1. Josefina Nobleza v. Shirley Nuega, GR 193038, March 11, 2015, Villarama, Jr., J.

(Purchaser in Good Faith)

FACTS:
Shirley Nuega was married to Rogelio Nuega on September 1, 1990. In 1988, when they were
still engaged, Shirley was working as a domestic helper in Israel. Upon Rogelio’s request,
Shirley sent him money for the purchase of a residential lot in Marikina where they planned to
build their home. Rogelio was then working abroad as a seaman. On September 13, 1989,
Rogelio purchased the house and lot for P102k from Rodeanna Realty Corporation. The
property is 111m2. Shirley claims that upon her arrival in PH in 1989, she settled the balance for
the equity over the property with the developer thru SSS financing. She paid the succeeding
monthly amortizations. On October 19, 1989, TCT 171963 was issued solely under the name
of Rogelio.

They married in Sept. 1, 1990 and lived in the property. Shirley returned to Israel. While there,
she received info that Rogelio brought home another woman, Monica Escobar, into the
family home. She also learned and confirmed upon her return to PH in May 1992 that Rogelio
was introducing Escobar as his wife. Shirley filed for concubinage before the provincial
prosecutor and for legal separation and liquidation of property with RTC. She withdrew the legal
separation case but refiled the same. In between the filing of the cases, Shirley learned that
Rogelio had the intention of selling the property.

She advised the interested buyers, one of whom was their neighbor Nobleza, of the existence
of the cases she filed against Rogelio and cautioned them against buying the property until the
cases are terminated. Nonetheless, Rogelio sold the property to Nobleza without Shirley’s
consent for P380k under a deed of absolute sale dated De. 29, 1992.

Meanwhile, RTC granted the legal separation and ordered the dissolution and liquidation of
their absolute community of property. CA dismissed the appeal. The decision became final
and executory.

Shirley instituted a complaint for rescission of sale and recovery of property against Nobleza
and Rogelio before RTC. RTC ordered the rescission of the deed of absolute sale insofar as ½ of
the property is involved, representing Shirley’s portion and ordered Nobleza to reconvey 55.05
m2 of the property to Shirtley. Nobleza appealed to CA (Rogelio did not). CA declared that the
deed of absolute sale is entirely void and ordered Nobleza to reconvey the whole property to
Shirley and Rogelio. Hence this petition.

ISSUE:
Whether the sale is valid.
HELD: NO.
Nobleza is not a buyer in GF. An innocent purchaser for value is one who buys the property of
another, without notice that some other person has a right or interest in the property, for
which a full and fair price is paid by the buyer at the time of the purchase or before receipt of any
notice of claims or interest of some other person in the property. The person claiming to be an
innocent purchaser has the burden of proving such assertion, and it is not enough to invoke the
ordinary presumption of GF. To be a buyer in GF, he must have shown prudence and due
diligence in the exercise of his rights. It presupposes that the buyer did everything that an
ordinary person would do for the protection and defense of his rights and interests against
prejudicial concerns when placed in such a situation. The prudence required of a buyer in GF is
not that of a person with training in law, but that of an average man who weighs facts and
circumstances without resorting to the calibration of our technical rules of evidence of which his
knowledge is nil. Such prudence can be shown by making an ocular inspection of the property,
checking the ownership/title with the Register of Deeds and payment of taxes, or inquiring into
the minutiae like the lot area, type of ownership, and capacity of the seller to dispose of the
property, which includes an inquiry into the civil status of the seller to ensure that if married,
marital consent is secured when necessary.

Nobleza claims that she is a buyer in GF since the property is titled in the name of Rogelio alone.
Since she examined the TCT and found it registered in Rogelio’s name alone, she is an innocent
purchaser and not required to go beyond the face of the title in verifying the status of the
property.

But a buyer cannot claim to be an innocent purchaser for value by merely relying on the TCT of
the seller while ignoring all the other surrounding circumstances relevant to the sale. In
Arrofo v. Quiño, it was held that while the law does not require a person dealing with registered
land to inquire further than what the Torrens Title on its face indicates, this is not absolute.
Arrofo was held not an innocent purchaser for value as she saw the house constructed on the
property yet did not bother to inquire about the house’s occupants. Myrna, seller thereof, was
renting a room from Arrofo yet selling a land with a house, which should have put Arrofo on her
guard. Myrna was not occupying the house. Thus, someone else is. Had she inquired on who
occupied the house, she would have discovered that the lessee was paying rentals to Quiño, not
to Myrna.

An analogous situation exists here. The TCT states that its sole owner is Rogelio, described as
“single.” But Nobleza’s sister Bautista, at the time of the sale, was residing near Rogelio and
Shirley’s house, the property. Had she been prudent, Nobleza could have easily checked if
Rogelio had the capacity to dispose of the property. She could have inquired with such facility
since her sister lived in the same Ladislao Diwa village as the property, if there was any person
other than Rogelio who had an interest in the property. Nuega even testified that she had warned
their neighbors, including Bautista, not to engage in any deal with Rogelio as to the purchase of
the property because she filed cases against him.

Second, the deed of absolute sale was executed and dated December 29, 1992. But the
Community Tax Certificates of the witnesses therein were dated January 2 and 20, 1993.

Also, in the deed, Rogelio’s civil status as seller was not stated, while Nobleza as buyer was
indicated as “single.” It puzzles the Court that while Nobleza repeatedly claimed that Rogelio is
single under TCT 171963, his civil status as seller was not stated in the deed.

CA was also correct in declaring the deed void in its entirety. While the TCT shows that the
owner is only Rogelio, Nuega proved at trial that she contributed in the payment of the purchase
price of the property. Thus, the property must be divided equally between Shirley and Rogelio
upon the grant of the legal separation. But the nullity of the sale is not premised on Shirley’s
financial contribution. The law itself defines what is community property. Art. 91 of Family
Code states that it consists of all the property owned by the spouses at the time of celebration of
the marriage or acquired thereafter. The only exceptions are 1) those excluded from the ACP by
the FC in Art. 92 and 2) by the marriage settlement. Since the property does not fall under any of
the exclusions in Art. 92, it is part of the ACP regardless of their contribution to its acquisition
before their marriage and despite only Rogelio’s name appearing in TCT as the owner.

Rogelio, without the consent of Shirley, sold the property during the subsistence of a valid
marriage. Under Art. 96 of FC:
Art. 96. The administration and enjoyment of the community property shall belong to
both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject
to recourse to the court by the wife for a proper remedy, which must be availed of within
five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the common properties, the other spouse may assume sole powers of
administration. These powers do not include the powers of disposition or
encumbrance without the authority of the court or the written consent of the other
spouse. In the absence of such authority or consent, the disposition or encumbrance
shall be void.
Under this, Rogelio could not sell the property without the written consent of Shirley or court
authority. Without such consent, the entire sale is void.

2. Spouses Nicanor Tumbokon v. Apolonia Legaspi, GR 153736, August 04, 2010,

Bersamin, J. (Void deed of sale because the first seller, Victor, did not own the land)
FACTS:
Under contention are the ownership and possession of a land of 12,480 m2 in Brgy. Buenavista
in the province of Aklan. The land, planted to rice, corn, and coconuts, was owned by the late
Alejandra who had 2 marriages. The first was to Gaudencio Franco, by whom she bore Ciriaca
Franco, whose husband was Victor Miralles. The second was to Jose Garcia, by whom she bore
respondent Apolonia Garcia, who married Primo Legaspi. Alejandra died without a will in
1935 and was survived by Apolonia and Crisanto Miralles, son of Ciriaca (who died in 1924)
and Victor Miralles. So Crisanto was Alejandra’s grandson.

Spouses Nicanor Tumbokon and Rosario Sespeñe (petitioners) filed a criminal case of qualified
theft against respondents Apolonia, Paulina Magtanum, and others not parties herein for stealing
coconuts from the land. CFI convicted them. CA affirmed their conviction. Meanwhile, the
ownership and possession of the land became controversial after petitioners asserted their right in
it by virtue of their purchase from Cresenciana Inog, who supposedly acquired it from Victor
Miralles. Petitioners filed this suit for recovery of ownership and possession of real property
in CFI against respondents Apolonia, Paulina Magtanum, and others not respondents here.

RTC, replacing CFI, ruled in favor of petitioners and declared them the true owners of the land.
CA reversed RTC and dismissed the complaint. It found that in the deed of absolute sale by
Victor to Cresenciana, it was provided that the land was inherited from Alejandra, Victor being
the sole heir of Alejandra. This is false as Alejandra had more than one intestate heir, and
Victor, as mere son-in-law, is not one of them. This puts in serious doubt their other
contradictory claim that Victor instead bought the lot from Alejandra, which sale was supposedly
oral. Neither does the testimony of Crisanto, son of Victor and husband of Cresenciana, succor
petitioners. Crisanto testified that he did not bother to go to the land. This strongly suggests that
the sales and claim of possession were shams. But since there was no proof that Apolonia and
Paulina were the exclusive owners of the lot, the CA only declared that petitioners are not
owners, but not that Paulina and Apolonia were the owners thereof. Hence this petition.

ISSUE:
Whether Sps. Tumbokon’s claim of ownership from the supposed sale by Victor to Cresenciana
to them is valid.
HELD: NO.
Petitioners adduced no competent evidence to establish that Victor, transferor of the land to
Cresenciana, had any legal right in the first place to transfer ownership. He was not an heir of
Alejanra, being only her son-in-law. Thus, the statement in the deed of absolute asle between
Victor and Cresenciana that the land was “inherited from the deceased Alejandra by Victor
being the sole heir of Alejandra,” was outrightly false.

Also, a decedent’s compulsory heirs in whose favor the law reserves a part of the decedent’s
estate are exclusively the persons in Art. 887 of NCC:
Article 887. The following are compulsory heirs:
(1) Legitimate children and descendants, with respect to their legitimate parents and
ascendants; 
(2) In default of the foregoing, legitimate parents and ascendants, with respect to their
legitimate children and descendants;
(3) The widow or widower;
(4) Acknowledged natural children, and natural children by legal fiction;
(5) Other illegitimate children referred to in article 287.
Compulsory heirs mentioned in Nos. 3, 4, and 5 are not excluded by those in Nos. 1 and
2; neither do they exclude one another.
Only 2 forced heirs survived Alejandra: Apolonia and her grandson Crisanto. The latter
succeeded Alejandra by right of representation because his mother, Ciriaca, predeceased
Alejandra. Representation is a right created by fiction of law by virtue of which the
representative is raised to the place and degree of the person represented, and acquires the rights
which the latter would have if she were living or if she could have inherited. Crisanto was called
to the succession by law and not by the person represented, Ciriaca.

Victor’s supposed acquisition thru oral sale from Alejandra had no factual support in the records.
The evidence was insufficient and incredible. The CA said that this can be facilely feigned, and it
is likely so for the claim is sweeping, vacuous, and devoid of standard particulars like what was
the price, when and where the sale was made, who were present, or who knew of it.

3. Spouses Rex and Concepcion Aggabao v. Dionisio Parulan, Jr., GR 165803, September
01, 2010, Bersamin, J. (Buyer in GF of conjugal property)
FACTS:
Involved in this case are two parcels of land and their improvements (property) in Parañaque.

Real estate broker Marta Atanacio offered the property to Sps. Aggabao. Atanacio’s persistence
prevailed upon them, so they and Atanacio met with Ma. Elena at the site of the property. Elena
showed them the owner’s original copy of TCT 63376 (on one of the lands), certified true copy
of TCT 63377, 3 tax declarations, and a copy of the special power of attorney (SPA) executed
by Dionisio authorizing Elena to sell the property. Sps. Aggabao paid P20k as earnest money.
Elena executed a handwritten receipt of earnest money, where the parties stipulated that they
would pay an additional P130k and the bank loan of Elena and Dionisio Parulan of P650k and
that they would make final payment of P700k once Elena turned over the property.

Sps. Aggabao went to the register of deeds of Parañaque to verify the TCTs shown by Elena.
They found that TCT 63376 was encumbered to Banco Filipino which was already cancelled
due to full payment of the obligation. The Banco Filipino loan was effected thru SPA by
Dionisio to Elena. On TCT 63377, they found an annotation of an existing mortgage in favor of
Los Baños Rural Bank, also thru SPA, coupled with a copy of a court order authorizing Elena
to mortgage the lot to secure a loan of P500k.

Sps. Aggabao and Atanacio next inquired about the mortgage and court order annotated on TCT
63377 at Los Baños Rural Bank. They met Atty. Zarate, the bank’s legal counsel, who told them
that the bank asked for the court order since the lot involved was conjugal property.

After the verification, Sps. Aggabao delivered the P130k, the P650k to Los Baños Rural Bank
who released the owner;s duplicate of TCT 63377 to them. They then delivered the final amount
of P700k to Elena who executed a deed of absolute sale in their favor. But Elena did not turn
over the owner’s duplicate copy of TCT 63376, saying that it was in the possession of a relative
in HK. She assured Sps. Aggabao that it would be given after a week.

TCT 63377 was cancelled and a new one was issued to Sps. Aggabao. But Elena did not turn
over TCT 63376. Sps. Aggabao learned that the duplicate copy thereof had all along beein with
Atty. Jeremy Parulan, who held an SPA by his brother Dionisio authorizing him to sell both
lots. Sps. Aggabao met with Atty. Parulan at Manila Peninsula, who they claimed “smugly
demanded P800k” in exchange for TCT 63376. Sps. Aggabao tendered P250k, which Atty.
Parulan declined, giving them only up to April 5, 1991 to decide. Atty. Parulan called them on
April 5, but Sps. Aggabao told him that they fully paid to Elena.

Thus, Dionisio, thru Atty. Parulan, commenced an action praying for the nullity of the deed of
absolute sale executed by Elena and the cancellation of the title issued to Sps. Aggabao. In turn,
Sps. Aggabao filed their own action for specific performance.

RTC declared that the SPA with Elena was a forgery, finding that Dionisio had been out of the
country at the execution of the SPA. NBI Sr. Document Examiner Flores certified that the
signature on the SPA purporting to be of Dionisio’s and the sample signatures of Dionisio were
not written by the same person. RTC rejected the defense of buyers in GF for failure to exercise
ordinary prudence. CA affirmed, saying that Art. 124 of FC applied since Dionisio did not
consent to the sale of the conjugal property by Elena. Hence this petition.
ISSUE:
Whether Sps. Aggabao are buyers in GF.
HELD: NO.
Sps. Aggabao claim that Art. 173 of NCC, not Art. 124 of FC, governed the property relations of
Parulan as they married before the effectivity of FC. But Art. 254 repealed several titles under
NCC including that in which Art. 173 was found. Secondly, the sale was made after August 3,
1988, the effectivity of FC. The proper law to apply is thus Art. 124, for any alienation or
encumbrance of conjugal property during the effectivity of FC is governed by Art. 124 thereof:
In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include disposition or encumbrance without
authority of the court or the written consent of the other spouse. In the absence of such
authority or consent, the disposition or encumbrance shall be void. However, the
transaction shall be construed as a continuing offer on the part of the consenting spouse
and the third person, and may be perfected as a binding contract upon the acceptance by
the other spouse or authorization by the court before the offer is withdrawn by either or
both offerors.
Art. 256 of FC also provides that it may apply retroactively provided no vested rights are
impaired. Here, Sps. Aggabao did not show any vested right in the property acquired prior
to August 3, 1988. The void sale was a continuing offer from Sps. Aggabao and Elena that
Parulan had the option of accepting or rejecting before the offer was withdrawn by either or both
Elena and Sps. Aggabao.

-Due diligence is required in verifying not only vendor’s title, but also agent’s authority to sell
the property. A purchaser in GF is one who buys the property of another, without notice that
some other person has a right to, or interest in, such property, and pays the full and fair price for
it at the time of such purchase or before he has notice of the claim or interest of some other
persons in the property.

Sps. Aggabao claim that they exercised due diligence by verifying the TCT’s status and
inquiring about the details surrounding the mortgage extended by Los Baños Rural Bank. But
Art. 124 requires the consent of BOTH spouses before the conjugal property may be
disposed of by sale, mortgage, etc. in Bautista v. Silva, the Court held that to determine GF of
buyers in dealing with a seller with title and possession but whose capacity to sell was restricted
in that the consent of the other spouse was required before the conveyance, to prove GF, the
buyers must show that they inquired not only into the title of the seller but also into the
seller’s CAPACITY to sell. Thus, buyers of conjugal property must observe two kinds of
requisite diligence: 1) diligence in verifying the validity of the TITLE covering the property,
and 2) diligence in inquiring into the AUTHORITY of the transacting spouse to sell conjugal
property in behalf of the other spouse.

It is true that a buyer of registered land needs only to show that he has relied on the face of the
title for he is not required to explore beyond what the certificate indicates on its face. In this
respect, Sps. Aggabao sufficiently proved that they checked the authenticity of TCT 63376 and
63377 with the registry of deeds and Los Baños Rural Bank. Thus, they observed the requisite
diligence in examining the validity of the TCTs.

But the issue was if they diligently inquired into Elena’s authority to convey the property. They
knew that the law required Parulan’s consent to the sale, but they did not present evidence that
they inquired into the circumstances behind the execution of the SPA purportedly executed by
Parulan to Elena. Had they made inquiries, they would have discovered that Parulan and Elena,
respondents, had been estranged from each other and were under de facto separation and
probably held conflicting interests to negate the existence of an agency between them. To lift this
doubt, they must of necessity further inquire into Elena’s SPA. This omission indicated their not
being buyers in GF. The unquestioning reliance of Sps. Aggabao on Elena’s SPA without taking
precautions to verify its authenticity was not a prudent buyer’s move. They could have also
inquired into the authority of the notary public, Atty. Datingaling, who turned out not to be
authorized to act as notary during 1990-1991.

Also, the payment of P700k without the owner’s duplicate of TCT 63376 being handed by Elena
indicated lack of precaution. They could have rightly withheld final payment. That they did not
reflected lack of due care. Lastly, they did not take immediate action against Elena upon
discovering that TCT 63376 was with Atty. Parulan contrary to Elena’s representation. This is
another reason that rendered their GF incredible.

4. Far East Bank and Trust Company v. Philippine Deposit Insurance Corporation, GR
172983, July 22, 2015, Brion, J.
FACTS:
Central Bank of PH issued Monetary Board (MB) Resolution 699 which placed Pacific Banking
Corporation (PBC) under receivership. CB formally invited banks to submit their proposals for
the purchase of the assets and franchise of the various offices of PBC and assumption of an
equivalent amount of PBC’s liabilities. In answer, Far East Bank and Trust Company (FEBTC)
submitted its bid. FEBTC’s bid covered the purchase of PBC’s non-fixed and fixed assets and
assumption of PBC’s recorded liabilities. According to the bid, the fixed assets are those
described in the Asian Appraisal Report which FEBTC offered to purchase at a price
equivalent to the sound values in the report. The sound value totaled P87,226,050.

MB accepted FEBTC’s bid, finding it as the most advantageous. FEBTC as buyer and PBC as
seller and the CB entered into a MOA. S1 thereof stated that the parties shall execute an absolute
purchase agreement of all the assets of PBC. These covered non-fixed assets and fixed assets.
S3(c), reflecting FEBTC’s bid, stated that the fixed assets are those in the Asian Appraisal
Report. In accordance with S1(a) of the MOA, PBC as seller, FEBTC as buyer, and CB executed
a purchase agreement (PA) for purchase of PBC assets and assumption of its liabilities. PA
included only the non-fixed assets and not the fixed assets as agreed under S3(c). They
agreed that there were other assets not yet covered and they may agree within 90 days to
purchase the other assets.

PA was approved by MB and RTC as liquidating court. FEBTC claims that it complied with its
obligation under the MOA, including payment of P260M. It took possession of the fixed assets
and opened its branches thereon. But liquidator Santos, representing PBC, failed to execute the
PA covering the disputed fixed assets.

After, PDIC took over as PBC liquidator, with liquidator Nañagas replacing Santos. Nañagas
informed FEBTC that the fixed assets of PBC can be purchased only at their present appraisal
value which is much higher than their sound value in the report. He began bidding and
negotiating the sale of PBC’s fixed assets to third persons.

Thus, FEBTC filed with RTC a motion to compel liquidator to execute the implementing deeds
of sale over the fixed assets. RTC ordered PDIC to execute the implementing deeds of absolute
sale to FEBTC and for FEBTC to pay the price for the fixed assets in the report equivalent to
their sound values. It held that there was a perfected contract of sale and that the P260M FEBTC
had paid pursuant to the MOA was part of the consideration and not merely serving as authority
to reopen the PBC branches.

CA reversed RTC, ruling that the disputed fixed assets was submitted as collaterals with CB and
thus excluded from the purchase. Hence this petition.

ISSUE:
Whether there is a perfected contract of sale such that PDIC, as liquidator of PBC, may be
compelled to comply with its terms.
HELD: YES.
There was a perfected contract of sale over the 9 disputed fixed assets. A contract undergoes
various stages that include its negotiation or preparation, perfection, and consummation.
Negotiation covers the period from the time the prospective contracting parties indicate interest
in the contract to the time the contract is concluded/perfected. The perfection takes place upon
the concurrence of its essential elements. Consummation begins when the parties perform
their undertakings under the contract, culminating in its extinguishment. Contract of sale are
perfected by mutual consent. This may only be inferred from the confluence of two acts of the
parties: an offer certain as to the object and its consideration, and an absolute acceptance of the
offer- as to the exact object and consideration in the offer. Based on these, the essential elements
of a contract of sale are present in the MOA as confirmed by FEBTC’s bid and the
provisions of the MOA and PA.

1. Negotiation stage.
FEBTC submitted its bid to CB in response to CB’s invitation to submit a formal proposal to
purchase PBC’s assets. FEBTC’s bid or offer included the purchase of selected fixed and non-
fixed PBC assets. Its bid was: P360M, 10% discount on the sound value, and authority to
relocate the PBC branches within 2 years of takeover/ P310M, 8% discount, within 2 years/
P260M, 5% discount, within 1 year/ P215M, no discount, within 1 year. In addition to these
alternative bids, FEBTC consistently stated its intent: 1) to include the purchase of the fixed
assets in the Asian Appraisal’s Report of August 1984, and 2) that these fixed assets are to be
valued based on their sound values pursuant to the report subject to discount.

2. Perfection.
After, FEBTC, PBC, and CB entered into a MOA that eseentially adopted FEBTC’s bid.
S1(a) of the MOA adopted the bid to purchase all PBC assets subject to proposed exclusions, a
category of which are assets submitted to CB as collaterals. The bid chosen by the parties and
incorporated in the MOA was bid 1(d) (*yung P215M), incorporated in S10(a) and (b) of the
MOA. On the terms of payment, FEBTC’s offer in II. (2) was substantially incorporated in
S10(c)(i), (ii), and 10(d) of the MOA. The MOA thus covered the purchase of the non-fixed
assets and the disputed fixed assets, their valuation, and manner of payment including
discounts. The mOA contained PBC’s ACCEPTANCE of the relevant provisions of FEBTC’s
bid and FEBTC’s ACCEPTANCE of any changes or counter-offer made by the Liquidator and
CB. Thus, the essential elements of a contract of sale- object, consideration, and consent- were
present in the MOA.

a. Object. This covered the purchase of PBC’s assets as defined in S1(a), 3(a), and 3(c) of the
MOA, specifically including 1) the non-fixed assets, 2) the fixed assets as contained in the
Asian Appraisal’s Report which include the disputed fixed assets, and 3) authority to re-
open/relocate any PBC branch to other service areas within 18months from execution of the
absolute PA.

b. Consideration and Manner of Payment.

