehicles was attributable to the
v. EDUARD QUINONES hidden defects of the primer-coated sheets and/or their incompatibility
April 19, 2017 (SERENO, CJ) with the Guilder acrylic paint process used by the Amianan Motors. Because
of the barrage of complaints, Quinones was forced to repair the damaged
Facts: buses.
A complaint for damages was filed by respondent Quinones (owner of PhilSteel counters that that the breaking and peeling off of the paint was
Amianan Motors) against petitioner PhilSteel. Richard Lopez, a sales caused by the erroneous painting application done by Quinones.
engineer of PhilSteel, offered Quinones their new product: primer-coated,
long-span, rolled galvanized iron (G.I.) sheets. The latter showed interest The RTC rendered a Decision in favor of Quinones and ordered PhilSteel to
but asked if the primer-coated sheets were compatible with the Guilder pay damages. The trial court concluded that the paint blistering and peeling
acrylic paint process used by Amianan Motors in the finishing of its off were due to the incompatibility of the painting process with the primer-
assembled buses. Uncertain, Lopez referred the query to his immediate coated G.I. sheets. It also found out that the assurance made by Angbengco
superior, Ferdinand Angbengco, PhilSteel’s sales manager. constituted an express warranty under Article 1546. The CA affirmed the
ruling of the RTC in toto.
Angbengco assured Quinones that the quality of their new product was
superior to that of the non-primer coated G.I. sheets being used by the latter Issues:
in his business. He further guaranteed that a laboratory test had in fact been
conducted by PhilSteel, and that the results proved that the two products 1) Were the oral statements made by Angbengco a case of express warranty
were compatible. under Article 1546 of the Civil Code that may be invoked to warrant
payment of damages? YES
However, Quinones received several complaints from customers who had 2) Prescription period for express warranty.
bought bus units, claiming that the paint or finish used on the purchased 3) Is there negligence on Petitioner’s part?NO
vehicles was breaking and peeling off. Quinones sent a letter-complaint to
Case Digest 2018
4) Is non-payment of price justified on allegations of breach of warranty? would have used in a given situation. Under Article 1173 of the Civil Code,
YES where it is not stipulated in the law or the contract, the diligence required
to comply with one’s obligations is commonly referred to as paterfamilias;
HELD: or, more specifically, as bonos paterfamilias or “a good father of a family.” A
good father of a family means a person of ordinary or average diligence. To
1) Yes. Article 1546 of the Civil Code provides that any affirmation of fact or determine the prudence and diligence that must be required of all persons,
any promise by the seller relating to the thing is an express warranty if the we must use as basis the abstract average standard corresponding to a
natural tendency of such affirmation or promise is to induce the buyer to normal orderly person. Anyone who uses diligence below this standard is
purchase the same, and if the buyer purchases the thing relying thereon. As guilty of negligence.
held in Carrascoso, Jr. vs. CA, the following requisites must be established in
order to prove that there is an express warranty in a contract of sale: (1) the It bears reiteration that Quiñ ones had already raised the compatibility issue
express warranty must be an affirmation of fact or any promise by the seller at the outset. He relied on the manpower and expertise of PhilSteel, but at
relating to the subject matter of the sale; (2) the natural effect of the the same time reasonably asked for more details regarding the product. It
affirmation or promise is to induce the buyer to purchase the thing; and (3) was not an impulsive or rush decision to buy. In fact, it took 4 to 5 meetings
the buyer purchases the thing relying on that affirmation or promise. Here, to convince him to buy the primed G.I. sheets. And even after making an
the oral statements of Angbengco created an express warranty. hey were initial order, he did not make subsequent orders until after a painting test,
positive affirmations of fact that the buyer relied on, and that induced him done upon the instructions of Angbengco proved successful. The test was
to buy petitioner’s primer-coated G.I. sheets. Seller is expert in the eyes of conducted using their acrylic paint over PhilSteel’s primer-coated G.I.
the buyer. sheets. Only then did Quiñ ones make subsequent orders of the primer-
coated product, which was then used in the mass production of bus bodies
An express warranty can be oral when it is a positive affirmation of a fact by Amianan Motors. This Court holds that Quiñ ones was not negligent and
that the buyer relied on. should therefore not be blamed for his losses.
Petitioner argues that the purported warranties by mere “vague oral 4) Yes, Article 1599 of the Civil Code applies when an express warranty is
statements” cannot be invoked to warrant the payment of damages. breached. The provision reads:
Where there is a breach of warranty by the seller, the buyer may, at his
A warranty is a statement or representation made by the seller of goods – election:
contemporaneously and as part of the contract of sale that has reference to (1) Accept or keep the goods and set up against the seller, the breach of
the character, quality or title of the goods; and is issued to promise or warranty by way of recoupment in diminution or extinction of the price;
undertake to insure that certain facts are or shall be as the seller represents (2) xxxx
them.[8] A warranty is not necessarily written. It may be oral as long as it is (3) xxxx
not given as a mere opinion or judgment. Rather, it is a positive affirmation (4) Rescind the contract of sale and refuse to receive the goods or if the
of a fact that buyers rely upon, and that influences or induces them to goods have already been received, return them or offer to return them to
purchase the product. the seller and recover the price or any part thereof which has been paid.
Xxxxx
All in all, these “vague oral statements” were express affirmations not only Xxxxx
of the costs that could be saved if the buyer used PhilSteel’s G.I. sheets, but Where the buyer is entitled to rescind the sale and elects to do so, he
also of the compatibility of those sheets with the acrylic painting process shall cease to be liable for the price upon returning or offering to
customarily used in Amianan Motors. Angbengco did not aimlessly utter return the goods. If the price or any part thereof has already been paid, the
those “vague oral statements” for nothing, but with a clear goal of seller shall be liable to repay so much thereof as has been paid, concurrently
persuading Quiñ ones to buy PhilSteel’s product. Taken together, the oral with the return of the goods, or immediately after an offer to return the
statements of Angbengco created an express warranty. They were positive goods in exchange for repayment of the price.
affirmations of fact that the buyer relied on, and that induced him to buy Xxxx
petitioner’s primer-coated G.I. sheets. (5) xxx
Under Article 1546 of the Civil Code, “[n]o affirmation of the value of the Quiñ ones has opted for a reduction in price or nonpayment of the unpaid
thing, nor any statement purporting to be a statement of the seller’s opinion balance of the purchase price. Applying Article 1599 (1), this Court grants
only, shall be construed as a warranty, unless the seller made such this remedy.
affirmation or statement as an expert and it was relied upon by the buyer.”
The above provisions define the remedy of recoupment in the diminution or
Despite its claims to the contrary, petitioner was an expert in the eyes of the extinction of price in case of a seller’s breach of warranty. According to the
buyer Quiñ ones. The latter had asked if the primer-coated G.I. sheets were provision, recoupment refers to the reduction or extinction of the price of
compatible with Amianan Motors’ acrylic painting process. Petitioner’s the same item, unit, transaction or contract upon which a plaintiff’s claim is
former employee, Lopez, testified that he had to refer Quiñ ones to the founded.
former’s immediate supervisor, Angbengco, to answer that question. As the
sales manager of PhilSteel, Angbengco made repeated assurances and In the case at bar, Quiñ ones refused to pay the unpaid balance of the
affirmations and even invoked laboratory tests that showed compatibility. purchase price of the primer-coated G.I. sheets PhilSteel had delivered to
In the eyes of the buyer Quiñ ones, PhilSteel – through its representative, him. He took this action after complaints piled up from his customers
Angbengco -was an expert whose word could be relied upon. regarding the blistering and peeling-off of the paints applied to the bus
bodies they had purchased from his Amianan Motors. The unpaid balance of
2) The prescription period of the express warranty applies to the instant the purchase price covers the same G.I. sheets. Further, both the CA and the
case. There being an express warranty, this Court holds that the RTC concurred in their finding that the seller’s breach of express warranty
prescription period applicable to the instant case is that prescribed for had been established. Therefore, this Court finds that respondent has
breach of an express warranty. The applicable prescription period is legitimately defended his claim for reduction in price and is no longer liable
therefore that which is specified in the contract; in its absence, that period for the unpaid balance of the purchase price of P448,041.50.
shall be based on the general rule on the rescission of contracts: four years
(see Article 1389, Civil Code). In this case, no prescription period specified
in the contract between the parties has been put forward. Quiñ ones filed the
instant case on 6 September 1996 or several months after the last delivery
of the thing sold. His filing of the suit was well within the prescriptive
period of four years; hence, his action has not prescribed.
3) The buyer cannot be held negligent in the instant case. Negligence is the
absence of reasonable care and caution that an ordinarily prudent person
Case Digest 2018
Topic: Recoupment them to the seller and recover the price or any part thereof which has
been paid.
FIRST UNITED CONSTRUCTORS CORPORATION and BLUE STAR
CONSTRUCTION CORPORATION vs. BAYANIHAN AUTOMOTIVE When the buyer has claimed and been granted a remedy in anyone of these
CORPORATION ways, no other remedy can thereafter be granted, without prejudice to the
G.R. No. 164985, January 15, 2014, BERSAMIN, J. provisions of the second paragraph of article 1191. (Emphasis supplied)
Facts: Petitioner First United Constructors Corporation (FUCC) and xxxx

petitioner Blue Star Construction Corporation (Blue Star) were associate
construction firms sharing financial resources, equipment and technical In its decision, the CA applied the first paragraph of Article 1599 of the Civil
personnel on a case-to-case basis. From May 27, 1992 to July 8, 1992, they Code to this case, explaining thusly:
ordered six units of dump trucks from the respondent, a domestic
corporation engaged in the business of importing and reconditioning used Paragraph (1) of Article 1599 of the Civil Code which provides for the
Japan-made trucks, and of selling the trucks to interested buyers who were remedy of recoupment in diminution or extinction of price in case of breach
mostly engaged in the construction business. of warranty by the seller should therefore be interpreted as referring to the
reduction or extinction of the price of the same item or unit sold and not to
On September 19, 1992, FUCC ordered from the respondent one unit of a different transaction or contract of sale. This is more logical interpretation
Hino Prime Mover that the respondent delivered on the same date. On of the said article considering that it talks of breach of warranty with
September 29, 1992, FUCC again ordered from the respondent one unit of respect to a particular item sold by the seller. Necessarily, therefore, the
Isuzu Transit Mixer that was also delivered to the petitioners. or the two buyer’s remedy should relate to the same transaction and not to another.
purchases, FUCC partially paid in cash, and the balance through post-dated
checks. Upon presentment of the checks for payment, the respondent Defendants-appellants’ act of ordering the payment on the prime mover and
learned that FUCC had ordered the payment stopped. The respondent transit mixer stopped was improper considering that the said sale was a
immediately demanded the full settlement of their obligation from the different contract from that of the dump trucks earlier purchased by
petitioners, but to no avail. Instead, the petitioners informed the respondent defendants-appellants.
that they were withholding payment of the checks due to the breakdown of
one of the dump trucks they had earlier purchased from respondent, The claim of defendants-appellants for breach of warranty, i.e. the expenses
specifically the second dump truck delivered on May 27, 1992. paid for the repair and spare parts of dump truck no. 2 is therefore not a
proper subject of recoupment since it does not arise out of the contract or
Respondent commenced an action for collection, seeking payment of the transaction sued on or the claim of plaintiff-appellee for unpaid balances on
unpaid balance in the amount of ₱735,000.00 represented by the two the last two (2) purchases, i. e. the prime mover and the transit mixer.8
checks.
The CA was correct. It was improper for petitioners to set up their claim for
In their answer, the petitioners averred that they had stopped the payment repair expenses and other spare parts of the dump truck against their
on the two checks worth ₱735,000.00 because of the respondent’s refusal to remaining balance on the price of the prime mover and the transit mixer
repair the second dump truck; and that they had informed the respondent they owed to respondent.
of the defects in that unit but the respondent had refused to comply with its
warranty, compelling them to incur expenses for the repair and spare parts. Recoupment must arise out of the contract or transaction upon which the
plaintiff’s claim is founded. 9 To be entitled to recoupment, therefore, the
It was the position of the respondent that the petitioners were not legally claim must arise from the same transaction, i.e., the purchase of the prime
justified in withholding payment of the unpaid balance of the purchase price mover and the transit mixer and not to a previous contract involving the
of the Hino Prime Mover and the Isuzu Transit Mixer due the alleged defects purchase of the dump truck. That there was a series of purchases made by
in second dump truck because the purchase of the two units was an entirely petitioners could not be considered as a single transaction, for the records
different transaction from the sale of the dump trucks, the warranties for show that the earlier purchase of the six dump trucks was a separate and
which having long expired. distinct transaction from the subsequent purchase of the Hino Prime Mover
and the Isuzu Transit Mixer. Consequently, the breakdown of one of the
Issue: Whether or not the petitioners validly exercised the right of dump trucks did not grant to petitioners the right to stop and withhold
recoupment through the withholding of payment of the unpaid balance of payment of their remaining balance on the last two purchases.
the purchase price of the Hino Prime Mover and the Isuzu Transit Mixer.
Ruling: NO. Petitioners could not validly resort to recoupment against

respondent.
Recoupment (reconvencion) is the act of rebating or recouping a part of a

claim upon which one is sued by means of a legal or equitable right
resulting from a counterclaim arising out of the same transaction. 7 It is the
setting up of a demand arising from the same transaction as the plaintiff’s
claim, to abate or reduce that claim.
The legal basis for recoupment by the buyer is the first paragraph of Article
1599 of the Civil Code, viz:
Article 1599. Where there is a breach of warranty by the seller, the buyer
may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach
of warranty by way of recoupment in diminution or extinction of the
price;
(2) Accept or keep the goods and maintain an action against the seller
for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the
seller for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if
the goods have already been received, return them or offer to return
Case Digest 2018
Topic: Recoupment the Civil Code. According to petitioner, Quinones can no longer put up the
defense of hidden defects in the product sold as a basis for evading payment
PHILIPPINE STEEL COATING CORP. vs. EDUARD QUINONES of the balance. 29
G.R. No. 194533, April 19, 2017, SERENO, CJ:
We agree with petitioner that the nonpayment of the balance cannot be
Facts: This case arose from a Complaint for damages filed by premised on a mere allegation of nonexisting warranties. This Court has
respondent Quinones (owner of Amianan Motors) against petitioner consistently ruled that whenever a breach of warranty is not proven, buyers
PhilSteel. The Complaint alleged that in early 1994, Richard Lopez, a sales who refuse to pay the purchase price - or even the unpaid balance of the
engineer of PhilSteel, offered Quinones their new product: primer-coated, goods they ordered - must be held liable therefor. 30
long-span, rolled galvanized iron (G.I.) sheets. The latter showed interest,
but asked Lopez if the primer-coated sheets were compatible with the However, we uphold the finding of both the CA and the RTC that petitioner's
Guilder acrylic paint process used by Amianan Motors in the finishing of its breach of warranty was proven by respondent.
assembled buses. Uncertain, Lopez referred the query to his immediate Since what was proven was express warranty, the remedy for implied
superior, Ferdinand Angbengco, PhilSteel's sales manager. Angbengco warranties under Article 1567 of the Civil Code does not apply to the instant
assured Quinones that the quality of their new product was superior to that case. Instead, following the ruling of this Court in Harrison Motors
of the non-primer coated G.l. sheets being used by the latter in his business. Corporation v. Navarro,31 Article 1599 of the Civil Code applies when an
Quinones expressed reservations, as the new product might not be express warranty is breached.1awp++i1 The provision reads:
compatible with the paint process used by Amianan Motors. Angbengco
guaranteed that a laboratory test had in fact been conducted by PhilSteel, Where there is a breach of warranty by the seller, the buyer may, at his
and that the results proved that the two products were compatible; hence, election:
Quinones was induced to purchase the product and use it in the
manufacture of bus units. (l) Accept or keep the goods and set up against the seller, the breach of
warranty by way of recoupment in diminution or extinction of the price;
However, sometime in 1995, Quinones received several complaints from (2) Accept or keep the goods and maintain an action against the seller for
customers who had bought bus units, claiming that the paint or finish used damages for the breach of warranty;
on the purchased vehicles was breaking and peeling off. Quinones then sent (3) Refuse to accept the goods, and maintain an action against the seller for
a letter-complaint to PhilSteel invoking the warranties given by the latter. damages for the breach of warranty;
According to respondent, the damage to the vehicles was attributable to the (4) Rescind the contract of sale and refuse to receive the goods or if the
hidden defects of the primer-coated sheets and/or their incompatibility goods have already been received, return them or offer to return them to
with the Guilder acrylic paint process used by Amianan Motors, contrary to the seller and recover the price or any part thereof which has been paid.
the prior evaluations and assurances of PhilSteel. Because of the barrage of
complaints, Quinones was forced to repair the damaged buses. When the buyer has claimed and been granted a remedy in anyone of these
ways, no other remedy can thereafter be granted, without prejudice to the
PhilSteel counters that Quinones himself offered to purchase the subject provisions of the second paragraph of article 1191.
product directly from the former without being induced by any of Where the goods have been delivered to the buyer, he cannot rescind the
PhilSteel's representatives. According to its own investigation, PhilSteel sale if he knew of the breach of warranty when he accepted the goods
discovered that the breaking and peeling off of the paint was caused by the without protest, or if he fails to notify the seller within a reasonable time of
erroneous painting application done by Quinones. the election to rescind, or if he fails to return or to offer to return the goods
to the seller in substantially as good condition as they were in at the time
Issue: Whether non-payment of price is justified on allegations of the ownership was transferred to the buyer. But if deterioration or injury of
breach of warranty. the goods is due to the breach or warranty, such deterioration or injury
shall not prevent the buyer from returning or offering to return the goods to
Ruling: YES. the seller and rescinding the sale.
The nonpayment of the unpaid Where the buyer is entitled to rescind the sale and elects to do so, he shall
purchase price was justified, since a cease to be liable for the price upon returning or offering to return the
breach of warranty was proven. goods. If the price or any part thereof has already been paid, the seller shall
be liable to repay so much thereof as has been paid, concurrently with the
Petitioner takes issue with the nonpayment by Quinones to PhilSteel of a return of the goods, or immediately after an offer to return the goods in
balance of ₱448,041.50, an amount that he has duly admitted. 27 It is the exchange for repayment of the price.
nonpayment of the unpaid balance of the purchase price, of the primer-
coated G.I. sheets that is at the center of the present controversy. Where the buyer is entitled to rescind the sale and elects to do so, if the
Quinones, through counsel, sought damages against petitioner for breach of seller refuses to accept an offer of the buyer to return the goods, the buyer
implied warranty arising from hidden defects under Article 156 l of the Civil shall thereafter be deemed to hold the goods as bailee for the seller, but
Code, which provides: subject to a lien to secure the payment of any portion of the price which has
been paid, and with the remedies for the enforcement of such lien allowed
The vendor shall be responsible for warranty against the hidden defects to an unpaid seller by article 1526.
which the thing sold may have, should they render it unfit for the use for
which it is intended, or should they diminish its fitness for such use to such (5) In the case of breach of warranty of quality, such loss, in the absence of
an extent that, had the vendee been aware thereof he would not have special circumstances showing proximate damage of a greater amount, is
acquired it or would have given a lower price for it; but said vendor shall the difference between the value of the goods at the time of delivery to the
not be answerable for patent defects or those which may be visible, or for buyer and the value they would have had if they had answered to the
those which are not visible if the vendee is an expert who, by reason of his warranty.
trade or profession, should have known them.
Quinones has opted for a reduction in price or nonpayment of the unpaid
In seeking a remedy from the trial court, Quinones opted not to pay the balance of the purchase price. Applying Article 1599 (1), this Court grants
balance of the purchase price, in line with a proportionate reduction of the this remedy.
price under Article 1567 Civil Code, which states:
The above provisions define the remedy of recoupment in the diminution or
In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may extinction of price in case of a seller's breach of warranty. According to the
elect between withdrawing from the contract and demanding a provision, recoupment refers to the reduction or extinction of the price of
proportionate reduction of the price, with damages in either case. the same item, unit, transaction or contract upon which a plaintiffs claim is
Petitioner reasons that since the action of respondent is based on an founded. 32
implied warranty, the action has already prescribed under Article 1571 28 of
Case Digest 2018
In the case at bar, Quinones refused to pay the unpaid balance of the
purchase price of the primer-coated G.I. sheets PhilSteel had delivered to
him.1âwphi1
He took this action after complaints piled up from his customers regarding
the blistering and peeling-off of the paints applied to the bus bodies they
had purchased from his Amianan Motors. The unpaid balance of the
purchase price covers the same G .I. sheets. Further, both the CA and the
RTC concurred in their finding that the seller's breach of express warranty
had been established. Therefore, this Court finds that respondent has
legitimately defended his claim for reduction in price and is no longer liable
for the unpaid balance of the purchase price of ₱448,04l.50.
Case Digest 2018
Topic: Breach of Contract of Sales; Sales of Movables Appellants would invoke the last paragraph. But there has been no
foreclosure of the chattel mortgage nor a foreclosure sale. Therefore the
AMADOR TAJANLANGIT, ET AL. vs. SOUTHERN MOTORS, INC., ET AL. prohibition against further collection does not apply.
G.R. No. L-10789, May 28, 1957, BENGZON, J.
At any rate it is the actual sale of the mortgaged chattel in accordance with
Facts: In April 1953 Amador Tajanlangit and his wife Angeles, residents section 14 Act No. 1508 that would bar the creditor (who chooses to
of Iloilo, bought, from the Southern Motors Inc. of Iloilo two tractors and a foreclose) from recovering any unpaid balance. (Pacific Com. Co. vs.De la
thresher. In payment for the same, they executed the promissory note Rama, 72 Phil. 380.) (Manila Motor Co. vs. Fernandez, 99 Phil., 782.).
whereby they undertook to satisfy the total purchase price of P24,755.75 in
several installments (with interest) payable on stated dates from May 18, It is true that there was a chattel mortgage on the goods sold. But the
1953 to December 10, 1955. The note stipulated that if default be made in Southern Motors elected to sue on the note exclusively, i.e. to exact
the payment of interest or of any installment, then the total principal sum fulfillment of the obligation to pay. It had a right to select among the three
still unpaid with interest shall at once become demandable etc. The spouse remedies established in Article 1484. In choosing to sue on the note, it was
failed to meet any installment. Wherefore, they were sued, in Civil Case No. not thereby limited to the proceeds of the sale, on execution, of the
2942, for the amount of the promissory note. 1 The spouses defaulted, and mortgaged good.2
the court, after listening to the Southern Motors' evidence entered
Judgment for it in the total sum of P24,755.75 together with interest at 12 In Southern Motors Inc. vs. Magbanua, (100 Phil., 155) a similar situation
per cent, plus 10 per cent of the total amount due as attorney's fees and arose in connection with the purchase on installment of a Chevrolet truck
costs of collection. by Magbanua. Upon the latter's default, suit on the note was filed, and the
truck levied on together with other properties of the debtor. Contending
Carrying out the order of execution, the sheriff levied on the same that the seller was limited to the truck, the debtor obtained a discharge of
machineries and farm implements which had been bought by the spouses; the other properties. This court said:
and later sold them at public auction to the highest bidder — which turned
out to be the Southern Motors itself — for the total sum of P10,000. By praying that the defendant be ordered to pay the sum of P4,690 together
with the stipulated interest at 12% per annum from 17 March 1954 until
As its judgment called for much more, the Southern Motors subsequently fully paid, plus 10 per cent of the total amount due as attorney's fees and
asked and obtained, an alias writ of execution; and pursuant thereto, the cost of collection, the plaintiff acted to exact the fulfillment of the obligation
provincial sheriff levied attachment on the Tajanlangits' rights and interests and not to foreclose the mortgage on the truck. . . .
in certain real properties — with a view to another sale on execution.
As the plaintiff has chosen to exact the fulfillment of the defendant's
To prevent such sale, the Tajanlangits instituted this action in the Iloilo obligation, the former may enforce execution of the judgement rendered in
court of first instance for the purpose among others, of annulling its favor on the personal and real properties of the latter not exempt from
the alias writ of execution and all proceedings subsequent thereto. Their execution sufficient to satisfy the judgment. That part of the
two main theories: (1) They had returned the machineries and farm judgement depriving the plaintiff of its right to enforce judgment against the
implements to the Southern Motors Inc., the latter accepted them, and had properties of the defendant except the mortgaged truck and discharging the
thereby settled their accounts; for that reason, said spouses did not contest writ of attachment on his other properties is erroneous. (Emphasis ours.)
the action in Civil Case No. 2942; and (2) as the Southern Motors Inc. had
repossessed the machines purchased on installment (and mortgaged) the Concerning their second theory, — settlement or cancellation — appellants
buyers were thereby relieved from further responsibility, in view of the allege that the very implements sold "were duly returned" by them, and
Recto Law, now article 1484 of the New Civil Code. "were duly received and accepted by the said vendor-mortgagee". Therefore
they argue, "upon the return of the same chattels and due acceptance of the
For answer, the company denied the alleged "settlement and same by the vendor-mortgagee, the conditional sale is ipso facto cancelled,
understanding" during the pendency of civil case No. 2949. It also denied with the right of the vendor-mortgagee to appropriate whatever
having repossessed the machineries, the truth being that they were downpayment and posterior monthly installments made by the purchaser
attached by the sheriff and then deposited by the latter in its shop for as it did happen in the present case at bar."
safekeeping, before the sale at public auction.
The trouble with the argument is that it assumes that acceptance of the
Issue: Was there foreclosure sale in this case under the last paragraph goods by the Southern Motors Co, with a view to "cancellation" of the sale.
of Article 1484? The company denies such acceptance and cancellation, asserting the goods,
were deposited in its shop when the sheriff attached them in pursuance of
Ruling: None. the execution. Its assertion is backed up by the sheriff, of whose credibility
there is no reason to doubt. Anyway this cancellation or settlement theory
"What is being sought in this present action" say appellants "is to prohibit may not be heeded now, because it would contravene the decision in Civil
and forbid the appellee Sheriff of Iloilo from attaching and selling at public Case No. 2942 above-mentioned — it would show the Tajanlangits owned
auction sale the real properties of appellants because that is now forbidden nothing to Southern Motors Inc. Such decision is binding upon them, unless
by our law after the chattels that have been purchased and duly mortgagee and until they manage to set it aside in a proper proceeding — and this is
had already been repossessed by the same vendor-mortgagee and later on not it.
sold at public auction sale and purchased by the same at such meager sum
of P10,000."
"Our law" provides,
ART. 1484. In a contract of sale of personal property the price of which is

