PENALOSA vs SANTOS

G.R. No. 176289, April 8, 2013

TOPIC INVOLVED: perfection of contract of sale
FACTS:Severino sold his property to Henry. Henry applied for a loan with Philam
life. As it was already approved pending the submission of certain documents such
as the owners duplicate of TCT which is in possession of Severino. Henry already
took possession of the property in question after ejectment of the lessees. He also
paid earnest money of 300,000 under the promise that it shall be forfeited in favor
of Severino in case of non-payment.Severino now claims ownership over the
property claiming that Henry did not pay for the property, therefore there was no
sale.
ISSUE:Whether or not the contract of sale was perfected in this case.
HELD:There is a perfected contract of sale. The basic characteristic of an
absolutely simulated or fictitious contract is that the apparent contract is not really
desired or intended to produce legal effects or alter the juridical situation of the
parties in anyway. However, in this case, the parties already undertook certain acts
which were directed towards the fulfilment of their respective covenants under the
second deed, indicating that they intended to give effect to their agreement.
Non-appearance of the parties before the notary public who notarized the
deed does not necessarily nullify nor render the parties transaction void ab initio.
Art. 1358 of the New Civil Code on need of public document is only for
convenience not for validity or enforceability, since are obligatory in whatever form
they may have been entered into provided all essential elements are present.
Non-payment of the contract price merely results in a breach of contract and
warrants an action for rescission or specific performance. Although the law allows
rescission as remedy for breach of contract, it cannot be availed by the parties in
the contract because it was Severino who prevented full payment of the stipulated
price when he refused to deliver the owners original duplicate title to Philam life
which is unjustified since Severino admitted that he signed the deed to enable
petitioner to acquire the loan and he also knew that the property was given as
security.
DOCTRINE:
Respondent insist that the second deed is a complete nullity because a) the
consideration stated in the deed was not paid; b)seller was not present when the
deed was notarized; c) seller did not surrender a copy of the title; d)real estate
taxes were not paid. The elements of a valid contract of sale are: (1) consent or
meeting of the minds; (2) determinate subject matter; and (3) price certain in
money or its equivalent which are present in the second Deed of Sale hence there
is already a perfected contract of sale.

FIRST OPTIMA REALTY CORPORATION vs SECURITRON SECURITY

G.R. No. 199648, January 28, 2015
TOPIC INVOLVED: perfection of contract of sale

FACTS:Desiring to expand business and add to its existing offices, Securitron

Security Services through its General Manager, Eleazea, sent a letter to Young, the
Executive Vice-President of First Optima Realty Corporation, owner of the lot
adjacent to the offices of Securitron, offering to buy the property at P6,000.00 per
square meter. No direct negotiation occurred between Young or the board or
directors, and Eleazar. Subsequently, Eleazer went directly to First Optimas office
offering to pay the property in cash which he brought with him, but Young refused
to accept the payment, averring that she still need to secure her sisters advice.
She also informed him that prior approval of the Board of Directors is required for
the sale. Securiton sent a letter to First Optima, enclosing therewith a check for
P100,000.00 payable to the latter. It stated that As agreed upon, we are making a
deposit of Php 100,000.00 as earnest money for your property for a total of Php
1,536,000.00. Full payment upon clearing of the tenants at said property and
signing of the Deed of Sale. The letter was received by an ordinary receiving
clerk/receipt who issued a Provisional Receipt for the same with an annotation.
Despite the delicate nature of the transaction or the large amount of cash,
Securitron did not course the payment directly to Young or the companys board of
directors. The check was eventually deposited in First Optimas account.
Securtiron then sent a letter demanding that First Optima proceed with the sale of
the property but the latter denied that the money received was earnest money as
the company have yet to decide on the sale of the property. It then proceeded to
reject the offer to buy the property. Because of the refusal of First Optima to sell
the property, Securitron then filed a complaint for specific performance with
damages to compel First Optima to proceed with the sale of the property. In the
Answer with Compulsory Counterclaim, First Optima denied that it agreed to sell
the subject property; that its board of directors did not authorize the sale thereof
to respondent, as no corresponding board resolution to such effect was issued; that
the P100,000.00 check payment cannot be considered as earnest money for the

subject property, since said payment was merely coursed through petitioners
receiving clerk, who was forced to accept the same. After trial, the RTC ruled in
favour of Securitron and opined that there was a perfected contract of sale
between the parties with First Optimas acceptance of the P100,00.00 check; nor
was there any showing that harassment or intimidation attended the receipt of the
check by the clerk; for the sale of the property, no board resolution is required
since Young was free to represent the corporation. The Court of Appeals affirmed
the RTC decision.
ISSUE:Whether or not there was a perfected contract of sale
HELD:Although it cannot be denied that there were negotiations between Antonio
and Optima, it should be noted that Carolina rejected the offer of Antonio saying
that she still needed to get the approval of Optimas board of directors, to which
Antonio replied that he will await the approval. The offer of Antonio to purchase
the land was never accepted by Optima. Thus, between them there is no sale to
speak of.
Since there is no perfected sale between the parties, Antonio had no
obligation to make payment through the check, not did it possess the right to
deliver earnest money to Optima in order to bind it to the sale. As contemplated
under Art. 1482 of the Civil Code, there must first be a perfected contract of sale
before we can speak of earnest money.
In a potential sale transaction, the prior payment of earnest money even
before the property owner can agree to sell his property is irregular, and cannot be
used to bind the owner to the obligations of a seller. Thus, though Optima is
obliged to return the amount of the earnest money, it cannot be obliged to execute
a deed of sale to Antonio.
DOCTRINE:
Since there is no perfected sale between the parties, respondent had no
obligation to make payment through the check; nor did it possess the right to
deliver earnest money to petitioner in order to bind the latter to a sale. As
contemplated under Art. 1482 of the Civil Code, there must first be a perfected
contract of sale before we can speak of earnest money. Where the parties merely
exchanged offers and counter-offers, no contract is perfected since they did not yet
give their consent to such offers. Earnest money applies to a perfected sale.

MOLDEX REALTY vs SABERON

G.R. No. 176289, April 8, 2013
TOPIC INVOLVED: validity of contract to sell
FACTS:Respondent Flora asked Moldex, to reserve the lot for her as shown by a
reservation application. Flora opted to pay on instalment and began making
periodical payments. Moldex sent flora notices reminding her to update her
account. Upon inquiry, however, Flora was shocked to find out that she owed
Moldex a large amount of money. Moldex suggested to Flora to execute a written
authorization for the sale of the subject lot to a new buyer and written request for
refund so that she can get half of all payments she made. However, Flora never
made a written a request for refund.
Moldex, then sent Flora a notice of cancellation of reservation application and /or
contract to sell. Flora filed before the HLURB complaint for annulment of the

contract to sell and cancellation of Moldexs license to sell alleging that Moldex
violation of P.D. 967 when it sold the land before it was issued license to sell and
that Moldex failed to register the contract to sell in the registry of deeds. Moldex
answered that it exercised its right under the Maceda Law by cancelling
reservation agreement or contract to sell and forfeiting payments made.
HLURB declared as void the contract to sell because of moldexs lack of license to
sell at the perfection of contract. Moldex averred that absence of license does not
render contracts perfection as void. Moldex appealed to Office of President but it
affirmed HLURBs ruling. Moldex appealed to Court of appeals which reversed the
ruling of O.P.
ISSUE:Whether or not there was a valid contract to sell
HELD:Contract to sell entered into between Flora and Moldex remains valid
despite the lack of license to sell on the part of the latter at the time the contract
was entered into.
While the law penalizes the selling of subdivision lots and condominium units
without prior issuance of a Certificate of Registration and License to sell by the
HLURB, it does not provide that the absence thereof will automatically render a
contract, otherwise validly entered, void. The penalty imposed by the decree is the
general penalty provided for the violation of any of its provisions. It is well-settled
in this jurisdiction that the clear language of the law shall prevail. This principle
particularly enjoins strict compliance with provisions of law which are penal in
nature, or when a penalty is provided for the violation thereof. With regard to P.D.
957, nothing therein provides for the nullification of a contract to sell in the event
that the seller, at the time the contract was entered into, did not possess a
certificate of registration and license to sell. Absent any specific sanction
pertaining to the violation of the questioned provisions (Secs. 4 and 5), the general
penalties provided in the law shall be applied. The general penalties for the
violation of any provisions in P.D. 957 are provided for in Sections 38 and 39. As
can clearly be seen in the aforequoted provisions, the same do not include the
nullification of contracts that are otherwise validly entered.
DOCTRINE:The lack of a license to sell or the failure on the part of a

subdivision developer to register the contract to sell or deed of conveyance

with the Register of Deeds does not result to the nullification or invalidation
of the contract to sell it entered into with a buyer. The contract to sell
remains valid and subsisting. The intrinsic validity of the contract to sell is
not affected by the developers violation of Section 5 of PD
957.Nevertheless, the respondent in this case is entitled to 50% refund
under the Maceda Law.

SPS. TUMIBAY VS. SPS. LOPEZ

G.R No. 171692, June 3, 2013
Topic: Contract to sell vis--vis Contract of sale

FACTS: Petitioners are owner of a parcel of land, which executed an SPA in favor of
Reynalda, as agent, to among others, offer for sale the subject land provided that
the purchase price thereof should be approved by the former. Thereafter,
petitioners and respondent allegedly agreed to enter into a contract to sell over the
subject land for a certain price payable in 10yrs through installments. Respondent
paid the first monthly installment and had failed to pay religiously thereafter but
was able pay intermittently, in short, she was not able to pay for the full price
thereof. Despite the failure of fulfillment of payment of the purchase price, the
agent, transferred the title of the property to the respondent without the consent
of the petitioner.
ISSUE/S: W/N there is a contract to sell? Is the sale valid?
Held: There is a contract to sell. The sale in not valid.
Although the contract to sell was not put into writing, the evidence show that there
was a contract to sell for the following reasons: 1.) the title was not immediately
transferred; 2.) petitioners received intermittent payments; 3.) the title was only
transferred when the respondent thought that she was able to substantially pay the
purchase price.
A contract to sell has been defined as 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 fulfillment of the condition agreed upon,
that is, full payment of the purchase price. In a contract to sell, ownership is
retained by the seller and is not to pass until the full payment of the price x x x. It
is commonly entered into so as to protect the seller against a buyer who intends
to buy the property in installment[s] by withholding ownership over the property
until the buyer effects full payment therefor.
And since there was a breach of contract on the part of the agent to prematurely
transfer the title to the respondents, the contract to sell can be rescinded under
Art. 1191. Further, the transfer of the title being done by an agent who acted ultra
vires, the sale/transfer is void.

Heirs of Arturo Reyes vs Socco Beltran

GR No. 176474 November 27, 2008
Topic: Ownership of the thing to be transferred
Facts: The subject property in this case is a parcel of land allocated to the Spouses
Laquian, who paid for the same with Japanese money. When the husband died, the
property was left to his wife Constancia;. Upon her death, the original parcel of
land was left with her heirs her siblings. The subject property, Lot No. 6-B, was
adjudicated to respondent, but no title had been issued in her name. On 25 June
1998, respondent Elena Socco-Beltran filed an application for the purchase of Lot
No. 6-B before the Department of Agrarian Reform (DAR), alleging that it was
adjudicated in her favor in the extra-judicial settlement of Constancia Soccos
estate.
Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to
respondents petition before the DAR on the ground that the subject property was
sold by respondents brother, Miguel R. Socco, in favor of their father, Arturo
Reyes, as evidenced by a Contract to Sell.
Issue: Whether or not petitioners acquired ownership over the disputed property
by virtue of the contract to sell?
Held: No. Under Article 1459 of the Civil Code on contracts of sale, The thing
must be licit and the vendor must have a right to transfer ownership thereof at the
time it is delivered. The law specifically requires that the vendor must have
ownership of the property at the time it is delivered. Petitioners claim that the
property was constructively delivered to them in 1954 by virtue of the Contract to
Sell. However, it was explicit in the Contract itself that, at the time it was
executed, Miguel R. Socco was not yet the owner of the property and was only
expecting to inherit it. Hence, there was no valid sale from which ownership of the
subject property could have transferred from Miguel Socco to Arturo Reyes.
Without acquiring ownership of the subject property, Arturo Reyes also could not
have conveyed the same to his heirs, herein petitioners.

NOOL VS. CA
G.R No. 116635, July 24, 1997
Topic: Nomo dat quod non habet.
FACTS: One lot formerly owned by Victorio Nool (TCT T-74950) has an area of 1
hectare. Another lot previously owned by rancisco Nool (TCT T-100945) has an
area of 3.0880 hectares. Spouses Conchita Nool and Gaudencio Almojera
(plaintiffs) alleged that they are the owners of the subject land as they bought the
same from Victorio and Francisco Nool, and that as they are in dire need of money,
they obtained a loan from DBP (Ilagan, Isabela), secured by a real estate mortgage
on said parcels of land, which were still registered in the names of Victorino and
Francisco Nool, at the time, and for the failure of the plaintiffs to pay the said loan,
including interest and surcharges, the mortgage was foreclosed; that within the
period of redemption, the plaintiffs contacted Anacleto Nool for the latter to
redeem the foreclosed properties from DBP, which the latter did; and as a result,
the titles of the2 parcels of land in question were transferred to Anacleto; that as
part of their arrangement or understanding, Anacleto agreed to buy from Conchita
the 2 parcels of land under controversy, for a total price of P100,000.00,
P30,000.00 of which price was paid to Conchita, and upon payment of the balance
of P14,000.00, the plaintiffs were to regain possession of the 2 hectares of land,
which amounts spouses Anacleto Nool and Emilia Nebre (defendants) failed to pay,
and the same day the said arrangement was made; another covenant was entered
into by the parties, whereby the defendants agreed to return to plaintiffs the lands
in question, at anytime the latter have the necessary amount; that latter asked the
defendants to return the same, defendants refused to return the said parcels of
land to plaintiffs; thereby impelling the plaintiffs to come to court for relief. On the
other hand, defendants theorized that they acquired the lands in question from the
DBP, through negotiated sale, and were misled by plaintiffs when defendant
Anacleto Nool signed the private writing, agreeing to return subject lands when
plaintiffs have the money to redeem the same; defendant Anacleto having been
made to believe, then, that his sister, Conchita, still had the right to redeem the
said properties. It should be stressed that DBP certified that the 1-year redemption

period and that the mortgagors right of redemption was not exercised within this
period. Hence, DBP became the absolute owner of said parcels of land for which it
was issued new certificates of title. About 2 years thereafter, DBP entered into a
Deed of Conditional Sale involving the same parcels of land with Anacleto Nool as
vendee. Subsequently, the latter was issued new certificates of title.
ISSUE: Whether the Contract of Repurchase is valid.
HELD: A contract of repurchase arising out of a contract of sale where the seller
did not have any title to the property sold is not valid. Since nothing was sold,
then there is also nothing to repurchase. Article 1505 of the Civil Code provides
that where goods are sold by a person who is not the owner thereof, and who does
not sell them under authority or with consent of the owner, the buyer acquires no
better title to the goods than the seller had, unless the owner of the goods is by his
conduct precluded from denying the sellers authority to sell. Jurisprudence, on
the other hand, teaches us that a person can sell only what he owns or is
authorized to sell; the buyer can as a consequence acquire no more than what the
seller can legally transfer. No one can give what he does not have nomo dat
quod non habet. In the present case, there is no allegation at all that petitioners
were authorized by DBP to sell the property to the private respondents. Further,
the contract of repurchase that the parties entered into presupposes that
petitioners could repurchase the property that they sold to private respondents.
As petitioners sold nothing, it follows that they can also repurchase nothing. In
this light, the contract of repurchase is also inoperative and by the same analogy,
void.
DAROY vs. ATTY. ABECIA
.A.C. NO. 3046, October 26, 1998
TOPIC INVOLVED:BUYER, ART. 1491
FACTS: Respondent Abecia was counsel of complainant Daroy in a case for
forcible entry. Judgment was rendered in favor of complainant, ordering the
defendants to pay damages. To satisfy the judgment, the sheriff sold at public
auction a parcel of land belonging to one of the defendants to complainant Daroy
as highest bidder. Upon failure of the defendants to redeem the land, its ownership
was consolidated in complainant Daroy.Daroy filed a complaint for falsification of
documents against Atty. Abencia claiming that Abecia forged his signature in a
deed of absolute sale transferring the subject parcel of land to Jose Gangay and
that in a fictitious deed of absolute sale, it was made to appear that Gangay in turn
conveyed the land to Nena Abecia, wife of respondent Abecia. Complainant alleged
that he entrusted the title to the land to Abecia as his counsel and allowed him to
take possession of the land upon the latters request. Moroever, Daroy filed a
disbarment proceeding against Atty. Abencia for unethical conduct.

ISSUE: WON the transfer of the property to Atty. Abecia is a violation of the
prohibition set forth in Art. 1491 of the New Civil Code?
RULING: No. The parties thought that because the land had been acquired at a
public sale to satisfy a judgment in a case in which respondent was complainants
counsel, the latter could not acquire the land. The parties made this arrangement
to circumvent Art. 1491 of the Civil Code which prevents lawyers from acquiring
property and rights that may be the object of any litigation in which they may take
by virtue of their profession. However, the prohibition in Art. 1491 does not apply
to the sale of a parcel of land, acquired by a client to satisfy a judgment in his favor
to his counsel as long as the property was not the subject of the litigation.While
judges, prosecuting attorneys, and others connected with the administration of
justice are prohibited from acquiring property or rights in litigation or levied upon
in execution the prohibition with respect to attorneys in the case extends only to
property and rights that may be the object of any litigation in which they may take
part by virtue of their profession.

ARCENIO vs. JUDGE PAGOROGON

A.M. NO. MTJ-89-270 July 5, 1993 &A.M. NO. MTJ-92-637 July 5, 1993
TOPIC INVOLVED:BUYER, ART. 1491
FACTS: A complaint was filed with the Office of the Ombudsman accusing
respondent judge of abuse of authority and irregularity in connection with a motor
vehicle in custodia legis alleged to have been used in connection with a robbery
case filed with respondent's court. It was disclosed that respondent judge
conducted a preliminary examination of a robbery (hold-up) case and part of the
evidence in the said case was a black and white renegade type jeepney. The

robbery case was endorsed to the Office of the Provincial Fiscal of Malolos,
Bulacan, for filing of the information inasmuch as three (3) of the accused were
detained. The jeep, however, was not turned over to the Provincial Fiscal because
the Clerk of Court had no available funds to tow said jeep. The subject vehicle,
therefore, remained in the premises of the municipal building of San Jose del
Monte, Bulacan. The Station Commander of San Jose del Monte requested
respondent judge to remove the jeep from the premises of the municipal building
as it was becoming as eyesore. Respondent judge then took possession of the jeep
and had an auto mechanic tow it to his (the auto mechanic's) shop in Marilao,
Bulacan, repair and repaint the same from black and white to red. Respondent
judge even provided new batteries for the jeep and initially spent P1,500.00 to put
the jeep in good running condition. Her brother volunteered "to take care of the
jeep" as she "could not afford to hire a driver." In addition, her brother shouldered
additional expenses for the further repair and maintenance of the jeep. It is for
these expenses that respondent judge is seeking reimbursement from the
anonymous owner with the threat that unless she is reimbursed "she is to return
the jeep to its original condition."On the basis of the documentary evidence
obtaining in the present case, the investigating Executive Judge found respondent
judge guilty of misconduct in that she "exerted undue interest" over the vehicle by
spending for its repair and maintenance over and beyond what the circumstances
and the duties of her office called for.
ISSUE: WON respondent judge violated the prohibition on Art. 1491 under the
New Civil Code?
RULING: Yes. The intention of respondent judge to make use of and benefit from
the vehicle, a property in custodia legis, was manifest. Respondent judge had no
reason to go overboard in spending for the repair of the jeep. Respondent judge
engaged the services of a mechanic, not only to tow the jeep but also to place the
jeep in good running condition, spending in the process P1,500.00 of her own
money. No other logical inference could be deduced from such an action other than
respondent judge's desire to use and enjoy the jeep for her own benefit and
convenience. Quite obviously, respondent judge exhibited manifest intent to gain.
The act of respondent judge is not unlike the prohibited acquisition by
purchase described in Article 1491 of the New Civil code and is in fact, even
worse. In Article 1491 paragraphs 4 and 5, public officers and employees, justices,
judges, lawyers and similar persons charged with the administration of justice are
prohibited from acquiring by purchase, property the administration of which has
been entrusted to them or any other property which is the object of litigation.
Here, respondent judge did not even offer to purchase the jeep from the owner but
by the mere fact of having whimsically spent for its repairs, automatically
appropriated the jeep for her own use and benefit.

VALENCIA vs. ATTY. CABANTING

A.M. Nos. 1302, 1391 and 1543 April 26, 1991
TOPIC INVOLVED:BUYER, ART. 1491
FACTS: In 1933, complainant Paulino Valencia and hiswife allegedly bought a
parcel of land, where they builttheir house, from a certain Serapia Raymundo, an
heirof Pedro Raymundo the original owner. However, theyfailed to register the sale
or secure a transfercertificate of title in their names. A conference washeld in the
house of Atty. Jovellanos to settlethe land dispute between Serapia and the
Valencia spouses. Serapia was willing to relinquish ownership if the Valencias
could show documents evidencingownership. Paulino exhibited a deed of sale
written inthe Ilocano dialect. However, Serapia claimed that thedeed covered a
different property. Serapia, assisted by Atty. Arsenio Fer Cabanting, filed a
complaintagainst Paulino for the recovery of possession withdamages. The
Valencias engaged the services of Atty.Dionisio Antiniw. Atty. Antiniw advised them
to presenta notarized deed of sale in lieu of the private documentwritten in
Ilocano. For this purpose, Paulino gave Atty.Antiniw an amount of P200.00 to pay
the person whowould falsify the signature of the alleged vendor. A"Compraventa
Definitiva" as a result thereof. The trial court rendered adecision in favor of
Serapia. Paulino filed a Petition for Certiorari with Preliminary Injunction before
the CA.While the petition was pending, the trial court issued an orderof execution
stating that "the decision in this case hasalready become final and executory".On
1973, Serapia sold 40 square meters of the litigated lot to Atty. Jovellanos and the
remainingportion she sold to her counsel, Atty. Arsenio Fer Cabanting. Paulino filed
adisbarment proceeding against Atty. Cabanting on theground that said counsel
allegedly violated Art. 1491 of the New Civil Code, prohibiting the purchaseof
property under litigation by a counsel.
ISSUE: WON Atty. Cabanting purchased the subject property in violation of Art.
1491 of theNew Civil Code?
RULING:Yes.Paulino alleged that the trial court failed to provide a workable
solution concerning his house and while the petition for certiorari was pending the
trial court issued an order of execution stating that "the decision in this case has
already become final and executory". While it is true that Atty. Cabanting
purchased the lot after finality of judgment, there was still a pending certiorari
proceeding. A thingis said to be in litigation not only if there is somecontest or
litigation over it in court, but also from themoment that it becomes subject to the
judicial actionof the judge. Logic indicates, in certiorari proceedings,that the
appellate court may either grant or dismissthe petition. Hence, it is not safe to
conclude, forpurposes under Article 1491 that the litigation hasterminated when
the judgment of the trial court become final while a certiorari connected therewith

isstill in progress. Thus, purchase of the property byAtty. Cabanting in this case
constitutes malpractice inviolation of Art. 1491. Clearly, this malpractice is a
ground forsuspension.