-For the non-fixed assets, S1(B) provides that it shall be compensated and matched by FEBTC’s
simultaneous assumption of liabilities of PBC in an amount at least equal to the value of the
assets purchased as determined by SGV & Co.
-For the fixed assets, the consideration therefor is their sound value less any assigned
depreciation from August 1984 up to the valuation date as described in the Report of August
1984. There shall also by a 5% discount of the value of the fixed assets pursuant to the report’s
valuation.
-In addition to the consideration for the fixed and non-fixed assets, the parties also agreed that
FEBTC shall pay an additional or further consideration of P260M for the sale of assets and
assumption of liabilities of PBC.

Thus, the parties had a meeting of minds on the essential elements, perfecting their contract of
sale. This meeting was embodied in their MOA which contained the absolute acceptance of the
offer and the elements.

3. Consummation stage, which includes execution of an absolute PA over non-fixed assets.

That the contract was already perfected could be confirmed by supervening events which prove
that the parties consummated the perfected contract of sale:
1) FEBTC’s down payment of P5M upon execution of the MOA intended to be part of the
purchase price as it was part of the additional consideration of P260M. It is thus earnest money
and is proof of the perfection of contract pursuant to Art. 1482 of NCC.
2) FEBTC took possession of the fixed assets after execution of the MOA and PA and introduced
improvements thereon with the knowledge of the liquidator without the latter demanding rent.
3) The parties executed the PA over the non-fixed assets as contemplated under S1(a) of the
MOA. Although it did not cover the purchase of fixed assets, the parties ensured in S4 of PA that
they may still execute another PA for the assets that, due to time constraints, were not included
in the PA. They thus contemplated a PA for the fixed assets since these are the only remaining
assets.
4) Prior to the execution of PA for the fixed assets, liquidator Santos delivered to FEBTC the
TCT over the disputed assets.

Since the contract of sale was perfected, the execution of the PA over the fixed assets, like that
over the non-fixed assets, falls under the consummation stage and not the perfection stage.
Pursuant to the obligatory nature of the contract under Art. 1356, the terms of the perfected
contract of sale over the disputed fixed assets are reciprocally DEMANDABLE from both
parties. Thus, liquidator and CB must execute the deeds of sale to FEBTC and FEBTC must
pay the agreed price.

The CA’s ruling that the PA was the final repository of the transaction and that the sale was
perfected only with the PA’s execution is wrong. The PA did not modify, but confirmed, the
contract of sale perfected under the MOA. The perfected contract under the MOA remained
unaltered by the PA. The execution of the PA falls under the consummation stage.

The disputed fixed assets were not submitted as collaterals and thus not excluded from the
purchase. CA’s reliance on the approval of CA and SC of the RTC’s order denying preliminary
injunction on the ground that the disputed assets were submitted as collaterals does not preclude
RTC from issuing a different ruling after trial on the merits. The determination of issuance of a
writ of preliminary injunction is based on evidence tending to show that the action complained of
must be stayed so that movant will not suffer irreparable injury or that the final judgment
granting him relief will not become ineffectual. The evidence needs only be a “sampling” and is
merely to give the court an idea of the justification for the preliminary injunction pending
decision of the case on the merits. The evidence is not conclusive of the principal action, which
is yet to be decided.

5. Nemencio Pulumbarit, Sr. v. CA, GR 153745-46, October 14, 2015, Jardeleza, J.

FACTS:
San Juan Macias Memorial Park, Inc. (SJMMPI) authorized Atty. Soledad de Jesus to look for a
buyer for the SJMMP for P1.5M. the officers of SJMMPI, Pascual et al., were introduced to
Pulumbarit. They came to an agreement, with Pulumbarit issuing 18 checks in the name of
SJMMPI secretary-treasurer Leonila Acasio. Pulumbarit and his lawyer took charge of reducing
the agreement into writing and securing the signatures of all concerned parties. Pascual et al.
requested for a copy of their written agreement. They also asked him to replace the checks with
new ones. Failing to get a favorable response, Pascual et al. filed a complaint for rescission of
contract against Pulumbarit.

In RTC, Pascual et al. alleged that they entered into a contract of management with option to buy
SJMMP with Pulumbarit, with the latter agreeing to pay P750k on staggered installments. His
failure to make good on these installments would cause the cancellation of the contract,
forfeiture of any payment already made, and surrender by Pulumbarit of possession over SJJMP.
They requested new checks because the old ones were in the name of SJMMPI’s secretary-
treasurer Acasio, who has already resigned. Since he refused, Pulumbarit was in breach of his
obligations under the contract. Pulumbarit further violated the contract by destroying the fence
surrounding the park, annexing adjacent lots, and operating these under “Infinito Memorial Park”
using the permit issued to SJMMPI without its consent and proper governmental clearances.

Pulumbarit moved to dismiss, attaching a copy of their MOA. Pascual et al. claimed that
Pulumbarit falsified their agreement as the MOA did not reflect the terms agreed upon. They
disputed the statement in the MOA that the agreement was a sale of all paid-up stocks of
SJMMPI and not a management agreement with option to buy.

Pulumbarit denied ever having offered to manage the park for Pascual et al. presenting the signed
MOA as evidence. He claims that SJMMPI and its officers sold all its stock to him for P750k.
Pascual et al. presented a document examiner from NBI, Constantino, who testified that the
second page of the MOA was typed from a typewriter different from the one used in pages 1, 3,
and 4.

RTC ruled in favor of Pascual et al. and declared void the MOA. It directed Pulumbarit to render
an accounting of his operation from when he took over the operation and to pay damages. It also
ordered him to cease from operating SJMMP. Pending appeal, RTC granted a motion to execute
decision pending appeal. So Pulumbarit filed a certiorari with CA and an appeal. CA reversed
RTC. Hence this petition.

ISSUE:
Whether the contract between Pulumbarit and SJMMPI was a contract to sell or contract of sale
or management contract with option to buy.
HELD: Contract to sell.
Pascual et al. claim that the terms of the MOA do not reflect the terms actually agreed upon by
the parties. They prayed for its nullity. CA held that as between the verbal agreement for the
management of the memorial park and the MOA evidencing the intention of the parties to sell
the park, it was inclined to give more weight to the written agreement of the parties which was
duly signed by the incorporators. The agreement or contract is the formal expression of the
parties’ rights, duties, and obligations. It is the best evidence of the intention of the parties.
Although the NBI investigation found that the MOA’s second page differed in type size and
design from pages 1, 3, and 4, this does not nullify the entire agreement, especially since page
3 bore the signature of the incorporators. Page 1 of the MOA clearly shows the intent of the
parties to sell the park. Even if no evidentiary weight be given to the MOA, the letter of
authority given to Atty. Pascual by Dr. Pascual tasking Atty. Pascual to look for a buyer for the
park shows that Dr. Pascual intenred to sell the park. If it was really an agreement for
management of the park, it should have been SJMMPI paying Pulumbarit. But Pulumbarit had
already paid P400k in the 1980s, a substantial amount back then.

We affirm the findings of CA insofar as it ruled that the parties did not contemplate a
management contract with option to buy. But we rule that what was entered into was not a
contract OF sale, but rather a contract TO sell. The pertinent portion of page 3 of the MOA
reads:
4. The shares of stocks stated above and subject matter of this Agreement will only be
transferred in the name of the PARTY OF THE SECOND PART, its heirs, successors
 and assigns upon full payment and/or full satisfaction thereon of the consideration of
this agreement.
The NBI report that page 2 was typed from a different typewriter different from that used in
pages 1, 3, and 4 is inconclusive as to possibility of falsification. The report does not contain any
categorical statement from the NBI examiner that the pages were substituted or that the MOA
was falsified. Even if page 2 is assumed substituted, then we can infer that the other 3 pages
were not substituted, all three having the same type size and design. We can deduce that the
provisions in these un-substituted pages reflect the true terms agreed upon. In page 1, the parties
show the intent to enter into a contract to sell in the preambular clause:
WHEREAS, THE PARTY OF THE FIRST PART have offered to sell all their rights,
interest and participations with San Juan Macias Memorial Park, Inc., to the extent
indicated above to the PARTY OF THE SECOND PART and the PARTY OF THE
SECOND PART has accepted the offer of the PARTY OF THE FIRST PART.
That Pascual et al. intended to sell SJMMPI is further shown by the document issued to Atty. De
Jesus authorizing her to look for a buyer for the park and negotiate the sale of the corporation.
Also, as CA said, it is absurd for a person rendering service to pay compensation to his
employers. Pulumbarit made payments to Pascual et al. and not vice versa. If Pascual’s version
of the agreement is to be believed, then they should be the ones paying Pulumbarit for managing
the park.

6. Ali Akang v. Municipality of Isulan, GR 186014, June 26, 2013, Reyes, J.

FACTS:
Ali Akang is a member of the national and cultural community belonging to the Maguindanaoan
tribe of Isulan, Province of Sultan Kudarat and the registered owner of Lot LRC located at
Kalawag Sultan Kudarat with TCT 3653 with are 20,030 m2. A 2 hectare portion of the property
was sold by Akang in 1962 to the Municipality of Isulan, Province of Sultan Kudarat thru then
Isulan Mayor Datu Ampatuan for P3k. Isulan immediately took possession and began
construction of the municipal building.

39 years later on Oct. 26, 2001, Akang filed a civil action for recovery of possession of the Lot
and quieting title thereon and damages against Isulan. He alleged that the agreement was one to
sell, which was not consummated as the purchase price was not paid. Isulan denied the
allegation, claiming that his cause of action is barred by laches, and that the deed of sale was
valid. RTC ruled in favor of Akang, holding that the deed is a contract to sell. It found that
payment was not made as the municipal voucher presented suffers infirmities and not recorded.

By virtue of the RTC ruling, proceedings for the cancellation of TCT 49349 under Isulan was
instituted. Isulan’s title over the property was cancelled and a new one issued in Akang’s name.
CA reversed RTC and upheld the contract of sale. It ruled that estoppel and laches applied
against him and that the deed of sale was a contract of sale. There was actual payment as
evidenced by the municipal voucher. Even if he was not paid, it does not affect the validity of the
contract of sale for it is not the fact of payment of the price that determines its validity. Hence
this petition.

ISSUE:
Whether Akang may recover the land in question.
HELD: NO.
Akang claims that the deed is merely an agreement to sell which was not perfected due to non-
payment of the stipulated consideration.

The deed of sale is a valid contract of sale. A contract of sale is defined under Art. 1458. Its
elements are 1) consent, 2) determinate subject matter, 3) price. A contract to sell is defined by
Art. 1479 of NCC:
[A] bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the prospective buyer upon ful7llment of
the condition agreed upon, that is, full payment of the purchase price.
In a contract of sale, title to the property passes to the buyer upon delivery of the thing sold,
whereas in a contract to sell, the ownership is, by agreement, retained by the seller and is not to
pass to the vendee until full payment of the price. The deed here is a contract of sale. There was
mutual agreement to enter into the sale by their free and voluntary signing. There was absolute
transfer of ownership by Akang to Isulan as shown in the stipulation: “I, [petitioner]. Hereby
sell, transfer, cede, convey, and assign as by these presents do have sold, transferred, ceded,
conveyed, and assigned.” There was also a determinate subject matter, the 2 hectare land. The
price is P3k. The fact that no express reservation of ownership or title to the property can be
found in the deed bolsters the absence of such intent and thus, the contract could not be one to
sell. Had his intent been otherwise, he could have immediately sought judicial recourse to
prevent further construction of the municipal building or taken legal action to contest the
agreement.

The municipal voucher proves payment of P3k. Akang, notwithstanding the lack of the
municipal treasurer’s approval, admitted that the signature on the voucher was his and is not
estopeed from disclaiming payment. Even if he was not paid, this is immaterial to the validity of
the contract of sale. A contract of sale is a consensual contract. Here, the contract was perfected
the moment Akang and Isulan agreed on the object and price. Non-payment merely gave rise to
a right of Akang to either demand specific performance or rescission.

Akang’s claim for recovery of possession and ownership is barred by laches. Laches has been
defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier. Laches cannot bar an
action to recover registered land covered by the Torrens System, generally. Neither can it be set
up to resist the enforcement of an imprescriptible legal right. But in exceptional cases, SC
allowed laches as a bar to recover titled property. Although in PD 1529, no title to registered
land in derogation to that of the registered owner shall be acwuired by prescription or adverse
possession, the same is not true with laches. Akang’s right to recover has been converted into a
stale demand due to Isulan’s long period of possession and by his own inaction and neglect.

7. Rebecca Fullido v. Gino Grilli, GR 215014, February 29, 2016, Mendoza, J.

FACTS:
Grilli, an Italian national, met Fullido in Bohol and courted her. Grilli decided to build a
residential house where he and Fullido would stay whenever he would vacation in PH. Grilli
financially assisted Fullido in procuring a lot in Bohol from her parents which was registered in
her name under TCT 30626. They constructed thereon a house funded by Grilli. They
maintained there a common-law relationship and lived there whenever Grilli was on vacation in
PH twice a year.

They executed a contract of lease, MOA, and SPA to define their respective rights over the
house and lot. The lease contract stipulated that Grilli, as lessee, would rent the lot registered to
Fullido for 50 years to be automatically renewed for another 50 years upon its expiration for
P10k for the whole term of the lease contract and that Fullido, as lessor, was prohibited from
selling, donating, or encumbering the lot without the written consent of Grilli. This was
registered.

The MOA stated that Grilli paid for the house and lot; ownership of the house and lot was to
reside with him; and that should the common-law relationship be terminated, Fullido could only
sell the house and lot to whomever Grilli so desired. The SPA allowed Grilli to administer,
manage, and transfer the house and lot on behalf of Fullido.

Their relationship turned sour after 16 years of living together. Grilli demanded Fullido to vacate
the property, but these were unheeded. Grilli filed a complaint for unlawful detainer against
Fullido with MCTC. He claimed that when he arrived in PH in 2002, Fullido was pregnant and
she admitted that the child was sired by another man. He decided to end their relationship but
allowed Fullido to live in his house out of generosity and he did not demand rent. Fullido became
more hostile and did not maintain the house in good condition. She let her 2 children, siblings,
and parents stay in his house, damaging the property.

Fullido claims that she found that Grilli had found a new and younger woman in his life. He
began to threaten and physically hurt her by knocking her head and choking her. When she
refused to leave their house even after the unlawful detainer case was filed, he again harassed
and threatened to hurt her and her children. So she filed a TPO and PPO against Grilli under RA
9262 in RTC. She claims that she exclusively owned the lot and contributed to the value of the
house.

MCTC dismissed the case, finding that she was a co-owner as she contributed to it by
supervising its construction. RTC reversed MCTC, finding that Grilli had exclusive right to use
and possess the house and lot by virtue of the contract of lease. Since it was not yet expired,
Fullido, as lessor, had the obligation to respect the peaceful and adequate enjoyment of the
leased premises by Grilli as lessee. CA upheld RTC. Hence this petition.

ISSUE:

HELD:
Fullido claims that the contract of lease and MOA are void for being contrary to the constitution
and law. Grilli countered that he was the rightful owner of the house because a foreigner was not
prohibited from owning residential buildings. The lot was also transferred to one Jaqueline
Guibone (his new girlfriend). Fullido fully agreed with their terms and must abide.
Unlawful detainer is an action to recover possession of real property from one who unlawfully
withholds possession thereof after the expiration of his right to hold possession under any
contract. The possession was originally legal but became illegal by expiration of the right to
possess. The only issue to be resolved in an unlawful detainer case is the physical possession of
the property involved independent of any claim of ownership. Fullido claims that the contracts
were void. Thus, the issue is whether a contract could be declared void in a summary action of
unlawful detainer. We rule in the affirmative.

A void contract cannot be the source of any right. It cannot be used in an ejectment suit. It
produces no effect whatsoever. In various cases, contracts were declared void in a case of
unlawful detainer. Contracts may be declared void even in a summary action for unlawful
detainer because, precisely, void contracts do not produce legal effect and cannot be the source
of any rights.

The lease contract and MOA circumvent the constitutional restraint against foreign ownership
of lands. Under S1, Art. XIII of the 1935 Constitution, natural resources shall not be alienated
except with respect to public agricultural lands and in such cases, the alienation is limited to
Filipino citizens. The prohibition on transfer of lands to aliens was adopted in the 1987
Constitution under S2, 3, and 7 of Art. XII. The prohibition also covers leases of lands
amounting to the transfer of all or substantially all the rights of dominion. Where a scheme
to circumvent the constitutional prohibition against the transfer of lands to aliens is readily
revealed as the purpose of the contracts, then the illicit purpose becomes the illegal cause
rendering the contracts void. Thus, if an alien is given not only a lease of, but also an option to
buy, a land by virtue of which the Filipino owner cannot sell or dispose of his property, this to
last 50 years, then the arrangement is a virtual transfer of ownership.

But it is clarified in Llantino v. Co Long Chong that a lease contract in favor of aliens for a
reasonable period was valid as long as it did not have any scheme to circumvent the
constitutional prohibition, like depriving the lessors of their right to dispose of the land.

PD 471 was consequently enacted to regulate lease of lands to aliens. It provides that the
maximum period allowable for the duration of leases of private lands to aliens or alien-owned
corporations or entities not qualified to acquire private lands in PH shall be 25 years, renewable
for another 25 years upon mutual agreement of both lessor and lessee. It also provides that any
contract made in violation thereof shall be void.

Based on these, the lease and MOA in this case are void for virtually transferring the reigns of
the land to a foreigner. The lease to Grilli was for 50 years automatically extended for another 50
years upon expiration of the original period. It strictly prohibited Fullido from selling, donating,
or encumbering her land to anyone without the written consent of Grilli. For a measly P10k,
Grilli would be able to absolutely occupy the land of Fullido for 100 years, and she is powerless
to dispose the same. The terms of lease practically deprived Fullido of her property rights and
effectively transferred them to Grilli. The MOA also dictated that ownership of the land and
building resided with Grilli and that he would permanently reside in the building. Fullido would
also be compelled to transfer the land to Grilli if a law would be passed allowing foreigners to
own real properties in PH.
The lease contract and MOA operated hand-in-hand to strip Fullido of any dignified right over
her own property. The jus possidendi, jus utendi, jus fruendi, jus abutendi, and more importantly,
the jus disponendi, the sum of rights composing ownership of the property, were effectively
transferred to Grillo. Even if Fullido voluntarily executed the contracts, no amount of consent
could legalize an unconstitutional agreement.

Grilli has no cause of action for unlawful detainer. There is such cause of action if the complaint
recites: (1) initially, possession of property by the defendant was by contract with or by tolerance
of the plaintiff; (2) eventually, such possession became illegal upon notice by plaintiff to
defendant of the termination of the latter's right of possession; (3) thereafter, the defendant
remained in possession of the property and deprived the plaintiff of the enjoyment thereof; and
(4) within one year from the last demand on defendant to vacate the property, the plaintiff
instituted the complaint for ejectment. Complainant must either be a lessor, vendor, vendee, or
other person against whom the possession of any land or building is unlawfully withheld.
He must have some right of possession over the property.

Here, the lease contract and MOA from which Grilli purportedly drew his right of possession
were found void. Thus, Grilli has no possessory right over the land.

8. Heirs of Fausto Ignacio v. Home Bankers Savings and Trust Company, GR 177783,
January 23, 2013
FACTS:
Fausto Ignacio mortgaged two parcels of land to Home Bankers Savings and Trust Company
(HBSTC) as security for the P500k loan extended to him by the bank. When he defaulted,
HBSTC proceeded to foreclose the real estate mortgage. At the foreclosure sale, HBSTC was the
highest bidder. The certificate of sale was registered. With failure of Ignacio to redeem the
properties within 1 year, the titles were consolidated in favor of HBSTC. New titles were issued
to HBSTC, TCTs 111058 and 111059. Despite the lapse of the period for redemption and the
consolidation of title to HBSTC, Ignacio offered to repurchase the properties. While HBSTC
considered the offer, no repurchase contract was executed. But Ignacio claims that a verbal
repurchase agreement was actually reached and implemented.

HBSTC sold TCT 111059, subdivided into TCT 117771-117776, to others except the properties
covered by TCT 117774 to 117776 which are still registered in HBSTC’s name. Ignacio
expressed willingness to pay P600k in full as balance of the repurchase price and requested the
bank to release to him the remaining land covered by TCT 111058 and 154658. HBSTC turned
down the request. Ignacio caused the annotation of an adverse claim on the title.

Prior to the annotation, the property covered by TCT 154658 was sold by HBSTC to respondent
spouses Rodriguez without informing Ignacio. It also sold, without Ignacio’s knowledge, the
property covered by TCT 111058 to respondents Sps. Rodriguez, Catherine, Reynold, and
Jeannette Zuñiga.
Ignacio filed an action for specific performance in RTC against HBSTC. Ignacio sought
reconveyance after his payment of P600k. RTC ruled for Ignacio and declared the deeds of sale
by HBSTC to Sps. Rodriguez et al. void. CA reversed RTC. Hence this petition.

ISSUE:
Whether a contract for the repurchase of the foreclosed properties was perfected between Ignacio
and HBSTC.
HELD: NO.
Contracts are perfected by mere consent manifested by meeting of the offer and acceptance upon
the thing and the cause which are to constitute the contract. The acceptance is expressed in Art.
1319 of NCC:
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon
the thing and the cause which are to constitute the contract. The offer must be certain and
the acceptance absolute. A qualified acceptance constitutes a counter-offer.
If the acceptance of the offer was not absolute, it is insufficient to generate consent that would
perfect a contract. A qualified acceptance, or one that involves a new proposal, constitutes a
counter-offer and is a rejection of the original offer. A perfect contract would arise only if the
other party had accepted this counter-offer. The acceptance must assent to those points in the
offer which are not only material but motivating as well. The offer and acceptance must be
unanimous both on the rate of payment and on its terms.