payable in installments, the vendor may exercise of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void. (New Civil Code.)
Case Digest 2018
Topic: Breach of Contract of Sales; Sales of Movables mortgaged motor vehicle from appellant to appellee. If at all, only transfer
of possession of the mortgaged motor vehicle took place, for it is quite
FILINVEST CREDIT CORPORATION vs. PHILIPPINE ACETYLENE, CO., possible that appellee, as mortgagee, merely wanted to secure possession to
INC. forestall the loss, destruction, fraudulent transfer of the vehicle to third
G.R. No. L-50449, January 30, 1982, DE CASTRO, J. persons, or its being rendered valueless if left in the hands of the appellant.
Facts: On October 30, 1971, the Philippine Acetylene Co., Inc. A more solid basis of the true intention of the parties is furnished by the
(defendant-appellant herein) purchased from one Alexander Lim a motor document executed by appellant captioned "Voluntary Surrender with
vehicle described as Chevorlet, 1969 model for P55,247.80 with a down Special Power of Attorney To Sell" dated March 12, 1973, attached as Annex
payment of P20,000.00 and the balance of P35,247.80 payable, under the "C" of the appellant's answer to the complaint. An examination of the
terms and conditions of the promissory note, at a monthly installment of language of the document reveals that the possession of the mortgaged
P1,036.70 for thirty-four (34) months. As security for the payment of said motor vehicle was voluntarily surrendered by the appellant to the appellee
promissory note, the appellant executed a chattel mortgage over the same authorizing the latter to look for a buyer and sell the vehicle in behalf of the
motor vehicle in favor of said Alexander Lim. Subsequently, on November 2, appellant who retains ownership thereof, and to apply the proceeds of the
1971. Alexander Lim assigned to the Filinvest Finance Corporation all his sale to the mortgage indebtedness, with the undertaking of the appellant to
rights, title, and interests in the promissory note and chattel mortgage. pay the difference, if any, between the selling price and the mortgage
Filinvest Finance Corp later merged with Credit and Development obligation. With the stipulated conditions as stated, the appellee, in essence
Corporation and assigned to the new corporation, Filinvest Credit Corp was constituted as a mere agent to sell the motor vehicle which was
(Plaintiff-appellee herein), all its rights under the said Promissory Note and delivered to the appellee, not as its property, for if it were, he would have
Chattel Mortgage. full power of disposition of the property, not only to sell it as is the limited
authority given him in the special power of attorney. Had appellee intended
Philippine Acetylene failed to make nine successive installments prompting to completely release appellant of its mortgage obligation, there would be
Filivest to send demand letters to the former. Replying thereto, Philippine no necessity of executing the document captioned "Voluntary Surrender
Acetylene wrote back advising appellee of its decision to "return the with Special Power of Attorney To Sell." Nowhere in the said document can
mortgaged property, which return shall be in full satisfaction of its We find that the mere surrender of the mortgaged motor vehicle to the
indebtedness pursuant to Article 1484 of the New Civil Code." Accordingly, appellee extinguished appellant's obligation for the unpaid price.
the mortgaged vehicle was returned to the appellee together with the
document "Voluntary Surrender with Special Power of Attorney To Sell" Appellant would also argue that by accepting the delivery of the mortgaged
motor vehicle, appellee is estopped from demanding payment of the unpaid
On April 4, 1973, appellee wrote a letter to appellant informing the latter obligation. Estoppel would not he since, as clearly set forth above, appellee
that appellee cannot sell the motor vehicle as there were unpaid taxes on never accepted the mortgaged motor vehicle in full satisfaction of the
the said vehicle in the sum of P70,122.00. On the last portion of the said mortgaged debt.
letter, appellee requested the appellant to update its account by paying the
installments in arrears and accruing interest in the amount of P4,232.21 on Under the law, the delivery of possession of the mortgaged property to the
or before April 9, 1973. mortgagee, the herein appellee, can only operate to extinguish appellant's
liability if the appellee had actually caused the foreclosure sale of the
On May 8, 1973, appellee, in a letter, offered to deliver back the motor mortgaged property when it recovered possession thereof. 6 It is worth
vehicle to the appellant but the latter refused to accept it, so appellee noting that it is the fact of foreclosure and actual sale of the mortgaged
instituted an action for collection of a sum of money with damages in the chattel that bar the recovery by the vendor of any balance of the purchaser's
Court of First Instance of Manila on September 14, 1973. outstanding obligation not satisfied by the sale. 7 As held by this Court, if the
vendor desisted, on his own initiative, from consummating the auction sale,
Issue: Whether or not the return of the mortgaged motor vehicle to the such desistance was a timely disavowal of the remedy of foreclosure, and
appellee by virtue of its voluntary surrender by the appellant totally the vendor can still sue for specific performance. 8 This is exactly what
extinguished and/or cancelled its obligation to the appellee. happened in the instant case.
Ruling: NO.
Consistent with its stand in the court a quo, appellant now reiterates its
main contention that appellee, after giving appellant an option either to
remit payment in full plus stipulated interests and charges or return the
mortgaged motor vehicle, had elected the alternative remedy of exacting
fulfillment of the obligation, thus, precluding the exercise of any other
remedy provided for under Article 1484 of the Civil Code of the Philippines
which reads:
Article 1484. Civil Code. - In a contract of sale of personal property the price
of which is payable in installments, the vendor may exercise any of the
following remedies:
1) Exact fulfillment of the obligation, should the vendee fail to pay;
2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;
3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more
contrary shall be void.
Passing at once on the relevant issue raised in this appeal, We find

appellant's contention devoid of persuasive force. The mere return of the
mortgaged motor vehicle by the mortgagor, the herein appellant, to the
mortgagee, the herein appellee, does not constitute dation in payment
or dacion en pago in the absence, express or implied of the true intention of
the parties. In the absence of clear consent of appellee to the proferred
special mode of payment, there can be no transfer of ownership of the
Case Digest 2018
Topic: Breach of Contract of Sales; Sales of Movables mortgagee, the herein appellee, can only operate to extinguish appellant’s
liability if the appellee had actually caused the foreclosure sale of the
SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL mortgaged property when it recovered possession thereof (Northern
FAJARDO, Petitioners, v. ASIAN CONSUMER AND INDUSTRIAL FINANCE Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v. Dy
CORPORATION and the HONORABLE COURT OF APPEALS, Respondents. Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil.
G.R. No. 94828. September 18, 1992, BELLOSILLO, J. 782 [1956]). It is worth noting that it is the fact of foreclosure and actual
sale of the mortgaged chattel that bar recovery by the vendor of any balance
Facts: On 22 September 1982, the spouses Romulo de la Cruz and Delia of the purchaser’s outstanding obligation not satisfied by the sale (New Civil
de la Cruz, and one Daniel Fajardo, petitioners herein, purchased on Code, par. 3, Article 1484). As held by this Court, if the vendor desisted, on
installment basis one (1) unit Hino truck from Benter Motor Sales his own initiative, from consummating the auction sale, such desistance was
Corporation (BENTER for brevity). To secure payment, they executed in a timely disavowal of the remedy of foreclosure, and the vendor can still sue
favor of BENTER a chattel mortgage over the vehicle and a promissory note for specific performance" (Industrial Finance Corp. v. Tobias, 78 SCRA 28
for P282,360.00 payable in thirty (30) monthly installments of P9,412.00. [1977]; Radiowealth, Inc. v. Lavin, L-18563, April 27, 1963, 7 SCRA 804;
On the same date, BENTER assigned its rights and interest over the vehicle Pacific Commercial Co. v. dela Rama, 72 Phil. 380 [1941]).
in favor of private respondent Asian Consumer and Industrial Finance
Corporation (ASIAN for brevity). Although petitioners initially paid some Consequently, in the case before Us, there being no actual foreclosure of the
installments they subsequently defaulted on more than two (2) mortgaged property, ASIAN is correct in resorting to an ordinary action for
installments. Thereafter, notwithstanding the demand letter of ASIAN, collection of the unpaid balance of the purchase price.
petitioners failed to settle their obligation.
We note however that the trial court, as well as the Court of Appeals failed
On 26 September 1984, by virtue of a petition for extrajudicial foreclosure to consider that the vehicle was already in the possession of ASIAN when it
of chattel mortgage, the sheriff attempted to repossess the vehicle but was directed petitioners herein to pay P184,466.67 representing the balance of
unsuccessful because of the refusal of the son of petitioner, Rolando de la the purchase price of the mortgaged property. Law and equity will not
Cruz to surrender the same. Hence, the return of the sheriff that the service permit ASIAN to have its cake and eat it too, so to speak. By allowing ASIAN
was not satisfied. to retain possession of the vehicle and then directing petitioners to pay the
unpaid balance would certainly result in unjust enrichment of the former.
On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the Accordingly, the ownership and possession of the vehicle should be
office of ASIAN and left it there where it was inventoried and inspected. returned to petitioners by ASIAN in the condition that it was when
delivered to it, and if this be no longer feasible, to deduct from the adjudged
On 27 November 1984, ASIAN filed an ordinary action with the court a quo liability of petitioners the amount of P60,000.00, its corresponding
for collection of the balance of P196,152.99 of the purchase price, plus appraised value.
liquidated damages and attorney’s fees.
Issue: Whether a chattel mortgagee, after opting to foreclose the

mortgage but failing afterwards to sell the property at public auction, may
still sue to recover the unpaid balance of the purchase price.
Ruling: NO.
It is not disputed that the instant case is covered by the so-called "Recto
Law", now Art. 1484 of the New Civil Code, which provides:
"In a contract of sale of personal property the price of which is payable in

installments, the vendor may exercise any of the following remedies: (1)
Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel
the sale, should the vendee’s failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee’s failure to pay cover two or more
contrary shall be void."
In this jurisdiction, the three (3) remedies provided for in the "Recto Law"
are alternative and not cumulative; the exercise of one would preclude the
other remedies. Consequently, should the vendee-mortgagor default in the
payment of two or more of the agreed installments, the vendor-mortgagee
has the option to avail of any of these three (3) remedies: either to exact
fulfillment of the obligation, to cancel the sale, or to foreclose the mortgage
on the purchased chattel, if one was constituted. 7
The records show that on 14 September 1984 ASIAN initiated a petition for
extrajudicial foreclosure of the chattel mortgage. But the sheriff failed to
recover the motor vehicle from petitioners due to the refusal of the son of
petitioners Romulo and Delia de la Cruz to surrender it. It was not until 10
October 1984, or almost a month later that petitioners delivered the unit to
ASIAN. The action to recover the balance of the purchase price was
instituted on 27 November 1984.
It is thus clear that while ASIAN eventually succeeded in taking possession

of the mortgaged vehicle, it did not pursue the foreclosure of the mortgage
as shown by the fact that no auction sale of the vehicle was ever conducted.
As we ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. 8 —
"Under the law, the delivery of possession of the mortgaged property to the
Case Digest 2018
Topic: Breach of Contract of Sales; RA 6552 Petitioners cannot seek protection from PD 957 28 particularly its provision
providing for non-forfeiture of payments when the vendee desists from
RUSSEL, RIZZA, KATHERINE, LYRA, RUTH, all surnamed DE LOS further payment due to the failure of the developer or owner to develop the
SANTOS, represented by their father LEONARDO DE LOS SANTOS vs. subdivision. The ocular inspection report showed substantial compliance on
COURT OF APPEALS, PASIG REALTY AND DEVELOPMENT the part of the corporation insofar as the development of the subdivision
CORPORATION and SPOUSES JOSE RAMIREZ SAN BUENAVENTURA and was concerned.
JOSEPHINE REDIGA SAN BUENAVENTURA
G.R. No. 147912, April 26, 2006, CORONA, J.
Facts: On May 18, 1987, petitioners entered into a contract to sell with
private respondent Pasig Realty and Development Corporation for the
purchase of a parcel of land in Phase I-D of Parkwood Greens Executive
Village, Maybunga, Pasig. Out of the total purchase price of P189,810, a
down payment of P45,506.40 was required, with the balance of
P144,103.60 payable over 60 months with interest at P3,898.48 per month
beginning June 18, 1987.
Upon execution of the contract, petitioners paid the down

payment.1avvphil.net On February 24, 1988, they issued ten postdated
checks in the amount of P5,000 each in favor of private respondent
corporation. Only one of the checks was honored while the others were
dishonored by reason of insufficiency of funds.
On May 27, 1988, private respondent corporation demanded the settlement

of all unpaid amortizations amounting to P46,781.76 covering the period
June 18, 1987 to May 18, 1988. On June 6, 1988, petitioners paid P10,000 in
cash. No further payment was made.
On January 18, 1989, private respondent corporation notified petitioners

that it was exercising its option to cancel the contract to sell with forfeiture
of payments made, effective 30 days from notice, 3 in accordance to Section
4 of RA 6552 4 and paragraph 6 of the contract to sell.
On May 3, 1991, private respondent corporation requested petitioners to

vacate the property to enable the new buyer to take possession of the same.
Instead, petitioners questioned the cancellation of the contract alleging that
they stopped payment due to private respondent corporation’s failure to
develop the subdivision.
Issue: WON the rescission of the contract and the consequent forfeiture
of the payments made were in accordance to the contract itself and RA
6552.
Ruling: YES
Petitioners defaulted in the payment of several monthly amortizations. Out

of the contract price of P189,810, only P60,506.40 26 was paid. In effect, of
the 60 monthly amortizations agreed upon, only about 15 were settled.
In cases such as this where less than two years of installments have been
made, Section 4 of RA 6552 grants the vendee a grace period of not less than
sixty days from the date the installment became due to pay the
amortizations. If the vendee fails to pay at the end of the grace period, the
vendor may cancel the contract 30 days after the receipt by the vendee of
the notice of cancellation.
In the same vein, paragraph 6 of the contract to sell granted the vendor an
option to cancel the contract and forfeit the payments made should the
vendee fail to pay any of the monthly amortizations within 60 days from the
due date. Thereafter, the vendor may dispose of the subject lot to any other
person as if said contract had never been made. 27
Here, petitioners paid P10,000 on June 6, 1988. Despite the lapse of more

than 60 days as grace period, they continued to default in their obligation.
On January 18, 1989, private respondent corporation opted to cancel the
contract with forfeiture of payments made. Accordingly, thirty days
therefrom, the contract was cancelled and payments made were forfeited.
Case Digest 2018
Topic: Breach of Contract of Sales; RA 6552 We sustain the findings and ruling of the CA, which were supported by the
records and relevant laws, and were consistent with the findings and ruling
FEDMAN DEVELOPMENT CORPORATION vs. FEDERICO AGCAOILI of the RTC.
G.R. No. 165025, August 31, 2011, BERSAMIN, J.
In upholding Agcaoilis right to suspend the payment of his monthly
Facts: FDC was the owner and developer of a condominium project amortizations due to the increased interest rates imposed by FDC, and
known as Fedman Suites Building (FSB) located on Salcedo Street, Legazpi because he found FDCs cancellation of the contract to sell as improper, the
Village, Makati City. On June 18, 1975, Interchem Laboratories Incorporated CA found and ruled as follows:
(Interchem) purchased FSBs Unit 411 under a contract to sell. On March 31,
1977, FDC executed a Master Deed with Declaration of Restrictions, and It is the contention of the appellee that he has the right to suspend
formed the Fedman Suite Condominium Corporation (FSCC) to manage FSB payments since the increase in interest rate imposed by defendant-
and hold title over its common areas. appellant FDC is not valid and therefore cannot be given legal effect.
Although Section II, paragraph d of the Contract to Sell entered into by the
On October 10, 1980, Interchem, with FDCs consent, transferred all its parties states that, should there be an increase in bank interest rate for
rights in Unit 411 to respondent Federico Agcaoili (Agcaoili), a practicing loans and/or other financial accommodations, the rate of interest provided
attorney who was then also a member of the Provincial Board of Quezon for in this contract shall be automatically amended to equal the said
Province. In December 1983, the centralized air-conditioning unit of FSBs increased bank interest rate, the date of said amendment to coincide with
fourth floor broke down.[7] On January 3, 1984, Agcaoili, being thereby the date of said increase in interest rate, the said increase still needs to [be]
adversely affected, wrote to Eduardo X. Genato (Genato), vice-president and accompanied by valid proofs and not one of the parties must unilaterally
board member of FSCC, demanding the repair of the air-conditioning unit alter what was originally agreed upon. However, FDC failed to substantiate
but the same was unheeded. He then informed FDC and FSCC that he was the alleged increase with sufficient proof, thus we quote with approval the
suspending the payment of his condominium dues and monthly findings of the lower court, to wit:
amortizations.
In the instant case, defendant FDC failed to show by evidence that it
On August 30, 1984, FDC cancelled the contract to sell involving Unit 411 incurred loans and /or other financial accommodations to pay interest for
and cut off the electric supply to the unit. Agcaoili was thus prompted to sue its loans in developing the property. Thus, the increased interest rates said
FDC and FSCC for injunction and damages. [10] The parties later executed a defendant is imposing on plaintiff is not justified, and to allow the same is
compromise agreement that the RTC approved through its decision of tantamount to unilaterally altering the terms of the contract which the law
August 26, 1985. As a result, FDC reinstated the contract to sell and allowed proscribes. Article 1308 of the Civil Code provides:
Agcaoili to temporarily install two window-type air-conditioners in Unit
411.[11] Art. 1308 The contract must bind both contracting parties; its validity or
On April 22, 1986, FDC again disconnected the electric supply of Unit 411. compliance cannot be left to the will of one of them.
[12]
Agcaoili thus moved for the execution of the RTC decision dated August
26, 1985.[13] On July 17, 1986, the RTC issued an order temporarily allowing For this reason, the court sees no valid reason for defendant FDC to cancel
Agcaoili to obtain his electric supply from the other units in the fourth floor the contract to sell on ground of default or non-payment of monthly
of FSB until the main meter was restored.[14] amortizations.