MAURO P. MANANQUIL, complainant,

vs.
ATTY. CRISOSTOMO C. VILLEGAS, respondent
A.M. No. 2430 August 30, 1990
FACTS:
Mauro P. Mananquil charged respondent Atty. Crisostomo C. Villegas with gross
misconduct or malpractice committed while acting as counsel of record of one
Felix Leong in the latter's capacity as administrator of the Testate Estate of the late
Felomina Zerna in Special Proceedings. The complaint alleges that over a period
of 20 years, respondent allowed lease contracts to be executed between his client
Felix Leong and a partnership HIJOS DE JOSE VILLEGAS, of which respondent is
one of the partners, covering several parcels of land of the estate. On the basis of
the pleadings submitted by the parties, and other pertinent records of the
investigation, the Solicitor General , finding that respondent committed a breach in
the performance of his duties as counsel of administrator Felix Leong when he
allowed the renewal of contracts of lease for properties involved in the testate
proceedings to be undertaken in favor of HIJOS DE JOSE VILLEGAS without
notifying and securing the approval of the probate court.
ISSUE:
Whether or not the persons referred to in Article 1491 are prohibited from leasing,
either in person or through the mediation of another, the properties or things
mentioned in that article.
HELD:
Yes. By virtue of Article 1646 of the new Civil Code, the persons referred to in
Article 1491 are prohibited from leasing, either in person or through the mediation
of another, the properties or things mentioned in that article.
The disqualification imposed on public and judicial officers and lawyers is
grounded on public policy considerations which disallow the transactions entered
into by them, whether directly or indirectly, in view of the fiduciary relationship

involved, or the peculiar control exercised by these individuals over the properties
or rights covered.
Thus, even if the parties designated as lessees in the assailed lease contracts were
the "Heirs of Jose Villegas" and the partnership HIJOS DE JOSE VILLEGAS, and
respondent signed merely as an agent of the latter, the Court rules that the lease
contracts are covered by the prohibition against any acquisition or lease by a
lawyer of properties involved in litigation in which he takes part. To rule otherwise
would be to lend a stamp of judicial approval on an arrangement which, in effect,
circumvents that which is directly prohibited by law. For, piercing through the
legal fiction of separate juridical personality, the Court cannot ignore the obvious
implication that respondent as one of the heirs of Jose Villegas and partner, later
manager of, in HIJOS DE JOSE VILLEGAS stands to benefit from the contractual
relationship created between his client Felix Leong and his family partnership over
properties involved in the ongoing testate proceedings.

FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio

Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio Fabillo), petitioners, vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case
Division)
and ALFREDO MURILLO (substituted by his heirs Fiamita M. Murillo, Flor M.
Agcaoili and Charito M. Babol), respondents. Francisco A. Tan for petitioners. Von
Kaiser P. Soro for private respondent.
1991-03-11 | G.R. No. 68838
FACTS:
In a last will testament Justina Fabillo bequeathed to her brother, Florencio, a
house and lot which is subject of litigation. Two years later, Florencio sought the
assistance of lawyer Alfredo M. Murillo in recovering the San Salvador property.
Entered into the service contract is that Atty. Murillo be paid 40% of whatever the
result that may benefit Fabillo. The case was terminated and the lot was awarded
to Florencio Fabillo. Murillo then seek for the enforcement of the service contract.
Fabillo died during the trial and his heirs in their defense stated that the consent to
the contract of services of the Fabillo spouses was vitiated by old age and ailment
and seek for the nullity of the contract.and that the contract was void since the
land in dispute was subject to litigation and Murillo is prohibited to obtain the
land.
ISSUE:
Whether or not contract of services violated Article 1491 of the Civil Code.
HELD:
No.
The contract of services did not violate said provision of law. Article 1491 of the
Civil Code, specifically
paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public
or judicial auction,
properties and rights which are the objects of litigation in which they may take
part by virtue of their
profession. The said prohibition, however, applies only if the sale or assignment of
the property takes
place during the pendency of the litigationinvolving the client's property.
Hence, a contract between a lawyer and his client stipulating a contingent fee is
not covered by said
prohibition under Article 1491 (5) of the Civil Code because the payment of said
fee is not made during
the pendency of the litigation but only after judgment has been rendered in the
case handled by the
lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may
have a lien over funds

and property of his client and may apply so much thereof as may be necessary to
satisfy his lawful fees
anddisbursements. As long as the lawyer does not exert undue influence on his
client, that no fraud is committed orimposition applied, or that the compensation is
clearly not excessive as to amount to extortion, a contractfor contingent fee is valid
and enforceable. Moreover, contingent fees were impliedly sanctioned byNo. 13 of
the Canons of Professional Ethics which governed lawyer-client relationships when
thecontract of services was entered into between the Fabillo spouses and Murillo.

ANGEL L. BAUTISTA, complainant, vs. ATTY. RAMON A. GONZALES,

respondent.
1990-02-12 | A.M. No. 1625
FACTS:
Ramon A. Gonzales was charged with malpractice, deceit, gross misconduct and
violation of lawyer's oath. He was allegedly accepted a case wherein he agreed
with his clients, namely, Alfaro Fortunado, Nestor Fortunado andEditha Fortunado
[hereinafter referred to as the Fortunados] to pay all expenses, including court
fees, for a contingent fee of fifty percent (50%) of the value of the property in
litigation. That during the pendency of the case where he represents Fortunato he
transfer to himself one-half of the properties of the Fortunados, which properties
are the subject of the litigation , while the case was still pending.
In his contention he connotes that Canon 10 of the old Canons of Professional
Ethics, which states that
"[t]he lawyer should not purchase any interests in the subject matter of the
litigation which he is
conducting," does not appear anymore in the new Code of Professional
Responsibility. He therefore
concludes that while a purchase by a lawyer of property in litigation is void under
Art. 1491 of the Civil
Code, such purchase is no longer a ground for disciplinary action under the new
Code of Professional
Responsibility.
ISSUE:
Whether or not the contract he entered into constitutes gross misconduct.
HELD:
Yes.
Mentioned in Art. 1491 of the Civil Code areprohibited from purchasing the
property mentioned therein because of their existing trust relationshipwith the
latter. A lawyer is disqualified from acquiring by purchase the property and rights
in litigationbecause of his fiduciary relationship with such property and rights, as
well as with the client. And itcannot be claimed that the new Code of Professional
Responsibility has failed to emphasize the natureand consequences of such
relationship. Canon 17 states that "a lawyer owes fidelity to the cause of hisclient
and he shall be mindful of the trust and confidence reposed in him." On the other
hand, Canon 16provides that "a lawyer shall hold in trust all moneys and
properties of his client that may come into hispossession." Hence, notwithstanding
the absence of a specific provision on the matter in the new Code,the Court,
considering the abovequoted provisions of the new Code in relation to Art. 1491 of
the CivilCode, as well as the prevailing jurisprudence, holds that the purchase by a
lawyer of his client's propertyin litigation constitutes a breach of professional
ethics for which a disciplinary action may be brought
against him.

IN RE: SUSPENSION FROM THE PRACTICE OF LAW IN THE TERRITORY OF

GUAM OF ATTY. LEON MAQUERA
B.M. No. 793
TOPIC: PROHIBITION OF LAWYERS IN ACQUIRING THE PROPERTY OF HIS
CLIENT
FACTS: Edward Benavente, the creditor of a certain Castro, obtained a judgment
against Castro in a civil case. Maquera, a Filipino law practitioner in Guam, served
as Castros counsel in said case.
Castros property subject of the case, a
parcel of land, was to be sold at a public auction in satisfaction of his obligation to
Benavente. Castro, however, retained the right of redemption over the property for
one year. The right of redemption could be exercised by paying the amount of the
judgment debt within the aforesaid period.
At the auction sale, Benavente purchased Castros property for Five Hundred
U.S. Dollars (US$500.00), the amount which Castro was adjudged to pay him.
On December 21, 1987, Castro, in consideration of Maqueras legal services
amounting to 45, 000 U.S. Dollars in the civil case involving Benavente, entered
into an oral agreement with Maquera and assigned his right of redemption in favor
of the latter.
On January 8, 1988, Maquera exercised Castros right of redemption by
paying Benavente US
$525.00 in satisfaction of the judgment debt. Thereafter,
Maquera had the title to the property transferred in his name.
On December 31, 1988, Maquera sold the property to C.S. Chang and C.C. Chang
for Three Hundred Twenty Thousand U.S. Dollars (US$320,000.00).
The District Court of Guam informed the SC of the Philippines of the
suspension of Atty. Leon G. Maquera (Maquera) from the practice of law in Guam
for two (2) years pursuant to the Decision rendered by the Superior Court of Guam
in light of the aforementioned misconduct.
ISSUE: WON Atty. Maquera may also be suspended in the practice of law in the
Philippines.

HELD: Yes. the attorney-client relationship between Maquera and Castro was not
yet completely terminated when they entered into the oral agreement to transfer
Castros right of redemption to Maquera on December 21, 1987. It also held that
Maquera profited too much from the eventual transfer of Castros property to him
since he was able to sell the same to the Changs with more than US$200,000.00 in
profit, whereas his legal fees for services rendered to Castro amounted only to
US$45,000.00. Such transaction falls squarely under Article 1492 in relation to
Article 1491, paragraph 5 of the Civil Code of the Philippines. Paragraph 5 of
Article 1491prohibits the lawyers acquisition by assignment of the clients property
which is the subject of the litigation handled by the lawyer. Under Article 1492,the
prohibition extends to sales in legal redemption.

PROVINCE OF CEBU vs. HEIRS OF RUFINA MORALES

G.R. No. 170115, February 19, 2008
TOPIC: CONSENSUALITY OF A CONTRACT OF SALE
FACTS: Province of Cebu (Petitioner) leased in favor of Rufina Morales (Morales) a
lot which formed part of the Banilad Estate. Subsequently. petitioner donated in
favour of the City of Cebu several parcels of land including that leased to Morales.
City of Cebu sold the donated lots to public auction and Morales was allowed
to match the highest bid for having a preferential right as an actual occupant
thereof. Thus, Morales paid the required deposit and partial payment for the lot.
In the meantime, the Province of Cebu filed an action for reversion over the
same lot against City of Cebu. The parties in this civil case ended into a
compromise wherein the City of Cebu agreed to return the donated lots except
those already utilised.
Morales died and thus she was not able to make a downpayment to the
remaining balance of the purchase price of the lot. Later on, respondents asked for
a formal conveyance of the lot in their favour. However, petitioner refused to
recognise the sale made during the public auction in view of the non-payment of
the balance.
ISSUE: WON there is a perfected contract of sale between petitioner and Rufina
Morales/
HELD: Yes. A sale bu auction is perfected when auctioneer announces its
perfection by the fall of the hammer or in other customary manner . Also, there is
here already a meeting of the minds between the City of Cebu and Morales as to

the lot sold and its price, such that each of them may reciprocally demand
performance of the contract from the other.

HEIRS OF AMPARO DEL ROSARIO vs. SANTOS

GR No. L-46892, September 30, 1981
TOPIC: SALE OF EXPECTED THING
FACTS:Amparo entered into a contract with Atty. Santos and his wife Aurora
Santos whereby he sold to the former a 20, 000 sam parcel of lot. Said lot forms
part of a parcel of land belonging to a certain Teofilo Custodio, of which lots, Atty.
Santos, by agreement with the latter, as his attorneys fees, owns 1/2 interests
thereof. Parties agreed that Atty. Santow will thereafter execute a Deed of
Confirmation of Sale in favor of Del Rosario as soon as the title is released and the
subdivision plan therefor.
In light of failure of respondent Atty. Santos to execute the Deed of
Confirmation of sale as aforementioned, Amparo brought the instant action. In hir
reply, Atty. Santos denied the existence of said contract. He further claims that the
same is not valid as the 1/2 interest he has in the land of his client Custodio was
not yet existing when the alleged contract was entered into.
ISSUE: WON there is a valid contract of sale.
HELD: Yes. the execution of Deed of Sale is valid notwithstanding the lack of any
title to Atty. Santos at the time of execution of deed of sale. Under Art 1461, things
having potential existence may be the object of a contract of sale.

JAVIERvs.COURTOFAPPEALS,
G.R.NO.L48194March15,1990

FACTS:Private respondent is a holder of an ordinary timber license issued by the

Bureau of Forestry covering 2,535 hectares in the town of Medina, Misamis
Oriental. On February 15, 1966 he executed a "Deed of Assignment" in favor of
petitioners for a total of 120,000 pesos, in which, 20,000 would be paid upon
signing the contract and the balance of 100,000 pesos shall be paid 10,000 pesos
for ever shipment of export logs produced from the concession of Timberwealth
Corporation. At the time the said deed of assignment was executed, private
respondent had a pending application, dated October 21, 1965, for an additional
forest concession covering an area of 2,000 hectares southwest of and adjoining
the area of the concession subject of the deed of assignment. Hence, on February
28, 1966, private respondent and petitioners entered into another "Agreement"
that respondent will transfer and covey whatever rights he may acquire from the
pending application and approval of the forest concession which is now to

Timberwealth Corporation and the Javier Spouses (petitioners) for the sum of
30,000 pesos.
On November 18, 1966, the Acting Director of Forestry wrote private respondent
that his forest concession was renewed up to May 12, 1967, but since the
concession consisted of only 2,535 hectares, he was therein informed that: he
needs to form an organization such as a cooperative, partnership or corporation
with a total holding area of not less than 20,000 hectares and an allowable
aggregate cut of 25,000 cubic meters otherwise, his license will not be further
renewed.
On July 16, 1968, for failure of petitioners to pay the balance due under the two
deeds of assignment, private respondent filed an action against petitioners, based
on the said contracts, for the payment of the amount of P83,138.15 with interest at
6% per annum from April 10, 1967 until full payment, plus P12,000.00 for
attorney's fees and costs.
After trial, the lower court rendered judgment dismissing private respondent's
complaint and ordering him to pay petitioners the sum of P33,161.85 with legal
interest at six percent per annum from the date of the filing of the answer until
complete payment. On appeal, the CA reversed the decision. Hence, this petition.
ISSUE/S: Whether or not the deed of assignment dated February 15, 1966 is null
and void for total absence of consideration? ; Whether or not the deed of
assignment dated February 28, 1966 is null and void for non-fulfillment of the
conditions stated therein?
RULING:
No. The true cause or consideration of said deed was the transfer of the forest
concession of private respondent to petitioners for P120,000.00. The deed of
assignment of February 15, 1966 is a relatively simulated contract which states a
false cause or consideration, or one where the parties conceal their true
agreement. A contract with a false consideration is not null and void per se.. Under
Article 1346 of the Civil Code, a relatively simulated contract, when it does not
prejudice a third person and is not intended for any purpose contrary to law,
morals, good customs, public order or public policy binds the parties to their real
agreement.
Yes. The efficacy of said deed of assignment is subject to the condition that the
application of private respondent for an additional area for forest concession be
approved by the Bureau of Forestry. Since private respondent did not obtain that
approval, said deed produces no effect. When a contract is subject to a suspensive
condition, its birth or effectivity can take place only if and when the event which
constitutes the condition happens or is fulfilled. 28 If the suspensive condition does
not take place, the parties would stand as if the conditional obligation had never
existed.

Moreover, under the second paragraph of Article 1461 of the Civil Code, the
efficacy of the sale of a mere hope or expectancy is deemed subject to the
condition that the thing will come into existence. In this case, since private
respondent never acquired any right over the additional area for failure to secure
the approval of the Bureau of Forestry, the agreement executed therefor, which
had for its object the transfer of said right to petitioners, never became effective or
enforceable.

DEL PRADO vs SPOUSES CABALLERO,

G.R. NO. 148225, March 3,2010

FACTS: On June 11, 1990, respondents sold to petitioner, Carmen del Prado, Lot
No. 11909 on the basis of the tax declaration covering the property which was
unregistered and was described as follows: "A parcel of land known as Cad. Lot
No. 11909, bounded as follows:North : Lot 11903East : Lot 11908West : Lot
11910South : Lot 11858 & 11912containing an area of 4,000 square meters, more
or less, covered by Tax Dec. No. 00787 of the Cebu City Assessors Office, Cebu
City." of which parcel of land we are the absolute and lawful owners.
Original Certificate of Title (OCT) No. 1305, covering Lot No. 11909, was issued
only on November 15, 1990, and entered in the "Registration Book" of the City of
Cebu on December 19, 1990. Therein, the technical description of Lot No. 11909
states that said lot measures about 14,457 square meters, more or less.
On March 20, 1991, petitioner filed in the same cadastral proceedings a "Petition
for Registration of Document Under Presidential Decree (P.D.) 1529" in order that
a certificate of title be issued in her name, covering the whole Lot No. 11909. After
trial on the merits, the court found that petitioner had established a clear and
positive right to Lot No. 11909. The intended sale between the parties was for a
lump sum, since there was no evidence presented that the property was sold for a
price per unit. It was apparent that the subject matter of the sale was the parcel of
land, known as Cadastral Lot No. 11909, and not only a portion thereof.
An appeal was duly filed. On September 26, 2000, the CA promulgated the
assailed decision, reversing and setting aside the decision of the RTC. Hence, this
petition.
ISSUE: Whether or not the sale of the land was for a lump sum or not?; Whether
the petitioners are the owners of the whole lot or just 4,000 sq. mtrs.?
RULING: Yes . In the instant case, the deed of sale is not one of a unit price
contract. The parties agreed on the purchase price of P40,000.00 for a
predetermined area of 4,000 sq m, more or less, bounded on the North by Lot No.
11903, on the East by Lot No. 11908, on the South by Lot Nos. 11858 & 11912,
and on the West by Lot No. 11910. In a contract of sale of land in a mass, the
specific boundaries stated in the contract must control over any other statement,
with respect to the area contained within its boundaries.
The Court, however, clarified that the rule laid down in Article 1542 is not hard and
fast and admits of an exception. It held:
A caveat is in order, however. The use of "more or less" or similar words in
designating quantity covers only a reasonable excess or deficiency. A vendee of
land sold in gross or with the description "more or less" with reference to its area
does not thereby ipso facto take all risk of quantity in the land..

Clearly, the discrepancy of 10,475 sq m cannot be considered a slight difference in

quantity. The difference in the area is obviously sizeable and too substantial to be
overlooked. It is not a reasonable excess or deficiency that should be deemed
included in the deed of sale.

Semira vs CA
G.R. No. 76031 March 2, 1994
TOPIC: In a case of sale of real estate property is for lump sum, whether the
boundaries or the area stated in the sale should govern or control.
FACTS:
Juana Gutierrez owned a parcel of land, later designated as Lot 4221which she
sold to private respondent Buenaventura An for P850.00 executed on January 4,
1961. Aside from the estimated area of 822.5 square meters appearing in the deed
of sale, the following boundaries of the lot are also stated: on the north, by TaysanLobo-Sto. Nio-Pinagbayanan and Sto. Nio-Dagatan Road; on the east, by Sto.
Nio-Pinagbayanan Road and Juana Gutierrez; on the south, by Sto. Nio School
site; and, on the west, by Sto. Nio-Dagatan Road. Thereafter, private respondent
entered the premises observing thereby the boundaries of the property and not the
area given.
On 18 October 1972, private respondent sold Lot 4221 to his nephew, Cipriano
Ramirez. On 12 March 1979, Cipriano Ramirez sold the lot to petitioner Miguel
Semira for P20,000.00. However, the area stated in the "Kasulatan ng Bilihan ng
Lupa" 4was 2,200 square meters and not 822.5 appearing in the previous
document.
On 17 March 1979, Miguel Semira entered the very same premises previously
occupied by Ramirez and began the construction of a new rice-mill. However, on
18 April 1979, a complaint for forcible entry was filed against him by private
respondent in the Municipal Circuit Trial Court of Taysan-Lobo. The case was
initially dismissed for lack of jurisdiction.the trial court modified its earlier
resolution and adjudged petitioner the rightful and lawful owner and possessor of
the area in question and cannot therefore be ejected therefrom.
-Private respondent appealed to the Regional Trial Court which reversed the
Municipal Circuit Trial Court. Then, Petitioner appealed to the Court of Appeals,
but without success. Hence, this petition.

ISSUE: Whether or not the petitioner is the owner of the whole lot consisting of
2,200 sq. meters?

RULING: YES. We sustain petitioner as did the Municipal Circuit Trial Court. We
have repeatedly ruled that where land is sold for a lump sum and not so much per
unit of measure or number, the boundaries of the land stated in the contract
determine the effects and scope of the sale, not the area thereof. 15Hence, the
vendors are obligated to deliver all the land included within the boundaries,
regardless of whether the real area should be greater or smaller than that recited
in the deed. This is particularly true where the area is described as "humigit
kumulang," that is, more or less. 16These conclusions are drawn from Art. 1542 of
the Civil code.
Hence, when private respondent Buenaventura An sold Lot 4221 to his nephew
Cipriano Ramirez which incorporated both the area and the definite boundaries of
the lot, the former transferred not merely the 822.5 square meters stated in their
document of sale but the entire area circumscribed within its boundaries. In
addition, the fact that the area turned out to be 2,200 square meters; instead of
only 822.5 square meters, is of no moment and does not entitle private respondent
to the difference because the definite object sold was Lot 4221 in its entirety and
not just any unit of measure or number. 17That the sale resulted in a disadvantage
to private respondent does not confer on him any cause of action against
petitioner.

DANGUILAN vs. CA G.R. NO. L-69970 November 28, 1988

FACTS:
The subject property located in Cagayan was owned by Domingo
Melad. Private respondent, an alleged illegitimate child of Domingo, claims that
she purchased the subject property for a consideration of P80.00 from her father.
She claims that she and her mother lived in the subject property until petitioner
asked for permission from the former to cultivate the subject property in exchange
of the fruits of their harvest. When petitioner stopped delivering the fruits of their
harvest, respondent filed a complaint against petitioner for illegally withholding
the property.
Petitioner, husband of Domingo's niece, in his defense, contends that he is
the lawful owner of the property as Domingo and his wife gave the property to the
former by way of donation provided that petitioner takes care of them until he dies.
Domingo executed two private instruments one for the farm and the other for a
residential lot.
RTC ruled infavor of held that the petitioner was more believable and that
the plaintiff's evidence was "unpersuasive and unconvincing." It was held that the
plaintiff's own declaration that she moved out of the property left it in the
possession of petitioner was contradictory to her claim of ownership. She was also

inconsistent when she testified first that the petitioner was her tenant and later in
rebuttal that he was her administrator. The decision concluded that where there
was doubt as to the ownership of the property, the presumption was in favor of the
one actually occupying the same, which in this case was the petitioner.
Court of Appeals reversed the decision of the RTC stating that the instruments
were null and void and must have been executed in a public document.
ISSUE:
Whether or not the instruments are null and void using Article
749 of the Civil Code.
RULING:
No. Considering the language of the two instruments, that Domingo
Melad did intend to donate the properties to the petitioner, as the private
respondent contends. We do not think, however, that the donee was moved by pure
liberality. While truly donations, the conveyances were onerous donations as the
properties were given to the petitioner in exchange for his obligation to take care
of the donee for the rest of his life and provide for his burial. Hence, it was not
covered by the rule in Article 749 of the Civil Code requiring donations of real
properties to be effected through a public instrument. The case at bar comes
squarely under the doctrine laid down in Manalo v. De Mesa, where the Court held:
"There can be no doubt that the donation in question was made for a valuable
consideration, since the donors made it conditional upon the donees' bearing the
expenses that might be occasioned by the death and burial of the donor Placida
Manalo, a condition and obligation which the donee Gregorio de Mesa carried out
in his own behalf and for his wife Leoncia Manalo; therefore, in order to determine
whether or not said donation is valid and effective it should be sufficient to
demonstrate that, as a contract, it embraces the conditions the law requires and is
valid and effective, although not recorded in a public instrument."
The Supreme Court reversed the decision of CA and upheld the validity of
the instruments making the petitioner the legitimate owner of the property.
Municipality of Victorias vs. CA
G.R No. L-31189 March 31, 1987
Facts:Respondent Norma Leuenberger, married to Francisco Soliva, inherited the
whole of Lot No. 140 from her grandmother, Simeona J. Vda. De Ditching. In 1952,
she donated a portion of Lot No. 140, about 3 ha. to the municipality for the
ground of a certain high school and had 4 ha. converted into a subdivision.
Rspondent had the remaining 21 ha. relocated by a surveyor upon request of
lessee Ramon Jover who complained of being prohibited by municipal officials from
cultivating the land. It was then that Respondent discovered that the parcel of

land, more or less 4 ha. or 33,747 sq.m. used by Petitioner Municipality of

Victorias, as a cemetery, is within her property which is now Identified as Lot 76.
Respondent wrote the Mayor of Victorias regarding her discovery, demanding
payment of past rentals and requesting delivery of the area allegedly illegally
occupied by Petitioner. When the Mayor replied that Petitioner bought the land she
asked to be shown the papers concerning the sale but was referred by the Mayor
to the municipal treasurer who refused to show the same.
Respondents filed a complaint for recovery of possession of the parcel of land
occupied by the municipal cemetery. In its answer, petitioner Municipality, by way
of special defense, alleged ownership of the lot, having bought it from Simeona
Jingco Vda. de Ditching sometime in 1934. The lower court decided in favor of the
Municipality. On appeal Respondent appellate Court set aside the decision of the
lower court.
Issue:Whether or not there is a perfected contract of sale.
Held:Although the petitioner cannot present a deed of absolute sale, the sale was
still valid by the delivery of the property through the execution of a public
instrument. Under Art.1498, when the sale is made through a public instrument,
the execution thereof shall be equivalent to the delivery of the thing which is the
object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred.
Although respondent was able to register the disputed land under the
Torrens System Art. 1456 provides that if the property is acquired through mistake
or fraud, the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property comes.
Therefore, the land in dispute is held by private respondents in trust for the
Municipality of Victorias, it is logical to conclude that the latter can neither be
deprived of its possession nor be made to pay rentals thereof.