Ignacio submitted as evidence of a perfected contract of repurchase the March 22 letter from
Manuel, then president of Universal Properties Inc., a corporation formed by HBSTC to dispose
of its acquired assets. It read:
Your proposal to repurchase your foreclosed properties located at Cabuyao, Laguna
consisting of a total area of 203,413 square meters has been favorably considered
subject to the following terms and conditions: 1) Total Selling Price shall be
P950,000.00 2) Downpayment of P150,00000 with the balance Payable in Three (3)
equal installments as follows:
1st Installment — P266,667 — on or before May 31, '84; 2nd Installment — P266,667 —
on or before Sept. 31, '84; 3rd Installment — P266,666 — on or before Jan. 30, '85
TOTAL — P800,000.00

It contained handwritten notations of Ignacio which, according to him, he wrote in the presence
of a certain Lazaro, representative of Manuel, which notations supposedly represent their
compromise agreement. These notations indicate that the repurchase price would be P900k to
be paid as follows: P150k- end of May 1984, P150k- end of June 1984; balance- depending on
financial position.

These clearly show that Ignacio’s acceptance of HBSTC’s terms and conditions for the
repurchase was NOT ABSOLUTE. Ignacio set a different repurchase price and also
modified the terms of payment, which even contained a unilateral condition for payment of the
P600k balance- depending on his financial position. CA thus considered the qualified acceptance
of Ignacio as a counter-proposal which must be accepted by HBSTC. But there was no
evidence showing conformity of HBSTC to the counter-proposal.
Except where a formal acceptance is required, although it must be affirmatively and clearly made
and evidenced by some acts communicated to the offeror, it may be made either in a formal or
informal manner. Acceptance may be shown by acts, conduct, or words. even assuming that the
bank officer whom Ignacio claimed he talked to regarding the March 22 letter had acceded to his
modified terms for repurchase, their verbal exchange did not bind HBSTC in view of its
corporate nature. There was no evidence that Lazaro was authorized by HBSTC’s board to
accept Ignacio’s counter-proposal at the price and terms other than those communicated in the
March 22 letter.

Thus, without acceptance by properly authorized bank officers of Ignacio’s counter-proposal, no

perfected repurchase contract was born out of the negotiations of Ignacio and Lazaro. Ignacio
has no legal right to compel HBSTC to accept the P600k tendered by him as payment.

9. Andres Quiroga v. Parsons Hardware Co, GR L-11491, August 23, 1918, Avanceña, J.
(Sale vs Agency to sell)
FACTS:
A contract was entered into between Quiroga and Parsons:
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the
Visayan Islands to J. Parsons under the following conditions:
Quiroga claims that Parsons violated the following obligations: not to sell the beds at higher
prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the
agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the
same; and to order the beds by the dozen and in no other manner. Except for the obligation of
Parsons to order beds by the dozen, none of the obligations are expressly set forth in the
contract. But Quiroga alleged that Parsons was his agent for the sale of his beds in Iloilo, and
that said obligations are implied in a contract of commercial agency.

ISSUE:
Whether Parsons is a purchaser or agent of Quiroga for the sale of his beds by reason of the
contract.
HELD:
To classify a contract, due regard must be given to its essential clauses. In the contract here,
Quiroga was to furnish Parsons with the beds which Parsons might order at the price stipulated,
and Parsons was to pay the price in the manner stipulated. Payment was to be made at the end of
60 days or before at Quiroga’s request or in cash, if Parsons so preferred, and in the latter 2 cases
there would be a 2% discount. These are precisely the essential features of a contract of
purchase and sale.

There was the obligation of Quiroga to supply the beds, and of Parsons to pay their price.
These features exclude the legal conception of agency or order to sell whereby the agent
received the thing to sell it and does not pay its price, but delivers to the principal the price
he obtains from the sale of the thing to a third person, and if he does not succeed in selling
it, he returns it. Here, upon receiving the beds, Parsons was obliged to pay their price within the
term fixed regardless as to whether he had or had not sold the beds.
As to the obligation to order by the dozen, the only one expressly imposed by the contract, its
breach would only entitle Quiroga to disregard the orders. But if he consents to fill them, he
waives his right.

10. Ang Yu Asuncion v. CA, GR 109125, December 02, 1994, Vitug, J.

FACTS:
A second amended complaint for specific performance was filed by Asuncion and Keh Tiong, et
al. against Bobby Unjieng, Rose Unjieng, and Jose Tan (Bobby et al.)with RTC alleging that
Asuncion et al. are tenants/lessees of residential and commercial spaces owned by Bobby et al. in
Ongpin, Binondo. They have occupied these since 1935 and have been religiously paying rental
and complying with the conditions of the lease contract. In 1986, Bobby et al. wanted to sell the
property, giving Asuncion et al. priority to acquire. Bobby et al. offered the price of P6M while
Asuncion et al. made a counter offer of P5M. Asuncion et al. asked Bobby et al. to put their offer
in writing to which they acceded. But since Bobby et al. failed to specify the terms of and
conditions of the offer to sell and because of info received that Bobby et al. were about to sell the
property, Asuncion et al. filed the petition to compel Bobby et al. to sell to them.

RTC found that Bobby et al.’s offer to sell was never accepted since the parties did not agree on
the terms of the proposed sale. Thus, there was no contract of sale at all. But it held that if the
property be sold for P11M or below, Asuncion et al. would have the right of first refusal.
Asuncion et al. appealed to CA, which affirmed that there was no meeting of minds, so the
specific performance will not lie. But CA held that the right of first refusal is granted even if the
property is sold for a price above P11M. (CA Case 21123) On certiorari to SC, SC denied the
appeal for insufficiency in form and substance.

While the appeal to CA was pending, Bobby and Rose Unjieng executed a deed of sale,
transferring the property to private respondent Buen Realty and Development Corporation for
P15M. Buen, as new owner, demanded the lessees to vacate the premises. The lessees replied
that Buen bought the property subject to notice of lis pendens. The lessees filed a motion for
execution of the CA decision in Case 21123.

RTC ordered Buen to execute the necessary deed of sale to Asuncion, Keh Tiong, and Arthur Go
for P15M in recognition of their right of first refusal. CA reversed RTC, declaring without
effect said orders. Hence this petition for review on certiorari.

ISSUE:
Whether the motion for execution may be granted.
HELD: NO.
An obligation is a juridical necessity to give, to do, or not to do. It has 3 elements: 1) juridical tie,
2) object which is the prestation or conduct required to be observed, and 3) subject persons.
Among its sources is contract, which undergoes stages from negotiation, perfection, and
consummation (begins when the parties perform their respective undertakings under the contract
culminating in the extinguishment thereof).

Until the contract is perfected, it cannot serve as a binding juridical relation. In sales, 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 right to another, called the buyer, over which the
latter agrees. Art. 1458 of NCC provides xxx. When the sale is not absolute but conditional,
like in a contract to sell where the ownership of the thing sold is retained until fulfillment of a
positive suspensive condition (normally full payment), the breach of condition will prevent the
obligation to convey title from acquiring an obligatory force. Although denominated a deed of
conditional sale in Dignos v. CA, it was held that a sale is still absolute where the contract is
devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated until or
unless the price is paid. Where the condition is imposed upon the perfection of the contract itself,
the failure of the condition would prevent such perfection.

An unconditional mutual promise to buy and sell can be obligatory. An accepted unilateral
promise which specifies the thing to be sold and the price to be paid, when coupled with a
valuable consideration distinct and separate from the price, is a contract of option. It conforms
with the 2nd paragraph of Art. 1479. But the option is not the contract of sale itself. The
optionee has the right, but not the obligation, to buy. Once the option is timely exercised-
accepted before a breach of the option, a bilateral promise to sell and buy ensues and both
parties are then reciprocally bound to comply with their respective undertakings.

Where a period is given to the offeree within which to accept the offer the following rules
generally govern:
1) If the period is not supported by a consideration, the offeror is still free and has the right to
withdraw the offer before its acceptance or, if acceptance has been made, before the offeror’s
coming to know of such fact, by communicating that withdrawal to the offeree (Art. 1324). This
rule applies to a unilateral promise to sell in Art .1479 (Atkins, Kroll & Co. v. Cua). The right to
withdraw must not be exercised whimsically or it could give rise to a damage claim under Art.
19 of NCC.

2) If the period has a separate consideration, a contract of option is perfected, and it is breach
of that contract to withdraw the offer during the agreed period. The option is an independent
contract to be distinguished from the projected main agreement yet to be concluded. If the
optioner-offeror withdraws the offer before acceptance (exercise of option) by the optionee-
offeree, the latter may not sue for specific performance on the proposed contract (object of
option) since it has failed to reach its own stage of perfection. The optioner is liable for
damages for breach of option. But if the consideration is part of the consideration of the main
contract with right of withdrawal of the optionee, the main contract could be deemed perfected.
A similar instance is earnest money.

A right of first refusal cannot be deemed a perfected contract of sale in Art 1458. It is not an
option under Art. 1479 or possibly of an offer in Art. 1319. An option or offer would require a
clear certainty on both the object and cause 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 price, yet to be later firmed up. Prior
thereto, it can at best be described as belonging to a class of preparatory juridical relations
governed not by contracts (since the juridical tie or vinculum juris would still be indefinite
and inconclusive), but by, among others, laws of general application, the pertinent scattered
provisions of NCC on human conduct.

The breach of the right cannot justify an issuance of a writ of execution under a judgment that
merely recognizes its existence nor would it sanction specific performance without negating the
consensuality in contracts. But the right is not inconsequential as an unjustified disregard thereof,
like in Art. 19 of NCC, can warrant a recovery for damages. The RTC judgment merely
accorded a right of first refusal to Asuncion et al. If Asuncion et al. are aggrieved by the failure
of Buen to honor the right of first refusal, the remedy is not writ of execution on the judgment,
since there is none to execute, but an action for damages.

11. Bible Baptist Church v. CA, GR 126454, November 26, 2004, Azcuna, J.
FACTS:
Bible Baptist Church (BBC) entered into a contract of lease with respondent Sps. Villanueva.
Villanuevas are the registered owners of a property in 2436 Leon Guinto, Malate Manila. The
lease shall take effect on June 7, 1985 for 15 years. Upon signing the lease agreement, “LESSEE
shall pay P84k xxx to be paid directly to the Rural Bank, Valenzuela, Bulacan for the purpose of
redemption of said property which is mortgaged by the lessor.” Title will remain with BBC until
expiration of the lease or if the property is purchased by lessee.

“8. That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of
the lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price
of One Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down
payment agreed upon by both parties. C) The balance of the selling price may be paid at the rate
of One Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year.”

The above provisions of the lease contract are subject of the controversy. CA had ruled that the
option to buy under the lease contract had no consideration and thus did not bind the
Villanuevas. It held also that there was no fixed price for the purchase of the property.

ISSUE:
Whether the option to buy is founded upon a consideration.
HELD: NO.
Under Art. 1479 of NCC:
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.
For an option contract under the 2nd paragraph of Art. 1479 to be valid and enforceable against
the promissor, there must be a separate and distinct consideration that supports it. BBC seeks to
buy the leased premises from Villanuevas under the option. BBC claims that it agreed to
advance the large amount needed to rescue the property but, in exchange, asked Villanuevas to
grant BBC a long term lease and option to buy the property for P1.8M. The consideration for the
option was, BBC claims, their agreement to pay off Villanuevas’ P84k loan with the bank.
But BBC cannot insist that the P84k they paid to release the property from mortgage should be
deemed the separate consideration to support the option contract. The amount was in fact
apportioned into monthly rentals over 1 year at P7k monthly. The P84k was advance rental
equivalent to P7k per year so that from 1985 to 1986, BBC did not pay rent. There is no separate
consideration of the P84k since it was fully utilized by BBC’s occupation of the premises and
there is no separate consideration to support the option.

BBC insists that a consideration need not be a separate sum of money. The act of advancing
money to rescue the property should be enough consideration.

Consideration was defined as “the why of contracts, the essential reason which moves the parties
to enter into the contract.” This definition shows that the consideration need not be monetary.
But by the nature of an option contract in Art. 1479, it is an onerous contract for which
consideration must be something of value, although its kind may vary.

In Villamor v. CA, half a parcel of land was sold to Sps. Villamor for P70/m2, much higher than
the reasonable prevailing price. A deed of option was executed where the sellers undertook to
sell the other half also. It was stated in the deed that the only reason Sps. Villamor bought the
first half of the land at a much higher price was the undertaking of the sellers to sell the second
half at the same price. It was held that the consideration or cause for the option for Sps.
Villanueva was the undertaking of the sellers to sell the other half. For the sellers, the
consideration supporting the option was the much higher amount at which Sps. Villamor bought
the land. Such amount above the prevailing price was found sufficient and a distinct
consideration supporting the option contract.

Villamor is distinct from this case. BBC did not part with anything of value aside from the P94k,
which was in fact eventually utilized as rental payments. Also, there is no document that
contains an agreement between the parties that BBC’s supposed rescue of the mortgaged
property was the consideration the parties contemplated to support the option clause.

Since the option clause was part of a lease contract, SC looked into its previous ruling. In Vda.
de Quirino v. Palarca, the SC did say that in reciprocal contracts, the obligation or promise of
each party is the consideration for that of the other. But in that case, it was expressly stated that
should there be failure to exercise the option to buy the property, the optionee undertakes to sell
the improvements he made on the premises. The optionee had also been paying an amount of
rent so high as to be too burdensome that 5 years later, they agreed to reduce it. The SC found
that the too burdensome rentals and the improvements introduced by the lessee were part of the
consideration for his option to purchase the leased premises.

But the parties therein CLEARLY STIPULATED in their contract that there was an
undertaking of the optionee to sell the improvements made if the option was not exercised.
Such is a valuable consideration. There was also the excessive rental.

To summarize, an option contract needs to be supported by a separate consideration. This need

not be monetary. But if not monetary, these must be things or undertakings of value, in view of
the onerous nature of the contract of option. Further, if the consideration is not monetary, said
consideration must be clearly SPECIFIED as such in the option contract or clause. Thus, since
the option was not founded upon a separate consideration, Villanuevas cannot be compelled to
sell their property to BBC.

Since the option to buy was not founded upon a separate consideration and thus not enforceable,
there is no need to discuss whether a price certain was fixed as the purchase price.

12. Lourdes Ong Limson v. CA, GR 135929, April 20, 2001, Bellosillo, J.
FACTS:
Limson in her May 14, 1979 complaint with the trial court alleged that respondent Sps. De vera,
thru their agent Marcosa Sanchez, offered to sell to Limson a parcel of land of 48,260 m2 in
Parañaque. De Veras informed her that they were the owners of this property. She agreed to buy
the property for P34/m2 and gave P20k to de Veras as “earnest money.” De Veras signed a
receipt therefor and gave her a 10-day option period to purchase the property. Lorenzo de Vera
then informed Limson that the property was mortgaged to Emilio and Isidro Ramos. Lorenzo de
Vera asked Limson to pay the balance of the price to let him and his wife settle their obligation
with the Ramoses.

Limson agreed to meet de Veras and the Ramoses at the registry of deeds in Makati to
consummate the transaction but due to failure of Asuncion de Vera and Ramoses to appear, no
transaction was formalized. In a second meeting, she claimed to be willing to pay the balance of
the price but the transaction did not again materialize as de Veras failed to pay back taxes of the
property. Limson gave de Veras 3 checks for P36,170 to settle the back taxes and payment of the
quitclaims of the 3 tenants of the land. The amount was purportedly considered part of the
price and Lorenzo signed receipts therefor.

The deed of sale between de Veras and Sunvar was executed and TCT 72377 was issued in favor
of Sunvar with Limson’s adverse claim annotated thereon. Limson claims that when de Veras
sold the property to Sunvar, her legal right to purchase it was violated. She claims that the sale
should be annulled and the title to Sunvar cancelled. She insists that a deed of sale between her
and de Veras be executed upon her payment of the balance of the price agreed upon.

RTC ordered the annulment of the deed of absolute sale by de Veras to Sunvar and the
cancellation of TCT 72377. CA reversed RTC. Hence this petition.

ISSUE:
Whether there was a perfected contract to sell such that the sale to Sunvar would be invalid.
HELD: NO.
Limson’s main argument is that there was a perfected contract to sell between her and de Veras.
De Veras and Sunvar argue that what was perfected was a contract of option and not a contract
to sell.

An option, as used in sales, is a continuing offer or contract by which the owner stipulates with
another that the latter shall have the right to buy the property at a fixed price within a time
certain or in compliance with certain conditions. It is sometimes called an “unaccepted offer”.
An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of
property but a sale of the right to purchase. It is simply a contract by which the owner of property
agrees with another person that he shall have the right to buy his property at a fixed price within
a certain time. He sells not the land but the right or privilege to buy at the election or option of
the other party. It imposes no binding obligation on the person holding the option aside from the
consideration for the offer.

Contracts, in general, are perfected by mere consent. The receipt that contains the contract
between Limson and de Veras read:
Received from Lourdes Limson P20k xxx as earnest money with option to purchase a
parcel of land owned by Lorenzo de Vera located xxx at the price of P34 subject to the
condition and stipulation that have been agreed upon by the buyer and me which will
form part of the receipt. Should the transaction of the property not materialize not on the
fault of the buyer, I obligate myself to return the full amount of P20k earnest money with
option to buy or forfeit on the fault of the buyer. Xxx. This option to buy is good within
10 days until the absolute deed of sale is finally signed by the parties or the failure of the
buyer to comply with the terms of the option to buy.
In interpreting contracts, the intention of the parties is to be discharged by looking to the words
they used to project their intention in their contract. The receipt shows that de Veras and Limson
only entered into a contract of option, a contract by which de Veras agreed with Limson that
Limson shall have the right to buy de Veras’ property at P34/m2 within 10 days from July 31,
1978. De Veras did not sell their property nor agree to sell it. But they sold something- the
privilege to buy at the election or option of Limson.

The P20k paid by Limson was referred to as “earnest money.” But the money is not earnest
money but option money. Earnest money and option money are not the same but distinguished
thus: 1) earnest money is part of the purchase price while option money is money given as a
distinct consideration for an option contract; 2) earnest money is given only where there is
already a sale, while option money applies to a sale not yet perfected; and 3) when earnest
money is given, the buyer is bound to pay the balance, while when the would-be buyer gives
option money, he is not required to buy, but may even forfeit it depending on the terms of the
option.

Nothing in the receipt indicates that the P20k was part of the purchase price. It was not shown
that there was a perfected sale. The receipt did not reveal that Limson was bound to pay the
balance of the price. She could even forfeit the money given if the terms of the option were not
met. That the P20k is earnest money is bolstered by the provision that if the transaction did not
materialize without fault of Limson, Lorenzo de Vera obligates himself to return the P20k or, if
with fault of Limson, forfeit it. Finally, the receipt provided for a period within which the option
to buy was to be exercised- within 10 days from July 31, 1978.

During the option period, the agreement was not converted into a bilateral promise to sell and
buy where both parties would then be reciprocally bound because Limson did not timely,
affirmatively, and clearly accept the offer of de Veras. Acceptance may be made either in a
formal or informal manner, and mayb e shown by conduct or words by the accepting party that
clearly manifest an intention to accept the offer to buy or sell. But there is nothing in the conduct
of Limson that clearly manifest an intention to accept the offer to buy the property within the 10-
day period. The only occasion within the 10-day option period that she could have demonstrated
her acceptance was when she agreed to meet de Veras and Ramoses in the registry. But whether
that showed acceptance of the offer is hazy and dubious.

On August 10, 1978, last day of the option period, no affirmative or clear manifestation was
made by Limson to accept the offer. Thus, there is no contract to sell perfected.

The non-consummation of the contract with Limson was not the fault of de Veras. Within the
option period, it was de Veras and not Limson who initiated the meeting at the registry. That
Ramoses failed to appear was beyond de Veras’ control. The succeeding meetings that transpired
to consummate the contract were all beyond the option period and the question of fault was
already immaterial. Even if the meetings were within the option period, Limson was not ready to
pay in cash as agreed upon.

De Veras’ telegram to Limson demanding full payment is not acknowledgment of their contract
to sell as to estop them but only showed that de Veras were willing to give Limson a chance to
buy the property even if it was no longer exclusive. Thus, the sale to Sunvar was perfectly valid
and in good faith.

13. Atkins, Kroll & Co., Inc. v. Cua Hian Tek, GR L-9871, January 31, 1958, Bengzon, J.
FACTS:
For failure to deliver 1000 cartons of sardines which it sold to Tek, Atkins was sued and ordered
by CFI to pay damages, which on appeal was reduced by CA to P3.2k. Atkins claims that there
was no such contract of sale but only an option to buy, which was not enforceable for lack of
consideration in accordance with Art. 1479.

Atkins had sent Tek a letter:

“We are pleased to make you herewith the following firm offer, subject to reply by
September 23, 1951: 400 Ctns. Luneta brand sardines xxx. We are very looking forward
to receive your valued order and remain
Very truly yours.”
CFI and CA found that Tek accepted the offer unconditionally and delivered his letter of
acceptance. But due to shortage of sardines by the packers in California, Atkins failed to deliver
the commodities it offered for sale. Atkins does not dispute the acceptance, but it merely claims
that the acceptance created an option, which, lacking consideration, is not enforceable.
ISSUE:
Whether there was a contract of option only.
HELD: NO.
Atkins claims that only a unilateral promise arose when Tek accepted. But this is wrong since a
bilateral contract to sell and buy was created upon acceptance. So much so that Tek could be
sued if he backed out after accepting by refusing to pay for or get the sardines. The word
“option” is not found in the offer or acceptance. Contrarily, Tek accepted the “firm offer for the
sale.”

Atkins claims that there was a mere offer of option because the offer was a continuing offer until
September 23. It claims that an option is nothing more than a continuing offer for a specified
time. But in our opinion, an option is more than that as it implies the legal obligation to keep
the offer open for the time specified. Yet the letter did not produce such legal obligation. It
could be withdrawn before acceptance because, as admitted, there was no consideration for
it.

"ART. 1324. When the offerer has allowed the offeree a certain period to accept, the
offer may be withdrawn at any time before acceptance by communicating such
withdrawal, except when the option is founded upon a consideration, as something
paid or promised."
Also, an option is unilateral: a promise to sell at the price fixed whenever the offeree should
decide to exercise his option within the specified time. After accepting the promise and before
he exercises his option, the holder of the option is not bound to buy. But here, upon accepting
Atkin’s offer, a bilateral promise to sell and to buy ensued, and Tek assumed the obligations
of a purchaser. He did not just get the right subsequently to buy or not to buy. It was a bilateral
contract of sale.

But even if the letter granted an option not binding for lack of consideration, if acceptance is
made before withdrawal, there is a binding contract of sale even though the option was not
supported by a sufficient consideration. It can be taken for granted that the option contract was
not valid for lack of consideration.

14. Antonio Banzon v. Hon. Cruz, GR L-31789, June 29, 1972, Teehankee, J.
FACTS:
In 1952, Maximo Sta. Maria obtained crop loans from PNB. Respondent Associated Insurance &
Surety Co. Inc. acted as surety of Maximo, filing surety bonds in favor of the bank. Petitioner
Banzon and Emilio Naval in turn acted as indemnitors of Associated and were obligated to
indemnify and hold harmless Associated from liability thus acting as surety of the loan. Maximo
failed to pay. PNB demanded from Associated.