On March 6, 1987, Agcaoili lodged a complaint for damages against FDC and It was also grave error on the part of the FDC to cancel the contract to sell
FSCC. for non-payment of the monthly amortizations without taking into
consideration Republic Act 6552, otherwise known as the Maceda Law. The
In its answer, FDC contended that despite demands, Agcaoili did not pay the policy of law, as embodied in its title, is to provide protection to buyers of
amortizations due from November 1983 to March 1985 and the surcharges, real estate on installment payments. As clearly specified in Section 3, the
the total amount of which was ₱376,539.09; that due to the non-payment, declared public policy espoused by Republic Act No. 6552 is to protect
FDC cancelled the contract to sell and forfeited the amount of ₱219,063.97 buyers of real estate on installment payments against onerous and
paid by Agcaoili, applying the amount to the payment of liquidated oppressive conditions. Thus, in order for FDC to have validly cancelled the
damages, agents commission, and interest; that it demanded that Agcaoili existing contract to sell, it must have first complied with Section 3 (b) of RA
vacate Unit 411, but its demand was not heeded; that Agcaoili did not pay 6552. FDC should have refund the appellee the cash surrender value of the
his monthly amortizations of ₱1,883.84 from October 1985 to May 1986, payments on the property equivalent to fifty percent of the total payments
resulting in FSCC being unable to pay the electric bills on time to the Manila made. At this point, we, find no error on the part of the lower court when it
Electric Company resulting in the disconnection of the electric supply of ruled that:
FSB; that it allowed Agcaoili to obtain electric supply from other units
because Agcaoili promised to settle his accounts but he reneged on his There is nothing in the record to show that the aforementioned requisites
promise. for a valid cancellation of a contract where complied with by defendant FDC.
Hence, the contract to sell which defendant FDC cancelled as per its letter
On its part, FSCC filed an answer, admitting that the electric supply of Unit dated August 17, 1987 remains valid and subsisting. Defendant FDC cannot
411 was disconnected for the second time on April 22, 1986, but averring by its own forfeit the payments already made by the plaintiff which as of the
that the disconnection was justified because of Agcaoilis failure to pay the same date amounts to ₱263,637.73.
monthly amortizations and condominium dues despite repeated demands.
It averred that it did not repair the air-conditioning unit because of Among the obligations of FDC and FSCC to the unit owners or purchasers of
dwindling collections caused by the failure of some unit holders to pay their FSBs units was the duty to provide a centralized air-conditioning unit,
obligations on time; that the unit holders were notified of the electricity lighting, electricity, and water; and to maintain adequate fire exit, elevators,
disconnection; and that the electric supply of Unit 411 could not be restored and cleanliness in each floor of the common areas of FSB.[41] But FDC and
until Agcaoili paid his condominium dues totaling ₱14,701.16 as of April FSCC failed to repair the centralized air-conditioning unit of the fourth floor
1987. [17] of FSB despite repeated demands from Agcaoili. [42] To alleviate the physical
discomfort and adverse effects on his work as a practicing attorney brought
RTC rendered judgment in favor of Agcaoili: that he was justified in about by the breakdown of the air-conditioning unit, he installed two
suspending the payment of his monthly amortizations. window-type air-conditioners at his own expense.[43]Also, FDC and FSCC
failed to provide water supply to the comfort room and to clean the
Issue: WON (a) Agcaoili had the right to suspend payment of his corridors.[44] The fire exit and elevator were also defective. [45] These defects,
monthly amortizations and (b) that FDC had no right to cancel the contract among other circumstances, rightly compelled Agcaoili to suspend the
to sell payment of his monthly amortizations and condominium dues. Instead of
addressing his valid complaints, FDC disconnected the electric supply of his
Ruling: YES. Unit 411 and unilaterally increased the interest rate without justification. [46]
Case Digest 2018
Ramos v. Heruela27 held that Articles 1191 and 1592 of the Civil Code 28 are
Topic: Breach of Contract of Sales; RA 6552 applicable to contracts of sale, while R.A. No. 6552 applies to contracts to
sell.
MANUEL UY & SONS, INC. vs. VALBUECO, INCORPORATED The Court of Appeals correctly held that R.A. No. 6552, otherwise known as
G.R. No. 179594, September 11, 2013, PERALTA, J. the Realty Installment Buyer Act, applies to the subject contracts to sell. R.A.
No. 6552 recognizes in conditional sales of all kinds of real estate
Facts: Petitioner Manuel Uy & Sons, Inc. is the registered owner of (industrial, commercial, residential) the right of the seller to cancel the
parcels of land located in Teresa, Rizal. On November 29, 1973, two contract upon non-payment of an installment by the buyer, which is simply
Conditional Deeds of Sale were executed by petitioner, as vendor, in favor of an event that prevents the obligation of the vendor to convey title from
respondent Valbueco, Incorporated, as vendee. acquiring binding force.29
Respondent was able to pay petitioner the amount of ₱275,055.55 8 as It also provides the right of the buyer on installments in case he defaults in
partial payment for the two properties corresponding to the initial the payment of succeeding installments30 as follows:
payments and the first installments of the said properties.
Section 3. In all transactions or contracts involving the sale or financing of
At the same time, petitioner complied with its obligation under the real estate on installment payments, including residential condominium
conditional deeds of sale. However, respondent suspended further payment apartments but excluding industrial lots, commercial buildings and sales to
as it was not satisfied with the manner petitioner complied with its tenants under Republic Act Numbered Thirty-eight hundred forty-four, as
obligations under the conditional deeds of sale. Consequently, on March 17, amended by Republic Act Numbered Sixty-three hundred eighty-nine,
1978, petitioner sent respondent a letter 11 informing respondent of its where the buyer has paid at least two years of installments, the buyer is
intention to rescind the conditional deeds of sale and attaching therewith entitled to the following rights in case he defaults in the payment of
the original copy of the respective notarial rescission. succeeding installments:
On November 28, 1994, respondent filed a Complaint 12 for specific
performance and damages against petitioner with the RTC of Antipolo City. To pay, without additional interest, the unpaid installments due within the
However, on January 15, 1996, the case was dismissed without total grace period earned by him which is hereby fixed at the rate of one
prejudice13 for lack of interest, as respondent's counsel failed to attend the month grace period for every one year of installment payments made:
pre-trial conference. Provided, That this right shall be exercised by the buyer only once in every
five years of the life of the contract and its extensions, if any.
Five years later, or on March 16, 2001, respondent again filed with the RTC
of Manilaa Complaint14 for specific performance and damages, seeking to If the contract is canceled, the seller shall refund to the buyer the cash
compel petitioner to accept the balance of the purchase price for the two surrender value of the payments on the property equivalent to fifty per cent
conditional deeds of sale and to execute the corresponding deeds of of the total payments made, and, after five years of installments, an
absolute sale. additional five per cent every year but not to exceed ninety per cent of the
total payments made: Provided, That the actual cancellation of the contract
In its Answer,15 petitioner argued that the case should be dismissed, as it shall take place after thirty days from receipt by the buyer of the notice of
was barred by prior judgment. Moreover, petitioner contended that it could cancellation or the demand for rescission of the contract by a notarial act
not be compelled to execute any deed of absolute sale, because respondent and upon full payment of the cash surrender value to the buyer.
failed to pay in full the purchase price of the subject lots. Petitioner claimed
that it gave respondent a notice of notarial rescission of both conditional Down payments, deposits or options on the contract shall be included in the
deeds of sale that would take effect 30 days from receipt thereof. The notice computation of the total number of installment payments made.
of notarial rescission was allegedly received by respondent on March
17,1978. Petitioner asserted that since respondent failed to pay the full Sec. 4. In case where less than two years of installments were paid, the
purchase price of the subject lots, both conditional deeds of sale were seller shall give the buyer a grace period of not less than sixty days from the
rescinded as of April 16, 1978; hence, respondent had no cause of action date the installment became due.
against it.
If the buyer fails to pay the installments due at the expiration of the grace
In its Reply,16 respondent denied that it received the alleged notice of period, the seller may cancel the contract after thirty days from receipt by
notarial rescission. Respondent also denied that the alleged recipient (one the buyer of the notice of cancellation or the demand for rescission of the
Wenna Laurenciana)17 of the letter dated March 17, 1978, which was contract by a notarial act.31
attached to the notice of notarial rescission, was its employee. Respondent
stated that assuming arguendo that the notice was sent to it, the address In this case, respondent has paid less than two years of installments;
(6th Floor, SGC Bldg., Salcedo Street, Legaspi Village, Makati, Metro Manila) therefore, Section 4 of R.A. No. 6552 applies.
was not the given address of respondent. Respondent contended that its
address on the conditional deeds of sale and the receipts issued by it and The Court of Appeals held that even if respondent defaulted in its full
petitioner showed that its principal business address was the 7th Floor, payment of the purchase price of the subject lots, the conditional deeds of
Bank of P.I. Bldg, Ayala Avenue, Makati, Rizal. sale remain valid and subsisting, because there was no valid notice of
notarial rescission to respondent, as the notice was sent to the wrong
On August 1, 2005, the trial court rendered a Decision, 18 dismissing the address, that is, to Mahogany Products Corporation, and it was received by a
complaint, as petitioner had exercised its right to rescind the contracts. person employed by Mahogany Products Corporation and not the
The trial court held that the conditional deeds of sale were executed on respondent.
November 29, 1973 and were already covered by Republic Act (R.A.) No.
6552, otherwise known as the Realty Installment Buyer Act. Under Section However, upon review of the records of this case, the Court finds that
4 of the law, if the buyer fails to pay the installments due at the expiration of respondent had been served a notice of the notarial rescission of the
the grace period, which is not less than 60 days from the date the conditional deeds of sale when it was furnished with the petitioner's
installment became due, the seller may cancel the contract after 30 days Answer, dated February 16, 1995, to its first Complaint filed on November
from receipt of the buyer of the notice of cancellation or the demand for 28, 1994with the RTC of Antipolo City, which case was docketed as Civil
rescission of the contracts by notarial act. On December 11, 2006, the Court Case No.94-3426, but the complaint was later dismissed without prejudice
of Appeals rendered a Decision, reversing and setting aside the Decision of on January15, 1996.32
the trial court.
It appears that after respondent filed its first Complaint for specific
Issue: performance and damages with the RTC of Antipolo City on November
28,1994, petitioner filed an Answer and attached thereto a copy of the
written notice dated March 17, 1978 and copies of the notarial acts of
Ruling:
rescission dated March 15, 1978, and that respondent received a copy of the
Case Digest 2018
said Answer with the attached notices of notarial rescission. However, to