De Leon vs. Ong

G.R No. 170405 February 2, 2010

Facts:
On March 10, 1993, Raymundo S. De Leon (petitioner) sold 3 parcels
of land to Benita T. Ong (respondent). The said properties were mortgaged to Real
Savings & LoanAssociation Inc. (RSLAI) a financial institution. The parties then
executed a notarized deed of absolute sale with assumption of mortgage. As
indicated in the deed of mortgage, the parties stipulated that the petitioner shall
execute a deed of assumption of mortgage in favor of respondent after full
payment of the P415,000. They also agreed that the respondent shall assume the
mortgage. The respondent then subsequently gave petitioner P415,000 as partial
payment.
On the other hand, De Leon handed the keys to Ong and De Leon wrote a letter to
inform RSLAI that the mortgage will be assumed by Ong. Thereafter, the
respondent took repairs and made improvements in the properties. Subsequently,
respondent learned that the same properties were sold to a certain Viloria after
March 10, 1993 and changed the locks, rendering the keys given to her useless.
Respondent proceeded to RSLAI but she was informed that the mortgage has been
fully paid and that the titles have been given to the said person.
Respondent then filed a complaint for specific performance and declaration
of nullity of the second sale and damages. The petitioner contended that
respondent does not have a cause of action against him because the sale was
subject to a condition which requires the approval of RSLAI of the mortgage.
Petitioner reiterated that they only entered into a contract to sell. The RTC
dismissed the case. On appeal, the CA upheld the sale to respondent and nullified
the sale to Viloria. Petitioner moved for reconsideration to the SC.
Issue:
sell?

Whether the parties entered into a contract of sale or a contract to

Held: In a contract of sale, the seller conveys ownership of the property to the
buyer upon the perfection of the contract. The non-payment of the price is
a negative resolutory condition. Contract to sell is subject to a positive suspensive
condition. The buyer does not acquire ownership of the property until he fully pays
the purchase price. In the present case, the deed executed by the parties did not
show that the owner intends to reserve ownership of the properties. The terms and
conditions affected only the manner of payment and not the immediate transfer of
ownership. It was clear that the owner intended a sale because he unqualifiedly
delivered and transferred ownership of the properties to the respondent.
This case also involves a double sale as the disputed property were sold validly on
two separate occasions by the same seller to the two different buyers, Article 1544
provides that: If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession
thereof in good faith, if it should be movable property. 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. Should there be no inscription, the
ownership shall pertain to the person who in good faith was first in the possession,
and in the absence thereof, to the person who presents the oldest title, provided
there is good faith. In the case at bar since neither of parties registered the sale,
the one who possess the property first in good faith has the better right, in this

case it is the respondent who first took actual possession of the property when
petitioner handed to him the keys of the property. Hence respondent has the better
right.

Puromines Inc. vs. CA

G.R No. 130115 March 22, 1993
Facts: Puromines Inc. and Makati Agro Trading Inc. entered into a contract with
Philipp Brothers Oceanic Inc. for the sale of prilled Urea in bulk. On 22 May 1988,
the vessel M/V Liliana Dimitrova loaded on board at Yuzhny USSR a shipment of
15,500 metric tons prilled Urea in bulk complete and in good order and condition
for transport to Iloilo and Manila, to be delivered to Puromines. Three bills of
lading were issued by the ship-agent in the Philippines, Maritime Factors Inc.,
namely: Bill of Lading 1 dated 12 May 1988 covering 10,000 metric tons for
discharge Manila; Bill of Lading 2 of even date covering 4,000 metric tons for
unloading in Iloilo City; and Bill of Lading 3, same date, covering 1,500 metric tons
likewise for discharged in Manila. The shipment covered by Bill of Lading 2 was
discharged in Iloilo City complete and in good order and condition. However, the
shipments covered by Bill of Ladings 1 and 3 were discharged in Manila in bad
order and condition, caked, hardened and lumpy, discolored and contaminated with
rust and dirt. Damages were valued at P683, 056.29 including additional
discharging expenses.
Consequently, Puromines filed a complaint with the trial court for breach of
contract of carriage against Maritime Factors Inc. as ship-agent in the Philippines
for the owners of the vessel MV Liliana Dimitrova, while Philipp Brothers Oceanic
Inc., was impleaded as charterer of the said vessel and proper party to accord
Puromines complete relief. Philipp Bros. filed a motion to dismiss, on the grounds
that the complaint states no cause of action, that it was prematurely filed, and that
Puromines should comply with the arbitration clause in the sales contract. The
motion to dismiss was opposed by Puromines contending the inapplicability of the
arbitration clause inasmuch as the cause of action did not arise from a violation of
the terms of the sales contract but rather for claims of cargo damages where there
is no arbitration agreement. The trial court denied Philipp Bros. motion to dismiss.
Elevating the matter to the Court of Appeals, Purominess complaint was
dismissed. The appellate court found that the arbitration provision in the sales
contract and/or the bills of lading is applicable in the present case. Hence, the
special civil action for certiorari and prohibition.
Issue: Whether or not the sales contract includes claim for damages arising from
carriage and delivery of goods.

Held: The sales contract is comprehensive enough to include claims for damages
arising from carriage and delivery of the goods. As a general rule, the seller has
the obligation to transmit the goods to the buyer, and concomitant thereto, the
contracting of a carrier to deliver the same.
Article 1523 of the Civil Code provides that Where in pursuance of a contract of
sale, the seller in authorized or required to send the goods to the buyer, delivery of
the goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the buyer,
except in the cases provided for in article 1503, first, second and third paragraphs,
or unless a contrary intent appear. Unless otherwise authorized by the buyer, the
seller must take such contract with the carrier on behalf of the buyer as may be
reasonable, having regard to the nature of the goods and the other circumstances
of the case. If the seller omit so to do, and the goods are lost or damaged in course
of transit, the buyer may decline to treat the delivery to the carrier as a delivery to
himself,, or may hold the seller responsible in damages. The Supreme Court
dismissed the petition and affirmed the decision of the court a quo.

Boy v. Court of Appeals

G.R. No. 125088, April 14, 2004
Obligations of a Seller to Transfer Ownership (Art. 1477)
Unless there is a stipulation to the contrary, when the sale is made through a
public instrument, the execution thereof is equivalent to the delivery of the thing
which is the object of the contract.
Facts: Lagrimas Boy loaned P26,200 from spouses Isagani and Erlinda Ramos,
covered by a real estate mortgage of a parcel of land and the house thereon at
Singalong, Manila. The parties subsequently executed a Deed of Absolute sale over
the same property for P31,000. Boy contends that she executed a Kasunduan with
the spouses, acknowledging the sale for P31,000, P22,500 of which was
immediately paid and the balance of P8,500 to be paid at the end of August 1988
and that the property would be transferred to the spouses only upon full payment
of the purchase price. Boy continued to possess the property by the spouses
Ramos tolerance. However, when the spouses demanded that Boy vacate the
property, the latter refused, prompting the spouses to file the present ejectment
case. MeTC ruled that the notarized Deed of Absolute Sale, execution of which was
not denied by the parties, was binding upon them over the Kasunduan. RTC

reversed the decision and held that the Kasunduan reflected the true intention of
the parties. CA agreed with MeTC decision and with the spouses contention that
Erlinda was tricked into signing the Kasunduan.
Issues:
1. Whether MeTC has jurisdiction over the case
2. Whether CA erred in misinterpreting and disregarding the Kasunduan
3. Whether CA correctly ruled that the spouses Ramos have a right of material
possession over the property
Ruling:
1. Yes. Pursuant to B.P. 129 or the Judiciary Reorganization Act of 1980, in
forcible entry and unlawful detainer cases, if the defendant raises the
question of ownership in his pleadings and the question of possession cannot
be resolved without deciding the issue of ownership, the inferior courts have
the undoubted competence provisionally to resolve the issue of ownership
for the sole purpose of determining the issue of possession.
2. No. Findings of the fact of CA are final and cannot be reviewed on appeal,
provided they are borne out by the record or are based on substantial
evidence. Upon reviewing the records, the Court found no ground to change
the factual finding of CA on the Kasunduan, with the resulting holding that it
is not binding on the parties.
3. Yes.By the contract of sale, Boy obligated herself to transfer the ownership
of, and to deliver, the subject property to the spouses Ramos after they paid
the price of P31,000. The Deed of Absolute Sale does not contain any
stipulation against the constructive delivery of the property to the spouses.
In the absence of stipulation to the contrary, the ownership of the property
sold passes to the vendee upon the actual or constructive delivery
thereof.Boys continued occupation of said property after the sale was
without payment of rent and was by mere tolerance. A person who occupies
the land of another at the latters tolerance or permission, without any
contract between them, is bound by an implied promise that he will vacate
the same upon demand, failing which a summary action for ejectment is the
proper remedy against him.
Spouses Buenaventura, et al. v. Court of Appeals
G.R. No. 126376, Nov. 20, 2003
Price (Art. 1470)
If there is a meeting of the minds of the parties as to the price, the contract of sale
is valid and gross inadequacy of price does not affect a contract of sale, except if
there is a defect in the consent, or that the parties really intended a donation or
some other contract.

Facts: Leonardo and Feliciana Joaquin executed six deeds of sale in favor of their
children Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, Gavino and their respective
spouses. Spouses Bernardo and Consolacion, Juanito and Nora, Rufino and Emma,
and Natividad (also children of Leonardo and Feliciana) sought to declare null and
void the said deeds of sale for lack or gross inadequacy of consideration and for
being the result of a deliberate conspiracy to unjustly deprive them as compulsory
heirs of their share in the legitime. RTC and CA both ruled in favor of defendants
and held that the deeds of sale have valuable consideration and that the petitioners
had only an inchoate interest in the estate of their parents while the latter are still
alive, thus, they are not the real parties in interest.
Issues:
1. Whether petitioners have a legal interest over the properties
2. Whether the deeds of sale are void for lack of consideration
3. Whether the deeds of sale are void for inadequacy of price
Ruling:
All no.
1. Petitioners right to their parents properties is merely inchoate and vests
only upon their parents death. While still living, the parents of petitioners
are free to dispose of their properties.
2. A contract of sale is a consensual contract. If there is a meeting of the minds
of the parties as to the price, the contract of sale is valid, despite the
manner of payment, or even the breach of that manner of payment.
Petitioners failed to show that the prices in the Deeds of Sale were
absolutely simulated. On the other hand, the Deeds of Sale which petitioners
presented as evidence plainly showed the cost of each lot sold.
3. Art. 1355. Except in cases specified by law, lesion or inadequacy of cause
shall not invalidate a contract,unless there has been fraud, mistake or
undue influence.
Art. 1470. Gross inadequacy of price does not affect a contract of
sale, except as may indicate a defect in the consent, or that the parties
really intended a donation or some other act or contract.
Petitioners failed to prove any of the instances mentioned in these articles,
which would invalidate, or even affect, the Deeds of Sale. There is no
requirement that the price be equal to the exact value of the subject matter
of sale. All the respondents believed that they received the commutative
value of what they gave.

Ho, Jr. v. Teng Gui

G.R. No. 130115, July 16, 2008

Price (Art. 1471)

The reliance of the trial court on the provisions of Art. 1471 of the Civil Code to
conclude that the simulated sales were a valid donation to the respondent is
misplaced because its finding was based on a mere assumption when the law
requires positive proof, which the respondent was unable to show.
Facts: Felix Ting Ho, Sr., a Chinese citizen, died intestate and left an estate
consisting of a 774 sqm. commercial land, a two-storey residential house, a twostorey commercial building and a sari-sari store. Ho, Sr. allegedly sold the house to
his sister-in-law Victoria Cabasal, while the building was sold to Gregorio Fontela,
which he later sold to Vicente Teng Gui, Ho, Sr.s eldest son. Ho, Sr. then executed
an Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interest
including Improvements on Land in favor of Teng Gui. On the basis of said
document, Teng Gui applied for a Miscellaneous Sales Patent with the Bureau of
Lands, which was granted. While the properties were transferred, Ho, Sr. and wife
Leonila continued to occupy the same and to manage the store. RTC held that
being a Chinese citizen proscribed from owning real property, Ho, Sr. resorted to a
series of simulated transactions to preserve the right to the properties in the hands
of his family. Nevertheless, RTC considered the Affidavit a donation, which was
accepted by Teng Gui, and awarded to him the entire conjugal share of Ho, Sr.,
dividing only Leonilas conjugal share among the other children (petitioners). CA
reversed RTC decision and held that Ho, Sr. is disqualified from owning public
lands and that Teng Gui is the rightful owner of the lot by virtue of the patent,
while the house and building form part of the estate of the spouses since the sale
to Cabasal and Fontela were simulated. CA awarded 4/5 of the properties erected
on the land to petitioners
Issue: Whether both the lot and properties erected thereon should be included in
the estate of Ho, Sr.
Ruling:Yes.With regard to the lot, the Constitution is clear that the right to
acquire lands of the public domain is reserved for Filipino citizens or corporations
at least 60% of the capital of which is owned by Filipinos. Thus, Ho, Sr. was never
the owner of the lot in light of the constitutional proscription. By virtue of the sales
patent and the certificate of title issued pursuant to it, Teng Gui became the owner
of said lot.
As regards the properties erected on the lot, the Court agreed with RTC and CA
that the transfers thereof were simulated. However, it cannot be deemed a
donation as ruled by the RTC as such finding was based on mere presumption,
when the law requires positive proof.

Hyatt Elevators vs. Cathedral Heights

G.R. No. 173881, December 1, 2010
Topic involved: Price is an essential element in the formation of a binding and
enforceable contract of sale.
Facts: Petitioner Hyatt Elevators and Escalators Corporation entered into a
service agreement with respondent Cathedral Heights Building Complex
Association, Inc., wherein petitioner was contracted to maintain four passenger
elevators in respondents building. It was agreed that it would be petitioners duty
and obligation to perform monthly inspection adjustment and lubrication of
machinery, motors, control parts and necessary equipment, including switches and
wirings. And on the part of the respondent, to pay for the additional charges
incurred in connection with the repair and supply of parts.
Petitioner claimed that it incurred expenses from April 1997 to July 1998
amounting to P1,161,933.47 for maintenance and repair of elevators. Petitioner
demanded payment through demand letters but respondent refused to pay. A
complaint for a sum of money was filed by petitioner with the RTC, which ruled in
its favor. The RTC based its decision on the presence of the sale invoices which
apparently proved that the parties entered into a contract of sale of goods.
On appeal, the CA reversed the ruling and said that respondent did not consent to
the purchase of the parts and there was no meeting of the minds as to the price. It
further stated that the service agreement did not give petitioner the unbridled
license to purchase and install parts and demand payment according to its dictated
price.
Issue: Whether or not there is a perfected contract of sale between the parties for
the parts used in the maintenance of the elevators as agreed upon in the service
agreement
Ruling: No. The Supreme Court agreed with respondent when it stated that the
standard operating procedure in maintenance of elevators by purchasing parts
required the approval of the board of directors. The contention of petitioner that
the building engineer approved the transaction and the non-observance of the SOP
since 1994 was not sufficiently proven. Hence, there was no consent.

As to the fixing of the price, the SC ruled that there was no meeting of the
minds upon the price since it cannot be left to the discretion of one of the parties
to fix it. It cannot be said that there has been an arrangement on the price since it
is not possible for the other contracting party to agree on something of which he
does not know beforehand. But a price fixed by one of the contracting parties, if
accepted by the other, gives rise to a perfected sale.There would have been a
perfected contract of sale had respondent accepted the price dictated by petitioner
even if such assent was given after the services were rendered. There is, however,
no proof of such acceptance on the part of respondent. Hence, there was no
perfected contract of sale between the parties.

Chua vs. Court of Appeals & Valdes-Choy

G.R. No. 119255, April 9, 2003
Topic involved: Failure of the buyer to deliver full payment upon the date
stipulated in a contract to sell no longer binds the seller to deliver the property.
Facts: Valdes-Choy advertised for sale her 718sqm. house and lot located in San
Lorenzo Village, Makati City. Petitioner Chua responded to the advertisement and
after several meetings, the parties agreed on a purchase price of P10,800,000.00.
On, June 30, 1989, the parties agreed that an earnest money of P100,000 be paid
and the balance is payable on or before July 15, 1989. They also agreed that the
capital gains tax shall be paid by the seller, failure to pay the balance will forfeit
the earnest money and provided that all papers are in proper order.
On July 13, 1989, Chua secured from PBCom a managers check for P480,000
which he gave to Valdes-Choy to pay the capital gains tax. Later that day, the
parties signed two deeds of absolute sale, the first for the house and lot and the
second for the furniture and fixtures contained in the house for a total price of
10.8million less capital gains tax and earnest money.
On the following day, Valdes-Choy accompanied by Chua, went to the bank to
deposit the managers check and buy another managers check payable to the
Commissioner of Internal Revenue. When the parties returned to the office, Chua
showed Valdes-Choy a managers check representing the amount of the balance to
be paid but however, Chua demanded that the TCT be first transferred in his name
before giving the check. This angered Valdes-Choy and tore the deeds of sale.
Upon expiration of the agreed date to make payment, an action for specific
performance was filed by Chua with the trial court.
The trial court ruled in favor of Chua ordering the defendant to deliver the
property and accept the payment since the non-payment of the purchase price
resulted from the fact that respondent has not yet complied with the condition of
having all papers in proper order, as when the capital gains tax had not yet been
settled. The CA reversed the decision stating that the parties entered into a
contract to sell and the capital gains tax could not be computed till the execution
of a contract of sale. Hence, it was not a reason to withhold payment of the
purchase price and the non-payment of the purchase price on the specified date
removes the right of petitioner to demand the transfer of the property to his name.
Issue: Whether or not the transaction between Chua and Valdes-Choy is a
perfected contract of sale or a contract to sell; Whether or not Chua can compel
Valdes-Choy to cause the transfer of the property to his name before payment of
the full purchase price
Ruling: The Supreme Court ruled that it was a perfected contract to
sell.Ownership over the property was retained by Valdes-Choy and was not to pass
to Chua until full payment of the purchase price. The Court stated that it was
evident from three circumstances: First, the earnest money shall be forfeited upon
failure of the buyer to pay the full price on the given date. In such event, the
Valdes-Chua may sell the property to other interested parties. Second, the

agreement was embodied in a receipt and not a deed of sale. It was not the
intention of the parties to transfer ownership of the property until the purchase
price had been paid. Third, Valdes-Choy retained possession of the title and other
documents relative to the sale.
Also, regarding the earnest money, the law only provides that earnest money in a
contract of sale is proof of perfection of the contract. However in this case, the
contract was a contract to sell where the law does not provide any provision
regarding earnest money. It was even agreed upon by the parties that non-payment
of the full price will forfeit the earnest money. Since the agreement between
Valdes-Choy and Chua is a mere contract to sell, the full payment of the purchase
price partakes of a suspensive condition. The non-fulfillment of the condition
prevents the obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer. Hence, the seller cannot be compelled to
transfer the property.

Fule vs. Court of Appeals

G.R. No. 112212, March 2, 1998
Topic involved: Non-payment of the remaining balance is not a sufficient cause to
invalidate the contract of sale neither should failure to pay the balance result in
payment of interest.
Facts:Petitioner Gregorio Fule, a banker by profession and a jeweler, acquired a
10-hectare property in Tanay, Rizal which used to be under the name of Fr. Antonio
Jacobe. The latter had mortgaged it earlier to the Rural Bank of Alaminos, Laguna,
Inc. to secure a loan, but the mortgage was later foreclosed and the property
offered for public auction.
In July 1984, petitioner, as corporate secretary of the bank, asked Remelia Dichoso
and Oliva Mendoza to look for a buyer who might be interested in the Tanay
property. The two found private respondent Dr. Ninevetch Cruz. It so happened
that at the time, petitioner had shown interest in buying a pair of emerald-cut
diamond earrings owned by Dr. Cruz which he had seen in January of the same
year when his mother examined and appraised them as genuine.
Dr. Cruz, however, declined petitioners offer to buy the jewelry. Subsequently,
negotiations for the barter of the jewelry and the Tanay property ensued. In an
effort to cut through any legal impediment, petitioner executed a deed of
redemption on behalf of Fr. Jacobe, in which the latter purportedly sold the
property to the petitioner.
On October 23, 1984, petitioner met Atty. Belarmino to prepare the documents of
sale. They agreed that the value of the jewelry was for P200,000 and the balance of
P40,000 will be paid later on. As agreed upon, petitioner went to the bank with
Dichoso and Mendoza to meet Dr. Cruz and the cashier of the bank to access the
safety deposit box containing the jewelry. Upon retrieving the contents of the
deposit box, the petitioner was given the chance to verify the genuineness of the
earrings. Dr. Cruz even asked if the jewelry was already okay, which petitioner
nodded to with satisfaction.
Subsequently, at about 8:00 in the evening, petitioner went to the residence of Atty.
Belarmino complaining that the jewelry given was fake. It was even presented to a
jeweler who testified that it was fake. They countered that petitioner could not
have been fooled during the transaction since petitioner had vast experience as a
jeweler.
Petitioner filed a complaint with the RTC praying that the contract of sale be
declared null and void on the ground of deceit, fraud, and the non-payment of the
balance. The RTC ruled in favor of the validity of the contract and was affirmed by
the CA. The petitioner on appeal to the SC also asked for the award payment of
interest for the non-payment of the balance.

Issues:Whether or not the contract of barter or sale over the Tanay property is
valid; Whether or not the petitioner is entitled to payment of the balance with
interest
Ruling:The Supreme Court ruled that the contract of sale is valid as all the
elements of a valid contract under Article 1458 of the Civil Code were present,
namely: (a) consent or meeting of the minds; (b) determinate subject matter, and
(c) price certain in money or its equivalent. It is evident from the facts of the case
that there was a meeting of the minds between petitioner and Dr. Cruz. As such,
they are bound by the contract unless there are reasons or circumstances that
warrant its nullification. The Supreme Court said there was no fraud since there
was no proof that showed Dr. Cruz resorting to insidious words or machinations to
acquire consent from the other party. Also, petitioner was given reasonable
opportunity to examine the jewelry which he in fact accepted. Hence, there was no
reason to nullify the contract.
As to the payment of the balance with interest, while it is true that the amount of
P40,000.00 forming part of the consideration was still payable to petitioner, its
nonpayment by Dr. Cruz is not a sufficient cause to invalidate the contract or bar
the transfer of ownership and possession of the things exchanged considering the
fact that their contract is silent as to when it becomes due and demandable.
Neither may such failure to pay the balance of the purchase price result in the
payment of interest thereon. Article 1589 of the Civil Code prescribes the payment
of interest by the vendee "for the period between the delivery of the thing and the
payment of the price" in the following cases:(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income; (3) Should he be
in default, from the time of judicial or extrajudicial demand for the payment of the
price. However, none of these circumstances were present in this case. Hence, only
the balance of the purchase price is demandable without any interest thereon.