Instead of paying PNB, Associated filed a complaint with CFI Manila against Maximo and
indemnitors Banzon and Naval alleging that the outstanding obligations of Maximo with PNB
guaranteed by it amounted to a total of P30k excluding interest. CFI ordered Maximo, Banzon,
and Naval to pay jointly and severally to Associated for the benefit of PNB the P30k with 12%
interest etc.

This became final and executory. The writ of execution was issued and levy was made upon
properties of judgment debtor Antonio Banzon covered by TCTs 39685 and 53759. The lands
covered by the TCTs were sold in execution sales. Judgment creditor Associated was the highest
bidder for P41k. The redemption period expired without Banzon repurchasing the property.
Thus, Associated demanded Banzon to deliver to it the owner’s duplicate of certificate of title
39685 and 53759, but Banzon refused. It filed in CFI Rizal a petition to direct Banzon to present
his owner’s dupolicate to the register of deeds for cancellation and for a new title to be issued in
Associated’s name.

Banzon claims that the decision of CFI Manila was void insofar as he is concerned since he was
never summoned therein and that the levy of his properties were void as these are conjugal
properties. CFI Rizal ordered Banzon to surrender his title. The SC affirmed this decision, saying
he failed to prove that no notice was made to him and that the properties were acquired during
Banzon’s marriage to make them conjugal.

Notwithstanding the CFI manila’s judgment acquired by Associated and executed against
Banzon as indemnitor of Maximo whose loan PNB was enforcing against Associated as surety,
Associated never discharged its liability as surety to PNB nor paid PNB to discharge
Maximo’s obligations as guaranteed by it. In fact, PNB filed its own complaint in CFI
Pampanga against principal debtor Maximo, his 6 brothers and sisters, and Associated as surety
for collection of Maximo’s outstanding obligations.

CFI Pampanga ordered all defendants jointly and severally to pay PNB the outstanding amounts
due on the crop loans to Maximo which amounted to only P15k. Maximo had been making
payments all along to PNB such that by 1963, the total principal due and amount outstanding
thereon amounted only to P15k. This is practically ½ of the advance judgment for P30k obtained
by Associated 6 years earlier against Banzon “for the benefit of PNB” allegedly which
Associated as surety would have to pay PNB which it never paid. Maximo and Associated did
not appeal the decision to pay P15k. SC sustained the appeal of Maximo’s brothers and sisters
and reversed the trial court, holding that PNB has no cause of action against Maximo’s siblings
for the loan obtained by Maximo.

PNB thus collected directly from Maximo with Associated never paying even 1 centavo. PNB
informed Associated that the loan was fully satisfied by payment thru the sheriff on the proceeds
of the extrajudicial sale of Maximo’s properties and that PNB releases Associated from its joint
obligation with Maximo. This should have put an end to the matter but for certain complications
due to the intervention of the other private respondents, Sps. Pedro Cardenas and Leonila
Baluyot and Associated’s own unjustifiable actions.

According to Banzon, even before ownership over the lands of Banzons could be consolidated in
Associated’s name, Associated, “in clear collusion” with Sps. Cardenas, allowed Cardenas to
execute and levy one of the lands for a judgment debt of P5.1k of Associated in favor of
Cardenas notwithstanding that the property was worth P130k, and notwithstanding that
Associated knew that the property was merely being held by it in trust for PNB and that, it not
being the legal owner, it cannot dispose of it. Cardenas was awarded the property in the
auction sale for execution of his P5.1k judgment against Associated. He cancelled Banzon’s title
and a new one issued to Cardenas, even if Associated’s right thereto was still sub-judice in
Associated v. Banzon to be resolved much later by SC. Associated did not resist execution on
Banzon’s property despite knowing that its interest in the property is only of a trust character
since the judgment in Associated’s favor is contingent on Associated’s being made to pay
PNB, which contingency never materialized.

Banzons, learning that PNB released Associated already, filed a complaint for reconveyance and
damages with CFI against Associated and Cardenas. Banzons prayed for the return of their two
parcels of land covered by TCT 8567 in Cardenas’ name and 53759 still in Banzon’s name. on
March 16, 1970, sheriff of Caloocan served Banzons a copy of the order giving them until March
20 within which to deliver possession of the land covered by TCT 8567 and to remove the
improvements thereon. Banzons then filed a petition for injunction with SC on March 20. SC, on
March 24, restrained respondents Sps. Cardenas and Associated from enforcing the questioned
writ of execution and demolition order.

Acting Insurance Commissioner is the liquidator of Associated by virtue of an order of

liquidation by CFI which was affirmed by SC. He submits to SC that after receiving the books of
Associated and its voluminous records, he acquired knowledge of the status of the different cases
involved here. He says that the two lands executed and levied upon deserve to be reconveyed to
Banzons. One of the lots covered by TCT 8567 in the names of Sps. Cardenas was transferred to
them under dubious circumstances and unauthorized by law. It should be reconveyed to
Associated to reconvey to Banzons. The transfer to Sps. Cardenas was void from the beginning.

Sps. Cardenas filed a motion to dissolve TRO and dismiss petition. Banzons claim that they are
entitled to reconveyance of the lot covered by TCT 8567 and for damages from Associated. Sps.
Cardenases secured title fraudulently and thus the title is void.

ISSUE:
Whether Banzons may be restored to their possession of the lots in question.
HELD: YES.
The immediate objectives of this petition are to enjoin respondent Judge Cruz of CFI Rizal and
respondents Sps. Cardenas from enforcing the writ of execution and order of demolition issued
by Judge Cruz in relation to TCT 8567 and to enjoin Associated from disposing of its alleged
rights in the two lots covered by TCT 8567 and 53759. The substantive objectives of this petition
are to seek the rightful restoration and reconveyance to Banzons of their two Caloocan city lots
on the ground that Associated’s levy in execution was in trust for the benefit of PNB for the
purpose of paying the bank loan of Maximo which Associated guaranteed as surety.

The judgment of CFI Manila sentencing Banzon to pay Associated P30k for the “benefit of
PNB” expressly made of record the court’s intent that the execution of its judgment against
Banzon were conditioned upon Associated’s actually paying or being compelled to pay PNB.
That this is so is made more evident when we consider Art. 2071 of NCC which permit the
surety to file such an advance suit against the principal debtor, not against an indemnitor like
Banzon, only to obtain release from the guaranty or security against the danger of the debtor’s
insolvency. Where the debtor paid his loan where Associated did not pay anything, Associated in
turn would necessarily release Banzon as indemnitor and the CFI Manila judgment would be
inoperable and unenforceable against Banzon.

When Associated prematurely levied in execution the two lots of Banzon, the interest it acquired
was clearly impressed with a trust character. Such acquisition of Banzon’s property by
Associated was effected, if not thru fraud, certainly thru mistake, and thus by force of law, there
is an implied trust (Art. 1456). Had there been no fraudulent concealment of Associated’s non-
payment to PNB or a mistaken notion that Association had paid, the writ of execution against
Banzon would not have been issued. Associated is now legally bound by force of law to
discharge its implied trust and return Banzon’s properties.
This obligation of Associated as implied trustee to restore to Banzon his properties becomes
more compelling when it is considered that in the premature execution sale, Associated
ostensibly was the highest bidder therefor applying its purported judgment credit of P41k when
in law such judgment was not subject to execution e=since the condition that it be made to pay
PNB did not happen.

Sps. Cardenas, in levying in turn for satisfaction of his P5,100 judgment against Associated on
one of Banzon’s lots, acquired only whatever interest Associated had in the lot and with the
knowledge that Associated’s 1957 judgment against Banzon was “for the benefit of PNB” and
hence Associated’s interest in the property was with a trust character. The trust character of the
lot titled by Cardenas necessarily passed to him. Cardenas could not claim absolute ownership
of the lot but could only hold it as trustee like Associated as his predecessor.

Cardenas’ pleadings show clearly that they were fully aware of these vital antecedents of the
suits between Banzons and Associated. Thus, Cardenas acquired Associated’s obligation as
trustee to restore Banzon’s lawful properties to him.

Even though Associated’s suretyship agreement guaranteeing Maximo’s loans permitted it to

proceed judicially against the principal debtor and indemnitors even prior to the surety’s making
payment to PNB, Art. 2071 of NCC regulates this and provides that the surety’s right in such
cases is against the principal debtor and that “in all these cases, the action of the guarantor is to
obtain release from the guaranty or to demand a security that shall protect him from any
proceedings by the creditor xxx.” Associated thus did not even have any valid cause of action
against Banzon as its indemnitor but could proceed only against Maximo as principal debtor.
And even as against Maximo, it could not prematurely demand payment even before it had paid
PNB, its action being limited only to obtain release or a security against eventual insolvency of
the debtor.

The SC issued a wri restoring the status quo ante to restore Banzons to their possession of the
lots.

15. EDCA Publishing and Distributing Corp. v. Sps. Leonor and Gerardo Santos, GR
80298, April 26, 1990
FACTS:
A person identifying himself as Professor Jose Cruz placed an order by telephone with EDCA
for 406 books payable on delivery. EDCA prepared the invoice and delivered the books as
ordered, for which Cruz issued a personal check covering the price of P8,995. Cruz sold 120 of
the books to Leonor Santos who, after verifying Cruz’s ownership from the invoice he showed
her, paid him P1.7k.

EDCA, suspisious over a second order by Cruz even before clearing his first check, inquired
with De La Salle College where he claimed to be a dean and was informed that there was no
such person there. Verification showed that Cruz had no more account with PH Amanah Bank,
against which he drew the payment check. EDCA went to police who arrested Cruz. His real
name was Tomas de la Peña and his sale to Leonor was found out.
EDCA sought assistance of police in UN Avenue. They went to the store of Sps. Santos and
threatened Leonor with prosecution for buying stolen property. They seized the 120 books
without warrant, loaded them in a van belonging to EDCA, and turned them over to EDCA. Sps.
Santos sued to recover the books after their demand was rejected by EDCA. A writ of
preliminary attachment was issued and EDCA surrendered the books to Sps. Santos.

MTC ruled that Sps. Santos owned the books. RTC sustained. CA affirmed. Hence this petition.

ISSUE:
Whether Leonor must return the books to EDCA.
HELD: NO.
EDCA claims that Sps. Santos did not establish ownership of the books because they did not
produce a receipt to prove that they bought the stock. But this is unacceptable. Art. 559 provides:
ART. 559. The possession of movable property acquired in good faith is equivalent to a
title. Nevertheless, one who has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully deprived
has acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.

The first sentence of art. 559, providing that possession of movables acquired in good faith is
equvalent to title, dispenses with further proof. Leonor first ascertained the ownership of the
books from the EDCA invoice showing that they were sold to Cruz, who said he was selling
them as a discount because he was in financial need. Sps. Santos deal in buy and sell of books
and often deal with hard-up sellers who urgently have to part with their books at reduced prices.
To Leonor, Cruz must have been only one of many such sellers she was accustomed to dealing
with.

Was EDCA unlawfully deprived of the books, personal property, due to the check issued by the
impostor which was dishonored? EDCA cites cases in which the owner unlawfully deprived of
personal property is entitled to recovery except only where the property was purchased at a
public sale, in which event its return is subject to reimbursement of the purchase price. But it has
yet to be established whether EDCA has been unlawfully deprived of the books.

EDCA argues that it was because Cruz acquired no title to the books that he could have validly
transferred to Sps. Santos. Since the check bounced, there was failure of consideration that
nullified the contract of sale between it and Cruz.

A contract of sale is consensual and perfected once agreement is reached on the subject matter
and consideration. NCC provides that
ART. 1477. The owner ship of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.
ART. 1478. The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
From these, especially Art. 1478, ownership in the thing sold shall not pass to the buyer until full
payment only if there is a stipulation to that effect. Otherwise, the rule is that ownership shall
pass from the vendor to the vendee upon actual or constructive delivery of the thing sold even if
the price has not yet been paid. Non-payment only creates a RIGHT TO DEMAND payment
or to RESCIND the contract, or to criminal prosecution in case of bouncing checks. But absent
the stipulation, delivery will transfer ownership to the buyer who can in turn transfer it to
another.

Since there was actual delivery of the books, Cruz acquired ownership which he could then
validly transfer to Sps. Santos. That he had not yet paid EDCA was a matter between him and
EDCA.

If the phrase “unlawfully deprived” were to be interpreted in the manner suggested by EDCA, a
person relying on the seller’s title who buys a movable from him would have to surrender it to
another person claiming to be the original owner who was unpaid. The buyer in the second sale
would be left holding the bag and would be compelled to return the thing bought by him in GF
without even the right to reimburse of the amount he had paid for it.

Leonor took care to ascertain first that the books belonged to Cruz. The EDCA invoice showed
her assured her that the books had been paid for on delivery. In contrast, EDCA was less than
cautious, too trusting, in dealing with the impostor. It readily delivered the books he ordered and
readily accepted his personal check in payment. It did not wait to clear the check of this
unknown drawer. Worse, it indicated in the sales invoice that the books had been paid for on
delivery. Leonor did not have to go beyond the invoice to satisfy herself that the books belonged
to Cruz, yet she did. Although title of Cruz was presumed under Art. 559 by his mere possession
of the books, being movable, Leonor demanded more proof.

EDCA’s remedy is against Tomas de la Peña.

16. Philippine Suburban Development Corporation v. Auditor General, GR L-19545, April

18, 1975,
FACTS:
The president of PH approved the acquisition by People’s Homesite and Housing Corporation
(PHHC) of the unoccupied portion of the Sapang Palay Estate in Bulacan for relocating
squatters. PHHC Board passed resolution 700 authorizing purchase of this unoccupied portion at
P0.45/m2. President approved floating of bonds under RA 1000 and 1322 worth P7.5M to be
absorbed by GSIS to finance the acquisition by PHHC of the entire Sapang Palay Estate at a
price not to exceed P0.45/m2.

As early as first week of June 1960, prior to the signing of the deed, PHHC acquired possession
of the property with PSDC’s consent to let PHHC proceed immediately with the construction of
roads and resettlement of squatters and flood victims in Manila.

PH Suburban Development Corporation (PSDC), as owner of the unoccupied portion (2 parcels

of land) of the Sapang Palay Estate, and PHHC entered into a contract on December 29, 1960
embodied in a public instrument entitled “Deed of Absolute Sale” where PSDC conveyed unto
PHHC the two parcels of unoccupied land for P3,386,223. This was not registered in the register
of deeds until March 14, 1961 due to PHHC being unable to at once advance the money for
registration expense.

Provincial Treasurer of Bulacan requested PHHC to withhold P30k from the purchase price to be
paid by it to PSDC representing realty tax due on the property for year 1961. PSDC, thru
PHHC, paid under protest the P30k and requested secretary of finance Aytona to order a refund
of the P30k. PSDC claims that it ceased to be the owner of the land upon the execution of the
deed of sale on December 29, 1960. This request to Aytona was denied. hence this appeal.

ISSUE:
Whether vendor PSDC is liable for the real estate tax assessed.
HELD: NO.
It is claimed that Auditor General erred in disallowing the refund of real estate tax of P30k
because aside from the presumptive delivery by the execution of the deed of sale on Dec. 29, the
possession was actually delivered to PHHC, vendee, before the sale and thus, by the transmission
of ownership to PHHC, PSDC has ceased to be the owner of the property and under no
obligation to pay the real property tax for 1961. Auditor General argues that presumptive
delivery under Art. 1498 of NCC does not apply since there is a requirement in the contract that
the sale shall first be approved by Auditor General.

But considering the approval of the president, the prior approval of the Auditor General
envisioned by AO 290 would not be necessary. Where the contract is already approved by the
president, the action of the auditor general would no longer be necessary because under AO 290,
the president has, at any rate, the final say.

Under civil law, delivery (tradition) as a mode of transmission of ownership may be actual/real
or constructive. When the sale of real property is made in a public instrument, the execution
thereof is equivalent to delivery of the thing object of the contract if from the deed the contrary
does not appear. There is symbolic delivery by the execution of the public instrument unless this
was not the intention of the parties (like if it is stipulated that the purchaser shall take possession
at a certain date). Here, vendor PSDC placed PHHC in possession over the thing even before
the sale. The condition that petitioner should first register the deed of sale and secure a new title
in the name of the vendee before the latter shall pay the balance of the purchase price, did not
preclude the transmission of ownership. In the absence of an express stipulation to the
contrary, the payment of the purchase price of the goods is not a condition precedent to the
transfer of title to the buyer, but title passes by the delivery of the goods.

As between the parties to a contract of sale, registration is not necessary to make it valid and
effective, for actual notice is equivalent to registration. There are no rights of third persons
involved here. Thus, since delivery of possession coupled with execution of the deed of
absolute sale had consummated the sale and transferred title to the purchaser PHHC, the
payment of real estate tax after such transfer is the responsibility of the purchaser. But PHHC
is a government entity not subject to real property tax.

17. Hospicio Rosaroso v. Lucila Soria, GR 194846, June 19, 2013, Mendoza, J.
FACTS:
Spuses Luis Rosaroso and Honorata Duazo acquired several real properties in Cebu City,
including the subject properties here. They had 9 children: Antonio, Angelica, Cleofe, Hospicio,
Arturo, Florita, Lucila, Eduardo, Manuel. Honorata died. Luis married Lourdes Rosaroso.

A complaint for declaration of nullity of documents was filed by Luis against his daughter
Lucila, Lucila’s daughter Laila, and Meridian Realty Corporation. Luis died, so an amended
complaint was filed with Spouse of Laila, Ham, and Lourdes included as defendants.

In the amended complaint, petitioners Antonio, Angelica, Cleofe, and Hospicio claim that Luis,
with full knowledge of Lourdes, executed a deed of absolute sale of Lots 8, 19, 22, 23, 5665, and
7967 (first sale) to them. Despite this, respondent Laila, in conspiracy with Lucila her mother,
obtained a SPA from Luis (first SPA). Luis was claimed to be then sick and of unsound mind.
Lucila and Laila affixed Luis’ thumb mark on the SPA which purportedly authorized Laila to sell
lots 8, 22, and 23 already sold to them. On the strength of a second SPA, respondents Laila and
Ham mortgaged Lot 19 to Vital Lending Investors Inc. for P150k with the concurrence of
Lourdes.

They also claim that a second sale took place when respondents Lucila, Ham, and Laila made
Luis sign a deed of absolute sale conveying to respondent Meridian 3 lands (second sale) and
that Meridian was in BF since it did not inquire as to the occupants and owners of the lots. They
pray that the 2 SPAs and the deed of sale to Meridian be declared void.

Respondents Lucila and Laila claim that even if the first sale to petitioners was valid, petitioners
were estopped from questioning the second sale to Meridian because they failed in not only
effecting the necessary transfer of title but also in annotating their interests on the titles of the
lots.

RTC ruled for petitioners. It ruled that when Luis executed the second deed of sale, he was no
longer the owner of Lots 19, 22, and 23 as these were sold to petitioners. In fact, the lots were
delivered to vendees who had been living there since birth and so had been in actual possession.
CA reversed, saying that the first sale is void as there is no proof of consideration for the 4 lots.
The price was simulated to make it appear that payment was made when no payment was in fact
made. Hence this petition.
ISSUE:
Whether the second sale to Meridian may be upheld.
HELD: NO.
Petitioners argue that the second sale was void because Luis could not transfer ownership to
Meridian since he is not the owner after selling it to petitioners.

Under S3, Rule 131, one of these are the disputable presumptions: (1) private transactions have
been fair and regular; (2) the ordinary course of business has been followed; and (3) there was
sufficient consideration for a contract. Respondents failed to trounce said presumption. They
failed to show clear evidence that the first sale was made without consideration. They only have
their bare allegation. Granting that there was no delivery of consideration, the seller would have
no right to sell again what he no longer owned. His remedy is to rescind the sale for failure of
the buyer to perform his part of the obligation pursuant to Art. 1191 of NCC. Non-payment only
creates a right to demand fulfillment of the obligation or rescind the contract.

Meridian claims that they are buyers in good faith. But the fact that Meridian first registered the
sale will not help it. In case of double sale, Art. 1544 provides xxx. Otherwise stated, ownership
of an immovable subject of a double sale shall be transferred: 1) to the person acquiring it who in
GF first recorded it, 2) in default thereof, to the person who in GF was first in possession, and
3) in default thereof, to the person who presents the oldest title, provided there is GF. The
requirement is two-fold. Acquisition in GOOD FAITH and registration in GOOD FAITH. If
the buyer was in bad faith, the registration they made amounted to no registration at all.

When a piece of land is in actual possession of persons other than the seller, the buyer must be
wary and should investigate the rights of those in possession. Without making such inquiry, one
cannot claim to be a buyer in GF. The general rule is that a purchaser is in GF when he has
examined the latest certificate of title. An exception is when there are important facts that would
create suspicion in a reasonable man to go beyond the present title and to investigate those that
preceded it. A person who deliberately ignores a significant fact which would create suspicion
in an otherwise reasonable man is not an IPV. A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard.

If a vendee in a double sale registers the sale after he acquired knowledge of a previous sale, the
registration is one in BF and does not confer upon him any right. A registration in BF is as if
there is no registration at all, and the buyer who first took possession in GF shall be
preferred.

Here, Meridian knew that the lots were in possession of persons other than Luis the seller.
Instead of investigating the rights of the occupants, it chose to just believe that Luis still owned
them. Meridian failed to exercise the due diligence required by law of purchasers in acquiring a
land in the possession of persons other than the seller. The CA was reversed.

18. Skunac Corporation v. Roberto Sylianteng, GR 205879, April 23, 2014

FACTS:
Involved here are lots 1 and 2 both found in Pujalte subdivision in Greenhills, San Juan City
which are portions of a land previously registered in the name of Luis Pujalte and covered by
TCT 93165 (Mother title). Respondents Roberto and Caesar Sylianteng claim ownership over
these lots based on a deed of absolute sale executed in their favor by their mother, Emerenciana
Sylianteng. Emerenciana, they claim, acquired the lots from the late Luis thru a deed of sale.

Petitioners Skunac and Alfonso Enriquez claim that one Romeo Pujalte, declared by the RTC in
a special proceeding as sole heir of Luis, caused the reconstitution of the Mother Title resulting
to its cancellation and issuance of TCT 5760 in Romeo’s favor. Romeo then allegedly sold the
lots to Skunac and Enriquez. Thus, TCT 5888 for lot 1 to Skunac and TCT 5889 for lot 2 to
Enriquez was issued.

Respondents contend that they have a better right to the lots because the transactions conveying
the same to them preceded those claimed by petitioners as source of the latter’s titles and that
petitioners are not innocent purchasers in GF as they had prior notice of the previous
transactions.

RTC ruled for petitioners, declaring void the titles of respondents. CA reversed, declaring void
the titles of Romeo, Skunac, and Alfonso. Hence this petition.