reiterate, the first Complaint was dismissed without prejudice.
Five years after the dismissal of the first Complaint, respondent again filed
this case for specific performance and damages, this time, with the RTC of
Manila. Petitioner filed an Answer, and alleged, among others, that the case
was barred by prior judgment, since respondent filed a complaint on
November 28, 1994 before the RTC of Antipolo City, Branch 73, against it
(petitioner) involving the same issues and that the case, docketed as Civil
Case No. 94-3426, was dismissed on January 15, 1996 for lack of interest.
Respondent filed a Reply 33 dated July 18, 2001, asserting that petitioner
prayed for the dismissal of the first case filed on November 28, 1994 (Civil
Case No. 94-3426) on the ground of improper venue as the parties agreed in
the deeds of conditional sale that in case of litigation, the venue shall be in
the courts of Manila. To prove its assertion, respondent attached to its Reply
a copy of petitioner’s Answer to the first Complaint in Civil Case No. 94-
3426, which Answer included the written notice dated March 17, 1978 and
two notarial acts of rescission, both dated March 15, 1978, of the two
conditional deeds of sale. Hence, respondent is deemed to have had notice
of the notarial rescission of the two conditional deeds of sale when it
received petitioner’s Answer to its first complaint filed with the RTC of
Antipolo, since petitioner’s Answer included notices of notarial rescission of
the two conditional deeds of sale. The first complaint was filed six years
earlier before this complaint was filed. As stated earlier, the first complaint
was dismissed without prejudice, because respondent’s counsel failed to
appear at the pre-trial. Since respondent already received notices of the
notarial rescission of the conditional deeds of sale, together with
petitioner’s Answer to the first Complaint five years before it filed this case,
it can no longer deny having received notices of the notarial rescission in
this case, as respondent admitted the same when it attached the notices of
notarial rescission to its Reply in this case. Consequently, respondent is not
entitled to the relief granted by the Court of Appeals.
Under R.A. No. 6552, the right of the buyer to refund accrues only when he
has paid at least two years of installments. 34 In this case, respondent has
paid less than two years of installments; hence, it is not entitled to a
refund.35
Case Digest 2018
Topic: Breach of Contract of Sales; RA 6552 Section 3. In all transactions or contracts, involving the sale or financing of
real estate on installment payments, including residential condominium
SPOUSES JAIME SEBASTIAN AND EVANGELINE SEBASTIAN vs. BPI apartments but excluding industrial lots, commercial buildings and sales to
FAMILY BANK, INC., CARMELITA ITAPO AND BENJAMIN HAO tenants under Republic Act Numbered Thirty-Eight hundred forty-four as
G.R. No. 160107, October 22, 2014, BERSAMIN, J. amended by Republic Act Sixty-three hundred eighty-nine, where the buyer
has paid at least two years of installments, the buyer is entitled to the
Facts: The petitioners are spouses who used to work for BPI Family, following rights in case he defaults in the payment of succeeding
Jaime as a Branch Manager of BPI Family – San Francisco Del Monte, QC installments:
while Evangeline was a bank teller at Blumentritt, Manila Branch. On
October 30, 1987, they availed themselves of a housing loan from BPI (a) To pay, without additional interest, the unpaid installments due within
Family as one of the benefits extended to its employees. Their loan the total grace period earned by him which is hereby fixed at that rate of
amounted to ₱273,000.00, and was covered by a Loan Agreement secured one month grace period for every one year of installment payments made;
by a real estate mortgage in favor of BPI Family over the property situated provided, That this right shall be exercised by the Buyer only once in every
in Bo. Ibayo, Marilao, Bulacan and covered by TCT No. T-30.827 (M) of the five years of the life of the contract and its extensions, if any.
Register of Deeds of Bulacan.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash
The petitioners’ monthly loan amortizations were regularly deducted from surrender value of the payments on the property equivalent to fifty percent
Jaime’s monthly salary since January 10, 1988. On December 14, 1989, of the total payments made, and, after five years of installments, an
however, Jaime received a notice of termination from BPI Family’s Vice additional five per cent every year but not to exceed ninety per cent of the
President, Severino P. Coronacion, informing him that he had been total payments made; Provided, That the actual cancellation or the demand
terminated from employment due to loss of trust and confidence resulting for rescission of the contract by a notarial act and upon full payment of the
from his wilful non-observance of standard operating procedures and cash surrender value to the buyer.
banking laws. Evangeline also received a notice of termination dated
February 23, 1990, telling her of the cessation of her employment on the Down payments, deposits or options on the contract shall be included in the
ground of abandonment. computation of the total number of installment payments made.
Immediately, the petitioners filed a complaint for illegal dismissal against SECTION 4. In case where less than two years of installments were paid, the
BPI Family in the National Labor Relations Commission (NLRC). seller shall give the buyers a grace period of not less than sixty days from
the date the installment become due.
About a year after their termination from employment, the petitioners
received a demand letter from BPI Family’s counsel requiring them to pay If the buyer fails to pay the installments due at the expiration of the grace
their total outstanding obligation amounting to ₱221,534.50. The demand period, the seller may cancel the contract after thirty days from receipt by
letter stated that their entire outstanding balance had become due and the buyer of the notice of cancellation or the demand for rescission of the
demandable upon their separation from BPI Family. contract by a notarial act.
In the meantime, BPI Family instituted a petition for the foreclosure of the SECTION 5. Under Section 3 and 4, the buyer shall have the right to sell his
real estate mortgage. The petitioners received on March 6, 1991 the notice rights or assign the same to another person or to reinstate the contract by
of extrajudicial foreclosure of mortgage dated February 21, 1991. updating the account during the grace period and before actual cancellation
of the contract. The deed of sale or assignment shall be done by notarial act.
To prevent the foreclosure of their property, the petitioners filed against the
respondents their complaint for injunction and damages with application Having paid monthly amortizations for two years and four months, the
for preliminary injunction and restraining order in the Regional Trial Court petitioners now insist that they were entitled to the grace period within
(RTC) in Malolos, Bulacan. They therein alleged that their obligation was not which to settle the unpaid amortizations without interest provided under
yet due and demandable considering that the legality of their dismissal was Section 3, supra. Otherwise, the foreclosure of the mortgaged property
still pending resolution by the labor court; hence, there was yet no basis for should be deemed premature inasmuch as their obligation was not yet due
the foreclosure of the mortgaged property. and demandable.
In its answer with counterclaim, BPI Family asserted that the loan extended
The petitioners’ insistence would have been correct if the monthly
to the petitioners was a special privilege granted to its employees; that the
amortizations being paid to BPI Family arose from a sale or financing of real
privilege was coterminous with the tenure of the employees with the
estate. In their case, however, the monthly amortizations represented the
company; and that the foreclosure of the mortgaged property was justified
installment payments of a housing loan that BPI Family had extended to
by the petitioners’ failure to pay their past due loan balance.
them as an employee’s benefit. The monthly amortizations they were
liable for was derived from a loan transaction, not a sale transaction,
RTC dismissed the case filed by the Spouses as well as the bank’s
thereby giving rise to a lender-borrower relationship between BPI
counterclaim. On appeal to the CA, Petitioners contended for the first time
Family and the petitioners. It bears emphasizing that Republic Act No.
that their rights under Republic Act No. 6552 (Realty Installment Buyer
6552 aimed to protect buyers of real estate on installment payments, not
Protection Act) had been disregarded, considering that Section 3 of the law
borrowers or mortgagors who obtained a housing loan to pay the costs of
entitled them to a grace period within which to settle their unpaid
their purchase of real estate and used the real estate as security for their
installments without interest. CA however denied their claim.
loan. The "financing of real estate in installment payments" referred to in
Section 3, supra, should be construed only as a mode of payment vis-à -vis
Issue: Whether or not respondent Court of Appeals gravely erred in
the seller of the real estate, and excluded the concept of bank financing that
denying petitioners’ motion for reconsideration despite justifiable reasons
was a type of loan. Accordingly, Sections 3, 4 and 5, supra, must be read as
therefor.
to grant certain rights only to defaulting buyers of real estate on
installment, which rights are properly demandable only against the seller of
Ruling: NO
real estate.
The Court finds no substantial basis to reverse the judgments of the lower
Thus, in Luzon Brokerage Co., Inc. v.Maritime Building Co., Inc.,30 the Court
courts.
held:
Republic Act No. 6552 was enacted to protect buyers of real estate on
Congress in enacting in September 1972 Republic Act 6552 (the Maceda
installment payments against onerous and oppressive conditions. The
law), has by law which is its proper and exclusive province (and not that of
protections accorded to the buyers were embodied in Sections 3, 4 and 5 of
this Court which is not supposed to legislate judicially) has taken care of
the law, to wit:
Justice Barredo’s concern over "the unhappy and helpless plight of
thousands upon thousands of subdivision buyers" of residential lots.
Case Digest 2018
The Act even in residential properties recognizes and reaffirms the vendor's
right to cancel the contract to sell upon breach and non-payment of the
stipulated installments but requires a grace period after at least two years
of regular installment payments (of one month for every one year of
installment payments made, but to be exercise by the buyer only once in
every five years of the life of the contract) with a refund of certain
percentages of payments made on account of the cancelled contract
(starting with fifty percent with gradually increasing percentages after five
years of installments). In case of industrial and commercial properties, as in
the case at bar, the Act recognizes and reaffirms the Vendor's right
unqualifiedly to cancel the sale upon the buyer's default.
The petitioners purchased the real estate from PHILVILLE Realty, not from
BPI Family. Without the buyer-seller relationship between them and BPI
Family, the provisions of Republic Act No. 6552 were inapplicable and could
not be invoked by them against BPI Family.
Case Digest 2018
Topic: Breach of Contract of Sales; RA 6552 b. The balance of TWENTY THREE THOUSAND FIVE HUNDRED SIXTY TWO
ONLY PESOS (P23,562.00) in eighty four (84) consecutive monthly
TAGAYTAY REALTY CO., INC. vs. ARTURO G. GACUTAN installments of FOUR HUNDRED FIFTEEN & 95/100 PESOS (P415.95) each
G.R. No. 160033, July 1, 2015, BERSAMIN, J. installment, including interest at the rate of twelve (12%) percent per
annum on all outstanding balances, the first of such monthly installment to
Facts: On September 6, 1976, the Respondent Gacutan entered into a be paid on or before the 6th day of each month, beginning October, 1976. It
contract to sell with the Petitioner Tagaytay Realty for the purchase on is understood that unpaid installments or installments in arrears shall earn
installment of a residential lot situated in the Foggy Heights Subdivision a penalty interest of one (1%) percent per month until fully paid. 27 (Bold
then being developed by the Petitioner. Earlier, on June 30, 1976, the underscoring supplied for emphasis of the relevant portion)
Petitioner executed an express undertaking in favor of the Respondent, as xxxx
follows:
Accordingly, the parties agreed to an 84-month or seven-year term of
We hereby undertake to complete the development of the roads, curbs, installment on the net contract price of P23,562.00 at the monthly rate of
gutters, drainage system, water and electrical systems, as well as all the P415.95, the monthly rate being inclusive of the 12% interest per annum.
amenities to be introduced in FOGGY HEIGHTS SUBDIVISION, such as, Such monthly installment of P415.95 included the principal and the annual
swimming pool, pelota court, tennis and/or basketball court, bath house, interest, the latter being legally termed the amortization interest. The
children’s playground and a clubhouse within a period of two years from 15 annual interest was designed to compensate the petitioner for waiting
July 1976, on the understanding that failure on their part to complete such seven years before receiving the total principal amount. As such, the total
development within the stipulated period shall give the VENDEE the option to cost of the lot purchased by the respondent for the seven-year term would
suspend payment of the monthly amortization on the lot/s he/she purchased be P39,097.80, which amount would be inclusive of the contract price of the
until completion of such development without incurring penalty interest. It is lot and the amortization interest.
clearly understood, however, that the period or periods during which we
cannot pursue said development by reason of any act of God, any act or event Vendor and vendee are legally free to stipulate for the payment of either the
constituting force majeure or fortuitous event, or any restriction, regulation, cash price of a subdivision lot or its installment price. Should the vendee opt
or prohibition by the government or any of its branches or instrumentalities, to purchase a subdivision lot via the installment payment system, he is in
shall suspend the running of said 2-year period and the running thereof shall effect paying interest on the cash price, whether the fact and rate of such
resume upon the cessation of the cause of the stoppage or suspension of said interest payment is disclosed in the contract or not. The contract for the
development. purchase and sale of a piece of land on the installment payment system in
the case at bar is not only quite lawful; it also reflects a very wide spread
In his letter dated November 12, 1979, the Respondent notified the usage or custom in our present day commercial life.
Petitioner that he was suspending his amortizations because the amenities
had not been constructed in accordance with the undertaking. Despite
In view of the foregoing, the respondent’s insistence on condoning his
receipt of the Respondent’s other communications requesting updates on
liability for the contractually-stipulated 12% annual amortization interest is
the progress of the construction of the amenities so that he could resume
unwarranted. The condonation will impose a harsh burden upon the
his amortization, the Petitioner did not reply. Instead, on June 10, 1985, the
petitioner, even as it will result in the unjust enrichment of the respondent.
petitioner sent to him a statement of account demanding the balance of the
We cannot ignore that the former has waited for a very long period of time
price, plus interest and penalty. He refused to pay the interest and penalty.
before it would be able to use the proceeds of the lot sold to the respondent.
On October 4, 1990, the Respondent sued the Petitioner for specific
The 1% monthly penalty sought to be charged on the arrears for failure to
performance in the HLURB Arbiter, praying that the Petitioner be ordered
pay the amortizations on time until the arrears would be fully paid was also
to accept his payment of the balance of the contract without interest and
stipulated in paragraph 2.b, second sentence, of the contract to sell, supra.
penalty, and to deliver to him the title of the property. HLURB Arbiter
But such stipulation could not be enforced against the respondent because
ruled in favor of the respondent ordering the latter to accept the payment of
the petitioner waived the penalty should the subdivision development not
the balance of the contract price in the amount of Eight Thousand Five
be completed by July 15, 1978. The waiver should stand considering that
Hundred Eighty Seven and 80/100 Pesos (P8,587.80) without regular and
the suspension of the amortization payment in 1979 was excusable on
penalty interest. The Petitioners appealed to the HLURB Board of
account of the failure to construct the amenities by July 15, 1978, and
Commission but affirmed the decision of the Arbiter. CA also affirmed the
considering further that the petitioner did not contest the suspension of
same.
payment of the monthly amortization.
Issue: WON Respondent as installment buyer should pay the annual
interest and penalty. Under Tamayo v. Huang,32 the buyer has the option to demand the
reimbursement of the total amounts paid, or to await the further
Ruling: Respondent as installment buyer should pay the annual interest development of the subdivision; when the buyer opts for the latter
but not the penalty. alternative, he may suspend the payment of his installments until the time
when the developer has fulfilled its obligation to him; should the developer
The respondent insists that his unpaid obligation was only the balance of persist in refusing to complete the facilities, the National Housing Authority
the contract price amounting to P8,587.80.26 He declines to pay the interest may take over or cause the development and completion of the subdivision
and the penalty on the ground that the petitioner had not constructed the at the expense of the developer.
amenities as promised under the undertaking.
In this case, the respondent initially opted to suspend the payment of his
The Court holds that the respondent was liable for the stipulated annual amortizations, but then offered to complete the payment upon realizing that
interest of 12% but not the penalty. the petitioner did not anymore intend to build the amenities. His payments
from October 6, 1976 to October 6, 1979 corresponded to 36 monthly
Paragraph 2.b, first sentence, of the contract to sell stipulated the 12% amortizations totaling P14,974.20, leaving 48 installments unpaid totaling
annual interest, as follows: P19,965.60.
xxxx
2.) The VENDEE/S hereby agree/s to pay the purchase price of TWENTY
SEVEN THOUSAND SEVEN HUNDRED TWENTY ONLY PESOS (P27,720.00),
Philippine Currency, at the office of the V kati, Rizal, without necessity of
demand or the services of a collector in the following manner:
a. As downpayment, the amount of FOUR THOUSAND ONE HUNDRED FIFTY
EIGHT ONLY PESOS (P4,158.00) upon the execution of the contract.
Case Digest 2018
Topic: Redemption
Should two or more co-owners desire to exercise the right of redemption,
ANGELA M. BUTTE vs. MANUEL UY and SONS, INC. they may only do so in proportion to the share they may respectively have
G.R. No. L-15499, February 28, 1962, REYES, J.B.L., J. in the thing owned in common. (1522a)
Facts: It appears that Jose V. Ramirez, during his lifetime, was a co- ART. 1623. The right of legal predemption or redemption shall not be
owner of a house and lot located at Sta. Cruz, Manila, as shown by Transfer exercised except within thirty days from the notice in writing by the
Certificate of Title No. 52789, issued in the name of the following co- respective vendor, or by the vendor, as the case may be. The deed of sale
owners: Marie Garnier Vda. de Ramirez, 1/6; Jose V. Ramirez, 1/6; Jose E. shall not be accorded in the Registry of Property, unless accompanied by an
Ramirez, 1/6; Rita de Ramirez, 1/6; and Jose Ma. Ramirez, 1/6. affidavit of the vendor that he has given written notice thereof at all
possible redemptioners.
On October 20, 1951, Jose V. Ramirez died. Subsequently, Special
Proceeding No. 15026 was instituted to settle his estate, that included the The right of redemption of co-owners excludes that of adjoining owners.
one-sixth (1/6) undivided share in the aforementioned property. (1524a)
Meanwhile, on December 9, 1958, Mrs. Marie Garnier Vda. de Ramirez, one That the appellant Angela M. Butte is entitled to exercise the right of
of the co-owners of the late Jose V. Ramirez in the Sta. Cruz property, sold legal redemption is clear. As testamentary heir of the estate of J.V.
her undivided 1/6 share to Manuel Uy & Sons, Inc. defendant-appellant Ramirez, she and her co-heirs acquired an interest in the undivided
herein, for the sum of P500,000.00. After the execution by her attorney-in- one-sixth (1/6) share owned by her predecessor (causante) in the
fact, Mrs. Elsa R. Chambers, of an affidavit to the effect that formal notices of Santa Cruz property, from the moment of the death of the aforesaid co-
the sale had been sent to all possible redemptioners, the deed of sale was owner, J.V. Ramirez. By law, the rights to the succession of a deceased
duly registered and Transfer Certificate of Title No. 52789 was cancelled in persons are transmitted to his heirs from the moment of his death, and the
lieu of which a new one was issued in the name of the vendee and the other- right of succession includes all property rights and obligations that survive
co-owners. the decedent.
On the same day (December 9, 1958), Manuel Uy & Sons, Inc. sent a letter to The principle of transmission as of the time of the predecessor's death is
the Bank of the Philippine Islands as judicial administrator of the estate of basic in our Civil Code, and is supported by other related articles. Thus, the
the late Jose V. Ramirez informing it of the above-mentioned sale. This capacity of the heir is determined as of the time the decedent died (Art.
letter, together with that of the bank, was forwarded by the latter to Mrs. 1034); the legitime is to be computed as of the same moment(Art. 908), and
Butte (1/3 of the free portion of Jose’s estate was bequeathed to her) c/o so is the in officiousness of the donation inter vivos (Art. 771). Similarly, the
her counsel Delgado, Flores & Macapagal, Escolta, Manila, and having legacies of credit and remission are valid only in the amount due and
received the same on December 10, 1958, said law office delivered them to outstanding at the death of the testator (Art. 935),and the fruits accruing
plaintiff-appellant's son, Mr. Miguel Papa, who in turn personally handed after that instant are deemed to pertain to the legatee (Art. 948).
the letters to his mother, Mrs. Butte, on December 11 and 12, 1958. Aside As a consequence of this fundamental rule of succession, the heirs of Jose V.
from this letter of defendant-appellant, the vendor, thru her attorney-in-fact Ramirez acquired his undivided share in the Sta. Cruz property from the
Mrs. Chambers, wrote said bank on December 11, 1958 confirming vendee's moment of his death, and from that instant, they became co-owners in the
letter regarding the sale of her 1/6 share in the Sta. Cruz property for the aforesaid property, together with the original surviving co-owners of their
sum of P500,000.00. Said letter was received by the bank on December 15, decedent (causante). A co-owner of an undivided share is necessarily a co-
1958 and having endorsed it to Mrs. Butte's counsel, the latter received the owner of the whole. Wherefore, any one of the Ramirez heirs, as such co-
same on December 16, 1958. Appellant received the letter on December 19, owner, became entitled to exercise the right of legal redemption (retracto
1958. de comuneros) as soon as another co-owner (Maria Garnier Vda. de
Ramirez) had sold her undivided share to a stranger, Manuel Uy & Sons, Inc.
On January 15, 1959, Mrs. Angela M. Butte, thru Atty. Resplandor Sobretodo, This right of redemption vested exclusively in consideration of the
sent a letter and a Philippine National Bank cashier's check in the amount of redemptioner's share which the law nowhere takes into account.
P500,000.00 to Manuel Uy & Sons, Inc. offering to redeem the 1/6 share
sold by Mrs. Marie Garnier Vda. de Ramirez. This tender having been The situation is in no wise altered by the existence of a judicial
refused, plaintiff on the same day consigned the amount in court and filed administrator of the estate of Jose V. Ramirez while under the Rules of Court
the corresponding action for legal redemption. the administrator has the right to the possession of the real and personal
estate of the deceased, so far as needed for the payment of the decedent's
After the filing by defendant of its answer containing a counterclaim, and debts and the expenses of administration (sec. 3, Rule 85), and the
plaintiff's reply thereto, trial was held, after which the court rendered administrator may bring or defend actions for the recovery or protection of
decision on May 13, 1959, dismissing plaintiff's complaint on the grounds the property or rights of the deceased (sec. 2, Rule 88), such rights of
that she has no right to redeem the property and that, if ever she had any, possession and administration do not include the right of legal redemption
she exercised the same beyond the statutory 30-day period for legal of the undivided share sold to Uy & Company by Mrs. Garnier Ramirez. The
redemptions provided by the Civil Code. reason is obvious: this right of legal redemption only came into existence
when the sale to Uy & Sons, Inc. was perfected, eight (8) years after the
Issue: (1) whether or not plaintiff-appellant, having been bequeathed death of Jose V. Ramirez, and formed no part of his estate. The redemption
1/3 of the free portion of the estate of Jose V. Ramirez, can exercise the right right vested in the heirs originally, in their individual capacity, they did not
of legal redemption over the 1/6 share sold by Mrs. Marie Garnier Vda. de derivatively acquire it from their decedent, for when Jose V. Ramirez died,
Ramirez despite the presence of the judicial administrator and pending the none of the other co-owners of the Sta. Cruz property had as yet sold his
final distribution of her share in the testate proceedings; and (2) whether or undivided share to a stranger. Hence, there was nothing to redeem and no
not she exercised the right of legal redemption within the period prescribed right of redemption; and if the late Ramirez had no such right at his death,
by law. he could not transmit it to his own heirs. Much less could Ramirez acquire
such right of redemption eight years after his death, when the sale to Uy &
Ruling: (1) YES Sons, Inc. was made; because death extinguishes civil personality, and,
therefore, all further juridical capacity to acquire or transmit rights and
The applicable law involved in the present case is contained in Articles obligations of any kind (Civil Code of the Phil., Art. 42).
1620, p. 1, and 1623 of the Civil Code of the Philippines, which read as
follows: It is argued that the actual share of appellant Mrs. Butte in the estate of Jose
V. Ramirez has not been specifically determined as yet, that it is still
ART. 1620. A co-owner of a thing may exercise the right of redemption in contingent; and that the liquidation of estate of Jose V. Ramirez may require
case the shares of all the other-co-owners or of any of them, are sold to a the alienation of the decedent's undivided portion in the Sta. Cruz property,
third person. If the price of the alienation is grossly excessive, the in which event Mrs. Butte would have no interest in said undivided portion.
redemptioner shall pay only a reasonable one. Even if it were true, the fact would remain that so long as that undivided
Case Digest 2018
share remains in the estate, the heirs of Jose V. Ramirez own it, as the The date of receipt of the vendor's notice by the Administrator Bank
deceased did own it before his demise, so that his heirs are now as much co- (December 15) cannot be counted as determining the start of thirty days;
owners of the Sta. Cruz property as Jose V. Ramirez was himself a co-owner for the Administrator of the estate was not a proper redemptioner, since, as
thereof during his lifetime. As co-owners of the property, the heirs of Jose V. previously shown, the right to redeem the share of Marie Garnier did not
Ramirez, or any one of them, became personally vested with right of legal form part of the estate of Jose V. Ramirez.
redemption as soon as Mrs. Garnier sold her own pro-indiviso interest to Uy
& Sons. Even if subsequently, the undivided share of Ramirez (and of his
heirs) should eventually be sold to satisfy the creditors of the estate, it
would not destroy their ownership of it before the sale, but would only
convey or transfer it as in turn sold (of it actually is sold) to pay his
creditors. Hence, the right of any of the Ramirez heirs to redeem the Garnier
share will not be retroactively affected. All that the law requires is that the
legal redemptioner should be a co-owner at the time the undivided share of
another co-owner is sold to a stranger. Whether or not the redemptioner
will continue being a co-owner after exercising the legal redemptioner is
irrelevant for the purposes of law.
Nor it can be argued that if the original share of Ramirez is sold by the
administrator, his heirs would stand in law as never having acquired that
share. This would only be true if the inheritance is repudiated or the heir's
quality as such is voided. But where the heirship is undisputed, the
purchaser of hereditary property is not deemed to have acquired the title
directly from the deceased Ramirez, because a dead man can not convey
title, nor from the administrator who owns no part of the estate; the
purchaser can only derive his title from the Ramirez heirs, represented by
the administrator, as their trustee or legal representative.
(2) YES
The right of appellant Angela M. Butte to make the redemption being