CENTRAL BANK OF THE PHILIPPINES, vs. SPOUSES ALFONSO and

ANACLETA BICHARA, [G.R. No. 131074. March 27, 2000]
Topics: RESCISSION OF CONTRACTS, WITHOLDING PAYMENTS
FACTS:
Spouses Alfonso and Anacelta Bichara were the former registered owners of two
lots situated in Legazpi City. They then sold the property to Central Bank of The
Philippines. The deed of sale to evince the said contract contain the following
provisions.
The vendee by virtue of the sale of real property agreed upon shall pay to the
vendors at the rate of P500.00 per square meter or at a total price of P405,500.00,
such payment to be effected only after this Deed of Sale shall have been duly
registered and a clean title issued in the name of vendee. 2. The vendors hereby
likewise undertake at their expense to fill the parcels of land with an escombro
free from waste materials compacted to the street level upon signing of the Deed
of Sale to suit the ground for the construction of the office of the Central Bank of
the Philippines.Despite the issuance of the title, petitioner failed to pay
respondent. On its part, respondents did not fill up the lot with escombro despite
several demands made by petitioner. Petitioner was then forced to fill up the said
lots, by contracting the services of a construction firm. The filling up of the lots
cost petitioner P45,000.00.Petitioner deducted the said amount from the purchase
price payable to respondents.Due to that the petitioner had not yet paid
respondent, an action for rescission or specific performance with damages, against
petitioner before the RTC was filed. Respondents alleged that petitioner failed to
pay the purchase price despite demand. They prayed for the rescission of the
contract of sale. Petitioner tendered payment to respondents Central Bank check
in the amount of P360, 500.00. Respondents refused the tender. . After receipt of
summons, petitioner filed its answer stating that it was justified in delaying
payment of the purchase price in view of respondents' breach of several conditions
in the contract. First, that respondents failed to deliver to the former free and legal

possession of the two properties, in view of the encumbrances noted in the title, in
addition to the presence of squatters who were not evicted by respondents.
Second, it claimed that respondents did not fill up the lots with escombro free from
waste materials, as agreed upon.
RTC ruled in favor of petitioner and asked the respondents to accept the payment.
CA reversed the RTC and rescind the contract.
ISSUE:Is the rescission made by the CA valid; Is the delay in payments justified?
HELD:
I. The right to rescind a contract involving reciprocal obligations is provided for in
Article 1191 of the Civil Code, which states:
The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has choosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
The law speaks of the right of the "injured party" to choose between rescission or
fulfillment of the obligation, with the payment of damages in either case. Here,
respondents claim to be the injured party and consequently seek the rescission of
the deed of sale, or in the alternative, its fulfillment but on terms different from
those previously agreed upon. Respondents aver that they are entitled to cancel
the obligation altogether in view of petitioner's failure to pay the purchase price
when the same became due. Petitioner disputes respondent's stand, claiming that
if anyone was at fault, it was the latter who dismally failed to comply with their
contractual obligations. Hence, it was entitled to withhold payment of the purchase
price.
II.. An instance where the law clearly allows the vendee to withhold payment of the
purchase price is Article 1590 of the Civil Code, which provides: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

G.R. No. 179594

September 11, 2013

MANUEL UY & SONS, INC. v VALBUECO, INCORPORATED

TOPICS:RESCISION OF CONTRACTS, Republic Act No. 6552 (Realty Installment
Buyer Protection Act)
FACTS:Petitioner is the owner of four parcels of land. Petitioner then executed two
deed of conditional sale in favor of respondent for the parcels of land which states
the following provisions.

That the vendee shall be given a grace period of thirty (30)days from the due date
of any installment with corresponding interest to be added, but should the
VENDEE fail to make such payment within the grace period this contract shall be
deemed rescinded and without force and effect after notice in writing by VENDOR
to VENDEE.
That the VENDOR agrees to have the above-described property freed and cleared
of all lessees, tenants, adverse occupants or squatters within 100 days from the
execution of this conditional deed of sale. In case of failure by the VENDOR to
comply with this undertaking provided in this paragraph and the VENDEE shall
find it necessary to file a case or cases in court to eject the said lessees, tenants,
occupants and/or squatters from the land, subject of this sale, the VENDOR agrees
to answer and pay for all the expenses incurred and to be incurred in connection
with said cases until the same are fully and finally terminated.
Respondent was able to pay petitioner the amount of P275,055.558 as partial
payment for the two properties corresponding to the initial payments and the first
installments of the said properties.
At the same time, petitioner complied with its obligation under the conditional
deeds of sale, as follows: the unlawful occupants surrendered their possession and
use of the said lots in consideration of the amount of P6,000.00 in a
document9 dated November 19, 1973, and they agreed to demolish their shanties.
Respondents then further suspended the payments as it was not satisfied with how
the petitioner had complied with their obligations. Petitioner then sent a letter to
respondent informing them of their intention to rescind the conditional sale with a
notarial rescission. A Complaint for specific performance and damages, seeking to
compel petitioner to accept the balance of the purchase price for the two
conditional deeds of sale and to execute the corresponding deeds of absolute sale.
Respondent contended that its non-payment of the installments was due to the
following reasons: first, Petitioner refused to receive the balance of the purchase
price as the properties were mortgaged and had to be redeemed first before a
deed of absolute sale could be executed, and Petitioner failed to fully eject the
unlawful occupants in the area.
Petitioner contended that it could not be compelled to execute any deed of
absolute sale, because respondent failed to pay in full the purchase price of the
subject lots. Petitioner claimed that it gave respondent a notice of notarial
rescission of both conditional deeds of sale that would take effect 30 days from
receipt thereof. The notice of notarial rescission was allegedly received by
respondent. Petitioner asserted that since respondent failed to pay the full
purchase price of the subject lots, both conditional deeds of sale were rescinded
hence, respondent had no cause of action against it.RTC ruled in favor petitioner.
CA ruled in favor of respondent.
ISSUE:Can resccsion be availed by respondents?

HELD:R.A. No. 6552, otherwise known as the Realty Installment Buyer Act,
applies to the subject contracts to sell. R.A. No. 6552 recognizes in conditional
sales of all kinds of real estate (industrial, commercial, residential) the right of the
seller to cancel the contract upon non-payment of an installment by the buyer,
which is simply an event that prevents the obligation of the vendor to convey title
from acquiring binding force.29
It also provides the right of the buyer on installments in case he defaults in the
payment of succeeding installments30 as follows:
Section 3. In all transactions or contracts involving the sale or financing of real
estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two
years of installments, the buyer is entitled to the following rights in case he
defaults in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within
the total grace period earned by him which is hereby fixed at the rate of one
month grace period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in every
five years of the life of the contract and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent
of the total payments made, and, after five years of installments, an
additional five per cent every year but not to exceed ninety per cent of the
total payments made: Provided, That the actual cancellation of the contract
shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act
and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the
computation of the total number of installment payments made.
Sec. 4. In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than sixty days from the date the
installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period,
the seller may cancel the contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a notarial
act.31
In this case, respondent has paid less than two years of installments; therefore,
Section 4 of R.A. No. 6552 applies.

The Court of Appeals held that even if respondent defaulted in its full payment of
the purchase price of the subject lots, the conditional deeds of sale remain valid
and subsisting, because there was no valid notice of notarial rescission to
respondent, as the notice was sent to the wrong address, that is, to Mahogany
Products Corporation, and it was received by a person employed by Mahogany
Products Corporation and not the respondent. The Court of Appeals stated that the
allegation that Mahogany Products Corporation and respondent have the same
President, one Valeriano Bueno, is irrelevant and has not been actually proven or
borne by evidence. The appellate court held that there was insufficient proof that
respondent actually received the notice of notarial rescission of the conditional
deeds of sale; hence, the unilateral rescission of the conditional deeds of sale
cannot be given credence.
CA REVERSED. SC Ruled in favor of petitioner.

G.R. No. 160107, October 22, 2014

SPOUSES JAIME SEBASTIAN AND EVANGELINE SEBASTIAN, v. BPI
FAMILY BANK, INC., CARMELITA ITAPO AND BENJAMIN HAO.
TOPICS: REPUBLIC ACT NO. 6552 (Realty Installment Buyer Protection Act)
FACTS:The petitioners are spouses who used to work for BPI Family. On October
30, 1987, they had availed a housing loan from BPI Family as one of the benefits
extended to its employees. Their loan amounted to P273,000.00, and was covered
by a Loan Agreement, whereby they agreed that the loan would be payable in
equal monthly amortizations of P3,277.57 starting on January 10, 1988 until
December 10, 1996 and that the monthly amortizations would be deducted from
his monthly salary. To secure the payment of the loan, they executed a real estate
mortgage in favor of BPI Family over the property situated in Bulacan. Jaime then
signed another agreement with BPI with the provisions stating that in connection
with the loan extended to me by BPI Family Bank, I hereby authorize you to
automatically deduct an amount from my salary or any money due to me to be
applied to my loan, more particularly described as follows, This authority is
irrevocable and shall continue to exist until my loan is fully paid.
The payment was consistently being deducted from the salary of Jaime. Until one
day, he had received a letter stating the termination of the employment of both
spouses from their work. They receieved a letter ordering them to settle all
outstanding obligations they owe from respondents.
To prevent the foreclose of their property they filed a restraining order. In RTC,
they alleged that They therein alleged that their obligation was not yet due and
demandable considering that the legality of their dismissal was still pending
resolution by the labor court; hence, there was yet no basis for the foreclosure of

the mortgaged property; and that the property sought to be foreclosed was a
family dwelling in which they and their four children resided. BPI Family asserted
that the loan extended to the petitioners was a special privilege granted to its
employees; that the privilege was coterminous with the tenure of the employees
with the company; and that the foreclosure of the mortgaged property was justified
by the petitioners failure to pay their past due loan balance.
RTC ruled in favor of respondent by dismissing the complaint. In CA, the petitioner
raised the R.A. 6522, however, CA still ruled to affirm the RTC.
ISSUE:Is petitioner correct in raising R.A. 6522 as a defense?
HELD:Republic Act No. 6552 was enacted to protect buyers of real estate

on installment payments against onerous and oppressive conditions. 27 The

protections accorded to the buyers were embodied in Sections 3, 4 and 5 of
the law, to wit:cSection 3. In all transactions or contracts, involving the sale
or financing of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-Eight
hundred forty-four as amended by Republic Act Sixty-three hundred eightynine, where the buyer has paid at least two years of installments, the buyer
is entitled to the following rights in case he defaults in the payment of
succeeding
installments:
(a) To pay, without additional interest, the unpaid installments due within
the total grace period earned by him which is hereby fixed at that rate of
one month grace period for every one year of installment payments made;
provided, That this right shall be exercised by the Buyer only once in every
five years of the life of the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty percent
of the total payments made, and, after five years of installments, an
additional five per cent every year but not to exceed ninety per cent of the
total payments made; Provided, That the actual cancellation or the demand
for rescission of the contract by a notarial act and upon full payment of the
cash
surrender
value
to
the
buyer.
The petitioners insistence would have been correct if the monthly
amortizations being paid to BPI Family arose from a sale or financing of real
estate.
In their case, however, the monthly amortizations represented the installment
payments of a housing loan that BPI Family had extended to them as an employees
benefit. The monthly amortizations they were liable for was derived from a loan
transaction, not a sale transaction, thereby giving rise to a lender-borrower
relationship between BPI Family and the petitioners.

SPOUSES MICHELLE M. NOYNAY and NOEL S. NOYNAY vs.CITIHOMES

BUILDER AND DEVELOPMENT, INC.
G.R. No. 204160, September 22, 2014

TOPIC INVOLVED: Art. 1624

FACTS: Spouses Noynay insist that by virtue of the assignment of rights which
Citihomes executed in favor of UCPB, Citihomes did not have a cause of action
against them because it no longer had an interest over the subject property.
Citihomes counters that it has the right to ask for the eviction of the petitioners in
its capacity as the registered owner despite the assignment of rights it made to
UCPB. It believes that because Spouses Noynay failed to pay at least two (2) years
of installments, the cancellation became effective upon the expiration of the 30-day
period following the receipt of the notice of delinquency and cancellation notice
and without the need for the payment of the cash surrender value under Section
3(b) of the Maceda Law.
ISSUE: Whether Citihomes has a cause of action for ejectment against Spouses
Noynay.
RULING: Well-established is the rule that the assignee is deemed subrogated to
the rights as well as to the obligations of the seller/assignor. By virtue of the deed
of assignment, the assignee is deemed subrogated to the rights and obligations of
the assignor and is bound by exactly the same conditions as those which bound the
assignor.18 What can be inferred from here is the effect on the status of the
assignor relative to the relations established by a contract which has been
subsequently assigned; that is, the assignor becomes a complete stranger to all the
mattersthat have been conferred to the assignee.
In this case, the execution of the Assignment in favor of UCPB relegated Citihomes
to the status of a mere stranger to the jural relations established under the
contract to sell. With UCPB as the assignee, it is clear that Citihomes has ceased
tohave any right to cancel the contract to sell with Spouses Noynay. Without this
right,which has been vested in UCPB, Citihomes undoubtedly had no cause
ofaction against Spouses Noynay.

The Court still upholds the right of the Spouses Noynay to remain undisturbed in
the possession of the subject property. The reason is simple Citihomes failed to
comply with the procedures for the proper cancellation of the contract to sell as
prescribed by Maceda Law.

SKUNAC CORPORATION and ALFONSO F. ENRIQUEZ vs.ROBERTO S.

SYLIANTENG and CAESAR S. SYLIANTENG,
G.R. No. 205879, April 23, 2014

TOPIC INVOLVED: Essential Requisites of a Contract of Sale; Double Sale

FACTS: Respondents Roberto S. Sylianteng and Caesar S. Sylianteng base their

claim of ownership over the subject lots a Deed of Absolute Sale executed in their
favor by their mother, Emerenciana Sylianteng. They further allege that
Emerenciana acquired the lots from the late Luis Pujalte through a Deed of Sale.
Petitioners Skunac Corporation and Alfonso F. Enriquez on the other hand, claim
that a certain Romeo Pujalte who was declared as the sole heir of Luis Pujalte,
caused the reconstitution of the Mother Title resulting to its cancellation and the
issuance of TCT No. 5760-R in his favor. Romeo Pujalte then allegedly sold the lots
to Skunac and Enriquez .

ISSUE: (1) whether or not respondents' predecessor-in-interest, Emerenciana,

validly acquired the subject lots from Luis, and (2) whether or not respondents, in
turn, validly acquired the same lots from Emerenciana.

RULING: Yes.Evidence, , shows that Romeo never became the owner of the
subject properties for two reasons.First, as shown above, the disputed lots were
already sold by Luis during his lifetime. Thus, these parcels of land no longer
formed part of his estate when he died. As a consequence, Romeo's sale of the
disputed lots to petitioners was not affirmed by the estate court, because the
subject parcels of land were not among those included in the said estate at the
time that Romeo was appointed as the administrator thereof. Subsequently, in the
Project of Partition of the residual estate of Luis, , Paz (mother of Luis) again did
not include the disputed lots as part of such residual estate. Hence, Romeo's sale
of the subject lots to petitioners is invalid as it is settled that any unauthorized
disposition of property under administration is null and void and title does not pass
to the purchasers.
Indeed, not being an heir of Luis, Romeo never acquired any right whatsoever over
the subject lots, even if he was able to subsequently obtain a title in his name. It is
a well-settled principle that no one can give what one does not have, nemo dat
quod non habet. One can sell only what one owns or is authorized to sell, and the
buyer can acquire no more right than what the seller can transfer legally. Since
Romeo has no right to the subject lots, petitioners, who simply stepped into the
shoes of Romeo, in turn, acquired no rights to the same.
Further, in the present case, the subject lots were sold to petitioners and
respondents by two different vendors Emerenciana and Romeo Pujalte (Romeo).
Hence, Article 1544 of the Civil Code is not applicable.

SPOUSES CLEMENCIO C. SABITSANA, JR. and MA. ROSARIO M.

SABITSANA

vs.

JUANITO F. MUERTEGUI
G.R. No. 181359, August 5, 2013
TOPIC INVOLVED:Double Sale
FACTS: Alberto Garcia executed an unnotarized Deed of Sale in favor of

respondent Juanito Muertegui. Juanitos father Domingo Muertegui, Sr.

(Domingo Sr.) and brother Domingo Jr. took actual possession of the lot and

planted thereon coconut and ipil-ipil trees. They also paid the real property
taxes on the lot for the years 1980 up to 1998.Garcia sold the lot to the
Muertegui family lawyer, petitioner Atty. Clemencio C. Sabitsana, Jr. (Atty.
Sabitsana), through a notarized deed of absolute sale. The sale was
registered with the Register of Deeds. Although Domingo Jr. and Sr. paid the
real estate taxes, Atty. Sabitsana also paid real property taxes in 1992,
1993, and 1999. In 1996, he introduced concrete improvements on the
property, which shortly thereafter were destroyed by a typhoon.
When Domingo Sr. passed away, his heirs applied for registration and
coverage of the lot under the Public Land Act Atty. Sabitsana, opposed the
application, claiming that he was the true owner of the lot. He asked that
the application for registration be held in abeyance until the issue of
conflicting ownership has been resolved.
ISSUE:Whether or not Article 1544 of the Civil Code does not apply to sales
involving unregistered land.
RULING:

Yes. The issue of the buyers good or bad faith is relevant only

where the subject of the sale is registered land, and the purchaser is buying
the same from the registered owner whose title to the land is clean. In such
case, the purchaser who relies on the clean title of the registered owner is
protected if he is a purchaser in good faith for value. What applies in this
case is Act No. 3344, as amended, which provides for the system of
recording of transactions over unregistered real estate. Act No. 3344
expressly declares that any registration made shall be without prejudice to
a third party with a better right.The sale to respondent Juanito was executed on
September 2, 1981 via an unnotarized deed of sale, while the sale to petitioners
was made via a notarized document only on October 17, 1991, or ten years
thereafter. Thus, Juanito who was the first buyer has a better right to the lot, while
the subsequent sale to petitioners is null and void, because when it was made, the
seller Garcia was no longer the owner of the lot. Nemo dat quod non habet.

INDUSTRIAL TEXTILE MANUFACTURING vs.LPJ ENTERPRISES

G.R. No. 66140, January 21, 1993
TOPIC INVOLVED: Express warranties, Art. 1502
FACTS: Respondent LPJ Enterprises, Inc. had a contract to supply 300,000 bags of
cement per year to Atlas Consolidated Mining and Development Corporation (Atlas
for short), a member of the Soriano Group of Companies. Cesar Campos, a VicePresident

of

petitioner

Industrial

Textile

Manufacturing

Company

of

the

Philippines (or Itemcop, for brevity), asked Lauro Panganiban, Jr., President of
respondent corporation, if he would like to cooperate in an experiment to develop
plastic cement bags. On the third experiment, with three hundred (300) "improved
bags", the seepage in the woven plastic bags was substantially reduced.
Consequently, Panganiban agreed to use the plastic cement bags. Four purchase
orders (P.O.s) were thereafter issued.A collection suit was filed by the petitioner
upon the failure of the respondent to pay its remaining liability. Respondent said
that it is not liable for the remaining 47,000 bags for the workers of Luzon Cement
strongly objected to the use thereof due to the serious health hazards posed by the
continued seepage of cement dust. Respondent was, therefore, constrained to
revert to the use of kraft paper bags in packing cement. Thereafter, petitioner was
asked to take back the unused plastic bags. Considering however, that the bags
were in the cement factory of respondent's supplier, petitioner maintained that it
was respondent's obligation to return the bags to them. Apparently, this was not
done and so petitioner demanded payment for the said bags.
ISSUE: Whether or not Article 1502 is applicable.
RULING: No. The conditions which allegedly govern the transaction according to
respondent may not be considered. The trial court correctly observed that such
conditions should have been distinctly specified in the purchase orders and
respondent's failure to do so is fatal to its cause. We find that Article 1502 of the
Civil Code, invoked by both parties herein, has no application at all to this case.

The provision in the Uniform Sales Act and the Uniform Commercial Code from
which Article 1502 was taken, clearly requires an express written agreement to
make a sales contract either a "sale or return" or a "sale on approval". Parol or
extrinsic testimony could not be admitted for the purpose of showing that an
invoice or bill of sale that was complete in every aspect and purporting to embody
a sale without condition or restriction constituted a contract of sale or return. If
the purchaser desired to incorporate a stipulation securing to him the right of
return, he should have done so at the time the contract was made. On the other
hand, the buyer cannot accept part and reject the rest of the goods since this falls
outside the normal intent of the parties in the "on approval" situation

SONNY LO VS. KJS

G.R. No. 149420, October 8, 2003
TOPIC INVOLVED:Implied warranties, Art. 1628
FACTS: Respondent KJS ECO-FORMWORK System Phil., Inc. is a corporation
engaged in the sale of steel scaffoldings, while petitioner Sonny L. Lo, doing
business under the name and style Sans Enterprises, is a building contractor.
On February 22, 1990, petitioner ordered scaffolding equipments from respondent
worth P540,425.80. He paid a downpayment in the amount of P150,000.00. The
balance was made payable in ten monthly installments. Respondent delivered the
scaffoldings to petitioner. Petitioner was able to pay the first two monthly
installments. His business, however, encountered financial difficulties and he was
unable to settle his obligation to respondent despite oral and written demands
made against him.On October 11, 1990, petitioner and respondent executed a Deed
of Assignment, whereby petitioner assigned to respondent his receivables in the
amount of P335,462.14 from Jomero Realty Corporation.

However, when

respondent tried to collect the said credit from Jomero Realty Corporation, the
latter refused to honor the Deed of Assignment because it claimed that petitioner
was also indebted to it. On November 26, 1990, respondent sent a letterto
petitioner demanding payment of his obligation, but petitioner refused to pay
claiming that his obligation had been extinguished when they executed the Deed of

Assignment. Consequently, on January 10, 1991, respondent filed an action for

recovery of a sum of money against the petitioner.
ISSUE: Whether or not the petitioners obligation was already extinguished by
executing the Deed of Assignment.
RULING:It may well be that the assignment of credit, which is in the nature of a
sale of personal property, produced the effects of a dation in payment which may
extinguish the obligation. However, as in any other contract of sale, the vendor or
assignor is bound by certain warranties.Article 1628 of the Civil Code provides:The
vendor in good faith shall be responsible for the existence and legality of the credit
at the time of the sale, unless it should have been sold as doubtful; but not for the
solvency of the debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge. When Jomero claimed
that it was no longer indebted to petitioner since the latter also had an unpaid
obligation to it, it essentially meant that its obligation to petitioner has been
extinguished by compensation. In other words, respondent alleged the nonexistence of the credit and asserted its claim to petitioners warranty under the
assignment. Therefore, it behooved on petitioner to make good its warranty and
paid the obligation.Furthermore, we find that petitioner breached his obligation
under the Deed of Assignment. With this, indeed, by warranting the existence of
the credit, petitioner should be deemed to have ensured the performance thereof
in case the same is later found to be inexistent. He should be held liable to pay to
respondent the amount of his indebtedness
ANG vs. CA

G.R.

No.