ISSUE:
Whether Emerenciana validly acquired the lots fromLuis and, in turn, whether respondents
validly acquired them from Emerenciana.
HELD: YES.
Since the findings of fact of CA and RTC are conflicting, the SC entertaines questions of fact
raised by petitioners. Reliance by CA and RTC on Art. 1544 is misplaced. The requisites for Art.
1544 to apply are:
(a) The two (or more sales) transactions must constitute valid sales; (b) The two (or
more) sales transactions must pertain to exactly the same subject matter; (c) The two (or
more) buyers at odds over the rightful ownership of the subject matter must each
represent conflicting interests; and (d) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each have bought from the very same seller.

Obviously, Art. 1544 does not apply where the sales were initiated by two vendors. Here, the
lots were sold to petitioners and respondents by two different vendors- Emerenciana and Romeo.

Petitioners insist that they have valid title over the properties, tracing their titles from Romeo.
Romeo, in turn, derives his supposed title from his claim that he is the sole heir of the estate of
Luis. But evidence shows that Romeo never became the owner of the properties for 2 reasons.

First, the lots were already sold by Luis during his lifetime. Thus, these lands no longer formed
part of his estate when he died. thus, Romeo’s sale to petitioners was not affirmed by the estate
court because the lands were not among those included in the estate.

Second, even if the lands formed part of the estate, it was proven in a separate case that Romeo is
not his heir. In a criminal case for use of falsified documents against Romeo, it was proven that
his claim of heirship is spurious. His birth cert and the marriage cert of his supposed parents
which he presented before the estate court to prove that he is the sole heir of Luis were found by
the criminal court to be falsified. Not being an heir, Romeo never acquired any right over the
lots. No one can give what one does not have, nemo dat quod non habet. Since Romeo has no
right to the lots, petitioners, who simply stepped into the shoes of Romeo, acquired no
rights to the same.

Even if petitioners bought the lots in GF by simply relying on the certs of the sellers and later
acquiring titles in their own names, respondents title shall still prevail. When two certs of title are
issued to different persons covering the same land, the earlier in date shall prevail. In case of
successive registrations where more than one cert is issued over the land, the person holding a
prior cert is entitled to the land as against a person who relies on a subsequent cert. Respondents
titles, having emanated freom older titles, should thus be upheld. At any rate, petitioners had
prior knowledge of the estate proceedings involving the lots and they had notice of the defect of
title of Romeo.

19. Taina Manigque-Stone v. Cattleya Land, Inc. GR 195975, September 05, 2016, Del
Castillo, J.
FACTS:
Cattleya Land Inc. sent its lawyer Atty. Cabilao to investigate at the register of deeds the status
of the properties of Sps. Col and Asuncion Tecson which Cattleya wanted to purchase. There
was no encumbrance except for an attachment issued in civil case 3399. Cattleya entered into a
contract of conditional sale with Sps. Tecson, represented by Atty. Pizarras. This was entered in
the primary book of the register of deeds. The parties then executed a deed of absolute sale
covering the property, which was also entered. But neither the conditional nor absolute sale
deeds could be annotated on the title of the lot because the register of deeds, Atty. De la Serna
refused to do so because there was a writ of attachment in case 3399. Even when the attachment
was lifted, the deed of absolute sale was not registered because Sps. Tecson said they could not
surrender TCT 17655 as it was destroyed in a fire.

This claim by Sps. Tecson turned out to be false because the owner’s copy of TCT 17655 had in
fact been presented by Taina at the register of deeds along with a deed of sale executed by Sps.
Tecson in favor of Taina. Taina bought this property because Taina’s then common-law
husband, Michael Stone (Mike), a foreigner, visited Bohol, he fell in love with the place and
decided to buy a portion of the beach lot in Bohol. Sps. Tecson agreed to sell them said portion.
Tecson Jr., son of Col Tecson and Taina’s brother-in-law, delivered to Taina the owner’s copy of
TCT 17655. Meanwhile, Tiana and Mike married.

Taina filed a notice of adverse claim on the lot after she learned that Col Tecson filed a petition
for issuance of a second owner’s copy over TCT 17655. Taina sought to register her deed of
absolute sale and presented the owner’s copy of TCT 17655. Thus, TCT 21771 was issued in
Taina’s name in lieu of TCT 17655.

Cattleya filed against Taina for quieting of title and recovery of ownership and cancellation of
title in RTC. RTC ruled for Cattleya, holding that the sale by Sps. Tecson with Cattleya and with
Taina involving one lot was a double sale, and that Cattleya had a superior right as it was the first
to register the sale in its favor in GF and that it had no notice of Taina’s claim. CA affirmed.
Hence this petition.

ISSUES:
1. Whether the sale by Sps. Tecson to Michael Stone (Mike), a foreigner or alien, although
ostensibly made in Taina’s name, was valid.
2. Whether Art. 1544 governs.
HELD:
1. NO.
Taina claims that there was no violation of the constitutional prohibition because no real transfer
of ownership in favor of Mike was made. All payments made by Mike to Col Tecson must be
presumed to have come from the community property he had with Taina. Cattleya argues that
there could not have been a double sale as the first sale to Mike was void in violation of the
constitution.

S7, Art. XII of the 1987 constitution states that “Save in cases of hereditary succession, no
private lands shall be transferred or conveyed except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.” Thus, aliens, whether individuals or
corporations, are disqualified from acquiring lands of the public domain. They are also
disqualified from acquiring private lands. Taina admitted that it was really Mike who paid with
his own funds. Thus, Mike was its real purchaser or buyer. If the title to the property was
placed in Taina’s name, it was because Taina and Mike wanted to circumvent the constitutional
prohibition. Taina was a mere dummy for Mike.

2. NO.
Thus, since the sale to Taina as Mike’s dummy was totally repugnant to the constitution and is
thus void ab initio, there can be no double sale to speak of here. Art. 1544 of NCC applies
ony to a situation where the same property is VALIDLY SOLD to different vendees. There is
thus only one sale to reckon with, that is, the sale to Cattleya.

20. Spring Homes Subdivision Co., Inc. v. Sps. Tablada, GR 200009, January 23, 2017,
Peralta, J.
FACTS:
Sps. Pedro Lumbres and Rebecca Roaring (Sps. Lumbres) entered into a JVA with Spring
Homes Subdivision Co., Inc. for the development of several lands of 28,378 m2. For
convenience and to facilitate the acquisition of permits and licenses in connection with the
project, Sps. Lumbres transferred the titles to the lands to Spring Homes’ name.

Spring Homes entered into a contract to sell with Sps. Pedro and Zenaida Tablada to sell a land,
Lot 8 in Calamba Laguna in Spring Homes Subdivision, with TCT 284037. Sps. Lumbres filed
with RTC a complaint for sum of money, specific performance against Spring Homes for its
alleged failure to comply with the JVA. Unaware of this action, Sps. Tablada began constructing
their house on the lot and occupied it. After, Spring Homes executed a deed of absolute sale to
Sps. Tablada who paid Spring Homes P179k, more than the P157k price indicated in the deed.
Title remained with Spring Homes for its failure to cause cancellation of the TCT and issuance
of a new one to Sps. Tablada who only received a photocopy of said title.

Later, Sps. Tablada discovered that the property was mortgaged for a loan of P4M with Premier
Development Bank as mortgagee and Spring Homes as mortgagor. The loan remained unpaid so
extrajudicial proceedings were instituted.

Meanwhile, without waiting for trial on the sum of money complaint, Sps. Lumbres and Spring
Homes entered into a compromise agreement where Spring Homes conveyed the property to
Sps. Lumbres. As mortgagee, Premier was included as party in the compromise agreement.

Sps. Lumbres was authorized to collect Spring Homes’ receivables from conditional sales of
properties. Sps. Lumbres sent demand letters to Sps. Tablada to pay an alleged outstanding
balance of the price of the subject property of P230k. No payment was received, so Sps.
Lumbres cancelled the contract to sell to Sps. Tablada. Later, Sps. Lumbres and Spring Homes
executed a deed of absolute sale over the property. TCT 473055 was issued to Sps. Lumbres.

Sps. Tablada filed a complaint for nullification of title against Spring Homes and Sps. Lumbres,
praying for the nullification of the second sale to Sps. Lumbres and the title to them. Spring
Homes was not summoned as its certificate of registration was revoked on September 29, 2003.

RTC dismissed Sps. Tablada’s action for lack of jurisdiction over Spring Homes whom it says is
an indispensable party without whom no complete determination of the case may be reached. CA
reversed, finding Spring Homes not an indispensable party. It ruled that the first sale to Sps.
Tablada is valid.

CA ruled that even if Sps. Lumbres, as second buyer, registered their deed of absolute sale while
Sps. Tablada was unable to do so because Spring Home failed to deliver the owner’s copy of the
TCT, Sps. Lumbres were in bad faith as they were informed that the property was already sold to
Sps. Tablada who already constructed their house thereon. Hence this petition.

ISSUE:
Which of the two sales- to Sps. Tablada or to Sps. Lumbres- must be upheld?
HELD: Sps. Tablada’s.
Spring homes is not an indispensable party. Sps. Lumbres, as assignee of the property, and not
Spring Homes as assignor, are the indispensable parties. Due to the second deed of sale to Sps.
Lumbres, the latter became the registered owner of the subject property herein. Spring Homes is
at best a necessary party whose presence is needed to adjudicate the whole controversy but
whose interests are so far separable that a final decree can be made in its absence without
affecting it.

As to the merits, Sps. Tablada entered into a contract to sell with Spring Homes in 1995 followed
by a deed of absolute sale in 1996. In 2000, Sps. Lumbres and Spring Homes executed a deed of
absolute sale over the same property. Sps. Lumbres claim that the first sale to Sps. Tablada is
void for having no consideration since out of the P409k price of the contract to sell, Sps. Tablada
only paid P179k, failing to pay the rest. This has no merit.

The consideration of the first deed of sale is P157k. This same amount was indicated as price in
the second deed of sale to Sps. Lumbres. The P409k included the price for a house to be
constructed at P6k/m2 of 42m2. Since the house was eventually constructed at Sps. Tablada’s
own expense, they paid only for the land. Thus, there is no factual basis for Sps. Lumbres claim
that there is still a P230k balance, that the sale to Sps. Tablada was void, and consequently that
they were thus authorized to unilaterally cancel the sale and execute another one transferring the
property in their names. The first sale is valid with sufficient consideration.

In view of the validity of the first sale to Sps. Tablada, who between the two spouses acquired
ownership? Art. 1544 of NCC provides:
“Should it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property.”
The principle of primus tempore, potior jure (first in time, stronger in right) has greater
significance in a double sale of an immovable. Ownership of an immovable subject of a double
sale shall be transferred: 1) to the person acquiring it who in GF first recorded it in the registry
of property, 2) in default thereof, to the person who in GF was first in possession, and 3) in
default thereof, to the person who presents the oldest title, provided there is GF. The
requirement is two-fold- acquisition in GF and registration in GF. GF must concur with
registration: the registrant must have no knowledge of the defect or lack of title of his vendor or
must not have been aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor.

The first buyers, Sps. Tablada, were able to take possession but failed to register the property
since Spring Homes unjustifiedly failed to deliver the owner’s copy of title while Sps. Lumbres
were able to register the property in their names. But while Sps. Lumbres transferred title in their
name, this was done in BAD FAITH since when the compromise agreement with Spring Homes
was executed, they were informed that the property was previously sold to Sps. Tablada.
They were also aware that Sps. Tablada had constructed a house thereon and were in
physical possession thereof. They cannot claim GF for the mere reason that the first sale was
not annotated to the title. They cannot feign ignorance of the first sale since they made numerous
demands to Sps. Tablada to pay albeit erroneously.

Knowledge gained by the first buyer of the second sale cannot defeat the first buyer’s rights
except only as provided by law as where the second buyer first registers in GF. Such knowledge
of the first buyer does not bar her from availing of her rights under the law- first her purchase
as against the second buyer. Conversely, knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register since such knowledge taints his prior
registration with BF. Thus, for Sps. Lumbres to obtain priority over Sps. Tablada, the law
requires a continuing GF.

21. Romeo Edu v. Hon. Gomez, GR L-33397, June 22, 1984, Relova, J.
FACTS:
Subject matter of this case is a 1968 model Volkwagen bantam car allegedly owned by Lt.
Walter Bala of Clark Airbase under whose name the car was allegedly registered at the Angeles
City Land Transportation Commission Agency. The car was stolen from the residence of Lt.
Bala. Petitioners Eduardo Domingo, Carlos Rodriguez, and Patricio Yambao, agents of Anti-
Carnapping Unit (ANCAR) of PH constabulary, recognized the car in possession of private
respondent Lucila Abello and impounded it as stolen property. Romeo Edu, then commissioner
of Land Transportation, seized the car.

Lucila filed a complaint for replevin in CFI impleading petitioners, praying an order to the
sheriff to take the car into his custody. Judge Gomez ordered the seizure of the car. Solicitor
Torres submits that the car legally belongs to Lt. Bala under whose name it is originally
registered and that it was stolen from him. CFI found that Lucila acquired the car by purchase
from its registered owner Marcelino Guansing for P9k under notarial deed of absolute sale
and that Lucila had been in possession thereof since then until when the car was seized from her.
Hence this petition.
ISSUE:
Whether the replevin should be granted.
HELD: YES.
There is no merit in the petition since the purchaser in GF of a chattel of movable property is
entitled to be respected and protected in his possession as if he were the true owner thereof
until a court rules otherwise. In the meantime, as the true owner, the possessor in GF cannot be
compelled to surrender possession nor to be required to institute an action fro recovery of the
chattel. The filing of an information charging that the chattel was illegally obtained thru esta
from its true owner by the transferor of the bona fide possessor does not warrant disturbing the
possession of the chattel against the will of the possessor.

22. Circe Duran v. IAC, GR L-64159, September 10, 1985, Relova, J.

FACTS:
Petitioner Duran owned 2 lands, Lots 5 & 6, covered by TCT 1647 which she purchased from
the Moja Estate. She left PH in June 1954 and returned in May 1966. On May 13, 1963, a deed
of sale of the two lots was made in favor of Circe’s mother, Fe Duran who, on Dec. 3, 1965,
mortgaged the same to private respondent Erlinda Tiangco. When Circe knew of the mortgage,
she wrote the register of deeds of Caloocan, informing him that she did not give her mother
authority to sell or mortgage any of her properties. Since she did not get an answer, she returned
to PH. Fe failed to redeem the mortgaged properties, foreclosure proceedings were initiated by
Erlinda Tiangco and the sale by the sheriff and issuance of a cert of sale in favor of Erlinda.

Circe claims that the deed of sale to Fe is a forgery as she was in US when it was executed in
1963. IAC held the signature of Circe as genuine because of the presumption of regularity of a
public document and that Circe was unable to prove satisfactorily that she was in US in 1963.
Her return in 1966 does not prove that she was not here in 1963. Hence this petition.

ISSUE:
Whether Erlinda Tiangco was a buyer in GF and for value.
HELD:
GF consists in the possessor’s belief that the person from whom he received the thing was the
owner thereof and could convey his title. There is GF where there is an honest intention to
abstain from taking any unconscientious advantage from another. here, private respondents, in
GF, relied on the cert of title in the name of Fe. Even if the sale was void, the general rule that
the direct result of a previous illegal contract is invalid does not apply. A fraudulent or forged
document of sale may become the root of a valid title if the cert of title has already been
transferred from the name of the true owner to the name of the forger or the name
indicated by the forger.

Where innocent third persons relying on the correctness of the cert of title acquire rights over the
property, the court cannot disregard such rights else public confidence in the cert of title would
be impaired. Everone dealing with property registered under the torrens system would have to
inquire in every instance as to whether the title had been regularly or irregularly issued by the
court. This is contrary to the evidence purpose of the law.

23. JM Tuason & Co., Inc. v. CA, GR L-41233, November 21, 1979, De Castro, J.
FACTS:
On January 31, 1952, JM Tuason executed in favor of Ricardo de Leon a contract to sell Lot 15
for P41,908. Meanwhile, JM signed a compromise agreement with Deudors in Case 135. With
JM’s consent, on July 19, 1965, Ricardo transferred all his rights in the lot to his parents, private
respondents Alfonso and Rosario de Leon. Private respondents paid the outstanding balance. JM
executed to them the deed of sale and, upon its registration, TCT 96143 was issued to private
respondents.

At the time the contract to sell was executed, the contracting parties knew that a portion of the lot
was occupied by Ramon Rivera. It was their understanding that JM would eject Ramon.

On May 13, 1958, JM filed a complaint of ejectment against Ramon in CFI, impleading Ricardo
and private respondents as necessary parties(Case 2989). CFI’s decision, principally based on the
compromise agreement executed in Case 135, dismissed the complaint against Ramon and
ordered JM to enter into an agreement with Ramon to let him purchase 1050 m2 of the land. CA
affirmed. CA decision became final and executory in September 1971, when De Leons were
evicted from the premises in question.

Private responents filed an action in CFI against JM to enforce vendor’s warranty against
eviction or to recover the value of the land. CFI ruled against JM. CA affirmed. Hence this
petition.

ISSUE:
Whether De Leons are entitled to the vendor’s warranty against eviction and damages.
HELD: NO.
CA held that JM failed to comply with its obligation to transfer ownership over the lot to De
Leons due to the compromise agreement it entered with Deudors, thus it is guilty of willful
deception.

But we hold that it was not JM’s own making that it executed the compromise agreement with
Deudors. The prior right of Ramon to purchase the lot in litigation was based more on his
prior occupancy since 1949, about which fact JM informed De Leons when the contract to sell
was executed. The compromise agreement merely recognized this prior right. It is stipulated in
the compromise that buyers of lots from Deudors like Ramon can acquire lots from the
subdivision being sold by JM only when said lots have not already been sold to third parties. JM
believed that lot 15 would not be covered by the compromise agreement since it was sold
already, but it was covered because of the prior right and, thus, preferential right of Ramon to
purchase. It is in GF.

Also, when the contract to sell was executed, Ricardo de Leon knew that a third party was
occupying part of the lot subject of sale. He ought to have known that he was buying a property
with the distinct possibility of not being able to possess and own the land due to occupancy of
another. Ricardo knowingly assumed the risk when he bought the land and was even called a
vendee in BF by CA in doing so, clearly not an innocent purchaser in GF. Private respondents
lacked GF for knowing beforehand at the time of the sale the presence of an obstacle to their
taking over possession of the land which, in effect, would amount to eviction from the land and
they still bought the land without first removing the obstacle.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title in GF as against the true owner. The same rule must be applied to
one who has knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his
vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his
guard and then claim that he acted in GF under the belief that there was no defect in the title of
the vendor.

Thus, private respondents are not entitled to warranty against eviction nor to damages. JM was
ordered only to compensate P126k, aggregate value of the 1050 m2 land.

24. Maria Escaler v. CA, GR L-42636, August 1, 1985, Cuevas, J.

FACTS:
Private respondents Sps. Africa and Jose Reynoso sold to petitioners, Sps. Maria and Ernesto
Escaler and Sps. Cecilia and Pedro Roxas, several lands in Antipolo Rizal. The deed of sale
contained this covenant against eviction:
“That the VENDOR is the absolute owner of a parcel of land…” “That the VENDOR
warrants valid title to and ownership of said parcel of land and further warrant to defend
the property herein sold and conveyed unto the VENDEES xxx from any and all claims
of any persons xxx.”
The register of deeds and Doronilla Resources Development Inc. filed Case 4252 in CFI to
cancel the OCT 1526 issued to Angelina Reynoso, predecessor-in-interest of Sps. Reynoso, on
the ground that the property covered by the title is already previously registered to Doronilla.
Petitioners as vendees opposed. CFI ordered OCT 1526 cancelled.

Petitioners filed in CFI for recovery of value of the property sold and damages against Sps.
Reynoso, vendors, for violation of warranty against eviction. It alleges that Case 4252 canceleld
Angelina’s title and all TCTs emanating therefrom including petitioners’ titles, so they lost their
right over the property, and that Sps. Reynoso were summoned in Csae 4252. Sps. Reynoso
claim that petitioners failed to file a third-party complaint against them in Case 4252.

CFI ordered Sps. Reynoso to pay petitioners the value of the property sold at the time of
eviction. CA reversed, holding that petitioners did not give Sps. Reynoso formal notice of
eviction. Hence this petition.

ISSUE:
Whether Sps. Reynoso are liable for breach of warranty.
HELD: NO.
Art. 1548, in relation to Arts. 1558 and 1559 of NCC, provide:
"Art. 1548. Eviction shall take place whenever by a final judgment based on a right prior
to the sale or an act imputable to the vendor, the vendee is deprived of the whole or of a
part of the thing purchased. "The vendor shall answer for the eviction even though
 nothing has been said in the contract on the subject. "The contracting parties, however,
may increase, diminish, or suppress this legal obligation of the vendor.
"Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he
is summoned in the suit for eviction at the instance of the vendee.

For a vendor’s liability for eviction to be enforced, these requisites must concur: 1) there must be
a final judgment, 2) the purchaser has been deprived of the whole or part of the thing, 3) the
deprivation was by virtue of a right prior to the sale made by the vendor, and 4) the vendor has
been summoned and made co-defendant in the suit for eviction at the instance of vendee.

Here, the fourth requisite, summoning in the suit for eviction (Case 4252) at vendee’s instance, is
not present. All that petitioners did was to furnish Sps. Reynoso, by registered mail, with a
copy of the opposition they (petitioners) filed in the eviction suit. This is not the kind of
notice prescribed by Arts. 1558 and 1559. “Unless he is summoned xxx at the instance of the
vendee” means that Sps. Reynoso as vendors should be MADE PARTIES to the suit at the
instance of vendees, either by way of asking that the former be made co-defendant or by filing
a third party complaint against the vendors.

25. Jerry Moles v. IAC, GR 73913, January 31, 1989, Regalado, J.

FACTS:
Moles needed a linotype printing machine for his printing business, LM Press at Bacolod, and
applied for an industrial loan with DBP for its purchase. Moles was introduced to private
respondent Mariano Diolosa, owner of Diolosa Publishing House in Iloilo, who had 2 machines.
Moles inspected the two machines offered for sale and was informed that they were secondhand
but functional.

On his second visit to Diolosa, Moles bought the linotype machine. The transaction was verbal in
nature but to facilitate the loan application with DBP, a pro forma invoice reflecting P50k as
consideration of the sale was signed by Moles.

On August 29, 1977, Diolosa issued a certification warranting that the machine sold was in
“A-1 condition”, together with other express warranties. The DBP loan of P50k was released.
DBP check worth P50k was given to Diolosa.

On November 29, 1977, Moles wrote Diolosa that the machine was not functioning properly. He
also wrote his grievances, saying that an expert of linotype machine from manila says that the
most he will buy the machine is P5k only. After several telephone calls regarding the defects in
the machine, Diolosa sent two technicians, but they failed to fix the machine. Since then, Moles
was never able to use the machine.