established, the next point of inquiry is whether she had made or tendered
the redemption price within the 30 days from notices as prescribed by law.
This period, be it noted, is peremptory, because the policy of the law is not
to leave the purchaser's title in uncertainty beyond the established 30-day
period. In considering whether or not the offer to redeem was timely, we
think that the notice given by the vendee (buyer) should not be taken into
account. The text of Article 1623 clearly and expressly prescribes that the
thirty days for making the redemption are to be counted from notice in
writing by the vendor. Under the old law (Civ. Code of 1889, Art. 1524), it
was immaterial who gave the notice; so long as the redeeming co-owner
learned of the alienation in favor of the stranger, the redemption period
began to run. It is thus apparent that the Philippine legislature in Article
1623 deliberately selected a particular method of giving notice, and that
method must be deemed exclusive (39 Am. Jur., 237; Payne vs. State, 12 S.W.
[2d] 528). As ruled in Wampler vs. Lecompte, 150 Atl. 458 (affd. in 75 Law
Ed. [U.S.] 275) —
Why these provisions were inserted in the statute we are not informed, but
we may assume until the contrary is shown, that a state of facts in respect
thereto existed, which warranted the legislature in so legislating.
The reasons for requiring that the notice should be given by the seller, and
not by the buyer, are easily divined. The seller of an undivided interest is in
the best position to know who are his co-owners that under the law must be
notified of the sale. Also, the notice by the seller removes all doubts as to the
fact of the sale, its perfection; and its validity, the notice being a
reaffirmation thereof, so that the party need not entertain doubt that the
seller may still contest the alienation. This assurance would not exist if the
notice should be given by the buyer.
The notice which became operative is that given by Mrs. Chambers, in her
capacity as attorney-in-fact of the vendor Marie Garnier Vda. de Ramirez.
Under date of December 11, 1958, she wrote the Administrator Bank of the
Philippine Islands that her principal's one-sixth (1/6) share in the Sta. Cruz
property had been sold to Manuel Uy & Sons, Inc. for P500,000.00. The Bank
received this notice on December 15, 1958, and on the same day endorsed it
to Mrs. Butte, care of Delgado, Flores and Macapagal (her attorneys), who
received the same on December 16, 1958. Mrs. Butte tendered redemption
and upon the vendee's refusal, judicially consigned the price of P500,000.00
on January 15, 1959. The latter date was the last one of the thirty days
allowed by the Code for the redemption, counted by excluding December
16, 1958 and including January 15, 1959, pursuant to Article 13 of the Civil
Code. Therefore, the redemption was made in due time.
Case Digest 2018
Topic: Redemption
(2) NO. There was no valid and effective query.
PAZ TORRES DE CONEJERO and ENRIQUE CONEJERO vs. COURT OF
APPEALS, VISITACION A. DE RAFFIÑAN and ENRIQUE TORRES The next query is: did petitioners effectuate all the steps required for the
G.R. No. L-21812, April 29, 1966, REYES, J.B.L., J. redemption? We agree with the Court of Appeals that they did not, for they
failed to make a valid tender of the price of the sale paid by the Raffiñ ans
Facts: Paz Torres and Enrique Torres were co-owners pro indiviso of a within the period fixed by law. Conejero merely offered a check for P10,000,
lot and building in Cebu City, covered by Transfer Certificate of Title No. which was not even legal tender and which the Raffiñ ans rejected, in lieu of
197-A1230 (T-3827), that both had inherited from their deceased parents. the price of P28,000 recited by the deed of sale. The factual finding of the
As of September 15, 1949, Enrique Torres sold his half interest to the Court of Appeals to this effect is final and conclusive. Nor were the vendees
Raffiñ an spouses for P13,000, with right to repurchase within one year. obligated to accept Conejero's promise to pay the balance by means of a
Subsequent advances by the vendees a retro increased their claims against loan to be obtained in future from a bank. Bona fide redemption necessarily
Enrique Torres, and finally, on April 3, 1951 (six months after the expiration imports a seasonable and valid tender of the entire repurchase price, and
of the right to repurchase), said Enrique executed a deed of absolute sale of this was not done. There is no cogent reason for requiring the vendee to
the same half interest in the property in favor of the Raffiñ ans for P28,000. accept payment by installments from a redemptioner, as it would ultimately
This deed of absolute sale had not been brought to the attention of result in an indefinite extension of the 30-day redemption period, when the
Enrique's sister and co-owner, Paz Torres de Conejero, nor of her husband, purpose of the law in fixing a short and definite term is clearly to avoid
until August 19, 1952, when Enrique Torres showed his brother-in-law, prolonged and anti-economic uncertainty as to ownership of the thing sold
Enrique Conejero, a copy of the deed of absolute sale of his share of the (Cf. Torrijos vs. Crisologo, et al., G.R. No. L-1773, Sept. 29, 1962).
property in favor of the Raffiñ ans. Conejero forthwith went to the buyers,
offering to redeem his brother-in-law's share, which offer he latter raised to Petitioners Conejero urge that, under the provisions of the Civil Code of the
P29,000.00 and afterwards to P34,000. Philippines, a valid tender of the redemption (or repurchase) price is not
required, citing De la Cruz vs. Marcelino, 84 Phil. 709, and Torio vs. Rosario,
Amicable settlement not having been attained, the Conejeros filed, on 93 Phil. 800. Close scrutiny of these cases reveals that the Supreme Court
October 4, 1952, a complaint in the Court of First Instance of Cebu, seeking held therein that a judicial demand, by action filed within the redemption
to be declared entitled to redeem the half interest of Enrique Torres; to period and accompanied by consignation in Court of the redemption price,
which the Raffiñ ans made answer, claiming absolute title to the property in can take the place of a personal tender to the vendee of the redemption
dispute and pleading that plaintiffs lost their right of redemption because money under the Civil Code of 1889, because the nine-day redemption
they failed to exercise it within the statutory period. period allowed thereunder was so short as to render it impractical that in
The court of first instance found the deed of sale to be an equitable every case the redemptioner should be required to seek out and offer the
mortgage, and declared the plaintiffs Conejero entitled to redeem Enrique's redemption price personally to the buyer. Under the present Civil Code, the
half interest for P34,000. Upon appeal by the defendants, the Court of urgency is greatly lessened by the prolongation of the redemption period to
Appeals reversed the decision of the court of first instance, found that the 30 days, instead of the 9 previously allowed; and the petitioners herein have
deed in favor of the Raffiñ ans was a true sale. neither filed suit within the 30-day redemption period nor made
consignation of the price. While they received copy of the deed of sale on
Issue: (1) WON no written notice was given to the petitioners in this August 19, 1952, complaint was only filed on October 4, 1952.
case and (2) Was there a valid and effective offer to redeem?
It is, likewise, argued that tender of the price is excused because Article
Ruling: (1) There was written notice in this case. 1620 of the new Civil Code allows the redemptioner to pay only a
reasonable price if the price of alienation is grossly excessive, and that the
We are now asked by petitioners Conejero to reverse and set aside the reasonableness of the price to be paid can only be determined by the courts.
foregoing decision of the Court of Appeals, on the basis of two propositions We think that the right of a redemptioner to pay a reasonable price under
advanced by them, to wit: (a) that no written notice of the sale to the Article 1620 does not excuse him from the duty to make proper tender of
Raffiñ ans having been given by Enrique Torres to his sister and co-owner, the price that can be honestly deemed reasonable under the circumstances,
Paz T. de Conejero, the latter's light to exercise legal redemption has not without prejudice to final arbitration by the courts; nor does it authorize
expired, in fact, it has not even started to run; and (b) that in legal said redemptioner to demand that the vendee accept payment by
redemption no tender of the redemption price is required, mere demand to installments, as petitioners have sought to do. At any rate, the petitioners, in
allow redemption being sufficient to preserve the redemptioner's right. making their offer to redeem, never contested the reasonableness of the
price recited in the deed of sale. In fact, they even offered more, and were
With regard to the written notice, we agree with petitioners that such notice willing to pay as much as P34,000.
is indispensable, and that, in view of the terms in which Article of the
Philippine Civil Code is couched, mere knowledge of the sale, acquired in It is not difficult to discern why the redemption price should either be fully
some other manner by the redemptioner, does not satisfy the statute. The offered in legal tender or else validly consigned in court. Only by such
written notice was obviously exacted by the Code to remove all uncertainty means can the buyer become certain that the offer to redeem is one made
as to the sale, its terms and its validity, and to quiet any doubts that the seriously and in good faith. A buyer can not be expected to entertain an
alienation is not definitive. The statute not having provided for any offer of redemption without attendant evidence that the redemptioner can,
alternative, the method of notification prescribed remains exclusive. and is willing to accomplish the repurchase immediately. A different rule
would leave the buyer open to harassment by speculators or crackpots, as
Upon the other hand, Article 1623 does not prescribe any particular form of well as to unnecessary prolongation of the redemption period, contrary to
notice, nor any distinctive method for notifying the redemptioner. So long, the policy of the law. While consignation of the tendered price is not always
therefore, as the latter is informed in writing of the sale and the particulars necessary because legal redemption is not made to discharge a pre-existing
thereof, the 30 days for redemption start running, and the redemptioner debt (Asturias Sugar Central vs. Cane Molasses Co., 60 Phil. 253), a valid
has no real cause to complain. In the case at bar, the redemptioners (now tender is indispensable, for the reasons already stated. Of course,
petitioners) admit that on August 19, 1952 the co-owner-vendor, Enrique consignation of the price would remove all controversy as to the
Torres, showed and gave Enrique Conejero (who was acting for and on redemptioner's ability to pay at the proper time.
behalf of his wife, Paz Torres) a copy of the 1951 deed of sale in favor of
respondents Raffiñ an. The furnishing of this copy was equivalent to the
giving of written notice required by law: it came from the vendor and made
available in writing the details and finality of the sale. In fact, as argued for
the respondents at bar, it served all the purposes of the written notice, in a
more authentic manner than any other writing could have done. As a
necessary consequence, the 30-day period for the legal redemption by co-
owner Paz Torres (retracto de comuneros) began to run its coursed from
and after August 19, 1952, ending on September 18, of the same year.
Case Digest 2018
Topic: Redemption requirement for written notice. "So long, therefore, as the latter (i.e., the
redemptioner) is informed in writing of the sale and the particulars
CARLOS ALONZO and CASIMIRA ALONZO vs. INTERMEDIATE thereof," he declared, "the thirty days for redemption start running. "
APPELLATE COURT and TECLA PADUA
G.R. No. 72873, May 28, 1987, CRUZ, J. In the earlier decision of Butte v. UY, " the Court, speaking through the same
learned jurist, emphasized that the written notice should be given by the
Facts: Five brothers and sisters inherited in equal pro indiviso shares a vendor and not the vendees, conformably to a similar requirement under
parcel of land registered in 'the name of their deceased parents under OCT Article 1623, reading as follows:
No. 10977 of the Registry of Deeds of Tarlac.
Art. 1623. The right of legal pre-emption or redemption shall not be
On March 15, 1963, one of them, Celestino Padua, transferred his undivided exercised except within thirty days from the notice in writing by the
share of the herein petitioners for the sum of P550.00 by way of absolute prospective vendor, or by the vendors, as the case may be. The deed of sale
sale. One year later, on April 22, 1964, Eustaquia Padua, his sister, sold her shall not be recorded in the Registry of Property, unless accompanied by an
own share to the same vendees, in an instrument denominated "Con Pacto affidavit of the vendor that he has given written notice thereof to all
de Retro Sale," for the sum of P 440.00. 3 possible redemptioners.
The right of redemption of co-owners excludes that of the adjoining owners.
By virtue of such agreements, the petitioners occupied, after the said sales,
an area corresponding to two-fifths of the said lot, representing the portions As "it is thus apparent that the Philippine legislature in Article 1623
sold to them. The vendees subsequently enclosed the same with a fence. In deliberately selected a particular method of giving notice, and that notice
1975, with their consent, their son Eduardo Alonzo and his wife built a must be deemed exclusive," the Court held that notice given by
semi-concrete house on a part of the enclosed area. the vendees and not the vendor would not toll the running of the 30-day
period.
On February 25, 1976, Mariano Padua, one of the five coheirs, sought to
The petition before us appears to be an illustration of the Holmes dictum
redeem the area sold to the spouses Alonzo, but his complaint was
that "hard cases make bad laws" as the petitioners obviously cannot argue
dismissed when it appeared that he was an American citizen . On May 27,
against the fact that there was really no written notice given by the vendors
1977, however, Tecla Padua, another co-heir, filed her own complaint
to their co-heirs. Strictly applied and interpreted, Article 1088 can lead to
invoking the same right of redemption claimed by her brother.
only one conclusion, to wit, that in view of such deficiency, the 30 day
period for redemption had not begun to run, much less expired in 1977.
The trial court also dismiss this complaint, now on the ground that the right
had lapsed, not having been exercised within thirty days from notice of the In requiring written notice, Article 1088 seeks to ensure that the
sales in 1963 and 1964. Although there was no written notice, it was held redemptioner is properly notified of the sale and to indicate the date of such
that actual knowledge of the sales by the co-heirs satisfied the requirement notice as the starting time of the 30-day period of redemption. Considering
of the law. the shortness of the period, it is really necessary, as a general rule, to
pinpoint the precise date it is supposed to begin, to obviate any problem of
Issue: Was there actual knowledge of the sales by the co-heirs which alleged delays, sometimes consisting of only a day or two.
will satisfy the requirement of the law.
The instant case presents no such problem because the right of redemption
Ruling: YES. was invoked not days but years after the sales were made in 1963 and 1964.
The complaint was filed by Tecla Padua in 1977, thirteen years after the
In truth, such actual notice as acquired by the co-heirs cannot be plausibly first sale and fourteen years after the second sale. The delay invoked by the
denied. The other co-heirs, including Tecla Padua, lived on the same lot, petitioners extends to more than a decade, assuming of course that there
which consisted of only 604 square meters, including the portions sold to was a valid notice that tolled the running of the period of redemption.
the petitioners . Eustaquia herself, who had sold her portion, was staying in
the same house with her sister Tecla, who later claimed redemption Was there a valid notice? Granting that the law requires the notice to be
petition. Moreover, the petitioners and the private respondents were close written, would such notice be necessary in this case? Assuming there was a
friends and neighbors whose children went to school together. valid notice although it was not in writing. would there be any question that
the 30-day period for redemption had expired long before the complaint
It is highly improbable that the other co-heirs were unaware of the sales was filed in 1977?
and that they thought, as they alleged, that the area occupied by the
petitioners had merely been mortgaged by Celestino and Eustaquia. In the In the face of the established facts, we cannot accept the private
circumstances just narrated, it was impossible for Tecla not to know that respondents' pretense that they were unaware of the sales made by their
the area occupied by the petitioners had been purchased by them from the brother and sister in 1963 and 1964. By requiring written proof of such
other. co-heirs. Especially significant was the erection thereon of the notice, we would be closing our eyes to the obvious truth in favor of their
permanent semi-concrete structure by the petitioners' son, which was done palpably false claim of ignorance, thus exalting the letter of the law over its
without objection on her part or of any of the other co-heirs. purpose. The purpose is clear enough: to make sure that the redemptioners
are duly notified. We are satisfied that in this case the other brothers and
The only real question in this case, therefore, is the correct interpretation sisters were actually informed, although not in writing, of the sales made in
and application of the pertinent law as invoked, interestingly enough, by 1963 and 1964, and that such notice was sufficient.
both the petitioners and the private respondents. This is Article 1088 of the
Civil Code, providing as follows: Now, when did the 30-day period of redemption begin?
Art. 1088. Should any of the heirs sell his hereditary rights to a stranger While we do not here declare that this period started from the dates of such
before the partition, any or all of the co-heirs may be subrogated to the sales in 1963 and 1964, we do say that sometime between those years and
rights of the purchaser by reimbursing him for the price of the sale, 1976, when the first complaint for redemption was filed, the other co-heirs
provided they do so within the period of one month from the time they were actually informed of the sale and that thereafter the 30-day period
were notified in writing of the sale by the vendor. started running and ultimately expired. This could have happened any time
during the interval of thirteen years, when none of the co-heirs made a
In reversing the trial court, the respondent court declared that the notice move to redeem the properties sold. By 1977, in other words, when Tecla
required by the said article was written notice and that actual notice would Padua filed her complaint, the right of redemption had already been
not suffice as a substitute. extinguished because the period for its exercise had already expired.
According to Justice J.B.L. Reyes, furnishing the co-heirs with a copy of the The following doctrine is also worth noting:
deed of sale of the property subject to redemption would satisfy the
Case Digest 2018
While the general rule is, that to charge a party with laches in the assertion
of an alleged right it is essential that he should have knowledge of the facts
upon which he bases his claim, yet if the circumstances were such as should
have induced inquiry, and the means of ascertaining the truth were readily
available upon inquiry, but the party neglects to make it, he will be
chargeable with laches, the same as if he had known the facts.
It was the perfectly natural thing for the co-heirs to wonder why the
spouses Alonzo, who were not among them, should enclose a portion of the
inherited lot and build thereon a house of strong materials. This definitely
was not the act of a temporary possessor or a mere mortgagee. This
certainly looked like an act of ownership. Yet, given this unseemly situation,
none of the co-heirs saw fit to object or at least inquire, to ascertain the
facts, which were readily available. It took all of thirteen years before one of
them chose to claim the right of redemption, but then it was already too
late.
We realize that in arriving at our conclusion today, we are deviating from

the strict letter of the law, which the respondent court understandably
applied pursuant to existing jurisprudence. The said court acted properly as
it had no competence to reverse the doctrines laid down by this Court in the
above-cited cases. In fact, and this should be clearly stressed, we ourselves
are not abandoning the De Conejero and Buttle doctrines. What we are
doing simply is adopting an exception to the general rule, in view of the
peculiar circumstances of this case.
The co-heirs in this case were undeniably informed of the sales although no
notice in writing was given them. And there is no doubt either that the 30-
day period began and ended during the 14 years between the sales in
question and the filing of the complaint for redemption in 1977, without the
co-heirs exercising their right of redemption. These are the justifications for
this exception.
More than twenty centuries ago, Justinian defined justice "as the constant
and perpetual wish to render every one his due." That wish continues to
motivate this Court when it assesses the facts and the law in every case
brought to it for decision. Justice is always an essential ingredient of its
decisions. Thus when the facts warrants, we interpret the law in a way that
will render justice, presuming that it was the intention of the lawmaker, to
begin with, that the law be dispensed with justice. So we have done in this
case.
Case Digest 2018
Topic: Redemption respective rights within the ten-year prescriptive period, is more in keeping
with fairness and equity.
HEIRS OF JOSE REYES, JR., namely: MAGDALENA C. REYES, OSCAR C.
REYES, GAMALIEL C. REYES, NENITA R. DELA CRUZ, RODOLFO C. REYES, We agree with the petitioners.
and RODRIGO C. REYES vs. AMANDA S. REYES, CONSOLACION S. REYES,
EUGENIA R. ELVAMBUENA, LUCINA R. MENDOZA, PEDRITO S. REYES, Considering that sa oras na silay makinabang, the period of redemption
MERLINDA R. FAMODULAN, EDUARDO S. REYES, and JUNE S. REYES stated in the Kasulatan ng Biling Mabibiling Muli, signified that no definite
G.R. No. 158377, August 13, 2010, BERSAMIN, J. period had been stated, the period to redeem should be ten years from the
execution of the contract, pursuant to Articles 1142 and 1144 of the Civil
Facts: Antonio Reyes and his wife, Leoncia Reyes (Leoncia) were Code. Thus, the full redemption price should have been paid by July 9, 1955;
owners of a parcel residential land with an area of 442 square meters in and upon the expiration of said 10-year period, mortgagees Spouses Francia
Pulilan, Bulacan, where they constructed their dwelling. The couple had or their heirs should have foreclosed the mortgage, but they did not do so.
four children: Jose, Sr., Teofilo, Jose, Jr., and Potenciana. Antonio Reyes died Instead, they accepted Alejandros payments, until the debt was fully
intestate, and was survived by Leoncia and their three sons and Potenciana. satisfied by August 11, 1970.
Potenciana having predeceased her father also died intestate, survived by
her children. The acceptance of the payments even beyond the 10-year period of
redemption estopped the mortgagees heirs from insisting that the period to
On July 9, 1955, Leoncia and her three sons executed a deed denominated redeem the property had already expired. Their actions impliedly
Kasulatan ng Biling Mabibiling Muli, whereby they sold the land and its recognized the continued existence of the equitable mortgage. The conduct
existing improvements to the Sps. Francia for the amount of P500.00, of the original parties as well as of their successors-in-interest manifested
subject to the vendor’s right to repurchase for the same amount oras na that the parties to the Kasulatan ng Biling Mabibiling Muli really intended
silay makinabang. Potenciana’s heirs did not assent to that deed, and Teofilo their transaction to be an equitable mortgage, not a pacto de retro sale.
and Jose, Jr. and their respective families remained in possession of the
property and paid real property taxes thereon. When Alejandro redeemed the property on August 11, 1970, he did not
thereby become a co-owner thereof, because his father Jose, Sr. was then
The Sps. Francia both died intestate, without Leoncia and her children still alive. Alejandro merely became the assignee of the mortgage, and
paying the amount of P500.00. Alejandro, son of Jose, Sr., paid said amount the property continued to be co-owned by Leoncia and her sons Jose, Sr.,
to Sps. Francia. The heirs of Sps. Francia then, transferred and conveyed to Jose Jr., and Teofilo. As an assignee of the mortgage and the mortgage credit,
Alejandro all the rights and interests to Alejandro. Alejandro acquired only the rights of his assignors, nothing more. He
himself confirmed so in the Magkasanib na Salaysay, whereby he
On August 21, 1970, Alejandro executed a Kasulatan ng Pagmeme-ari acknowledged the co-owners right to redeem the property from him at any
declaring that he had acquired all the rights and interests of the heirs of the time (sa ano mang oras) for the same redemption price of P500.00.
Sps. Francia after the vendors failed to repurchase within the given period,
and paid realty property taxes from then on. It is worthy to note that Alejandros confirmation in the Magkasanib na
Salaysay of the co-owners right to redeem was made despite 15 years
On October 17, 1970, Alejandro, Leoncia and Jose, Sr. executed a Magkalakip having meanwhile elapsed from the execution of the original Kasulatan ng
na Salaysay, acknowledging the right of Leoncia, Jose, Jr. and Jose, Sr. to Biling Mabibiling Muli (July 9, 1955) until the execution of the Magkasanib
repurchase the property at any time for the same amount. Leoncia died na Salaysay (August 21, 1970).
intestate and was survived by Jose, Sr., Teofilo, Jose, Jr. and the heirs of
Potenciana. Alejandro likewise died intestate survived by his wife, Amanda What was the effect of the Magkasanib na Salaysay?
Reyes and her children (respondents).
Both the trial court and the CA declared that the Magkasanib na
In 1994, respondent Amanda Reyes asked the heirs of Teofilo and Jose, Jr., Salaysay, which extended the redemption period of the mortgaged property,
to vacate the property because she and her children already needed it. After was inefficacious, because the period to redeem could no longer be
the petitioners refused to comply, she filed a complaint against the extended after the original redemption period had already expired.
petitioners in the barangay, seeking their eviction from the property. When
no amicable settlement was reached, the Barangay Lupon issued In contrast, the petitioners submit that disregarding the Magkasanib na
a certification to file action to the respondents on September 26, 1994. Salaysay made no sense, considering that the respondents predecessors-in-
interest admitted therein that the petitioners had a right to redeem the
On May 21, 1996, the RTC ruled in favor of the respondents, declaring that property.
Alejandro had acquired ownership of the property in 1965 by operation of
law upon the failure of the petitioners predecessors to repurchase the The respondents counter, however, that the Magkasanib na Salaysay, which
property; that the joint affidavit executed by Alejandro, Leoncia and Jose, Jr. acknowledged the other co-owners right to redeem the property, was void;
and Jose, Sr., to extend the period of redemption was inefficacious, because that the petitioners could no longer claim to be co-owners entitled to
there was no more period to extend due to the redemption period having redeem the property, because the co-ownership had come to an end by
long lapsed by the time of its execution; and that the action should be Alejandro having openly repudiated the co-ownership; that Alejandros acts
dismissed insofar as the heirs of Potenciana were concerned, considering of repudiation had consisted of: (a) redeeming the property from the
that Potenciana, who had predeceased her parents, had no successional Spouses Francia; (b) acquiring the property from the heirs of
rights in the property. Spouses Francia by virtue of a deed of assignment denominated as Pag-
aayos ng Pag-aari at Pagsasalin; (c) executing an affidavit of consolidation
Issue: Whether or not the CA erred in affirming the findings of the court of ownership over the property (Kasulatan ng Pagmeme-ari); (d) applying
a quo that the Magkasanib na Salaysay (Joint Affidavit), executed by for the cancellation of the tax declaration of property in the name of
Alejandro, Leoncia and Jose, Jr., wherein Leoncia and her children were Leoncia, and the subsequent issuance of a new tax declaration in his name;
granted by Alejandro the right to repurchase the property at anytime for the (e) his continuous possession of the property from 1955, which possession
amount of P500.00, was of no legal significance. the respondents as his heirs had continued up to the present time, or for a
period of almost 50 years already; and (f) the payment of the taxes by
Ruling: NO Alejandro and the respondents for more than 30 years without any
contribution from the petitioners; and that such repudiation established
The petitioners contend that prescription, if it must apply to them, should as that Alejandro and his successors-in-interest had already acquired sole title
well be applied to the respondents, who had similarly failed to enforce their over the property through acquisitive prescription.
right under the equitable mortgage within ten years from its execution
on July 9, 1955. Consequently, they urge the upholding of the original The respondents and the lower courts positions cannot be sustained.
intention of the parties to the Kasulatan ng Biling Mabibiling Muli, without
taking prescription into account, because both parties did not enforce their
Case Digest 2018
The provisions of the Civil Code governing equitable mortgages disguised as

sale contracts, like the one herein, are primarily designed to curtail the evils
brought about by contracts of sale with right to repurchase, particularly the
circumvention of the usury law and pactum commissorium. Courts have
taken judicial notice of the well-known fact that contracts of sale with right
to repurchase have been frequently resorted to in order to conceal the true
nature of a contract, that is, a loan secured by a mortgage. It is a reality that
grave financial distress renders persons hard-pressed to meet even their
basic needs or to respond to an emergency, leaving no choice to them but to
sign deeds of absolute sale of property or deeds of sale with pacto de retro if
only to obtain the much-needed loan from unscrupulous money
lenders.This reality precisely explains why the pertinent provision of
the Civil Code includes a peculiar rule concerning the period of redemption,
to wit:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:
xxx
(3)When upon or after the expiration of the right to repurchase

another instrument extending the period of redemption or granting a
new period is executed;
xxx

Ostensibly, the law allows a new period of redemption to be agreed upon or
granted even after the expiration of the equitable mortgagors right to
repurchase, and treats such extension as one of the indicators that the true
agreement between the parties is an equitable mortgage, not a sale with
right to repurchase. It was indubitable, therefore, that the Magkasanib na
Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh
period within which to pay to Alejandro the redemption price of P500.00.