177874, September 29, 2008

TOPIC INVOLVED:Implied warranties, Art. 1546, 1548
FACTS: Under a car-swapping scheme, respondent Soledad sold his Mitsubishi
GSR sedan 1982 model to petitioner Ang by Deed of Absolute Sale. Ang later
offered the Mitsubishi GSR for sale through Far Eastern Motors, a second-hand
auto display center. The vehicle was eventually sold to a certain Paul Bugash.
Before the deed could be registered in Bugashs name, however, the vehicle was
seized by virtue of a writ of replevin on account of the alleged failure of Ronaldo

Panes, the owner of the vehicle prior to Soledad, to pay the mortgage
debt constituted thereon.To secure the release of the vehicle, Ang paid BA Finance
the amount of P62,038.47. Soledad refused to reimburse the said amount, despite
repeated demands, drawing Ang to charge him for Estafa with abuse of confidence.
It was dismissed later for insufficiency of evidence. Ang filed the first complaint for
damages against Soledad but it was dismissed on two occasions. Ang thereupon
filed with the Municipal Trial Court in Cities (MTCC) a complaint the subject of the
instant petition. After trial, the MTCC dismissed the complaint on the ground of
prescription pursuant to Article 1571.
ISSUE: Whether or not the cause of action already prescribed; requisites for
warrant against eviction
RULING: 1.The resolution of the sole issue of whether the complaint had
prescribed hinges on a determination of what kind of warranty is provided in the
Deed of Absolute Sale subject of the present case. Among the implied warranty
provisions of the Civil Code are: as to the sellers title (Art. 1548), against hidden
defects and encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562),
and against eviction (Art. 1548). For actions based on breach of implied warranty,
the prescriptive period is, under Art. 1571 (warranty against hidden defects of or
encumbrances upon the thing sold) and Art. 1548 (warranty against eviction), six
months from the date of delivery of the thing sold.Soledad gave a warranty against
eviction. Given Angs business of buying and selling used vehicles, he could not
have merely relied on Soledads affirmation that the car was free from liens and
encumbrances. He was expected to have thoroughly verified the cars registration
and related documents. Since what Soledad, as seller, gave was an implied
warranty, the prescriptive period to file a breach thereof is six months after the
delivery of the vehicle, following Art. 1571. In this case, it was filed 16 months
later. Hence, prescription cannot lie.
(1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is 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 the vendee.
MEGA PRIME REALTY vs. PNB
G.R. NO. 173456, October 6, 2008
Doctrine: ART 1547: In a contract of sale, unless a contrary intention appears,
there is an implied warranty on the part of the seller that he has a right to sell the
thing at the time when the ownership is to pass, and that the buyer shall have a
peaceful possession of the thing and it shall be free from any hidden faults or
defects, or any charge or encumbrance not declared or known to the buyer.
Facts: A deed of sale was executed between PNB (as vendor) and Mega Prime (as
vendee) whereby PNB sold to Mega Prime, on an "As is where is" basis, all of its
stockholdings in PNB-Madecor for the sum of P505,620,000.00. Mega Prime
states that one of the principal inducements for it to purchase the stockholdings of
defendant PNB in PNB-Madecor was to acquire the latters assets, specifically the
Pantranco property.
Later on, Mega Prime learned that said property was likewise the subject matter of
another title registered in the name of the City Government of Quezon City.
The former sought the annulment of the deed of sale on ground that the subject
property was outside the commerce of man, the same being a road owned by the
Quezon City Government.
PNB maintains that the subject matter of the deed of sale was PNB's shares of
stock in PNB-Madecor and not the properties owned by the latter as evidenced by
the deed itself. That PNB only transferred its control over PNB-Madecor to Mega
Prime, and that the real properties of PNB-Madecor remain to be under its
ownership.
PNB claims that Mega Prime, as buyer, bought the shares of stock at its own risk,
and that the sale was made on an "as is where is" basis. Moreover, the fact that the
QC Government was able to secure a title over the same lot does not necessarily
mean that PNB-Madecor's title to it is void or outside the commerce of man.
Issue: WON Mega Primes ground for the annulment of the deed of sale is valid.

Ruling: NO. The deed of sale reveals that the sale involves the entire
shareholdings of PNB in PNB-Madecor, and not the real properties and
improvements therein. Any defect in any of the said titles should not affect the
entire sale. Although it is expressly stated in the deed of sale that the transfer of
the entire stockholdings will effectively result in the transfer of the said properties,

the discovery of the title under the name of the Quezon City government does not
substantially affect the integrity of the object of the sale.

Nevertheless, the Court holds that there was a breach in the warranties of the
seller PNB, and that a breach in the warranties of the seller entitles the buyer to a
proportionate reduction of the purchase price. An important sense of the deed of
sale is the transfer of ownership over the subject properties to Mega Prime.
Clearly, the failure of the seller PNBs failure to effect a change in ownership of the
subject properties amounts to a hidden defect within the contemplation of Articles
1547 and 1561 of the New Civil Code.

ANG vs. CA
G.R. NO. 177874, September 29, 2008
Doctrine: ART 1548 - Warranty against eviction; The seller, in pledging that he
will defend the same from all claims or any claim whatsoever [and] will save the
vendee from any suit by the government of the Republic of the Philippines, is
giving a warranty against eviction. A breach of this warranty requires the
concurrence of these four requisites:(1) The purchaser has been deprived of the
whole or part of the thing sold; (2) This eviction is by a final judgment; (3) The
basis thereof is 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 the vendee. In the absence of these requisites, a breach of the
warranty against eviction under Article 1548 cannot be declared.
Facts: Under a car-swapping scheme, private respondent Soledad sold his
Mitsubishi sedan to petitioner Ang by a Deed of Absolute Sale. Ang later offered
the Mitsubishi for sale through Far Eastern Motors. The vehicle was eventually
sold to a certain Paul Bugash. However, before the deed could be registered in the
latters name, the vehicle was seized by virtue of a writ of replevin on account of
the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to
pay the mortgage debt constituted thereon.
To secure the release of the vehicle, Ang paid BA Finance the amount of
P62,038.47. Soledad refused to reimburse the said amount, despite repeated
demands.
Ang filed with the Municipal Trial Court in Cities (MTCC) a complaint the subject
of the instant petition. After trial, the MTCC dismissed the complaint on the ground
of prescription.
Ang appealed to the RTC which affirmed the dismissal of the complaint, albeit it
rendered judgment in favor of Ang, holding that defendant should reimburse
plaintiff the P62,038.47. Soledad elevated the case to the Court of Appeals. The
latter court reversed the RTC decision and denied Angs motion for reconsideration

Issue: WON respondent is liable for breach of warranty against eviction, pursuant
to Art. 1548 of the New Civil Code
Ruling: NO. Although Soledad explicitly stated in the Deed of Absolute Sale: I
hereby covenant my absolute ownership to (sic) the above-described property and
the same is free from all liens and encumbrances and I will defend the same from
all claims or any claim whatsoever, petitioner Ang cannot recover under this
warranty since a breach of this warranty requires the concurrence of these four
requisites: (1) The purchaser has been deprived of the whole or part of the thing
sold; (2) This eviction is by a final judgment; (3) The basis thereof is 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 the vendee.
For one, there is no judgment which deprived Ang of the vehicle. For another, there
was no suit for eviction in which Soledad as seller was impleaded as co-defendant
at the instance of the vendee.
In the absence of these requisites, a breach of the warranty against eviction under
Article 1548 cannot be declared.

DE YSASI vs. ARCEO

G.R. NO. 136586, November 22, 2001
Doctrine: ART 1561 - Warranty against hidden defects; Petitioner admitted
that he inspected the premises three or four times before signing the lease
contract and during his inspection, he noticed the rotten plywood on the ceiling
which in his opinion was caused by leaking water or "anay" (termites), yet he
decided to go through with the lease agreement. The lessor is responsible for
warranty against hidden defects, but he is not answerable for patent defects or
those which are visible.
Facts: Spouses Jon and Marissa de Ysasi leased from spouses Arturo and Estela
Arceo the latter's premises in order to carry on their business of hand painting and
finishing services. Petitioners paid P5,000.00 as goodwill money and P15,000.00 as
deposit for three months.
Due to heavy rains, the roof of the building leaked and the premises were flooded,
as a result of which the schedule of the delivery of hand painted moldings to
petitioners' customers was disrupted. Although petitioners asked respondents to
make the necessary repairs, the latter repaired only a portion of the leased
premises. Consequently, petitioners stopped paying rent as well as their share of
the electric, water, and telephone bills from December 1988 up to the time they
vacated the leased premises in June 1989.
Respondents in turn filed an ejectment suit against petitioners in the MTC. The
court ruled that while petitioners were justified in suspending the payment of rent,
the deposits made by them shall be applied to the payment of rentals up to June
1989 plus payment for electric and water bills.
Petitioners then filed a complaint in the RTC for specific performance or rescission
of contract , which they subsequently changed to a claim for damages in view of
the expiration of the lease contract. The trial court, however, dismissed the
complaint and ordered petitioners to pay respondents P20,000.00 as back rentals,
with interest at the legal rate. Upon appeal, the CA affirmed the decision of the
RTC, and petitioners' motion for reconsideration was subsequently denied.
Issue: WON respondents are liable for breach of warranty against hidden defects
Ruling: NO. Under Arts. 1561 and 1653 of the Civil Code, the lessor is responsible
for warranty against hidden defects, but he is not answerable for patent defects or
those, which are visible. Petitioner admitted on cross-examination that he
inspected the premises three or four times before signing the lease contract.
During his inspection, he noticed the rotten plywood on the ceiling, which in his
opinion was caused by leaking water or termites, yet he decided to go through with
the lease agreement.Hence, respondents cannot be held liable for the alleged
warranty against hidden defects.

ENGINEERING & MACHINERY CORPORATION vs.COURT OF APPEALS and

PONCIANO L. ALMEDA,
G.R. No. 52267,

January 24, 1996

TOPIC INVOLVED: Prescriptive period applicable to a contract for a piece of work.

FACTS: Pursuant to the contract dated September 10, 1962 between petitioner
and private respondent, the former undertook to fabricate, furnish and install the
air-conditioning system in the latter's building along Buendia Avenue, Makati in
consideration of P210,000.00.
Petitioner was to furnish the materials, labor, tools and all services required in
order to so fabricate and install said system. The system was completed in 1963
and accepted by private respondent, who paid in full the contract price.
Private respondent commissioned Engineer David R. Sapico to render a technical
evaluation of the system in relation to the contract with petitioner. In his report,
Sapico enumerated the defects of the system and concluded that it was "not
capable of maintaining the desired room temperature of 76oF - 2oF. Private
respondent filed an action for damages against petitioner with the then Court of
First Instance of Rizal. The complaint alleged that the air-conditioning system
installed by petitioner did not comply with the agreed plans and specifications
Petitioner argued that Article 1571 of the Civil Code providing for a six-month
prescriptive period is applicable to a contract for a piece of work by virtue of
Article 1714, which provides that such a contract shall be governed by the
pertinent provisions on warranty of title and against hidden defects and the
payment of price in a contract of sale.
The trial court ruled that the complaint was filed within the ten-year court
prescriptive period although the contract was one for a piece of work, because it
involved the "installation of an air-conditioning system which the defendant itself
manufactured, fabricated, designed and installed."

Upon appeal, CA affirmed.

ISSUE: W/N six-month prescriptive period is applicable to a contract for a piece of
work by virtue of Article 1714.
RULING: NO
The mere fact that the private respondent accepted the work does not, ipso facto,
relieve the petitioner from liability for deviations from and violations of the written
contract, as the law gives him ten (10) years within which to file an action based on
breach thereof. The contract in question is one for a piece of work. It is not
petitioner's line of business to manufacture air- conditioning systems to be sold
"off-the-shelf." Its business and particular field of expertise is the fabrication and
installation of such systems as ordered by customers and in accordance with the
particular plans and specifications provided by the customers.

Court is persuaded to believe the plaintiff that not only had the defendant failed to
install items and parts provided for in the specifications of the air-conditioning
system be installed, like face
and by-pass dampers and modulating thermostat and many others, but also that
there are items, parts and accessories which were used and installed on the airconditioning system which were not in full accord with contract specifications.

A close scrutiny of the complaint filed in the trial court reveals that the original
action is not really for
enforcement of the warranties against hidden defects, but one for breach of the
contract itself. It alleged that the petitioner, "in the installation of the air
conditioning system did not comply with the specifications provided" in the written
agreement between the parties, "and an evaluation of the air-conditioning system
as installed by the defendant showed the following defects and violations of the
specifications of the agreement.

INOCENCIA YU DINO and her HUSBAND doing business under the trade
name "CANDY CLAIRE FASHION GARMENTS" vs.COURT OF APPEALS and

ROMAN SIO, doing business under the name "UNIVERSAL TOY MASTER
MANUFACTURING"
fG.R. No. 113564, June 20, 2001
TOPIC INVOLVED: Prescriptive period applicable to a contract for a piece of work.
FACTS:Petitioners spouses Dino, doing business under the trade name "Candy
Claire Fashion Garment" are engaged in the business of manufacturing and selling
shirts.Respondent Sio is part owner and general manager of a manufacturing
corporation doing business under the trade name "Universal Toy Master
Manufacturing."
Petitioners and respondent Sio entered into a contract whereby the latter would
manufacture for the petitioners 20,000 pieces of vinyl frogs and 20,000 pieces of
vinyl mooseheads at P7.00 per piece in accordance with the sample approved by
the petitioners. These frogs and mooseheads were to be attached to the shirts
petitioners would manufacture and sell.
Respondent Sio delivered in several installments the 40,000 pieces of frogs and
mooseheads. The last delivery was made on September 28, 1988. Petitioner fully
paid the agreed price.4 Subsequently, petitioners returned to respondent 29,772
pieces of frogs and mooseheads for failing to comply with the approved sample.5
The return was made on different dates: the initial one on December 12, 1988
consisting of 1,720 pieces,6 the second on January 11, 1989,7 and the last on
January 17, 1989.

Petitioners then demanded from the respondent a refund of the purchase price of
the returned goods in the amount of P208,404.00. As respondent Sio refused to
pay, petitioners filed on July 24, 1989 an action for collection of a sum of money in
the Regional Trial Court of Manila, Branch 38.
The trial court ruled in favor of the petitioners
Upon appeal, CA affirmed the RTC and dismissing the complaint of the petitioners
on the ground that the action had prescribed.
ISSUE: W/n the respondent Court of Appeals erred in dismissing the complaint of
the Petitioners on the ground that the action had prescribed.
RULING:NO
It was an action for breach of warranty as the sum of money petitioners sought to
collect was actually a refund of the purchase price they paid for the alleged
defective goods they bought from the respondent. The contract is contract for a
piece of work.

By returning the 29,772 pieces of vinyl products to respondent and asking for a
return of their purchase price, petitioners were in effect "withdrawing from the
contract" as provided in Art. 1567. The prescriptive period for this kind of action is
provided in Art. 1571 of the New Civil Code, viz:
"Art. 1571. Actions arising from the provisions of the preceding ten articles shall
be barred after six months from the delivery of the thing sold."
There is no dispute that respondent made the last delivery of the vinyl products to
petitioners on September 28, 1988. It is also settled that the action to recover the
purchase price of the goods petitioners returned to the respondent was filed on
July 24, 1989, more than nine months from the date of last delivery. Petitioners
having filed the action three months after the six-month period for filing actions for
breach of warranty against hidden defects stated in Art. 1571, the appellate court
dismissed the action.

LAFORTEZA et al vs. MACHUCA

G.R. No. 137552. June 16, 2000
Topic involved: Contract of sale and rescission of sale of an immovable property.
FACTS:In the exercise of the authority of a Special Power of Attorney, Laforteza
entered into a Memorandum of Agreement (Contract to Sell) with Machuca over
the subject property which is a house and lot located at No. 7757 Sherwood

Street, Marcelo Green Village, Paraaque, Metro Manila for the sum of P630,000,
payable as follows:
(a) P30,000.00 as earnest money, to be forfeited in favor of the defendants if the
sale is not effected due to the fault of the plaintiff;
(b) P600,000.00 upon issuance of the new certificate of title in the name of the late
Francisco Q. Laforteza and upon execution of an extra-judicial settlement of the
decedents estate with sale in favor of the plaintiff.
Significantly, the fourth paragraph of the Memorandum of Agreement (Contract to
Sell) dated January 20, 1989 contained a provision as follows:
Upon issuance by the proper Court of the new title, the BUYER-LESSEE shall be
notified in writing and said BUYER-LESSEE shall have thirty (30) days to produce
the balance of P600,000.00 which shall be paid to the SELLER-LESSORS upon the
execution of the Extrajudicial Settlement with sale.
On January 20, 1989, plaintiff paid the earnest money of P30,000 plus rentals for
the subject property.
On September 18, 1998 Laforteza through their counsel wrote a letter to the
plaintiff furnishing the latter a copy of the reconstituted title to the subject
property, advising him that he had 30 days to produce the balance of P600,000.00
under the Memorandum of Agreement which plaintiff received on the same date.
On October 18, 1989, Machuca sent a letter requesting for an extension of the
THIRTY (30) DAYS deadline up to November 15, 1989 within which to produce the
balance of P600,000. Defendant Roberto Z. Laforteza, assisted by his counsel Atty.
Romeo L. Gutierrez, signed his conformity to the plaintiffs letter request. The
extension, however, does not appear to have been approved by Gonzalo Z.
Laforteza, the second attorney-in-fact as his conformity does not appear to have
been secured.
On November 15, 1989, Machuca informed the Roberto Z. Laforteza, that he
already had the balance of P600,000.00 covered by United Coconut Planters Bank
Managers Check No. 000814 dated November 15, 1989. However, the Laforteza
refused to accept the balance. Laforteza had told him that the subject property was
no longer for sale.
On November 20, 1998 defendants informed the plaintiff that they were canceling
the Memorandum of Agreement (Contract to Sell) in view of the plaintiffs failure to
comply with his contractual obligations
Thereafter, Machuca reiterated his request to tender payment of the P600,000.
Defendants, however, insisted on the rescission of the Memorandum of Agreement.
Thereafter, Machuca filed the instant action for specific performance. The lower
court rendered judgment on July 6, 1994 in favor of the Machuca. The CA affirmed
the decision.

ISSUE:WON the memorandum of agreement is an option contract, contract to sell

or a contract of sale
RULING: It is a contract of sale. The SC ruled that there was a perfected
agreement between Laforteza and Machuca whereby Laforteza et al obligated
themselves to transfer ownership and deliver the house ad lot located at No. 7757
Sherwood Street, Marcelo Green Village, Paraaque and the respondent to pay the
price amounting to P600,000. All the elements of a contract of sale were thus
present. The elements of a valid contract of sale under Article 1458 are (1) consent
or meeting of the minds (2) determinate subject matter and (3) price certain
money or tis equivalent.
Even assuming for the sake of argument that the petitioners were ready to comply
with their obligation, the court find that rescission of the contract will still not
prosper. The rescission of a sale of an immovable property is specifically governed
by Article 1592 of the New Civil Code, which reads: "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." It is
not disputed that the petitioners did not make a judicial or notarial demand for
rescission.

INTEGRATED PACKAGING CORP. (IPC) vs. COURT OF APPEALS and FIL-ANCHOR

PAPER CO., INC.
G.R. No. 115117. June 8, 2000
Topic involved: breach of contract and damages
FACTS:IPC and Fil-anchor executed on May 5, 1978, an order agreement whereby
Fil-anchorbound itself to deliver to IPC 3,450 reams of printing paper, worth
P1,040,060.00 under the following schedule: May and June 1978450 reams at
P290.00/ream; August and September 1978700 reams at P290/ream; January
1979575 reams at P307.20/ream; March 1979575 reams at P307.20/ream; July
1979575 reams at P307.20/ream; and October 1979575 reams at P307.20/ream. In
accordance with the standard operating practice of the parties, the materials were
to be paid within a minimum of thirty days and maximum of ninety days from
delivery.
Later, on June 7, 1978, IPC entered into a contract with Philippine Appliance
Corporation (Philacor) to print three volumes of "Philacor Cultural Books" for
delivery on the following dates: Book VI, on or before November 1978; Book VII, on
or before November 1979 and; Book VIII, on or before November 1980, with a
minimum of 300,000 copies at a price of P10.00 per copy or a total cost of
P3,000,000.00.
As of July 30, 1979, Fil-anchor had delivered to petitioner 1,097 reams of printing
paper out of the total 3,450 reams stated in the agreement. IPC alleged it wrote
private respondent to immediately deliver the balance because further delay would
greatly prejudice petitioner. From June 5, 1980 and until July 23, 1981, Fil-anchor
delivered again to petitioner various quantities of printing paper amounting to
P766,101.70. However, IPC encountered difficulties paying private respondent said
amount. Accordingly, FIL-anchor made a formal demand upon petitioner to settle
the outstanding account. On July 23 and 31, 1981 and August 27, 1981, petitioner
made partial payments totalling P97,200.00 which was applied to its back accounts
covered by delivery invoices dated September 29-30, 1980 and October 1-2, 1980.
Meanwhile, IPC entered into an additional printing contract with Philacor.
Unfortunately, IPC failed to fully comply with its contract with Philacor for the
printing of books VIII, IX, X and XI. Thus, Philacor demanded compensation from
petitioner for the delay and damage it suffered on account of petitioners failure.

On August 14, 1981, Fil-anchor filed with the Regional Trial Court of Caloocan City
a collection suit against IPC for the sum of P766,101.70, representing the unpaid
purchase price of printing paper bought by petitioner on credit.
In its answer, IPC denied the material allegations of the complaint and alleged that
private respondent was able to deliver only 1,097 reams of printing paper which
was short of 2,875 reams, in total disregard of their agreement; that Fil-anchor
failed to deliver the balance of the printing paper despite demand therefor, hence,
petitioner suffered actual damages and failed to realize expected profits; and that
petitioners complaint was prematurely filed.
The trial court rendered judgment declaring that IPC should pay Fil-anchor the
sum of P763,101.70 representing the value of printing paper delivered by private
respondent from June 5, 1980 to July 23, 1981. However, the lower court also
found petitioners counterclaim meritorious. It ruled that were it not for the failure
or delay of private respondent to deliver printing paper, petitioner could have sold
books to Philacor and realized profit of P790,324.30 from the sale. It further ruled
that petitioner suffered a dislocation of business on account of loss of contracts
and goodwill as a result of private respondents violation of its obligation, for which
the award of moral damages was justified.
On appeal, the respondent Court of Appeals reversed and set aside the judgment of
the trial court. The appellate court ordered petitioner to pay private respondent
the sum of P763,101.70 representing the amount of unpaid printing paper
delivered by Fil-anchor to petitioner, with legal interest thereon from the date of
the filing of the complaint until fully paid. However, the appellate court deleted the
award of P790,324.30 as compensatory damages as well as the award of moral
damages and attorneys fees, for lack of factual and legal basis.
ISSUE: WON Fil-anchor is liable for IPC's breach of contract with Philacor
RULING: No, Fil-anchor was not liable. Fil-anchor was justified in suspending its
deliveries when IPC failed to pay within 90 days from the receipt of the goods as
agreed upon. Neither may Fil-anchor be held liable for the breach of contract
committed by IPC agains Philacor when Fil-anchor was not a party thereto.
Suspension of its deliveries to IPC whenever the latter failed to pay on time, as in
this case, is legally justified under the second paragraph of Article 1583 of the Civil
Code hence the Fil-anchor did not violate the order agreement. Fil-anchor is not a
party to the agreement between Philacor neither is it a contract pour autrui so no
direct bearing indemnification for damages comprehends not only the loss
suffered, that is to say actual damages (damnum emergens), but also profits which
the obligee failed to obtain, referred to as compensatory damages (lucrum
cessans).
However, to justify a grant of actual or compensatory damages, it is necessary to
prove with a reasonable degree of certainty, premised upon competent proof and
on the best evidence obtainable by the injured party, the actual amount of loss.

The trial court in arriving at the amount are mere estimates or self-serving claim of
unrealized profit prepared by IPC. deletion of the award of moral damages is
proper, since private respondent could not be held liable for breach of contract.
Moral damages may be awarded when in a breach of contract the defendant acted
in bad faith, or was guilty of gross negligence amounting to bad faith, or in wanton
disregard of his contractual obligation. Finally, since the award of moral damages
is eliminated, so must the award for attorney's fees be also deleted.

Visayan Sawmill Company, Inc. vs. The Honorable Court of Appeals

G.R. No. 83851, March 3, 1993
Topic involved: The effect of opening, making or indorsing of the irrevocable and
unconditional letter of credit.
Facts:
On May 1, 1983, herein plaintiff-appellee and defendants-appellants entered
into a sale involving scrap iron located at the stockyard of defendant-appellant
corporation at Cawitan, Sta. Catalina, Negros Oriental, subject to the condition
that plaintiff-appellee will open a letter of credit in the amount of P250,000.00 in
favor of defendant-appellant corporation on or before May 15, 1983. This is
evidenced by a contract entitled `Purchase and Sale of Scrap Iron' duly signed by
both parties.