Moles filed suit against private respondent Mariano Diolosa in CFI for rescission of contract.
Expert witness for Moles testified that the linotype machine had various defects. He opined that
major repairs were needed to put the machine back in good running condition. CFI decreed
rescission and ordered the return of the machine and P40k and damages. IAC reversed. Hence
this petition.
ISSUE:
Whether there was a warranty on the machine.
HELD: YES.
1. It is generally held that in the sale of a designated and specific article sold as secondhand,
there is no implied warranty as to its quality or fitness for the purpose intended at least when it
is subject to inspection at the time of sale. There is also authority to the effect that in a sale of
secondhand articles, there may be, under some circumstances, an implied warranty of fitness for
the ordinary purpose of the article sold or for the particular purpose of the buyer.

In finding for Diolosa, IAC cited Sison v. Ago that unless goods are sold as to raise an implied
warranty, as a general rule there is no implied warranty in the sale of secondhand articles. But
this general rule is not without exceptions. Art. 1562, taken from Uniform Sales Act, provides:

"Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality
or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the
particular purpose for which the goods are acquired, and it appears that the buyer
relies on the seller's skill or judgment (whether he be the grower or manufacturer or not),
there is an implied warranty that the goods shall be reasonably fit for such purpose;" xxx.

Past US decisions also show rulings to the effect that an express warranty can be binding on the
seller even in the sale of a secondhand article. In Markman v. Hallbeck, it was said that it was not
error to refuse an instruction that upon sale of secondhand goods, no warranty was implied since
secondhand goods might be sold under such circumstances as to raise an implied warranty.

Here, a certification to the effect that the linotype machine bought by Moles was in A-1
condition was issued by Diolosa to Moles. This cannot but be considered as an EXPRESS
warranty.

Diolosa claims this is not binding as not being part of the contract of sale. But the certification
was a condition sine qua non for the release of Moles’ loan used to pay the price of the machine.

We disagree with IAC that the express warranty as to the A-1 condition was merely “dealer’s
talk”. Diolosa was NOT a dealer of printing or linotype machines to whom could be
ascribed the supposed resort to the usual exaggerations of trade in said items. His
certification was not made to induce Moles to purchase it but to confirm in writing for
purposes of the financing aspect of the transaction his representations thereon. Ordinarily,
what does not appear on the face of the written instrument should be regarded as dealer’s or
trader’s talk. Conversely, what is specifically represented as true in said document, as here,
cannot be considered mere dealer’s talk.

2. As to whether the hidden defects is sufficient to warrant rescission, we consider the rule on
redhibitory defects in Art. 1561. A redhibitory defect must be an imperfection or defect of such
nature as to engender a certain degree of importance. An imperfection or defect of little
consequence is not redhibitory. Here, an expert witness for Moles established that the machine
required major repairs before it could be used. The machine is thus not reasonably fit for the
particular purpose for which it was intended.

3. While it is true that Art. 1571 of NCC provides for a prescriptive period of 6 months for a
redhibitory action, a reading of the 10 preceding articles to which it refers reveals that this
applies only in case of implied warranties. This case involves an express warranty.

26. Nutrimix Feeds Corporation v. CA, GR 152219, October 25, 2004, Callejo, Sr., J.
FACTS:
Sps. Efren and Maura Evangelista, respondents, started to directly procure various kinds of
animal feeds from Nutrimix. The various animal feeds were paid and covered by checks.
Respondents sometimes failed to issue checks for payments despite deliveries, eventually
incurring an aggregate unsettled account of P766k, P490k of which was from dishonored checks
because Mauro’s account with UCPB was closed already. Despite demands, Sps. Evangelista
refused to pay.

Nutrimix filed in RTC a complaint against Sps. Evangelista for sum of money. Sps. Evangelista
admitted the unpaid obligation, but claim that the 9 checks issued were to guarantee payment of
the purchases which was previously determined to be procured from the expected proceeds in
the sale of their broilers and hogs. Because of the sudden and massive death of their animals
which they claim was caused by Nutrimix’s contaminated products, the nonpayment of the
obligation is with legal ground. Nutrimix claims that the deaths of the animals were due to
widespread pestilence in Sps. Evangelista’s farm and theorized that Nutrimix mixed poison in
the feeds to make it appear contaminated.

Various witnesses were presented, including veterinarians. RTC ruled for Nutrimix and ordered
Sps. Evangelista to pay P766k. It believed that the feeds were contaminated sometime between
their storage at the bodega of Evangelistas and their consumption by the poultry and hogs and
that the contamination was done by unidentified ill-meaning mischief-makers over whom
Nutrimix had no control. For lack of proof to the contrary, Nutrimix was held not responsible for
the contamination.

CA dismissed the complaint, holding that there was breach of warranty, giving credence to the
testimony of veterinarian Diaz who said that the sample feeds she tested were taken from a
sealed sack bearing the brand of Nutrimix. Hence this petition.

ISSUE:
Whether there was proven violation of warranty against hidden defects.
HELD: NO.
The provisions on warranty against hidden defects are found in Arts. 1561 and 1566 of NCC:
Art. 1561. The vendor shall be responsible for warranty against hidden defects 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 an extent that, had the vendee been
aware thereof, he would not have acquired it or would have given a lower price for it; but
said vendor shall not be answerable for patent defects or those which may be visible, or
 for those which are not visible if the vendee is an expert who, by reason of his trade or
profession, should have known them.
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the
thing sold, even though he was not aware thereof. This provision shall not apply if the
contrary has been stipulated, and the vendor was not aware of the hidden faults or defects
in the thing sold.
The requisites to recover on account of hidden defects are: (a) the defect must be hidden; (b) the
defect must exist at the time the sale was made; (c) the defect must ordinarily have been
excluded from the contract; (d) the defect, must be important (renders thing UNFIT or
considerably decreases FITNESS); (e) the action must be instituted within the statute of
limitations.

In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to
be used for the purpose which both parties contemplated. To prove liability based on breach
of implied warranty, 3 things must be established by Sps. Evangelista: 1) they sustained injury
because of the product, 2) the injury occurred because the product was defective or unreasonably
unsafe, and 3) the defect existed when the product left the hands of Nutrimix. A manufacturer
or seller of a product is not liable for damage allegedly caused by the product without proof that
the product was defective, which defect must be present upon delivery or manufacture of the
product. Tracing the defect to Nutrimix requires some evidence that there was no tampering
with or changing of the anumal feeds.

Here, Nutrimix delivered the feeds allegedly containing rat poison on July 26, 1993. But it is
astonishing that Sps. Evangelista had the animal feeds examined only on October 20, 1993, 3
months after their broilers and hogs died. In 3 months, the feeds could have already been
contaminated by outside factors and subjected to many conditions beyond Nutrimix’s control.
We agree with Nutrimix that there is no evidence to prove that the feeds taken to various
governmental agencies for laboratory examination were the same animal feeds given to Sps.
Evangelista’s broilers and hogs. Dr. Diaz admitted that the feeds submitted to him for analysis
came from a sealed bag. There is no evidence that the feeds submitted for analysis on July 26 &
27, 1993 were identical to those submitted to the expert witnesses in October 1993. Mere
sickness and death of the chickens is not satisfactory evidence to establish a prima facie case of
breach of warranty.

OBLIGATIONS OF A VENDEE
1. Arra Realty Corporation and Sps. Arguelles v. Guarantee Development Corporation and
Insurance Agency (GDCIA), GR 142310, September 20, 2004, Callejo, Sr., J.
FACTS:
Arra Realty Corporation (ARC) was the owner of a land in Makati. ARC decided to construct a
5-storey building on it and engaged Engr. Peñaloza as project and structural engineer. Penaloza
and ARC, thru Carlos Arguelles, agreed on November 18, 1982 that Penaloza would share the
purchase price of one floor of the building worth P3.1M, P901k payable within 60 days and the
balance in 20 equal quarterly installments of P110k. They also agreed that Penaloza’s payments
would be credited to her account of stock subscription in ARC’s capital stock.
Penaloza took possession of ½ portion of the second floor where she put up her office and
operated the St. Michael International Institute of Technology. Unknown to her, ARC had
executed a real estate mortgage over the land and building to China Banking
Corporation(CBC) as security for a loan.

Penaloza paid P1.1M for the portion of the second floor she purchased from ARC. She learned
that the property was mortgaged,. Thereafter, she stopped paying the installments on the price.
She wrote CBC that ARC had conveyed a portion of the second floor building to her and that she
paid P1.1M out of the total P3.1M price. She offered to open an account with CBC and to make
monthly deposits there to serve as payments of the loan of ARC. CBC rejected. Penaloza
informed ARC that her offer to CBC was rejected and reminded ARC that it conformed to her
proposal to assume payment of its loan up to the equivalent of the price.

When ARC failed to pay its loan to CBC, the property was foreclosed extrajudicially and
thereafter sold at public auction to CBC. ARC and GDCIA executed a deed of conditional sale
over the building and lot for P22M, part of which was to be used to redeem the property from
CBC. The property was redeemed. ARC executed a deed of absolute sale over the lot and
building to GDCIA for P22M. ARC obliged itself to deliver possession without any occupants
therein. Title was issued to GDCIA.

Penaloza filed a complaint against ARC, GDCIA, and Sps. Arguelles in RTC for specific
performance or damages. Penaloza caused annotation of notice of lis pendens at the back of
TCT 112269.

RTC ruled against ARC and in favor of Penaloza and GDCIA. CA affirmed with modification.
Hence this petition.

ISSUE:
Whether Peñaloza’s failure to pay on time the installments resulted in the contract of sale
between her and ARC not being perfected.
HELD: NO.
ARC claims that no contract of sale was perfected between ARC and respondent Penaloza
because the latter failed to pay the balance of the price. Penaloza was only able to pay 3 and part
of the fourth quarterly installment. ARC claims that GDCIA was a purchaser in BF as it bought
the lot and building despite its presumed knowledge of the claims of Penaloza and that the
building was occupied by private individuals.

Penaloza claims that there is a perfected contract of sale with ARC. GDCIA is not a purchaser in
GF as it purchased the building although it was still occupied. GDCIA even retained P1M of the
purchase price to answer for any claims of the occupants.

Central to the issue is the November 18 letter-agreement of the parties:

Dear Erlinda Penaloza
I would like to review the arrangement arrived at our meeting yesterday afternoon. You
shall share one (1) floor of the proposed 5-storey ofice building to be constructed on a
992 sq. mt. lot owned by ARRA Realty Corporation located at Alvarado St., Legaspi
 Village, Makati, Metro Mla. The consideration for which you shall own one (1) floor is
THREE MILLION ONE HUNDRED FIVE THOUSAND EIGHT HUNDRED
THIRTY-EIGHT PESOS (P3,105,838.00) on a deferred payment plan. The initial
payment of NINE HUNDRED ONE THOUSAND SEVEN HUNDRED THIRTY-
EIGHT PESOS (P901,738.00) shall be paid within sixty (60) days from November 20,
1982 and the balance payable in 20 equal quarterly payments of ONE HUNDRED TEN
THOUSAND TWO HUNDRED FIVE PESOS (P110,205.00). Every payment that you
make, ARRA shall credit your account by way of partial payment to your stock
subscriptions of ARRA's capital stock. As soon as our contractor, Pyramid
Construction and Engineering Corporation, complete its commitment with us,
which is not more than five (5) months, you shall immediately take possession of the
floor of your choice. Further, as soon as practicable, the Title corresponding to the
floor that you own shall be transferred to your name.

Thus, the parties entered into a contract of sale over a portion of the second floor of the building
yet to be constructed for P3.1M payable in installments. As soon as the second floor was
constructed within 5 months, Penaloza would take possession of the property, and title would be
transferred to her name. The parties had agreed on the 3 elements of subject matter, price,
and terms of payment. Thus, the contract of sale was perfected, it being consensual perfected
by mere consent. The perfection was not negated by the fact that the property subject of the sale
was not yet in existence because ownership by the seller at the time of perfection of the sale is
not an element for its perfection. What the law requires is that the seller has the right to
transfer ownership at the time the thing is delivered.

When Penaloza took possession of a portion of the second floor, she became the owner pursuant
to Art. 1477 of NCC (ownership transferred upon actual/constructive delivery).

In a contract of sale, unless the contract is resolved or rescinded, the vendor cannot recover the
thing sold even if the vendee failed to pay in full the initial payment. The failure of the buyer to
pay the price within the stipulated period does not by itself bar transfer of ownership or
possession nor ipso facto rescind the contract. Such failure will merely give the vendor the
option to rescind the contract of sale judicially or by notarial demand as provided in Art.
1592 of NCC:
Art. 1592. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the contract
shall of right take place, the vendee may pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon him either judicially
or by a notarial act. After the demand, the court may not grant him a new term.
Penaloza failed to pay the downpayment on time. But ARC accepted WITHOUT ANY
OBJECTIONS the DELAYED payments. Thus, as provided in Art. 1235 of NCC, the
obligation is deemed complied with:
Art. 1235. When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection, the obligation is deemed
fully complied with.
Penaloza cannot be blamed for suspending further payment to ARC because when she pushed for
issuance of her title after taking possession, ARC failed to comply. She was aghast when she
discovered that even before she took possession, ARC had already mortgaged the lot and
building to CBC. When she offered to pay the balance of the price to secure her title, ARC
ignored her. Under Art. 1590, a vendee may suspend payment of the price of property sold:
Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing
acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory
action or a foreclosure of mortgage, he may suspend the payment of the price until the
vendor has caused the disturbance or danger to cease, unless the latter gives security for
the return of the price in a proper case, or it has been stipulated that, notwithstanding any
such contingency, the vendee shall be bound to make the payment. A mere act of trespass
shall not authorize the suspension of the payment of the price.

Contrary to ARC’s claim, Penaloza did not waive her right to enforse the letter-agreement or
abandon the property she purchased. While Penaloza transferred the school to another location,
she maintained her office in the property only to discover that ARC had padlocked the office. she
had it reopened and continued holding office thereat for a year or so. She turned over possession
of the property to ARC and shortly thereafter filed her complaint against ARC. That she filed her
complaint shortly after vacating shows her determination to pursue her claims against ARC.

In view of the failure of ARC to transfer title to Penaloza because of the mortgage to CBC and
sale to GDCIA, Penaloza is entitled to the refund of the amount she paid to ARC pursuant to
Art. 1398:
Art. 1398. An obligation having been annulled, the contracting parties shall restore to
each other the things which have been the subject matter of the contract, with their fruits,
and the price with its interest, except in cases provided by law.
In obligations to render service, the value thereof shall be the basis for damages.

There is no abuse of right under Art. 19 of NCC as ARC failed to prove BF on Penaloza’s part.

ARC did not adduce evidence to prove BF of GDCIA. They warranted in the deeds of
conditional and absolute sale to GDCIA that it undertakes to deliver the property including all
floors as entirely vacant to GDCIA. GDCIA relied on the representations of ARC. GDCIA
retained P1M when it received claims of ownership of portions of the property from tenants of
the building, including Penaloza.

2. Roberto Laforteza v. Alonzo Machuca, GR 137552, June 16, 2000, Gonzaga-Reyes, J.

FACTS:
The property involved is a house and lot in Parañaque. It is registered in the name of the late
Francisco Laforteza. Lea Laforteza appointed Roberto and Gonzalo Laforteza as attorney-in-fact
authorizing them to sell the subject property and sign any document for settlement of the estate
of the late Francisco. Michael Laforteza also executed an SPA to Roberto granting the same
authority. Dennis Laforteza executed a SPA to Roberto and Gonzalo to sell the subject property
also.

Exercising the authority, heirs of Francisco, represented by Roberto and Gonzalo, entered into a
“Memorandum of Agreement (Contract to Sell)” with Machuca over the property for P630k.
P30k was earnest money to be forfeited if the sale is not effected due to the fault of Machuca and
P600k upon issuance of the new title and extrajudicial settlement of estate with sale to Machuca.
After issuance of new title, BUYER-LESSEE shall have 30days to produce the balance of
P600k.

The P30k was paid. On Sept. 18, 1989, the heirs wrote a letter to Machuca with a copy of the
reconstituted title of the property, advising him that he had 30days to produce the P600k. On
Oct. 18, Machuca sent a letter requesting an extension of 30 days. This was signed in conformity
by Roberto but not by Gonzalo. On Nov. 15, Machuca informed the heirs that he already had the
P600k. But the heirs refused to accept the balance. Roberto told Machuca that the property was
no longer for sale and that they were cancelling the MOA due to Machuca’s failure to comply
with his contractual obligations.

Machuca reiterated his request to tender payment. But the heirs insisted on the rescission of the
MOA. Machuca filed a petition for specific performance. Trial court ruled for Machuca. CA
affirmed with modification. Hence this petition.

ISSUE:
Whether Machuca can still enforce the MOA despite his failure to pay on time.
HELD: YES.
Petitioners heirs claim that the MOA is merely a lease with option to purchase. Thus, Machuca
only had a limited period to purchase. Since the tender of payment was made after the lapse of
the option agreement, it did not give rise to perfection of a contract of sale. At most, the MOA is
only a contract to sell. The obligation of petitioners to sell the property to Machuca was
conditioned upon issuance of a new certificate of title and execution of the extrajudicial partition
with sale and payment of P600k. This is why possession was delivered not as owner but only as
lessee. The failure of Machuca to pay the price in full prevented the petitioners’ obligation to
convey title from acquiring obligatory force.

The MOA was one of sale and lease:

"1. For and in consideration of the sum of PESOS: SIX HUNDRED THIRTY
THOUSAND (P630,000.00) payable in a manner herein below indicated, SELLER-
LESSOR hereby agree to sell unto BUYER-LESSEE the property described in the first
WHEREAS of this Agreement within six (6) months from the execution date hereof, or
upon issuance by the Court of a new owner's certificate of title and the execution of
extrajudicial partition with sale of the estate of Francisco Laforteza, whichever is earlier;
3. Parties reasonably estimate that the issuance of a new title in place of the lost one, as
well as the execution of extrajudicial settlement of estate with sale to herein BUYER-
LESSEE will be completed within six (6) months from the execution of this Agreement.
It is therefore agreed that during the six months period, BUYER-LESSEE will be leasing
the subject property for six months period at the monthly rate of PESOS: THREE
THOUSAND FIVE HUNDRED (P3,500.00). xxx provided further that if after the
expiration of six (6) months, the lost title is not yet replaced and the extra judicial
partition is not executed, BUYER-LESSEE shall no longer be required to pay rentals
and shall continue to occupy, and use the premises until subject condition is complied
by SELLER-LESSOR;
A contract of sale is consensual. The elements are consent, subject matter, price certain in money
or its equivalent.

Here, there was a perfected agreement where petitioners obligated themselves to transfer
ownership of and deliver the property and Machuca to pay the price. All elements are present.
But the balance was to be paid only upon issuance of the new title in lieu of the one in
Francisco’s name and upon execution of an extrajudicial settlement of his estate. Prior to
issuance of the “reconstituted” title, Machuca was already placed in possession as lessee.

The 6-month period during which Machuca would be in possession as lessee was not a period
within which to exercise an option. An option is a contract granting privilege to buy or sell
within an agreed time and at a determined price. An option must be supported by consideration.
It is governed by the 2nd par. of Art. 1479.

The 6-month period merely delayed the demandability of the contract of sale and did not
determine its perfection for after expiration of the 6-month period, there was an absolute
obligation of petitioners and Machuca to comply with the terms of the sale. After 6 months, the
parties presumed that they would be able to comply with what was reciprocally incumbent upon
them. That after the 6-month period Machuca would retain possession without eed of paying
rentals clearly indicated that the parties contemplated that ownership over the property would
already be transferred by that time.

The issuance of new title and execution of extrajudicial settlement was not a condition which
determined perfection of the contract. Petitioners claim that since the condition was not met, they
no longer had an obligation to proceed with the sale. Petitioners fail to distinguish between a
condition imposed upon perfection of the contract and a condition on the performance of an
obligation. Failure to comply with the first results in failure of contract while failure to comply
with the second only gives the other party either to refuse to proceed with the sale or to waive
the condition under Art. 1545 of NCC.

Considering that title was eventually “reconstituted” and petitioners admit their ability to execute
extrajudicial settlement of Francisco’s estate, Machuca had the right to demand fulfillment of
petitioners’ obligation to deliver and transfer ownership of the property.

Also, there was P30k earnest money, which is proof of the perfection of the contract and part of
the purchase price. There is nothing in the MOA to show that the parties intended to enter into a
contract to sell. There is no express reservation of title or provision imposing non-payment as
condition for the contract’s entering into force. Although denominated contract to sell, the parties
contemplated a contract of sale.

-IS the failure of Machuca to pay the balance within the period allowed fatal to his right to
enforce the agreement? No. admittedly, the failure to pay the balance was a breach and a ground
for rescission. The extension of 30 days was ineffective since Gonzalo did not sign as required
by the SPAs.
However, after the expiration of the 6-month period, petitioners were not ready to comply with
what was incumbent upon them- delivery of the reconstituted title. It was only on Sept. 18,
1989, 8 months after the MOA, when petitioners informed Machuca that they had the new title
and demanded payment of the balance. Thus, Machuca is not in delay for in reciprocal
obligations, neither party incurs in delay if the other party does not comply or is not ready to
comply in a proper manner with what is incumbent upon him.

But even assuming that petitioners were ready to comply, rescission still would not prosper.
Rescission of sale of an immovable is specifically governed by Art. 1592 of NCC xxx.
Petitioners did NOT make a judicial or notarial demand for rescission. The letter of
petitioners informing Machuca of the automatic rescission of the agreement did not amount to
a demand for rescission as it was NOT NOTARIZED. It was also made 5 days after
Machuca’s attempt to pay. This prior offer to pay defeats petitioners’ right under Art. 1592 to
demand for rescission. Besides, the MOA did not contain a clause expressly authorizing
automatic cancellation without court intervention. A seller cannot unilaterally and extrajudicially
rescind a contract of sale where there is no express stipulation authorizing him to extrajudicially
rescind.

At any rate, the delay of one month under the mistaken belief that extension was granted is a
mere casual breach that would not entitle respondents to rescind the contract. Rescission of
contract will not be permitted for a slight or casual breach, but only for substantial and
fundamental breach as to defeat the object of the parties in making the agreement.

3. Vda. de Mistica v. Sps. Bernardino and Maria Naguiat, GR 137909, December 11, 2003,
Panganiban, J.
FACTS:
Eulalio Mistica, predecessor-in-interest of petitioner, is the owner of a land in Bulacan, a portion
of which was leased to Bernardino Naguiat. Eulalio entered into a contract to sell with
Bernardino over a portion of the land, 200m2. This reads as follows:
Na magbibigay ng paunang bayad ang BUMIBILI SA NAGBIBILI na halagang
DALAWANG LIBONG PISO (P2,000.00) Kualtang Pilipino, sa sandaling lagdaan ang
kasulatang ito.
'Na ang natitirang halagang LABING WALONG LIBONG PISO (P18,000.00) Kualtang
Pilipino, ay babayaran ng BUM[I]BILI sa loob ng Sampung (10) taon, na magsisimula
sa araw din ng lagdaan ang kasulatang ito.
'Sakaling hindi makakabayad ang Bumibili sa loob ng panahon pinagkasunduan,
an[g] BUMIBILI ay magbabayad ng pakinabang o interes ng 12% isang taon,
Bernardino thus gave a P2k downpayment. He made another payment of P1k. He failed to make
payments thereafter. Eulalio died.