Case Digest 2018
Topic: Redemption The opportunity given to the petitioners was to avail of the liberalized
payment scheme which program would expire on December 31, 1988. As
SPOUSES RUBIN AND PORTIA HOJAS vs. PHILIPPINE AMANAH BANK explained by Abraham Iribani (Iribani), the OIC of the Project Development
AND RAMON KUE, Department of PAB, it was to give a chance to previous owners to repossess
G.R. No. 193453, June 5, 2013, MENDOZA, J. their properties on easy term basis, possibly by condonation of charges and
penalties and payment on instalment. The letter of Carpizo was an
Facts: The petitioners, Spouses Rubin and Portia Hojas (petitioners), invitation to the petitioners to come to the bank with their proposal. It
alleged that on April 11, 1980, they secured a loan from respondent appears that the petitioners could not come up with a proposal acceptable
Philippine Amanah Bank (PAB) in the amount of ₱450,000.00; that this loan to the bank.
was secured by a mortgage, covering both personal and real properties; that
from May 14, 1981 to June 27, 1986, they made various payments Moreover, petitioners’ allegation that they had signified their intention to
amounting to ₱486,162.13. However, PAB did not properly credit their avail of the incentive scheme (which they have equated to their intention to
payments. It listed their total payment as ₱412,211.54 on the principal, and redeem the property), did not amount to an exercise of redemption
₱138,472.09 as 30% interest, all amounting to ₱550,683.63, despite the fact precluding the bank from making the public sale. In the case of China
that at that time, petitioners had already paid the total sum of Banking Corporation v. Martir, this Court expounded on what constitutes a
₱486,162.13.2 proper exercise of the right of redemption, to wit:
Petitioners further averred that for failure to pay the loan, PAB applied for The general rule in redemption is that it is not sufficient that a person
the extrajudicial foreclosure of the mortgaged real properties of petitioners offering to redeem manifests his desire to do so. The statement of intention
with the Ex-Officio Sheriff. Consequently, a Notice of Extrajudicial must be accompanied by an actual and simultaneous tender of payment.
Foreclosure was issued on January 12, 1987 setting the foreclosure sale on This constitutes the exercise of the right to repurchase.
April 21, 1987 and, stating therein the mortgage debt in the sum of
₱450,000.00. In the public auction conducted, PAB acquired said real In several cases decided by the Court where the right to repurchase was
property. held to have been properly exercised, there was an unequivocal tender of
payment for the full amount of the repurchase price. Otherwise, the offer to
redeem is ineffectual. Bona fide redemption necessarily implies a
It was further alleged that on March 9, 1988, the OIC President of PAB,
reasonable and valid tender of the entire repurchase price, otherwise the
wrote Roberto Hojas (Roberto), petitioners’ son, informing him that
rule on the redemption period fixed by law can easily be circumvented.
although the one-year redemption period would expire on April 21, 1988,
by virtue of the bank’s incentive scheme, the redemption period was
Moreover, jurisprudence also characterizes a valid tender of payment as
extended until December 31, 1988.
one where the full redemption price is tendered. Consequently, in this case,
the offer by respondents on July 24, 1986 to redeem the foreclosed
Despite said letter from the OIC-President, the OIC of the Project
properties for ₱1,872,935 and the subsequent consignation in court of
Development Department of PAB wrote Rubin Hojas that the real properties
₱1,500,000 on August 27, 1986, while made within the period of
acquired by PAB would be sold in a public bidding before the end of August,
redemption, was ineffective since the amount offered and actually
1988. On November 4, 1988, a public bidding was conducted and the
consigned not only did not include the interest but was in fact also way
mortgaged properties were awarded to respondent Ramon Kue (Kue).
below the ₱2,782,554.66 paid by the highest bidder/purchaser of the
Subsequently, they received a letter from the OIC of the Project
properties during the auction sale.
Development Department, dated January 3, 1989, informing them that they
had fifteen (15) days from receipt within which to vacate the premises.
In Bodiongan vs. Court of Appeals, we held:
Because of this development, on May 7, 1991, petitioners filed an action for
In order to effect a redemption, the judgment debtor must pay the
"Determination of True Balance of Mortgage Debt, Annulment/Setting Aside
purchaser the redemption price composed of the following: (1) the price
of Extrajudicial Foreclosure of Mortgage and Damages, with Prayer for
which the purchaser paid for the property; (2) interest of 1% per month on
Preliminary Injunction" against PAB.
the purchase price; (3) the amount of any assessments or taxes which the
purchaser may have paid on the property after the purchase; and (4)
On May 27, 1996, the RTC dismissed petitioners’ complaint. On appeal to interest of 1% per month on such assessments and taxes x x x.
the CA, it held that the period of redemption was never extended.
Furthermore, Article 1616 of the Civil Code of the Philippines provides:
Issue: Did the Petitioners signified their intention to avail of the The vendor cannot avail himself of the right to repurchase without
incentive scheme (which they have equated to their intention to redeem the returning to the vendee the price of the sale x x x.
property), consequently precluding the bank from making public sale.
It is not difficult to understand why the redemption price should either be
Ruling: NO. fully offered in legal tender or else validly consigned in court. Only by such
means can the auction winner be assured that the offer to redeem is being
In this case, a perusal of the letter, on which petitioners based their position made in good faith.
that the redemption period had been extended, shows otherwise. Pertinent
portions of the said letter read: Respondents' repeated requests for information as regards the amount of
loan availed from the credit line and the amount of redemption, and
Our records show that the above account has already been foreclosed by the petitioner's failure to accede to said requests do not invalidate the
bank. However, the borrowers concerned can still exercise the one (1) year foreclosure. Respondents can find other ways to know the redemption
right of redemption over the foreclosed properties until April 21, 1988. As the price. For one, they can examine the Certificate of Sale registered with the
Bank has adopted an incentive scheme whereby payments are liberalized to Register of Deeds to verify the purchase price, or upon the filing of their
give chances to former owners to repossess their properties, we suggest that complaint, they could have moved for a computation of the redemption
you advise your parents to drop by at our Zamboanga Office so they can avail price and consigned the same to the court. At any rate, whether or not
of this rare privilege which shall be good only up to December 31, 1988. respondents '"were diligent in asserting their willingness to pay is
irrelevant. Redemption within the period allowed by law is not a matter of
As correctly held by the RTC and upheld by the CA, the date "December 31, intent but a question of payment or valid tender of the full redemption price
1988" refers to the last day when owners of foreclosed properties, like within said period.
petitioners, could submit their payment proposals to the bank. The letter
was very clear. It was about the availment of the liberalized payment Even the complaint instituted by respondents cannot aid their plight
scheme of the bank. On the last day for redemption, the letter was also clear. because the institution of an action to annul a foreclosure sale does not
It was April 21, 1988. It was never extended. suspend the running of the redemption period.
Case Digest 2018
In the case at bench, the record is bereft of concrete evidence that would The rule is likewise settled that the proceeding in a petition for a writ of
show that, aside from the fact that petitioners manifested their intention to possession is ex-parte and summary in nature. As one brought for the
avail of the scheme, they were also ready to pay the redemption price. benefit of one party only and without notice by the court to any person
Hence, as they failed to exercise their right of redemption and failed to take adverse of interest, it is a judicial proceeding wherein relief is granted
advantage of the liberalized incentive scheme, PAB was well within its right without giving the person against whom the relief is sought an opportunity
to sell its property in a public sale. to be heard. The issuance of the writ of possession is, in turn, a ministerial
function in the exercise of which trial courts are not granted any
discretion. Since the judge to whom the application for writ of possession is
SPOUSES MONTANO T. TOLOSA and MERLINDA TOLOSA vs. UNITED
filed need not look into the validity of the mortgage or the manner of its
COCONUT PLANTERS BANK, G.R. No. 183058, April 3, 2013, PEREZ, J.
foreclosure, it has been ruled that the ministerial duty of the trial court does
not become discretionary upon the filing of a complaint questioning the
A purchaser at an extrajudicial foreclosure sale is entitled to a writ of mortgage. Corollarily, any question regarding the validity of the
possession as a matter of right after consolidation of ownership for failure extrajudicial foreclosure sale and the resulting cancellation of the writ may,
of the mortgagor to redeem the property. likewise, be determined in a subsequent proceeding as outlined in Section 8
of Act No. 3135.
Facts: On 7 April 1997, petitioners Spouses Montano and Merlinda
Tolosa (Spouses Tolosa) entered into a Credit Agreement with respondent Gauged from the foregoing principles, we find that the CA committed no
United Coconut Planters Bank (UCPB) for the purpose of availing of the reversible error in ordering the issuance of the writ of possession sought by
latter’s credit facilities. To secure their credit availments, the Spouses UCPB. The record shows that UCPB caused the extrajudicial foreclosure of
Tolosa executed deeds of real estate mortgage over four properties in the mortgage on the subject realties as a consequence of the Spouses
Barangay Caticlan, Malay, Aklan, which were registered and/or declared for Tolosa’s default on their mortgage obligation. As the highest bidder at the 4
taxation purposes in their names. For failure of the Spouses Tolosa to pay January 2000 foreclosure sale, UCPB consolidated its ownership on 22
their principal obligation which amounted to ₱13,300,000.00, exclusive of January 2001 or upon failure of the Spouses Tolosa to exercise their right of
interests, penalties and other charges, UCPB foreclosed the mortgage on the redemption within the one-year period therefor prescribed. Subsequent to
aforesaid realties and filed a petition for the extra-judicial sale thereof. the issuance of the certificates of title and tax declarations over the same
properties in its name, UCPB complied with the requirements under Act
3135 by filing its ex-parte petition for issuance of a writ of possession
After the due notice and publication, the mortgaged properties were sold on
before the RTC on 2 September 2004. Since UCPB had already become the
4 January 2000 at a public auction where UCPB tendered the highest bid of
absolute and registered owner of said properties, the CA correctly ruled
₱17,240,000.00. For failure of the Spouses Tolosa to exercise their right of
that it was the ministerial duty of the RTC to issue the writ of possession in
redemption within the prescribed one year period, UCPB went on to
favor of the former.
consolidate its ownership over the subject realties on 22 January 2001.
In urging the reversal of the assailed decision and resolution, the Spouses
On 2 September 2004, UCPB filed an ex-parte petition for issuance of a writ
Tolosa argue that the prima facie merit of their complaint in Civil Case No.
of possession in the cadastral case. Notified of the filing of the petition, the
6180 justified, at the very least, the deferment of the issuance of the writ of
Spouses Tolosa filed their 8 November 2004 Opposition, calling the RTC’s
possession. For this purpose, they call our attention to the supposed fact
attention to the pendency of the complaint for declaration of nullity of
that UCPB not only failed to release the entirety of the proceeds of their
promissory notes, foreclosure of mortgage and certificate of sale as well as
loans but also violated Republic Act No. 3765 by failing to specify the rates
accounting and damages which they instituted against UCPB. Docketed as
of interest it charged on their mortgage obligation. Insisting that they were
Civil Case No. 6180 before Branch 8 of the RTC, the complaint alleged that
misled by UCPB into signing the Credit Agreement, Promissory Notes and
the Spouses Tolosa were misled by UCPB into signing the Credit Agreement,
Real Estate Mortgage which they impugned in Civil Case No. 6180, the
Promissory Notes and Real Estate Mortgage sued upon. In addition to not
Spouses Tolosa also claim that, discounting the illegal interests and charges
releasing the full amount of their loans, UCPB was likewise faulted for
imposed thereon, their mortgage obligation only amounted to
supposedly failing to disclose the actual interests it charged and for causing
₱14,041,000.00 and was more than amply discharged by the
the extrajudicial foreclosure of the mortgage despite the Spouses Tolosa’s
₱17,240,000.00 proceeds realized at the foreclosure sale.
overpayment of their loans. Claiming that there was prima facie showing of
invalidity of their mortgage obligation, the foreclosure of the mortgage and
the sale of their properties, the Spouses Tolosa prayed that the issuance of Given the ministerial nature of the RTC’s duty to issue the writ of possession
the writ of possession be held in abeyance and that UCPB’s petition therefor after the purchaser has consolidated its ownership, it has been ruled,
be consolidated with Civil Case No. 6180. moreover, that any question regarding the regularity and validity of the
mortgage or its foreclosure cannot be raised as justification for opposing
the issuance of the writ. More to the point, a pending action for annulment
Issue: Whether or not the prima facie nullity of the mortgage obligation
of mortgage or foreclosure does not stay the issuance of a writ of
and the foreclosure sale justified an order to hold in abeyance the issuance
possession. Regardless of the pendency of such suit, the purchaser remains
of the writ of possession
entitled to a writ of possession, without prejudice, of course, to the eventual
outcome of the pending annulment case. Otherwise stated, the issuance of
Ruling: No. The petition is bereft of merit. the writ of possession remains the ministerial duty of the RTC until the
issues raised in the annulment case are, once and for all, decided by a court
of competent jurisdiction.
A writ of possession is simply an order by which the sheriff is commanded
by the court to place a person in possession of a real or personal property.
Under Section 7 of Act No. 3135, as amended, a writ of possession may be To be sure, the foregoing rule admits of a few jurisprudential
issued in favor of a purchaser in a foreclosure sale either (1) within the one- exceptions.1âwphi1 In Cometa v. Intermediate Appellate Court, the
year redemption period, upon the filing of a bond; or (2) after the lapse of judgment debtor filed a separate action to invalidate the auction sale of
the redemption period, without need of a bond. Within the one-year properties approximately worth ₱500,000.00 for the unusually low price of
redemption period, the purchaser may apply for a writ of possession by ₱57,396.85. Citing equitable considerations, this Court upheld the
filing a petition in the form of an ex parte motion under oath, in the deferment of the issuance of the writ of possession sought by the judgment
registration or cadastral proceedings of the registered property. The law creditor on the ground that the validity of the auction sale is an issue that
requires only that the proper motion be filed, the bond approved and no requires pre-emptive resolution to avoid injustice. In the case of Barican v.
third person is involved. After the consolidation of title in the buyer’s name Intermediate Appellate Court, on the other hand, the Court ruled that the
for failure of the mortgagor to redeem the property, entitlement to the writ duty ceases to be ministerial where the property mortgaged had been, in
of possession becomes a matter of right. In the latter case, the right of the meantime, sold to third parties who had assumed the mortgagor’s
possession becomes absolute because the basis thereof is the purchaser’s indebtedness and took possession of the property. In Sulit v. Court of
ownership of the property. Appeals, the mortgagee’s failure to deliver the surplus from the proceeds of
Case Digest 2018
the foreclosure sale equivalent to at least 40% of the mortgage debt was
likewise found sufficient justification for the non-issuance of the writ of
possession sought.
While there are, concededly, exceptions to the foregoing rules as above-

discussed, none of them was adequately established in the Spouses Tolosa' s
petition.
Case Digest 2018
GOLDENWAY MERCHANDISING CORPORATION vs. EQUITABLE PCI SEC. 6. In all cases in which an extrajudicial sale is made under the special
BANK, G.R. No. 195540, March 13, 2013, VILLARAMA, JR., J power herein before referred to, the debtor, his successors-in-interest or
any judicial creditor or judgment creditor of said debtor, or any person
having a lien on the property subsequent to the mortgage or deed of trust
The one-year period of redemption is counted from the date of the
under which the property is sold, may redeem the same at any time within
registration of the certificate of sale.
the term of one year from and after the date of the sale; and such
redemption shall be governed by the provisions of sections four hundred
Facts: and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil
Procedure, in so far as these are not inconsistent with the provisions of this
Act.
On November 29, 1985, Goldenway Merchandising Corporation (petitioner)
executed a Real Estate Mortgage in favor of Equitable PCI Bank
(respondent) over its real properties situated in Valenzuela, Bulacan (now The one-year period of redemption is counted from the date of the
Valenzuela City). The mortgage secured the Two Million Pesos registration of the certificate of sale. In this case, the parties provided in
(₱2,000,000.00) loan granted by respondent to petitioner and was duly their real estate mortgage contract that upon petitioner’s default and the
registered. latter’s entire loan obligation becoming due, respondent may immediately
foreclose the mortgage judicially in accordance with the Rules of Court, or
extrajudicially in accordance with Act No. 3135, as amended.
As petitioner failed to settle its loan obligation, respondent extrajudicially
foreclosed the mortgage on December 13, 2000. During the public auction,
the mortgaged properties were sold for ₱3,500,000.00 to respondent. However, Section 47 of R.A. No. 8791 otherwise known as "The General
Accordingly, a Certificate of Sale was issued to respondent on January 26, Banking Law of 2000" which took effect on June 13, 2000, amended Act No.
2001. On February 16, 2001, the Certificate of Sale was registered and 3135. Said provision reads:
inscribed on TCT Nos. T-152630, T-151655 and T-214528.
SECTION 47. Foreclosure of Real Estate Mortgage. — In the event of
In a letter dated March 8, 2001, petitioner’s counsel offered to redeem the foreclosure, whether judicially or extrajudicially, of any mortgage on real
foreclosed properties by tendering a check in the amount of ₱3,500,000.00. estate which is security for any loan or other credit accommodation
On March 12, 2001, petitioner’s counsel met with respondent’s counsel granted, the mortgagor or debtor whose real property has been sold for the
reiterating petitioner’s intention to exercise the right of full or partial payment of his obligation shall have the right within one year
redemption. However, petitioner was told that such redemption is no longer after the sale of the real estate, to redeem the property by paying the
possible because the certificate of sale had already been registered. amount due under the mortgage deed, with interest thereon at the rate
Petitioner also verified with the Registry of Deeds that title to the foreclosed specified in the mortgage, and all the costs and expenses incurred by the
properties had already been consolidated in favor of respondent and that bank or institution from the sale and custody of said property less the
new certificates of title were issued in the name of respondent on March 9, income derived therefrom. However, the purchaser at the auction sale
2001. concerned whether in a judicial or extrajudicial foreclosure shall have the
right to enter upon and take possession of such property immediately after
the date of the confirmation of the auction sale and administer the same in
On December 7, 2001, petitioner filed a complaint for specific performance
accordance with law. Any petition in court to enjoin or restrain the conduct
and damages against the respondent, asserting that it is the one-year period
of foreclosure proceedings instituted pursuant to this provision shall be
of redemption under Act No. 3135 which should apply and not the shorter
given due course only upon the filing by the petitioner of a bond in an
redemption period provided in Republic Act (R.A.) No. 8791. Petitioner
amount fixed by the court conditioned that he will pay all the damages
argued that applying Section 47 of R.A. 8791 to the real estate mortgage
which the bank may suffer by the enjoining or the restraint of the
executed in 1985 would result in the impairment of obligation of contracts
foreclosure proceeding.
and violation of the equal protection clause under the Constitution.
Additionally, petitioner faulted the respondent for allegedly failing to
furnish it and the Office of the Clerk of Court, RTC of Valenzuela City with a Notwithstanding Act 3135, juridical persons whose property is being sold
Statement of Account as directed in the Certificate of Sale, due to which pursuant to an extrajudicial foreclosure, shall have the right to redeem the
petitioner was not apprised of the assessment and fees incurred by property in accordance with this provision until, but not after, the
respondent, thus depriving petitioner of the opportunity to exercise its right registration of the certificate of foreclosure sale with the applicable Register
of redemption prior to the registration of the certificate of sale. of Deeds which in no case shall be more than three (3) months after
foreclosure, whichever is earlier. Owners of property that has been sold in a
foreclosure sale prior to the effectivity of this Act shall retain their
In its Answer with Counterclaim, respondent pointed out that petitioner
redemption rights until their expiration. (Emphasis supplied.)
cannot claim that it was unaware of the redemption price which is clearly
provided in Section 47 of R.A. No. 8791, and that petitioner had all the
opportune time to redeem the foreclosed properties from the time it Under the new law, an exception is thus made in the case of juridical
received the letter of demand and the notice of sale before the registration persons which are allowed to exercise the right of redemption only "until,
of the certificate of sale. As to the check payment tendered by petitioner, but not after, the registration of the certificate of foreclosure sale" and in no
respondent said that even assuming arguendo such redemption was timely case more than three (3) months after foreclosure, whichever comes first.
made, it was not for the amount as required by law.
May the foregoing amendment be validly applied in this case when the real
Issue: estate mortgage contract was executed in 1985 and the mortgage foreclosed
when R.A. No. 8791 was already in effect?
Whether or not the petitioner can no longer exercise the right of
redemption over its foreclosed properties after the certificate of sale in We answer in the affirmative.
favor of respondent had been registered.
Petitioner’s contention that Section 47 of R.A. 8791 violates the
Ruling: constitutional proscription against impairment of the obligation of contract
has no basis.
Yes.
The purpose of the non-impairment clause of the Constitution is to
safeguard the integrity of contracts against unwarranted interference by the
The law governing cases of extrajudicial foreclosure of mortgage is Act No.
State. As a rule, contracts should not be tampered with by subsequent laws
3135, as amended by Act No. 4118. Section 6 thereof provides:
that would change or modify the rights and obligations of the
Case Digest 2018
parties. Impairment is anything that diminishes the efficacy of the contract.