On May 17, 1983, plaintiff-appellee through his man, started to dig and
gather and scrap iron at the defendant-appellant's premises, proceeding with such
endeavor until May 30 when defendants-appellants allegedly directed plaintiffappellee's men to desist from pursuing the work in view of an alleged case filed
against plaintiff-appellee by a certain Alberto Pursuelo. This, however, is denied by
defendants-appellants who allege that on May 23, 1983, they sent a telegram to
plaintiff-appellee cancelling the contract of sale because of failure of the latter to
comply with the conditions thereof.
On May 24, 1983, plaintiff-appellee informed defendants-appellants by
telegram that the letter of credit was opened May 12, 1983 at the Bank of the
Philippine Islands main office in Ayala, but then the transmittal was delayed. On
May 26, 1983, defendants-appellants received a letter advice from the Dumaguete
City Branch of BPI dated May 26, 1983, that a domestic letter of credit had been
opened in favor of Visayan Sawmill Company. On July 19, 1983 plaintiffs then
demanded that defendants comply with the deed of sale. On July 20, 1983
defendant corporation informed plaintiffs lawyer that it is unwilling to continue
with the sale due to plaintiffs failure to comply with the essential preconditions of
the contract. Private respondent prayed for judgment ordering the petitioner
corporation to comply with the contract by delivering to him the scrap iron subject
thereof.
Issue:
Whether or not the petitioner violated the terms and conditions of the
contract
Held:
The petitioner corporation's obligation to sell is unequivocally subject to a
positive suspensive condition, i.e., the private respondent's opening, making or
indorsing of an irrevocable and unconditional letter of credit. The former agreed to
deliver the scrap iron only upon payment of the purchase price by means of an
irrevocable and unconditional letter of credit. Otherwise stated, the contract is not
one of sale where the buyer acquired ownership over the property subject to the
resolutory condition that the purchase price would be paid after delivery. Thus,
there was to be no actual sale until the opening, making or indorsing of the
irrevocable and unconditional letter of credit. Since what obtains in the case at bar
is a mere promise to sell, the failure of the private respondent to comply with the
positive suspensive condition cannot even be considered a breach, casual or
serious,
but simply an event that prevented the obligation of petitioner
corporation to convey title from acquiring binding force
The letter of credit in favor of petitioner was indisputably not in accordance
with the stipulation in the contract signed by the parties on at three counts: (1) it
was not opened, made or indorsed by the private respondent, but by a corporation
which is not a party to the contract; (2) it was not opened with the bank agreed
upon and; (3) it is not irrevocable and unconditional, for it is without recourse, it is
set to expire on a specific date and it stipulates certain conditions with respect to
shipment. Consequently, the obligation of petitioner to sell did not arise. Therefore
it cannot be compelled by specific performance to comply with its prestation.

Diamante vs. The Honorable Court of Appeals

G.R. No. L-51824, February 7, 1992

Topic: Option to Repurchase

Facts:
A fishery lot, encompassing an area of 9.4 hectares and designated as Lot
No. 518-A of the Cadastral Survey of Dumangas, Iloilo, was previously covered by
Fishpond Permit No. F-2021 issued in the name of Anecita Dionio. Upon Anecita's
death, her heirs, petitioner Diamante and Primitivo Dafeliz, inherited the property
which they later divided between themselves; petitioner got 4.4. hectares while
Dafeliz got 5 hectares. It is the petitioner's share that is the subject of the present
controversy. Primitivo Dafeliz later sold his share to private respondent. On 21 May
1959, petitioner sold to private respondent his leasehold rights over the property
in question for P8,000.00 with the right to repurchase the same within three (3)
years from said date. On 16 August 1960, private respondent filed an application
with the Bureau of Fisheries, dated 12 July 1960, for a fishpond permit and a
fishpond lease agreement over the entire lot, submitting therewith the deeds of
sale executed by Dafeliz and the petitioner. Pressed by urgent financial needs,
petitioner, on 17 October 1960, sold all his remaining rights over the property in
question to the private respondent for P4,000.00.
On 25 October 1960, private respondent, with his wife's consent, executed
in favor of the petitioner an Option to Repurchase the property in question within
ten (10) years from said date, with a ten-year grace period. Private respondent
submitted to the Bureau of Fisheries the definite deed of sale; he did not, however,
submit the Option to Repurchase. Thereafter, on 2 August 1961, the Bureau of
Fisheries issued to private respondent Fishpond Permit No. 4953-Q; on 17
December 1962, it approved FLA No. 1372 in the latter's favor. On 11 December
1963, petitioner, contending that he has a valid twenty-year option to repurchase
the subject property, requested the Bureau of Fisheries to nullify FLA No. 1372
insofar as the said property is concerned. On 18 December 1964, his lettercomplaint was dismissed. Petitioner then sought a reconsideration of the dismissal;
the same was denied on 29 April 1965. His appeal to the Secretary of the DANR
was likewise dismissed on 30 October 1968. Again, on 20 November 1968,
petitioner sought for reconsideration; this time, however, he was successful.
Issue:
Whether or not there was a valid Option to Repurchase
Held:
It is settled by this Court that an agreement to repurchase becomes a
promise to sell when made after the sale, because when the sale is made without
such an agreement, the purchase acquires the thing sold absolutely, and if he
afterwards grants the vendor the right to repurchase, it is a new contract entered
into by the purchaser, as absolute owner already of the object. In that case, the
vendor has not reserved to himself the right to repurchase. Hence, the Option to
Repurchase executed by private respondent in the present case, was merely a
promise to sell, which must be governed by Article 1479 of the Civil Code.

A copy of the so-called option to Repurchase executed is neither attached to

the records nor quoted in any of the pleadings of the parties. This Court cannot,
therefore, properly rule on whether the promise was accepted and a consideration
distinct from the price, supports the option. Undoubtedly, in the absence of either
or both acceptance and separate consideration, the promise to sell is not binding
upon the promissor (private respondent).
A unilateral promise to buy or sell is a mere offer, which is not converted
into a contract except at the moment it is accepted. Acceptance is the act that
gives life to a juridical obligation because, before the promise is accepted, the
promissor may withdraw it at any time. Upon acceptance, however, a bilateral
contract to sell and to buy is created, and the offeree ipso facto assumes the
obligations of a purchaser; the offeror, on the other hand, would be liable for
damages if he fails to deliver the thing he had offered for sale. The contract of
option is a separate and distinct contract from the contract which the parties may
enter into upon the consummation of the option, and a consideration for an
optional contract is just as important as the consideration for any other kind of
contract. Thus, a distinction should be drawn between the considerations for the
option to repurchase, and the consideration for the contract of repurchase itself.

Spouses Alexander Cruz And Adelaida Cruz, Vs. Court Of Appeals

G.R. No. 125233. March 9, 2000

TOPIC INVOLVED: Redemption by a co-owner doesn't terminate the co-ownership nor

give her title to the whole property subject of the co-ownership

FACTS:Leis and Isidro married each other in 1923. Isidro subsequently acquired from
the Department of Agriculture and Natural Resources a parcel of land, which was
titled in her name, with the description that she was a widow. Leis only passed away
in 1973 without executing a will.
Isidro then secured a loan from Cruz (PhP 15,000, with 5% interest) secured by a
mortgage on the land from DANR, but failed to pay on due date. Isidro executed 2
contracts in favor of Cruz: an Deed of Absolute Sale and a Contract indicating a pacto
de retro sale. Isidro still failed to repurchase the property within 1 year, so she
consolidated

the

ownership

of

the

land

in

favor

of

Cruz.

When Isidro died, Cruz demanded her heirs to vacate the premises. The heirs then
filed a complaint with the RTC averring that the land was conjugal property having
been purchased during their marriage. The RTC found in favor of the heirs. The case
was appealed to the CA, but the CA merely affirmed the ruling because Cruz failed to
get a judicial order to have the land consolidated in his name after failure of Isidro to
comply with the requirements of the right to repurchase (Art. 1607).

ISSUE:Whether or not the land in question is conjugal property, and therefore subject
to the rules on co-ownership?

HELD:Although the land was purchased during the marriage, upon Leis death, the
conjugal property regime ceased, and gave Isidro an equal portion of Leis half of the

property to be divided among his legitimes. Co-ownership of the land then began.
However, upon failure of Isidro the heirs to exercise the right to repurchase, the
ownership of the land transferred to Cruz. Despite the TCT being void for noncompliance with 1607, the ownership did not transfer back to the heirs, for compliance
with 1607 is merely for purposes of registering the title in the Torrens System.

B PI FAM IL Y S AV ING S B AN K, INC v. SPS. J A N U A R I O

N I O

V E L O S O

A N T O

A N D NATIVIDAD VELOSO

[G.R. No. 141974. August 9, 2004]

TOPIC INVOLVED: The general rule in redemption is that it is not sufficient that a
person offering to redeem manifests his desire to do so. The statement of intention
must be accompanied by an actual and simultaneous tender of payment. This
constitutes the exercise of the right to repurchase.
FACTS: Sps Veloso obtained a loan in the amount of 1.3 Million from BPI and Trust
Company secured by a deed of Mortgage over three parcels of land. They likewise
executed a promissory note. However, they failed to pay the installment amounts of
the loan hence their properties were foreclosed and sold to BPI and Trust
Company as the highest bidder in the auction sale. The BPI and Trust Company
assigned its rights to BPI Family Savings bank. Acting on the matter, respondents
offered to redeem the properties. This was rejected by the petitioner. Respondents
therefore filed a complaint for annulment of foreclosure with consignation and
prayer for Damages before the RTC. In the meantime, BPI was able to obtain writ
of possession which the respondent opposed and filed a petition for certiorari with
preliminary injunction with the CA. CA initially granted it but eventually lifted said
injunction when it finally resolved the issue of possession in favor of BPI.
Respondents filed with SC petition for review which affirmed CA.

Pursuant to the said decision, RTC release the consigned amount to respondents.
RTC finally decided in favor of the validity of the foreclosure proceedings but
allowed the respondents to redeem the properties at P2.14M.From this decision
BPI appealed to the CA which affirmed the RTC with modification that the
redemption price should be 2.6M. Hence this petition. BPI contended that the right
to redeem granted to the respondents is in violation of the earlier ruling of the SC.
ISSUE: W/N the sps have complied all the requisites for redemption in order to
obtain a favorable ruling from CA.
HELD: NO. Redemption implies a reasonable and valid tender of the entire
repurchase price otherwise the rule on the redemption period fixed by law can be
easily circumvented. Redemption within the period allowed by law is not a matter
of intent but a question of payment of the full redemption price. The law granted
respondents the right of redemption but in so granting that right, the law intended
that their offer to redeem valid and effective and accompanied by an actual tender
of the redemption price. Their offer was not a legal and effective exercise of the
right of redemption contemplated by law, hence, the refusal of the offer by
petitioner was completely justified.

LEE CHUY REALTY CORPORATION vs HON. COURT OF APPEALS,

G.R. NO. 104114, DECEMBER 4, 1995
TOPIC INVOLVED: Legal Redemption; To avail of the right of redemption, what is
essential is to make an offer to redeem within the prescribed period, either
through a formal tender with consignation or by filing a complaint in court coupled
with consignation of the redemption price within the prescribed period.
FACTS: A valuable piece of land in Malhacan, Meycauayan, Bulacan, with an area
of 24,576 square metersnis disputed by LEE CHUY REALTY and MARC REALTY.
Originally the property was co-owned by Ruben Jacinto to the extent of one-sixth
and Dominador, Arsenio, Liwayway, all surnamed Bascara, and Ernesto Jacinto who
collectively owned the remaining five-sixths.
Ruben Jacinto sold his one-sixth proindiviso share to Lee Chuy Realty. Bascaras
and Ernesto Jacinto also sold their share to Marc Realty. Both sales were
registered.

Lee Chuy Realty claims that it was never informed of the existence of the sale
between Marc Realty on one hand and the Bascaras and Jacinto on the other, and
that on the contrary it was only upon inquiry from the Register of Deeds of Bulacan
that the sale was brought to its attention. Marc Realty contends otherwise. It
insists that Lee Chuy Realty was verbally notified of the sale and was in fact given
a copy of the deed of sale. Lee Chuy Realty filed a complaint for legal redemption
against Marc Realty and consigned in court a managers check for 614,400.
Marc contends that prior tender of payment is a condition precedent to the filing of
an action in court in order to validly exercise the right of legal redemption. Lee
Chuy Realty however argues that the filing of the action itself is equivalent to a
formal offer to redeem, which is a condition precedent to the valid exercise of the
right of legal redemption.
ISSUE: WON the filing of the action with consignation equivalent to a formal offer
to redeem?
RULING: No. Prior tender or offer of redemption is NOT a prerequisite or
precondition to the filing of the action for legal redemption, notwithstanding
prevailing jurisprudence holding that to avail of the right of redemption what is
essential is to make an offer to redeem within the prescribed period. There is
actually no prescribed form for an offer to redeem to be properly effected. Hence,
it can either be through a formal tender with consignation, or by filing a complaint
in court coupled with consignation of the redemption price within the prescribed
period. What is condition precedent to a valid exercise of the right of legal
redemption is either the formal tender with consignation or the filing of a
complaint in court. What is paramount is the availment of the fixed and definite
period within which to exercise the right of legal redemption.

Where the right to redeem is exercised through judicial action within the
reglementary period, the formal offer to redeem, accompanied by a bona fide
tender of the redemption price, while proper, may be unessentialthe filing of the
action itself is equivalent to a formal offer to redeem.

The formal offer to redeem is not a distinct step or condition sine qua non to the
filing of the action in Court for the valid exercise of the right of legal redemption.

VILLANUEVA vs HON. ALFEDO C. FLORENDO,

G.R. No., L-33158, October 17, 1985

TOPIC INVOLVED: Legal Redemption; Where a surviving spouse sold his

undivided portion of the conjugal property to the wife of one of his sons, the
vendor's other children are entitled to exercise the right of redemption as coowners of the right portion sold, The daughterinlaw is deemed a stranger or 3rd
person under Art 1620 NCC.
FACTS: Petitioners and respondent Concepcion Villanueva are the children of
spouses Macario Villanueva (one of the respondents) and Basilia Garcia. Said
spouses owned a small parcel of land with an area of 165 square meters situated
along Pres. Quezon St., in the Poblacion of Aparri, Cagayan. Sometime in 1944,
Basilia Garcia died intestate, leaving her husband, Macario Villanueva and children
(herein petitioners) as her sole and only legitimate heirs. Macario, without the
subject lot having been partitioned, sold in favor of Erlinda Vallangca, the wife of
respondent Concepcion Villanueva, one-half or 82.5 square meters of the
aforementioned lot, particularly the western portion thereof, measuring 151/2
meters by 15 meters, for P1,100.00. Having been informed of the sale, petitioners
signified their intention to redeem the lot in question but respondent vendee
refused to allow such redemption contending that she is the wife of one of the legal
heirs and therefore redemption will not lie against her because she is not the
"third party" or "stranger" contemplated in the law. Petitioners filed a complaint for
rescission of sale and legal redemption of the portion sold to Vallangca.
ISSUE: WON within the meaning of Art.1620, the term third person or
stranger may be construed as any one who is not a coowner
RULING: Within the meaning of Art. 1620, the term "third person" or "stranger"
refers to all persons who are not heirs in succession, and by heirs are meant only
those who are called either by will or the law to succeed the deceased and who
actually succeeds. In short, a third person is any one who is not a co owner. The
vendee is related by affinity to the deceased by reason of her marriage to one of
the heirs and being married to Concepcion does not entitle the vendee to inherit or
succeed in her own right. She is not an heir of Basilia Garcia nor included in the
"family relations" of spouses Macario and Basilia as envisioned in Art. 217 of the
Civil Code.
The coowners should therefore be allowed to exercise their right to redeem the
property sold to Erlinda Vallangca. To deny petitioners the right of redemption
recognized in Art. 1620 of the Civil Code is to defeat the purpose of minimizing coownership and to contravene the public policy in this regard. Moreover, it would
result in disallowing the petitioners a way out of what, in the words of Manresa,
"might be a disagreeable or inconvenient association into which they have been
thrust." Respondent seller Macario, as coowner and before partition, has the right
to freely sell and dispose of his undivided interest or his ideal share but not a
divided part and one with boundaries as what was done in the case at bar. It is an

inherent and peculiar feature of coownership that although the coowners may have
unequal shares in the common property quantitatively speaking, each coowner has
the same right in a qualitative sense as any one of the other coowners. In other
words, every coowner is the owner of the whole and over the whole, he exercises
the right of dominion, but he is at the same time the owner of a portion which is
truly abstract because until division is effected, such portion is not correctly
determined.
PRIMARY STRUCTURES CORP. represented herein by its President ENGR.
WILLIAM C. LIU, petitioner, vs. SPS. ANTHONY S. VALENCIA and SUSAN T.
VALENCIA, respondents.
Topic Involved: Right of legal pre-emption or redemption of the owners of
adjoining lands.
Facts:
Petitioner is a private corporation based in Cebu City and the registered owner of
Lot 4523 situated in Liloan, Cebu, with an area of 22,214 square meters. Adjacent
to the lot of petitioner are parcels of land, identified to be Lot 4527, Lot 4528, and
Lot 4529 with a total combined area of 3,751 square meters. The three lots,
aforenumbered, have been sold by Hermogenes Mendoza to respondent spouses
sometime in December 1994. Petitioner learned of the sale of the lots only in
January, 1996, when Hermogenes Mendoza sold to petitioner Lot No. 4820, a
parcel also adjacent to Lot 4523 belonging to the latter. Forthwith, it sent a letter
to respondents, on 30 January 1996, signifying its intention to redeem the three
lots. On 30 May 1996, petitioner sent another letter to respondents tendering
payment of the price paid to Mendoza by respondents for the lots. Respondents, in
response, informed petitioner that they had no intention of selling the
parcels. Thereupon, invoking the provisions of Articles 1621 and 1623, petitioner
filed an action against respondents to compel the latter to allow the legal
redemption. Petitioner claimed that neither Mendoza, the previous owner, nor
respondents gave formal or even just a verbal notice of the sale of the lots as so
required by Article 1623 of the Civil Code.
Issue:
What is the proper application of: 1) Article 1621; and 2) Article 1623?
Ruling:
1) Whenever a piece of rural land not exceeding one hectare is alienated, the law
grants to the adjoining owners a right of redemption except when the grantee
or buyer does not own any other rural land. In order that the right may arise,
the land sought to be redeemed and the adjacent property belonging to the
person exercising the right of redemption must both be rural lands. If one or
both are urban lands, the right cannot be invoked.

The trial court found the lots involved to be rural lands.

Article 1621 of the Civil Code expresses that the right of redemption it grants to an
adjoining owner of the property conveyed may be defeated if it can be shown that
the buyer or grantee does not own any other rural land. The appellate court,
sustaining the trial court, has said that there has been no evidence proffered to
show that respondents are not themselves owners of rural lands for the
exclusionary clause of the law to apply.
2) Article 1623 of the Civil Code provides that the right of legal pre-emption or
redemption shall not be exercised except within thirty days from notice in
writing by the prospective vendor, or by the vendor, as the case may be. In
stressing the mandatory character of the requirement, the law states that the
deed of sale shall not be recorded in the Registry of Property unless the same is
accompanied by an affidavit of the vendor that he has given notice thereof to all
possible redemptioners.
The Court of Appeals has equated the statement in the deed of sale to the effect
that the vendors have complied with the provisions of Article 1623 of the Civil
Code, as being the written affirmation under oath, as well as the evidence, that the
required written notice to petitioner under Article 1623 has been
met. Respondents, like the appellate court, overlook the fact that petitioner is not a
party to the deed of sale between respondents and Mendoza and has had no hand
in the preparation and execution of the deed of sale. It could not thus be
considered a binding equivalent of the obligatory written notice prescribed by the
Code.
In Verdad vs. Court of Appeals this court ruled:
We hold that the right of redemption was timely exercised by private
respondents. Concededly, no written notice of the sale was given by the Burdeos
heirs (vendors) to the co-owners required under Article 1623 of the Civil Code xxxxxxxxx
Hence, the thirty-day period of redemption had yet to commence when private
respondent Rosales sought to exercise the right of redemption on 31 March 1987,
a day after she discovered the sale from the Office of the City Treasurer of Butuan
City, or when the case was initiated, on 16 October 1987, before the trial court.
The written notice of sale is mandatory. This Court has long established the rule
that notwithstanding actual knowledge of a co-owner, the latter is still entitled to a
written notice from the selling co-owner in order to remove all uncertainties about
the sale, its terms and conditions, as well as its efficacy and status.

SEN PO EK MARKETING CORPORATION, petitioner, vs. TEODORA PRICE

MARTINEZ, JUANITO TIU UYPING, JR., NELSON TIU UYPING LEONCIO
TIU UYPING, respondents

Topics Involved: Right of first refusal of the lessee over the property leased and
the applicability of Article 1622 of the New Civil Code.
Facts:
Sofia P. Martinez was the registered owner of two (2) parcels of land, located at
No. 84 Justice Romualdez St., formerly Gran Capitan, Tacloban City.
Sofia leased the lots to Yu Siong, father of the president and stockholders of
petitioner Sen Po Ek for a period of ten (10) years. The lease contract required the
lessee to construct a commercial building on the leased property which shall
become the property of Sofia upon the expiration of the lease. The building which
was constructed was declared, for taxation purposes, in the name of petitioner Sen
Po Ek under Tax Declaration.
On October 25, 1971, the contract of lease expired.
On September 20, 1973, the lease contract was renewed between Sofia and Yu
Siongs wife, Lim Hua, who succeeded him, as lessee, upon his death. Said
contract explicitly states that as of October 1, 1973, the lessor shall be the
absolute owner of the building. The lease underwent several renewals. The last
written contract of lease was executed on March 24, 1982 for a term of five (5)
years expiring on January 1, 1987.
Meantime, Sofia sold the lots and the building to her daughter, private respondent
Teodora. The deed of sale was executed sometime in 1979 but was notarized only
on November 5, 1985.
After the lease contract expired in January 1987, it was no longer renewed by the
parties. Petitioner Sen Po Ek, however, continued to possess and occupy the leased
properties, and regularly paid the monthly rentals to Sofia until her death in
August 1989. After the latters death, the rentals were paid to the heirs of Sofia
through private respondent Teodora.
On November 11, 1989, Teodora sent a letter to petitioner Sen Po Ek informing it
of her intention to sell the leased premises and authorizing Mrs. Remedios Petilla
to negotiate the sale "with any and all interested parties."
But petitioner Sen Po Ek received the letter only on December 12, 1989. It sought
to purchase the properties at P6,000.00 per square meter, and the Yu Siongs were
able to contact private respondent Teodora who advised them to formalize the offer
of petitioner Sen Po Ek in writing. This was done in a letter dated December 27,
1989 by Consorcio Yu Siong.
Meantime, sometime in December 1989, private respondent Juanito Tiu Uyping, Jr.
was informed by a certain Mr. Militante that the subject leased premises were for
sale and that the sale was being brokered by Petilla. Juanito contacted his two (2)

other brothers, and together, they went to the office of Governor Leopoldo Petilla,
the husband of Remedios Petilla, and inquired about the property.
On January 9, 1990, petitioner Sen Po Ek filed a verified complaint against Teodora
in the RTC for the annulment of the Deed of Sale executed by her mother in her
favor. Petitioner invoked its alleged right of first refusal or preferential right to buy
the leased premises based on Republic Act (R.A.) No. 1162, as amended, in relation
to Presidential Decree (P.D.) No. 1517.
On January 12, 1990, Teodora sold the property to the respondent Tiu Uyping
brothers. As a result, title was issued in the names of the latter. Thus, an amended
complaint was filed to include the respondents Tiu Uyping brothers and also
praying for the nullity of the second sale transaction.
RTC rendered a decision in favor of petitioner Sen Po Ek. The CA reversed the RTC
decision.
Issues:
1) Whether or not Teodora has the right to sell the leased property to the Tiu
Uyping brothers.
2) Whether or not Sen Po Ek has the right of first refusal over the leased property.
Ruling:
1) Yes. The first sale between mother and daughter, Sofia and Teodora, was void
for being fictitious. Under Art. 1409 (2) of the New Civil Code, one type of
contract which can be declared void and inexistent is that which is absolutely
simulated or fictitious, and this was established by several badges of simulation
proving that the sale between Sofia and Teodora was not intended to have any
legal effect between them.
Immediately suspect is the Contract of Sale itself which was executed sometime in
1979 but was notarized only on November 5, 1985, six (6) years later. Said sale all
the more inspires doubt when upon close reading of the lease contracts executed
thereafter, Teodora signed not as owner but merely as an instrumental witness.
If Teodora was really the owner of the leased premises as transferee-vendee under
the 1979 Deed of Sale, she should have signed in that capacity and not in any
other. Moreover, this clearly indicates that Sofia retained enjoyment and control of
the leased premises as lessor-owner thereof so much so that Teodora never
asserted her alleged right of ownership over the leased premises. Indeed the most
protuberant index of simulation is the absence of an attempt in any manner in the
past of the alleged vendee-owner to exercise his rights as such over the subject
property.