Petitioner filed a complaint for rescission alleging that the failure to pay the balance is a
violation of the contract entitling her to rescind. Sps. Naguiat claim that the contract cannot be
rescinded since the contract states that in case of failure to pay the balance, a yearly interest of
12% is to be paid. Bernardino alleges also that in the wake of Eulalio, he offered to pay the
balance but was refused. He claims to have also acquired the lot from a free patent.
Trial court dismissed the complaint and ordered Sps. Naguiat to pay heirs of Eulalio and
petitioner the balance. CA disallowed rescission. Hence this petition.

ISSUE:
Whether the contract may be rescinded.
HELD: NO.
1. Petitioner claims that she is entitled to rescind under Art .1191 of NCC because Sps. Naguiat
committed substantial breach when they did not pay the balance of the price within the 10-year
period. The proviso on payment of interest did not extend the period to pay.

The contract is a contract of sale. The remedy of an unpaid seller is either specific performance
or rescission. Under Art. 1191, the right to rescind is predicated on violation of the reciprocity
between parties by breach of faith by one of them. But rescission is allowed only where the
breach is SUBSTANTIAL and FUNDAMENTAL to the fulfillment of the obligation.

Here, the failure of Sps. Naguiat to pay the balance within 10 years is not a substantial breach. It
was stipulated in the “Kasulatan” that payment could be made even after 10 years from
execution of the contract provided the vendee paid 12% interest. The contract is law between the
parties. Courts have no alternative but to enforce them as written.

Also, during the 10-year period, petitioner and her deceased husband Eulalio never made any
demand for the balance. Petitioner even refused payment tendered during Eulalio’s funeral. Had
she accepted, payment would have been made within the agreed period.

Petitioner claims that to allow extension beyond 10 years would convert the buyer’s obligation to
a purely potestative obligation, annulling the contract under Art. 1182. But this is untenable. The
Kasulatan does not allow any condition to depend exclusively on the debtor’s will. Nowhere is it
stated that payment is dependent upon whether Sps. Naguiat want to pay it or not. Also, the fact
that they already made partial payment shows that the parties intended to be bound by the
Kasulatan.

2. The issuance of certificate of title to Sps. Naguiat does not determine whether petitioner is
entitled to rescission. The propriety of issuance of title was an issue not determinable in this case
since attack on title cannot be collateral. Rescission is unrelated to registration.

4. Fedman Development Corporation v. Federico Agcaoili, GR 165025, August 31, 2011,

Bersamin, J.
FACTS:
Fedman Development Corporation (FDC) was the owner and developer of a condominium
project known as Fedman Suites Building (FSB) in Makati. Interchem Laboratories purchased
FSB’s Unit 411 under a contract to sell.

Interchem, with FDC’s consent, transferred all its rights to respondent Federico Agcaoili, lawyer
and then member of Quezon provincial board. The obligations Agcaoili assumed totaled P302k.
The centralized aircon unit of FSB’s 4th floor broke down on Dec. 1983. On Jan. 3, 1984,
Agcaoili wrote to Fedman Suite Condominium Corporation (FSCC) VP Genato and demanded
the repair of the aircon. He sent follow-up letters which went unheeded. He then informed FDC
and FSCC that he was suspending payment of his condominium dues and monthly
amortizations.

FDC cancelled the contract to sell of Unit 411 and cut off the electric supply to the unit on Aug.
30, 1984. Agcaoili sued FDC and FSCC in RTC. They compromised. Agcaoili was to pay P39k
as amortizations from Nov. 1983 to July 1985 and P17k for accrued condominium dues, realty
taxes, electric bills, and surcharges. FDC reinstated the contract to sell and allowed Agcaoili to
temporarily install two window-type aircons in Unit 411.

On April 22, 1986, FDC again disconnected electric supply of Unit 411. Agcaoili filed a
complaint for damages against FDC and FSCC, alleging that the disconnection seriously affected
his law practice and caused him sufferings, and that FDC and FSCC violated the compromise
agreement.

FDC claims that it had a personality separate from FSCC, being the manager of FSB and title-
holder of its common areas. FSCC was in charge of maintaining all installations for utility. It
claims that Agcaoili failed to pay amortizations from Nov. 1983 to March 1985. FDC claims that
the interest increase from 12% to 24% per annum was authorized under the contract to sell due
to the adverse economic conditions of the country. FSCC claims that the disconnection of
electric supply was justified due to Agcaoili’s failure to pay the monthly amortizations and
condominium dues despite repeated demands.

RTC ruled for Agcaoili. CA affirmed. Hence this appeal by FDC.

ISSUE:
Whether FDC may cancel the contract to sell.
HELD: NO.
FDC claims that there was failure to pay the correct amount of docket fee as the complaint did
not specify the amounts of moral, exemplary damages, and attorney’s fees. Since the fees were
not paid, RTC did not acquire jurisdiction.

The filing of complaint and payment of docket fee are the acts that vest a trial court with
jurisdiction over the claim. If the amount of docket fees paid is insufficient, the clerk of court
must make a deficiency assessment. The prevailing rule is that if the correct amount of docket
fees are not paid at the time of filing, the trial court still acquires jurisdiction upon full payment
within a reasonable time as the court may grant, barring prescription. The docket fees paid by
Agcaoili were insufficient since the complaint did not specify the moral, exemplary damages,
and attorney’s fees, nonetheless, he paid the assessed docket fees, which negated BF. He must
pay the docket fee deficiency.

FDC cannot anymore assert that HLURB, not RTC, has jurisdiction over the case since it
executed a compromise agreement with Agcaoili in RTC, which was approved by RTC. In all
that time, FDC never challenged RTC’s jurisdiction. It is estopped.
Agcaoili had the right to suspend payments since the increase in interest rate imposed by FDC is
invalid. Although SII, par. d of the contract to sell states that if there is an increase in bank
interest rate for loans or other financial accommodations the interest in the contract shall be
automatically amended to equal said bank interest rate, the increase still needs to be
accompanied by valid proofs and not one of the parties unilaterally altering what was originally
agreed upon. FDC failed to substantiate the alleged increase. To allow it is tantamount to
unilaterally altering the terms of the contract which is prohibited by law:
Art. 1308 — the contract must bind both contracting parties; its validity or compliance
cannot be left to the will of one of them."
It was also wrong for FDC to cancel the contract to sell for non-payment of the monthly
amortizations without taking into consideration RA 6552, Maceda Law. its policy is to
protect buyers of real estate on installment payments against oppressive conditions. For FDC to
have validly cancelled the contract to sell, it should have complied with S3(b) of RA 6552. FDC
should have refunded the cash surrender value of the payments on the property of 50% of the
total payments made.

FDC and FSCC had the duty to provide a centralized aircon unit, lighting, electricity, and water
etc. but they failed to repair the centralized aircon unit despite demands. They failed to provide
water to the CRs and to clean the corridors. The fire exit and elevator were also defective. These
rightly compelled Agcaoili to suspend payment of his monthly amortizations and condominium
dues. Instead of addressing the complaints, FDC disconnected the electric supply and unilaterally
increased interest rate. Art. 1171 of NCC provides that those who in the performance of their
obligations are guilty of fraud, negligence, or delay are liable for damages.
ACTIONS FOR BREACH OF CONTRACT OF SALE OF
GOODS
1. Levy Hermanos Inc. v. Lazaro Gervacio, GR 46306, October 27, 1939, Moran, J.
FACTS:
Levy Hermanos sold to Gervacio a Packard car. Gervacio, after making initial payment,
executed a promissory note for the balance P2.4k payable on or before June 15, 1937 with 12%
interest per annum. He mortgaged the car to Hermanos. Gervacio failed to pay the note at
maturity. Hermanos foreclosed the mortgaged car and it was sold at public auction at which
Hermanos was highest bidder for P800.

Hermanos filed for collection of the P1.6k balance and interest. CFI applied Art. 1454-A of the
Old Civil Code:
"In a contract for the sale of personal property payable in installments, failure to pay
two or more installments shall confer upon the vendor the right to cancel the sale or
foreclose the mortgage if one has been given on the property, without reimbursement to
the purchaser of the installments already paid, if there be an agreement to this effect.
"However, if the vendor has chosen to foreclose the mortgage he shall have no further
action against the purchaser for the recovery of any unpaid balance owing by the
same, and any agreement to the contrary shall be null and void."
 "The same rule shall apply to leases of personal property with option to purchase, when
the lessor has chosen to deprive the lessee of the enjoyment of such personal property.”

ISSUE:
Whether Hermanos may still recover the unpaid balance.
HELD: YES.
To apply Art. 1454-A, there must be a contract for sale of personal property payable in
installments and that there was failure to pay two or more installments. The contract here is
not one on installments, but on straight term, in which the balance should be paid totally at
the time specified in the PN. The transaction is thus not the one contemplated in Art. 1454-A and
the mortgagee is thus not bound by the prohibition therein as to its right to recover the unpaid
balance.

The law is aimed at those sales where the price is payable in several installments for, generally, it
is in these cases that partial payments consist in relatively small amounts, constituting a great
temptation for improvident purchasers to buy beyond their means. There is no such temptation
where the price is to be paid in cash or, as here, partly in cash and partly in one term for the
partial payments are not so small as to place purchasers off their guard and delude them to
a miscalculation of their ability to pay.

The cash payment here cannot be considered as payment by installment and even if it can be so
considered, Art. 1454-A still doesn’t apply since it requires two or more installments. Here,
there would be only one unpaid installment. CFI was reversed.

2. Eutropio Zayas Jr. v. Luneta Motor Company, GR L-30583, October 23, 1982,
Gutierrez, Jr., J.
FACTS:
Zayas purchased on installment basis a motor vehicle, Ford Thames Freighter, from Mr.Escaño
of the Escano Enterprises, dealer of Luneta Motor Company. The terms of the sale are as
follows:
Selling price = 7,500.00; Financing charge = 1,426.82; Total Selling Price = 8,926.82;
Payable on Delivery = 1,006.82; Payable in 24 months at 12 % interest per annum =
7,920.00

The car was delivered to Zayas. He 1) paid the initial payment of 1,006.82 and 2) executed a PN
for P7,920, balance of the total price in favor of Luneta. The PN stated the amounts and dates of
payment of 26 installments covering the P7920 debt. Simultaneously, he executed a chattel
mortgage on the car in favor of Luneta.

After paying P3,148, Zayas was unable to pay further monthly installments. Luneta foreclosed
the mortgage and the car was sold at public auction with Luneta as highest bidder for P5k. Since
the P5k and Zayas’ payment could not cover the total amount of the PN, Luneta sued Zayas for
P1,1551.74 with interest.

Zayas claims that pursuant to Art. 1484 of NCC, his obligation on the PN was extinguished by
the sale at public auction of the car. Luneta claims that Art. 1484 doesn’t apply since the sale is
not one on installment. City court dismissed the case, applying Art. 1484. CFI remanded the case
to City Court for presentation of evidence. Hence this petition.

ISSUE:
Whether Luneta may still claim the deficiency.
HELD: NO.
Luneta claims that the contract between Escano and Zayas was merely an ordinary loan. Escano
is a distinct entity from it and its role was only to finance the purchase price of the car. Art. 1484
is inapplicable.

This has no merit. Escano was an agent of Luneta. A certification from the cashier of Excano on
the monthly installments of Zayas mentioned the PN executed in favor of Luneta. Escano was
only a collecting agent.

But even if Escano was an independent entity as claimed, the nature of the transaction as a sale
of personal property on installment basis remains. When Escano assigned its rights to the sale to
Luneta, Luneta had no better rights than assignor Escano. The transaction would still be a sale of
personal property in installments covered by Art. 1484:
"ART. 1484. 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: xxx xxx xxx
"(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,
The rule is that the foreclosure and actual sale of a mortgaged chattel bars further recovery by the
vendor of any balance on the purchaser’s outstanding obligation not satisfied by the sale. The
reason is to prevent mortgagees from seizing the mortgaged property, buying it at foreclosure
sales for a low price and then suing the mortgagor for deficiency. The result is that the mortgagor
found himself minus the property and still owing practically the full amount of his original
indebtedness.

There was no necessity for the remand to city court.

3. Daniel and Francisco Borbon v. Servicewide Specialists Inc., GR 106418, July 11, 1996,
Vitug, J.
FACTS:
Daniel and Francisco Borbon signed a PN which provides:
“For value received (installment price of the chattel/s purchased), I/We jointly and
severally promised to pay Pangasinan Auto Mart, Inc. or order xxx P122,856, xxx, in
installments of the amounts following and at the dates hereafter set forth, to wit: P10,238
monthly for 12 months due and payable on the 7th day of each month starting January
1985 xxx.”
To secure the PN, Borbons executed a chattel mortgage on one 1984 Isuzu.
The rights of auto mart was assigned to Filinvest Credit Corporation with notice to Borbons.
Filinvest assigned its rights to Servicewide. Borbons failed to comply with their obligation and
pay the monthly installments. Servicewide demanded payment of the entire obligation.

As defense, Borbons claim that what they intended to buy from Auto Mart was a jeepney type
Isuzu Cab. Instead, what was delivered was an Isuzu crew cab. Later, they were told that there
was an Isuzu Cab available but minus the rear body, and Borbons agreed with the understanding
that Auto Mart will refund the P10k to have the rear body completed. Despite communication
with Auto Mart, it was unable to replace the vehicle. Thus, Borbons claim not to be in default as
Auto Mart was first guilty of not fulfilling its obligation in the contract. Neither party incurs in
delay if the other does not comply with his obligation.

RTC ordered Borbons to pay liquidated damages and attorney’s fees. CA affirmed. Hence this
petition.

ISSUE:
Whether the award of liquidated damages and attorney’s fees are proper.
HELD: Liquidated damages- NO. Attorney’s fees- YES.
Borbons invoke Art. 1484 of NCC:
ART. 1484. 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 or 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."
The remedies in Art. 1484 are not cumulative but alternative and exclusive. The exercise of one
bars the exercise of the others. When the seller assigns his credit to another person, the latter is
also bound by the same law. In ordinary alternative obligations, a communication by the person
entitled to choose an option concludes the parties. The creditor may not thereafter exercise any
other option, unless the chosen alternative proves ineffectual or unavailing due to no fault on his
part.

This is the difference between alternative obligations and alternative remedies whereas on the
latter, the choice generally becomes conclusive only upon exercise of the remedy. For instance,
in one of the remedies in Art. 1484, it is only when there has been a foreclosure of chattel
mortgage that the vendee-mortgagor would be allowed to escape from deficiency liability.

Thus, if the case is for specific performance, even when this action is selected after vendee
refused to surrender the mortgaged property to permit an extrajudicial foreclosure, that property
may still be levied if the proceeds are insufficient to satisfy the judgment credit. A mere demand
to surrender the object which is not heeded will not amount to foreclosure, but repossession by
the vendor-mortgagee would have the effect of foreclosure.
This action for replevin has been instituted for the foreclosure of the car. Petitioners argue that
in Art. 1484, vendor-mortgagee loses any right to “recover any unpaid balance of the price.”

The phrase “any unpaid balance” in Art. 1484 can only mean the deficiency judgment to which
the mortgagee may be entitled to when the proceeds from the auction sale are sufficient to cover
the full amount of the secured obligations which include interest on the principal, attorney’s
fees, expenses of collection, and costs. The legislative intent is not merely to limit the
proscription of any further action to the unpaid balance of the principal, but also to all other
claims that may also be called for in the accompanying PN, including costs and attorney’s
fees.

But the protection given to the buyer-mortgagor should not be considered being preclusive of all
other legal principles. Thus, where the mortgagor unjustifiably refused to surrender the chattel
subject of the mortgage upon failure of two or more installments, or if he concealed the chattel
that constrained the mortgagee to seek court relief, the expenses incurred for the
prosecution of the case, like attorney’s fees, could rightly be awarded.

Thus, we strike down the liquidated damages but uphold the attorney’s fees.

4. Bachrach Motor Co., Inc. v. Pablo Millan, GR 42256, April 25, 1935, Goddard, J.
(Vendor is not limited to the options in Art. 1454-A, now Art. 1484, and can still compel
performance of the obligation under Art. 1124, now Art .1191)
FACTS:
Millan, for value received, executed a PN for P939 payable in monthly installments. The P939
was the balance of the price of one second hand Renault touring car bought by Millan from
Bachrach. A chattel mortgage was executed by Millan in favor of Bachrach. Millan failed to pay
the installments due on Dec. 22, 1933, January 22 and Februar 22, 1934. The balance is P928.50
with interest. Millan had offered to return the car to Bachrach in payment of the full amount, but
Bachrach refused.

Bachrach instituted complaint against Millan to recover the balance on the PN without
foreclosing the chattel mortgage.

CFI applied Art. 1454-A and held that since the article gives vendor the alternative of either
cancelling the sale or foreclosing the mortgage and Bachrach, having elected not to foreclose,
can only make use of the other alternative to cancel and retain the total amount of the
installment already paid. CFI thus dismissed the case. Hence this petition.

ISSUE:
Whether Bachrach may recover on the PN.
HELD: YES.
Bachrach claims that CFI erred. Art. 1454-A states xxx. The amendment of old Civil Code by
Act 4122 prevents mortgagees from seizing mortgaged property, buying it at a foreclosure sale
for a lower price and then bringing suit against the mortgagor for a deficiency judgment. The
mortgagor would find himself minus the property and still owing practically the full amount of
his original indebtedness.
Under this, the vendor of personal property, the price of which is payable in installments, has the
right to cancel the sale or foreclose the mortgage if one was given on the property. Whichever
right the vendor elects, he need not return to the purchaser the amount of installments already
paid “if there be an agreement to the effect.” Also, if the vendor avails of the right to foreclose,
the amendment prohibits him from bringing an action against the purchaser for the unpaid
balance.

Has Art. 1454-A repealed Art. 1124 giving the prejudiced person the right to exact fulfillment of
an obligation?
"ART. 1124. The right to resolve reciprocal obligations, in case one of the obligors
should fail to comply with that which is incumbent upon him, is deemed to be implied.
"The person prejudiced may choose between exacting the fulfillment of the obligation or
its resolution with indemnity for losses and payment of payment of interest in either case.
He may also demand the resolution of the obligation even after having elected its
fulfillment, should the latter be found impossible."

Before Act 4122, the right to exact fulfillment of an obligation was also available to the person
prejudiced by the failure of one of the obligors to comply with the terms of an obligation. Act
4122 does not prohibit the injured party in a sale of personal property on installments from
exacting fulfillment of that obligation. Neither do the provisions of Act 4122 express or imply
that, upon failure to pay 2 or more installments, the vendor “must” cancel the sale or foreclose
the mortgage if one has been given on the property.

Thus, the legislature, in adopting Act 4122, did not intend to limit the remedies available to a
vendor of personal property on installment plan. The real object is to prevent the exercise of
either of these rights by vendor until after the vende has failed to pay 2 or more installments
and to limit the rights of vendor after he has availed himself of either remedies. That part of Art.
1124 has not been repealed.

Thus, in a sale of personal property on installment, the vendor may elect to EXACT
FULFILLMENT of the obligation as Bachrach has done, CANCEL the sale or FORECLOSE
his mortgage if one was given on the property sold. If he elects to cancel or foreclose, he is
bound by Art. 1454-A.

5. Amador Tajanlangit et al. v. Southern Motors, Inc. et al., GR L-10789, May 28, 1957,
Bengzon, J. (If the mortgage was not foreclosed but the property sold is attached and
publicly sold due to suit on the obligation to pay, Art. 1484 (3) doesn’t apply)
FACTS:
Amador Tajanlangit and his wife Angeles bought from Southern Motors of Iloilo 2 tractors and a
thresher. In payment, they executed a PN for P24,755 in several installments with interest
payable on stated dates from May 18, 1953 to December 10, 1955. It stated that if there is default
in payment of interest or of any installment, then the total principal with interest shall at once be
demandable. The spouses failed to meet any installment. They were sued for the amount of the
PN and was adjudged liable for P24,755 with interest. The sheriff, carrying out the order of
execution, levied on the same machineries bought by the spouses and later sold them at public
auction. Southern was the highest bidder for P10k.

As to the balance, Southern obtained an alias writ of execution. The sheriff levied attachment on
Tajanlangit’s rights and interests in certain real properties with a view to another sale on
execution.

To prevent such sale, Tajanlangits filed this action in CFI to annul the alias writ, claiming that
they had already returned the machineries to Southern and had thereby settled their accounts and,
since Southern repossessed the machines purchased on installment and mortgaged, Tajanlangits
were relieved from further responsibility in view of Recto Law, Art. 1484.

CFI held that it had no authority to declare void the alias writ issued by another equal court and
dismissed the complaint. Hence this petition.

ISSUE:
Whether Southern may still claim the remaining balance after the public auction sale of the
implements sold arising from suit on the obligation on the promissory note.
HELD: YES.
Tajanlangit claims that its action seeks to prohibit the sheriff form attaching and selling at public
auction their real properties as that is not forbidden by “our law” after the chattels have been
purchased and mortgaged to the vendor-mortgagee, had already been repossessed by said
vendor-mortgagee, and later sold at public auction at the meager sum of P10k.

Art. 1484 reads xxx (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."

But there has been NO foreclosure of the chattel mortgage nor a foreclosure sale. Thus, the
prohibition against further collection does not apply. It is the sale of mortgaged chattel in
accordance with S14, Act 1508 (Chattel Mortgage law) that bars the creditor who chooses to
foreclose from recovering any unpaid balance.
.
It is true that there was a chattel mortgage on the goods sold. But Southern elected to sue ON
THE NOTE exclusively- to exact fulfillment of the obligation to pay. It had the right to select
among the three remedies in Art. 1484. In choosing to sue on the note, it was thus not limited to
the proceeds of the sale, on execution, of the mortgaged good.

In Southern Motors v. Magbanua, plaintiff elected to exact fulfillment of the obligation and not
to foreclose the mortgage on the truck. Thus, it may enforce execution of the judgment in its
favor on the personal and real properties of Magbanua not exempt from execution.

Tajanlangit claims that the very implements sold were returned and duly accepted by Southern.
Thus, the conditional sale is ipso facto cancelled with the right of the vendor-mortgagee to
appropriate any downpayment and posterior monthly installments. But this argument assumes
that Southern’s acceptance was with a view to “cancellation” of the sale. The goods were
deposited with Southern when the sheriff attached them.

6. Ruperto Cruz et al. v. Filipinas Investment & Finance Corporation, GR L-24772, May
27, 1968, Reyes, JBL., J.
FACTS:
Ruperto Cruz purchased on installments from Far East Motor Corp. an Isuzu Diesel Bus for P44k
payable in installments of P1.4k per month for 30 months starting Oct. 22, 1963 with
12%interest per annum. As evidence of the debt, Cruz executed a negotiable PN for P44k. To
secure payment of the PN, Cruz executed a chattel mortgage over the car. Since there was no
down payment, Cruz agreed to give additional security in the form of a second mortgage on a
land owned by Felicidad Reyes and its improvements. The land was at the time mortgaged to
DBP to secure Reyes’ P2.6k loan.