There is an impairment if a subsequent law changes the terms of a contract
between the parties, imposes new conditions, dispenses with those agreed
upon or withdraws remedies for the enforcement of the rights of the
parties.
Section 47 did not divest juridical persons of the right to redeem their
foreclosed properties but only modified the time for the exercise of such
right by reducing the one-year period originally provided in Act No. 3135.
The new redemption period commences from the date of foreclosure sale,
and expires upon registration of the certificate of sale or three months after
foreclosure, whichever is earlier. There is likewise no retroactive
application of the new redemption period because Section 47 exempts from
its operation those properties foreclosed prior to its effectivity and whose
owners shall retain their redemption rights under Act No. 3135.
Petitioner’s claim that Section 47 infringes the equal protection clause as it

discriminates mortgagors/property owners who are juridical persons is
equally bereft of merit.
The equal protection clause is directed principally against undue favor and
individual or class privilege. It is not intended to prohibit legislation which
is limited to the object to which it is directed or by the territory in which it
is to operate. It does not require absolute equality, but merely that all
persons be treated alike under like conditions both as to privileges
conferred and liabilities imposed. Equal protection permits of reasonable
classification. We have ruled that one class may be treated differently from
another where the groupings are based on reasonable and real distinctions.
If classification is germane to the purpose of the law, concerns all members
of the class, and applies equally to present and future conditions, the
classification does not violate the equal protection guarantee.
We agree with the CA that the legislature clearly intended to shorten the
period of redemption for juridical persons whose properties were
foreclosed and sold in accordance with the provisions of Act No. 3135.
Having ruled that the assailed Section 47 of R.A. No. 8791 is constitutional,
we find no reversible error committed by the CA in holding that petitioner
can no longer exercise the right of redemption over its foreclosed
properties after the certificate of sale in favor of respondent had been
registered.
Case Digest 2018
ROBERTO R. DAVID vs. EDUARDO C. DAVID, G.R. No. 162365, January may have been agreed upon." Conformably with Article 1616, the seller
15, 2014, BERSAMIN, J. given the right to repurchase may exercise his right of redemption by
paying the buyer: (a) the price of the sale, (b) the expenses of the contract,
(c) legitimate payments made by reason of the sale, and (d) the necessary
In a sale with right to repurchase, title and ownership of the property sold are
and useful expenses made on the thing sold.
immediately vested in the vendee, subject to the resolutory condition of
repurchase by the vendor within the stipulated period.
The deed of sale entered into by Eduardo and Roberto contained the
following stipulation on the right to repurchase, to wit:
Facts:
x x x the Vendors are given the right to repurchase the aforesaid described
Respondent Eduardo C. David (Eduardo) initiated this replevin suit against
real property, together with the improvements thereon, and the two (2)
Roberto R. David (Roberto), his first cousin and former business partner, to
motor vehicles, together with their respective trailers from the Vendee
recover the possession of one unit of International CO 9670 Truck Tractor
within a period of three (3) years from the execution of this document on
and Mi-Bed Trailer.
the purchase price agreed upon by the parties after considering the amount
previously paid to the Vendors in the amount of TWO MILLION PESOS
It appears that on July 7, 1995, Eduardo and his brother Edwin C. David (₱2,000,000.00), Philippine Currency, with an interest of twelve percent
(Edwin), acting on their own and in behalf of their co-heirs, sold their (12%) per annum and the amount paid with the Development Bank of the
inherited properties to Roberto, specifically: (a) a parcel of land with an Philippines with an interest of twelve percent (12%) per annum.
area of 1,231 square meters, together with all the improvements existing
thereon, located in Baguio City and covered by Transfer Certificate of Title
The CA and the RTC both found and held that Eduardo had complied with
No. T-22983 of the Registry of Deeds of Baguio City (Baguio City lot); and
the conditions stipulated in the deed of sale and prescribed by Article 1616
(b) two units International CO 9670 Truck Tractor with two Mi-Bed
of the Civil Code. Pertinently, the CA stated:
Trailers. A deed of sale with assumption of mortgage (deed of sale)
embodied the terms of their agreement, stipulating that the consideration
for the sale was ₱6,000,000.00, of which ₱2,000,000 was to be paid to It should be noted that the alleged repurchase was exercised within the
Eduardo and Edwin, and the remaining ₱4,000,000.00 to be paid to stipulated period of three (3) years from the time the Deed of Sale with
Development Bank of the Philippines (DBP) in Baguio City to settle the Assumption of Mortgage was executed. The only question now, therefore,
outstanding obligation secured by a mortgage on such properties. The which remains to be resolved is whether or not the conditions set forth in
parties further agreed to give Eduardo and Edwin the right to repurchase the Deed of Sale with Assumption of Mortgage, i.e. the tender of the
the properties within a period of three years from the execution of the deed purchase price previously agreed upon, which is Php2.0 Million, plus 12%
of sale based on the purchase price agreed upon, plus 12% interest per interest per annum, and the amount paid by the defendant to DBP, had been
annum. satisfied.
In April 1997, Roberto and Edwin executed a memorandum of agreement From the testimony of the defendant himself, these preconditions for the
(MOA) with the Spouses Marquez and Soledad Go (Spouses Go), by which exercise of plaintiff's right to repurchase were adequately satisfied by the
they agreed to sell the Baguio City lot to the latter for a consideration of latter. Thus, as stated, from the Php10 Million purchase price which was
₱10,000,000.00. The MOA stipulated that "in order to save payment of high directly paid to the defendant, the latter deducted his expenses plus
and multiple taxes considering that the x x x subject matter of this sale is interests and the loan, and the remaining amount he turned over to the
mortgaged with DBP, Baguio City, and sold [to Roberto], Edwin will execute plaintiff. This testimony is an unequivocal acknowledgement from
the necessary Deed of Absolute Sale in favor of [the Spouses Go], in lieu of defendant that plaintiff and his co-heirs exercised their right to repurchase
[Roberto]." The Spouses Go then deposited the amount of ₱10,000,000.00 to the property within the agreed period by satisfying all the conditions
Roberto’s account. stipulated in the Deed of Sale with Assumption of Mortgage. Moreover,
defendant returned to plaintiff the amount of Php2.8 Million from the total
purchase price of Php10.0 Million. This only means that this is the excess
After the execution of the MOA, Roberto gave Eduardo ₱2,800,000.00 and
amount pertaining to plaintiff and co-heirs after the defendant deducted the
returned to him one of the truck tractors and trailers subject of the deed of
repurchase price of Php2.0 Million plus interests and his expenses. Add to
sale. Eduardo demanded for the return of the other truck tractor and trailer,
that is the fact that defendant returned one of the trucks and trailers subject
but Roberto refused to heed the demand.
of the Deed of Sale with Assumption of Mortgage to the plaintiff. This is, at
best, a tacit acknowledgement of the defendant that plaintiff and his co-
Thus, Eduardo initiated this replevin suit against Roberto, alleging that he heirs had in fact exercised their right to repurchase. x x x
was exercising the right to repurchase under the deed of sale; and that he
was entitled to the possession of the other motor vehicle and trailer.
Considering that the factual findings of the trial court, when affirmed by the
CA, are binding on the Court, the Court affirms the judgment of the CA
In his answer, Roberto denied that Eduardo could repurchase the upholding Eduardo’s exercise of the right of repurchase.
properties in question; and insisted that the MOA had extinguished their
deed of sale by novation.
In Metropolitan Bank and Trust Company v. Tan, the Court ruled that a
redemption within the period allowed by law is not a matter of intent but of
Issue: payment or valid tender of the full redemption price within the period.
Verily, the tender of payment is the seller’s manifestation of his desire to
repurchase the property with the offer of immediate performance. As we
Whether or not the respondent has exercised their right of repurchase
stated in Legaspi v. Court of Appeals, a sincere tender of payment is
sufficient to show the exercise of the right to repurchase. Here, Eduardo
Ruling: paid the repurchase price to Roberto by depositing the proceeds of the sale
of the Baguio City lot in the latter’s account. Such payment was an effective
exercise of the right to repurchase.
The petition for review has no merit.
On the other hand, the Court dismisses as devoid of merit Roberto’s

A sale with right to repurchase is governed by Article 1601 of the Civil Code,
insistence that the MOA had extinguished the obligations established under
which provides that: "Conventional redemption shall take place when the
the deed of sale by novation.
vendor reserves the right to repurchase the thing sold, with the obligation
to comply with the provisions of Article 1616 and other stipulations which
Case Digest 2018
In sales with the right to repurchase, the title and ownership of the property
sold are immediately vested in the vendee, subject to the resolutory
condition of repurchase by the vendor within the stipulated period.
Accordingly, the ownership of the affected properties reverted to Eduardo
once he complied with the condition for the repurchase, thereby entitling
him to the possession of the other motor vehicle with trailer.
Case Digest 2018
Development Bank of the Philippines vs. Fidelita Abrigo Garcia, G.R. finding respondent's appeal meritorious and reversing the RTC Branch 71
No. 207748, March 25, 2015 Decision.
The Court has repeatedly emphasized that the policy of the law is liberality in Issue:
favor of redemption. Redemptions should be looked upon with favor and
where no injury is to follow, a liberal construction will be given to our Whether or not a valid redemption took place
redemption laws as well as to the exercise of the right of redemption. This
flows from the intention of the law to protect the rights of the original owner Ruling:
and to aid, rather than defeat, the owner's claim over his or her property. In
line with the foregoing policies, the Court finds that the Sps. Garcia validly
Yes.
redeemed their property from petitioner
Facts: The Court has repeatedly emphasized that the policy of the law is liberality
in favor of redemption. Redemptions should be looked upon with favor and
In April 1981, respondent Fidelita Abrigo Garcia and her estranged where no injury is to follow, a liberal construction will be given to our
husband, Reynaldo Garcia (Reynaldo), obtained a loan from the petitioner redemption laws as well as to the exercise of the right of redemption. This
Development Bank of the Philippines, Balanga Branch and secured the same flows from the intention of the law to protect the rights of the original
by a mortgage over a lot covered by Transfer Certificate of Title No. 19105 owner and to aid, rather than defeat, the owner's claim over his or her
(TCT No. 19105) registered in their names. When the Sps. Garcia failed to property. In line with the foregoing policies, the Court finds that the Sps.
pay their loan, petitioner foreclosed the mortgage at an auction sale held on Garcia validly redeemed their property from petitioner.
August 21, 1986 where it was the highest bidder. On September 10, 1986,
the certificate of sale was registered and annotated on TCT No. 19105. Petitioner is assailing the validity of the redemption on two grounds. First,
petitioner insists that the Sps. Garcia exercised their right of redemption
On September 10, 1987, or one (1) year after the registration of the beyond the redemption period. Second, petitioner contends that even if it
certificate of sale, the Sps. Garcia redeemed the subject property by were to be assumed that the right of redemption was exercised on time, the
tendering to Sheriff Pedro Q. Santos (Sheriff Santos) P62,800 representing redemption price paid by the Sps. Garcia was insufficient. The records show
the purchase price during the auction sale. A day after, the Sps. Garcia paid that the Sps. Garcia paid P62,800 to Sheriff Santos on September 10, 1987,
P7,536 as accrued interest. All in all, the Sps. Garcia paid P70,336. Sheriff and then P7,536, as accrued interest, one day after the expiration of the
Santos then issued a certificate of redemption dated September 10, 1987 in redemption period on September 11, 1987. Nevertheless, applying the
favor of the Sps. Garcia and turned over the money to petitioner, which then protection given by redemption laws to original owners, We find that
issued, through its branch manager, a provisional receipt for the invalidating the redemption in the instant case simply because the same
redemption money received. was exercised a day late would defeat the very policies this Court is duty
bound to uphold.
On September 23, 1987, petitioner sent a letter to the Sps. Garcia in which it
opposed the redemption because of the insufficiency of the amount Allowing the exercise of redemptioner's right to redeem one day late will
tendered, insisting that the Bank's total claim was P192,239.46. Reynaldo cause inconsiderable harm compared to the grave loss that a redemptioner
replied in writing, explaining that in a letter dated June 10, 1986, petitioner will suffer when deprived of his or her property. Despite their failure to
advised them that their total obligation amounted to P41,043.48 only. complete their redemption within the period provided by law, the Sps.
Reynaldo noted that in the certificate of sale issued by the sheriff, the Garcia's right to redeem their property should be upheld.
purchase price of the property during the public auction was P62,800,
adding that the increase in the amount was not disclosed to them. Thus, he As regard petitioner's contention on the insufficiency of the repurchase
argued that the accelerated total claim of petitioner was without basis. price,We confirm the appellate court's finding that there is nothing in the
records substantiating petitioner's claim that respondent should have paid
On June 10, 1993, petitioner tried to return the redemption price received P192239.46 instead of P703336. We note that while petitioner has
but was rejected by the Sps. Garcia who returned the manager's check painstakingly quoted in its petition provisions of law and jurisprudence on
covering the same to petitioner. Thus, rebuffed, petitioner filed a case for pie computation of redemption price, as well as excerpts from the
the consignation of the same. The consignation case was dismissed by the testimonies of its bank officers, petitioner has failed to offer any document
MTC for lack of jurisdiction. to prove the actual computation of the redemption price. In fact, a perusal of
petitioner's Formal Offer of Exhibits would show that petitioner did not
In 2002, petitioner filed a case Declaration of Nullity of Certificate of submit any document showing its computation. Petitioner merely presented
Redemption and Recovery of Possession against the Sps. Garcia and Sheriff bare and self-serving assertions which are unconvincing and doubtful.
Santos. Considering that petitioner's appeal to this Court is its last resort, it should
have clearly detailed how it came up and computed the amount it insists to
On November 7, 2002, a Decision based on a Compromise Agreement under be the correct redemption price.
which the parties mutually agreed, among others, to sell or dispose the
subject property to persons mutually acceptable to them was rendered. The redemption being valid, all acts and proceedings thereafter done by
Further, the parties requested the trial court to direct the Register of Deeds petitioner with respect to the subject property and all issuances issued
of Iba, Zambales to cancel the existing annotation of respondent's adverse relative thereto were null and void.
claim on TCT No. 41948. To implement this Decision, the subject property
was sold by petitioner to one Mary Jane Lumba Coloma (Mary Jane) who Bearing in mind, however, that this decision not only upholds the
happened to be the daughter of Reynaldo's live-in partner. Pursuant to the redemption but also nullifies ·all acts performed thereafter, including the
Compromise Agreement, petitioner returned the amount of P70,336 via issuance of the manager's check to Reynaldo refunding the amount of
Manager's Check dated December 4, 2002 to Reynaldo which he encashed P70,336 and the latter's encashment of the same, it follows that the said
on the same date. amount should be returned to petitioner. Considering that there is no
allegation or proof that the Sps. Garcia's marriage has been nullified or
On September 16, 2004, respondent filed a Complaint for Annulment of declared void, it is presumed that the return of the aforesaid amount to
Title and Recovery of Ownership and Possession with Damages against Reynaldo redounded to the benefit of their conjugal partnership. Thus, the
petitioner and Mary Jane where she prayed for the annulment of TCT No. fact that Reynaldo is not impleaded in the instant petition should not hinder
T41948 and the Deed of Absolute Sale in favor of Mary Jane. She also respondent from returning the aforesaid amount to petitioner in order to
prayed for the restoration of her ownership and possession over the subject complete the redemption.
property.
The RTC Branch 71 ruled in favor of petitioner and found that no valid
redemption took place. On June 14, 2013, the CA rendered a Decision
Case Digest 2018
CEBU STATE COLLEGE OF SCIENCE AND TECHNOLOGY (CSCST), Asuncion Sadaya, informed the then Governor of the Province of Cebu,
represented by its incumbent President vs. LUIS S. MISTERIO, GABRIEL Emilio Osmeñ a, through a letter, of their intention to repurchase the subject
S. MISTERIO, FRANCIS S. MISTERIO, THELMA S. MISTERIO, and ESTELA property as stipulated in the Deed of Sale. Thereafter, on March 13, 1990,
S. MISTERIO-TAGIMACRUZ, G.R. No. 179025, June 17, 2015, respondents, through their counsel, Atty. Ricardo Padilla, informed
PERALTA, J. petitioner of their intention to exercise their right to repurchase under the
Deed of Sale on the ground that the SAHS had ceased to exist. However,
petitioner’s Vocational School Superintendent II, Jesus T. Bonilla, informed
In cases of conventional redemption when the vendor a retro reserves the
respondents that SAHS still existed as only the name of the school was
right to repurchase the property sold, the parties to the sale must observe the
changed.
parameters set forth by Article 1606 of the New Civil Code, which states:
On December 23, 1993, respondents filed a Complaint before the RTC of