Finally, Sofia continued receiving the rentals until her demise in August 1989.
Nonetheless, the sale between private respondents Teodora P. Martinez and the
Tiu Uyping brothers, is valid.
Teodora, as only one of the co-heirs of Sofia, had no authority to sell the entire lot
to the Tiu Uyping brothers. She can only sell her undivided portion of the property.
Thus, when she sold the leased premises to private respondent brothers Tiu
Uyping, the sale is unenforceable having been entered into by Teodora in behalf of
her co-heirs who, however, gave no authority or legal representation. However,
such a contract is susceptible of ratification. In this case, the ratification came in
the form of "Confirmation of Sale of Land and Improvements" executed by the
other heirs of Sofia. Since the sale by private respondent Teodora Martinez of the
leased premises to private respondents Tiu Uyping brothers was ratified by her coheirs, then the sale is considered valid and binding.
2) No. Petitioner cites P.D. No. 1517, R.A. No. 1162 and Article 1622 of the New
Civil Code, but they are not applicable to the case at bar. P.D. No. 1517, otherwise
known as "The Urban Land Reform Act", pertains to areas proclaimed as urban
land reform zones. Lot Nos. 50 and 106 are both located in Tacloban City, which
has not been declared as an urban land reform zone. R.A. No. 1162, on the other
hand, only deals with expropriation of parcels of land located in the City of Manila,
which the leased premises are not. Finally, Article 1622 of the New Civil Code only
deals with small urban lands that are bought for speculation where only adjoining
lot owners can exercise the right of pre-emption or redemption. Petitioner Sen Po
Ek is not an adjoining lot owner, but a lessee trying to buy the land that it was
leasing.
Indeed the right of first refusal may be provided for in a lease contract. However in
this case, such right was never stipulated in any of the several lease contracts
between petitioner and Sofia. Petitioner claims that it was Teodora herself who
assured them that they can have the first priority to buy the subject parcels of
land, but there is absolutely no proof of this. Such grant of the right of first refusal
must be clearly embodied in a written contract, but there is none in the present
case.

CABALES V. COURT OF APPEALS

G.R. No. 162421 AUGUST 31, 2007
TOPIC INVOLVED: Right of redemption within 30 days fr. notice in writing of the
sale by their co-owners

FACTS: Rufino Cabales died and left a 5,714-square meter parcel of land located in
Brgy. Rizal, Sogod, Southern Leyte to his surviving wife Saturnina and children
Bonifacio, Albino, Francisco, Leonora, Alberto and petitioner Rito. Brothers and coowners Bonifacio, Albino and Alberto sold the subject property to Dr. Corrompido
for P2,000.00, with right to repurchase within eight 8 years. The 3 siblings divided
the proceeds of the sale among themselves, each getting a share of P666.66. The
following month Alberto secured a 300 vale from Dr. Corrompido. Alberto died
leaving his wife and son, Nelson. Within the 8yr redemption period, Bonifacio and
Albino tendered their payment of P666.66 each to Dr. Corrompido but the latter
only released the document of sale with pacto de retro after Saturnina paid for the
share and vale. Thereafter Saturnina and her 4 children Leonora sold the land to
respondents-spouses Feliano for P8,000.00. The Deed of Sale which provides that
the amount of P2,286.00 shall be paid and delivered only to of Alberto Cabales and
to Rito Cabales upon reaching the age of 21. The RD issued an OCT over the
purchased land in the names of respondents-spouses. After Saturnina died. Nelson
learned of the sale of subject property. He signified his intention to redeem the
subject land during a barangay conciliation process that he initiated. He then filed
to the RTC of Southern Leyte a complaint for redemption plus damages contending
that they were minos at that time so the sale cannot be effected. Respondentsspouses maintained that petitioners were estopped from claiming any right over
subject property. RTC ruled against petitioners. CA modified the decision of the
trial court. It held that the sale by Saturnina of petitioner Rito's undivided share to
the property was unenforceable for lack of authority or legal representation but
that the contract was effectively ratified by petitioner Rito's receipt of the proceeds
and ruled that Nelson is co-owner to the extent of 1/7 of subject property as
Saturnina was not subrogated to Alberto's rights when she repurchased his share
to the property. However, it denied petitioner Nelson's claim for redemption for his
failure to tender or consign in court the redemption money within the period
prescribed by law.
ISSUE: Whether or not he petitioner has the right of legal redemption.
RULLING: As to Rito, the contract of sale was unenforceable Saturnina was clearly
petitioner Rito's legal guardian however it does not include the power of alienation
which needs judicial authority. But may petitioners redeem the subject land from
respondents-spouses. Articles 1088 and 1623 of the New Civil Code are pertinent.
Clearly, legal redemption may only be exercised by the co-owner or co-owners who
did not part with his or their pro-indiviso share in the property held in common. As
demonstrated, the sale as to the undivided share of petitioner Rito became valid
and binding upon his ratification on July 24, 1986. As a result, he lost his right to
redeem subject property. However, as likewise established, the sale as to the
undivided share of petitioner Nelson and his mother was not valid such that they
were not divested of their ownership thereto. Necessarily, they may redeem the
subject property from respondents-spouses. But they must do so within thirty days
from notice in writing of the sale by their co-owners vendors. In the instant case,
the right of redemption was invoked not days but years after the sale was made in
1978. The Court is satisfied that there was sufficient notice of the sale to petitioner
Nelson. The thirty-day redemption period commenced in 1993, after petitioner
Nelson sought the barangay conciliation process to redeem his property. By
January 12, 1995, when petitioner Nelson filed a complaint for legal redemption

and damages, it is clear that the thirty-day period had already expired. Petitioner
Nelson, as correctly held by the Court of Appeals, can no longer redeem subject
property. But he and his mother remain co-owners thereof with respondentsspouses. Accordingly, title to subject property must include them.

SPOUSES SI V. COURT OF APPEALS

G.R. No. 122047, OCTOBER 12, 2000
TOPIC INVOLVED: Co-owners with actual notice of the sale are not entitled to
written notice.
FACTS: Spouses Armada transferred their property to the names of their three
sons namely, Crisotomo, Jose and Severo. Crisostomo through Cresencia (atty-infact) executed a deed of sale in favor Anita Si. Spouses Jose Armada (other
brother) filed a complaint to annul the sale on the ground that there was no written
notice of such sale whereas the deed stated that the co-owners are not interested
in buying the land. Further, there was misrepresentation on the citizenship of
Cresencia
is
a
Filipino
citizen.
Petitioners claimed that there was really no co-ownership since the parents
executed three deeds of sale assigning specific properties to the brothers. Since
there is no-ownership it follows that there is no right to redemption. Petitioners
pointed out that it was only because the brothers failed to submit a subdivision
plan which is the reason why there is only one certificate of title.
Lower court dismissed the petition. CA reversed and said that co-ownership still
exists and that the land was undivided. Petitioners filed a motion for new trial on
the basis that there was annotation at the back of the original TCT due to the sale
in favor of the brothers. CA denied because the reglementary period had lapsed
and the decision has become final and executory.
ISSUE: Whether or not private respondents are co-owners and that they are
entitled to right of redemption based on Art 1623 of NCC.
RULING: 1) Rightfully, the lot in question had already been partitioned when their
parents executed three 3 deed of sales in favor of Jose, Crisostomo and Severo, all
surnamed Armada which documents purports to have been registered with the
Register of Deeds of Pasay City, and as a consequence TCT No. 16007 was
issued. Every portion conveyed and transferred to the three sons was definitely
described and segregated and with the corresponding technical description In
short, this is what we call extrajudicial partition. Hence, no right of redemption
among co-owners exists. 2) There was an actual notice of the impending sale and
Jode even acknowledged such when he told his brother Crisostomo in a letter Well
you are the king of yourselves, and you can sell your share of Leveriza. Written
notice is no longer necessary when there is actual notice. Co-owners with actual
notice of the sale are not entitled to written notice. A written notice is a formal
requisite to make certain that the co-owners have actual notice of the sale to
enable them to exercise their right of redemption within the limited period of

30days. But wherere the co-owners had actual notice of the sale at the time thereof
and/or afterwards, a written notice of a fact already known to them would be
superfloud. The statute does not demand what is unnecessary.

PAGURAYAN V. REYES
GR. No. 154577, July 23, 2008
TOPIC INVOLVED: Contract of Lease
FACTS: Leonardo T. Reyes filed a complaint for specific performance and damages
against respondents Dolores Soriano et al. and a decision was rendered in favor of
Reyes. Provincial sheriff of Cagayan levied the 3 of land belonging to the Sorianos.
The levied properties were sold in a public auction wherein respondent Reyes was
the sole and highest bidder. Since the Sorianos never exercised their right of
redemption, a deed of absolute sale covering the properties was issued to
respondent Reyes. Sorianos filed a complaint for declaration of nullity of the
auction sale and certificate of sheriff's sale with damages in the RTC of
Tuguegarao which upheld the same. The CA and SC affirmed it and the decision
became final and executory. Thereafter, respondent Reyes filed a motion for
execution and the issuance of a writ of possession in the RTC. The RTC granted the
motion and issued a resolution ordering that a writ of possession be issued to
respondent Reyes and commanding the lessees of the subject lots to pay their
rentals to him. A writ of execution was issued. Pagurayan et al. as occupants
refused to vacate and remove their improvements so a writ of demolition followed.
Consequently, petitioners sought to intervene and to quash the writ of demolition.
The RTC denied the motion since petitioners were lessees of the judgment debtors
(the Sorianos), they could not be deemed to be third parties holding the property
adversely, hence their rights ended when that of their lessor ceased. An alias writ
of demolition was issued. Petitioners filed a petition for certiorari assailing the RTC
resolution and alias writ of demolition, the CA issued a TRO. The CA issued a
resolution directing the issuance of a writ of preliminary injunction enjoining the
implementation of the assailed resolution and writ. Reyes questioned this

resolution in SC which was denied. Thereafter, proceedings in the other case

continued. CA denied both the petition for certiorari and denied reconsideration
holding that petitioners were the agents/lessees of the Sorianos and that the
resolution commanding them to pay rent to respondent Reyes did not
automatically create a lessor-lessee relationship between them. Respondent Reyes
was entitled to the fruits of the properties as the purchaser and lawful owner
thereof.
ISSUE: Whether or not petitioners were mere agents of the Sorianos or were they
lessees of respondent Reyes.
RULING: A contract of lease is a consensual, bilateral, onerous and commutative
contract by which the owner temporarily grants the use of his property to another
who undertakes to pay the rent. Reyes maintains that he never entered into a
contract of lease with petitioners. The only proof presented by petitioners of the
alleged lease was Reyes' acceptance of rentals from them but respondent Reyes
insists that he was entitled to receive those rentals as the owner of the properties.
Under Section 34, Rule 39 of the old Rules of Court, respondent Reyes, as the
purchaser in the execution sale, was allowed to receive the rentals if the
purchased properties were occupied by tenants. Moreover, as the owner of the
properties after the expiration of the redemption period, he was entitled to their
fruits. Petitioners never held the properties adversely to but in fact derived their
rights from the judgment debtors, the Sorianos. Since they were the lessees of the
judgment debtors against whom the writs of possession and demolition could
unquestionably be enforced, the said writs could be enforced against them as well.

ADALIA B. FRANCISCO VS. ZENAIDA F. BOISER

G.R. NO. 137677. MAY 31, 2000
Topic: Notice requirement for a valid legal redemption under article 1623 of the
New Civil Code in relation to the principle of Co-Ownership.
Facts: Petitioner Adalia Francisco and her three sisters (Adelusia, Ester, and
Elizabeth) co-own4 parcels of land in Caloocan City, on one of said parcels of land
is the Ten Commandments Building which forms part of the co-owned properties
and was being rented out by the aforementioned co-owners. On 1979 the four
sisters sold 1/5 of their ideal share on the co-owned properties to their mother, one
Adel Blas, for 10,000.00 PHP making her another co-owner of the said parcels of
land. On 1986 Adel Blas (Mother) sold her ideal share to herein respondent
Zenaida, who is another sister of petitioner, without written notification to the
other co-owners. On Aug. 5, 1992 Zenaida, by way of a complaint and judicial

summons with the Deed of Absolute Sale attachedtherein between her and
Blas, demanded that she receive her share in the rentals collected from the Ten
Commandments Building.
Moreover, Adalia refused to give the rentals and counterclaimed that she was
exercising her right of legal redemption and deposited 10,000.00 PHP on Aug.
12, 1992 in the court which dismissed the case. On 1995 Adalia, this time,
instituted legal proceedings concerning the legal redemption of Zenaidas
undivided share stating that the 30 day period did not start to run against her for
she did not receive any notice of the sale of Blas ideal share of the co-owned
properties to Zenaida. Zenaida contends that the judicial summons was a valid
notification because her Deed of Absolute Sale with Blas was attached therein.
This case reached the Supreme Court.
Issue: Whether or Not the notification requirement of art. 1623 was complied
with.
Held:
Yes it was complied with, the stated judicial summons with a copy of Zenaidas
complaint and Deed of Absolute Sale between her and Blas is a constructive notice
of the sale to the co-owners. The reckoning period of the 30 day period of
redemption starts at Aug 5, 1992, the time Adalie received the said summons.
Since Adalia counterclaimed that she was exercising her right of legal redemption
and deposited 10,000.00 PHP to the trial court on Aug. 12, 1992 a valid legal
redemption was then executed for it was well within the 30 day period.
The court revived the Butte doctrine which states that the written notice must be
given by the vendor/co-owner personally for she is the one best suited to notify
the co-owners of her sale of her ideal share and not the buyer. Further, non
compliance of this requirement will result in the prohibition of the registration of
the deed of absolute sale and will not activate the running of the 30 day
redemption period.

EDGAR
LEDONIO
VS.
CAPITOL
GR. NO. 149040, JULY 4, 2007

DEVELOPMENT

CORPORATION

Topic: Difference between Assignment of Credits (Art.1624 NCC) and Subrogation

(Art. 1300 NCC)

Facts: xxx(1) petitioner obtained two loans totaling P60,000.00 from Ms. Picache,
for which he executed promissory notes, dated 9 November 1988 and 10
November 1988; (2) he failed to pay any of the said loans; (3) Ms. Picache executed
on 1 April 1989 an Assignment of Credit covering petitioner's loans in favor of
respondent for the consideration of P60,000.00; xxxx and (5) petitioner still failed
to pay his indebtedness despite repeated demands by respondent and its counsel.
Petitioner's persistent assertions that he never acquired any loan from Ms.
Picache, or that he signed the promissory notes in blank and under duress, deserve
scant consideration. They were already found by both the Court of Appeals and the
RTC to be implausible and inconsistent with petitioner's own evidence.xxx
The loans were for petitioners manufacturing plant for Telas. Said plant was not
successful. Petitioners contention is that the loans were false and he never
acquired such. What was owed was the unpaid Meralco Bills of the owner of the
land petitioner was leasing for his plant and not the stated loans. This was treated
as baseless and false by the Trial Court and the Courts of Appeals for his
signatures on the promissory notes were authentic and no seasoned businessman
would sign blank promissory notes.
On Appeal to the Supreme Court herein petitioner sated that what happened in
this case was a subrogation and not an assignment of credit and since his consent,
as the debtor, was not acquired said subrogation is invalid.
Issue: WON there was an assignment of credit or subrogation of the obligation.
Held:It was an assignment of credit. xxx An assignment of credit has been
defined as an agreement by virtue of which the owner of a credit (known as the
assignor), by a legal cause - such as sale, dation in payment or exchange or
donation - and without need of the debtor's consent, transfers that credit and its
accessory rights to another (known as the assignee), who acquires the power to
enforce it, to the same extent as the assignor could have enforced it against the
debtor. In other words an assignment of credit is generally accompanied
with a consideration and only transfers the ownership of the credit to
another.
Subrogation on the other hand is xxxby definition, is the transfer of all the
rights of the creditor to a third person, who substitutes him in all his rights. It may
either be legal or conventional. Legal subrogation is that which takes place without
agreement but by operation of law because of certain acts. Conventional
subrogation is that which takes place by agreement of parties.xxx Subrogation
then is generally not accompanied with any consideration and there is a
complete substitution of creditor which creates a new obligation and
extinguishes the old one. The Supreme Court cited the case of Licaros v.
Gatmaitan as an illustration in which the Court ruled that there was a subrogation
because the parties expressly stipulated that the consent of third parties involved
are needed, the third party in this case is Anglo-Asean Bank the debtor in this case.
The Court further elucidated that axxx conventional subrogation is not
identical to assignment of credit. In the former, the debtor's consent is

necessary; in the latter, it is not required. Subrogation extinguishes an obligation

and gives rise to a new one; assignment refers to the same right which passes from
one person to another. The nullity of an old obligation may be cured by
subrogation, such that the new obligation will be perfectly valid; but the nullity of
an obligation is not remedied by the assignment of the creditor's right to
another.xxx However an assignment of credit only takes effect upon the
knowledge of the debtor of said assignment. Further, Assignment of credit as a rule
has a consideration while subrogation does not.
In the case at hand Ms. Picache showed her intention to sell her credit to
herein respondent for 60,000.00 PHP and did not require the consent of herein
petitioner in the transaction. Moreover, herein petitioner indeed does have
knowledge of the assignment as evidenced by his allegations in his complaint.

Heirs of Reynaldo Dela Rosa, Namely: Teofista Dela Rosa, Josiphine Santiago and
Joseph Dela Rosa, Petitioners.
Vs.
Mario A. Batongbacal, Ireneo Batongbacal, Jocelyn
Batongbacal and Lourdes Batongbacal, Respondents.
G.R. No. 179205

Batongbacal,

Nestor

July 30, 2014

Facts:3750 square meter portion of 15001 square meters parcel of land was
registered under the name of Petitioners. Reynaldo offered to sell the subject
property to the Respondents for 50 pesos per square meter for a total 187500
pesos. Reynaldo received the advance payment of 31500 pesos as shown in the
Resibo signed by him, the parties agreed that 20000 as part of the payment will be
delivered upon delivery of the Special Power of Attorney which would authorize
Reynaldo to alienate the property in behalf of the co-owners. The balance will be
paid in 10000 monthly installments. Petitioners made several demands for the
delivery of the SPA but was unheeded by Reynaldo. The respondents initiated an
action for specific performance before the Regional Trial Court of Bulacan. Then
respondents also filed a notice of Lis Pendens registering their claim on the
certificate of title covering the entire property. Reynaldo countered that the
purported contract to sell is void. Reynaldo insisted that the contract was merely
an equitable mortgage. Trial court ruled that the supposed contract to sell was
unenforceable under Art. 1403 of NCC because he cannot bind his co-owners into
such contract without SPA. CA brushed aside the claim of equitable mortgage and
held that the the sale was valid and enforceable. However the contract was no
longer feasible because the property was already sold to third persons to whom
new title was issued. The Appellate court thus rescinded the contract and ordered
the return of the amount received thereby restoring to their situation before
entering into the agreement.
Issue: WON there was a contract of sale between Reynaldo and Guillermo?
Held:The document clearly indicates the intent of Reynaldo to sell his share in the
property. The primary consideration in determining the true nature of a contract is
the intention of the parties. If the words of a contract appear to contravene the
evident intention of the parties, the latter shall prevail. The subject of the contract

to sell was limited only to the pro indiviso share of Reynaldo consisting an area of
3750 square meters. The co-owner has the right to alienate his pro indiviso share
in the co-owned property even without the consent of his co-owners.

The petition is denied. The decisions of the Court of Appeals were affirmed.

Bienvenido C. Teoco and Juan C. Teoco Jr. Petitioners

Vs.
Austria-Martinez , Chico-Nazario Reyes,
Company, Respondents.
G.R. No. 162333

and Metropolitan Bank and Trust

December 23, 2008

Facts:
Lydia T. Co, married to Ramon Co, was the registered owner of two parcels
of land. Ramon Co mortgaged the said parcels of land to Metrobank for a sum of
P200,000.00. The properties were sold to Metrobank in an extrajudicial foreclosure
sale. One year after the registration of the Certificates of Sale, the titles to the
properties were consolidated in the name of Metrobank for failure of Ramon Co to
redeem the same within the one year period provided for by law. Metrobank filed a
petition for the issuance of a writ of possession against Ramon Co and Lydia Co.
The brothers Teoco filed an answer-in-intervention alleging that they are the
successors-in-interest of the spouses Co, and that they had duly and validly
redeemed the subject properties within the reglementary period provided by law.
Teoco had deposited the amount of P356,297.57 to the clerk of court of the RTC.
Metrobank refused to accept the amount deposited by the brothers Teoco, alleging
that they are obligated to pay the spouses Cos subsequent obligations to
Metrobank as well.

Issues:

WON Bienvinido Teoco and Juan Teoco Jr. can redeem the foreclosed
properties?

Held:
In order to prevent any injustice to, or unjust enrichment of, any of the
parties, this Court holds that the fairest resolution is to allow the brothers Teoco to
redeem the foreclosed properties based on the amount for which it was foreclosed
(P255,441.14 plus interest). This is subject, however, to the right of Metrobank to
foreclose the same property anew in order to satisfy the succeeding loans entered
into by the spouses Co, if they were, indeed, covered by the mortgage contract. In
the case at bar, Metrobank would not be prejudiced by the assignment by the
spouses Co of their right of redemption in favor of the brothers Teoco. As conceded
by Metrobank, the assignees, the brothers Teoco, would merely step into the shoes
of the assignors, the spouses Co.

WHEREFORE, the decision of the Court of Appeals is SET ASIDE. The

decision of the Regional Trial Court in Catbalogan, Samar is REINSTATED with the
following MODIFICATION: the redemption by Bienvenido C. Teoco and Juan C.
Teoco, Jr. of the properties covered by TCT Nos. T-6910 and T-6220 shall be without
prejudice to the subsequent foreclosure of same properties by Metropolitan Bank
and Trust Company to satisfy other loans covered by the Real Estate Mortgage

Ceballos v. Intestate Estate of the late Emigdio Mercado

GR No. 155856
May 28, 2004

FACTS:
Leonora Ceballos, herein petitioner, owns a parcel of land located in Bato, Badian,
Cebu. Sometime in October 1980, the petitioner obtained a loan from Emigdio
Mercado, who was known to be in the business of lending money. Petitioner was
able to barrow P12,000 which she agreed to pay in two months, and as a security
for the said loan, she executed a Deed of Real Estate Mortgage over the subject
property in favor of Mercado. The said mortgage deed was not registered by the
the mortgagee. The petitioner was not able to pay the mortgage within the
stipulated period. On February 13, 1982, the parties executed a duly notarized
Deed of Absolute Sale involving the same property on mortgage, for P16,500, in
favor of Mercado. Sometime in 1990, the petitioner offered to buy back the
property for the price of P30,000 but Mercado's wife refused since the same was

already transferred in their names. Mercado died on January 12, 1991. Her
daughter, Thelma A. Aranas, filed a petitioner for the issuance of letters of
administration over his intestate estate. On august 18, 1990, the petitioner
instituted the present suit against the intestate estate of Emigdio Mercado,
Teresita Mercado as the administrator, and/or heirs of the late Emigdio Mercado.
The petitioner alleged that the absolute deed of sale, among others, be considered
as equitable mortgage. She contends that the contract should be declared as an
equitable mortgage under Art. 1602 and 1604 of the Civil Code.

ISSUE:
Whether of not the absolute deed of sale should be considered as equitable
mortgage.

HELD:
No. Concededly, the original transaction was a loan. When petitioner failed to pay
the loan, the parties entered into the assailed deed of absolute sale, which
superseded the loan document. Petitioner had the burden of proving that she did
not intent to sell the property; that Emigdio Mercado did not intent to buy the
same; and that the new agreement did not embody the true intention of the
parties. We find no basis for disturbing the CA's finding that petitioner had failed to
discharge this burden. Hence, her contention that the selling price was
unconscionably low lacks sufficient substantiation. Petitioner also argues that
Mercado's delay in registering the deed of absolute mortgage shows that the real
agreement was an equitable mortgage. An equitable mortgage is one that-although lacking in some formality, xxx or other requisites demanded by a statute-nevertheless reveals the intention of the parties to charge a real property as
security for a debt contains nothing impossible of contrary to law. Delay in
transferring the title is not one of the instances in which an equitable mortgage
can be presumed as enumerated by law.