Far East assigned the PN and mortgages on the car and land to Filipinas with notice to
petitioners.

Cruz defaulted, the only sum paid by him being P500. Filipinas took steps to foreclose the
mortgage on the bus which was damaged in an accident while possessed by Cruz. In the
foreclosure sale, Filipinas was highest bidder for P15k. This was insufficient to cover the
obligation. Filipinas, preparatory to foreclosing Reyes’ land, paid the loan balance of P2.1k of
Reyes to DBP. Reyes wrote Filipinas asking for cancellation of the mortgage on her land but
Filipinas did not comply. At the request of petitioners, the sheriff held in abeyance the sale of the
mortgaged land pending result of this action.

ISSUE:
Whether Filipinas, which had already extrajudicially foreclosed the chattel mortgage on the bus
sold on installments, may also extrajudicially foreclose the real estate mortgage on the land of
Reyes.
HELD: NO.
The pertinent provision is Art. 1484 of NCC. The remedies therein are alternative, not
cumulative. The exercise of one would bar the exercise of others. The rule is that foreclosure
and sale of a mortgaged chattel bars further recovery by vendor of any balance on the
purchaser’s outstanding obligation not satisfied by the sale. This was to prevent mortgagees from
seizing the mortgaged property, buying it at foreclosure sale for a low price, and then suing the
mortgagor for a deficiency judgment. The mortgagor would find himself minus the property and
still owing practically the full amount of his original indebtedness.

Filipinas foreclosed the mortgage on the bus. But it seeks to collect the supposed deficiency by
going against the real estate mortgage on Reyes’ land, claiming that what is being withheld from
the vendor in Art. 1484 is only the right to recover “against the purchaser” and not the
additional security put up, not by the purchaser himself, but by a third person.

This has no merit. To sustain this argument is to overlook the fact that if the guarantor should be
compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to
recover from the debtor vendee (Art. 2066); so that ultimately, it will be the vendee who will
bear the payment of the balance of the price despite earlier foreclosure of the chattel mortgage
given by him. Thus, the protection in Art. 1484 would be indirectly subverted and public policy
overturned.

“Action” has no definite or exclusive meaning. It is invariably defined as the legal demand of
one’s rights etc. Considering the purpose of the prohibition in Art. 1484, the word “action” used
therein may be construed as referring to ANY judicial or extrajudicial proceeding by virtue of
which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied
balance of the price from the purchaser or his privy. An extrajudicial foreclosure of real
mortgage is one such proceeding.

PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging, Inc. GR 142618, July 12,
2007, Garcia, J. (Recto Law)
FACTS:
PCI and Giraffe entered into a lease agreement where PCI leased to Giraffe a silicon high impact
graphics and accessories worth P3.9M and 1 Oxberry Cinescan worth P6.5M. In connection,
they signed 2 separate documents denominated “disclosure statements of loan transaction” for
each leased equipment. Giraffe agreed to pay P116k/month for the Silicon and P181k for the
Oxberry. The total amount Giraffe had to pay PCI for 36 months of lease are
1) P116k * 36 for Silicon= P4.2M; 2) P181k *36 for Oxberry = P6.5M

The lease agreement contained an acceleration clause in case Giraffe fails to pay any rental. A
year into the agreement, Giraffe defaulted. After a 3-month default, PCI sent a formal pay-or-
surrender-equipment demand letter to Giraffe. This demand was unheeded.

So PCI filed in RTC this case. PCI prayed for a writ of replevin to recover the leased property
and for payment of the balance of P8.2M inclusive of interest and charges. RTC issued a writ of
replevin, letting PCI seize the equipment.

Giraffe then moved to dismiss arguing that since the 2 leased equipment were seized, PCI lost
its cause of action. Giraffe argues that pursuant to Art. 1484, PCI is barred from further pursuing
any claim arising from the lease agreement, also adding that the agreement was a lease of
movables with option to buy, bring the situation under the operation of Art. 1485 also. Thus,
PCI’s action is prohibited by the application of Arts. 1484 and 1485, claims Giraffe.

PCI maintains that its contract with Giraffe is a straight lease without option to buy, thus
rejecting the applicability of Arts. 1484 and 1485.

RTC granted Giraffe’s motion to dismiss. PCI directly filed a petition for review in SC.

ISSUE:
Whether the “lease agreement” is covered by Arts. 1484 and 1485.
HELD: YES.
PCI claims that the contract, being a financial leasing agreement under RA 8556, Financing
Company Act of 1998, which by definition does not give the lessee the option to buy, precludes
application of Arts. 1484 and 1485.
The Court can allow that the lease agreement has the earmarks of a financial leasing as defined
in S3(d) of RA 8556. But the Court, considering equity, the stipulations, and actuations of the
parties, has treated contracts disguised as financing lease as creating a different contractual
relationship. In BA Finance Corp v. CA, we treated a purported financial lease as a sale of
movable in installments- “A financial lease is where a financing company would initially
purchase a mobile equipment and turn around to lease it to a client who gets, in addition, an
option to purchase the property at the expiry of the lease period.”

“Financing companies are primarily organized for the purpose of extending credit facilities to
consumers by leasing of movables. Credit means any loan xxx any contract to sell or sale etc.
under which part or all of the price is payable subsequent to the making of such sale or contract.
These definitions indicate a financing scheme extended by a financing company to a client in
acquiring a motor vehicle and allowing the client to obtain immediate possession and use thereof
pending full payment of the financial accommodation.”

Here, PCI acquired the office equipment for their subsequent lease to Giraffe with Giraffe
undertaking to pay a monthly rental, totaling P10.5M for the 36 months. As a measure of GF,
Giraffe made an up-front guarantee deposit of P3.1M. If Giraffe fails to pay any rental due, the
agreement gives PCI cumulative remedies: xxx 4. Recover all rentals for the remaining term
of the lease; 5. Recover any amounts advanced by PCI for Giraffe’s account. The P3.1M
guarantee deposit shall also be forfeited in S6.1 of the agreement if Giraffe returns the equipment
before expiration of the lease.

Thus, a year’s worth of rentals of P3.5M plus the guarantee deposit of P3.1M. Giraffe had made
payments of P6.6M to PCI. The replevin-seized equipment had a residual value of P6.9M at the
time PCI filed its case in RTC. Adding all these, PCI actually obtained (P3.5M + P3.1M +
P6.9M [*kasi na seize ung equipment] =) P13.5M.

PCI’s demand letter demanded P8.2M as the “rental” balance which became due applying the
acceleration clauses of the agreement. Thus, Giraffe would be compelled to pay P13.5M +
P8.2M = P21.7M for its use- for a year and two months at most- of the equipment. For an
investment of P8.1M, PCI stands to make a net of P13.6M if we are to believe its outlandish
legal submission that the lease agreement was a straight lease.

-Also, the demand letter used “or” instead of “and” when it demanded that Giraffe pay P8.2M
“OR” to surrender the Silicon and Oxberry. This means that Giraffe need not return the
equipment if it paid the P8.2M. If Giraffe did not want to keep the equipment, then it need not
pay the balance. The logical import of the letter is that the transaction here is a lease in name
only. The monthly rentals are in truth monthly amortizations of the price of the leased office
equipment.

Thus, the lease agreement here is actually a lease with option to purchase the equipment. Art.
1485 applies. This is a situation where the financing company can conceal, up to the last
moment, its intention to sell the property so that the Recto Law may be circumvented. That the
agreement does not contain a “purchase option” clause does not mean that it is not with such
option to buy.

-In choosing thru replevin to deprive Giraffe of possession of the equipment, PCI waived its
right to bring action to recover unpaid rentals. Par. 3 of Art. 1484 in relation to Art. 1485 are
clear:
ART. 1484. 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: xxx xxx xxx
(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.
ART. 1485. The preceding article shall be applied to contracts purporting to be leases of
personal property with option to buy, when the lessor has deprived the lessee of the
possession or enjoyment of the thing.

The remedies in Art. 1484 are alternative. The condition that the lessor has deprived the lessee of
possession in Art. 1485 was fulfilled here by the filing of PCI of the complaint for sub of
money with prayer for replevin to recover possession of the office equipment. Due to the
writ of seizure issued by RTC, PCI has deprived Giraffe of their use which, by force of Recto
Law, in turn precludes PCI from maintaining an action for recovery of “Accrued rentals” or
recovery of the balance of the purchase price plus interest.

Nolasco v. Cuerpo, GR 210215, December 09, 2015, Perlas-Bernabe, J. (Rescission)

FACTS:
Nolasco and Cuerpo entered into a contract to sell over a land for P33M payable thus: P11M
downpayment, P21M payable in 36 monthly installments of P598k each. Later, Cuerpo sent
Nolasco a letter seeking to rescind the contract on the ground of financial difficulties in
complying with the same. They sought the return of P12M they had paid. This was unheeded.
Thus, Cuerpo filed a complaint for rescission before RTC.

RTC ordered the rescission under Art. 1191. It found that Nolasco substantially breached par.7
of the contract that
7. [Petitioners] shall, within ninety (90) days from the signing of [the subject contract],
cause the completion of the transfer of registration of title of the property subject of [the
subject contract], from Edilberta N. Santos to their names, at [petitioners'] own expense.
Failure on the part of [petitioners] to undertake the foregoing within the prescribed period
shall automatically authorize [respondents] to undertake the same in behalf of
[petitioners] and charge the costs incidental to the monthly amortizations upon due
date
Because Nolasco did not transfer such title. CA affirmed. Hence this petition.

ISSUE:
Whether there was substantial breach.
HELD: NO.
Rescission under Art. 1191 is predicated on a breach of faith that violates the reciprocity between
the parties to the contract. Rescission will not be permitted for a slight or casual breach, but
only for such substantial and fundamental violations that would defeat the very object of the
parties in making the agreement.

Here, par.7 reveals that while RTC and CA were correct that Nolasco failed to perform their
obligation to transfer title, this was not a substantial breach because the same paragraph
provides Cuerpo with a recourse to cause such transfer of title themselves in behalf and at the
expense of Nolasco.

Moldex Realty Inc. v. Flora Saberon, GR 176289, April 08, 2013, Del Cstillo, J.
FACTS:
Flora asked Moldex, developer of Metrogate Subdivision, to reserve the lot for her. She was to
pay P583k at monthly amortizations of P8k payable in 5 years with 21% interest per annum and
additional 5% surcharge for every month of delay. Flora made installment payments from 1992-
1996 worth P375k. She defaulted. On April 1997, Moldex sent Flora a notarized notice of
cancellation of contract to sell. Flora filed a complaint with HLURB.

HLURB ruled that since at the time of the sale Moldex did not have a license to sell as required
in S5, PD 957, the contract was void. It was ordered to refund all that Flora had paid. Board of
Commissioners of HLURB affirmed. OP affirmed. CA affirmed. Hence this petition.

ISSUE:
Whether Moldex must return the entire payments of Flora.
HELD: NO.
1) The lack of a license to sell on the part of a subdivision developer does not result to
nullification of the contract to sell. Nothing in S5, PD 957 requiring a license to sell provides for
the nullity of a contract validly entered into in cases of violation of its provisions. It only imposes
a general penalty.

2) Nevertheless, Flora is entitled to to 50% refund under the Maceda Law, which provides that
the defaulting buyer who has paid at least 2 years of installments has the right either to avail of
the grace period to pay or the cash surrender value of the payments made.

Flora had paid more than 2 years installments from March 11, 1992 to July 19, 1996 of P375k.
She defaulted after July 19, 1996. Moldex sent notices for her to update her account but to no
avail. She could thus no longer avail of the option in S3(a) to pay her unpaid installments within
the grace period. Besides, Moldex already sent Flora a notarized notice of cancellation. Thus,
the only option Flora has is S3(b) where Moldex shall refund to Flora the cash surrender value
of the payments on the property equivalent to 50% of the total payments or P187k.

Sps. Domingo v. Sps. Manzano, GR 201883, November 16, 2016

FACTS:
Sps. Manzano owned a land. They executed, thru their attorney-in-fact and co-respondent
Estabillo, a notarized agreement that the price would be P900k, with payment of P100k
reservation fee, and:
 Ayon sa aming napagkasunduan ililipat lamang ang Titulo ng lupa na may no. 160752
at bahay pag nabayaran ko ng lahat ang (P900,000.00) Nine Hundred Thousand Pesos
hanggang Marso ng 2001.
Sps. Domingo failed to tender full payment on March 2001, the deadline. Estabillo advised
them to continue their payments. They made P85k additional payment. In December 2001,
Sps. Domingo offered to pay the remaining P555k but Tita Manzano refused and said that the
property was no longer for sale and she was forfeiting their payments. Thus, Sps. Domingo
caused annotation of an affidavit of adverse claim on the Title. Thereafter, respondent Carmelita
Aquino bought the property and a new title was issued in her name. The adverse claim was
carried over.

Sps. Domingo filed for specific performance to compel Sps. Manzano to accept payment. RTC
ruled that Sps. Domingo have a prior right, applying Art. 1544. CA ruled that Art. 1544 is not
applicable.
ISSUE:
Whether there was a double sale.
HELD: NO.
CA held that
The vendors reserved ownership and title passes only upon full payment of P900k. Sps.
Domingo were never granted possession. No deed of sale was executed. All these are
indications that there is a contract to sell.

In Cheng v. Genato, it was held that Art. 1544 does not apply to a contarct to sell because
the requisites of Art. 1544 (2 or more valid sales etc.) are lacking in a contract to sell for
there is no transfer of ownership nor a sales transaction consummated. Before full
payment, specific performance is an improper remedy. There must be a breach of
contract for specific performance. The non-payment of the price renders the contract to
sell without force and effect.

As to reimbursement, Sps. Domingo paid less than 2 years installments. S4 of RA 6552

must be read with S3, which states that the buyer is “entitled to the following rights in
case he defaults in the payment of succeeding installments.” Thus, S3 and 4 apply only
when the buyer defaults in payment. In case the defaulting buyer paid less than 2 years’
installments, RA 6552 grants him no right to recover his installments. But here, Sps.
Domingo were not in default as Estabillo accepted late installments, thereby waiving
the original period for payment. As agent, Estabillo’s acceptance bound his principals
who also accepted the late payments, amounting to tacit ratification of the agent’s acts.
This Court agrees with CA’s pronouncement that Art. 1544 does not apply here. CA’s
disquisition is succinct, nothing more can be added.

Payment of the price is a positive suspensive condition in a contract to sell, failure of which is
not a breach but just an event that prevents the prospective buyer from compelling the
prospective seller to convey title. Thus, non-fulfillment of the condition renders the sale without
force and effect. Precisely for this reason that Art. 1544 does not apply since failure to pay the
price in full renders the contract to sell ineffective. There is NO SALE TO SPEAK OF. Sps.
Domingo failed to pay the price in full. Aquino did. Since there is only one valid sale, Art. 1544
does not apply.

Luzon Development Bank v. Enriquez, GR 168646, January 12, 2011, Del Castillo, J.
FACTS:
De Leon loaned P8M from LDB to develop Delta Homes. He mortgaged Lot 4 to secure the
loan. Delta obtained a license to sell and executed a contract to sell with Enriquez over lot 4 for
P614k. Delta defaulted in its loan obligation to LDB. LDB and Delta agreed to a dation in
payment where Delta assigned or transferred certain real estate to LDB, including lot 4 subject
of the contract to sell with Enriquez.

Enriquez filed a complaint against Delta and LDB. CA ruled that the dation is void as Delta
hadearlier transferred ownership already to Enriquez via the contract to sell. Hence this petition.

ISSUE:
Whether LDB is bound by the contract to sell to Enriquez.
HELD: YES.
1) Although the mortgages are void for violating S18 of PD 957, the loan just became unsecured.

2) A contract to sell does not transfer ownership. It does not by itself transfer ownership to the
buyer. Delta reserved ownership until full payment su h that Delta even reserved the right to
unilaterally void the contract if Enriquez fails to pay 3 successive monthly amortizations. Thus,
since Delta was still the owner, it could validly transfer such ownership to LDB thru dation.

3) However, LDB is bound by the contract to sell and has to respect Enriquez’s right
thereunder. This is because the contract to sell involving a subdivision lot is covered by PD 957.
S17 of PD 957 allows Enriquez to register the contract to sell to make it binding on third
parties.

While Delta failed to register Enriquez’s contract to sell, this failure will not prejudice
Enriquez as LDB cannot be considered an innocent purchaser for value when it accepted Lot
4 as payment. LDB was aware that Lot 4 were subdivision lots and thus within the purview of
PD 957. It knew that the loaned amounts were to be used to develop Delta’s subdivision project.
Under these circumstances, LDB knew or should have known of the possibility and risk that the
assigned properties were already covered that the assigned properties in the dation were already
covered by existing contracts to sell to subdivision lot buyers. Also, as an entity engaged in the
banking business, LDB is required to observe more care and prudence when dealing with
registered properties.

4) LDB claims that if it must deliver Lot 4 to Enriquez, Delta has the obligation to pay LDB its
value. But Dation extinguished the loan obligation as the parties intended that the assigned
properties would serve as full payment of Delta’s entire obligation without reservation or
condition. LDB thus assumed the risk that some of the assigned properties are covered by
contracts to sell which it is bound to honor under PD 957.
Dation is governed by the law on sales. There is no express warranty here. As to the implied
warranty in case of eviction, it is waivable and cannot be invoked if the buyer knew of the risks
of eviction and assumed its consequences. LDB, in accepting the dation as full payment of
Delta’s “total obligation”, assumed the risk that some of the assigned properties are covered by
contracts to sell.

Repuela v. Estate of Sps. Larawan and Bacus, GR 219638, December 07, 2016, Mendoza, J.
FACTS:
In July, 1963, Marcelino and Cipriano Repuela, brothers, inherited Lot 3357. They went to the
house of Otillo Larawan to borrow P200 for Marcelino’s fare to Iligan. To secure the loan, Sps.
Larawan required them to turn over the title to Lot 3357 and made them sign a purported
mortgage contract. Cipriano affixed his signature while Marcelino, being illiterate, placed his
thumbmark. They remained in possession and had been planting corn etc.

Cipriano’s daughter Cristina went to the treasurer’s office and found out that the title to the
property was already transferred to Sps. Larawan thru a extrajudicial declaration of heirs and
sale bearing the signature of Cipriano and thumb mark of Marcelino. Cipriano and Marcelino
remember that they signed a blank document.

Thus, on January 17, 2003, Cipriano and Marcelino filed a complaint to annul the extrajudicial
declaration of heirs and sale. Burlas, who lived next to the property, testified that Marcelino and
Cipriano remained in possession and that he never saw Otillo on the land.

ISSUE:
Whether the extrajudicial declaration of heirs and sale was an equitable mortgage.
HELD: YES.
Art. 1602, in relation to Art. 1604, provide:
ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(2) When the vendor remains in possession as lessee or otherwise;
(6) In any other case where it may be fairly inferred that the real intention of the parties is
that the transaction shall secure the payment of a debt or the performance of any other
obligation.
ART. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be
an absolute sale.

Under Art. 1602, the presence of any of the circumstances suffices for a contract to be deemed
an equitable mortgage. Here, there are 2 instances.

1) Burlas, a disinterested person, testified that it was only the Repuela brothers who remained in
possession of the land and she never saw Otillo work on the land.

Respondents’ claim of possession supported by a TCT and tax declaration of the property in the
name of Sps. Larawan are not persuasive. These do not prove actual possession and do not
rebut the overwhelming evidence of the Repuela brothes that they were in actual possession.
2) It can be inferred that the real intention of the Repuela brothers was to secure their
indebtedness from Sps. Larawan. They needed money for Marcelino’s fare of P200. Since Sps.
Larawan would only agree to extend the loan if they surrender their title, they obliged. It was
never their intention to sell the property.

3) Granting that Cipriano and Marcelino signed and thumbmarked the Extrajudicial Declaration
of Heirs and sale, they did so without understanding the real nature thereof as this was never
explained to them. Cipriano only finished grade 1 and Marcelino was an illiterate. They were in
dire need of money. In dire need, they signed a document knowing that it did not express their
real intention. Thus, they should be afforded the protection on the provisions on equitable
mortgage.

Besides, where a party is unable to read and mistake or fraud is alleged, the obligation to show
that the terms of the contract had been fully explained to such party devolves on the party
seeking to enforce it. Respondent failed to overcome this burden.

Arcaina v. Ingram, GR 196444, February 15, 2017, Jardeleza, J.

FACTS:
Arcaina owns Lot 3230. Thru Banta, her attorney-in-fact, she entered into a contract with Ingram
for its sale. Banta showed Ingram and Archinue, Ingram’s attorney-in-fact, the bounds of the
property and that it has an area of more or less 6,200 m2 as per the tax declaration covering it.
The contract price was P1,860,000. The property was described in the deeds of absolute sale as
with an rea “6200m2 more or less.”

Later, Ingram caused the land to be surveyed and discovered that Lot 3230 has an area of 12,000
m2. Banta insisted that the difference of 5,800m2 remains unsold. Ingram claims that she owns
the whole.

ISSUE:
Whether the sale must be deemed to include the excess of 5800.
HELD: NO.
Lot 3230 was sold for a lump sum. The deeds of sale the parties executed show that the property
was sold to Ingram at the predetermined price of P1,860,000. There was no indication that it
was bought on a per-square-meter basis. Thus, Art. 1542 governs.

This provisions says that where both the area and boundaries of the immovable are declared in a
sale of real estate for a lump sum, the area within the boundaries of the immovable prevails over
the stated area. The vendor is obliged to deliver all that is included within the boundaries
regardless of whether the actual area is more than what was specified in the contract of sale
without a corresponding increase or decrease in price.

Here, the boundaries and estimated area of the property are stated. The area is “more or less
6,200 m2.” But it was actually 12,000m2.

But the rule laid down in Art. 1542 is not hard and fast and admits an exception. the use of
“more or less” or similar words covers only a reasonable excess or deficiency. In case there is
conflict between the area actually covered by the boundaries and the estimated area stated in the
contract of sale for lump sum, the vendor shall deliver the excess or deficiency only if the latter
is REASONABLE.

The difference of 5,800m2 is too substantial to be considered reasonable. Art. 1542 does not
contemplate such an unfair situation to befall a vendor as to make her deliver double the amount
she originally sold without an increase in price. A vendee of land when it is sold in gross or with
the description “more or less” does not ipso facto take all risk of quantity in the land. The use of
“more or less” covers only a reasonable excess or deficiency.

Also, the parties at the time of sale did not have knowledge of the actual area and relied only on
the tax declaration. Thus, when petitioners offered the property for sale and when Ingram
accepted, the object of their consent is only a 6,200 m2 property.