Art. 1606. The right referred to in Article 1601, in the absence of an express
Cebu City for Nullity of Sale and/or Redemption against CSCST, its
agreement, shall last four years from the date of the contract.
chairman, Armand Fabella, and president, Dr. Mussolini Barillo, alleging the
following causes of action:
Should there be an agreement, the period cannot exceed ten years.
1. That SAHS, at the time of the execution of the deed of sale on
However, the vendor may still exercise the right to repurchase within thirty December 31, 1956, had no juridical personality. As such, it
days from the time final judgment was rendered in a civil action on the basis cannot acquire and possess any property, including the subject
that the contract was a true sale with right to repurchase. (Emphasis parcel of land. Hence, the Deed of Sale is null and void; and
supplied)
2. That with the enactment of BP Blg. 412, SAHS had ceased to
Facts: exist. Thus, the right to repurchase the subject property became
operative.
On December 31, 1956, the late Asuncion Sadaya, mother of herein
respondents, executed a Deed of Sale covering a parcel of land denominated On November 29, 1995, the RTC rendered judgment in favor of the plaintiffs
as Lot 1064, consisting of an area of 4,563 square meters, located at Lahug, and against the defendants declaring the Deed of Sale entered into by and
Cebu City, and covered by Transfer Certificate of Title (TCT) No. 13086 of between Asuncion Sadaya and Sudlon Agricultural High School as null and
the Register of Deeds, Cebu Province, in favor of Sudlon Agricultural High void for the latter’s lack of juridical personality to acquire real property or
School (SAHS). The sale was subject to the right of the vendor to repurchase to enter into such transaction or having ceased to exist and ordering the
the property after SAHS shall have ceased to exist, or shall have transferred Cebu State College of Science and Technology being the actual possessor of
its school site elsewhere, worded in the Deed of Sale as follows: the land, Lot 1064, to deliver and reconvey the same to plaintiffs upon
payment of the aforementioned purchased price.
That the Vendee herein, SUDLON AGRICULTURAL HIGH SCHOOL, hereby
obligates itself to use the aforementioned Lot No. 1064, for school purposes Petitioner appealed the aforesaid decision to the CA. During the pendency
only, and it is the condition attached to this contract that the thereof, respondents filed a Manifestation and Motion for Injunction,
aforementioned Vendee obligates itself to give the Vendor herein, the right amending their complaint and cause of action to include petitioner’s intent
to repurchase the said lot by paying to the Vendee herein the to abandon the subject property and to no longer use the same for school
aforementioned consideration of ₱9,130.00 only, after the aforementioned site purposes
SUDLON AGRICULTURAL HIGH SCHOOL shall (have) ceased to exist or shall
have transferred its school site elsewhere.
On July 31, 2000, the CA reversed the decision of the RTC. On June 23, 2005,
this Court affirmed the decision of the CA and denied the petition for review
Consequently, on May 22, 1957, TCT No. 13086 was cancelled, and in lieu filed by respondents.
thereof, TCT No. 15959 was issued in the name of SAHS, with the vendor’s
right to repurchase annotated at its dorsal portion.
However, on February 5, 2001, during the pendency of their appeal with
this Court, respondents again filed an Amended Complaint with the RTC of
On March 18, 1960, the Provincial Board of Cebu donated 41 parcels of land, Cebu City this time, impleading the Province of Cebu and the Register of
covering 104.5441 hectares of the Banilad Friar Lands Estate to the SAHS Deeds, essentially alleging that pursuant to petitioner’s transfer of its school
subject to two (2) conditions: (1) that if the SAHS ceases to operate, the site, their right of redemption on said condition became operative
ownership of the lots would automatically revert to the province, and (2)
that the SAHS could not alienate, lease or encumber the properties.
In its Answer, petitioner averred that when respondents failed to include
the ground of transfer of school site in their previous complaint in Civil Case
On June 10, 1983, Batas Pambansa (BP) Blg. 412, entitled "An Act No. CEB-15267, they are deemed to have waived the same; that
Converting the Cebu School of Arts and Trades in Cebu City into a Chartered respondents should not split a single cause of action by multiple suits; that
College to be Known as the Cebu State College of Science and Technology, the case was dismissible for being barred by litis pendentia; that appellants
Expanding its Jurisdiction and Curricular Programs" took effect. It were guilty of forum shopping; and, that the action was likewise barred by
incorporated and consolidated several schools in the Province of Cebu, prescription.
including the SAHS, as part of the Cebu State College of Science and
Technology (CSCST). The law also transferred all personnel, properties,
On October 1, 2002, the RTC dismissed respondents’ Amended Complaint.
including buildings, sites, and improvements, records, obligations, monies
On appeal, however, the CA reversed the decision of the RTC.
and appropriations of SAHS to the CSCST.
Issue:
In the meantime, the Province of Cebu sought to recover the 41 parcels of
land it previously donated to SAHS on the basis of an initial report of its
provincial attorney that SAHS had no personality to accept the donation, Whether or not the respondents can exercise their right to repurchase the
and thus, the deed it executed was void. subject property upon the occurrence of the second suspensive condition,
particularly, the relocation of SAHS on October 3, 1997, the time when
petitioner ceded the property to the Province of Cebu, which is nearly forty-
On August 19, 1988, respondents Luis, Gabriel, Francis, Thelma, all
one (41) years after the execution of the Deed of Sale on December 31, 1956
surnamed Misterio, and Estella S. Misterio-Tagimacruz, as heirs of the late
Case Digest 2018
Ruling: from 9 March 1975 or until 9 March 1979. In the instant case, while the
four(4)-year period was counted from the time the right to repurchase
could be exercised or when the SAHS ceased to exist, even beyond ten (10)
No.
years from the execution of the deed of sale, one must not nevertheless lose
sight of the fundamental spirit and intent of the law which have been upheld
In cases of conventional redemption when the vendor a retro reserves the in jurisprudence, time and time again, viz.: The question of the period
right to repurchase the property sold, the parties to the sale must observe within which the repurchase may be made is unanimously considered as a
the parameters set forth by Article 1606 of the New Civil Code, which states: question of public interest. It is not a good thing that the title to property
should be left for a long period of time subject to indefinite conditions of
this nature. For this reason, the intention of the law is restrictive and
Art. 1606. The right referred to in Article 1601, in the absence of an express
limitative.(10 Manresa)
agreement, shall last four years from the date of the contract.
A long term for redemption renders the tenure of property uncertain and
Should there be an agreement, the period cannot exceed ten years.
redounds to its detriment, for neither does the precarious holder cultivate
the ground with the same interest as the owner, nor does he properly
However, the vendor may still exercise the right to repurchase within thirty attend to the preservation of the building, and owing to the fact that his
days from the time final judgment was rendered in a civil action on the basis enjoyment of the property is temporary, he endeavours above all to derive
that the contract was a true sale with right to repurchase. (Emphasis the greatest benefit therefrom, economizing to that end even the most
supplied) essential expenses.
Thus, depending on whether the parties have agreed upon a specific period Hence, while the occurrence of the second suspensive condition may give
within which the vendor a retro may exercise his right to repurchase, the rise to a separate cause of action, the same must always be taken in
property subject of the sale may be redeemed only within the limits conjunction with the periods prescribed by law insofar as they frown upon
prescribed by the aforequoted provision. the uncertainty of titles to real property. Otherwise, vendors may simply
impose several resolutory conditions, the happening of each will practically
extend the life of the contract beyond the parameters set forth by the Civil
In the Decision dated June 23, 2005,this Court ruled that since petitioner
Code. This is certainly not in line with the spirit and intent of the law. To
and respondents in this case did not agree on any period for the exercise of
permit respondents to exercise their right to repurchase upon the
the right to repurchase the property herein, respondents may use said right
happening of the second resolutory condition, when they utterly failed to
within four (4) years from the happening of the allocated conditions
timely exercise the same upon the happening of the first, would effectively
contained in their Deed of Sale: (a) the cessation of the existence of the
result in a circumvention of the periods expressly mandated by law.
SAHS, or (b) the transfer of the school to other site. However, due to
respondents’ failure to exercise their right to redeem the property within
the required four (4) years from the time when SAHS had ceased to exist, or To repeat, Article 1606 expressly provides that in the absence of an
from June 10, 1983, the date of effectivity of BP Blg. 412, this Court held that agreement as to the period within which the vendor a retro may exercise
respondents are barred by prescription. his right to repurchase, the same must bed one within four (4) years from
the execution of the contract. In the event the contract specifies a period,
the same cannot exceed ten (10) years. Thus, whether it be for a period of
Despite this, respondents nevertheless insist on the redemption of the
four (4) or ten (10) years, this Court consistently implements the law and
subject property pursuant to the second suspensive condition, namely,
limits the period within which the right to repurchase may be exercised,
petitioner’s transfer of its school site. Applicable law and jurisprudence,
adamantly striking down as illicit stipulations providing for an unlimited
however, runs contrary to respondents’ stance.
right to repurchase. Indubitably, it would be rather absurd to permit
respondents to repurchase the subject property upon the occurrence of the
Consistent with such view, this Court frowned upon agreements indicating second suspensive condition, particularly, the relocation of SAHS on
indefinite stipulations for the exercise of the right to repurchase and October 3, 1997, the time when petitioner ceded the property to the
restricted the redemption period to ten (10) years from the date of the Province of Cebu, which is nearly forty-one (41) years after the execution of
contract of sale, in consonance with the provisions of the Civil Code. the Deed of Sale on December 31, 1956. This Court must, therefore, place it
Accordingly, when vendors a retro were granted the right to repurchase upon itself to suppress these kinds of attempts in keeping with the
properties sold "at any time they have the money," "in the month of March fundamentally accepted principles of law.
of any year," or "at any time after the first year," this Court had not hesitated
in imposing the ten (10)-year period, the expiration of which effectively
Indeed, the freedom to contract is not absolute. The contracting parties may
bars redemption of the subject properties. Similarly, there have been
establish such stipulations, clauses, terms and conditions as they may deem
numerous Occasions wherein We invalidated stipulations permitting the
convenient, provided they are not contrary to law, morals, good customs,
repurchase of property only after the lapse of at least ten (10) years from
public order, or public policy. When the conditions in a contract manifest an
the date of the execution of the contract for being in contravention of the
effective circumvention of existing law and jurisprudence, it is incumbent
limitation mandated by the Civil Code provision. Waivers of such period
upon the courts to construe the same in accordance with its ultimate spirit
were likewise held to be void for being against public policy.
and intent.
Furthermore, this Court deemed it necessary to keep within the ten (10)-
year period those instances where parties agree to suspend the right until
the occurrence of a certain time, event, or condition, insofar as the
application of the four (4)-year period in the first paragraph of Article 1606
Civil Code would prolong the exercise of the right beyond ten (10) years.
As elucidated in Badayos v. Court of Appeals:
While the counting of this four-year period shall begin from the execution of
the contract, where the right is suspended by agreement until after a certain
time, event or condition, the period shall be counted from the time such
right could be exercised, but not exceeding ten (10) years from the
execution of the contract. Applying the provision to the instant case, the
period to repurchase the property must be deemed to be four (4) years
Case Digest 2018
JUANA VDA. DE ROJALES, SUBSTITUTED BY HER HEIRS, REPRESENTED filed by respondent, the vendee, in whose favor the petitioner sold the
BY CELERINA ROJALES-SEVILLA v. MARCELINO DIME, SUBSTITUTED BY subject property under the contract of sale con pacto de retro.
HIS HEIRS, REPRESENTED BY BONIFACIA MANIBAY, G.R. No. 194548,
February 10, 2016, PERALTA, J.
Issue:
Not being a privy to the pacto de retro sale, Villamin cannot be considered to
have been prejudiced with the consolidation of title in respondent's name. Whether or not the parties enter into a pacto de retro sale? Yes
Assuming arguendo that she was indeed the source of the consideration, she
has a separate cause of action against respondent. The legal obligation of
Whether or not Villamin, the allged source of the fund in purchasing the lot
respondent to her is separate and distinct from the contract of sale pacto de
is an indispensable party? No
retro, thus, the award of consolidation of title in her name would be
untenable.
Ruling: As evidenced by the contract of Pacto de Retro sale,
petitioner, the vendor, bound herself to sell the subject property to
Facts: Petitioner Juana Vda. de Rojales owned a parcel of land (Lot 4-A)
respondent, the vendee, and reserved the right to repurchase the same
located at Barrio Remanente, Municipality of Nasugbu, Batangas consisting
property for the same amount within a period of nine (9) months from
of 2,064 square meters covered by TCT No. T-
March 24, 1999 to December 24, 1999. Therefore, in an action for the
55726.anroblesvirtuallawlibrary
consolidation of title and ownership in the name of vendee in accordance
with Article 1616 of the Civil Code, the indispensable parties are the parties
In a petition dated May 30, 2000 filed before the RTC of Nasugbu, Batangas
to the Pacto de Retro Sale - the vendor, the vendee, and their assigns and
respondent Marcelino Dime alleged that on May 16, 1999, petitioner
heirs.
conveyed under a pacto de retro contract Lot 4-A in favor of respondent for
and in consideration of the sum of P2,502,932.10. Petitioner reserved the
Villamin, as the alleged source of the consideration, is not privy to the
right to repurchase the property for the same price within a period of nine
contract of sale between the petitioner and the respondent. Therefore, she
(9) months from March 24, 1999 to December 24, 1999. Despite repeated
could not maintain an action for consolidation of ownership and title of the
verbal and formal demands to exercise her right, petitioner refused to
subject property in her name since she was not a party to the said contract.
exercise her right to repurchase the subject property.
Where there is no privity of contract, there is likewise no obligation or
In her answer, petitioner denied the execution of the pacto de retro sale in
liability to speak about. This Court, in defining the word "privy" in the case
favor of respondent and alleged that she had not sold the subject
of Republic vs. Grijaldo said that the word privy denotes the idea of
property. She claimed that the document presented by respondent was
succession, thus, he who by succession is placed in the position of one of
falsified since the fingerprint appearing therein was not hers and the
those who contracted the judicial relation and executed the private
signature of the Notary Public Modesto S. Alix was not his. She also averred
document and appears to be substituting him in the personal rights and
that she filed falsification and use of falsified documents charges against
obligation is a privy.
respondent.
For not being an heir or an assignee of the respondent, Villamin did not
In her sworn statement attached to her Answer, petitioner alleged that she
substitute respondent in the personal rights and obligation in the pacto de
mortgaged the subject property with the Batangas Savings and Loan Bank
retro sale by succession. Since she is not privy to the contract, she cannot be
for P100,000.00 when her daughter Violeta Rojales Rufo needed the money
considered as indispensable party in the action for consolidation of title and
for application of overseas work; Antonio Barcelon redeemed the property
ownership in favor of respondent. A cursory reading of the contract reveals
and paid P260,000.00 for the debt plus the unpaid interest with the bank;
that the parties did not clearly and deliberately confer a favor upon
when Barcelon entered the mayoralty race, he demanded payment of the
Villamin, a third person.
debt, then mortgaged the title of the subject property with respondent; and
the signatures appearing in the documents were falsified.
Petitioner alleges that the consolidation of the title should not be allowed
since the heirs admitted that they would be unjustly enriched, Villamin
Respondent passed away on June 22, 2002 before the trial on the merits of
being the source of the fund used for the purchase of the subject property.
the case ensued. Being his compulsory heirs, respondent's estranged wife
Bonifacia Dime and their children Cesario Antonio Dime and Marcelino
This Court notes that the RTC relied on the bare assertions of the heirs in
Dime, Jr., substituted him in the suit.
dismissing the case with prejudice. The records are bereft of evidence to
support the allegation that Villamin has indeed provided the consideration.
On July 11, 2006, the heirs of respondent filed a Manifestation and Motion Not being a privy to the pacto de retro sale, Villamin cannot be considered to
to Dismiss the Complaint on the ground that it was Rufina Villamin, have been prejudiced with the consolidation of title in respondent's name.
respondent's common law wife, who was the source of the fund in Assuming arguendo that she was indeed the source of the consideration, she
purchasing Lot 4-A. They alleged that the consolidation of ownership and has a separate cause of action against respondent. The legal obligation of
title to respondent would be prejudicial to Villamin and would unjustly respondent to her is separate and distinct from the contract of sale pacto de
enrich them. Consequently, the RTC, through Judge Christino E. Judit, in an retro, thus, the award of consolidation of title in her name would be
Order dated July 12, 2006, dismissed the case with prejudice on the ground untenable.
that the case was not filed by an indispensable party,
Villamin.chanroblesvirtallawlibrary --
However, on August 2, 2006, Atty. Pedro N. Belmi, the counsel of We have consistently decreed that the nomenclature used by the
respondent, filed a Motion for Reconsideration praying to set aside the contracting parties to describe a contract does not determine its nature. The
dismissal with prejudice on the ground that Villamin and the daughters of decisive factor is their intention - as shown by their conduct, words, actions
petitioner, Manilyn Rojales Sevilla and Olivia Rojales, tricked and and deeds - prior to, during, and after executing the agreement. Thus, even if
manipulated the respondent's widow and her children to affix their a contract is denominated as a pacto de retro, the owner of the property
signatures on the motion to dismiss. Atty. Belmi insisted that the RTC erred may still disprove it by means of parole evidence, provided that the nature
in giving credence to the motion without his verification that the motion of the agreement is placed in issue by the pleadings filed with the trial court.
was indeed freely and voluntarily executed by the parties.
Petitioner failed to specifically allege in all her pleadings that she did not
Thereafter, the RTC ruled in favor of the petitioner. The CA rejected the intend to sell her property to respondent, instead, she maintained that there
ruling of the court a quo that Villamin was an indispensable party. It ruled was no pacto de retro sale because her thumbmark and the notary public's
that the person who provided the funds for the purchase of the property is signature were falsified. She should have raised the issue that respondent
not considered as an indispensable party in a case of consolidation of title merely borrowed the title from her and promised to pay her in her
pleadings and not belatedly claimed the same after the NBI ruled that the
Case Digest 2018
thumbmark in the contract was hers. letter to FEBTC informing it of the pending action; attached to the letter was
a copy of the complaint filed as Civil Case No. 95-9344.
In light of petitioner's inconsistent and bare allegations and the conflicting
testimony of her other witness, we rule that petitioner failed to overcome
During the pendency of Civil Case No. 95-9344, the spouses Cortez
the presumption of regularity of the notarized contract of Pacto de
manifested that they were turning over the balance of the deposit in FEBTC
Retro sale. Moreover, this Court is unconvinced that petitioner has
(amounting to ₱ 54,534.00) to the spouses Serfino as partial payment of
successfully proven that her agreement with respondent was not a pacto de
their obligation under the compromise judgment. The RTC issued an order
retro sale but a contract of loan secured by a mortgage of the subject
dated July 30, 1997, authorizing FEBTC to turn over the balance of the
property.
deposit to the spouses Serfino.
SPOUSES GODFREY and GERARDINA SERFINO vs. FAR EAST BANK AND
TRUST COMPANY, INC., now BANK OF THE PHILIPPINE ISLANDS, G.R. On February 23, 2006, the RTC issued the assailed decision (a) finding the
No. 171845, October 10, 2012, BRION, J. spouses Cortez, Grace and Dante liable for fraudulently diverting the
amount due the spouses Serfino, but (b) absolving FEBTC from any
liability for allowing Grace to withdraw the deposit. The RTC declared
"An assignment of credit is an agreement by virtue of which the owner of a
that FEBTC was not a party to the compromise judgment; FEBTC was thus
credit, known as the assignor, by a legal cause, such as sale, dation in
not chargeable with notice of the parties’ agreement, as there was no valid
payment, exchange or donation, and without the consent of the debtor,
court order or processes requiring it to withhold payment of the deposit.
transfers his credit and accessory rights to another, known as the assignee,
Given the nature of bank deposits, FEBTC was primarily bound by its
who acquires the power to enforce it to the same extent as the assignor could
contract of loan with Grace. There was, therefore, no legal justification for
enforce it against the debtor. It may be in the form of sale, but at times it may
the bank to refuse payment of the account, notwithstanding the claim of the
constitute a dation in payment, such as when a debtor, in order to obtain a
spouses Serfino as stated in their three letters.
release from his debt, assigns to his creditor a credit he has against a
third person." As a dation in payment, the assignment of credit operates
as a mode of extinguishing the obligation; the delivery and transmission of Issue:
ownership of a thing (in this case, the credit due from a third person) by the
debtor to the creditor is accepted as the equivalent of the performance of the
Whether or not the Spouses Serfino are the owner of the deposit by virtue
obligation.
of assignment of credit
Facts:
Ruling:
The present case traces its roots to the compromise judgment dated

NO
October 24, 1995 of the RTC of Bacolod City, Branch 47, in Civil Case No. 95-
9880. Civil Case No. 95-9880 was an action for collection of sum of money
instituted by the petitioner spouses Godfrey and Gerardina Serfino The spouses Serfino’s claim for damages against FEBTC is premised on their
(collectively, spouses Serfino) against the spouses Domingo and Magdalena claim of ownership of the deposit with FEBTC. The deposit consists of
Cortez (collectively, spouses Cortez). By way of settlement, the spouses Magdalena’s retirement benefits, which the spouses Serfino claim to have
Serfino and the spouses Cortez executed a compromise agreement on been assigned to them under the compromise judgment. That the
October 20, 1995, in which the spouses Cortez acknowledged their retirement benefits were deposited in Grace’s savings account with FEBTC
indebtedness to the spouses Serfino in the amount of ₱ 108,245.71. To supposedly did not divest them of ownership of the amount, as "the money
satisfy the debt, Magdalena bound herself "to pay in full the judgment already belongs to the [spouses Serfino] having been absolutely assigned to
debt out of her retirement benefits[.]" Payment of the debt shall be made them and constructively delivered by virtue of the x x x public
one (1) week after Magdalena has received her retirement benefits from the instrument[.]" By virtue of the assignment of credit, the spouses Serfino
Government Service Insurance System (GSIS). In case of default, the debt claim ownership of the deposit, and they posit that FEBTC was duty bound
may be executed against any of the properties of the spouses Cortez that is to protect their right by preventing the withdrawal of the deposit since the
subject to execution, upon motion of the spouses Serfino. After finding that bank had been notified of the assignment and of their claim.
the compromise agreement was not contrary to law, morals, good custom,
public order or public policy, the RTC approved the entirety of the parties’
We find no basis to support the spouses Serfino’s claim of ownership
agreement and issued a compromise judgment based thereon. The debt was
of the deposit.
later reduced to ₱ 155,000.00 from ₱ 197,000.00 (including interest), with
the promise that the spouses Cortez would pay in full the judgment debt not
later than April 23, 1996. "An assignment of credit is an agreement by virtue of which the owner of a
credit, known as the assignor, by a legal cause, such as sale, dation in
payment, exchange or donation, and without the consent of the debtor,
No payment was made as promised. Instead, Godfrey discovered that
transfers his credit and accessory rights to another, known as the assignee,
Magdalena deposited her retirement benefits in the savings account of her
who acquires the power to enforce it to the same extent as the assignor
daughter-in-law, Grace Cortez, with the respondent, Far East Bank and
could enforce it against the debtor. It may be in the form of sale, but at times
Trust Company, Inc. (FEBTC). As of April 23, 1996, Grace’s savings account
it may constitute a dation in payment, such as when a debtor, in order to
with FEBTC amounted to ₱ 245,830.37, the entire deposit coming from
obtain a release from his debt, assigns to his creditor a credit he has
Magdalena’s retirement benefits. That same day, the spouses Serfino’s
against a third person." As a dation in payment, the assignment of credit
counsel sent two letters to FEBTC informing the bank that the deposit
operates as a mode of extinguishing the obligation; the delivery and
in Grace’s name was owned by the spouses Serfino by virtue of an
transmission of ownership of a thing (in this case, the credit due from a
assignment made in their favor by the spouses Cortez. The letter
third person) by the debtor to the creditor is accepted as the equivalent of
requested FEBTC to prevent the delivery of the deposit to either Grace or
the performance of the obligation.
the spouses Cortez until its actual ownership has been resolved in court.
The terms of the compromise judgment, however, did not convey an intent
On April 25, 1996, the spouses Serfino instituted Civil Case No. 95- 9344
to equate the assignment of Magdalena’s retirement benefits (the credit) as
against the spouses Cortez, Grace and her husband, Dante Cortez, and
the equivalent of the payment of the debt due the spouses Serfino (the
FEBTC for the recovery of money on deposit and the payment of
obligation). There was actually no assignment of credit; if at all, the
damages, with a prayer for preliminary attachment.
compromise judgment merely identified the fund from which payment
for the judgment debt would be sourced:
On April 26, 1996, Grace withdrew ₱ 150,000.00 from her savings
account with FEBTC. On the same day, the spouses Serfino sent another
Case Digest 2018
(c) That before the plaintiffs file a motion for execution of the decision or
order based [on this] Compromise Agreement, the defendant, Magdalena
Cortez undertake[s] and bind[s] herself to pay in full the judgment
debt out of her retirement benefits as Local [T]reasury Operation Officer
in the City of Bacolod, Philippines, upon which full payment, the plaintiffs
waive, abandon and relinquish absolutely any of their claims for attorney’s
fees stipulated in the Promissory Note (Annex "A" to the
Complaint). [emphasis ours]
Only when Magdalena has received and turned over to the spouses Serfino
the portion of her retirement benefits corresponding to the debt due would
the debt be deemed paid.
In the present case, the judgment debt was not extinguished by the mere
designation in the compromise judgment of Magdalena’s retirement
benefits as the fund from which payment shall be sourced. That the
compromise agreement authorizes recourse in case of default on other
executable properties of the spouses Cortez, to satisfy the judgment debt,
further supports our conclusion that there was no assignment of
Magdalena’s credit with the GSIS that would have extinguished the
obligation.
The compromise judgment in this case also did not give the supposed
assignees, the spouses Serfino, the power to enforce Magdalena’s credit
against the GSIS. In fact, the spouses Serfino are prohibited from enforcing
their claim until after the lapse of one (1) week from Magdalena’s receipt of
her retirement benefits:
(d) That the plaintiffs shall refrain from having the judgment based upon
this Compromise Agreement executed until after one (1) week from receipt
by the defendant, Magdalena Cortez of her retirement benefits from the
[GSIS] but fails to pay within the said period the defendants’ judgment debt
in this case, in which case [this] Compromise Agreement [may be] executed
upon any property of the defendants that are subject to execution upon
motion by the plaintiffs.
An assignment of credit not only entitles the assignee to the credit itself, but
also gives him the power to enforce it as against the debtor of the assignor.
Since no valid assignment of credit took place, the spouses Serfino cannot
validly claim ownership of the retirement benefits that were deposited with
FEBTC. Without ownership rights over the amount, they suffered no
pecuniary loss that has to be compensated by actual damages. The
grant of actual damages presupposes that the claimant suffered a duly
proven pecuniary loss.

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CIVIL LAW REVIEW 2 | Atty.

Josef inquired on the whereabouts of these missing TCTs from Luis R.

Josef personally talked to GM Manalili to inquire about what happened to

(3) Cause of the obligation which is established. The cause as far

The third element for a valid contract of sale is likewise lacking.

Lack of consideration makes a contract of sale fictitious. A fictitious sale is

The alleged deed of absolute sale dated November 2, 1989 notwithstanding,

Petitioner as transferee pendente lite merely steps into the shoes of

As an implementation of the MOA, the lands within Area I were then

It is in the context of this vesture of power that Demetrio, representing his

Marietta failed to pay her loan to DBP. Marietta failed to redeem the

Marietta cannot claim the protection accorded by law to innocent

As defined by the Civil Code, "[a] contract is a meeting of minds between

Hence, prior to partition, a sale of a definite portion of common property

The rules allow respondent to sell his undivided interestin the

There was no showing that respondent was authorized by his co owners to

Respondent had no right to define a 95-square-meter parcel of land, a 439-

A non-existent contract cannot be a

The absence of a contract of sale means that there is no source of

Bad faith is a state of mind indicated by acts and

Logically, therefore, since, as has already been earlier shown, respondent

Should there be no insciption, the ownership shall

the other witness,44 who were also signatories to the said document. In

Besides, as the CA correctly observed, respondent’s signature appearing on

Unrebutted too is the testimony of respondent who, during trial, attested to

Topic: Equitable Mortgage Said Jose A. Arches elected to consolidate without

For it appears that when the late Jose A. Arches, father

Moreover, we observe that while Rockville did take steps to register the

All told, we see no reason to depart from the findings and

DOLORES ADORA MACASLANG vs. RENATO AND MELBA ZAMORA

Further, We cannot allow the transfer of ownership ofLot 4098 to the

Parcel 2 reform the contract - known to him to be in truth a sale

In Claravall v. Lim,44 the Court explained:

Article 1606 is intended to cover suits where the seller claims

Granting that indeed Cipriano and Marcelino, signed and thumbmarked,

Besides, where a party is unable to read or when the contract is in a

There was no prescription

Contrary to the findings of the CA that petitioners’ cause of action was

xxx Where there is no consent given by one party in a purported

On November 15, 1989, plaintiff informed the defendant heirs, through

"In the sale of immovable property, even though it may

P600,000.00 is not tantamount to a breach of the contract for by the fact of

As stated in the Agreement, the payment of the purchase price, in

The fact that the predecessor-in-interest of the respondents failed to return

Petitioners alleged in their Complaint that in 1992, Eugenia refused to

In support of their contention, petitioners presented the testimony of Irene,

C&F Manila, freight, handling, insurance, custom duties and incidental

Where, in pursuance of a contract of sale, the seller is authorized or

Of course, Article 1523 provides a mere presumption and in order to

In the instant case, records show that Nicolas signed a mere

a) The stipulation to execute a deed of sale upon full payment of the

In Chua v. Court of Appeals,29 the Court, speaking through Justice Carpio,

In fine, "the need to execute a deed of absolute sale upon completion of

Indeed, it would be highly iniquitous for the Court to rule that

(4) WON the subject sale is valid. – NO

That petitioners continued to receive four monthly installments

The RTC found that petitioners were able to prove by a

A contract is what the law defines it to be, taking into

The very essence of a contract of sale is the transfer of