Deheza-Inamarga v. Alano
GR No. 171321
December 18, 2008

FACTS:
Tomas Alano mortgaged 2 parcels of land to Renato Gepty. When the time to
redeem his properties came, Alano did not have any money, so he sought the help
of his niece, Mary Ann Deheza-Inamarga, herein petitioner. Petitioner agreed to
pay the loan in order that Alano may redeem his land, however with the condition
that Alano shall mortgage the properties to her. As part of their agreement,
Petitioner kept possession of the land title and asked the spouses Alano to sign
blank papers, alleging that it would be use as a receipt evidencing their
indebtedness to her. When Tomas Alano died, the respondents Celenia, spouse of
the deceased, and their children, went to the petitioner to redeem the land.
However, the petitioner told them that she had the property mortgaged to Rural
Bank of Libacao. Respondents also further learned that the property a TCT was
issued in favor of the petitioner by virtue of a Deed of Sale allegedly executed by
the spouses Alano. Respondents then filed a complaint for declaration of nullity of
document, reconveyance and damages against the petitioner and the bank. They
contend that the sale was null and void on the ground of forgery, and even if it
were really the signatures of the spouses, it was never intended to be a deed of
sale because the signatures were affixed on blank sheets. Petitioner denies
allegations and contends that the deed of sale was valid. She claims that the
spouse offered to sell the property so that the latter can have enough money to
redeem the property to Gepty. RTC declared that there was an Equitable Mortgage
between the parties. It also declared the nullity of the sale and that the plaintiffs
are entitled to redeem the mortgage properties, which shall be effected by upon
payment of, mortgage debt.

ISSUE:
Won, the transaction between petitioner and the spouses Alano is one of sale or
equitable mortgage.

HELD:
The transaction between the parties is an equitable mortgage and not a contract of
sale. An equitable mortgage is one which, although lacking in some formality, or
form, or words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a debt, and contains
nothing impossible or contrary to law. The Supreme Court cited Articles 1602 and
1604 of the Civil Code. SC affirmed. CA correctly found that more than one of the
circumstances enumerated in Article 1602 are present, to wit: the inadequacy if
the sealing price, which is P7,000, of the properties in relating to its true value;
spouses Alano, as vendors, remained in possession as lessee; it was the
respondents who paid the real property taxes; and lastly, it was the spouses who

secured the payment of the principal debt owned by petitioner with said
properties.

Chateau De Baie Condominium Corporation v. Spouses Moreno

GR No. 186271
Feb. 23, 2011

FACTS:
Ma. Rosario Moreno is a registered owner of a penthouse unit and two parking
slots in Chateau De Baie condominium (chateau) in Roxas Blvd. manila. As such,
Moreno is also a member/stockholder of the condominium corporation.

Moreno obtain a loan from Oscar Salvacion in the amount of P16,600,000 and she
mortgaged the abovementioned properties in favor of the latter as the security. The
mortgage was annotated on the CCT.

Moreno was unable to pay her association dues, hence petitioner corporation
caused the lien of the said property, through an extrajudicial public auction sale.
Salvation then filed a petition seeking to prohibit the scheduled extrajudicial sale,
for lack of special power to sell from the registered owner, and declare the lien to
be excessive. The RTC dismissed the petition of Salvacion and denied the
injunctive relief for lack of merit. Salvacion went to the CA, however, it likewise
denied his petition for certiorari and prohibition.

Moreno meanwhile questions how the assessment was made concerning her
association dues. The lower court rule din favor of Moreno. Petitioner (Chateau)
filed a petition for certiorari, alleging that the finality of the extrajudicial
foreclosure bars the Moreno spouse to question the assessment of the latter's
association dues.

ISSUE:
Won the completion extrajudicial sale bars the complaint of the Moreno spouses
concerning the assessment of the association dues.

HELD:

We deny the petition for lack of merit. The CA did not err when it did not dismiss
the Moreno spouses complaint despite full completion of the extrajudicial sale.

Although the extrajudicial sale of the Moreno properties to the petitioner has been
fully effected and the petition of Salvacion has been dismissed with finality, the
completion of the sale does not bar the Moreno spouses from questioning the
amount of the unpaid dues that gave rise to the foreclosure and tot he subsequent
sale of their properties.

FLORENCIO EUGENIO, doing business under the name E & S Delta Village
vs
EXECUTIVE SECRETARY FRANKLIN M. DRILON, HOUSING AND LAND
USE REGULATORY BOARD (HLURB) AND PROSPERO PALMIANO

G.R. no. 109404. January 22, 1996

Panganiban, J.:

Facts:

NHA ordered Eugenio to cease from selling lots in Delta village based on nondevelopment complaints filed against him. While the said case was pending,
Palmiano filed a case against Eugenio and Sps. Rodolfo and Adelina Relevo before
the Office of Appeals, adjudication and legal affairs (OAALA) alleging that Palmiano
had suspended payment of amortizations because of Eugenios failure to develop
the village but the latter instead sold one of the two lots he bought to Sps. Relevo.
He prays for the annulment of the sale and reconveyance of the lot.
OAALA ruled in favor of Eugenio upholding the latters right to cancel the contract
between him and Palmiano as expressed in the contract itself. On appeal, the
Human settlements regulatory commission (HSRC) ordered Eugenio to complete
the subdivision and to reinstate Palmianos contract over one lot and as to the
other one, to refund the amount paid by Palmiano because a title has already been
issued in the name of the Relevos pursuant to PD 957 (Subd. and Condominium
buyers protection decree). Exec. Sec. affirmed the decision of HSRC.
Eugenio contends that PD 957 does not apply because the contract was entered
into prior to its enactment.
Issue: WON non-payment of amortizations by a buyer is justified for failure to
develop a subdivision prior to the enactment of PD 957.

Held:

P.D. 957 did not expressly provide for retroactivity in its entirety, but such can be
plainly inferred from the unmistakable intent of the law. The legislative intent must
have been to remedy the alarming situation by having P.D. 957 operate
retrospectively even upon contracts already in existence at the time of its
enactment.
Under Sec. 23 of PD 957, failure of the owner or developer to comply with its
obligations shall result in the non-forfeiture of payments already made by the
buyer. The section provides that;
No installment payment made by a buyer in a subdivision or condominium project
for the lot or unit he contracted to buy shall be forfeited in favor of the owner or
developer, when the buyer, after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and within
the time limit for complying with the same. Such buyer may, at his option, be
reimbursed the total amount paid including amortization interests.
Sec. 23 had been properly invoked by Palmiano when he desisted from making
further payment to Eugenio due to his failure to develop the subdivision project
according to the approved plans and within the time limit for complying with the
same.
WHEREFORE, there being no showing of grave abuse of discretion, the petition is
DENIED due course and is hereby DISMISSED.

PHILIPPINE NATIONAL BANK

vs
OFFICE OF THE PRESIDENT, HOUSING AND LAND USE REGULATORY
BOARD, ALFONSO MAGLAYA, ANGELINA MAGLAYA P. REYES, JORGE C.
BERNARDINO, CORAZON DE LEON, VICTORIANO ACAYA, FLORENCIA
CULTURA,
MARIA
CAMPOS,
ERNESTO
SARMIENTO,
SANTIAGO
TAMONAN, APOLONIA TADIAQUE, SIMEON DE LEON, NATIVIDAD J.
CRUZ, NATIVIDAD B. LORESCO, FELICIDAD GARCIA, ANA ANITA TAN,
LUCAS SERVILLION, JOSE NARAWAL, represented by their duly authorized

Attorney-in-Fact, CORAZON DE LEON AND SPOUSES LEOPOLDO AND

CARMEN SEBASTIAN

G.R. no. 104528. January 18, 1996

Panganiban, J.:

Facts:

Private respondents were buyers on installment of subdivision lots from Marikina

Village, Inc. Notwithstanding the purchases, the developer mortgaged these lots to
PNB. Unaware of the mortgage, respondents complied with their obligations and
constructed their houses in their respective lots.
PNB foreclosed the mortgage upon the developers default and became owner of
the lots after the sale for being the highest bidder. Actions were brought by the
respondents to the office of appeals, adjudication and legal affairs (OAALA) against
PNB. OAALA ruled that PNB may collect from respondents only the remaining
amortizations and canot compel them to pay all over again. HLURB affirmed the
decision. The office of the President concurred by invoking PD 957 (Subd. and
Condominium buyers protection decree).
PNB claims that PD 957 does not apply because the mortgage was constituted
before the enactment of PD 957.
Issue: WON PNB may compel respondents to pay again for the lots previously
bought from the developer on the theory that PD 957 does not apply because the
mortgage was executed prior to PD 057s enactment.

Held:

Normally, pursuant to Article 4 of the Civil Code, (1)aws shall have no retroactive
effect, unless the contrary is provided. However, it is obvious and indubitable that
P.D. 957 was intended to cover even those real estate mortgages, like the one at
issue here, executed prior to its enactment. f P.D. 957 were to exclude from its
coverage the aforecited mortgage contract, the vigorous regulation which PD. 957
seeks to impose on unconscientious subdivision sellers will be translated into a
feeble exercise of police power just because the iron hand of the State cannot
particularly touch mortgage contracts badged with the fortunate accident of
having been constituted prior to the enactment of P.D. 957.
Secs. 20 and 21 constitute strong argument for the retroactivity of PD 957:

 SEC. 20. Time of Completion. - Every owner or developer shall construct and
provide the facilities, improvements, infrastructures and other forms of
development, including water supply and lighting facilities, which are offered and
indicated in the approved subdivision or condominium plans, brochures,
prospectus, printed matters, letters or in any form of advertisement, within one
year from the date of the issuance of the license for the subdivision or
condominium project or such other period of time as may be fixed by the Authority.
SEC. 21. Sales Prior to Decree. - In cases of subdivision lots or condominium units
sold or disposed of prior to the effectivity of this Decree, it shall be incumbent
upon the owner or developer of the subdivision or condominium project to
complete compliance with his or its obligations as provided in the preceding
section within two years from the date of this Decree unless otherwise extended by
the Authority or unless an adequate performance bond is filed in accordance with
Section 6 hereof.
Moreover, Sec. 18 obliges PNB to accept the payment of the remaining unpaid
amortizations tendered by respondents, to wit; The buyer may, at his option, pay
his installment for the lot or unit directly to the mortgagee who shall apply the
payments to the corresponding mortgage indebtedness secured by the particular
lot or unit being paid for, with a view to enabling said buyer to obtain title over the
lot or unit promptly after full payment thereof.
WHEREFORE, in view of the foregoing considerations, the petition is hereby
DENIED, petitioner having failed to show any REVERSIBLE ERROR or GRAVE
ABUSE OF DISCRETION in the assailed decision.

CARDINAL BUILDING OWNERS ASSOCIATION, INC., Petitioner VS. ASSET

RECOVERY AND MANAGEMENT CORPORATION, Respondent
G.R. No. 149696 | July 14, 2006
Facts:Cardinal Building Owners Association, Inc., petitioner, is a corporation
organized and existing under The Condominium Act. Benjamin Marual is a member
of petitioner association being the owner of two condominium units at the Cardinal
Office Condominium, covered by Condominium Certificates of Title No. 14335 (1st
floor) and No. 17730 (2nd floor). Due to his failure to pay assessment dues in the
amount of P530,554.00, petitioner association filed with the RTC a complaint for
sum of money against him.
During the course of the proceedings, petitioner and Marual filed with the RTC a
Compromise Agreement, declaring that they have amicably settled their
controversy, the RTC rendered a Decision approving the Compromise Agreement
and enjoining the parties to strictly comply with its terms.

However, Marual failed to comply with his obligation, prompting petitioner to file
with the RTC a motion for the execution of the compromise judgment. Accordingly,
the RTC issued a writ of execution. On March, 1997, the court sheriff served a
Notice of Levy/Attachment upon Realty on the Registry of Deeds of Manila. It was
only at this time when petitioner learned that there were prior annotations on the
same titles, thus:
(a) Marual mortgaged his two condominium units to Planters Development Bank.
The mortgage was foreclosed and the said units were sold to the bank at a public
auction and the certificate of sale was annotated on the two Condominium
Certificates of Title.
(b) Before the expiration of the period for redemption of the foreclosed realties,
Marual sold the same units to Asset Recovery and Management Corporation,
herein respondent and the deed of sale was registered in the Registry of Deeds of
Manila.
(c) Respondent filed with the RTC an action for mandamus to redeem the
condominium units against the bank which the said court issued a writ of
preliminary injunction enjoining the bank from consolidating in its name the titles
or taking possession of the units, or otherwise disposing of them until further
orders from the court.
After learning of the above circumstances, petitioner filed with the RTC for sum of
money, a Motion for Possession of the units wherein it granted the motion. On July
1999, upon petitioners filing of the required bond, a writ of possession was issued.
Aggrieved, respondent filed with the CA, a Petition for Certiorari,
Respondent alleged mainly that the Judge acted with grave abuse of discretion in
issuing the Order and the writ of possession which are in variance with the
compromise judgment and the corresponding writ of execution. It then granted the
petition and nullifying the order, stating that there are four instances when a writ
of possession may be issued, to wit:
1) in a land registration proceeding, which is a proceeding in rem (Sec. 17, Act
No. 496;
2)

in an extra-judicial foreclosure of a realty mortgage (Sec. 7, Act No. 3135);

3) in a judicial foreclosure of mortgage, a quasi in rem proceeding, provided that

the mortgagor is in possession of the mortgaged realty and no third person, not a
party to the foreclosure suit, had intervened analac and Lopez, 89 Phil. 270, 275);
and
4)

in execution sales (last par. Of Sec. 35, Rule 39, Rules of Court).

Since the case at bar does not fall under any of these four instances and, in any
event, since it is not claimed that the judgment based on a compromise
contemplated the issuance of a writ of possession to private respondent of the
condominium units in case Marual, from whom petitioner claims to have purchased
the same, failed to comply with his obligation under said judgment based on a

compromise, then public respondent's assailed Order directing the issuance of a

writ of possession was issued with grave abuse of discretion. Hence, the instant
Petition, Petitioner contends that the CAs decision is not based upon, and militates
against, the applicable law, R.A. No. 4726.
Issue:Whether or not the amount of assessment could be considered as a lien
upon Maruals two condominium units under RA 4726?
Ruling:The petition must fail.
Section 20 of R.A. No. 4726, otherwise known as the Condominium Act,
provides:
An assessment upon any condominium made in accordance with a duly registered
declaration of restrictions shall be an obligation of the owner thereof at the time
the assessment is made. The amount of any such assessment plus any other
charges thereon, such as interest, costs (including attorney's fees) and penalties,
as such may be provided for in the declaration of restrictions, shall be and become
a lien upon the condominium assessed when the management body causes a notice
of assessment to be registered with the Register of Deeds of the city or province
where such condominium project is located. The notice shall state the amount of
such assessment and such other charges thereon as may be authorized by the
declaration of restrictions, a description of the condominium unit against which the
same has been assessed, and the name of the registered owner thereof. Such
notice shall be signed by an authorized representative of the management body or
as otherwise provided in the declaration of restrictions. Upon payment of said
assessment and charges or other satisfaction thereof, the management body shall
cause to be registered a release of the lien.
Such lien shall be superior to all other liens registered subsequent to the
registration of said notice of assessment except real property tax liens and except
that the declaration of restrictions may provide for the subordination thereof to
any other liens and encumbrances. Such liens may be enforced in the same
manner provided for by law for the judicial or extra-judicial foreclosure of
mortgage or real property. Unless otherwise provided for in the declaration of
restrictions, the management body shall have power to bid at foreclosure sale. The
condominium owner shall have the right of redemption as in cases of judicial or
extra-judicial foreclosure of mortgages.
Records do not show that petitioner had its notice of assessment registered
with the Registry of Deeds of Manila in order that the amount of such assessment
could be considered a lien upon Maruals two condominium units. Clearly, pursuant
to the above provisions, petitioners claim can not be considered superior to that of
respondent. As mentioned earlier, the deed of sale wherein Marual conveyed to
respondent his two condominium units, was registered in the Registry of Deeds of
Manila.
In sum, we find no reversible error committed by the Court of Appeals in its
assailed Decision. WHEREFORE, we DENY the instant petition. SO ORDERED.

EUGENIO vs. EXECUTIVE

January 22, 1996

SECRETARY,

G.R.

NO.

109404,

FACTS:
NHA ordered Eugenio to cease from selling lots in Delta village based
on non-development complaints filed against him. While the said case was pending,
Palmiano filed a case against Eugenio and Sps. Rodolfo and Adelina Relevo before
the Office of Appeals, adjudication and legal affairs (OAALA) alleging that Palmiano
had suspended payment of amortizations because of Eugenios failure to develop
the village but the latter instead sold one of the two lots he bought to Sps. Relevo.
He prays for the annulment of the sale and reconveyance of the lot.
OAALA ruled in favor of Eugenio upholding the latters right to cancel the
contract between him and Palmiano as expressed in the contract itself. On appeal,
the Human settlements regulatory commission (HSRC) ordered Eugenio to
complete the subdivision and to reinstate Palmianos contract over one lot and as
to the other one, to refund the amount paid by Palmiano because a title has already
been issued in the name of the Relevos pursuant to PD 957 (Subd. and
Condominium buyers protection decree). Exec. Sec. affirmed the decision of
HSRC.
Eugenio contends that PD 957 does not apply because the contract was
entered into prior to its enactment.
ISSUE:
WON non-payment of amortizations by a buyer is justified for
failure to develop a subdivision prior to the enactment of PD 957.
RULING:
P.D. 957 did not expressly provide for retroactivity in its entirety, but
such can be plainly inferred from the unmistakable intent of the law. The
legislative intent must have been to remedy the alarming situation by having P.D.
957 operate retrospectively even upon contracts already in existence at the time of
its enactment.
Under Sec. 23 of PD 957, failure of the owner or developer to comply with
its obligations shall result in the non-forfeiture of payments already made by the
buyer. The section provides that;
No installment payment made by a buyer in a subdivision or condominium project
for the lot or unit he contracted to buy shall be forfeited in favor of the owner or
developer, when the buyer, after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and within

the time limit for complying with the same. Such buyer may, at his option, be
reimbursed the total amount paid including amortization interests.
Sec. 23 had been properly invoked by Palmiano when he desisted from
making further payment to Eugenio due to his failure to develop the subdivision
project according to the approved plans and within the time limit for complying
with the same.
WHEREFORE, there being no showing of grave abuse of discretion, the petition is
DENIED due course and is hereby DISMISSED.

PNB vs. OFFICE OF THE PRESIDENT, G.R. NO. 104528, January 18,
1996
FACTS:
Private respondents were buyers on installment of subdivision lots
from Marikina Village, Inc. Notwithstanding the purchases, the developer
mortgaged these lots to PNB. Unaware of the mortgage, respondents complied
with their obligations and constructed their houses in their respective lots.
PNB foreclosed the mortgage upon the developers default and became
owner of the lots after the sale for being the highest bidder. Actions were brought
by the respondents to the office of appeals, adjudication and legal affairs (OAALA)
against PNB. OAALA ruled that PNB may collect from respondents only the
remaining amortizations and canot compel them to pay all over again. HLURB
affirmed the decision. The office of the President concurred by invoking PD 957
(Subd. and Condominium buyers protection decree).
PNB claims that PD 957 does not apply because the mortgage was
constituted before the enactment of PD 957.
ISSUE:
WON PNB may compel respondents to pay again for the lots
previously bought from the developer on the theory that PD 957 does not apply
because the mortgage was executed prior to PD 057s enactment.
RULING:
Normally, pursuant to Article 4 of the Civil Code, (1)aws shall have no
retroactive effect, unless the contrary is provided. However, it is obvious and
indubitable that P.D. 957 was intended to cover even those real estate mortgages,
like the one at issue here, executed prior to its enactment. f P.D. 957 were to
exclude from its coverage the aforecited mortgage contract, the vigorous
regulation which PD. 957 seeks to impose on unconscientious subdivision sellers

will be translated into a feeble exercise of police power just because the iron hand
of the State cannot particularly touch mortgage contracts badged with the
fortunate accident of having been constituted prior to the enactment of P.D. 957.
Secs. 20 and 21 constitute strong argument for the retroactivity of PD 957:
SEC. 20. Time of Completion. - Every owner or developer shall construct and
provide the facilities, improvements, infrastructures and other forms of
development, including water supply and lighting facilities, which are offered and
indicated in the approved subdivision or condominium plans, brochures,
prospectus, printed matters, letters or in any form of advertisement, within one
year from the date of the issuance of the license for the subdivision or
condominium project or such other period of time as may be fixed by the Authority.
SEC. 21. Sales Prior to Decree. - In cases of subdivision lots or condominium units
sold or disposed of prior to the effectivity of this Decree, it shall be incumbent
upon the owner or developer of the subdivision or condominium project to
complete compliance with his or its obligations as provided in the preceding
section within two years from the date of this Decree unless otherwise extended by
the Authority or unless an adequate performance bond is filed in accordance with
Section 6 hereof.
Moreover, Sec. 18 obliges PNB to accept the payment of the remaining
unpaid amortizations tendered by respondents, to wit; The buyer may, at his
option, pay his installment for the lot or unit directly to the mortgagee who shall
apply the payments to the corresponding mortgage indebtedness secured by the
particular lot or unit being paid for, with a view to enabling said buyer to obtain
title over the lot or unit promptly after full payment thereof.
WHEREFORE, in view of the foregoing considerations, the petition is hereby
DENIED, petitioner having failed to show any REVERSIBLE ERROR or GRAVE
ABUSE OF DISCRETION in the assailed decision.
JACOBUS BERNHARD HULST, Petitioner VS. PR BUILDERS, INC.,
Respondent.
G.R. NO. 156364 | September 25, 2008

Facts:On September 3, 2007, the Court rendered a Decision in the present case,
whereinPetitioner is ordered to return to respondent the amount of P2,125,540.00,
without interest, in excess of the proceeds of the auction sale delivered to
petitioner.
Petitioner then filed the present Motion for Partial Reconsiderationinsofar as he
was ordered to return to respondent the amount of P2,125,540.00 in excess of the
proceeds of the auction sale delivered to petitioner. Petitioner contends that the
Contract to Sell between petitioner and respondent involved a condominium unit
and did not violate the Constitutional proscription against ownership of land by
aliens. He argues that the contract to sell will not transfer to the buyer ownership

of the land on which the unit is situated; thus, the buyer will not get a transfer
certificate of title but merely a Condominium Certificate of Title as evidence of
ownership; a perusal of the contract will show that what the buyer acquires is the
seller's title and rights to and interests in the unit and the common areas.
Despite receipt of this Court's Resolution dated February 6, 2008, respondent
failed to file a comment on the subject motion.
Issue:Whether or not foreigner may acquire condominium units in the Philippines?
As against them owning lands?
Ruling:The Motion for Partial Reconsideration is impressed with merit.
The law provides that no condominium unit can be sold without at the same time
selling the corresponding amount of rights, shares or other interests in the
condominium management body, the Condominium Corporation; and no one can
buy shares in a Condominium Corporation without at the same time buying a
condominium unit. It expressly allows foreigners to acquire condominium units
and shares in condominium corporations up to not more than 40% of the total and
outstanding capital stock of a Filipino-owned or controlled corporation. Under this
set up, the ownership of the land is legally separated from the unit itself. The land
is owned by a Condominium Corporation and the unit owner is simply a member in
this Condominium Corporation.As long as 60% of the members of this
Condominium Corporation are Filipino, the remaining members can be foreigners.
Considering that the rights and liabilities of the parties under the Contract to Sell
is covered by the Condominium Act wherein petitioner as unit owner was simply a
member of the Condominium Corporation and the land remained owned by
respondent, then the constitutional proscription against aliens owning real
property does not apply to the present case. There being no circumvention of the
constitutional prohibition, the Court's pronouncements on the invalidity of the
Contract of Sale should be set aside. WHEREFORE, the Motion for Partial
Reconsideration is GRANTED.